NEW ISSUE - BOOK-ENTRY-ONLY RATINGS: See “RATINGS” herein$43,855,000

CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY 2011 TAX AND REVENUE ANTICIPATION BONDS

(County of Monterey)$22,000,000

Series 2011A-5a$21,855,000

Series 2011A-5b

Dated: Date of Delivery Due: As shown below

The Bonds are being executed and delivered pursuant to the terms of an Indenture, dated as of September 1, 2011 (the “Indenture”), by and between the California Statewide Communities Development Authority (the “Authority”) and Wells Fargo Bank, National Association, as trustee (the “Trustee”) for the purpose of purchasing those certain tax and revenue anticipation notes (the “Notes”) in the same aggregate principal amount as the Bonds issued by the County of Monterey (the “Local Agency”). The Series 2011A-5 Bonds are payable solely by the Local Agency. In accordance with California law and the authorizing resolution (the “Note Resolution”), the Notes of the Local Agency are payable only out of the taxes, income, revenue, cash receipts and other moneys which are received by the Local Agency for its general fund, attributable to the Fiscal Year 2011-12 and legally available for payment therefor. The Series 2011A-5a Bonds and the Series 2011A-5b Bonds are referred to herein as the “Series 2011A-5 Bonds” or the “Bonds.”

Interest and principal of the Bonds are payable as provided below. The Bonds will be issued in fully registered form and, when executed and delivered, will be registered in the name of CEDE & CO., as owner of the Bonds and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only, in Authorized Denominations. Purchasers will not receive certificates representing their interest in the Bonds purchased. Principal and interest on the Bonds will be payable by wire transfer to DTC, which in turn is required to remit such principal and interest to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds, as more fully described herein.

The Bonds are not subject to prepayment or redemption prior to maturity.The Notes are being issued and sold to the Authority to provide moneys to meet the Local Agency’s anticipated cash flow needs for its Fiscal Year

ending on June 30, 2012 (“Fiscal Year 2011-12”) created by timing differences between its anticipated expenditures for Fiscal Year 2011-12 and its estimated receipt of certain revenues for Fiscal Year 2011-12. The Notes are secured by a pledge of certain unrestricted revenues received by the Local Agency for its general fund attributable to the Fiscal Year 2011-12, and the Notes shall constitute a first lien and charge thereon and shall be payable from the first moneys received by the Local Agency from such pledged revenues. To the extent not so paid, the Notes shall be paid from any other taxes, income, revenue, cash receipts and other moneys of the Local Agency lawfully available therefor. The Note Resolution requires the Local Agency to set aside and deposit in a special fund to be established by the Local Agency an amount on the last business day on those months described herein so that the amount on deposit in such fund on such date, taking into consideration the actual investment earnings thereon accrued to such date, is equal to all of the principal of and interest due on the Notes, as more fully described herein.

Summary Schedule of Terms

SeriesPrincipal Amount Maturity Date

Interest Payment Date Coupon Yield CUSIP(1)

A-5a $22,000,000 January 31, 2012 January 31, 2012 2.00% 0.20% 1307954G9A-5b $21,855,000 May 15, 2012 May 15, 2012 2.00% 0.24% 1307954H7

THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM CERTAIN FUNDS PLEDGED UNDER THE INDENTURE RELATED TO THE BONDS. THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF AND INTEREST ON THE BONDS DOES NOT CONSTITUTE A DEBT OF THE AUTHORITY, THE LOCAL AGENCY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY. IT IS NOT INTENDED AS A SUMMARY OF THE TRANSACTION. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION.

In the opinion of Orrick, Herrington & Sutcliffe LLP, Special Counsel to the Local Agency and Bond Counsel to the Authority, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. The amount treated as interest on the Bonds and excluded from gross income may depend upon the taxpayer’s election under Internal Revenue Notice 94-84. In the further opinion of Special Counsel to the Local Agency and Bond Counsel to the Authority, interest on the Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Special Counsel to the Local Agency and Bond Counsel to the Authority observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Special Counsel and Bond Counsel express no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “TAX MATTERS.”

The Bonds are offered when, as and if issued and accepted by the Underwriters, subject to the approval of validity by Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel. Certain legal matters will be passed upon for the Underwriters by their counsel, Hawkins Delafield & Wood LLP, San Francisco, California. The Bonds in definitive form are expected to be available for delivery through the facilities of DTC in New York, New York on or about September 8, 2011.

CITIGROUP DE LA ROSA & CO.

Dated: August 30, 2011_________________(1) Copyright American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Service Bureau, a Division of the McGraw-

Hill Companies, Inc., and is set forth herein for convenience of reference only. Neither the Authority nor the Underwriters assume responsibility for the accuracy of such numbers.

No broker, dealer, sales representative or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by the Authority, the Local Agency or the Underwriters. Neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority or any Local Agency since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been obtained from the Local Agency and other sources believed by the Authority and the Underwriters to be reliable. The Underwriters have reviewed the information in the Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or opinions, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. Summaries of documents do not purport to be complete statements of their provisions. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the Local Agency since the date hereof.

In connection with this offering, the Underwriters may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY

2011 TAX AND REVENUE ANTICIPATION BONDS

LOCAL AGENCY OBLIGOR

Series 2011A-5County of Monterey

SPECIAL SERVICES

Bond CounselOrrick, Herrington & Sutcliffe LLP

Los Angeles, California

TrusteeWells Fargo Bank, National Association

Los Angeles, California

(THIS PAGE INTENTIONALLY LEFT BLANK)

TABLE OF CONTENTSPage

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INTRODUCTORY STATEMENT ...............................................................................................................................1

THE AUTHORITY AND THE PROGRAM ................................................................................................................2

DESCRIPTION OF THE BONDS................................................................................................................................3DENOMINATIONS; PAYMENT OF PRINCIPAL AND INTEREST .......................................................................................3REGISTRATION AND TRANSFER OF BONDS.................................................................................................................4

ESTIMATED SOURCES AND USES OF PROCEEDS ..............................................................................................4

SECURITY AND SOURCE OF PAYMENT ...............................................................................................................4NOTES........................................................................................................................................................................4PARITY NOTES ...........................................................................................................................................................5DEPOSIT OF NOTES; APPLICATION OF BOND PAYMENT FUND ...................................................................................5DEFAULTED NOTES....................................................................................................................................................6INVESTMENT OF NOTE PROCEEDS AND PAYMENT ACCOUNTS ...................................................................................6

RISK FACTORS ...........................................................................................................................................................6LIMITED OBLIGATIONS OF THE AUTHORITY ..............................................................................................................6LIMITED SOURCE OF REPAYMENT FOR NOTES AND DEFAULTED NOTES....................................................................6BANKRUPTCY ............................................................................................................................................................7IRS AUDIT .................................................................................................................................................................7RISK OF STATE OR LOCAL LEGISLATION....................................................................................................................8STATE BUDGET FINANCES .........................................................................................................................................8STATE BUDGET FOR FISCAL YEAR 2010-11...............................................................................................................8STATE BUDGET FOR FISCAL YEAR 2011-12.............................................................................................................10ECONOMIC CONDITIONS ..........................................................................................................................................13SECURITY ................................................................................................................................................................13POTENTIAL INCREASED PENSION AND OPEB FUNDING OBLIGATIONS ....................................................................13INVESTMENT OF FUNDS ...........................................................................................................................................14

PARTICIPATING LOCAL AGENCY INFORMATION ..........................................................................................14

GENERAL COUNTY DESCRIPTION ......................................................................................................................14

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS .....................15ARTICLE XIIIA OF THE CALIFORNIA CONSTITUTION ...............................................................................................15ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION ...............................................................................................15UNITARY PROPERTY ................................................................................................................................................16PROPOSITION 218.....................................................................................................................................................17PROPOSITION 62.......................................................................................................................................................17PROPOSITION 26.......................................................................................................................................................18PROPOSITION 1A (2004) ..........................................................................................................................................19PROPOSITION 22 ......................................................................................................................................................20ASSESSMENT APPEALS AND ASSESSOR REDUCTIONS ..............................................................................................20FUTURE INITIATIVES ................................................................................................................................................21

TAX MATTERS .........................................................................................................................................................21

LITIGATION ..............................................................................................................................................................24THE AUTHORITY ......................................................................................................................................................24LOCAL AGENCY.......................................................................................................................................................24

TABLE OF CONTENTS(continued)

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RATINGS....................................................................................................................................................................24

UNDERWRITING ......................................................................................................................................................25

CONTINUING DISCLOSURE...................................................................................................................................26

CERTAIN LEGAL MATTERS ..................................................................................................................................26

AUTHORIZATION AND APPROVAL.....................................................................................................................27

APPENDICES

LOCAL AGENCY GENERAL AND FINANCIAL INFORMATION.................................................. APPENDIX ACOUNTY OF MONTEREY AUDITED FINANCIAL STATEMENTS FOR FISCAL

YEAR ENDED JUNE 30, 2010 ............................................................................................................APPENDIX BDETAILED CASH FLOWS OF THE LOCAL AGENCY......................................................................APPENDIX CCOVERAGE ANALYSIS....................................................................................................................... APPENDIX DREPAYMENT DATES AND REPAYMENT MONTHS, PERCENTAGES AND AMOUNTS ...........APPENDIX EINVESTMENT OF PROCEEDS AND PAYMENT ACCOUNTS .........................................................APPENDIX FDEFINITIONS OF CERTAIN TERMS AND SUMMARY OF NOTE

RESOLUTION AND SUMMARY OF INDENTURE........................................................................ APPENDIX GPROPOSED FORM OF SPECIAL COUNSEL OPINION..................................................................... APPENDIX HTHE BOOK-ENTRY-ONLY SYSTEM ...................................................................................................APPENDIX I

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OFFICIAL STATEMENT

$43,855,000CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY

2011 TAX AND REVENUE ANTICIPATION BONDSSeries 2011A-5

(County of Monterey)

INTRODUCTORY STATEMENT

This Official Statement, including the cover page and appendices hereto (the “OfficialStatement”), sets forth certain information concerning the California Statewide CommunitiesDevelopment Authority, as sponsor thereof (the “Authority”) 2011 Tax and Revenue Anticipation Bonds.The Bonds will be executed and delivered in one series. The principal amounts, interest rates, interestpayment dates, maturity dates, obligors and certain other summary information with respect to the Bondsis provided on the cover page hereto. The Series 2011A-5a Bonds and the Series 2011A-5b Bonds arecollectively referred to herein as the “Series 2011A-5 Bonds” or the “Bonds.”

Pursuant to the California Communities Cash Flow Financing Program (the “Program”), theCalifornia Statewide Communities Development Authority (the “Authority”) is issuing the Bondspursuant to an Indenture, dated as of September 1, 2011 (the “Indenture”) by and between the Authorityand Wells Fargo Bank, National Association (the “Trustee”).

The net proceeds of the Bonds will be used to purchase tax and revenue anticipation notes (the“Notes”) of the County of Monterey (the “Local Agency”) in the State of California (the “State”). TheNotes purchased with the net proceeds of the Bonds will be assigned to the Trustee for the benefit of theregistered owners of the Bonds, and the payments on such Notes will be used for the payment of theprincipal of and interest on the Bonds, and the Notes shall not be used for any other purpose while any ofthe Bonds remain Outstanding.

The Notes of the Local Agency are issued under the authority of Article 7.6, Chapter 4, Part l,Division 2, Title 5 (commencing with Section 53850) of the California Government Code (the “Act”) andpursuant to a resolution of issuance adopted by the legislative body of the Local Agency (the “NoteResolution”). The issuance of the Local Agency’s Notes will provide moneys to meet the LocalAgency’s anticipated cash flow needs for its Fiscal Year ending on June 30, 2012 (“Fiscal Year 2011-12”) created by timing differences between its anticipated expenditures for Fiscal Year 2011-12 and itsestimated receipt of certain revenues for Fiscal Year 2011-12. The aggregate principal amount of theNotes will equal the aggregate principal amount of the Bonds. For information on the Local Agency andthe Notes, see Appendices A, B, C, D and E hereto.

THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELYFROM CERTAIN FUNDS PLEDGED UNDER THE INDENTURE RELATED TO THE BONDS. THEOBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF AND INTEREST ON THE BONDSDOES NOT CONSTITUTE A DEBT OF THE AUTHORITY, THE LOCAL AGENCY OR THESTATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IN CONTRAVENTIONOF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

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Copies of the Indenture and the standard form of the Note Resolution summarized herein and thestandard form of the Note Purchase Agreement (as defined herein) are available upon request during theinitial offering period from Wells Fargo Bank, National Association, Corporate Trust Services,707 Wilshire Blvd., 17th Floor, Los Angeles, California 90017.

All capitalized words, unless otherwise defined herein, shall have the meanings set forth inAPPENDIX G - “DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF NOTE RESOLUTIONAND SUMMARY OF INDENTURE” or, if not defined therein, in the Indenture.

THE AUTHORITY AND THE PROGRAM

The Authority. The Authority is a public entity organized pursuant to an Amended and RestatedJoint Exercise of Powers Agreement among a number of California counties, cities, and special districts,entered into pursuant to the provisions relating to the joint exercise of powers contained in Chapter 5 ofDivision 7 of Title 1 (commencing with Section 6500) of the California Government Code. TheAuthority is authorized to issue bonds and to finance working capital for local agencies within the State ofCalifornia pursuant to the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4(commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California GovernmentCode.

The Authority has sold and delivered obligations other than the Bonds, which other obligationsare and will be secured by instruments separate and apart from the Indenture and the Notes. The holdersof such obligations of the Authority have no claim on the security of the Bonds, and the Owners of theBonds will have no claim on the security of such other obligations issued by the Authority.

The Program. The Authority's California Communities Cash Flow Financing Program (the“Program”) began in 1993. The Program provides cash flow financing for California counties, cities andother local agencies meeting certain criteria. Since its inception, the Program has served over 170 localagencies and helped to finance approximately $7.9 billion in tax and revenue anticipation obligations.The Local Agencies participating in the Program have never defaulted in their obligations under the notesissued under the Program.

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California Statewide Communities Development AuthorityCash Flow Financing Program

Historical Information

Year Par Value IssuedNumber of

Local Agencies2011* $ 33,665,000 42010 145,330,000 102009 568,775,000 82008 854,070,000 292007 700,220,000 282006 597,530,000 322005 811,145,000 322004 803,750,000 412003 404,295,000 322002 445,345,000 482001 483,640,000 622000 513,095,000 741999 594,160,000 731998 301,120,000 651997 302,165,000 631996 275,125,000 641995 198,400,000 561994 232,085,000 691993 295,515,000 74

* Does not include Series 2011A-5a and 2011A-5b issuance.

DESCRIPTION OF THE BONDS

Denominations; Payment of Principal and Interest

The Bonds will be prepared in fully registered form and, when executed and delivered, will beregistered in the name of CEDE & Co., as registered Owner of the Bonds and nominee of The DepositoryTrust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds.Individual purchases may be made in book-entry form only in Authorized Denominations. Purchaserswill not receive certificates representing their interest in the Bonds purchased. So long as CEDE & Co. isthe registered Owner of the Bonds, as nominee of DTC, references herein to the Owners of the Bonds ofsuch Series shall mean CEDE & Co. and shall not mean the actual purchasers (the “Beneficial Owners”)of the Bonds of such Series.

The Bonds will be dated the date of initial delivery and execution thereof and will bear interestfrom the date of initial issuance of the Bonds, at the rate per annum set forth on the cover page hereof.Interest and principal of the Bonds is payable on the dates set forth on the cover page hereof.

So long as CEDE & Co. is the registered Owner of the Bonds, the principal of and interest on theBonds will be payable by wire transfer by the Trustee to CEDE & Co., as nominee for DTC, which isexpected, in turn, to remit such amounts to DTC Participants (as defined herein) for subsequentdisbursement to the Beneficial Owners. See APPENDIX I - “THE BOOK-ENTRY-ONLY SYSTEM.”

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Interest payable on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Registration and Transfer of Bonds

So long as the Bonds are subject to the DTC book-entry system, they will be registered, and maybe transferred, as described in APPENDIX I — “THE BOOK-ENTRY-ONLY SYSTEM.”

ESTIMATED SOURCES AND USES OF PROCEEDS

The following table lists the estimated sources and uses of proceeds in connection with theBonds.

Sources 2011A-5a 2011A-5b

Principal Amount $22,000,000.00 $21,855,000.00Original Issue Premium 157,080.00 263,352.75Total Sources $22,157,080.00 $22,118,352.75

Uses

Deposit to Proceeds Fund(1) $22,091,108.99 $22,052,816.51Costs of Issuance(2) 65,971.01 65,536.24Total Uses $22,157,080.00 $22,118,352.75

(1) Available to be withdrawn by the Local Agency on and after the closing date.(2) Includes Underwriters’ discount.

SECURITY AND SOURCE OF PAYMENT

Notes

The Notes will be purchased with the proceeds of the Bonds and deposited with the Trustee underthe Indenture.

The principal amount of the Local Agency’s Notes, together with the interest thereon, will bepayable from taxes, income, revenue (including, but not limited to, revenues from the State and federalgovernments), cash receipts and other moneys which are to be received by the Local Agency for itsgeneral fund and are attributable to Fiscal Year 2011-12 and which generally are available for thepayment of current expenses and other obligations of the Local Agency (“Unrestricted Revenues”). Assecurity for the payment of the principal of and interest on its Notes, the Local Agency pledges certainUnrestricted Revenues legally available for payment thereof (as further described below, the “PledgedRevenues”). See APPENDIX C - “DETAILED CASH FLOWS OF THE LOCAL AGENCY.” Theprincipal of the Local Agency’s Notes, and the interest thereon, constitute a first lien and charge on suchPledged Revenues and are payable from the first moneys received by the Local Agency from suchPledged Revenues and, to the extent not so paid, will be paid from any other taxes, income, revenue, cashreceipts and other moneys of the Local Agency lawfully available therefor.

In order to effect the pledge of such revenues, the Local Agency agrees under its Note Resolutionto fund a special payment account, its “Payment Account,” within the Bond Payment Fund to beestablished by the Trustee pursuant to the Indenture (the “Bond Payment Fund”), and the Local Agencyfurther agrees and covenants to fund its Payment Account until the payment of the principal of its Notes

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and the interest thereon. The Local Agency agrees under its Note Resolution to cause to be deposited onthe last Business Day of the Repayment Months an amount in its Payment Account equal to thepercentages of the principal and interest due on the Local Agency’s Notes for such Repayment Months.See APPENDIX C — “DETAILED CASH FLOWS OF THE LOCAL AGENCY.”

Any moneys placed in the Local Agency’s Payment Account will be for the benefit of the Ownersof the Bonds. The moneys in such Payment Account will be applied only for the purposes for which suchPayment Account is created until the principal of the Local Agency’s Notes and all interest thereon arepaid or until provision has been made for the payment of the principal of and interest on the Notes.

On or before the date specified in the Indenture, the moneys in the Local Agency’s PaymentAccount will be transferred to the Bond Payment Fund established under the Indenture to pay the intereston and principal of the Local Agency’s Notes when due. See the cover page hereof.

Parity Notes

Notwithstanding the foregoing, the Local Agency may at any time during Fiscal Year 2011-12(the “Repayment Fiscal Year”) issue a Parity Note (the “Parity Note”), secured by a first lien and chargeon Pledged Revenues; provided that (i) the Local Agency shall have received confirmation from eachrating agency rating the outstanding Note or Series of Bonds related to the Note, that the issuance of suchParity Note (or related series of bonds if sold into a pool) will not cause a reduction or withdrawal of suchrating agency’s rating on the outstanding Note or Series of Bonds related to the Note, (ii) the maturitydate of any such Parity Note shall be later than the outstanding Note and (iii) the Local Agency shall havereceived the written consent of the Credit Provider, if any, to the issuance of the Parity Note. In the eventthat the Local Agency issues a Parity Note, the Local Agency shall make appropriate deposits into thePayment Account with respect to such Parity Note, and in such event, the Payment Account shall also beheld for the benefit of the holders of the Parity Note.

Deposit of Notes; Application of Bond Payment Fund

Under the Indenture, the Notes are irrevocably assigned and pledged and transferred to theTrustee for the benefit of the Owners of the Bonds and the payments on the Notes will be used for thepunctual payment of the interest on and principal of the Bonds. Such assignment, pledge and transferconstitutes a first and exclusive lien on the principal and interest payments of and all other rights underthe Note for the foregoing purpose in accordance with the terms of the Indenture.

All principal and interest payments on the Local Agency’s Notes will be paid directly by theLocal Agency to the Trustee. All principal and interest payments on the Local Agency’s Notes receivedby the Trustee will be deposited by the Trustee, as and when received, in the Bond Payment Fund andwill be held in trust by the Trustee for the benefit and security of the Owners of the Bonds to the extentprovided in the Indenture.

Pursuant to the Indenture, the Trustee is required to deposit the moneys contained in the BondPayment Fund created by the Indenture at the following respective times in the following respective fundsin the manner hereinafter provided, and the money in each of such funds will be disbursed only for thepurposes and uses authorized.

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(a) Interest Fund. The Trustee shall deposit in the Interest Fund that amount of moneyrepresenting the interest due and payable on the Bonds on such date; and such money shall be used by theTrustee solely for the purpose of paying interest on the Bonds on such date.

(b) Principal Fund. The Trustee, on the related maturity date, shall deposit in the PrincipalFund that amount of money representing the principal becoming due and payable on the Bonds on suchmaturity date. All moneys in the Principal Fund shall be used and withdrawn by the Trustee solely for thepurpose of paying the principal of the Bonds on the maturity date thereof.

(c) Rebate Fund. The Trustee shall deposit in the Rebate Fund that amount of moneyrepresenting the amount of interest earned on funds deposited in the Bond Payment Fund in excess of thepermissible arbitrage yield as set forth in the Tax Certificate. All moneys in the Rebate Fund shall beused and withdrawn by the Trustee solely in accordance with the provisions of the Indenture.

Defaulted Notes

If the Local Agency fails to pay any of the principal of or interest on its Notes on the due datethereof, such Note will become a Defaulted Note.

Investment of Note Proceeds and Payment Accounts

The Local Agency intends to invest the Note proceeds in its county treasury investment pool. Forcertain risk factors related to investments, see “RISK FACTORS – Investment of Funds” and “–Bankruptcy” herein.

Moneys held by the Trustee in a Payment Account may be invested in Permitted Investments asdirected by the Local Agency, which includes, among other investments, investment agreements (the“Investment Agreements”), county treasury investment pools and LAIF. For further information on thecriteria for Investment Agreements, see the definition of “Permitted Investments” in APPENDIX G. TheLocal Agency intends to direct the Trustee to invest its related Payment Account in the Local Agency’scounty treasury investment pool. A more detailed description of the Local Agency’s current intentionwith respect to the investment of its related Note proceeds and Payment Account is provided inAPPENDIX F – “INVESTMENT OF PROCEEDS AND PAYMENT ACCOUNTS”

RISK FACTORS

In evaluating a purchase of the Bonds, potential investors should consider the following factors,together with all other information in this Official Statement.

Limited Obligations of the Authority

The Bonds are limited obligations of the Authority, payable solely from payments with respect tothe Notes related thereto as provided in the Indenture. The obligation of the Authority to pay principal ofand interest on the Bonds does not constitute a debt of the Authority or of any member thereof within themeaning of any constitutional or statutory debt limitation or restriction.

Limited Source of Repayment for Notes and Defaulted Notes

The primary source of repayment of the Bonds is payments on the Notes related to the Bonds.The Local Agency is liable on its Notes (even in the event that such Notes become Defaulted Notes) onlyto the extent of its unrestricted revenues attributable to Fiscal Year 2011-12. If such unrestricted revenues

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are not sufficient to pay its Notes or Defaulted Notes, as the case may be, the Local Agency is notobligated to pay such Notes or Defaulted Notes from any other sources (including subsequent fiscalyears’ revenues).

Bankruptcy

The rights of the Owners of the Bonds are subject to certain limitations in the State, including alimitation on enforcement of judgments against funds needed to serve the public welfare and interest.Additionally, enforceability of the rights and remedies of the Owners of the Bonds, and the obligationsincurred by the Local Agency, may become subject to the federal bankruptcy code and applicablebankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting theenforcement of creditor’s rights generally, now or hereafter in effect, equity principles which may limitthe specific enforcement under State law of certain remedies, the exercise by the United States ofAmerica of the powers delegated to it by the Constitution, and the reasonable and necessary exercise, incertain exceptional situations, of the police powers inherent in the sovereignty of the State and itsgovernmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcyproceedings or the exercise of powers by the federal or State government, if initiated, could subject theOwners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise,and consequently may entail risks of delay, limitation or modification of their rights.

As described herein, the Local Agency agrees under its Note Resolution to cause to be depositedon the last Business Day of the Local Agency’s Repayment Months an amount in its Payment Accountequal to the percentages of the principal and interest due on the Local Agency’s Note for such RepaymentMonth. See APPENDIX E — “REPAYMENT DATES AND REPAYMENT MONTHS,PERCENTAGES AND AMOUNTS,” and APPENDIX C — “DETAILED CASH FLOWS OF THELOCAL AGENCY.” The filing of bankruptcy by the Local Agency could delay or impair the payment ofthe Bonds. Further, the opinion of Special Counsel as to the enforceability of the Notes is expresslyqualified by the declaration of bankruptcy.

On January 24, 1996, the United States Bankruptcy Court for the Central District of Californiaheld in the case of County of Orange v. Merrill Lynch that a State statute providing for a priority ofdistribution of property held in trust conflicted with, and was preempted by, federal bankruptcy law. Inthat case, the court addressed the priority of the disposition of moneys held in a county investment poolupon bankruptcy of the county, but was not required to directly address the State statute that provides forthe lien in favor of holders of tax and revenue anticipation notes. The Local Agency is in possession ofthe taxes and other revenues that will be set aside and pledged to repay the Notes evidenced by the Bonds,and these funds and other funds held by the Trustee may be invested in various commingled investmentpools or other instruments. In the event of a petition for the adjustment of debts of the Local Agencyunder Chapter 9 of the federal bankruptcy code, a court might hold that the Owners of the Notesevidenced by the Bonds do not have a valid and/or prior lien on the Pledged Revenues where suchamounts are deposited in a commingled investment pool.

IRS Audit

The IRS has an ongoing program of examining tax-exempt obligations to determine whether, inthe view of the IRS, interest on such obligations is properly excluded from gross income for federalincome tax purposes, and it is possible that the Bonds may be selected for examination under suchprogram. There is no assurance that an IRS examination of the Bonds or the Notes will not adverselyaffect the market value of the Bonds. See “TAX MATTERS” below.

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Risk of State or Local Legislation

The Local Agency relies on a number of revenue sources that could be reduced or eliminated byState or local legislation, including, among others, sales and use taxes, license and permit fees, fines andpenalties, and motor vehicle license fees. There can be no assurance that the State or local governmentwill not adopt legislation to reduce or eliminate one or more of these revenue sources. See “State BudgetFinances” below.

In addition, a number of statutes and constitutional amendments have been adopted as measuresthat qualified for the ballot through California’s initiative process as described under“CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS,”below. There can be no assurance that other initiative measures will not be adopted affecting therevenues of the Local Agency.

State Budget Finances

The following information concerning the State’s budgets has been obtained from publiclyavailable information which the Local Agency believes to be reliable; however, the Local Agency takes noresponsibility as to the accuracy or completeness thereof and has not independently verified suchinformation. Information about the State budget is regularly available at various State-maintainedwebsites. Text of the budget may be found at the Department of Finance website, www.dof ca.gov, underthe heading “California Budget.” An impartial analysis of the budget is posted by the CaliforniaLegislative Analyst’s Office (“LAO”) at www.lao.ca.gov. In addition, various State official statements,many of which contain a summary of the current and past State budgets, may be found at the website ofthe State Treasurer, www.treasurer.ca.gov. The information referred to is prepared by the respectiveState agency maintaining each website and not by the Authority, the Local Agency or the Underwriters,and the Authority, the Local Agency and the Underwriters take no responsibility for the continuedaccuracy of the internet addresses or for the accuracy or timeliness of information posted there, and suchinformation is not incorporated herein by these references.

State Budget for Fiscal Year 2010-11

State Budget for Fiscal Year 2010-11. On October 8, 2010, the prior Governor signed the2010-11 State Budget Act (the “2010-11 State Budget Act”) to address a then-projected $19.3 billionshortfall in revenues. The 2010-11 State Budget Act estimates Fiscal Year 2009-10 revenues andtransfers of $86.92 billion, total expenditures of $86.35 billion and a year-end deficit of $4.80 billion,which included a negative $5.38 billion prior-year State General Fund balance, $6.34 billion withdrawalfrom the reserve for economic uncertainties and an allocation of $1.54 billion to the reserve for theliquidation of encumbrances. The 2010-11 State Budget Act projects 2010-11 revenues and transfers of$94.23 billion, total expenditures of $86.55 billion and a year-end surplus of $2.87 billion (net of the$4.80 billion deficit from Fiscal Year 2009-10), of which $1.54 billion is budgeted to be reserved for theliquidation of encumbrances and $1.34 billion is budgeted to be deposited in a reserve for economicuncertainties.

The 2010-11 State Budget Act approved placement of a constitutional amendment on the State’sreserve funds on the March 2012 ballot. If that ballot measure were approved by California voters, theState would increase the maximum size of its Budget Stabilization Account from five percent to tenpercent of annual State General Fund revenues and provide new requirements for depositing State fundsinto the Budget Stabilization Account. If the ballot measure were approved, the law would further restrictthe State’s ability to withdraw funds from its reserves.

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Certain of the features of the 2010-11 State Budget Act affecting counties in the State includedthe following:

1. The 2010-11 State Budget Act included a $187.1 million General Fund decrease infunding resulting from the enrollment of seniors and people with disabilities in managed care anddeferring a managed care payment for “two-plan” and geographic managed care counties.

2. The 2010-11 State Budget Act included a $84.5 million General Fund funding decreaseresulting from freezing daily per diem hospital inpatient rates at existing levels.

3. The 2010-11 State Budget Act included a $365.9 million funding decrease fromutilization of an advance of Temporary Assistance for Needy Families Block Grant funds for the quarterending June 30, 2011 in lieu of General Fund.

4. The 2010-11 State Budget Act included a $300 million decrease in funding for In-HomeSupportive Services (“IHSS”) consisting of (1) using IHSS provider-generated revenue to draw downadditional federal funds and offset General Fund expenditures in the program ($190 million),(2) imposing a 3.6% across-the-board reduction to the hours assessed for IHSS recipients ($35 million)and (3) reflecting an updated caseload estimate based on an actual decline in recipients as compared to theprevious caseload projection ($75 million).

5. The 2010-11 State Budget Act included approximately $162.4 million funding decreaseas a result of maintaining the level of Child Welfare Services program funding at Fiscal Year 2009-10budgeted levels, eliminating State funding for the Seriously Emotionally disturbed portion of the FosterCare program and reducing the reimbursement rates for license-exempt child care providers.

6. The 2010-11 State Budget Act included a one-time reduction of $365 million resultingfrom the suspension of most mandates not related to elections, law enforcement and property taxes.

2010-11 LAO Budget Overview. On October 8, 2010, the LAO released a report entitled “MajorFeatures of the Legislature’s 2010-11 Budget” (the “2010-11 LAO Budget Overview”), which providesan analysis by the LAO of the 2010-11 State Budget. The 2010-11 LAO Budget Overview is available onthe LAO website at www.lao.ca.gov. Information on the website is not incorporated herein by reference.The 2010-11 LAO Budget Overview states that more than two-third’s of the budget solutions containedState Legislature’s budget for 2010-11 are one-time or temporary in nature. Accordingly, the LAOcautions that the State will continue to face sizable annual budget problems in Fiscal Year 2011-12 andthereafter.

2011-12 LAO Fiscal Outlook. On November 10, 2010, the LAO released a report entitled “The2011-12 Budget: California’s Fiscal Outlook” (the “2011-12 LAO Fiscal Outlook”), which updates theLAO’s forecast of the State’s General Fund revenues and expenditures. The LAO projects that, absentcorrective action, the State will have a budget deficit of approximately $25.4 billion at the end of FiscalYear 2011-12 (inclusive of a budget deficit of $6 billion at the end of Fiscal Year 2010-11) and budgetdeficits of approximately $20 billion per fiscal year through Fiscal Year 2015-16. The LAO notes that theFiscal Year 2010-11 State Budget included $4 billion in assumed federal funding that had not beenapproved at the time of its adoption, and projected that $3.5 billion of such amount or flexibility grantedby the federal government to State and local governments in connection with the operation of certainprograms would not be received. The LAO cautioned that a net $3 billion of additional budget solutionswill not be achieved and that Proposition 22, an initiative that was approved by California voters inNovember 2010, will reduce State General Fund solutions by approximately $800 million. In order toaddress the State’s structural budget deficit, the LAO recommended the State take a multi-year approach

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and minimize the use of risky budgetary measures that it believes contribute to fiscal year-end deficits.The LAO further recommended that the State Legislature consider revenue policies including, amongother things, tax expenditure programs such as special credits, deductions and exemptions, increasingcharges for program beneficiaries, extending certain temporary tax increases, and reconsidering theoptional single sales factor for multistate companies. According to the LAO, the approval of permanentactions and certain temporary budget solutions could eliminate the State’s structural deficit and allow theState to build reserves to address the next economic downturn and any long-term fiscal liabilities.

State Budget for Fiscal Year 2011-12

Fiscal Year 2011-12 Proposed Budget. On January 10, 2011, Governor Jerry Brown released theProposed 2011-12 State Budget, which projected an estimated $8.2 billion budget deficit for fiscal year2010-11 and a $17.2 billion budget deficit in fiscal year 2011-12 absent corrective action. The Proposed2011-12 State Budget included proposals to (i) reduce expenditures by approximately $12.5 billion, (ii)generate an additional $3.0 billion in revenues for fiscal year 2010-11 and $12.0 billion in revenues forfiscal year 2011-12 by extending four temporary tax increases, subject to voter approval, and shiftingfunding and responsibility for certain services to local governments, and (iii) borrow $1.9 billion fromspecial funds and other sources. Approximately $12 billion of the additional revenues included in theProposed 2011-12 State Budget depended on voter approval. The State Legislature and the Governorwere unable to approve the Proposed 2011-12 State Budget's proposal for a June 2011 election.

On March 24, 2011, the Governor signed legislation that reduced the State's $26.6 billion budgetdeficit by $11.2 billion, and included cuts to CalWORKS, Medi-Cal and the State university system,tuition increases for community colleges and State universities, and inter-fund transfers. On March 29,2011, the Governor halted negotiations with members of the State Legislature related to the Proposed2011-12 State Budget.

Certain of the features of the Proposed 2011-12 State Budget affecting the County included thefollowing:

1. A proposal to realign government services, returning authority and responsibility forcertain of those services to counties, cities, special districts and school districts. While the details of therealignment were unclear, complete implementation of the realignment was expected to restructure over$10 billion in a wide range of public services. The first phase of the process was proposed for fiscal year2011-12 and would restructure over $5.9 billion in public services.

2. A proposal to eliminate redevelopment agencies effective July 1, 2011. Existingredevelopment obligations would continue to be paid with property taxes. Approximately $1.7 billionwould be shifted to the State's General Fund in fiscal year 2011-12. In subsequent fiscal years, taxincrement property taxes remaining after existing obligations would go to cities, counties and schoolsaccording to their proportionate share of property tax.

3. The Proposed 2011-12 State Budget included a $1.7 billion reduction in funding to Medi-Cal.

4. The Proposed 2011-12 State Budget included a $1.5 billion reduction in State and federalfunding to CalWORKs.

May Revision. On May 16, 2011, the Governor released the May Revision. After accounting forbudgetary actions adopted by the State Legislature, higher than expected revenues and updatedexpenditure projections, the May Revision projected a budget deficit of $9.6 billion through Fiscal Year

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2011-12, consisting of a $4.8 billion deficit that would be carried over from Fiscal Year 2010-11, and a$4.8 billion deficit for fiscal year 2011-12. The May Revision proposed $10.8 billion in budgetaryactions, to address the projected budgetary shortfall through fiscal year 2011-12 and provide for a reserveof $1.2 billion. Similar to the Proposed 2011-12 State Budget, the May Revision proposed to address theState's deficits through realignment of certain State and local government responsibilities and fundingsuch realignment with proceeds of certain temporary tax extensions, subject to California voter approval.The May Revision also proposed to reduce State government, repay the State's budgetary borrowings andcreate business incentives.

Assuming adoption of the proposals set forth in the May Revision, the State was estimated to endFiscal Year 2010-11 with revenues and transfers of $95.74 billion, total expenditures of $91.57 billionand a year-end deficit of $2.78 billion (net of the $6.95 billion deficit carried over from fiscal year 2009-10), which amount reflects an allocation of $770 million to the reserve for the liquidation ofencumbrances and $3.55 billion drawn from the Special Fund for Economic Uncertainties. The MayRevision projected Fiscal Year 2011-12 revenues and transfers of $93.62 billion, total expenditures of$88.80 billion and a year-end surplus of $2.04 billion (net of the $2.78 billion deficit carried over fromfiscal year 2010-11), of which $770 million would have been reserved for the liquidation ofencumbrances and $1.27 billion would have been deposited in a reserve for economic uncertainties. TheMay Revision also set forth the types of reductions that would be necessary should the revenue generatingproposals set forth therein fail to pass, including suspension of the Proposition 98 minimum guaranteeand large budgetary reductions for education, further reduced funding for public safety programs, thecourts system and fire prevention and protection, and additional reductions to health and human servicesthrough reduced CalWORKs grants, elimination of services for many IHSS recipients, capping Medi-Calcoverage and greater cuts to developmental services.

Features of the May Revision affecting the County included the following:

1. The May Revision proposed the realignment of State and local governmentresponsibilities set forth in the Proposed 2011-12 State Budget, with certain programmatic and fiscaladjustments to reflect caseload changes and modifications to certain responsibilities, such as shifting thefunding ($221.8 million) and responsibility for mental health and services for special education pupilsfrom counties to school districts. The May Revision proposed funding for the realignment throughtemporary extensions of certain taxes, subject to California voter approval.

2. The May Revision proposed to increase funding for Medi-Cal programs, including therestoration of $1 billion in State General Fund funding and adjustments to the Medi-Cal base to reflectmanaged care cost increases of $66.3 million in 2010-11 and $122.2 million in 2011-12. However, theMay Revision also proposed to assess a 20 percent fee on intergovernmental transfers used by countiesthat operate Medi-Cal managed care plans.

3. The May Revision proposed increasing CalWORKs funding by $14 million in fiscal year2010-11 and approximately $80 million in fiscal year 2011-12 and decreasing IHSS funding by $6.9million in Fiscal Year 2010-11 and $7 million in Fiscal Year 2011-12.

4. The May Revision proposed full funding for transportation consistent with thetransportation tax swap enacted in 2010, pursuant to which the gasoline sales tax revenue inuring to localgovernments was replaced with an equal amount of revenues from the Highway User Tax Account(“HUTA”). It was estimated that counties will receive, in the aggregate, approximately $387.9 million innew HUTA revenues in Fiscal Year 2011-12.

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5. The May Revision proposed the elimination of redevelopment agencies. However, theMay Revision proposed to reform rather than eliminate enterprise zones.

Fiscal Year Adopted 2011-12 State Budget. On June 30, 2011, the Governor signed the Adopted2011-12 State Budget to address a then-projected $26.6 billion deficit through June 30, 2012. Afteraccounting for budgetary actions adopted by the State Legislature, higher than expected revenues andupdated expenditure projections, the Adopted 2011-12 State Budget projects that the State's structuraldeficit has been reduced to less than $5 billion annually. The Adopted 2011-12 State Budget estimatesFiscal Year 2011-12 revenues and transfers of $88.5 billion, total expenditures of $85.9 billion and ayear-end surplus of $1.3 billion (net of the negative $1.2 billion prior-year State General Fund balance).The Adopted 2011-12 State Budget allocates the projected surplus to the reserve for the liquidation ofencumbrances ($770 million) and the special fund for economic uncertainties ($543 million).

The Adopted 2011-12 State Budget authorizes approximately $601.0 million in fundingreductions in the areas of higher education, health and human services and public safety, beginning inJanuary 2012, if the State's Director of Finance estimates that the State's revenues for Fiscal Year 2011-12will be less than $87,452,500,000, but will be at least $86,452,500,000. If the State's Director of Financeestimates that revenues for Fiscal Year 2011-12 will be less than $86,452,500,000, the Adopted 2011-12State Budget authorizes an additional $1.86 billion in education reductions. The State's Director ofFinance will make a determination whether the State's revenues meet or exceed such levels by December15, 2011.

Certain of the features of the Adopted 2011-12 State Budget that could affect the County includethe following:

1. The Adopted 2011-12 State Budget funds the Governor's realignment proposal set forthin the Proposed 2011-12 State Budget and the May Revision. The Adopted 2011-12 State Budget fundsrealignment by dedicating 1.0625 cents of the existing sales tax rate to generate a projected $5.1 billionfor the 2011 Local Revenue Fund and by redirecting Vehicle License Fee (“VLF”) revenues to generate$453.4 million. The Local Revenue Fund is expected to include accounts for Trial Court Security, LocalCommunity Corrections, Local Law Enforcement Services, Mental Health, District Attorney and PublicDefender, Juvenile Justice, and Health and Human Services, and a Reserve Account. The Adopted 2011-12 State Budget estimates $300 million in VLF revenues will be shifted from departmental support coststo local public safety programs.

2. The Adopted 2011-12 State Budget provides $98.6 million from the Mental HealthServices Fund to county mental health services on a one-time basis for mental health services to specialeducation students. On-going responsibility for these services, including out-of-home residential services,is realigned to school districts. The Governor has stated that school districts may contract with counties toprovide services using Proposition 63 funds, but school districts would be responsible for any costsexceeding this amount.

3. In connection with the Governor's realignment proposal, the State advanced funds tocounties for administration and grants for certain health and human services programs expected to berealigned as of July 1, 2011. The Adopted 2011-12 State Budget authorizes the State to repay itself forsuch July 2011 advances with payments from the realignment fund.

4. The Adopted 2011-12 State Budget realigns public safety to require local supervision ofcertain low-level offenders. The Adopted 2011-12 State Budget establishes a Community CorrectionsGrant Program in order to reduce overcrowding in State prisons. Pursuant to the Adopted 2011-12 StateBudget certain lower-level offenders will begin to be sentenced, housed, supervised and treated locally.

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Such lower-level offenders will be supervised by local law enforcement upon release from State prison.The Adopted 2011-12 State Budget authorizes counties to contract with public community correctionalfacilities to house county jail inmates.

5. In connection with the Governor's realignment plan, the Adopted 2011-12 State Budgetapproves a Voluntary Alternative Redevelopment Program, pursuant to which redevelopment agenciesmay continue operating provided that their respective establishing cities or counties agree to provide $1.7billion in payments to K-12 schools. If the establishing cities or counties do not agree to make paymentsto K-12 schools, the related redevelopment agency will be required to cease operations pursuant toAssembly Bill X1 26 and any property tax revenues that remain after payment of such redevelopmentagency's outstanding debt service obligations and allowable administrative costs will be distributed tocities, counties, special districts, and K-14 schools.

Future State Budgets. No prediction can be made by the Local Agency as to whether the Statewill encounter budgetary problems in this or in any future Fiscal Years, and if it were to do so, it is notclear what measures would be taken by the State to balance its budget, as required by law. In addition,the Local Agency cannot predict the final outcome of future State budget negotiations, the impact thatsuch budgets will have on its finances and operations, the outcome or impact of future ballot measuresand legislation, or what actions will be taken in the future by the State Legislature and Governor to dealwith changing State revenues and expenditures. Current and future State budgets will be affected bynational and State economic conditions and other factors, including the current economic downturn, overwhich the Local Agency has no control.

Economic Conditions

California and the rest of the nation have been in an economic recession since 2008. Theseeconomic conditions have negatively impacted the revenues of the Local Agency. While a numberof economic indicators show that certain sectors of the economy have been recovering, there can beno assurance that economic conditions will continue to improve.

Security

Military conflicts and terrorist activities may adversely impact the operation of the Local Agency.The Local Agency is not subject to safety and security measures and inspections on a continuing basis.The Local Agency does not represent that any existing or additional safety and security measures will beadequate in the event that terrorist activities are directed against the Local Agency or that costs of securitymeasures will not be greater than presently anticipated.

Potential Increased Pension and OPEB Funding Obligations

Many factors influence the amount of the Local Agency’s pension funding obligation, including,without limitation, inflationary factors, changes in statutory provisions of applicable public employeeretirement system laws, changes in the levels of benefits provided or in the contribution rates of the LocalAgency, increases or decreases in the number of covered employees, changes in actuarial assumptions ormethods, and differences between actual and anticipated investment experience of the Local Agency’spublic employee retirement system. Any of these factors could give rise to additional liability of theLocal Agency to its public employee retirement system as a result of which the Local Agency would beobligated to make additional payments to its public employee retirement system.

The Local Agency has a pension plan administered by the California Public Employees’Retirement System (“CalPERS”). During the ongoing economic recession and financial crisis, CalPERS

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investments have significantly declined in value. Pursuant to CalPERS actuarial policies, investmentgains and losses are spread over 15 years. These losses and any continuing decline in investments (if any)may increase required contributions in future fiscal years.

Additionally, the Governmental Accounting Standards Board released Statement No. 45 (“GASB45”), which establishes standards for the measurement, recognition, and display of post-employmentbenefits other than pension benefits, including healthcare and life insurance (“OPEB”)expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, requiredsupplementary information in the financial reports of state and local governmental employers.

The Local Agency is in the process of analysis, planning and preliminary actions with respect toGASB 45 and OPEB obligations and funding. The Local Agency has provided information relating tothese matters. See APPENDIX A for more information.

Investment of Funds

All investments, including the Permitted Investments and other investments made by the LocalAgency, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of returnthan expected, loss of market value and loss or delayed receipt of principal. The occurrence of theseevents with respect to amounts held under the Indenture or by the Local Agency could have a materialadverse effect on the security of the Notes.

PARTICIPATING LOCAL AGENCY INFORMATION

Certain information regarding the Local Agency is included in the appendices hereto. Certaingeneral information and a summary of certain budget and financial information for the Local Agency isset forth in APPENDIX A — “LOCAL AGENCY GENERAL AND FINANCIAL INFORMATION.”Current and projected cash flows and a description of alternative cash resources for the Local Agency isincluded in APPENDIX C — “DETAILED CASH FLOWS OF THE LOCAL AGENCY.” Cash flowsummary information and projected Note payment coverage for the Local Agency is set forth inAPPENDIX D — “COVERAGE ANALYSIS.” A description of the Local Agency’s current intentionwith respect to the investment of its Payment Account is provided in APPENDIX F — “INVESTMENTOF PROCEEDS AND PAYMENT ACCOUNTS.”

The information contained herein regarding the Local Agency has been derived from informationprovided by the Local Agency, unless otherwise noted. The Authority and the Underwriters have noreason to believe that any such information is incorrect; however, they have not verified the accuracy ofsuch information and take no responsibility therefor. The Local Agency has represented that theinformation related to the Local Agency included herein does not contain any untrue statement of materialfact or omit to state a material fact necessary to make the statements about the Local Agency containedherein, in light of the circumstances under which they were made, not misleading.

The information regarding the Local Agency contained in the Appendices hereto is essential tomaking an informed investment decision with respect to the Bonds. Investors are advised to thoroughlyand carefully review such information.

GENERAL COUNTY DESCRIPTION

Counties are political subdivisions of the State and are governed by elected boards of supervisors.Counties generally provide for the health, safety and welfare of their residents. County revenues aregenerally comprised of property and other taxes, aid from other government agencies, license, permit and

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use fees, and fines, forfeitures and penalties. A substantial portion of county revenues is derived from theState.

CONSTITUTIONAL AND STATUTORY LIMITATIONS ONTAXES AND APPROPRIATIONS

Article XIIIA of the California Constitution

In 1978, California voters approved Proposition 13, adding Article XIIIA to the CaliforniaConstitution. Article XIIIA was subsequently amended in 1986, as discussed below. Article XIIIA limitsthe amount of any ad valorem tax on real property to 1% of the full cash value thereof, except thatadditional ad valorem taxes may be levied to pay debt service on indebtedness approved by the votersprior to July 1, 1978 and on bonded indebtedness for the acquisition or improvement of real propertywhich has been approved on or after July 1, 1978 by two-thirds of the voters voting on such indebtedness.Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shownon the Fiscal Year 1975-76 tax bill under ‘full cash’ or thereafter, the appraised value of real propertywhen purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment.”This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base inthe event of declining property values caused by damage, destruction or other factors, and to provide thatthere would be no increase in the “full cash value” base in the event of reconstruction of propertydamaged or destroyed in a disaster.

Legislation has been enacted and amended a number of times since 1978 to implement ArticleXIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (exceptto pay voter-approved indebtedness). The 1% property tax is automatically levied by the county anddistributed according to a formula among taxing agencies. The formula apportions the tax roughly inproportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new construction,change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions inthe “taxing area” based upon their respective “situs.” Any such allocation made to a local agencycontinues as part of its allocation in future years.

Article XIIIB of the California Constitution

On November 6, 1979, California voters approved Proposition 4, known as the Gann Initiative,which added Article XIIIB to the California Constitution. Propositions 98 and 111, approved by theCalifornia voters in 1988 and 1990, respectively, substantially modified Article XIIIB. The principaleffect of Article XIIIB is to limit the annual appropriations of the State and any city, county, schooldistrict, authority, or other political subdivision of the State to the level of appropriations for the priorfiscal year, as adjusted for changes in the cost of living and population. The initial version of ArticleXIIIB provided that the “base year” for establishing an appropriations limit was the 1978-79 Fiscal Year,which was then adjusted annually to reflect changes in population, consumer prices and certain increasesin the cost of services provided by these public agencies. Proposition 111 revised the method for makingannual adjustments to the appropriations limit by redefining changes in the cost of living and inpopulation. It also required that beginning in Fiscal Year 1990-91, each appropriations limit must berecalculated using the actual 1986-87 appropriations limit and making the applicable annual adjustmentsas if the provisions of Proposition 111 had been in effect.

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Appropriations subject to limitation of a local government under Article XIIIB include generallyany authorization to expend during a fiscal year the proceeds of taxes levied by or for that entity and theproceeds of certain State subventions to that entity, exclusive of refunds of taxes. Proceeds of taxesinclude, but are not limited to, all tax revenues plus the proceeds to an entity of government from (1)regulatory licenses, user charges and user fees (but only to the extent such proceeds exceed the cost ofproviding the service or regulation), (2) the investment of tax revenues, and (3) certain subventionsreceived from the State. Article XIIIB permits any government entity to change the appropriations limitby a vote of the electors in conformity with statutory and constitutional voting effective for a maximum offour years.

Article XIII B includes a requirement pursuant to which fifty percent (50%) of all revenuesreceived by the State in a fiscal year and in the fiscal year immediately following it in excess of theamount which may be appropriated by the State in compliance with Article XIII B during that fiscal yearand the fiscal year immediately following it shall be transferred and allocated, from a fund established forthat purpose, pursuant to Article XVI of the State Constitution. In addition, fifty percent (50%) of allrevenues received by the State in a fiscal year and in the fiscal year immediately following it in excess ofthe amount which may be appropriated by the State in compliance with Article XIII B during that fiscalyear and the fiscal year immediately following it shall be returned by revising tax rates or fee scheduleswithin the next two subsequent fiscal years. Further, Article XIII B includes a requirement that allrevenues received by an entity of government, other than the State, in a fiscal year and in the fiscal yearimmediately following it that exceed the amount which may be appropriated by that entity in compliancewith Article XIII B during that fiscal year and the fiscal year immediately following it shall be returnedby revising tax rates or fee schedules within the next two subsequent fiscal years.

As amended in June 1990, the appropriations limit for the County in each year is based on thelimit for the prior year, adjusted annually for changes in the costs of living and changes in population, andadjusted, where applicable, for transfer of financial responsibility of providing services to or from anotherunit of government. The change in the cost of living is, at the County’s option, either (i) the percentagechange in California per capita personal income from the preceding fiscal year, or (ii) the percentagechange in the local assessment roll from the preceding fiscal year for the jurisdiction due to the additionof local nonresidential new construction. Pursuant to the Revenue and Taxation Code, the State’sDepartment of Finance annually transmits to each city and each county an estimate of the percentagechange in the population of the city or the county.

Article XIII B permits any government entity to change the appropriations limit by vote of theelectorate in conformity with statutory and Constitutional voting requirements, but any such voter-approved change can only be effective for a maximum of four years.

Unitary Property

AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility propertyassessed by the State Board of Equalization (“Unitary Property”), commencing with the Fiscal Year1988-89, will be allocated as follows: (i) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (ii) if county-wide revenues generated from Unitary Property are less than theprevious year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction willshare the burden of the shortfall or excess revenues by a specified formula. This provision applies to allUnitary Property except railroads, the valuation of which continues to be allocated to individual tax rateareas.

The provisions of AB 454 do not constitute an elimination of the assessment of any State-assessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization.

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Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by alljurisdictions in a county.

Proposition 218

On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right toVote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution andcontains a number of interrelated provisions affecting the ability of local agencies to levy and collect bothexisting and future taxes, assessments, fees and charges. The interpretation and application of Proposition218 will ultimately be determined by the courts with respect to a number of the matters discussed below,and it is not possible at this time to predict with certainty the outcome of such determination.

Proposition 218 (Article XIIIC) requires that all new local taxes be submitted to the electoratebefore they become effective. Taxes for general governmental purposes of the Local Agency require amajority vote and taxes for specific purposes, even if deposited in the Local Agency’s General Fund,require a two-thirds vote. Further, any general purpose tax which the Local Agency imposed, extended orincreased without voter approval after December 31, 1994 may continue to be imposed only if approvedby a majority vote in an election which must be held within two years of November 5, 1996.

Proposition 218 (Article XIIID) also adds several provisions making it generally more difficultfor local agencies to levy and maintain fees, charges, and assessments for municipal services andprograms. These provisions include, among other things, (i) a prohibition against assessments whichexceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement thatassessments must confer a “special benefit,” as defined in Article XIIID, over and above any generalbenefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of noticeand a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballotsweighted according to the proportional financial obligation of the affected party, and (iv) a prohibitionagainst fees and charges which are used for general governmental services, including police, fire orlibrary services where the service is available to the public at large in substantially the same manner as itis to property owners.

Proposition 218 (Article XIIIC) also removes limitations on the initiative power in matters ofreducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the votersof the Local Agency will not, in the future, approve an initiative or initiatives which reduce or repeal localtaxes, assessments, fees or charges currently comprising a substantial part of the Local Agency’s GeneralFund.

In connection with the sale of the Bonds, the Local Agency has represented that Proposition 218will not materially impact any existing or future taxes, fees and assessments collected by the LocalAgency and that no revenues collected by the Local Agency have been challenged as a result ofProposition 218. See APPENDIX A for more information.

Proposition 62

Proposition 62, a statutory initiative that was adopted by the voters voting in the State at theNovember 4, 1986 general election, (a) requires that any new or higher taxes for general governmentalpurposes imposed by local governmental entities be approved by a majority vote of the voters of thegovernmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxeslevied for other than general governmental purposes) imposed by a local governmental entity be approvedby a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restrictsthe use of revenues from a special tax to the purposes or for the service for which the special tax was

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imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entitiesexcept as permitted by Article XIIIA of the California Constitution, (e) prohibits the imposition oftransaction taxes and sales taxes on the sale of real property by local governmental entities, (f) requiredthat any tax imposed by a local governmental entity on or after August 1, 1985 be ratified by a majorityvote of the voters voting in an election on the tax within two years of November 5, 1986 or be terminatedby November 15, 1988 and (g) requires a reduction of ad valorem property taxes allocable to thejurisdiction imposing a tax not in compliance with its provisions equal to one dollar for each dollar ofrevenue attributable to the invalid tax, for each year that the tax is collected.

Following its adoption by the voters, various provisions of Proposition 62 were declaredunconstitutional at the appellate court level. For example, in City of Woodlake v. Logan, 230 Cal.App.3d1058 (1991) (the “Woodlake Case”), the Court of Appeal held portions of Proposition 62 unconstitutionalas a referendum on taxes prohibited by the California Constitution. In reliance on the Woodlake Case,numerous taxes were imposed or increased after the adoption of Proposition 62 without satisfying thevoter approval requirements of Proposition 62.

On September 28, 1995, the California Supreme Court, in Santa Clara County LocalTransportation Authority v. Guardino, 11 Cal. 4th 220 (1995) (the “Santa Clara Case”), upheld theconstitutionality of the portion of Proposition 62 requiring a two-thirds vote in order for a localgovernment or district to impose a special tax, and, by implication, upheld a parallel provision requiring amajority vote in order for a local government or district to impose any general tax. In deciding the SantaClara Case on Proposition 62 grounds, the Court disapproved the decision in the Woodlake Case.

The decision in the Santa Clara Case did not address the question of whether it should be appliedretroactively. On June 4, 2001, the California Supreme Court released Howard Jarvis TaxpayersAssociation v. City of La Habra, et al. (“La Habra”). In this decision, the court held that a publicagency’s continued imposition and collection of a tax is an ongoing violation, upon which the statute oflimitations period begins anew with each collection. The court also held that, unless another statute orconstitutional rule provided differently, the statute of limitations for challenges to taxes subject toProposition 62 is three years. Accordingly, a challenge to a tax subject to Proposition 62 may only bemade for those taxes received within three years of the date the action is brought.

In connection with the sale of the Bonds, the Local Agency has represented that Proposition 62will not materially impact any existing or future taxes, fees and assessments collected by the LocalAgency and that no revenues collected by the Local Agency have been challenged as a result ofProposition 62. See APPENDIX A for more information.

Proposition 26

Proposition 26 (“Proposition 26”), which was approved by California voters on November 2,2010, revises the California Constitution to expand the definition of “taxes.” Proposition 26 re-categorizes many State and local fees as taxes and specifies a requirement of two-thirds voter approval fortaxes levied by local governments.

Proposition 26 requires the State obtain the approval of two-thirds of both houses of the StateLegislature for any proposed change in State statutes, which would result in any taxpayer paying a highertax. Proposition 26 eliminates the previous practice whereby a tax increase coupled with a tax reductionthat resulted in an overall neutral fiscal effect was subject only to a majority vote in the State Legislature.Furthermore, pursuant to Proposition 26, any increase in a fee above the amount needed to provide thespecific service or benefit is deemed to be a tax and the approval thereof will require such two-thirds voteof approval to be effective. In addition, for State imposed fees and charges, any fee or charge adopted

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after January 1, 2010 with a majority vote of approval of the State Legislature which would have requireda two-thirds vote of approval of the State Legislature if Proposition 26 were effective at the time of suchadoption is repealed as of November 2011 absent the re-adoption by the requisite two-thirds vote.

Proposition 26 amends Article XIII C of the State Constitution to state that a “tax” means a levy,charge or exaction of any kind imposed by a local government, except (1) a charge imposed for a specificbenefit conferred or privilege granted directly to the payor that is not provided to those not charged, andwhich does not exceed the reasonable costs to the local government of conferring the benefit or grantingthe privilege; (2) a charge imposed for a specific government service or product provided directly to thepayor that is not provided to those not charged, and which does not exceed the reasonable costs to thelocal government of providing the service or product; (3) a charge imposed for the reasonable regulatorycosts to a local government for issuing licenses and permits, performing investigations, inspections andaudits, enforcing agricultural marketing orders, and the administrative enforcement and adjudicationthereof; (4) a charge imposed for entrance to or use of local government property or the purchase rental orlease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicialbranch of government or a local government as a result of a violation of law; (6) a charge imposed as acondition of property development; or (7) assessments and property related fees imposed in accordancewith the provisions of Proposition 218. See “ Proposition 218”) herein.

Proposition 26 applies to any levy, charge or exaction imposed, increased, or extended by localgovernment on or after November 3, 2010, unless exempted, as stated above. Accordingly, fees adoptedprior to that date are not subject to the measure until they are increased or extended or if it is determinedthat an exemption applies.

Proposition 1A (2004)

Proposition 1A, proposed by the Legislature in connection with the 2004-05 Budget Act,approved by the voters in November 2004 and generally effective in Fiscal Year 2007-08, provides thatthe State may not reduce any local sales tax rate, limit existing local government authority to levy a salestax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1Agenerally prohibits the State from shifting to schools or community colleges any share of property taxrevenues allocated to local governments for any fiscal year, as set forth under the laws in effect as ofNovember 3, 2004. Any change in the allocation of property tax revenues among local governmentswithin a county must be approved by two-thirds of both houses of the Legislature. Proposition 1Aprovides, however, that beginning in fiscal year 2008-09, the State may shift to schools and communitycolleges up to 8% of local government property tax revenues, which amount must be repaid, with interest,within three years, if the Governor proclaims that the shift is needed due to a severe state financialhardship, the shift is approved by two-thirds of both houses and certain other conditions are met. TheState may also approve voluntary exchanges of local sales tax and property tax revenues among localgovernments within a county. Proposition 1A also provides that if the State reduces the VLF ratecurrently in effect, 0.65 percent of vehicle value, the State must provide local governments with equalreplacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspendState mandates affecting cities, counties and special districts, excepting mandates relating to employeerights, schools or community colleges, in any year that the State does not fully reimburse localgovernments for their costs to comply with such mandates.

In connection with the State’s fiscal year 2009-10 budget, the Governor declared a severe statefinancial hardship and the legislature approved the 8% property tax shift from local governments to theState as described above, which affected the Local Agency. The State is required to repay the shiftedproperty tax revenue to the Local Agency (the “Loan Receivables”) by no later than June 30, 2013.However, the Local Agency participated in a securitization program whereby they sold their Loan

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Receivables to the Authority through a securitization program and received an amount equal to the shiftedproperty tax revenue in fiscal year 2009-10. As a result, the Local Agency experienced no net reductionof property tax revenues due to the shift. The State may not shift property tax revenues again pursuant toProposition 1A (2004) until after the local governments have been repaid (i.e. Loan Receivables havebeen paid). The State is also prohibited from shifting property tax revenues more than twice in a 10-yearperiod, which period begins in the year with the first suspension.

Proposition 1A may result in increased and more stable Local Agency revenues. The magnitudeof such increase and stability is unknown and would depend on future actions by the State. However,Proposition 1A could also result in decreased resources being available for State programs. Thisreduction, in turn, could affect actions taken by the State to resolve budget difficulties. Such actionscould include increasing State taxes, decreasing spending on other State programs or other action, someof which could be adverse to the finances of the Local Agency. The State’s ability to initiate futureexchanges and shifts of funds will be limited by Proposition 22 (described below).

Proposition 22

Proposition 22 (“Proposition 22”), which was approved by California voters in November 2010,prohibits the State, even during a period of severe fiscal hardship, from delaying the distribution of taxrevenues for transportation, redevelopment, or local government projects and services and prohibits fueltax revenues from being loaned for cash-flow or budget balancing purposes to the State General Fund orany other State fund. Due to the prohibition with respect to State’s ability to take, reallocate, and borrowmoney raised by local governments for local purposes, Proposition 22 supersedes certain provisions ofProposition 1A of 2004. See “ - Proposition 1A” herein. In addition, Proposition 22 generally eliminatesthe State’s authority to temporarily shift property taxes from cities, counties, and special districts toschools, temporarily increase school and community college district’s share of property tax revenues,prohibits the State from borrowing or redirecting redevelopment property tax revenues or requiringincreased pass-through payments thereof, and prohibits the State from reallocating vehicle license feerevenues to pay for State-imposed mandates. In addition, Proposition 22 requires a two-thirds vote ofeach house of the State Legislature and a public hearing process to be conducted in order to change theamount of fuel excise tax revenues shared with cities and counties. The LAO states that Proposition 22will prohibit the State from enacting new laws that require redevelopment agencies to shift funds toschools or other agencies.

Proposition 22 prohibits the State from borrowing sales taxes or excise taxes on motor vehiclefuels or changing the allocations of those taxes among local government except pursuant to specifiedprocedures involving public notices and hearings. In addition, Proposition 22 requires that the State applythe formula setting forth the allocation of State fuel tax revenues to local agencies revert to the formula ineffect on June 30, 2009. The LAO anticipates that Proposition 22 will require the State to adoptalternative actions to address its fiscal and policy objectives, particularly with respect to short-term cashflow need.

Assessment Appeals and Assessor Reductions

Pursuant to California law, a property owner may apply for a reduction of the property taxassessment for such owner’s property by filing a written application, in the form prescribed by the StateBoard of Equalization, with the appropriate county assessment appeals board (a “Proposition 8” appeal).In addition to reductions in assessed value resulting from Proposition 8 appeals, Proposition 8 also allowsassessors to reduce assessed value unilaterally to reflect reductions in market value.

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Any reduction in the assessment ultimately granted applies only to the year for which applicationis made and during which written application is filed. The assessed value increases to its pre-reductionlevel for fiscal years following the year for which the reduction application is filed. However, if thetaxpayer establishes through proof of comparable values that the property continues to be overvalued(known as “ongoing hardship”), a county assessor has the power to grant a reduction not only for the yearfor which application was originally made, but also for the then current year as well. In a similar manner,a county assessor may reassert the pre-appeal level of assessed value depending on the county assessor’sdetermination of current value.

In addition to reductions in assessed value resulting from Proposition 8 appeals, California lawalso allows assessors to reduce assessed value unilaterally based on a general decline in market value ofan area. Although Proposition 8 reductions are temporary and are expected to be eliminated underProposition 13 if and when market conditions improve, no assurance is given that such reductions will beeliminated.

The Local Agency is likely to be affected by a reduction in taxable property assessed values dueto successful property owner appeals and/or unilateral reductions by a county assessor. See APPENDIXA – “LOCAL AGENCY GENERAL AND FINANCIAL INFORMATION.”

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID, Propositions 218, 111, 62, 1A, 22 and26 were each adopted as measures that qualified for the ballot through California’s initiative process.From time to time other initiative measures could be adopted, further affecting Local Agency revenues.

TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP, Special Counsel to the Local Agencyand Bond Counsel to the Authority, based upon an analysis of existing laws, regulations, rulings andcourt decisions, and assuming, among other matters, the accuracy of certain representations andcompliance with certain covenants, interest on the Bonds is excluded from gross income for federalincome tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and isexempt from State of California personal income taxes. The amount treated as interest on the Bondsand excluded from gross income may depend on the taxpayer’s election under Internal RevenueService Notice 94-84. In the further opinion of Special Counsel and Bond Counsel, interest on theBonds is not a specific preference item for purposes of the federal individual and corporatealternative minimum taxes, although Special Counsel and Bond Counsel observe that it is included inadjusted current earnings when calculating corporate alternative minimum taxable income. Acomplete copy of the proposed form of opinion of Special Counsel and Bond Counsel is set forth inAPPENDIX H hereto.

Notice 94-84, 1994-2 C.B. 559, states that the Internal Revenue Service (the “IRS”) isstudying whether the amount of the payment at maturity on short-term debt obligations (i.e., debtobligations with a stated fixed rate of interest which mature not more than one year from the date ofissue) that is excluded from gross income for federal tax purposes is (i) the stated interest payable atmaturity or (ii) the difference between the issue price of short-term debt obligations and theaggregate amount to be paid at maturity of the short-term debt obligations (the “original issuediscount”). The Bonds may be executed as short-term debt obligations. For this purpose, the issueprice of the short-term debt obligations is the first price at which a substantial amount of the short-term debt obligations is sold to the public (excluding bond houses, brokers, or similar persons or

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organizations acting in the capacity of underwriters, placement agents or wholesalers). Until the IRSprovides further guidance with respect to tax-exempt short-term debt obligations, taxpayers may treateither the stated interest payable at maturity or the original issue discount as interest that is excludedfrom gross income for federal income tax purposes.

However, taxpayers must treat the amount to be paid at maturity on all tax-exempt short-termdebt obligations in a consistent manner. Taxpayers should consult their own tax advisors withrespect to the tax consequences of ownership of the Bonds if the Bonds are executed as short-termdebt obligations and if the taxpayer elects original issue discount treatment.

Bonds purchased, whether at original issuance or otherwise, for an amount higher than theirprincipal amount payable at maturity (“Premium Bonds”) will be treated as having amortizable bondpremium. No deduction is allowable for the amortizable bond premium in the case of bonds, like thePremium Bonds, the interest on which is excluded from gross income for federal income taxpurposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in aPremium Bond, will be reduced by the amount of amortizable bond premium properly allocable tosuch Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisorswith respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusionfrom gross income for federal income tax purposes of interest on obligations such as the Bonds. TheAuthority and the Local Agency have made certain representations and covenanted to comply withcertain restrictions, conditions and requirements designed to ensure that interest on the Bonds willnot be included in federal gross income. Inaccuracy of these representations or failure to complywith these covenants may result in interest on the Bonds being included in gross income for federalincome tax purposes, possibly from the date of original issuance of the Bonds. The opinion ofSpecial Counsel and Bond Counsel assumes the accuracy of these representations and compliancewith these covenants. Special Counsel and Bond Counsel have not undertaken to determine (or toinform any person) whether any actions taken (or not taken), or events occurring (or not occurring),or any other matters coming to Special Counsel and Bond Counsel’s attention after the date ofissuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds.Accordingly, the opinion of Special Counsel and Bond Counsel is not intended to, and may not, berelied upon in connection with any such actions, events or matters.

One of the covenants of the Local Agency referred to above requires the Local Agency thatdoes not qualify as a “small governmental issuer” under the Code to reasonably and prudentlycalculate the amount, if any, of excess investment earnings on the proceeds of the Bonds which mustbe rebated to the United States, to set aside from lawfully available sources sufficient moneys to paysuch amounts and to otherwise do all things necessary and within its power and authority to assurethat interest on the Bonds is excluded from gross income for federal income tax purposes. Under theCode, if the Local Agency spends 100% of its pro rata share of the proceeds of the Bonds within sixmonths after initial delivery, there is no requirement that there be a rebate of investment profits inorder for interest on the Bonds to be excluded from gross income for federal income tax purposes.The Code also provides that such proceeds are not deemed spent until all other available moneys(less a reasonable working capital reserve) are spent. The Local Agency expects to satisfy thisexpenditure test or, if they fail to do so, to make any required rebate payment from moneys receivedor accrued during the 2011-12 fiscal year. To the extent that any rebate cannot be paid from suchmoneys, the law of California is unclear as to whether such covenant would require the LocalAgency to pay any such rebate. This would be an issue only if it were determined that the Local

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Agency’s calculations of expenditures of Bond proceeds or of rebatable arbitrage profits, if any, wereincorrect.

Although Special Counsel and Bond Counsel are of the opinion that interest on the Bonds isexcluded from gross income for federal income tax purposes and is exempt from State of Californiapersonal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, theBonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature andextent of these other tax consequences depends upon the particular tax status of the Beneficial Owneror the Beneficial Owner’s other items of income or deduction. Special Counsel and Bond Counselexpress no opinion regarding any such other tax consequences.

Future legislative proposals, if enacted into law, clarification of the Code or court decisionsmay cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or tobe subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners fromrealizing the full current benefit of the tax status of such interest. The introduction or enactment ofany such future legislative proposals, clarification of the Code or court decisions may also affect themarket price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consulttheir own tax advisors regarding any pending or proposed federal or state tax legislation, regulationsor litigation, as to which Special Counsel and Bond Counsel expresses no opinion.

The opinion of Special Counsel and Bond Counsel is based on current legal authority, coverscertain matters not directly addressed by such authorities, and represents Special Counsel’s and BondCounsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is notbinding on the IRS or the courts. Furthermore, Special Counsel and Bond Counsel cannot give andhas not given any opinion or assurance about the future activities of the Authority or Local Agency,or about the effect of future changes in the Code, the applicable regulations, the interpretation thereofor the enforcement thereof by the IRS. The Authority and the Local Agency have covenanted,however, to comply with the requirements of the Code.

Special Counsel’s and Bond Counsel’s engagement with respect to the Bonds ends with theissuance of the Bonds, and, unless separately engaged, Special Counsel and Bond Counsel are notobligated to defend the Authority, the Local Agency or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under currentprocedures, parties other than the Authority, the Local Agency and their appointed counsels,including the Beneficial Owners, would have little, if any, right to participate in the auditexamination process. Moreover, because achieving judicial review in connection with an auditexamination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions withwhich the Authority or the Local Agency legitimately disagrees, may not be practicable. Any actionof the IRS, including but not limited to selection of the Bonds for audit, or the course or result ofsuch audit, or an audit of bonds presenting similar tax issues may affect the market price for, or themarketability of, the Bonds, and may cause the Authority, the Local Agency or the BeneficialOwners to incur significant expense.

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LITIGATION

The Authority

There is no action, suit or proceeding known to be pending or threatened, restraining or enjoiningthe execution or delivery of the Bonds, the Indenture or in any way contesting or affecting the validity ofthe foregoing or, any action of the Authority taken with respect to any of the foregoing.

There is no litigation pending or, to the knowledge of the Authority, threatened, questioning theexistence of the Authority, or the title of the officers of the Authority to their respective offices.

Local Agency

There is no action, suit or proceeding known to be pending or threatened, restraining or enjoiningthe execution or delivery of the Notes or in any way contesting or affecting the validity of the foregoingor, any action of the Local Agency taken with respect to any of the foregoing.

There is no litigation pending or, to the knowledge of the Local Agency, threatened, questioningthe existence of the Local Agency, or the title of the officers of the Local Agency to their respectiveoffices, or the power and authority of the Local Agency to issue and deliver the Notes or the Trustee toexecute and deliver the related Bonds.

For information on litigation concerning the Local Agency, see APPENDIX A attached hereto.

RATINGS

Moody’s Investors Service, Inc. has assigned the rating of “MIG 1” to the Bonds. Standard &Poor’s Rating Services has assigned the rating of “SP-1+” to the Bonds. The Local Agency suppliedcertain information to the rating agencies to be considered in evaluating the Bonds. Each rating reflectsonly the views of the rating agency issuing such rating, and any explanation of the significance of suchrating on the Bonds should be obtained from such rating agency. There is no assurance that any ratingwill be retained for any given period of time or that the same will not be revised downward or withdrawnentirely by the rating agency issuing such rating if, in its judgment, circumstances so warrant. TheAuthority undertakes no responsibility to oppose any downward revision or withdrawal of any rating.Any such downward revision or withdrawal of any rating may have an adverse effect on the market priceof the Bonds.

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UNDERWRITING

The Authority, and Citigroup Global Markets, Inc., as senior manager and as representative of theunderwriters (the “Underwriters”), have entered into a Bond Purchase Agreement (the “Bond PurchaseAgreement”) pursuant to which each Series of Bonds are to be purchased by the Underwriters at apurchase price described below.

Series Local Agency

PrincipalAmountof Bonds

Plus OriginalIssue Premium

LessUnderwriters’

Discount Purchase PriceA-5a County of Monterey $22,000,000.00 $157,080.00 $40,020.50 $22,117,059.50A-5b County of Monterey $21,855,000.00 $263,352.75 $39,756.75 $22,078,596.00

The Underwriters may offer and sell the Bonds to certain dealers and others at a price lower thanthe offering prices stated on the cover hereof. The Underwriters may change the offering prices fromtime to time.

Citigroup Inc., parent company of Citigroup Global Markets Inc., an underwriter of the Bonds,has entered into a retail brokerage joint venture with Morgan Stanley. As part of the joint venture,Citigroup Global Markets Inc. will distribute municipal securities to retail investors through the financialadvisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distributionarrangement became effective on June 1, 2009. As part of this arrangement, Citigroup Global MarketsInc. will compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.

De La Rosa & Co., one of the Underwriters of the Bonds, has entered into separate agreementswith Credit Suisse Securities USA LLC, UnionBanc Investment Services LLC and City NationalSecurities, Inc. for retail distribution of certain municipal securities offerings, at the original issue prices.Pursuant to said agreement, if applicable to the Bonds, De La Rosa & Co. will share a portion of itsunderwriting compensation with respect to the Bonds, with Credit Suisse Securities USA LLC,UnionBanc Investment Services LLC or City National Securities, Inc.

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CONTINUING DISCLOSURE

The Authority will covenant in the Indenture for the benefit of the Owners of the Bonds toprovide notices of the occurrence of certain enumerated events (the “Listed Events”), if material.The notices of material events will be filed with the Municipal Securities Rulemaking Board (the“MSRB”) through its Electronic Municipal Market Access (“EMMA”). These covenants will be madein order to assist the Underwriters in complying with Securities and Exchange Commission Rule15c2-12(b)(5) (the “Rule”). In connection with the prior issuance of bonds and certificates ofparticipation, the Authority has not breached a continuing disclosure obligation within the past fiveyears. See APPENDIX G – “DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF NOTERESOLUTION AND SUMMARY OF INDENTURE — SUMMARY OF INDENTURE —Continuing Disclosure.”

CERTAIN LEGAL MATTERS

At the time of the delivery of the Bonds, Orrick, Herrington & Sutcliffe LLP, Los Angeles,California, Bond Counsel to the Authority and Special Counsel to the Local Agency, will deliver its finalapproving opinion in the form set forth in Appendix H. A copy of such approving opinion will beavailable for delivery with each Series of Bonds.

Certain legal matters will be passed upon for the Underwriters by their counsel,Hawkins Delafield & Wood LLP, San Francisco, California. Certain legal matters will be passed upon forthe Local Agency by its general counsel.

[Remainder of Page Intentionally Left Blank]

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AUTHORIZATION AND APPROVAL

This Official Statement, and its distribution and use by the Underwriters, have been dulyauthorized and approved by the Authority.

CALIFORNIA STATEWIDE COMMUNITIESDEVELOPMENT AUTHORITY

By /s/ Kelli L. OropezaAuthorized Signatory

(THIS PAGE INTENTIONALLY LEFT BLANK)

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APPENDIX A

MONTEREY COUNTY GENERAL AND FINANCIAL INFORMATION

This Appendix contains information provided by Monterey County (the “County”), unlessotherwise noted. Such information relates to the County’s general and financial condition and includestables setting forth summary budget and financial information for the County. Such financial and budgetinformation is summary in nature and is not intended to present a detailed or comprehensive descriptionof the financial situation of the County. The County's Audited Financial Statements for Fiscal YearEnded June 30, 2010 are presented in APPENDIX B — “COUNTY OF MONTEREY AUDITEDFINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2010.” This Appendix containscash flow summary information and projected Note payment coverage for the County. Such cash flowsand payment coverage are projections only; there can be no assurance that such projections will berealized.

General Representations

The County has certified that the following statements are true and correct to the best knowledgeof an officer of such County.

The County has not failed (in the last ten (10) years) to make TRANs segregations torepayment accounts.

The County has not defaulted on a lease or debt obligation in the last ten (10) years.

The County has not failed to comply with any disclosure obligations with respect tosecurities, including under SEC Rule 15c2-12 and/or a written undertaking.

There has not been a material adverse change in the County’s financial condition since June30, 2010.

The County does not have any sales tax or property tax payers which are expected tocontribute in excess of 10% of the sales tax or property tax received by the County during the2011-12 Fiscal Year.

There are no major taxpayers currently delinquent or expected to be delinquent in thepayment of property taxes, franchise taxes or other taxes to the County.

Proposition 218 or Proposition 62 will not materially impact any existing or future taxes, feesand assessments collected by the County. See “Constitutional and Statutory Limitations onTaxes and Appropriations – Proposition 218” and “– Proposition 62” in the forepart of thisOfficial Statement.

There have been no revenues collected by the County that have been challenged as a result ofProposition 218 or Proposition 62.

The County does not have any funds invested in derivatives or reverse repurchaseagreements, and the County does not have a leveraged portfolio.

The County does not have illiquid investments in its investment portfolio.

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The County has not adopted, and does not plan to adopt, any significant change in accountingpractices for Fiscal Years 2010-11 or 2011-12 that may have a material adverse impact on itsfinances or the presentation of its finances in its financial statements; nor have the auditor’sopinions for the financial statements of the County been qualified in the last five years.

Neither the County nor its debt obligations have been audited by the IRS within the last ten(10) years.

The County has never contributed less than its Annual Required Contribution (ARC) to itspension plan.

There is no on-going or threatened litigation, proceeding, investigation or inquiry that mayadversely affect the finances or operations of the County.

The County does not expect any significant impact to its finances or operations due to theelimination of ARRA funding or other federal funding changes.

There are no significant issues existing with respect to the County’s labor relations.

There are no other conditions or events, including but not limited to hazardous materialswhich may adversely affect the finances of the County.

The County does not have any outstanding variable rate or auction rate debt.

The County is not a party to any swap agreement.

The County has invested $10,154,170 held in a reserve fund relating to the County's$152,680,000 Certificates of Participation (2007 Refunding and Public Facilities Financing)with FSA Capital Management Services LLC pursuant to a collateralized investmentagreement (the “Investment Agreement”). The Investment Agreement is guaranteed byFinancial Security Assurance Inc. (now Assured Guaranty Municipal Corp.) and bearsinterest at 5.171% per annum. The Investment Agreement must be collateralized and maybe collateralized by cash, securities issued or guaranteed by the United States Government,and/or securities issued or guaranteed by the Government National Mortgage Association(“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal HomeLoan Mortgage Corporation (“FHLMC”).

The weighted average maturity of the County’s investment portfolio is 291 days.

The County does not have any other information which is necessary to be disclosed in orderto make the statements above, in the light of the circumstances under which such statementsare made, not misleading.

Supplemental Financial Information for Monterey County

Introduction. Monterey County is located on the Pacific coast of California, famous for someof the world’s most beautiful coastline including Big Sur, California State Route 1, and 17 Mile Drive onthe Monterey Peninsula. With an area of approximately 3,300 square miles and 99 miles of coastline, theCounty borders the Pacific Ocean almost at the midpoint of California. Monterey County was one of theoriginal counties of California, created in 1850 at the time of statehood. The County is located

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approximately 100 miles south of San Francisco and 240 miles north of Los Angeles. It is bordered bySanta Cruz County to the north, San Benito (originally part of the County), Fresno and Kings Counties tothe east and San Luis Obispo County to the south. As of January 1, 2011, the current population wasapproximately 431,000.

Approximately 98% of the 3,300 square miles in the County are outside of a municipality, withapproximately 25% of the residents living in these unincorporated areas. The City of Salinas is theCounty's largest city with approximately 146,000 residents as of January 1, 2011 and serves as the Countyseat. The eleven other incorporated cities are Carmel-by-the Sea, Del Rey Oaks, Gonzales, Greenfield,King City, Marina, Monterey, Sand City, Seaside, Soledad and Pacific Grove.

There are two distinct sub-regions in the County: the Monterey Peninsula and the Salinas Valley.The Monterey Peninsula is world famous for beautiful ocean views, 17-mile drive, delicious seafood andworld-class golf courses. Pebble Beach, Cypress Point, Spyglass Hill, Poppy Hills, The Links at SpanishBay, and the Dunes and Shore courses at Monterey Peninsula Country Club are well-known MontereyPeninsula golf courses. The Monterey Bay Aquarium and the City of Carmel-by-the Sea are alsoattractions that draw tourists to the Monterey Peninsula. The Salinas Valley is equally renowned as anarea full of fertile farmland, running almost the entire length of the County and is one of the world's mostfertile major vegetable producing areas. Agriculture, tourism, and government are major contributors tothe County’s economy.

The County also benefits from two wilderness areas set aside for recreational enjoyment,consisting of 468,538 total acres. The Los Padres National Forest has 304,035 acres and the VentanaWilderness totals 164,503 acres.

Government and Administration. The County is a general law county, and is governed by afive-member Board of Supervisors elected to serve four-year terms. Other elected officials include theAssessor-Clerk-Recorder, District Attorney, Sheriff, Auditor-Controller and Treasurer-Tax Collector. TheCounty Administrative Officer is appointed by the Board of Supervisors and administers the day-to-daybusiness of the County. With approximately 4,300 governmental employees (approximately 3,100 ofwhom are general fund employees) , the County government provides a full range of public servicesincluding public safety, roads and facilities, social services, administrative services, health services,sanitation services and leisure services. Typically, the department heads that run these operations, otherthan the elected department heads, are appointed by the County Administrative Officer.

The Treasurer-Tax Collector is an elected officer of the County. Operating under State ofCalifornia statutes found in the Revenue and Taxation Code and Government Code, the Treasurer-TaxCollector performs a variety of functions which collectively contribute to the financial managementnetwork of the County, the County’s school districts, and many of the County’s special districts. TheAuditor-Controller is the chief fiscal officer of the County. The Auditor-Controller is elected by Countyvoters to provide accounting, budgeting, and financial services to the public, county agencies, schooldistricts, special districts, and cities as defined under Government Code.

Financial and Accounting Information. The accounts of the County are organized on the basisof funds and account groups, each of which is considered a separate entity. The operations of each fundare accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fundequity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to andaccounted for in individual funds based upon the purposes for which they are to be spent and the meansby which the spending activities are controlled. The various funds are grouped into fund and accountcategories as described below under the caption “Budgetary Process” and in APPENDIX B —

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“COUNTY OF MONTEREY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDEDJUNE 30, 2010.”

Countywide Economic Conditions

Housing. The County closely followed statewide trends during the recent boom-and-bust cycle,with total new home sales (including those not part of major subdivisions) last peaking at 263 sales in thethird quarter of 2005. Between that quarter and the second quarter of 2009 – with a few quarterlyexceptions – new home sales declined by 90%. Although new home sales did rise to nearly 50 units perquarter as various State and Federal tax credits caused the market to spike, by the last half of 2010,quarterly sales had again fallen to just 16 units. From the fourth quarter of 2010, new home sales fellmore sharply in Monterey County (68%) than in Santa Barbara County (48%) and in San Luis ObispoCounty (40%).

After peaking during the middle of 2004 at nearly 1,400 units, sales of existing single-familyhomes in the County continued to slide through the fourth quarter of 2007, reaching a trough of 332 sales.Although sales did begin to rise steadily through the first quarter of 2009 – nearly tripling to over 1,200units – this increase was expectedly due to rapidly falling home prices and Federal tax credit programsfavoring homebuyers. When price declines started to flatten out and the initial tax credit programsexpired, sales began to erode once again to 835 units during the fourth quarter of 2010.

From the fourth quarter of 2009 to the fourth quarter of 2010, as sales of single-family homesthroughout the State fell by just under 15%, sales in the County fell by 21%. In fact, sales in the Countyfell more steeply than in San Luis Obispo County (4.7%), Santa Barbara County (15.4%), and Santa CruzCounty (18.4%).

Median prices for existing single-family homes in the County last peaked at nearly $655,000 inthe first quarter of 2006, nearly doubling from levels seen in 2002. But as the housing bubble burst,prices began to steadily decline, falling below the $600,000 level in late 2007 and below $400,000 by themiddle of 2008. By the second quarter of 2009, the median sales price had fallen to just under $199,000or close to what it had been in the third quarter of 1999. While single-family home prices did begin torise throughout 2009 and into 2010 – rebounding to nearly $260,000 – the County believes much of thatrise was due to buyers taking advantage of tax credit programs. As of the fourth quarter of 2010, themedian sales price for single-family homes in Monterey County had fallen back to $226,602, representingdeclines of 5.0% from the previous quarter and 10.1% from the same quarter of 2008.

Monterey County Average Home Sales Price

$0$200,000$400,000$600,000$800,000

$1,000,000$1,200,000

Q2

2007

Q4

2007

Q2

2008

Q4

2008

Q2

2009

Q4

2009

Q2

2010

Q4

2010

Source: Monterey County Association of Realtors

Quarterly Real Estate Sales Volume

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

Volume

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Employment. Over the last year, the number in the workforce in the County has declined from194,900 in April 2010 to 187,800 in 2011. The number unemployed in April 2010 was 27,000 comparedto 27,200 in 2011. According to the chart below, unemployment is historically extremely cyclical inMonterey County.

Unemployment Rates

02468

101214161820

Jan-

07

Apr-0

7

Jul-0

7

Oct

-07

Jan-

08

Apr-0

8

Jul-0

8

Oct

-08

Jan-

09

Apr-09

Jul-0

9

Oct

-09

Jan-

10

Apr-1

0

Jul-1

0

Oct

-10

Jan-

11

Apr-1

1

Monterey County California

Source: California Employment Development Department, not seasonally adjusted unemployment tables.

The Farming, Fishing, and Forestry industry average annual wage is impacted, due to the cyclicalnature of the farming industry, with employment declining in December after the fall harvest.

Growth in total employment has been driven by strong growth in farm employment. The long-term trend shows fluctuations over time, but the level of farm employment has remained strong throughthe recession. Considering the cyclical nature of the trend, the farming sector appears to be less affectedby economic downturns and more heavily influenced by sector-specific issues, such as growingconditions. Although some sectors have continued to shed jobs, farm employment in January of 2011was at its highest level on record, at 49,800 jobs. A weak dollar has led to a boost in agricultural exportsfrom the County, which has translated to demand for agricultural labor.

Following farming and local government, the next largest sectors in employment are leisure andhospitality, and retail trade. The workers in these two sectors support the County’s tourism industry, asignificant part of the local economy. Informal sector employment in Monterey County grew throughoutthe recession. This sector includes workers who are employed but not on a company’s payroll, such asdaycare providers, house cleaners, and gardeners.

Employment Outlook. Since the start of Fiscal Year 2011, there have been significant layoffsthroughout the County affecting approximately 1,400 workers. Of that total, 467 were customarilyoccurring seasonal farm worker jobs. Recently, in efforts to balance its forecasted budget deficit, theCounty issued 170 layoff notices effective June 30. Through concessions and new funding,approximately 90 of those positions were reinstated. Similarly, the United States Post Office announcedthe closure of the 1,000 employee regional sorting operation in Salinas. Those workers willing to relocatewill not lose their jobs, however, the local economy will suffer additional revenue losses as a result. Apotential closure of the HSBC credit card processing operation in Salinas which could potentially impactan additional 1,000 jobs.

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During Fiscal Year 2010-11 the Monterey County Board of Supervisors unanimouslyapproved the creation of an Economic Development Department. The goal of the department is toencourage job creation by recruiting new business to the region and providing training to workers.

Social Services and Poverty Due to downturns in the economy, the County has experienced alarge increase in the need for social services. The bump in the need for government support has occurredacross California and the Central Coast, with a large surge in applications for both the CalFresh program,formerly know as Food Stamps, and for CalWORKs (California Work Opportunities and Responsibilityto Kids). The CalFresh program subsidizes household spending on basic food needs for low-incomefamilies and individuals. The CalWORKs program aims to assist families with children helping to payfor housing, food, and other necessities.

In Monterey County, the number of approved CalFresh applications jumped by 1,781, more thandoubling from the second quarter of 2007 through the fourth quarter of 2010. Declining revenue fromhotel, property and sales taxes impact County revenues, which fund social services, foster care services,courts and rural planning.

There has been a change in trend in the number of approved CalWORKs applications, withapplications remaining flat or even declining a bit during the past few quarters. This trend is seen acrossthe Central Coast. Although the need for CalWORKs has been on the decline, the program hasconsistently been targeted for cuts in the Governor’s recent budget proposals. If the most recent proposalgoes through, a family of three will see its CalWORKs grant drop 13% in addition to the 4% hit that wastaken in a previous cut.

Budgetary Information

Budgetary Process. The County is required by State law to adopt a balanced budget by July 1 ofeach fiscal year. The process begins in January with budget instructions issued to departments by theCounty Administrative Officer. The various departments develop departmental budget requests by earlyMarch. After the County Administrative Officer reviews the various departmental requests, the CountyAdministrative Officer prepares the County recommended budget, which is summarized by functionalareas, and submits it to the County Board of Supervisors (the “Board”) prior to budget hearings in June.The County operates beginning July 1, the start of the fiscal year. The County Auditor-Controller isresponsible for monitoring and reporting expenditures within budgeted appropriations. The Board hasestablished a Budget Committee with two members of the Board. This committee meets monthly toreview financial and program issues of the County. Semiannually, the Board receives a summary reviewof the County’s operating results as compared to the budget, with an analysis by the CountyAdministrative Officer.

Budget data is prepared on the modified accrual basis consistent with comparable actual amounts.Budget appropriations represent original amounts adjusted by budget transfers and appropriationamendments. Encumbrance accounting is utilized during the year for budget control purposes. However,encumbrances outstanding at year-end do not constitute expenditures or liabilities, but rather reserves offund balances. The County does, however, honor the contracts represented by year-end encumbrances.Unencumbered budget appropriations lapse at the end of the fiscal year. Board policy requires re-appropriation of carryover capital improvement projects on an annual basis after review of each projectstatus.

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Amendments or transfers of appropriations between major objects of expenditure within the samebudget unit have been delegated to the County Administrative Office and the Auditor-Controller’s Officeby the Board in 1986.

Supplemental appropriations necessary and normally financed by unanticipated revenues duringthe year must also be approved by the Board. Any deficiency of budgeted revenues and other financingsources over expenditures and other financing uses is financed by beginning available fund balances asprovided for in the County Budget Act.

Impacts of the State Budget. The County anticipates additional impacts that will requireadditional review and adjustment to assure funding requirements do not exceed available revenue.

State Funding of Counties. Counties are the principal agents for providing services on behalf ofthe State, particularly in the areas of public health, welfare, judicial and corrections programs, as well asproviders of local services in a variety of areas, including law enforcement, roads, parks, libraries,agriculture and various social service programs. Substantial portions of many of these services areimplementations of State mandated programs and State administered federal programs supported by Stateand federal revenues. The tension between counties and the State is often due to the adequacy of Stateprovided revenue for State mandated programs. Historically, the County has been able to reduceexpenditures when necessary to match available funding sources, as required by law.

Currently, approximately 50% of the County’s General Fund Budget consists of payments fromother government agencies including the State of California. The financial condition of the State has animpact on the level of these revenues. In the past several years the State has turned to counties to helpsolve the State’s budget problems. The State has diverted revenues such as cigarette taxes from countiesto the State. The federal government provides approximately 16.2% of the County’s General Fundbudget. The human services departments receive substantial funds for assistance payments and socialservices programs.

In connection with the issuance by the State of its deficit reduction bonds under Proposition 57,the State created a dedicated revenue stream secured by certain local sales taxes through a mechanismcalled the “Triple Flip.” Under this method, beginning in Fiscal Year 2004-05, the State would take 25%of the local government 1% sales tax (cities and counties), to continue for nine years. Each January (sixmonths into the fiscal year), the State would require that counties take property tax which was earmarkedfor schools and pay back the first six months of the sales tax takeaway to the local governments. The Statewould then have the counties pay the estimated next six months in May. The difference between theestimated and actual sales tax in one year would be corrected in the following year’s payments. Then, theState, using State General Fund monies, would pay back the schools. The State repayment of Countysales tax in Fiscal Year 2010-11 was $12,507,629.

In addition to the Triple Flip, which delayed the receipt of Sales Tax to local jurisdictions, theState of California cut the Motor Vehicle License Fees (VLF) that the citizens had to pay late in FiscalYear 2003-04. The local share was then effectively cut by 67.5%. The State agreed to pay a VLF backfillto the local jurisdictions. This agreement has no defined end date. Again, the State had the counties takeproperty tax from the schools to pay the local governments the VLF backfill and then the State GeneralFund would reimburse the schools for their lost property tax. The State payment for VLF backfill to theCounty for Fiscal Year 2010-11 was $61,775,195.

Redevelopment Agency Impacts of State Budget. Contained in the proposed state budget is theelimination of Redevelopment Agency funding. In response to ABx1 26 (“Dissolution Act”) and ABx127 (“Voluntary Program Act”) the County hired Keyser Marston Associates, Inc. to prepare an economic

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cost analysis of the net impact to the County and the Agency. Staff is preparing an ordinance forpresentation to the Board of Supervisors to allow the County to opt in to the Voluntary Program, whichwould allow the Agency to continue to operate after payment of a contribution to local school and specialdistricts. It is anticipated that the Board of Supervisors will consider an ordinance in September. Inaddition, staff is evaluating project schedules and priorities in the event that the ordinance is passed andthe contribution is required. The County will continue to monitor legal actions, including the request fora stay and petition to overturn filed by the California Redevelopment Association and the League ofCities.

[Remainder of Page Intentionally Left Blank]

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Fiscal Year 2009-10 Budget.

Set forth in the following table is a summary statement of the County’s General Fund final budgetfor Fiscal Year 2009-10.

TABLE 1COUNTY OF MONTEREY

GENERAL FUND BUDGET(1)

FOR THE YEAR ENDED JUNE 30, 2010

Budgeted

AmountsOriginal

Budgeted

Amounts Final

Actual

Amounts(Budgetary

Basis)

Variance with

Final BudgePositive

(Negative)

Revenues:Taxes, VLF and franchises $ 144,859,392 $ 144,859,392 $ 148,222,739 $ 3,363,347Licenses and permits 11,495,999 11,495,999 10,616,599 (879,400)Fines, forfeitures & penalties 10,096,923 10,096,923 8,080,377 (2,016,546)Revenue from money & property 2,839,844 2,839,844 1,967,288 (872,556)Aid from governmental agencies 286,620,560 305,209,877 283,019,307 (22,190,570)Charges for services 76,823,366 78,823,211 68,549,773 (10,273,438)Tobacco settlement & miscellaneous 10,360,088 10,660,170 7,619,976 (3,040,194)

Total Revenues 543,096,172 563,985,416 528,076,059 (35,909,357)

Expenditures:General Government 87,934,734 88,955,567 73,066,653 15,888,914Public safety 167,359,806 170,875,007 164,509,327 6,365,680Health & sanitation 122,419,157 124,895,846 117,164,030 7,731,816Public assistance 157,368,131 168,398,902 152,935,848 15,463,054Education 631,462 631,462 544,921 86,541Debt Service 432,155 432,155 233,951 198,204Contingency 1,174,230 311,063 311,063Recreation & cultural services 9,751,141 9,751,141 8,546,183 1,204,958

Total Expenditures 547,070,816 564,251,143 517,000,913 47,250,230

Excess (deficiency) of revenues over(under) expenditures

(3,974,644) (265,727) 11,075,146 11,340,873

Other financing sources (uses):Inception of capital leases 23,285 23,285Transfers in 924,500 2,461,530 925,000 (1,536,530)Transfers out (17,773,425) (18,398,425) (18,970,031) (571,606)Sale of capital assets 244,888 244,888

Total other financing sources (uses) (16,848,925) (15,936,895) (17,776,858) (1,839,963)

Net change in budgetary fundbalances

(20,823,569) (16,202,622) (6,701,712) 9,500,910

Budgetary fund balances, July 1 89,382,531 89,382,531 89,382,531Budgetary fund balances, June 30 $ 68,558,962 $ 73,179,909 $ 82,680,819 $ 9,500,910

Source: County of Monterey Auditor-Controller.(1) Audited.

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Fiscal Year 2010-11 Budget.

Set forth in the following table is a summary statement of the County’s General Fund adoptedbudget for Fiscal Year 2010-11.

TABLE 2

COUNTY OF MONTEREY

GENERAL FUND BUDGET(1)

For Fiscal Year 2010- 2011

As of May 31, 2011(Dollar amounts in thousands)

Net Increase

Adopted Amended (Decrease)

Financing Sources

Beginning Budgeted Fund Balance $6,630 $6,866 $236

Cancellation of Reserves/Designations 8,788 8,788 0

Estimated Revenues:

Taxes 132,893 132,893 0

Licenses and Permits 16,618 17,360 742

Fines and Forfeitures 10,454 10,454 0

Use of Money and Property 1,921 1,921 0

State and Federal Aid 299,972 308,220 8,248

Charges for Services 63,225 63,930 705

Miscellaneous Revenue 7,090 7,309 219

Other Financing Sources 1,418 1,696 278

Special Items 206 206 0Total EstimatedRevenues 533,797 543,989 10,192

Total FinancingSources 549,215 559,643 10,428

Financing Uses

Appropriations:

Salaries and Benefits 345,510 346,768 1,258

Services and Supplies 151,590 166,541 14,951

Charges for Services 24,550 24,676 126

Capital Outlay 4,090 4,824 734

Other Financing Uses 18,927 13,277 (5,650)

Contingencies 4,548 3,557 (991)TotalAppropriations $549,215 $559,643 $10,428

Source: County of Monterey Auditor-Controller.(1) Unaudited.

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Fiscal Year 2011-12 Recommended/Adopted Budget.

Set forth in the following table is a summary statement of the County’s General Fund adoptedbudget for Fiscal Year 2011-12. The Fiscal Year 2011-12 Budget was adopted by the Board ofSupervisors on June 21, 2011. This budget will be subject to amendment and revision during the 2011-12Fiscal Year.

TABLE 3

GENERAL FUND BUDGET

For Fiscal Year 2011- 2012

As of June 2011(Dollar amounts in thousands)

Recommended Adopted

Financing Sources

Beginning Budgeted Fund Balance $0 $0

Cancellation of Reserves/Designations 11,467 11,467

Estimated Revenues:

Taxes 133,568 133,568

Licenses and Permits 16,086 16,086

Fines and Forfeitures 9,046 9,046

Use of Money and Property 2,046 2,046

State and Federal Aid 290,888 290,888

Charges for Services 64,438 64,438

Miscellaneous Revenue 5,441 5,441

Other Financing Sources 679 679

Special Items 189 189Total EstimatedRevenues 522,380 522,380

Total FinancingSources 533,847 533,847

Financing Uses

Appropriations:

Salaries and Benefits 339,690 339,690

Services and Supplies 140,647 140,647

Charges for Services 27,858 27,858

Capital Outlay 3,352 3,352

Other Financing Uses 17,082 17,082

Contingencies 5,217 5,217TotalAppropriations $533,847 $533,847

Source: County of Monterey Auditor-Controller.

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Recent Financial Performance. The following table summarizes certain financial data of theCounty, has been prepared by the Auditor-Controller from audited financial statements and is presentedusing the modified accrual basis of accounting.

The table below summarizes the statements of revenues, expenditures and changes in unreservedfund balances for the last three years.

TABLE 4COUNTY OF MONTEREY

GENERAL FUND STATEMENT OF ACTUAL REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCE(1)

YEARS ENDED JUNE 30, 2008, 2009 AND 2010

2008 2009 2010

RevenuesTaxes, VLF and franchises $174,009,841 $167,056,856 $148,222,739Licenses and permits 12,566,838 9,942,596 10,616,599Fines, forfeitures and penalties 6,631,996 7,395,978 8,080,377Revenue from use of money and property 3,467,409 319,919 1,967,288Aid from other governmental agencies 252,057,135 272,667,521 283,019,307Charges for services 74,091,764 76,903,170 68,549,773Tobacco settlement and miscellaneous 9,025,923 8,876,998 7,619,976

Total Revenues 531,850,906 543,163,038 528,076,059

Expenditures:General government 64,873,818 68,166,053 73,066,653Public protection 169,328,925 174,034,071 164,509,327Health and sanitation 125,523,594 130,155,966 117,164,030Public assistance 139,464,676 148,420,439 152,935,848Recreation and culture services 8,412,939 8,263,216 8,546,183Education and Debt service 544,921TRAN – interest — 613,293 233,951Capital outlay 1,903,427 -

Total Expenditures 509,507,379 529,653,038 517,000,913

Excess (Deficiency) of Revenues Over (Under)Expenditures (22,343,527) (13,510,000) 11,075,146

Other Financing Sources (Uses):Inception of Capital Leases — - 23,285Operating transfers in 337,000 159,908 925,000Operating transfers out(2) (19,933,465) (19,909,399) (18,970,031)Sale of Capital Assets 241,192 186,417 244,888

Total Other Financing Sources (Uses) (19,355,273) (19,563,074) (17,776,858)

Net Change in Fund Balance 2,988,254 (6,053,074) (6,701,712)Total Equity at Beginning of Year-Restated 100,843,623 94,384,623 89,382,531Total Equity at End of Year $103,831,877 $89,382,531 $ 82,680,819

(1) This statement is a summary statement only. The complete audited financial statements of the County for Fiscal

Year 2009-10 should be read in their entirety. See APPENDIX B — “COUNTY OF MONTEREYAUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2010.”

(2) Includes operation subsidy, Pajaro debt settlement, debt service payments, the Jail Maintenance Project, capitalimprovements and capital projects.

Source: County of Monterey Audited Financial Reports for Fiscal Years 2007-08, 2008-09 and 2009-10.

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Below is a summary of the County's General Fund assets and liabilities for the Fiscal Years 2007-08 through 2009-10.

TABLE 5COUNTY OF MONTEREY

SUMMARY OF ASSETS AND LIABILITIES – GENERAL FUNDFiscal Years 2007-08 through 2009-10

(in Thousands)

2007-08 2008-09 2009-10

Total Assets $172,417 $159,224 151,234Total Liabilities 68,585 70,893 74,731Total Fund Balance 103,832 88,331 76,503

Total Liabilities + Fund Balance $172,417 $159,224 $151,234

Source: County of Monterey Comprehensive Annual Financial Reports.

Transient Occupancy Tax. Monterey County relies on Transient Occupancy Tax (“TOT”) asanother key source of discretionary revenue. TOT, often referred to as the “hotel tax”, is the tax appliedon hotel/motel accommodations. The rate for Monterey County is 10.5%. Revenues from TOT havesuffered from the recession as occupancy and room rates have fallen due to reduced numbers of visitors tothe reduced numbers of visitors to the County. One of the more optimistic indicators that the localeconomy is heading into some level of recovery after recent years of down-turn, Fiscal Year 2010-11TOT revenues are trending above budget, and are estimated to end the year approximately $0.6 millionhigher. With recent forecasts projecting continuing growth in this sector in the coming year, the FY2011-12 Recommended Budget includes a modest increase for TOT. The recommended total of $13.4million reflects nearly $1.0 million (7.7%) in growth over the prior year adopted budget.

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TABLE 6COUNTY OF MONTEREY

TRANSIENT OCCUPANCY TAX RECEIPTSFISCAL YEARS 2001-2012 (ENDING JUNE 30)

Transient OccupancyFiscal Year Tax Receipts Rate of Change

2001 $14,430,000 13.80%2002 (1) 13,286,548 (7.92)%2003 13,476,749 1.43%2004 13,452,336 (0.18)%2005 14,420,192 7.19%2006 15,569,105 7.97%2007 16,912,274 8.63%2008 16,441,176 (0.05)%2009 14,533,941 (11.60)%2010 (2) 12,656,751 (12.92)%2011 (3) 12,448,574 (1.64)%2012 (4) 13,401,300 7.65%

Source: County of Monterey Auditor-Controller and County of Monterey Administrative Office.(1) Transient Occupancy Taxes decreased approximately 8% below 2000-01 levels following a sharp decline in

tourism after September 11, 2001.(2) Transient Occupancy Tax is from the County of Monterey Comprehensive Annual Financial Report for Fiscal

Year Ended June 30, 2010.(3) Unaudited.(4) Unaudited; data from the County of Monterey Administrative Office Recommended Budget for Fiscal Year

2011-12.

Sales Taxes. The State collects a tax on retail transactions within the County and rebates 1% tothe County. The allocation is in addition to the half-cent sales tax allocated for public safety purposespursuant to Proposition 172. Sales and use taxes contributed approximately $5.4 million to the County’sGeneral Fund revenues in the fiscal year ended June 30, 2010, equating to approximately 1.1% of totalGeneral Fund revenues for that fiscal year. Sales and use taxes are expected to continue to decline due tothe ongoing recession. The County receives a share of sales tax revenues from unincorporated areas in theCounty. The following table illustrates, for unincorporated areas of the County only, the historical salestax receipts to the General Fund for the past five years as well as computed annual rate of change for suchperiods.

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TABLE 7COUNTY OF MONTEREY

HISTORICAL TAXABLE SALES AND SALES TAX RECEIPTSFOR UNINCORPORATED AREASFISCAL YEARS ENDING 2008-2012

YearHistorical

Taxable Sales(1)

Rate of ChangeSales Tax Receipts

2008 $6,754,283 5.36%2009 6,087,130 (9.88)%2010 5,378,707 (11.58)%2011(2) 5,654,499 5.06%2012(3) 6,009,306 6.27%

Source: County of Monterey Administrative Office and California State Board of Equalization.(1) Sales Tax Receipts for the unincorporated areas of the County only; presented on a fiscal year basis.

(2) Taxable Sales for 2011 are estimates from the Revised Budget for Fiscal Year 2010-11.(3) Taxable Sales for 2012 are estimated from the Recommended Budget for Fiscal Year 2011-12

Property Taxes The County collects property taxes against all property on the secured roll in twoannual installments. Property taxes are derived on the basis of an ad valorem tax levied against the currentassessed valuation of property in the County. For the Fiscal Year ended June 30, 2010, property taxescontributed $539 million to the County. Of that amount, property taxes contributed approximately $131million to General Fund revenues, equating to approximately 21.4% of total General Fund revenues forthat fiscal year. Property tax revenues decreased by $18.6 million for fiscal year ending June 30, 2011.

Out of the $131 million, $41 million pertains to property tax in-lieu of vehicle license fee. See“State Funding of Counties” above. The assessed valuation of property in the County is established by theCounty Assessor except for public utility property which is assessed by the State Board of Equalization.Assessed valuations are reported at 100% of the full value of the property as defined in Article XIIIA ofthe California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXESAND APPROPRIATIONS – Article XIIIA” in the forepart of this Official Statement.

Taxes are levied for each fiscal year on taxable real and personal property, which is situated in theCounty as of the preceding January 1. Real property which changes ownership or is newly constructed isrevalued at the time the change in ownership occurs or the new construction is completed. The currentyear property tax rate will be applied to the reassessment and the taxes will then be adjusted by aproration factor to reflect the portion of the remaining tax year for which taxes are due.

For assessment and collection purposes, property is classified either as “secured” or “unsecured”and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of theassessment roll containing State-assessed property and property the taxes on which are a lien on realproperty sufficient in the opinion of the County Assessor to secure payment of the taxes. Other property isassessed on the “unsecured roll.” Property taxes on the secured roll are due in two installments onNovember l and February 1 of each fiscal year and, if unpaid, become delinquent on December 10 andApril 10 respectively. A penalty of 10% attaches immediately to all delinquent payments. Property on thesecured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of thefiscal year. Such property may thereafter be redeemed by payment of a penalty of one and one-halfpercent per month to the time of redemption plus costs and a redemption fee. If taxes are unpaid for aperiod of five years or more, the property is subject to sale by the County Treasurer-Tax Collector.

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Property taxes on the unsecured roll are due as of the January l lien date and become delinquent ifunpaid on August 31. A l0% penalty attaches to delinquent unsecured taxes. If unsecured taxes areunpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of eachmonth until paid. The County has four ways of collecting delinquent unsecured personal property taxes:(1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerkspecifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificateof delinquency for record in the County Recorder’s office in order to obtain a lien on certain property ofthe taxpayer; and (4) seizing and selling personal property improvements or possessory interestsbelonging or assessed to the delinquent taxpayer.

Assessed Valuation and Appeals

The following table represents a five year history of assessed valuation in the County. Theassessed valuation of property in the County is established by the County Assessor, except for publicutility property which is assessed by the State Board of Equalization. Assessed valuations are reported at100% of the full cash value of the property, as defined in Article XIIIA of the California Constitution.

TABLE 8COUNTY OF MONTEREY

ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY

FiscalYear Local Secured Utility(1) Unsecured Total

Total LessRedevelopment

Increment

2006-07 $44,791,304,920 $723,160,918 $1,900,450,107 $47,414,915,945 $43,507,598,541

2007-08 48,646,781,445 693,671,435 1,943,801,446 51,284,254,326 46,813,372,451

2008-09 49,572,897,796 758,054,383 2,148,558,392 52,479,510,571 47,941,946,211

2009-10 51,334,367,000 668,853,350 2,164,773,805 50,610,235,945 46,324,099,439

2010-11 45,795,650,828 670,257,163 2,024,731,357 48,490,639,348 44,282533,693

Source: Monterey County Property Tax Records(1) Includes unitary utility valuation.

The County has experienced significant reductions in its property tax, transient occupancy tax andsales tax as a result of the economy. In particular, assessed values were down 3.5% for Fiscal Year 2009-10 and 4.25% for Fiscal Year 2010-11. Preliminary results indicate an estimated increase of 0.19% inassessed value for the January 1, 2012 lien date.

The County Assessor has unilaterally reduced assessed values on 36,131 properties in the Countypursuant to Proposition 8. The reductions total approximately $2.8 billion and the average reduction inassessed value is 17%.

The County currently has 845 properties under protest with a total value at risk of $1.19 billion,including: Dole Fresh Vegetables ($68 million); Fresh Express ($54 million); D’Arrigo Brothers Co ($42million); Marine Comm Partners LLC ($24 million); and Northridge Fashion Mall ($20 million). Noappeals are valued at more than 5% of total county assessed value.

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Property Taxation Collections

The table below sets forth the levies, collections and percent of collections and levies for propertytaxes in the County for the last eight Fiscal Years.

TABLE 9COUNTY OF MONTEREY

SECURED TAX LEVIES AND DELINQUENCIESFISCAL YEARS 2003-04 THROUGH 2010-11

YearSecured

Tax Levy(1)

AmountDelinquent as

of June 30 of suchFiscal Year

PercentDelinquent as

of June 30 of suchFiscal Year

2003-04 $53,117,172 $652,990 1.22%2004-05 56,333,355 644,152 1.142005-06 62,841,717 1,262,696 2.002006-07 69,915,077 2,236,988 3.192007-08 71,369,629 3,765,431 5.272008-09 73,564,146 2,904,572 3.942009-10 71,742,202 2,167,542 3.022010-11 69,315,936 1,487,980 2.14

Source: California Municipal Statistics, Inc.(1) County’s share of County-wide secured tax levy.

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The following table represents the largest taxpayers of local secured property taxes within theCounty:

TABLE 10COUNTY OF MONTEREY

LARGEST TAXPAYERS FISCAL YEAR 2010-11

Property Owner

2010-11Assessed Local

SecuredValuation

TaxTotal (1)

Dynegy Moss Landing LLC 654,600,000 6,961,474.64Pacific Gas and Electric Company 410,510,683 4,432,488.86Pebble Beach Company 246,057,082 2,578,910.54Texaco Inc 180,493,548 1,970,530.94Texaco Inc 139,625,617 1,507,599.82Pebble Beach Company 130,000,000 1,496,435.02Pebble Beach Company 115,186,597 1,245,726.28Pacific Bell Telephone Company 89,433,278 965,664.76Pacific Holdings LP Et Al 93,557,911 956,434.62D Arrigo Bros. Co. 81,752,644 911,970.78California American Water 87,628,320 910,848.12Aera Energy LLC 76,246,450 814,014.72Aera Energy LLC 72,550,461 774,555.96San Bernabe Vineyards LLC 49,944,169 723,098.52Dole Fresh Vegetables, Inc 63,039,415 718,711.34Northridge Fashion Center 61,495,502 699,622.20Scheid Vineyards California 61,475,085 688,155.24Pacific Wine Partners 61,137,769 658,625.14Eagle Creek Pacific LLC 30,028,676 635,954.92CMP-1 LLC 53,189,796 615,456.90P Monterey LP 58,214,048 595,389.76WTCC Ventana Investors V L 53,368,820 555,596.38Schilling Place Property LLP 43,756,254 496,530.18FBC LLC 42,809,632 487,908.34EFS King City LLC 42,728,892 478,157.74

TOTAL $2,998,830,649 $32,879,861.72

Source: County of Monterey Auditor-Controller(1) 2010-11 Local Secured Assessed Valuation: $45,795,650,828.

Outstanding Debt

As of June 30, 2010, the County was obligated to make payments for debt service onapproximately $281.4 million of then currently outstanding aggregate principal amount of long-termbond, note, and loan obligations. This was a decrease of $11.4 million or 3.9% from prior year of $292.8million.

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The following table summarizes the County’s long-term debt outstanding for the years endedJune 30, 2009, and 2010.

TABLE 11COUNTY OF MONTEREY

LONG-TERM DEBT OUTSTANDINGFOR THE YEARS ENDED JUNE 30, 2009 AND 2010

Governmental ActivitiesDate ofIssue

FinalMaturity

AmountAuthorized

Balance atJune 30, 2010

Balance atJune 30, 2010

Certificates of Participation 2007 Issue 5/30/07 2038 $144,400,000 $136,260,000 $132,800,000Unamortized premium 2,123,209 2,083,309Unamortized refunding loss (2,543,173) (2,496,846)

Certificates of Participation – WaterResources Agency 2008 Series A

7/1/08 2038 32,855,000 32,855,000 32,855,000

Judgment Obligation Bonds 6/29/04 2014 7,470,000 4,015,000 3,275,000Unamortized premium 54,414 43,531

Special Assessment Bonds 1984-93 2025 257,000 156,000 150,000Revenue Bonds 1980-95 2036 56,859,700 1,046,000 993,000

Unamortized premium 752,394 740,781Notes Payable – Redevelopment Agency 2001 2010 250,000 2,038 209Notes Payable – CA Housing Authority 2004 2014 936,146 416,146 36,146Notes Payable – Parks and Recreation 2008 2023 15,500,000 14,293,127 13,519,329Loans Payable – Bureau of Reclamation 1995 2037 35,035,790 30,828,498 29,785,024Capital Leases 253,132 213,032Compensated Absences 30,846,837 32,327,926Estimated Self-Insurance Liabilities 47,102,549 52,504,926Estimated Land Fill Closure (3) 2,915,243 2,707,016OPEB Liability 5,541,114 5,541,114

Total General Fund Long-TermObligations

$306,917,573 $307,078,497

Business Type ActivitiesDate ofIssue

FinalMaturity

AmountAuthorized

Balance atJune 30, 2009

Balance atJune 30, 2010

Natividad Medical Center, Series E (1)(2) 2/3/98 2027 $77,375,000 $63,530,000 $60,500,000

Certificates of Participation – 07 portion 5/3/07 2028 8,280,000 7,735,000 7,495,000Unamortized premium (1,207,241) 2,464,874Unamortized refunding loss (4,742,427) (5,567,614)

Capital Leases 1,399,786 150,651Compensated Absences 5,873,565 6,594,866OPEB Liability 1,045,250 1,045,250

Total Business Long Term Obligations $73,813,933 $72,683,027

_______________________Source: County of Monterey(1) All or a portion of these certificates are expected to be refunded with proceeds of the Certificates.(2) The County’s Certificates of Participation, Natividad Medical Center Improvement Project are payable from the

County’s General Fund, although the County is and expects to be reimbursed from Natividad Medical Centerrevenues. In the event Natividad Medical Center revenues are insufficient, the County remains obligated to makeprincipal and interest payments with respect to the Certificates of Participation. See “Natividad Medical Center”below.

(3) Funds are currently on deposit with the Salinas Valley Solid Waste Authority, a joint powers agency formed in 1997whose members include the cities of Salinas, Gonzales, Greenfield, Soledad and King City, as well as the eastern halfof unincorporated County, in an amount sufficient to cover all projected closure and post-closure costs.

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Statement of Direct and Overlapping Debt

Contained within the County are numerous overlapping local agencies providing public services.These local agencies have outstanding bonds issued in the form of general obligation, lease revenue andspecial assessment bonds. Set forth below is a statement of direct and overlapping debt as of June 30,2011 (the “Debt Statement”), prepared by California Municipal Statistics, Inc. The Debt Statement isincluded for general information purposes only. The County has not reviewed the Debt Statement forcompleteness or accuracy and makes no representations in connection therewith.

The Debt Statement generally includes long term obligations sold in the public credit markets bypublic agencies other than the County whose boundaries overlap the boundaries of the County in whole orin part. Such long term obligations generally are not payable from revenues of the County (except asindicated) nor are they necessarily obligations secured by land within the County. In many cases longterm obligations issued by a public agency are payable only from the general fund or other revenues ofsuch public agency. Self-supporting revenue bonds, tax allocation bonds and non-bonded capital leaseobligations are excluded from the debt statement.

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TABLE 12COUNTY OF MONTEREY

DIRECT AND OVERLAPPING DEBT AS OF JUNE 30, 2011

MONTEREY COUNTY

2010-11 Assessed Valuation: $49,119,679,333 (includes unitary utility valuation)Redevelopment Incremental Valuation: 3,921,843,582Adjusted Assessed Valuation: $45,197,835,751

OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable (1) Debt 6/30/11Hartnell Community College District 99.792% $122,535,577Monterey Peninsula Community College District 100. 122,978,685Carmel Unified School District 100. 37,273,445Monterey Peninsula Unified School District 100. 34,999,104North Monterey County Unified School District 100. 17,265,000Pacific Grove Unified School District 100. 43,971,000Soledad Unified School District 100. 3,413,012King City Joint Union High School District 98.611 12,444,708Salinas Union High School District and School Facilities Improvement District 100. 56,593,905Alisal Union School District 100. 40,594,264King City Union School District 100. 9,769,531Salinas City School District 100. 24,810,000Santa Rita Union School District 100. 23,279,523Washington Union School District 100. 13,405,000Other School Districts Various 38,509,973City of Marina 100. 8,425,000City of Pacific Grove 100. 560,000Soledad Community Hospital District 100. 1,525,000Monterey County Water Resources Agency Benefit Assessment District, Zone 2C 100. 32,305,000Community Facilities Districts 100. 4,152,542City 1915 Act Bonds 100. 25,120,000Special District 1915 Act Bonds 100. 5,036,000

TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $678,966,269

DIRECT AND OVERLAPPING GENERAL FUND DEBT:Monterey County General Fund Obligations 100. % $195,785,000

Monterey County Judgment Obligations 100. 2,505,000Monterey Peninsula Unified School District Certificates of Participation 100. 6,765,000North Monterey County Unified School District Certificates of Participation 100. 14,480,000King City Joint Union High School District General Fund Obligations 98.611 14,195,053Other School District General Fund Obligations Various 23,307,257City of Carmel General Fund Obligations 100. 7,575,000City of Gonzales General Fund Obligations 100. 4,440,000City of Marina Pension Obligations 100. 3,320,000City of Monterey General Fund Obligations 100. 12,815,000City of Pacific Grove Pension Obligations 100. 14,778,356City of Salinas Certificates of Participation 100. 39,525,000City of Seaside Pension Obligations 100. 6,395,000Carmel Valley Fire Protection District Certificates of Participation 100. 1,390,000Monterey Bay Unified Air Pollution Control Authority 58.224 1,228,526Pajaro/Sunny Mesa Community Services District General Fund Obligations 100. 455,000

TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $348,959,192

COMBINED TOTAL DEBT(2) $1,027,925,461

(1) Percentage of overlapping agency’s assessed valuation located within boundaries of the county.

(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital leaseobligations.

Ratios to 2010-11 Assessed Valuation:Total Overlapping Tax and Assessment Debt............................ 1.38%

Ratios to Adjusted Assessed Valuation:Combined Direct Debt ($198,290,000) .................................... 0.44%Combined Total Debt ................................................................ 2.27%

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0_______________Source: California Municipal Statistics, Inc.

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Natividad Medical Center

General. Founded in 1886, the County’s Natividad Medical Center (“NMC”) is a 172-bed,acute-care teaching hospital specializing in family medicine and affiliated with the University ofCalifornia at San Francisco Medical School. NMC currently operates hospital based specialty clinics andprovides medical/surgical hospital services as part of its medical office complex. NMC also networkswith a variety of community providers and County primary care clinics.

The mission of NMC is to provide high-quality, cost-effective health care to all residents of thecommunity. NMC is one of 11 California County operated “safety net” hospitals providing basic healthcare services, regardless of ability to pay. In this respect, counties fill a critical niche left by privatehospitals, which are not legally bound to provide services except for emergency services. However, thisrole can impose a financial burden on county hospitals.

NMC operations are accounted for with a separate set of self-balancing accounts that reflect itsassets, liabilities, fund equity, revenues, and expenditures or expenses on a full accrual basis; theseaccounts constitute the County’s only enterprise fund.

Natividad Medical Center’s Financial Results in General. As a result of its mission to serve allpatients, regardless of ability to pay, NMC had experienced financial difficulties. The County Board ofSupervisors hired Huron Consulting Group (“Huron”) which began work in November 2006. Theduration of the consulting contract was 30 months during which time Huron provided interim executivemanagement services and personnel consisting of a Chief Executive Officer, Chief Financial Officer,Chief Medical Officer, and a Chief Information Technology Officer. The Huron team sought tostreamline revenue generation and collection, physician services, non-labor expenses, and governance.Salinas Valley Memorial Healthcare System (“SVMH”) and Community Hospital of the MontereyPeninsula (“CHOMP”) joined a public/private partnership to provide $6 million and $4 million,respectively, towards the cost of the consulting services. Additionally, SVMH and CHOMP provided twoBoard of Trustee’s representatives each for a two year period.

The County General Fund contributed over $25 million to NMC in fiscal year 2005-06 to coveroperational losses. The Huron team reduced losses to $3.8 million in fiscal year 2006-07. The followingfiscal year ended June 30, 2008, NMC reported net income of $10.5 million, followed by net income of$7.6 million for fiscal year ended June 30, 2009, followed by net income of $ 13.8 for the fiscal yearended June 30, 2010. NMC has realized net income through April, 2011 of Fiscal Year 2011 of $ 26.4million (unaudited) and is forecast to realize a net profit in Fiscal Year 2012 of $4.7 million. Thesefinancial results have reduced the County subsidy to $10.4 million in fiscal year 2006-07, $4.2 million infiscal year 2007-08 to zero in fiscal year 2008-09 and fiscal year 2009-10. The subsidy is forecast toremain at zero. Cash balance improved from a negative $14 million in 2007 to $45 million at June 30,2010 and at April 2011 at $ 44.5 million. To assure continuity upon expiration, the Board of Supervisorshired the Huron interim CFO in April 2009 as the permanent CEO. Since that time, NMC has retainedqualified individuals to serve as CFO, CMO, and CIO.

NMC’s Adjusted Patient Days, which measure inpatient and outpatient volumes, have increased21.5% over the past three fiscal years. Average accounts receivable aging has been reduced from 95 daysto the mid 50’s during that same period and average core regular recurring patient and third party monthlycash receipts have doubled. NMC has rebuilt its medical staff team adding key physicians in OB/GYNand General Surgery and specialty surgery areas. Many operational improvements were made and a newbusiness model was developed for medical staff services.

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Additional Natividad Medical Center Liabilities. In addition, the NMC is obligated inconnection with the County’s annual principal and interest payments applicable to the NMC Series Dbonds refunded by the 2007 Refunding and Public Facilities Financing dated May 3, 2007. The NMCliability decreases slightly each year, with $591,680 of principal and interest due in fiscal year 2009-10.The obligation is payable from the Public Improvement Corporation, a wholly owned entity of theCounty. The County general fund and NMC contribute lease payments sufficient to cover debt serviceand fees. In the event NMC revenues are insufficient, the County remains obligated to make principaland interest payments evidenced by the refunding certificates. As of June 30, 2010, $7.49 million of the2007 Certificates attributable to the NMC Series D refunding were outstanding.

Investments of County Funds; County Pool

All funds in the County Treasurer’s Pooled Investments (the “County Pool”) are invested by theCounty Treasurer, according to the County’s Statement of Investment Policy (the “Investment Policy”)prepared by the County Treasurer. The Investment Policy is submitted to the Board of Supervisors forreview and approval on an annual basis, and the Treasurer presents a performance review of the CountyPool to the Board of Supervisors on a quarterly basis. The County Pool represents moneys deposited bythe County and school and special districts within the County. There are no voluntary depositors in theCounty Pool. The Investment Policy requires that all investments comply with the California GovernmentCode, and provides that the County Treasurer will establish and define authorized investments as well ascredit, marketability, maturity and diversification criteria for the investments. The stated goal of theInvestment Policy, in order of priority, is to minimize risk to principal, provide that cash is available tomeet anticipated needs and maximize earnings. The County Treasurer or his designee reviews theinvestment records, the contents of the County Pool, and the specific financial institutions with whominvestments have been made. As of June 30, 2011, the book value of investments in the Treasury Pooltotaled $976,919,348, of which approximately 61% belongs to school districts and community colleges.

Decisions on the investment of funds in the Treasury Pool are made by the Treasurer and hisdeputies in accordance with established policy guidelines. In the County, investment decisions aregoverned by sections 53601 and 53635, et seq. of the California Government Code which govern legalinvestments by local agencies in the State of California, and a more restrictive Investment Policyproposed by the Treasurer and adopted by the County Board of Supervisors on an annual basis. TheInvestment Policy provides first for the safety and liquidity of funds on deposit, restricts the weightedaverage maximum maturity to two years, limits reverse repurchase agreement maturities to 92 days,requires matched maturities on reverse repurchase agreement reinvestments, forbids acceptance of giftsfrom brokers and dealers, requires third-party safekeeping of all investments, and provides for marking tomarket valuation of the portfolio on a quarterly basis.

During the first quarter of Fiscal Year 2008-09, the issuers of two securities held by the Treasurydefaulted. These securities were medium term notes issued by Lehman Brothers Holding Company andWashington Mutual bank for $10 million and $20 million respectively. In September 2008, the TreasuryPool lost $29.8 million in Lehman Brothers and Washington Mutual. The County aggressively continuesrecovery efforts for the two securities including litigation against the firms and their accountants. TheCounty Treasurer negotiated sales of the defaulted securities and recovered a total of $7.7 million. Thelitigation effort continues for the residual balance of lost funds.

As of June 30, 2011, the Monterey County investment pool contains $79,812,000 invested withthe State Treasurer’s Local Agency Investment Fund (LAIF), of which $50,000,000 is the County’s and$29,812,000 is for a community college district, and $29,210,432 invested in CalTRUST.

Pension and Other Post-Employment Benefits The County contributes to the State of CaliforniaPublic Employees’ Retirement System (“PERS” or “CalPERS”), an agent multiple-employer public

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employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State. PERS is a contributory plan deriving funds from employee contributions as well as from employer contributions and earnings from investments. Changes in actuarial assumptions and benefit levels in the recent past have significantly increased pension cost estimates.

The County has experienced a significant increase in its pension funding obligations and anticipates an increase in Fiscal Year 2011-12. A current comparison of PERS costs for 2009-10 through 2011-12 is shown below

TABLE 13 COUNTY OF MONTEREY

COMPARISON OF PERS COSTS FOR FISCAL YEARS 2009-10 THROUGH 2011-12(1)

Rate Cost

2009-10 Safety 25.369% $12,625,212 Miscellaneous 9.870 23,736,316

2010-11(2) Safety 26.344 13,503,746 Miscellaneous 10.125 25,080,051

2011-12(2) Safety 27.854 14,128,003 Miscellaneous 10.856 28,537,022

________________ (1) Amounts represent employer contributions made by the County and employee contributions. (2) Rate was provided by CalPERS for 2010-11 and 2011-12. Cost was calculated by taking the Annual

Covered Payroll for such fiscal year, multiplying the amount by 3% and is added to the annual covered amount and then the rate was applied to equal the cost (e.g. for fiscal year 2011-12: Miscellaneous: $255,212,291 x 3% = 7,656,369 + 255,212,291 = 262,868,660 x 10.856% = $28,537,022). The same method was applied to calculate the cost for Safety.

Source: County of Monterey and CalPERS.

As of June 30, 2009, the County's miscellaneous plan was unfunded by $115,083,519 (funded level of 65.2%) and the safety plan was unfunded by $101,649,599 (funded level of 53.8%).

In addition to making annual contributions to CalPERS in accordance with the applicable actuarial valuation, the County also has agreed pursuant to the collective bargaining arrangements with the County's employee unions to pay all of the employees' required contribution to CalPERS, which for non-safety employees of the County is equal to approximately 7% of their salary. For safety employees of the County, such costs are equal to approximately 9% of their salary.

The County obtained an actuarial report on its OPEB liability as of June 30, 2009 indicating an unfunded liability of $23.142 million. Based on that valuation, estimates for Fiscal Year 2010-11 show normal costs of $1.358 million and an UAAL of amortization requirement of $2.106 million on a projected payroll of $304.426 million.

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The County adopted a contribution schedule in 2007 to amortize the unfunded liability over 20 years by contributing $3,711,000 over20 years. Due to the economic downturn that began that year, the County failed to meet the contribution schedule. For Fiscal Year ending June30, 2008, the County did not make a contribution. In Fiscal Year ending June 30, 2009, the County contributed $150,000 and in Fiscal Yearending June 30, 2010 the County paid $779,000 to the Trust. During Fiscal Year 2011, the County paid $3,348,000 to the Trust. The Trustcontribution remains constant through the next 10 years with the annual cost of benefit payments increasing to $1,127,000 in Fiscal Yearending June 30, 2012, $1,270,000 in Fiscal Year ending June 30, 2013, $1,426,000 in Fiscal Year ending June 30, 2014 and $1,587,000 inFiscal Year ending June 30, 2015, with annual costs to increase almost $200,000 per year thereafter.

Cash Coverage Analysis. The following table provides cash flow summary information and projected Note payment coverage forthe County. The cash flows and payment coverage presented below are projections only; there can be no assurance that such projections will berealized.

TABLE 14COUNTY OF MONTEREY CASH COVERAGE ANALYSIS

The County has provided more detailed historical and projected cash flows in APPENDIX C — “DETAILED CASH FLOWS OF THELOCAL AGENCY.”

Cash Coverage Analysis

Note Amounts ($) Base Amounts1 Series 2011 A-5a Coverage2

Series 2011 A-5b Coverage2

Series 2011 A-5 Coverage 2

Series 2011 A-5a (January 31, 2011 Maturity) 22,000,000 Series 2011 A-5b (May 15, 2011 Maturity) 21,855,000 Series 2011 A-5 (Combined Amount) 43,855,000

2011-12 Projected Cash Receipts through January 31, 2012 299,327,085 14.61x 7.83x

January 31, 2012 Cash Flow Balance 25,334,024 2.15x 1.58xJanuary 31, 2012 Alternative Cash Resources 184,232,000 9.37x 5.20xJanuary 31, 2012 Cash Flow Balance + Alt. Cash 209,566,024 10.53x 5.78x

2011-12 Projected Cash Receipts through May 15, 2012 507,981,908 24.24x 12.58x

May 15, 2012 Cash Flow Balance 73,494,209 4.36x 2.68xMay 15, 2012 Alternative Cash Resources 183,267,000 9.39x 5.18xMay 15, 2012 Cash Flow Balance + Alt. Cash 256,761,209 12.75x 6.85x

1) Base Amounts exclude Note Amount2) Cash Coverage Factors are calculated with the Note Amount added to each Base Amount

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TABLE 15MONTEREY COUNTY

ALTERNATIVE CASH RESOURCES

Alternative Cash Resources. The following table provides a summary of alternative cash resources available to the County. The June 30,2010 amounts are audited balances, the June 30, 2011 amounts are unaudited balances and the January 31, 2012, May 15, 2012 and June 30, 2012amounts are projections. The alternative cash resources represent cash balances maintained in other funds, under the control of the County thatcan be loaned to the General Fund on a temporary basis. Such funds must be repaid in the same fiscal year during which they are borrowed. Thealternative cash resources presented below include projections; there can be no assurance that such projections will be realized.

Alternative Cash Resources

Fund Type Fund PurposeAudited Cash Balance as of

6/30/2010

Unaudited Cash Balance as of

6/30/2011

Projected Cash Balance as of

1/31/2012

Projected Cash Balance as of

5/15/2012

Projected Cash Balance as of

6/30/2012 Enterprise Special Revenue Funds $36,259,100 $26,000,000 $18,000,000 $18,000,000 $18,000,000 Special Revenue Road Fund $16,831,979 $15,000,000 $13,000,000 $13,000,000 $13,000,000 Debt Service Community Development $1,021,681 $900,000 $750,000 $750,000 $750,000 Trust and Agency Capital Projects $15,154,349 $15,000,000 $15,000,000 $15,000,000 $15,000,000 Capital Project Facilities Maintenance Projects $3,411,501 $2,800,000 $1,100,000 $1,100,000 $1,100,000 Capital Project NGEN Radio Project $443,559 $200,000 $0 $0 $0 Capital Project Facilities Master Plan $28,313,205 $24,000,000 $22,000,000 $22,000,000 $22,000,000 Internal Service Self Insurance $7,425,719 $6,200,000 $5,000,000 $5,000,000 $5,000,000 Internal Service Imprest Cash $23,550 $22,000 $22,000 $22,000 $22,000 Enterprise NMC Cash $45,133,083 $68,264,170 $64,000,000 $63,000,000 $62,500,500 Internal Service General Liability Fund $7,265,106 $7,390,000 $7,410,000 $7,420,000 $7,425,000 Internal Service Workman's Comp Fund $37,669,868 $37,900,000 $37,950,000 $37,975,000 $38,000,000

TOTAL $198,952,700 $203,676,170 $184,232,000 $183,267,000 $182,797,500

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APPENDIX B

COUNTY OF MONTEREY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARENDED JUNE 30, 2010

(THIS PAGE INTENTIONALLY LEFT BLANK)

County of Monterey State of California

COMPREHENSIVE ANNUAL

FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2010

Prepared and Submitted by the Office of the Auditor-Controller Michael J. Miller, CPA, CISA

Monterey County Districts

The County of Monterey districts pictured on the cover clockwise from the top right: District 3, District 1, District 2, District 5, District 4.

Monterey County highlights everything that's best about California. From Monterey’s seaside restaurants to the Salinas Valley’s hillside vineyards, from Big Sur’s redwood groves to Pebble Beach’s perfectly groomed golf courses, from Salinas’ old-fashioned rodeo to Carmel-by-the-Sea’s elite music and art festivals, Monterey County has a feast of fun just waiting to be sampled.

Monterey offers iconic California experiences. Experience the top road trip in the United States as you wind along the breathtaking Big Sur coastline on Highway One. Sip handcrafted wines at tucked-away tasting rooms. Take a surfing lesson and catch a glimpse of a barefoot beach wedding as you ride your board to shore or play 18 holes at legendary golf courses. Monterey County has a little something special for everyone.

Monterey County's hundreds of thousands of acres of parks range from the “mini-Yosemite” of Pfeiffer Big Sur State Park to the austere beauty of Pinnacles National Monument, the coastal beauty of Point Lobos State Reserve and everything in between. Walk or ride your bike on the Monterey Bay Coastal Recreation Trail, which stretches 18 miles along the coast and connects many of the coastal parks. Go hang gliding, mountain biking, camping, horseback riding, surfing, birding, diving and more at the more than 30 parks in Monterey County.

*Registered Voters:

**County Road Mileage: ***Acres:

DISTRICT #1 17,528 0.00 5,845DISTRICT #2 34,551 239.93 108,110DISTRICT #3 20,478 691.17 1,506,689DISTRICT #4 33,623 31.45 53,875DISTRICT #5 52,381 277.92 452,840TOTAL: 158,561 1,240.47 2,127,359Source: *Monterey County Elections Department, 2009 **Monterey County Public Works Department , 2009 ***Monterey County Building Services and Planning Department, 2007

Cover photographs courtesy of Ma Mon

COUNTY of MONTEREY

STATE of CALIFORNIA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Fiscal Year Ended June 30, 2010

Prepared and Submitted by the Office of the Auditor-Controller Michael J. Miller, CPA, CISA

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COUNTY OF MONTEREY COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2010

Table of Contents

Page INTRODUCTORY SECTION Letter of Transmittal .......................................................................................................................... i-ix Awards for Achieving Excellence in Financial Reporting ................................................................ x-xi Directory of County Officials ............................................................................................................ xii Organizational Structure .................................................................................................................... xiii FINANCIAL SECTION Independent Auditor’s Report ............................................................................................................ 1-2 Management’s Discussion and Analysis (Required Supplementary Information) ............................ 3-16 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets ........................................................................................................... 19 Statement of Activities ............................................................................................................. 20-21 Fund Financial Statements: Governmental Funds: Balance Sheet ...................................................................................................................... 24-25 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets – Governmental Activities .......................... 26 Statement of Revenues, Expenditures, and Changes in Fund Balances .............................. 28-29 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities – Governmental Activities ........................................................... 30 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: General Fund ....................................................................................................................... 31 Road Fund ........................................................................................................................... 32 Community Development ................................................................................................... 33 Proprietary Funds: Statement of Net Assets ...................................................................................................... 34 Statement of Revenues, Expenses, and Changes in Net Assets .......................................... 35 Statement of Cash Flows ..................................................................................................... 36-37 Fiduciary Funds: Statement of Fiduciary Net Assets ...................................................................................... 38 Statement of Changes in Fiduciary Net Assets ................................................................... 39 Notes to the Financial Statements ................................................................................................. 41-88

COUNTY OF MONTEREY COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2010

Table of Contents

Page FINANCIAL SECTION (continued) Required Supplementary Information (Other than MD & A): Schedules of Funding Progress County of Monterey Employees’ Retirement Plan .................................................................. 91 County of Monterey Retiree Healthcare Plan .......................................................................... 92 Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet ...................................................................................................... 97 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ............... 98 Special Revenue Funds: Nonmajor Special Revenue Funds: Definition .......................................................................................................................... 99-100 Combining Balance Sheet ................................................................................................. 101-105 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......... 106-110 Budgetary Comparison Schedules: County Library Fund .................................................................................................... 111 In-Home Support Services ........................................................................................... 112 Fish and Game Propagation ......................................................................................... 113 Office of Employment Training ................................................................................... 114 Community Services .................................................................................................... 115 Inclusionary Housing ................................................................................................... 116 Disaster Assistance ....................................................................................................... 117 Productivity Investment ............................................................................................... 118 Lakes Resort Parks ....................................................................................................... 119 Emergency Medical Services ....................................................................................... 120 Fort Ord Reuse ............................................................................................................. 121 Nacimiento Hydroelectric Operations .......................................................................... 122 Water Resources Agency ............................................................................................. 123 County Service Areas ................................................................................................... 124 Sanitation Districts ....................................................................................................... 125 Redevelopment Agency – Set Aside Fund ................................................................... 126 Debt Service Funds: Nonmajor Debt Service Funds: Definition .......................................................................................................................... 127-128 Combining Balance Sheet ................................................................................................. 129 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......... 130 Budgetary Comparison Schedules: Debt Service – County ................................................................................................. 131 Debt Service – RDA ..................................................................................................... 132 County Financing Authority ......................................................................................... 133 Public Improvement Corporation ................................................................................. 134 Capital Projects Funds: Definition ............................................................................................................................... 135-136 Major Capital Projects Funds: Budgetary Comparison Schedule – Facility Master Plan ................................................. 137

COUNTY OF MONTEREY COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2010

Table of Contents Page FINANCIAL SECTION (continued) Supplementary Information (continued) Capital Projects Funds: Nonmajor Capital Projects Funds: Combining Balance Sheet ................................................................................................. 138-139 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......... 140-141 Budgetary Comparison Schedules: Capital Projects............................................................................................................. 142 Enterprise Resource Planning ...................................................................................... 143 Facilities Maintenance Projects .................................................................................... 144 Other Water Resources Agencies ................................................................................. 145 NGEN Radio Project .................................................................................................... 146 Redevelopment Capital Projects................................................................................... 147 Internal Service Funds: Definition ............................................................................................................................... 149-150 Combining Statement of Fund Net Assets ............................................................................. 151 Combining Statement of Revenues, Expenses and Changes in Net Assets ........................... 152 Combining Statement of Cash Flows ..................................................................................... 153 Agency Funds: Combining Statement of Changes in Assets and Liabilities .................................................. 157-158 Detailed Budget Schedule: General Fund – Schedule of Expenditures – Budget and Actual on Budgetary Basis ................................................................................................................... 161-163 STATISTICAL SECTION (Unaudited) Statistical Section ................................................................................................................... 165 Schedule 1: Net Assets by Component ............................................................................... 167 Schedule 2: Changes in Net Assets ..................................................................................... 168-169 Schedule 3: Fund Balances of Governmental Funds .......................................................... 170 Schedule 4: Changes in Fund Balances of Governmental Funds ........................................ 171 Schedule 5: Assessed Value and Actual Value of Taxable Property .................................. 172 Schedule 6: Principal Property Taxpayers .......................................................................... 173 Schedule 7: Property Tax Levies and Collections .............................................................. 174 Schedule 8: Debt Service Tax Rates for County and Major Overlapping Governments per $100 of Assessed Value .................................................... 175-176 Schedule 9: Taxable Sales by Category .............................................................................. 177 Schedule 10: Transient Occupancy Tax Actual Receipts ..................................................... 178 Schedule 11: Ratios of Outstanding Debt by Type ............................................................... 179 Schedule 12: Legal Debt Margin Information ...................................................................... 180 Schedule 13: Pledged Revenue Coverage .............................................................................. 181 Schedule 14: Direct and Overlapping Bonded Debt ............................................................. 182 Schedule 15: Demographics and Economic Statistics .......................................................... 183 Schedule 16: Major Industries by Number of Businesses, Employees and Payroll .............. 184

COUNTY OF MONTEREY COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2010

Table of Contents

Page STATISTICAL SECTION (Unaudited) (continued) Schedule 17: Full-Time Equivalent County Government Employees by Function/Program .......................................................................................... 185 Schedule 18: Operating Indicators by Function/Program ..................................................... 186-189 Schedule 19: Capital Asset Statistics by Function ................................................................ 190-191

INTRODUCTORY SECTION

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County as of June 30, 2010. A copy of their report is included on page 1 in the “Financial Section” of this CAFR. In planning and performing the audit of the financial statements, GALLINA considered the internal control structure of the County in order to determine appropriate audit procedures. During this review, no significant deficiencies or material weaknesses were noted. All fiscal year 2008-09 findings were implemented and corrected. This information was presented in a letter to the Board of Supervisors and management. Management is required by GAAP (GASB 34) to provide a management discussion and analysis (MD&A) in conjunction with financial statement reporting. The purpose of the MD&A is to introduce the basic financial statements and to provide an analytical overview of the financial activities of the County. The MD&A begins on page 3 in the “Financial Section” of this CAFR.

PROFILE OF THE COUNTY OF MONTEREY

Overview of the County History and Geography: Monterey, described as the “greatest meeting of land and sea” celebrated its quadricentennial in 2002. In 1602, Spanish merchant Sebastian Vizcaino became the first European on the Monterey Peninsula. He christened Monterey after the viceroy of New Spain, Count de Monte Rey. Eventually, the City of Monterey served as California’s first capital, where the State constitution was signed in 1849. Monterey County is one of the 27 original California counties, incorporating in 1850. With an area of about 3,300 square miles, the County of Monterey borders the Pacific Ocean almost at the midpoint of California with 99 miles of coastline. The County is located about 100 miles south of San Francisco and 240 miles north of Los Angeles. It is bordered by Santa Cruz County to the north, San Benito (originally part of Monterey County), Fresno and Kings Counties to the east and San Luis Obispo County to the south. There are two distinct sub-regions in the County. One is the Monterey Peninsula, world famous for beautiful ocean views, opulent homes, the 17-mile drive, delicious seafood and world-class golf courses. The other, the Salinas Valley, is equally renowned as an area full of fertile farmland, running almost the entire length of the County and is one of the world’s major vegetable producing areas. The County also benefits from two wilderness areas set aside for recreational enjoyment, consisting of 468,538 total acres. The Los Padres National Forest has 304,035 acres and the Ventana Wilderness totals 164,503 acres. Structure: The County is a general law county. The County government is comprised of ten elected officials including a five-member Board of Supervisors, the Assessor-Clerk-Recorder, the Auditor-Controller, the District Attorney, the Sheriff and the Treasurer-Tax Collector; all

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elected to four-year terms. A County Administrative Officer (CAO) is appointed by the Board of Supervisors and functions as the Chief Executive Officer. The accounts of the County are organized on the basis of funds, each of which is considered a separate entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, net assets, revenues and expenditures or expenses as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which the spending activities are controlled. Services: The County government provides a full range of public services including public safety, roads and facilities, social services, administrative services, health services, sanitation services and leisure services. Typically, the department heads who run these operations, other than the elected department heads, report to the CAO. Population: The County maintains a steady population base in excess of 400,000 people. About 98% of the 3,300 square miles in the County are outside of a municipality, with about 25% of the residents living in these unincorporated areas. The City of Salinas serves as the County seat, and is the County’s largest city with a population of over 150,000. The eleven other incorporated cities are Carmel-by-the-Sea, Del Rey Oaks, Gonzales, Greenfield, King City, Marina, Monterey, Sand City, Seaside, Soledad and Pacific Grove. Component Units This report includes all of the funds of the County of Monterey, Natividad Medical Center, and the entities described in Note 1 of the Notes. Although all these entities (except for Natividad Medical Center) are legally separate from the County, the County Board of Supervisors serve as the governing board of each entity and the entities meet the test required by GAAP to be presented as blended component units in the County Financial Statements except for the Children and Family Commission which is a discretely presented component unit of the County. In addition, individual financial statements are available for many of the above component units and can be obtained by contacting the Office of the Auditor-Controller of the County of Monterey. Budgetary Process

The County is required by State law to adopt a balanced budget by July 1 of each fiscal year. Budgets are adopted for the general fund, special revenue funds, debt service funds and capital project funds. The legal level of budgetary control is at the Appropriations Unit level. Budget data is prepared on the modified accrual basis consistent with comparable actual amounts. A budget is also adopted for the enterprise fund (Natividad Medical Center) and the internal service funds. Encumbrance accounting is utilized during the year for budget control purposes. Encumbrances outstanding at year-end do not constitute expenditures or liabilities, but rather restrictions (reserves) of net assets. The County does, however, honor the contracts represented by year-end

iv

encumbrances. Unencumbered budget appropriations lapse at the end of the fiscal year. Board of Supervisors policy requires re-appropriation of carryover capital improvement projects on an annual basis after review of each project status. The Board approves supplemental appropriations, which are normally financed by unanticipated revenues during the year.

FACTORS AFFECTING FINANCIAL CONDITION

State of California Budgetary difficulties: California has experienced steep declines in revenues from personal income tax, corporate tax, and sales tax, three of its main revenue sources. To mitigate this loss of revenue, the State has imposed temporary tax increases, claimed portions of local property tax revenues, and cut allocations to counties during the last two years. With the State facing a potential deficit of almost $20 billion in 2010-11, counties can expect more cuts in the next fiscal year. Additionally, as local revenue sources decline, the County will also experience losses in American Recovery and Reinvestment Act (ARRA) funding as the 18 month Federal stimulus program comes to an end in 2010. This may affect the County’s abilities to administer State and local services. Local Economy The local economy has traditionally centered on agribusiness, tourism, and government, but the trade, transportation and utilities group continues to become a larger part of the Monterey County economy. Agribusiness: Agribusiness is the County’s No. 1 industry, with a gross production value in excess of $4 billion. In terms of land allocation, out of 2,121,126 acres in the County, approximately 300,000 acres are prime farmland. Employment in this sector shows an increase of 1,300 from January 2009 to January 2010. Tourism: As the No. 2 industry in Monterey County, hospitality generated approximately $2.0 billion. However, the economic downturn has negatively impacted the amount of Transient Occupancy Tax (TOT) by 12.9% from FY 2008-09 to FY 2009-10, continuing the trend that began in 2008. The attractions in the Monterey Peninsula should cause tourism to rebound quickly as the economic downturn abates. Employment: The County normally experiences periods of relatively high unemployment as the agribusiness moves from one season to the next. However, the unemployment rate has been higher than normal at approximately 10.7% as of June, 2010, an adjusted increase of .8% over June of 2009. While this is still lower than the State average of 12.2%, it continues to be a condition that is the result of the economic downturn.

v

Real Estate / Housing: During the housing boom, the County experienced an unprecedented growth in the value of homes, with homes in some areas seeing an appreciation in excess of 150%. At the collapse of the market in the last three to four years, prices and sales plummeted. The median price has started to rebound. A median home price comparison of June 2009 to June 2010 show a 36% increase from $205,000 to $279,500. However, the number of sales in the same months shows a decrease of 32%. Long-Term Financial Planning Three-Year Financial Forecast: In order to provide County policy-makers and the public an updated assessment of the County’s financial conditions, the County Office of Administration develops an annual Three-Year Financial Forecast. This report takes into account the latest economic developments, and includes historical perspective on General Fund revenues and expenditures, an updated current year estimate, and three-year financial outlook. Capital Improvements Plan: In March 2010, the Monterey County Board of Supervisors unanimously approved and accepted the annual Capital Improvements Program (CIP) Five Year Plan, covering fiscal years 2010-11 through 2014-15. The CIP identified collectively a total of 172 capital projects with an estimated value of $1.02 billion over the next five-year period. Of this total amount, $205 million, or 20%, in funding sources have been identified. The remaining $816 million are recognized as unfunded. The FY 2010-11 CIP capital projects requests (in millions) by functional area are: General Government - $121.4 Public Protection - $274.3 Public Ways & Facilities - $529.8 Health - $30.0 Public Assistance - $0.2 Recreation & Education - $65.9 Debt Administration: In fiscal year 2009-10, the County implemented the interface with the Sympro Debt Management System to monitor and manage the debt for the County, schools and special districts. This tool will readily assist management to develop scenarios, and monitor market activities, and also capitalize on financial opportunities. County Debt Obligations: The County entered into two debt issuances in fiscal year 2009-10. • A Tax and Revenue Anticipation Note (TRAN) was issued through the California State

Communities Development Agency (CSCDA) on July 1, 2009 for $55 million. This TRAN was promptly paid with principal and interest on the maturity date.

• On December 30, 2009, a partial refunding of $43,700,000 of the outstanding Natividad Medical Center 1998 Series E Certificates of Participation took place with the issuance of new debt – 2009 Refunding Project. The partial refunding resulted in cash savings of $1,495,140 over the term of the bonds, equating to present value savings of $1,380,741 or 3.16% of the refunded principal. Unfortunately, at pricing, the maturities for years 2024 thru 2027 were unsold due to an upsurge in the long end of the yield curve. The County remained poised to

vi

take advantage of additional savings through refunding those maturities however such savings did not materialize during FY 2010.

Credit Ratings: The County utilized Standard and Poor’s and Fitch to provide credit ratings of the refunding. The County’s previously existing bond issuances were subjected to a follow-up review by both Fitch and Moody’s Investor Services at the end of FY 2009-10. During the year, Fitch and Moody’s adjusted their ratings scale which upgraded the County’s COP ratings. During the Fitch annual review, the county outlook was upgraded from Negative to Stable:

Fitch Rating/Outlook

Moody’sRating/Outlook

S&PRating/Outlook

General Obligation Bonds

Aa2/Negative

Judgment obligation Bonds

Aa3/Negative

Lease Obligation Bonds (COPs)

AA-/Stable A1/Negative AA/Stable

Short Term Mig-1 SP1+ The County continues developing strategies to aggressively improve the efficiencies and effectiveness of operations, and capitalize on these re-engineering efforts to improve its finances. Proposed and Subsequent Financings: The County has closed two financings since year end. A TRAN was issued on August 24, 2010 in the amount of $40 million as a stand alone tranche of the CSCDA. The Monterey County’s offering was purchased by several bidders with a coupon rate of 1.5% and a yield of 0.33% resulting in a premium to the County. The County closed a refunding of the remaining $16,800,000 of 1998 Natividad Medical Center Improvement Bonds, Series E which were not refunded in 2009. This refunding resulted in actual cash savings of $1,229,865 and a present value savings of $927,146 or 5.52%. The County recently approved two additional projects. The Next Generation radio infrastructure project will enable Monterey County safety radio and data interconnectivity to comply with the narrowband mandate set by the FCC by January 2013. The project is being slated for a private placement lease transaction in the amount of $8.5 million to allow for compliance with numerous grant funding requirements and to allow for the assumption of the liability by a JPA which may possibly be formed sometime in the future. The County will act as lead borrower pursuant to a MOU among the various cities and safety agencies throughout the County. Each participant will pay their proportionate share of the construction costs determined by radio capacities on the system. In addition, Natividad Medical Center’s lease financing in the amount of $15 million will obtain (and reimburse for prior expenditures related to) medical equipment, electronic health records software, seismic retrofits, and other projects contained in its five year Capital Improvement Plan.

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Relevant Financial Policies Reserve Policy: The Monterey County Board of Supervisors unanimously adopted in ordinance form a formal reserve policy for strategic reserves and contingencies. Beginning in fiscal year 2005-06, General Fund reserves were to be funded over eight years to equal ten percent of General Fund budgeted revenues. The reserve was established for use in legal judgment settlements against the County, economic downturns, natural disasters and for one-time State budget reductions that could not be addressed through the annual appropriations for contingencies. Because of current budget issues, the Board elected to suspend contributions to the strategic reserve fund for fiscal year 2008-09. On June 23, 2009, the Board again elected to continue suspension of the annual contribution to the Strategic Reserve in FY 2009-10 for the same reasons. Public Financing Policy: On April 29, 2008, the Board rescinded the previously adopted Public Financing Policies and the Mello Roos Financing Policy and adopted a revised formal written Monterey County Public Financing Policy dated April 21, 2008. The revised policy established a Debt Advisory Committee comprised of the County Administrative Officer (or his designee), the County Auditor, and the County Treasurer-Tax Collector to provide additional oversight of debt related matters. In addition, the policy provides general guidelines for the decision making process with regard to the issuance of debt instruments. The use of debt must provide general or specific benefits to its citizens in relation to the cost of repayment levied upon those citizens. Funding Plan: In fiscal year 2004-05, the County approved a 10 year plan to fund the deficit in the self insured Workers’ Compensation Fund. The County approved a one year postponement to this plan in fiscal year 2010-11, which may increase the deficit in the fund. The County anticipates continuing the funding plan starting in fiscal year 2011-12. Major Initiatives: The Next Generation Radio System: This project will bring the County and municipal law enforcement, fire, emergency services, and local government field forces into compliance with the Federal Communications Commission (FCC) regulations. The County plans on completing this project by 2013 and terminating the use of all obsolete band width as mandated by the FCC rules. The County is exploring financing alternatives for the Project. Once the contract for design and build of the infrastructure is awarded, the participants will determine the best method of financing. Natividad Medical Center The Natividad Medical Center (NMC) is a 172 bed inpatient hospital facility that operates with a medical staff of over 235 physicians. The mission of NMC is to provide high-quality healthcare access to all patients regardless of their ability to pay. Natividad is the only teaching hospital on the Central Coast and is one of the 15 California safety net hospitals that, combined, provide 50% of all hospital care for California’s 6.6 million uninsured.

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In fiscal year 2009-10, NMC expanded access to health care by increasing staffing and services in Pediatric, Obstetrics, Family Medicine, Orthopedics and Internal Medicine as well as implementing new clinical information technology systems to enhance patient care deliveries. NMC’s fiscal performance has continued to progress over the last three years and did not need, or receive, a contribution from the General Fund in fiscal year 2009-10. ADDITIONAL AVAILABLE INFORMATION Copies of this CAFR, the Single Audit Report, the County Proposed and Final Budgets, the Tax Rate Books, and other documents are available on the internet, www.co.monterey.ca.us/auditor.

AWARDS AND ACKNOWLEDGEMENTS

Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County of Monterey for its comprehensive annual financial report for the fiscal year ended June 30, 2009. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting, and its attainment represents a significant accomplishment by a government and its management. The GFOA is a nonprofit professional association serving approximately 17,600 government finance professionals with offices in Chicago, IL and Washington, DC.

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xii

COUNTY OF MONTEREY

DIRECTORY OF COUNTY OFFICIALS

Elected Officials: Legislative Branch: Board of Supervisors District #1.......................................................................................... Fernando Armenta District #2........................................................................................... Louis R. Calcagno District #3..................................................................................................Simon Salinas District #4...................................................................................................... Jane Parker District #5......................................................................................................Dave Potter

Executive Branch: Assessor – County Clerk-Recorder .................................................. Stephen L. Vagnini Auditor-Controller ................................................................ Michael J. Miller, CPA, CISA District Attorney ..................................................................................... Dean D. Flippo Sheriff-Coroner ...................................................................................... Mike Kanalakis Treasurer-Tax Collector ......................................................................... Louis G. Solton

Appointed Department Heads: County Administrative Officer .................................................................. Lew Bauman Agricultural Commissioner .......................................................................Eric Lauritzen Building Services Director ....................................................................Tim McCormick Child Support Services Director .................................................... Stephen H. Kennedy Clerk of the Board .................................................................................. Gail Borkowski Cooperative Extension Director ............................................ Sonya L.Varea-Hammond County Counsel ................................................................................... Charles J. McKee County Librarian ................................................................................. Jayanti Addleman Emergency Communications Director ...................................................... Lynn Diebold Equal Opportunity Officer ..................................................................... David Medrano Health Services Director ................................................................................ Len Foster Information Technology Director ............................................................ Virgil Schwab Military and Veterans’ Affairs Officer .................................................... Richard Garza Natividad Medical Center Chief Executive Officer ...................................... Harry Weis Parks Director .................................................................................................John Pinio Planning Director .......................................................................................... Mike Novo Public Defender ............................................................................................ James Egar Public Works Director ............................................................................ Yazdan Emrani Registrar of Voters ....................................................................................... Linda Tulett Resource Management Agency Director .................................................. Wayne Tanda Social Services Director ........................................................................ Elliott Robinson Water Resources Agency General Manager .............................................. Curtis Weeks

Appointed by Superior Court: Chief Probation Officer ............................................................................... Manuel Real

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FINANCIAL SECTION

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COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

3

This section of the County of Monterey’s (County) annual report presents the discussion and analysis of the County’s financial performance during the fiscal year that ended on June 30, 2010. Please read it in conjunction with the transmittal letter at the front of this report and the County’s financial statements, which follow this section. All amounts, unless otherwise indicated, are expressed in millions of dollars. FINANCIAL HIGHLIGHTS

The assets of the County exceeded its liabilities at the close of the fiscal year by $727.3 (net assets). Of this amount, $71.9 represents unrestricted net assets, whichwill be available to meet the County’s ongoing obligations to citizens and creditors. Restricted net assets of $106.8 may be used for the County’s ongoing obligations related to programs with external restrictions. The remaining $548.6 represents the County’s investment in capital assets, less any related outstanding debt used to acquire those assets (invested in capital assets, net of related debt). (See Table 1 – Net Assets.)

The County’s total net assets decreased by $9.9 during the current fiscal year. The decrease in net assets represents the degree to which expenses exceeded revenues by $5.7. The remaining decrease of $4.2 includes a transfer of $2.1 in Courts Facilities to the State and a Supplemental ERAF payment of $2.1. (See Table 1 – Net Assets and Table 2 – Change in Net Assets).

As of June 30, 2010, the County’s governmental funds reported total ending fund balances of $200.7. The decrease of $43.1 is due to the use of fund balances in current year to cover operations as revenues decreased, especially for Facilities Master Plan Projects $16.0 and Capital Projects $19.3. Approximately 86.2%, or $173.1, of this total amount is available for spending (unreserved fund balance). $62.2 of the unreserved balance is for capital projects, $35.6 is for special revenue fund purposes and $0.7 is for debt service. Of the remaining $74.6 unreserved fund balance, $1.9 is earmarked by management for self-insurance purposes, and $58.8 is designated by the Board of Supervisors for future plans or projects. Please refer to Note 10 for more specific details. (See further discussion in Financial Analysis of the County’s Funds beginning on page 11.)

At the end of the current fiscal year, the General Fund showed $74.6 in unreserved fund balance, which is a decrease of $6.1 or a negative 7.6% from the prior year unreserved fund balance. (See further discussion in Financial Analysis of the County’s Funds beginning on page 11.)

The total long-term debt for the current fiscal year decreased by $11.1 or 3.8% due to principal payments on debt. (See Table 4 – Long-Term Debt on page 15.)

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

4

OVERVIEW OF THE FINANCIAL STATEMENTS Management’s discussion and analysis is intended to serve as an introduction to the County’s financial statements. The County’s financial statements include three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to financial statements. Government-wide financial statements The Government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to a private-sector business and are presented on a full accrual basis. The statement of net assets presents information on all of the County’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the County’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g. uncollected taxes and earned, but unused, vacation leave). The government–wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County are: administration and support, public safety and protection, public ways and facilities, health and sanitation, public assistance, education, and recreation and cultural services. The County has one business-type activity: Natividad Medical Center. Component units consist of legally separate entities for which the County is financially accountable. Those entities that have substantially the same governing board as the County or provide services entirely to the County are blended as if they were a part of the County. The County has seven blended component units (See Note 1 in the Notes to Financial Statements for more details). Financial information on discretely presented component units is reported separately from the financial information presented for the County. The County has one discretely presented component unit. The government-wide financial statements can be found on pages 19 – 21 of this report. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into three categories: governmental, proprietary, and fiduciary.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

5

Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the County’s near-term financing decisions. Both the governmental funds’ balance sheet and the governmental funds’ statement of revenues, expenditures, and changes in fund balances provide a reconciliation to the government-wide financial statements in order to facilitate this comparison between governmental funds and governmental activities. The County maintains over 130 individual governmental funds. For financial reporting purposes, these funds have been combined into five groupings. The County segregates within the governmental funds the major funds: General Fund, Road Fund, Community Development Fund, Facility Master Plan Implementation Fund and a grouping for all nonmajor funds. Information is presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the four funds, which are considered to be major funds according to the rules stated in Government Accounting Standards Board Statement No. 34 (GASB 34). Data for the remaining governmental funds are combined into the presentation of Other Governmental Funds. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements located in the Supplementary Information section of this report. The County adopts an annual appropriated budget for all of its operating funds. A budgetary comparison statement has been provided for the General Fund, on page 161, to demonstrate performance against this budget. For individual fund budget comparisons for the Nonmajor Special Revenue, Capital Project and Debt Service funds please see the supplementary information schedules. The governmental funds’ financial statements can be found on pages 24 – 33 of this report. Proprietary funds Proprietary Funds include both Internal Service and Enterprise Funds and are presented on a full accrual basis similar to Government-wide financial statements. The County has two Internal Service Funds. These Internal Service Funds are used to account for the general liability and workers’ compensation insurance activities. The County maintains one Enterprise Fund to account for the County hospital (Natividad Medical Center) activities. The proprietary fund’s financial statements can be found on pages 34 – 37 of this report.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the County. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s own programs. The external portion of the Treasurer’s Investment Pool and agency funds are reported as fiduciary funds. The fiduciary funds’ financial statements can be found on pages 38 and 39 of this report. Notes to financial statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to financial statements can be found on pages 41 – 88 of this report. Other Information In addition to the financial statements and accompanying notes, this report also presents certain required supplementary information concerning the County’s progress in funding its obligations to provide pension and retiree health care benefits to its employees. Required supplementary information can be found on pages 91 and 92 of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 97 – 163 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the County, assets exceeded liabilities by $727.3 at the close of the current fiscal year (Table 1 – Net Assets). The largest portion of the County’s net assets, $548.6 or 75.4% reflects its investment in capital assets, (land, buildings, roads, bridges, machinery and equipment) less any related outstanding debt used to acquire those assets. This area decreased by $0.8 mainly due to the pay down of debt used to fund the construction or purchase of assets. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used. Another portion of the County’s net assets, $106.8, represents resources that are subject to constraints by either external creditors or government entities or by law through constitutional provisions or enabling legislation. The major restrictions on the County’s net assets are imposed by state and federal restrictions for allocations to areas such as: flood control, sanitation, debt service, roads, low income housing, emergency medical services, capital projects, and developments of unincorporated areas. Restricted net assets increased by $1.6, or 1.5%, which represents increases in Capital Projects and Debt Services.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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2010 2009 2010 2009 2010 2009Current and other assets $368.6 $397.6 $73.1 $53.4 $441.7 $451.0 ($9.3) -2.1%Capital assets 684.6 660.4 113.8 113.6 798.4 774.0 24.4 3.2% Total assets 1,053.2 1,058.0 186.9 167.0 1,240.1 1,225.0 15.1 1.2%

Current and other liabilities 144.5 125.5 20.2 22.0 164.7 147.5 17.2 11.7%Long-term liabilities 275.1 275.4 73.0 64.9 348.1 340.3 7.8 2.3% Total liabilities 419.6 400.9 93.2 86.9 512.8 487.8 25.0 5.1%

Net assets:Invested in capital assets, net of related debt 499.4 502.1 49.2 47.3 548.6 549.4 (0.8) -0.1%Restricted 106.8 105.2 - - 106.8 105.2 1.6 1.5%Unrestricted 27.4 49.8 44.5 32.8 71.9 82.6 (10.7) 13.0% Total net assets $633.6 $657.1 $93.7 $80.1 $727.3 $737.2 ($9.9) -1.3%

TABLE 1 - County of Monterey's Net Assets (in millions)

Governmental Activities Dollar

ChangePercent Change

Total Business-type Activites Total

The County’s unrestricted net assets balance of $71.9 represents resources that are available to meet the County’s ongoing obligations to citizens and creditors. The prior year data has been adjusted to reflect final recognition of expenditures and revenue then omitted due to timing issues. For additional details, please see Note 21 - Restatement of Net Assets and Fund Balances on page 87. The net decline of $9.9 represents the degree to which expenses exceeded revenue by $5.7. The remaining decrease of $4.2 includes a transfer of $2.1 in Courts Facilities to the State and a Supplemental ERAF payment of $2.1.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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2010 2009 2010 2009 2010 2009RevenuesProgram Revenues: Charges for services $107.4 $118.0 $219.4 $185.6 $326.8 $303.6 $23.2 7.6% Operating grants and contributions 311.0 303.2 - 12.9 311.0 316.1 (5.1) -1.6% Capital grants and contributions 11.9 - - 3.2 11.9 3.2 8.7 N/AGeneral revenues: Property taxes 130.8 149.2 - - 130.8 149.2 (18.4) -12.3% Sales tax & Sales Tax in lieu 5.4 6.5 - - 5.4 6.5 (1.1) -16.9% Transient occupancy and other taxes 12.9 15.0 - - 12.9 15.0 (2.1) -14.0% Franchise taxes 4.7 7.9 - - 4.7 7.9 (3.2) -40.5% Other taxes 3.5 2.0 - - 3.5 2.0 1.5 75.0% Vehicle license fees 11.6 12.2 - - 11.6 12.2 (0.6) -4.9%Unrestricted investment earnings 4.1 2.1 - - 4.1 2.1 2.0 95.2%Tobacco settlement revenues 4.1 4.9 - - 4.1 4.9 (0.8) -16.3%Other - 0.2 - - - 0.2 (0.2) -100.0%Donations - - - 0.7 - 0.7 (0.7) N/A Total revenues 607.4 621.2 219.4 202.4 826.8 823.6 3.2 0.4%

ExpensesGeneral government 89.4 77.8 - - 89.4 77.8 11.6 14.9%Public safety and protection 168.4 177.7 - - 168.4 177.7 (9.3) -5.2%Public ways and facilities 47.4 46.4 - - 47.4 46.4 1.0 2.2%Health and sanitation 124.0 135.2 - - 124.0 135.2 (11.2) -8.3%Public assistance 169.0 158.1 - - 169.0 158.1 10.9 6.9%Education 7.8 7.6 - - 7.8 7.6 0.2 2.6%Recreation and culture services 11.0 11.2 - - 11.0 11.2 (0.2) -1.8%Interest on long-term debt 9.7 10.2 - - 9.7 10.2 (0.5) -4.9%Natividad Medical Center - - 205.8 194.9 205.8 194.9 10.9 5.6% Total expenses 626.7 624.2 205.8 194.9 832.5 819.1 13.4 1.6%

Change in net assets before special and extraordinary items (19.3) (3.0) 13.6 7.5 (5.7) 4.5 (10.2) N/ASpecial and extraordinary items (4.2) - - - (4.2) - (4.2) N/AIncrease (decrease) in net assets (23.5) (3.0) 13.6 7.5 (9.9) 4.5 (14.4) -320.0%

Net assets, beginning 657.1 658.5 80.1 72.6 737.2 731.1 6.1 0.8%Prior Period Adjustment - 1.6 - - - 1.6 (1.6) -100.0%Net assets, ending $633.6 $657.1 $93.7 $80.1 $727.3 $737.2 ($9.9) -1.3%

TABLE 2 - County of Monterey's Changes in Net Assets (in millions)

Governmental Activities Dollar

ChangePercent Change

Total Business-type Activities Total

Governmental Activities Governmental activities decreased the County’s net assets by $23.5. This reduction is primarily due to the use of fund balance to finance government operations as tax revenues were decreasing due to the recession. (See Table 2 Change in Net Assets). Revenues Governmental activities’ revenue (not including special and extraordinary items) decreased $13.8 from $621.2 to $607.4, or a negative 2.2%. This net decrease was mainly due to the decrease in charges for services and property taxes with an offset of increased operating grants and contributions.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

9

Charges for Services decreased by $10.6 due to a drop in special assessments in various county service areas and special districts; reduction in various services within planning and engineering, licenses and permits, agricultural services, election and others due to economic factors and slower demands.

Operating grants and contributions increased by $7.8 and capital grants and contributions increased by $11.9. A large portion of the combined increase represents funding of $12.1 through the American Recovery and Reinvestment Act (ARRA). Capital grants and contributions increased, as well, due to $4.0 in contributions of land and buildings. The Health Department received $2.9 in contributions for the Tenant Improvement Project while the remainder was received by the Redevelopment Agency for a park.

Property taxes decreased by $18.4. This is due mainly to revaluation of properties reducing the net assessed valuations by nearly $4 billion dollars (see Schedule 5 in the Statistical Section of this report). The recession continues to impact tax revenues from sales, tourism, and franchises with decreases of $1.1, $2.1, and $3.2, respectively.

Interest and investment earnings increased by $2.0. This increase was due mainly to the recovery of $1.5 of the loss in the prior year from the Washington Mutual Bank bankruptcy.

Expenses Total governmental expenses increased by $2.5 or 0.4% to $626.7. The County implemented a new financial system and faced difficulties in extracting some data at a detailed level in time for reporting. This caused some functional grouping based at a higher fund level compared to activity level resulting in variance by function. After considering this reclassification effects, the variance numbers by function stated above in Table 2 changed in opposite direction in some cases. General government, public protection, and health and sanitation had impacts with the reclassification.

General government expenses show an increase by $11.6 or 14.9%. However, a later analysis of reclassification effect revealed expenses in this area decreased due to implementation of a non essential spending restriction and hiring freeze.

Public safety and protection expenses show a decrease by $9.3 or 5.2%. However, analysis of the reclassification effect revealed expenses in this area increased due to continued rising costs of pension and workers compensation.

Health and sanitation expenses show a decrease by $11.2 or 8.3%. However, analysis of the reclassification effect revealed expenses in this area only slightly dropped due to streamlining and cost readjustment measures to meet the challenge of shrinking revenues.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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Public assistance expenses moved up by $10.9 or 6.9%. The increase in this category was a result of increased assistance program activities (CalWORKS, food stamps, Medi-Cal, In-Home Supportive Services, general assistance, food aid, cash assistance, and medical assistance) due to continued declining economy and continuous job losses.

For FY 2009-10 the County has proactively managed the downturn of revenues by implementing a hiring freeze and a strategic control of all expenses. In addition to the 210 staff positions that were eliminated during the FY 2009-10 Adopted Budget process, the Board also approved the additional elimination of 25 positions during mid-year as County management deals proactively with current and anticipated economic challenges. As shown in the following chart, program revenues are less than the expenses in all functional areas. The difference of program expenses over program revenue is $196.4.

Program revenues are not intended to fully support governmental programs. This presentation is meant to show the net cost of each program prior to allocation of general revenues. The net cost of $196.4 of these programs is almost totally funded by general revenues of $177.1 with the deficit funded by prior year unrestricted net assets.

$0.0

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Health and sanitation

Public assistance Education Recreation and culture services

Interest on long-term debt

Expenses & Program Revenues- Governmental Activities

Expenses Program Revenues

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

11

Total revenue by sources for governmental activities is shown on the following chart.

Business-type Activities. Natividad Medical Center (NMC) is owned and operated by the County and governed by a separate Board of Trustees. As a County entity, NMC is mandated to treat patients, regardless of ability to pay.

NMC experienced a net operating gain of $15.6 in FY 2009-10. This gain, coupled with a net non-operating decrease of $1.8, resulted in the third year of profitability for NMC. The total positive increase in net assets for the fiscal year was $13.8. A strengthened collection and claiming process implemented by the NMC management team was responsible for the healthy increase in net assets. The components of the non-operating revenues consisted of $1.4 net rental income; $.5 from interest earnings and ($3.7) interest expense.

FINANCIAL ANALYSIS OF THE COUNTY’S FUNDS

As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds The focus of the County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources at the end of the fiscal year available for spending in the upcoming year.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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As of the end of the fiscal year, the County’s governmental funds reported total fund balances of $200.7, a decrease of $43.1 from the adjusted prior year total fund balances. Approximately 86.2%, or $173.1, of this amount constitutes unreserved fund balance, which is available to meet the County’s current and future needs. Designations by management of unreserved fund balance represent funds earmarked for planned activities, contingency or use during emergency need (see Note 10). The remainder of fund balance is reserved as these funds are not available for new spending but are designated for the following purposes:

$9.7 to liquidate contracts and purchase orders of the current period (Encumbrances) $15.9 to pay debt service $2.0 of unavailable assets and other reserves

General Fund The General Fund is the main operating fund of the County. All County activities not included in a separate fund are included in the General Fund. At June 30, 2010, unreserved fund balance totaled $74.6, a decrease of $6.1 from the adjusted unreserved fund balance of $80.7 from prior fiscal year. Overall, revenue fell by $15.1 mostly due to decline of Property Taxes as housing market continues to devalue, loss of Transient Occupancy Tax, and Sales & Use Tax. The revenue is expected to continue current trend due to a severe economic downturn. Expenditures decreased by $6.5 from prior year, primarily due to reduction in spending and workforce via the hiring freeze. Road Fund The Road Fund is used to segregate the revenues and expenditures associated with streets and roads within the County. The Road Fund has a total fund balance of $2.4, of which $1.6 is reserved to liquidate contracts and purchase orders, $0.1 is unavailable assets, and $0.7 is unreserved. The recession has reduced the collection of permits by $1.7 and operating grants and contributions by $4.0. While there was an offsetting reduction in expenditures of $3.7, the total expenditures exceeded revenues by $2.1. Due to net transfers of $2.5 from the General Fund and the Capital Projects Fund to the Road Fund for specific projects, the total fund balance increased $0.5, or 28.3%, from the prior fiscal year. Community Development Community Development is used for a variety of economic development activities. Total revenues of $3.1 were slightly less than total expenditures of $3.3, reducing the fund balance by $0.2 to $1.2.

Facility Master Plan Implementation The Facility Master Plan Implementation Fund ends the fiscal year with a total fund balance of $30.2, all of which is unreserved. This is a 34.6% decrease from the prior fiscal year’s total fund balance of $46.2. The completed projects that contributed to the decline of the fund balance were: 1) The Health Department Headquarters, 2) Probation – Youth Center Probation Module Education Center, and 3) the Agricultural Commissioner’s building.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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Other Governmental Funds The sum of the fund balances of the remaining governmental funds decreased $16.4 to a balance of $90.4. The major decreases were in:

Special Revenue Funds – $8.7 decrease, mainly in Water Resources where there was an influx of bond proceeds in fiscal year 2008-09 but no new debt was issued in fiscal year 2009-10. In addition, in FY 2008-09, Road Fund was included in Other Governmental Funds, but is a major fund in FY 2009-10. The Debt Service Funds – $3.7 decrease mostly due to even out effect of funds transferred in this category in fiscal year 2008-09 that got used for debt service in 2009-10.Capital Projects – $4.0 decrease mainly due to supplemental ERAF payment of $2.2 and higher capital outlay offset by funds transferred from other categories.

Proprietary funds. The County’s proprietary fund, Natividad Medical Center, increased its net assets by $13.8, reporting net assets of $93.2 at year end. NMC has improved operations due to aggressive receivable collection program implemented by the new management team. NMC achieved a positive net operating income of $15.6, a vast improvement over the prior year operating loss. The unrestricted cash balance for NMC is $45.0, a 57.3% growth when compared to the $28.6 cash balance at June 30, 2009.

GENERAL FUND BUDGETARY HIGHLIGHTS

Original Budget to Final Budget Increase

Original Final (Decrease)Estimated revenues $ 543.1 $ 564.0 $ 20.9 Appropriations $ 547.1 $ 564.3 $ 17.2

Estimated revenues increase of $20.9:

The final estimated revenue budget increased compared to the original budget by 3.8% due to unanticipated grant funding from ARRA-American Recovery and Reinvestment stimulus funds and various other grants to provide employment programs, housing for families in need, combat gang violence, and strengthen public health emergency response.

Appropriations increase of $17.2:

Appropriation budgets were increased to reflect the ARRA-American Recovery and Reinvestment stimulus funds and other various grants. These increases were mitigated by savings as departments eliminated or deferred non-essential activities and filled only crucial vacancies. The net result was an increase from the original budget of 3.1%.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

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Final Budget to Actual Variance Positive

Revenues Final$ 564.0

Actual $ 528.1

(Negative) ($ 35.9)

Expenditures $ 564.3 $ 517.0 $ 47.3

Revenues actual was lower than final budget by $35.9:

Taxes, VLF and franchises revenues exceeded the budget slightly. State and Federal Aids were significantly lower than the budget due to initial anticipation of case loads for entitlement programs that did not materialized and the anticipated reimbursement of earned revenue was not received within the 90-day accrual period. The decline in Prop 172 revenue and delayed state payments contribute slightly to the budget shortfall. Permit fees and services associated with housing and construction declined with the downturn of the housing market.

Expenditures actual was less than final budget by $47.3:

Savings in expenditures are mainly a result of elimination of more full-time equivalent (FTE) positions, reduction in non-essential spending, and excess of budget for entitlement and public assistance programs spending that did not materialized due to lower than expected case loads.

CAPITAL ASSETS

2010 2009 2010 2009 2010 2009Land 177.2$ 174.8$ -$ -$ 177.2$ 174.8$ 2.4$ 1.4%Structures and improvements 173.6 141.7 154.0 153.3 327.6 295.0 32.6 11.1%Equipment 91.5 79.3 48.5 42.2 140.0 121.5 18.5 15.2%Infrastructure 524.9 491.4 - - 524.9 491.4 33.5 6.8%Construction in Progress (CIP) 123.7 156.0 1.7 1.3 125.4 157.3 (31.9) -20.3%

Total Capital Assets 1,090.9 1,043.2 204.2 196.8 1,295.1 1,240.0 55.1 4.4%Accumulated Depreciation (406.4) (382.8) (90.5) (83.2) (496.9) (466.0) (30.9) 6.6% Total 684.5$ 660.4$ 113.7$ 113.6$ 798.2$ 774.0$ 24.2$ 3.1%

TABLE 3- County of Monterey's Capital Assets

Governmental Activities Dollar

ChangePercent Change

Total Business-type Activites Total

Capital projects are generally completed over multiple fiscal years. Costs accumulate within the construction in progress (CIP) account until the completion of projects. At completion, current year costs and all prior years’ costs of a project are totaled then transferred to structures and improvements, equipment or infrastructure. The County’s governmental activities’ major capital asset events in the current fiscal year included CIP completions of $77.1, CIP addition of $44.8 with a net decrease to CIP of $32.3.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

15

The accompanying government-wide financial statements include the costs of those assets that were either completed during the fiscal year or considered CIP at year-end. Additional information on the County’s capital assets can be found in Note 5 on page 62 of this report. DEBT ADMINISTRATION State statutes limit the amount of general obligation debt a government entity may issue to 1.25% of the total assessed valuation of property within the County. The current debt limitation of the County is $614.0. The County’s outstanding long-term issues payable is $281.7 but none is applicable to the debt limit. The following schedule does not include the liabilities for self-insurance, compensated absences, and estimated landfill closure, which are components of the long-term liabilities balance of $373.2 reported in Note 8. At June 30, 2010, the County had total long-term debt outstanding of $281.7. This was a decrease of $11.1 or 3.8% from the prior year balance of $292.8. The net decrease is due to the payment of debt.

2010 2009 2010 2009 2010 2009Certificates of participation 132.8$ 136.3$ 68.0$ 71.3$ 200.8$ 207.6$ (6.8)$ -3.3%Revenue bonds 33.8 33.9 - - 33.8 33.9 (0.1) -0.3%Loans payable-Bureau of Reclamation 29.8 30.8 - - 29.8 30.8 (1.0) -3.2%Judgment Obligation Bonds 3.3 4.0 - - 3.3 4.0 (0.7) -17.5%Notes payable 13.5 14.3 - - 13.5 14.3 (0.8) -5.6%Other bonds and notes 0.4 0.8 0.1 1.4 0.5 2.2 (1.7) -77.3% Total 213.6$ 220.1$ 68.1$ 72.7$ 281.7$ 292.8$ (11.1)$ -3.8%

TABLE 4 - County of Monterey's Long Term Debt (in millions)

Governmental Activities Dollar

ChangePercent Change

Total Business-type Activities Total

Additional information on the County’s long-term debt can be found in Note 8 beginning on page 66 of this report. ECONOMIC ANALYSIS AND NEXT YEAR’S BUDGET AND RATES The following are economic factors for fiscal year 2010-11:

Property tax revenues will remain low due to prior year major reassessments of property which brought the assessed values down.

The County of Monterey continues to experience the effects of the economic downturn in California and the nation. Reduced state intergovernmental funding is projected to continue as more state funding is cut, and programs, such as the American Recovery and Reinvestment Act, wind down.

COUNTY OF MONTEREY MANAGEMENT’S DISCUSSION AND ANALYSIS

16

The Board adopted a fiscal year 2010-11 balanced budget for the General Fund totaling $549.2, a decrease of $20.8 or 3.7% less than the fiscal year 2009-10 adopted budget. The decrease reflects County management’s continued commitment to align expenditures with available funding, streamline service levels while providing essential and mandated services and programs, and minimize the negative effects on County personnel.

REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the County’s finances and to demonstrate the County’s accountability for the money it receives. If you have questions about this report or need additional information, contact the County of Monterey, Office of Auditor-Controller, 168 West Alisal Street, Salinas, CA 93901.

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BASIC FINANCIAL STATEMENTS – GOVERNMENT-WIDE FINANCIAL STATEMENTS

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COUNTY OF MONTEREY

Statement of Net AssetsJune 30, 2010

ComponentPrimary Government Unit

Governmental Business-Type Children andActivities Activities Total Families Commission

ASSETSCash and investments:

Held in County treasury 246,511,938$ 44,967,648$ 291,479,586$ 21,983,203$ Held with trustee 17,690,039 492,396 18,182,435 -- Other bank accounts -- 163,307 163,307 438,654 Imprest cash 23,550 2,128 25,678 -- Restricted cash 2,168,496 -- 2,168,496 --

Receivables 78,733,378 21,767,079 100,500,457 956,018 Inventories 500,509 2,236,209 2,736,718 -- Land held for resale and development 856,017 -- 856,017 -- Prepaid items 146,869 1,531,619 1,678,488 4,196 Internal balances (502,166) 502,166 -- -- Long-term receivables 19,593,980 -- 19,593,980 -- Bond issuance costs, net of amortization 2,944,179 1,468,209 4,412,388 -- Capital assets:

Nondepreciable 300,928,623 1,697,360 302,625,983 -- Depreciable, net 383,644,954 112,038,468 495,683,422 20,687

Total assets 1,053,240,366$ 186,866,589$ 1,240,106,955$ 23,402,758$

LIABILITIESVouchers and accounts payable 23,340,611$ 6,365,786$ 29,706,397$ 2,720,084$ Accrued salaries and benefits 9,993,109 3,044,287 13,037,396 12,137 Accrued interest payable 3,239,019 1,458,660 4,697,679 -- Accrued liabilities 4,631,478 6,152,970 10,784,448 -- Deposits from others 6,524,534 3,179,656 9,704,190 -- Unearned revenues 63,491,742 -- 63,491,742 -- Long-term liabilities:

Due within one year 33,304,382 8,511,030 41,815,412 31,732 Due beyond one year 268,232,955 63,126,747 331,359,702 64,275 Liability for post-employment benefits 6,862,415 1,373,664 8,236,079 --

Total liabilities 419,620,245 93,212,800 512,833,045 2,828,228

NET ASSETSInvested in capital assets, net of related debt 499,357,153 49,185,313 548,542,466 13,561 Restricted for:

Community resources and facilities 30,245,670 -- 30,245,670 -- Health and public assistance 2,284,924 -- 2,284,924 -- Disaster assistance 258,355 -- 258,355 -- Capital projects 61,789,611 -- 61,789,611 -- Debt service 4,682,785 -- 4,682,785 -- Housing and redevelopment 7,528,424 7,528,424 -- Other -- -- -- 20,560,969

Unrestricted 27,473,199 44,468,476 71,941,675 -- Total net assets 633,620,121 93,653,789 727,273,910 20,574,530

Total liabilities and net assets 1,053,240,366$ 186,866,589$ 1,240,106,955$ 23,402,758$

The accompanying notes are an integral part of these financial statements.19

COUNTY OF MONTEREY

Statement of ActivitiesFor the Year Ended June 30, 2010

Program RevenuesFees, Fines, and Operating Capital

Charges for Grants and Grants andExpenses Services Contributions Contributions

Functions/ProgramsPrimary government

Governmental activities:General government 89,451,318$ 25,187,142$ 10,664,742$ --$ Public safety and protection 168,426,837 18,752,548 53,055,408 -- Public ways and facilities 47,463,448 19,700,184 12,102,035 9,015,518Health and sanitation 123,965,661 35,502,103 77,662,375 2,943,000Public assistance 168,967,862 1,591,224 156,220,094 -- Education 7,808,427 381,064 328,594 -- Recreation and cultural services 10,962,720 6,353,474 931,289 -- Interest on long-term debt 9,749,683 -- -- --

Total governmental activities 626,795,956 107,467,739 310,964,537 11,958,518

Business-type activities:Natividad Medical Center 205,759,528 219,326,424 -- --

Total business-type activities 205,759,528 219,326,424 -- --

Total primary government 832,555,484$ 326,794,163$ 310,964,537$ 11,958,518$

Component unitChildren and Families Commission 7,525,458$ --$ 6,119,354$ --$

General revenues:Taxes:

Property taxesSales and use taxesTransient occupancy taxesFranchise taxesOther taxes

Intergovernmental not restricted to specific programsUnrestricted interest and investment earningsTobacco settlement revenuesOther revenues

Total general revenues

Special Item - Transfer of Courts FacilityExtraordinary Item: Supplemental ERAF payment

Change in net assetsNet assets - July 1, 2009 as restated

Net assets - June 30, 2010

20

Net (Expenses) Revenues andChanges in Net Assets

ComponentPrimary Government Unit

Business- Children andGovernmental Type Families

Activities Activities Total Commission

(53,599,434)$ --$ (53,599,434)$ --$ (96,618,881) -- (96,618,881) --

(6,645,711) -- (6,645,711) -- (7,858,183) -- (7,858,183) --

(11,156,544) -- (11,156,544) -- (7,098,769) -- (7,098,769) -- (3,677,957) -- (3,677,957) -- (9,749,683) -- (9,749,683) --

(196,405,162) -- (196,405,162) --

-- 13,566,896 13,566,896 -- -- 13,566,896 13,566,896 --

(196,405,162) 13,566,896 (182,838,266) --

(1,406,104)

130,817,335 -- 130,817,335 -- 5,378,707 -- 5,378,707 --

12,952,337 -- 12,952,337 -- 4,691,532 -- 4,691,532 -- 3,525,705 -- 3,525,705 --

11,609,856 -- 11,609,856 -- 4,090,748 -- 4,090,748 383,730 4,069,510 -- 4,069,510 --

-- -- -- 275,000 177,135,730 -- 177,135,730 658,730

(2,050,109) -- (2,050,109) -- (2,170,500) -- (2,170,500) --

(23,490,041) 13,566,896 (9,923,145) (747,374) 657,110,162 80,086,893 737,197,055 21,321,904

633,620,121$ 93,653,789$ 727,273,910$ 20,574,530$

The accompanying notes are an integral part of these financial statements.21

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23

BASIC FINANCIAL STATEMENTS – FUND FINANCIAL STATEMENTS

COUNTY OF MONTEREY

Balance SheetGovernmental Funds

June 30, 2010

General Road CommunityFund Fund Development

ASSETSCash and investments:

Held in County Treasury 78,149,009$ 16,831,979$ 591,323$Held with trustee -- -- 430,358Imprest cash 23,550 -- --Restricted cash 2,168,496 -- --

Receivables 70,504,982 1,511,897 276,804Due from other funds 23 -- --Advances to other funds -- -- 150,000Inventories 388,354 112,155 --Land held for resale -- -- --Prepaid items and other assets -- -- 24,296Long-term receivables -- -- 14,053,119

Total assets 151,234,414$ 18,456,031$ 15,525,900$

LIABILITIESVouchers and accounts payable 15,108,097$ 1,715,491$ 261,293$Due to other funds -- -- --Accrued salaries and benefits 9,182,476 269,467 --Accrued liabilities 4,628,594 85 --Claims liability 656,168 -- --Deposits from others 3,340,305 2,895,008 22,112Deferred revenues 41,815,398 11,157,576 14,057,492Advances from other funds -- -- --

Total liabilities 74,731,038 16,037,627 14,340,897

FUND BALANCESReserved for:

Encumbrances 1,479,206 1,609,917 --Unavailable assets 411,904 112,155 24,296Debt service -- -- --

Unreserved:General

Designated 60,681,823 -- --Undesignated 13,930,443 -- --

Special revenue funds:Designated -- -- --Undesignated -- 696,332 1,160,707

Capital projects funds:Undesignated -- -- --

Debt service funds:Undesignated -- -- --

Total fund balances 76,503,376 2,418,404 1,185,003

Total liabilities and fund balances 151,234,414$ 18,456,031$ 15,525,900$

24

Facility OtherMaster Plan Governmental

Implementation Funds TotalASSETSCash and investments:

28,313,205$ 77,691,448$ 201,576,964$ Held in County Treasury4,897,402 11,861,794 17,189,554 Held with trustee

-- -- 23,550 Imprest cash-- -- 2,168,496 Restricted cash

345,874 6,093,821 78,733,378 Receivables-- 447,842 447,865 Due from other funds-- 60,295 210,295 Advances to other funds-- -- 500,509 Inventories-- 856,017 856,017 Land held for resale-- -- 24,296 Prepaid items and other assets-- 5,540,861 19,593,980 Long-term receivables

33,556,481$ 102,552,078$ 321,324,904$ Total assets

LIABILITIES3,391,799$ 2,474,619$ 22,951,299$ Vouchers and accounts payable

-- 447,865 447,865 Due to other funds-- 541,166 9,993,109 Accrued salaries and benefits-- 2,799 4,631,478 Accrued liabilities-- -- 656,168 Claims liability-- 267,109 6,524,534 Deposits from others-- 8,179,252 75,209,718 Deferred revenues-- 210,295 210,295 Advances from other funds

3,391,799 12,123,105 120,624,466 Total liabilities

FUND BALANCESReserved for:

-- 6,585,315 9,674,438 Encumbrances-- 1,487,026 2,035,381 Unavailable assets-- 15,893,401 15,893,401 Debt service

Unreserved:General

-- -- 60,681,823 Designated-- -- 13,930,443 Undesignated

Special revenue funds:-- 10,679,240 10,679,240 Designated-- 23,072,936 24,929,975 Undesignated

Capital projects funds:30,164,682 32,059,877 62,224,559 Undesignated

Debt service funds:-- 651,178 651,178 Undesignated

30,164,682 90,428,973 200,700,438 Total fund balances

Total liabilities and33,556,481$ 102,552,078$ 321,324,904$ fund balances

The accompanying notes are an integral part of these financial statements.25

COUNTY OF MONTEREY

Reconciliation of the Governmental Funds Balance Sheet tothe Government-Wide Statement of Net Assets - Governmental Activities

June 30, 2010

Fund balance - Total governmental funds 200,700,438$

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets used in governmental activities are not financial resourcesand, therefore, are not reported in the governmental funds. 679,522,219

Other long-term assets are not available to pay for current periodexpenditures and, therefore are deferred in the governmental funds. 11,717,976

Internal service funds are used by the County to charge the cost of generalliability and workers' compensation insurance to individual funds. Theassets and liabilities of the internal service funds are included ingovernmental activities in the statement of net assets. (18,521,077)

Issuance costs on certificates of participation and revenue bonds are capitalized and amortized over the life of the related debt issue. 2,944,179

Long-term liabilities, including bonds payable, are not due and payablein the current period and therefore are not reported in the governmentalfunds. Interest on long-term debt is not accrued in governmental funds,but rather is recognized as an expenditure when due. All liabilities arereported in the statement of net assets. Balances as of June 30, 2009 are:

Bonds and notes payable (63,819,379)$ Certificates of participation (132,800,000) Unamortized premium on certificates of participation (2,824,090) Unamortized gain on refunding of certificates of participation 2,496,846 Capital lease obligations (213,032) Accrued interest on long-term debt (3,184,436) Compensated absences (32,327,926) Estimated landfill closure and postclosure costs (2,707,016) OPEB liability (6,862,415) (242,241,448)

Adjustment necessary to close Internal Service Funds activities. This is thecummulative excess of revenues over expenses allocable to business-typeactivities (502,166)

Net assets of governmental activities 633,620,121$

The accompanying notes are an integral part of these financial statements.26

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COUNTY OF MONTEREY

Statement of Revenues, Expenditures, and Changes in Fund BalancesGovernmental Funds

For the Year Ended June 30, 2010

General Road CommunityFund Fund Development

Revenues:Taxes 148,222,739$ --$ --$ Licenses and permits 10,616,599 450,299 -- Fines, forfeitures and penalties 8,080,377 -- -- Revenue from use of money and property 1,967,288 71,240 31,164 Aid from other governmental agencies 283,019,307 19,719,791 2,282,925 Charges for services 68,549,773 3,572,478 2,094 Tobacco settlement and other revenue 7,619,976 78,097 739,813

Total revenues 528,076,059 23,891,905 3,055,996

Expenditures:Current:

General government 74,385,512 -- 3,280,682 Public safety and protection 166,183,507 -- -- Public ways and facilities -- 25,945,968 -- Health and sanitation 119,856,188 -- -- Public assistance 153,253,146 -- -- Education 545,067 -- -- Recreation and cultural services 8,720,985 -- --

Debt service:Principal -- -- -- Interest and debt service costs 233,951 -- --

Capital outlay -- -- -- Total expenditures 523,178,356 25,945,968 3,280,682

Excess (deficiency) of revenues over (under) expenditures 4,897,703 (2,054,063) (224,686)

Other financing sources (uses):Inception of capital leases 23,285 -- -- Transfers in 925,000 2,887,421 -- Transfers out (18,970,031) (300,000) -- Sale of capital assets 244,888 -- --

Total other financing sources (uses) (17,776,858) 2,587,421 --

Extraordinary Item:Supplemental ERAF payment -- -- --

Net change in fund balances (12,879,155) 533,358 (224,686)

Fund balances, beginning of year, restated 89,382,531 1,885,046 1,409,689

Fund balances, end of year 76,503,376$ 2,418,404$ 1,185,003$

28

Facility OtherMaster Plan Governmental

Implementation Funds TotalRevenues:

--$ 13,997,757$ 162,220,496$ Taxes-- 77,385 11,144,283 Licenses and permits-- 2,317,231 10,397,608 Fines, forfeitures and penalties

783,809 1,985,257 4,838,758 Revenue from use of money and property-- 15,640,839 320,662,862 Aid from other governmental agencies

18 20,292,982 92,417,345 Charges for services-- 617,356 9,055,242 Tobacco settlement and other revenue

783,827 54,928,807 610,736,594 Total revenues

Expenditures:Current:

-- 4,579,305 82,245,499 General government-- -- 166,183,507 Public safety and protection-- 17,991,446 43,937,414 Public ways and facilities-- 3,634,773 123,490,961 Health and sanitation-- 14,728,470 167,981,616 Public assistance-- 7,175,649 7,720,716 Education-- 2,852,539 11,573,524 Recreation and cultural services

Debt service:-- 4,919,722 4,919,722 Principal-- 8,719,567 8,953,518 Interest and debt service costs

16,784,769 18,164,611 34,949,380 Capital outlay16,784,769 82,766,082 651,955,857 Total expenditures

Excess (deficiency) of revenues(16,000,942) (27,837,275) (41,219,263) over (under) expenditures

Other financing sources (uses):-- 61,476 84,761 Inception of capital leases-- 53,218,031 57,030,452 Transfers in-- (37,760,421) (57,030,452) Transfers out-- -- 244,888 Sale of capital assets-- 15,519,086 329,649 Total other financing sources (uses)

Extraordinary Item:-- (2,170,500) (2,170,500) Supplemental ERAF payment

(16,000,942) (14,488,689) (43,060,114) Net change in fund balances

46,165,624 104,917,662 243,760,552 Fund balances, beginning of year, restated

30,164,682$ 90,428,973$ 200,700,438$ Fund balances, end of year

The accompanying notes are an integral part of these financial statements.29

COUNTY OF MONTEREY

Reconciliation of the Statement of Revenues, Expenditures, andChanges in Fund Balances of Governmental Funds to the

Government-Wide Statement of Activities - Governmental ActivitiesFor the Year Ended June 30, 2010

Net change in fund balance - Total governmental funds (43,060,114)$

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlay as expenditures. However, in the statementof activities, the cost of those assets is allocated over their estimated useful livesand reported as depreciation expense.

Expenditures for general capital assets, infrastructure, and other related capital asset additions 53,125,521$ Transfer of Court facilities (2,050,109) Less current year depreciation (25,060,641) 26,014,771

The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins and donations) is to decrease net assets (1,128,657)

Revenues in the statement of activities that do not provide currentfinancial resources are not reported as revenues in the funds. (7,651,924)

Some expenses reported in the statement of activities do not require the use ofcurrent financial resources and, therefore, are not reported as expenditures ingovernmental funds. In addition, interest on long-term debt is not recognizedunder the modified accrual basis of accounting until due, rather than as it accrues.

Change in accrued interest on long-term debt 200,264Change in compensated absences (1,481,089)Change in estimated landfill closure and postclosure 208,227Ch i OPEB li bili (1 462 490)

The accompanying notes are an integral part of these financial statements.30

Change in OPEB liability (1,462,490)Amortization of issuance costs (104,149)Amortization of refunding loss (46,327)Amortization of premiums and discounts 51,513 (2,634,051)

Long-term debt proceeds provide current financial resources for governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Costsassociated with the issuance of debt are reported as expenditures in the governmentalfunds, but deferred and amortized through out the period during which the associateddebt is outstanding. Prepayment of debt principal is an expenditure in the governmentalfunds, but the repayment reduces long-term liabilities in the statement of net assets.

Debt issued or incurred:Issuance of capital leases (84,761)

Principal repayments:Certificates of participation 3,460,000Revenue and special assessment bonds 59,000 Notes and loans 1,425,349 Capital leases 124,861 4,984,449

Internal service funds are used by management to charge the costs of certainactivities to individual funds. The net revenue of certain activities of theinternal service funds is reported with governmental activities. (239,916)

Adjustment necessary to close internal service funds activities. This is the current yearexcess of revenues over expenses allocable to business-type activities 225,401

Change in net assets of governmental activities (23,490,041)$

The accompanying notes are an integral part of these financial statements.30

COUNTY OF MONTEREY

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and ActualGeneral Fund

For the Year Ended June 30, 2010Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Taxes, VLF and franchises 144,859,392$ 144,859,392$ 148,222,739$ 3,363,347$Licenses and permits 11,495,999 11,495,999 10,616,599 (879,400)Fines, forfeitures and penalties 10,096,923 10,096,923 8,080,377 (2,016,546)Revenue from use of money and property 2,839,844 2,839,844 1,967,288 (872,556)Aid from other governmental agencies 286,620,560 305,209,877 283,019,307 (22,190,570)Charges for services 76,823,366 78,823,211 68,549,773 (10,273,438)Tobacco settlement and miscellaneous 10,360,088 10,660,170 7,619,976 (3,040,194)

Total revenues 543,096,172 563,985,416 528,076,059 (35,909,357)

Expenditures:Current:

General government 87,934,734 88,955,567 73,066,653 15,888,914Public safety and protection 167,359,806 170,875,007 164,509,327 6,365,680Health and sanitation 122,419,157 124,895,846 117,164,030 7,731,816Public assistance 157,368,131 168,398,902 152,935,848 15,463,054Education 631,462 631,462 544,921 86,541Recreation and cultural services 9,751,141 9,751,141 8,546,183 1,204,958Debt service 432,155 432,155 233,951 198,204Contingency 1,174,230 311,063 -- 311,063

Total expenditures 547,070,816 564,251,143 517,000,913 47,250,230

Excess (deficiency) of revenues over(under) expenditures (3,974,644) (265,727) 11,075,146 11,340,873

Other financing sources (uses):Inception of capital leases -- -- 23,285 23,285Transfers in 924,500 2,461,530 925,000 (1,536,530)Transfers out (17,773,425) (18,398,425) (18,970,031) (571,606)Sale of capital assets -- -- 244,888 244,888

Total other financing sources (uses) (16,848,925) (15,936,895) (17,776,858) (1,839,963)

Net change in budgetary fund balances (20,823,569) (16,202,622) (6,701,712) 9,500,910

Budgetary fund balances, beginning 89,382,531 89,382,531 89,382,531 --Budgetary fund balances, ending 68,558,962$ 73,179,909$ 82,680,819$ 9,500,910$

Explanation of differences between budgetary inflows and outflows and GAAP revenues and expenditures:

Uses/outflows of resourcesActual amounts (budgetary basis) of expenditures from the budgetary comparison statement 517,000,913$Differences - budget to GAAP:

Encumbrances for supplies and services ordered but not received is reported in theYear the order is placed for budgetary purposes, but in the year the supplies areReceived for financial reporting purposes 6,177,443

Total expenditures as reported on the statement of revenues, Expenditures, and changes in fund balances - governmental funds 523,178,356$

The accompanying notes are an integral part of these financial statements.31

COUNTY OF MONTEREY

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and ActualRoad Fund

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Licenses, permits and franchises 2,116,967$ 2,116,967$ 450,299$ (1,666,668)$Revenue from use of money and property 15,679 15,679 71,240 55,561Aid from other governmental agencies 27,021,787 27,021,787 19,719,791 (7,301,996)Charges for services 3,050,888 3,050,888 3,572,478 521,590Other revenue 32,144 32,144 78,097 45,953

Total revenues 32,237,465 32,237,465 23,891,905 (8,345,560)

Expenditures:Current:

Public ways and facilities 35,390,465 35,090,465 26,867,038 8,223,427Total expenditures 35,390,465 35,090,465 26,867,038 8,223,427

Excess (deficiency) of revenues over (under) expenditures (3,153,000) (2,853,000) (2,975,133) (122,133)

Other financing sources (uses):Transfers in 2,028,000 2,828,000 2,887,421 59,421Transfers out -- (300,000) (300,000) --

Total other financing sources (uses) 2,028,000 2,528,000 2,587,421 59,421

Net change in budgetary fund balances (1,125,000) (325,000) (387,712) (62,712)

Budgetary fund balances, beginning 1,885,046 1,885,046 1,885,046 --

Budgetary fund balances, ending 760,046$ 1,560,046$ 1,497,334$ (62,712)$

Explanation of differences between budgetary inflows and outflows and GAAP expenditures:

Uses/outflows of resources

Actual amounts (budgetary basis) of expenditures from the budgetary comparison statement 26,867,038$

Differences - budget to GAAP:Encumbrances for supplies and services ordered but not received is reported in the

Year the order is placed for budgetary purposes, but in the year the supplies areReceived for financial reporting purposes (921,070)

Total expenditures as reported on the combining statement of revenues, Expenditures, and changes in fund balances - governmental funds 25,945,968$

The accompanying notes are an integral part of these financial statements.32

COUNTY OF MONTEREY

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and ActualCommunity Development

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 124,399$ 124,399$ 31,164$ (93,235)$Aid from other governmental agencies 1,429,427 3,570,141 2,282,925 (1,287,216)Charges for services 9,000 9,000 2,094 (6,906)Other revenue 317,091 2,067,091 739,813 (1,327,278)

Total revenues 1,879,917 5,770,631 3,055,996 (2,714,635)

Expenditures:Current:

General government 3,046,679 7,149,894 3,136,264 4,013,630Total expenditures 3,046,679 7,149,894 3,136,264 4,013,630

Other financing sources (uses):Transfers in 75,000 75,000 -- (75,000)Transfers out (75,000) (75,000) -- 75,000

Total other financing sources (uses) -- -- -- --

Net change in budgetary fund balances (1,166,762) (1,379,263) (80,268) 1,298,995

Budgetary fund balances, beginning 1,409,689 1,409,689 1,409,689 --

Budgetary fund balances, ending 242,927$ 30,426$ 1,329,421$ 1,298,995$

Explanation of differences between budgetary inflows and outflows and GAAP expenditures:

Uses/outflows of resources

Actual amounts (budgetary basis) of expenditures from the budgetary comparison statement 3,136,264$

Differences - budget to GAAP:Encumbrances for supplies and services ordered but not received is reported in the

year the order is placed for budgetary purposes, but in the year the supplies arereceived for financial reporting purposes. 144,418

Total expenditures as reported on the combining statement of revenues, expenditures, and changes in fund balances - governmental funds 3,280,682$

The accompanying notes are an integral part of these financial statements.33

COUNTY OF MONTEREY

Statement of Net AssetsProprietary Funds

June 30, 2010Business-Type

Activities - GovernmentalEnterprise Fund Activities

Natividad InternalMedical ServiceCenter Funds

AssetsCurrent assets:

Cash and cash equivalents 44,967,648$ 44,934,974$ Imprest cash 2,128 --Other bank accounts 163,307 --Patient’s accounts receivable, net of estimated uncollectable of $113,995,129 18,700,372 --Due from other agencies 3,066,707 --Inventories 2,236,209 --Prepaid expenses 1,531,619 122,573

Total current assets 70,667,990 45,057,547

Noncurrent assets:Restricted assets:

Held by trustee 492,396 500,485Capital assets:

Non-depreciable 1,697,360 --Depreciable, net 112,038,468 5,051,358

Deferred charges, net of amortization 1,468,209 --Total noncurrent assets 115,696,433 5,551,843Total assets 186,364,423 50,609,390

LiabilitiesCurrent liabilities:

Accounts payable and deposits 9,545,442 389,312Accrued salaries and benefits 3,044,287 --Accrued interest payable 1,458,660 54,583Accrued liabilities 6,152,970 --Current portion of long-term debt and other liabilities 8,511,030 13,403,340

Total current liabilities 28,712,389 13,847,235

Long-term liabilities:Claims liability -- 40,028,755Bonds and notes payable -- 15,254,477Certificates of participation 62,467,260 --Liability for post-employment benefits 1,373,664 --Compensated absences 659,487 --

Total long-term liabilities 64,500,411 55,283,232Total liabilities 93,212,800 69,130,467

Net assetsInvested in capital assets, net of related debt 49,185,313 303,187Unrestricted (deficit) 43,966,310 (18,824,264)

Total net assets 93,151,623 (18,521,077)$

Adjustment to reflect the consolidation of internal service fund activities related to enterprise fund 502,166

Net assets of business-type activities 93,653,789$

The accompanying notes are an integral part of these financial statements.34

COUNTY OF MONTEREY

Statement of Revenues, Expenses and Changes in Net AssetsProprietary Funds

For the Year Ended June 30, 2010

Business-TypeActivities - Governmental

Enterprise Fund ActivitiesNatividad InternalMedical ServiceCenter Funds

Operating revenues:Net patient services revenues 202,833,885$ --$ Other charges for services -- 20,376,546Other operating revenues 14,597,331 --

Total operating revenues 217,431,216 20,376,546

Operating expenses:Salaries and wages 68,575,364 --Employee benefits 25,560,063 --Services and supplies 14,326,222 3,017,081Provisions for doubtful accounts receivable 47,590,815 --Claims expense -- 14,244,432Utilities 2,724,649 --Purchased services 30,247,765 936,139Insurance 2,522,074 1,246,557Depreciation 7,177,782 732,955Other 3,111,513 --

Total operating expenses 201,836,247 20,177,164

Net operating income (loss) 15,594,969 199,382

Non-operating revenues (expenses):Interest income 456,068 458,168Interest expense (3,697,880) (897,466)Rental income 1,439,140 --

Total non-operating revenues (expenses) (1,802,672) (439,298)

Change in net assets 13,792,297 (239,916)

Net assets, beginning of year, restated 79,359,326 (18,281,161)

Net assets, end of year 93,151,623$ (18,521,077)$

Change in net assets, from above 13,792,297$ Adjustment to reflect the consolidation of internal service funds activities related to enterprise fund (225,401)

Change in net assets of business-type activities 13,566,896$

The accompanying notes are an integral part of these financial statements.35

COUNTY OF MONTEREY

Statement of Cash FlowsProprietary Funds

For the Year Ended June 30, 2010

Business-TypeActivities - Governmental

Enterprise Fund ActivitiesNatividad InternalMedical ServiceCenter Funds

Cash flows from operating activities:Cash received from patients and third party payors 168,713,301$ --$ Cash receipts from customers and users -- 20,409,027Cash paid to employees for services (92,576,788) -- Cash paid to suppliers for goods and services (48,216,249) (13,892,704)

Net cash provided (used) by operating activities 27,920,264 6,516,323

Cash flows from capital and related financing activities:Principal paid on capital related debt (3,699,135) (1,524,678)Interest paid on capital related debt (2,292,089) (842,883)Payments related to the acquisition of capital assets (7,469,532) --

Net cash provided (used) by capital and related financing activities (13,460,756) (2,367,561)

Cash flow from investing activities:Cash received from rental income 2,079,872 -- Cash paid on rental property operations (464,451) -- Interest payments received 456,067 458,168

Net cash provided (used) by investing activities 2,071,488 458,168

Net increase (decrease) in cash and cash equivalents 16,530,996 4,606,930 Cash and cash equivalents, July 1 29,094,483 40,828,529 Cash and cash equivalents, June 30 45,625,479$ 45,435,459$

Reconciliation of cash and cash equivalents to statement of net assetsCash and cash equivalents 44,967,648$ 44,934,974$ Imprest cash 2,128 -- Other bank accounts 163,307 -- Restricted cash 492,396 500,485 Total cash and cash equivalents 45,625,479$ 45,435,459$

continued

The accompanying notes are an integral part of these financial statements.36

COUNTY OF MONTEREY

Statements of Cash Flows (continued)Proprietary Funds

For the Year Ended June 30, 2010

Business-TypeActivities - Governmental

Enterprise Fund ActivitiesNatividad InternalMedical ServiceCenter Funds

Reconciliation of operating income to net cashProvided by operating activities:Operating income (loss) $ 15,594,969 $ 199,382 Adjustments to reconcile operating income to net

Cash provided (used) by operating activities:Depreciation and amortization 7,177,782 732,955 (increase) decrease in provision for doubtful accounts 16,499,798 -- (increase) decrease in receivables (19,197,130) 32,481 (increase) decrease in inventories (513,110) -- (increase) decrease in prepaid items 234,916 -- Increase (decrease) in accounts payable 3,519,537 111,433 Increase (decrease) in other accrued liabilities 1,956,922 -- Increase (decrease) in patient refunds 1,846,265 -- Increase (decrease) in unearned revenue (40,361) -- Increase (decrease) in compensated absences 721,301 -- Increase (decrease) in post-employment liability 355,047 -- Increase (decrease) in estimated third-party payor settlements (235,672) -- Increase (decrease) in claims liability -- 5,440,072

Total adjustments 12,325,295 6,316,941

Net cash provided (used) by operating activities 27,920,264$ 6,516,323$

Noncash investing, capital, and financing activities:Refunding bonds issued to paydown existing indebtedness 44,520,000$ --$ Premium included in proceeds 2,356,020 -- Issuance costs withheld from bond proceeds (577,518) -- Interest costs withheld from bond proceeds (958,502) -- Repayment of capital related debt (43,700,000) -- Depreciation on leased assets (176,281) --

The accompanying notes are an integral part of these financial statements.37

COUNTY OF MONTEREY

Statement of Fiduciary Net AssetsJune 30, 2010

Investment AgencyTrust Funds

AssetsCash and investments held in county treasury 622,150,426$ 27,137,440$Taxes receivable -- 33,341,969Long-term receivables -- 30,000

Total assets 622,150,426 60,509,409

LiabilitiesAccounts payable -- 838,647Agency funds held for others -- 59,670,762

Total liabilities -- 60,509,409

Net assetsNet assets held in trust for investment pool

participants 622,150,426 --

Total net assets 622,150,426$ --$

The accompanying notes are an integral part of these financial statements.38

COUNTY OF MONTEREY

Statement of Changes in Fiduciary Net AssetsFor the Year Ended June 30, 2010

InvestmentTrust

AdditionsContributions to investment pool 974,479,293$Interest and investment income 9,442,035

Total additions 983,921,328

DeductionsDistributions from investment pool 978,408,940

Total deductions 978,408,940

Change in net assets 5,512,388

Net assets, beginning of year 616,638,038

Net assets, end of year 622,150,426$

The accompanying notes are an integral part of these financial statements.39

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41

NOTES TO FINANCIAL STATEMENTS

The notes provided in the financial section are considered an integral and essential part of adequate disclosure and fair presentation of this report. The notes include a summary of significant accounting policies for the County, and other necessary disclosure of pertinent matters relating to the financial position of the County. The notes express significant insight to the financial statements and are conjunctive to understanding the rationale for presentation of the financial statements and information contained in this document.

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COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

43

Note 1: Summary of Significant Accounting Policies

A. The Financial Reporting Entity

The County of Monterey (County) was created pursuant to general law as a subdivision of the State of California. It is governed by a five-member elected Board of Supervisors. As required by generally accepted accounting principles, the accompanying financial statements present the County (the primary government) and its component units, entities for which the government is considered to be financially accountable under the criteria set by Government Auditing Standards Board (GASB) Statement No. 14.

Although they are legally separate from the County, the following blended component units are reported as if they were a part of the County because the Monterey County Board of Supervisors also serves as the governing board of each component unit:

– Monterey County Water Resources Agency, including Storm Drain Maintenance District No. 2 and Gonzales Slough Maintenance District

– All County Service Areas – All County Sanitation Districts except Seaside County Sanitation District – Monterey County Redevelopment Agency – Nacimiento Hydroelectric Operations – Monterey County Financing Authority – Monterey County Public Improvements Corporation

Complete financial statements of the Monterey County Redevelopment Agency, Monterey County Financing Authority and Monterey County Public Improvements Corporation can be obtained by contacting the County of Monterey, Intergovernmental Affairs, P.O. Box 180, Salinas, CA 93902.

Monterey County Children and Families Commission (Commission) was established under the provisions of the California Children and Families Act. The Commission is a legally separate entity governed by a board of seven members. Three members are representatives of the County’s health care departments, County’s social services departments and the Board of Supervisors. The County Board of Supervisors may remove any Commission member at any time. Since the County Board of Supervisors can impose their will on the Commission, the Commission is considered a discretely presented component unit of the County. Separately issued statements may be obtained by contacting the Commission at 1125 Baldwin Street, Salinas, CA 93906.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

44

Note 1: Summary of Significant Accounting Policies (continued)

A. The Financial Reporting Entity (continued)

The Monterey County Board of Supervisors appoints a voting majority of the governing boards of the following entities; however, such entities are excluded from the accompanying financial statements due to the fact that (1) the County is not able to impose its will on the entity and (2) there is not a financial benefit/burden relationship between the County and the entity:

– Monterey County Housing Authority – Monterey Bay Unified Air Pollution Control District – All Cemetery Districts – Carmel Highlands Fire Protection District – Mid-Carmel Valley Fire Protection District – Mission Soledad Rural Fire Protection District – Salinas Rural Fire Protection District – North County Public Recreation District

B. New Accounting Pronouncements

The GASB has issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement enhances the usefulness of fund balance information by establishing fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds.

The definitions of the general fund, special revenue fund types, capital project fund types, debt service fund types and permanent fund types are clarified by the provisions in this statement. Interpretations of certain items within the definition of the special revenue fund type have been provided and, for some governments, those interpretations may affect the activities chosen to be reported as special revenue funds.

The requirements of this statement are effective for financial statements for periods beginning after June 5, 2010. Fund balance reclassifications made to conform to the provisions of the statement are required to be applied retroactively by restating beginning fund balance.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

45

Note 1: Summary of Significant Accounting Policies (continued)

C. Basis of Presentation

Government-Wide Financial Statements

The statement of net assets and statement of activities display information about the primary government (County) and its component units. These statements include the financial activities of the overall government, except for fiduciary activities. All internal balances in the statement of net assets have been eliminated with the exception of those representing balances between governmental activities and the business-type activities, which are presented as internal balances. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the County. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties.

The statement of activities presents a comparison between program expenses and program revenues for each segment of the business-type activities of the County and for each function of the County’s governmental activities. Program expenses include direct expenses, which are clearly identifiable with a specific function, and allocated indirect expenses. Program revenues include 1) charges paid by the recipients of goods or services offered by the programs and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments for services where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the County’s funds. Elimination of these charges would distort the direct costs and program revenues reported for the various functions.

When both restricted and unrestricted net assets are available, restricted resources are used first, then unrestricted resources as they are needed.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

46

Note 1: Summary of Significant Accounting Policies (continued)

C. Basis of Presentation (continued)

Fund Financial Statements

The fund financial statements provide information about the County’s funds, including fiduciary funds and blended component units. Separate statements for each fund category – governmental, proprietary and fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operation. The principal operating revenues of the County’s enterprise fund and internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

The County reports the following major governmental funds:

The General Fund is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the County that are not accounted for through other funds. For the County, the General Fund includes such activities as general government, public safety and protection, public ways and facilities, health and sanitation, public assistance, education and recreation and cultural services.

The Road Fund carries out basic governmental activities of the County that relate to public ways not accounted for through other funds.

The Community Development Fund is used for a variety of economic development activities and for planning and technical assistance studies. This fund is also used to account for monies received from the State and Federal Governments and loaned by the County to individuals and businesses to encourage economic growth.

The Facility Master Plan Implementation Fund is designated for the renovation of the North, East and West Wings of the Courthouse, the Government Center Parking Structure and the New Health Headquarters. Additionally, funds will be used to address space needs for various other County departments.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

47

Note 1: Summary of Significant Accounting Policies (continued)

C. Basis of Presentation (continued)

Fund Financial Statements (continued)

The County reports the following major enterprise fund:

The Natividad Medical Center (NMC) accounts for hospital operations involved in providing health services to County residents. Revenues are principally fees for patient services, payments from federal and state programs such as Medicare, Medi-Cal and Short Doyle, realignment revenues and subsidies from the General Fund. For more detailed information on the Center, refer to the Natividad Medical Center audit report.

The County reports the following additional fund types:

Internal Service Funds account for the County’s self-insurance programs including workers’ compensation and general liability insurance.

The Investment Trust Fund accounts for the assets of legally separate entities that deposit cash with the County Treasurer. These entities include school and community college districts and other special districts governed by local boards, regional boards and authorities. These funds represent the assets, primarily cash and investments, and the related liability of the County to disburse these monies on demand.

The Agency Funds account for assets held by the County as an agent for various local governments.

D. Basis of Accounting

The government-wide, proprietary and agency fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds have no measurement focus and report only assets and liabilities. However, agency funds use the accrual basis of accounting when recognizing receivables and payables.

Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the County gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales taxes

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

48

Note 1: Summary of Significant Accounting Policies (continued)

D. Basis of Accounting (continued)

are recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligible requirements have been satisfied.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available (“susceptible to accrual”). The County considers property tax revenues to be available if they are collected within 60 days of the end of the current fiscal period. All other revenues are considered to be available if they are collected within 90 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments are recorded only when payment is due. General capital assets acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and capital leases are reported as other financing sources.

For its business-type activities and enterprise fund, the County has elected under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, to apply all applicable GASB pronouncements as well as any applicable pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board or any Accounting Research Bulletins issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units.

E. Cash and Investments

The County follows the practice of pooling cash and investments of all funds with the County Treasurer, except for certain restricted funds which are generally held by outside custodians and classified as “Cash and investments with fiscal agents” on the accompanying financial statements. Interest earned on pooled investments is allocated to the funds entitled to receive interest based on the average daily cash balance of each fund for the quarter in which the interest was earned.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

49

Note 1: Summary of Significant Accounting Policies (continued)

E. Cash and Investments (continued)

For purposes of the Statement of Cash Flows, the proprietary fund types consider all highly liquid investments with a maturity date of three months or less at the time of purchase to be cash equivalents. Proprietary fund types deposits with the County Treasurer are demand-type deposits and are therefore considered to be cash equivalents.

Investment in the Treasurer’s Pool

Statutes authorize the County to invest its surplus cash in obligations of the U.S. Treasury, agencies and instrumentalities, corporate bonds rated P-1 by Standard & Poor’s Corporation or A-1 by Moody’s Investor Service, bankers’ acceptances, certificates of deposit, commercial paper, repurchase agreements, and the State of California Local Agency Investment Fund. Gains and losses are recognized upon sale based upon the specific identification method. Investments in nonparticipating interest-earning investment contracts (guaranteed investment contracts) are reported at cost, commercial paper which have maturities of less than 90 days and investments in external pools are reported at amortized cost and all other investments are reported at fair value. The fair values of investments are obtained by using quotations obtained from independent published sources.

The fair value of participants’ position in the County’s investment pool is the same as the value of the pool shares. The method used to determine the value of participants’ equity withdrawn is based on the book value of the participants’ percentage at the date of such withdrawal.

F. Inventories

Inventories are stated at cost (first-in, first-out basis) for governmental funds and lower of average cost or market for proprietary funds. Inventory recorded by governmental funds includes postage and materials, fleet vehicles and parts and supplies for roads. Governmental fund inventories are recorded as expenditures at the time the inventory is consumed. Reported inventories of governmental funds are equally offset by a fund balance reservation to indicate that portion of fund balance not available for future appropriation.

Inventory recorded in the proprietary funds mainly consists of maintenance supplies as well as pharmaceutical supplies maintained by the Center. Inventory is expensed as the supplies are consumed.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

50

Note 1: Summary of Significant Accounting Policies (continued)

G. Property Taxes

Property taxes attach as an enforceable lien on secured and unsecured property as of January 1, and are levied as of July 1. Secured property taxes are due in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are due on July 1 and become delinquent, if unpaid, on August 31. The County bills and collects its own property taxes and also collects such taxes for cities, schools, and special districts.

H. Capital Assets

Capital assets (including infrastructure) are recorded at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair market value on the date contributed. Capital assets include public domain (infrastructure) general capital assets consisting of certain improvements including roads, bridges, lighting system, drainage system, dams and water systems. The County defines capital assets as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. For infrastructure and buildings, the capitalization threshold is $100,000. Capital assets used in operations are depreciated or amortized (assets under capital leases) using the straight-line method over the lesser of the capital lease period or their estimated useful lives in the government-wide statements and proprietary funds.

The estimated useful lives are as follows:

Infrastructure (except for the maintained pavement subsystem) 15 to 50 years Structures and improvements 40 to 50 years Equipment 3 to 25 years The County has four networks of infrastructure assets – roads, lighting, drainage system, dams and water system.

I. Compensated Absences (Accrued Vacation, Paid-Time-Off, Sick Leave, and Compensatory Time)

Vacation and Paid-Time-Off

Unused vacation and paid-time-off (PTO) leaves may be accumulated up to a specified maximum cap based on an employee’s bargaining unit or management group.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

51

Note 1: Summary of Significant Accounting Policies (continued)

I. Compensated Absences (Accrued Vacation, Paid-Time-Off, Sick Leave, and Compensatory Time) (continued)

Vacation and Paid-Time-Off (continued)

Vacation and PTO leaves are paid to the employee at the time of separation from County employment. Some County employees have an option to buy back up to 80 hours of vacation or PTO leave. The current portion of the liability for vacation and PTO leaves is based on an estimated percentage of employees that will separate from County employment in the next fiscal year (turnover rate), applied to the total liability for vacation and PTO leaves. Sick Leave

Sick Leave can be accumulated indefinitely. Upon retirement or death, unused sick leave is paid up to 500 hours or 750 hours if an employee opts to exchange time to pay for health benefits. All unused sick leave above the 500-750 hours or any unused sick leave for employees separated from the County for other reasons is forfeited.

Compensatory Time

Compensatory time-off can be accrued in lieu of overtime payments. An employee can accumulate compensatory time-off up to 240 hours or 480 hours for public safety and seasonal workers. The compensatory time-off balances are expected to be used within the next fiscal year. All compensatory time-off balances are considered current year liabilities.

The County includes its share of Social Security and Medicare taxes payable on behalf of the employees in the accrual for compensated absences.

J. Bond Issuance Costs and Premium Discounts

In the government-wide financial statements and the proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using a method that approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Unamortized bond issuance costs are reported on the statement of net assets and amortized over the term of the related debt.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

52

Note 1: Summary of Significant Accounting Policies (continued)

J. Bond Issuance Costs and Premium Discounts (continued)

Gains or losses from advance refundings are deferred and amortized as interest expense over the life of the new refunding debt.

In the fund financial statements, governmental fund types recognize bond premiums and discount, as well as bond issuance costs, during the current period. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

K. Interfund Transactions

Interfund transactions are reflected as either loans, services provided/(received), reimbursements or transfers. Loans are reported as receivables and payables as appropriate, are subject to elimination upon consolidation and are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as “internal balances”. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not available financial resources.

Services provided/(received), deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide presentation.

L. Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

53

Note 1: Summary of Significant Accounting Policies (continued)

M. Budgetary Basis of Accounting

In accordance with the provisions of Sections 29000 and 29143, inclusive, of the California Government Code and other statutory provisions, commonly known as the County Budget Act, the County prepares a budget for each fiscal year on or before August 30. Budgeted expenditures are enacted into law through the passage of an Appropriation Ordinance. This ordinance mandates the maximum authorized expenditures for the fiscal year and cannot be exceeded except by subsequent amendments to the budget by the County’s Board of Supervisors.

An operating budget is adopted each fiscal year for the majority of the Governmental Funds. Expenditures are controlled at the appropriation unit level for the County. Appropriation unit level expenditures may not legally exceed appropriations. Any amendments or transfers of appropriations between departments or funds are authorized by the County Administrator’s office and must be approved by the Board of Supervisors. Supplementary appropriations normally financed by unanticipated revenues during the year must be approved by the Board of Supervisors. Budgeted amounts in the budgetary financial schedules are reported as originally adopted and as amended during the fiscal year by resolutions approved by the Board of Supervisors. The amounts reported in the budgetary basis differ from the basis used to present the basic financial statements in accordance with generally accepted accounting principles (GAAP). The County uses an encumbrances system as an extension of normal budgetary accounting for the general, special revenue, and debt service funds and to assist in controlling expenditures of the capital projects funds. Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of applicable appropriations. Encumbrances outstanding at year-end are recorded as reservations of fund balance since they do not constitute expenditures or liabilities. Unencumbered appropriations lapse at year-end. Encumbered appropriations are carried forward in the ensuing year’s budget. An annual budget was not adopted for the Natural Disaster Assistance special revenue fund.

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Note 2: Cash and Investments

Cash and investments for most County activities are included in an investment pool. The investment pool includes both voluntary and involuntary participation from external entities. The State of California statutes require certain special districts and other governmental entities to maintain their cash surplus with the County Treasurer.

The County investment pool is not registered with the Securities and Exchange Commission as an investment company. Investments made by the Treasurer are regulated by the California Government Code and by the County’s investment policy. The objectives of the policy are, in order of priority: safety, liquidity, yield, and public trust.

As of June 30, 2010, the County’s cash, deposits and investments were as follows:

With FiscalPooled Agents Other Total

Imprest cash and cash on hand 81,615$ --$ 25,678$ 107,293$ Deposits with financial institutions 6,412,973 921,012 2,770,457 10,104,442 Outstanding warrants and wires (16,532,456) -- -- (16,532,456) Investments 972,788,523 17,261,423 -- 990,049,946

Totals 962,750,655$ 18,182,435$ 2,796,135$ 983,729,225$

Total cash and investments at June 30, 2010 were presented on the County’s financial statements as follows:

Primary government 312,019,502$ Investment trust fund 622,150,426 Agency funds 27,137,440 Discretely presented component unit 22,421,857

Total cash and investments 983,729,225$

Investments The following table identifies the investment types that are authorized for the County by the California Government Code or the County’s investment policy, wherever is more restrictive. The table also identifies certain provisions of the County’s investment policy that address interest rate risk, credit risk, and concentration risk.

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Note 2: Cash and Investments (continued)

Investments (continued) Maximum Maximum

Authorized Maximum Percentage InvestmentInvestment Type Maturity of Portfolio in One Issuer

Local agency bonds 5 years None 5%U.S. treasury obligations 5 years None NoneState of California obligations 5 years None 5%U.S. agency securities 5 years None NoneBanker's acceptances 180 days 40% 5%Commercial paper 270 days 40% 5%Negotiable CDs/CD placement service 5 years 30% 5%Repurchase agreements 1 year 20% NoneReverse repurchase agreements 92 days 20% NoneMedium term notes 5 years 30% 5%Mutual/money market funds N/A 20% 5%Collateralized bank deposits 5 years None 5%Mortgage pass-through securities 5 years 20% 5%Time deposits 2 years None NoneLocal Agency Investment Fund (LAIF) N/A None* None

* The investment policy limits the pool's investments in LAIF to $40,000,000 per account,regardless of the percentage this represents.

At June 30, 2010, the County had the following investments:

Interest Carrying Fair WAMRates Maturities Par Value Value (Years)

Investments in investment poolFederal agency obligations 0.375% - 6.875% 7/1/2010 - 6/8/2015 371,250,000$ 376,273,882$ 373,533,587$ 1.14 U.S. treasury obligations 0.250% - 5.750% 8/15/2010 - 4/30/2011 190,000,000 193,417,861 191,850,100 0.48 Medium term notes 0.433% - 6.450% 2/1/2011 - 11/1/2012 54,000,000 55,304,790 54,807,910 1.34 Negotiable CDs 0.400% 2/24/2011 10,000,000 10,000,000 9,974,400 0.65 Commercial paper 0.350% 10/4/2010 10,000,000 9,982,694 9,975,700 0.26 Money market mutual funds Variable On Demand 142,047,954 142,047,954 142,047,954 - California asset management program Variable On Demand 95,761,342 95,761,342 95,761,342 - California Local Agency Investment Fund Variable On Demand 90,000,000 90,000,000 90,000,000 -

Total investment pool excluding defaulted securities 963,059,296$ 972,788,523$ 967,950,993$ 0.62

Default securitiesLehman Brothers medium-term notes N/A In Default 10,000,000$ --$ --$ N/A

Total investment pool 973,059,296$ 972,788,523$ 967,950,993$

Investments outside investment poolCash held with fiscal agent

Money market mutual funds Variable On Demand 4,845,048$ 4,845,048$ 4,845,048$ - Investment contract 4.851%-5.171% 7/29/2037 - 9/1/2038 12,416,375 12,416,375 12,416,375 27.27 Total outside investment pool 17,261,423$ 17,261,423$ 17,261,423$

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Note 2: Cash and Investments (continued)

Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the County manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. The County limits its exposure to interest rate risk inherent in its portfolio by managing the investment maturities, the weighted average maturity of its portfolio, as well as limiting the weighted average maturity to two years or less. Credit Risk and Concentration of Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Concentration of credit risk is the risk of loss attributed to the magnitude of an investment in a single issuer. The County Treasurer mitigates these risks by holding a diversified portfolio of high quality investments. The adopted investment policy contains specific limitations on investments by credit quality, maturity length and the maximum allocation by asset class. In all instances, the adopted investment policy is equal to or more restrictive than applicable codified statutes.

Commercial paper obligations must be rated a minimum of F1 by Fitch, P1 by Moody’s or A1 by Standard & Poor’s. Corporate bonds must be rated A or better by one of these three rating agencies. In addition, total exposure of all asset classes to any single issuer shall not exceed 5% of the 12-month projected minimum size of the portfolio, other than securities issued by the U.S. Government, its agencies and sponsored enterprises.

The following is a summary of the credit quality distribution and concentration of credit risk by investment type as a percentage of the County Investment Pool’s fair value at June 30, 2010.

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Note 2: Cash and Investments (continued)

Credit Risk and Concentration of Credit Risk (continued)

Standard & % ofMoody's Poor's Portfolio

U.S. treasury obligations Not rated Not rated 19.80%Federal agency obligations AAA AAA 38.59%Commercial paper P-1 A-1+ 1.03%Negotiable CDs P-1 A-1+ 1.03%Medium-term notes A1 AA- 1.57%Medium-term notes Aa3 AA- 1.06%Medium-term notes Aa2 AA+ 2.63%Medium-term notes Aa3 A+ 0.41%Money market mutual funds Not rated Not rated 14.68%California asset management fund AAA Not rated 9.90%California local agency investment fund Not rated Not rated 9.30%

Total 100.00%

As of the year ended June 30, 2010, the following Federal Agency Obligations, individually, were more than 5% of the County’s pooled investments.

Issuer AmountFederal Home Loan Bank 166,919,987$ Federal Home Loan Mortgage Corporation 90,602,700 Federal National Mortgage Association 85,692,200 Custodial Credit Risk Custodial credit risk for investments is the risk that the County will not be able to recover the invested securities that are in the possession of an outside party. The County’s investment policy requires the use of a safekeeping agent to mitigate custodial risk. Securities are invested on a “Delivery vs. Payment” basis using the custodian agent. In no case does the County engage in securities purchases that are held in broker or dealer accounts. At June 30, 2010, the County’s investment pool had no securities exposed to custodial risk.

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Note 2: Cash and Investments (continued)

Local Agency Investment Fund The County Treasurer’s Pool maintains an investment in the State of California Local Agency Investment Fund (LAIF). LAIF is part of the Pooled Money Investment Account (PMIA), an investment pool consisting of funds held by the state in addition to those deposited in LAIF. All PMIA funds are managed by the Investment Division of the State Treasurer’s Office. This fund is not registered with the Securities and Exchange Commission as an investment company, but is required to invest according to California Government Code. Participants in the pool include voluntary and involuntary participants, such as special districts and school districts for which there are legal provisions regarding their investments. The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. At June 30, 2010, the County’s investment position in LAIF was $90 million, which approximates fair value and is the same as the value of the pool shares which is determined on an amortized cost basis. The total amount invested by all public agencies in PMIA on that day was $69.6 billion. Of that amount, 5.42% was invested in structured notes and asset-backed securities with the remaining 94.58% invested in other non-derivative financial products. Investment Trust of California Joint Powers Authority Pool The County Treasurer’s Pool maintains an investment in the Investment Trust of California Joint Powers Authority Pool (CalTRUST). CalTRUST is not registered with the Securities and Exchange Commission as an investment company, but is overseen by a Board of Trustees composed of officials of the public agencies that participate in CalTRUST. The fair value of the County’s position in the pool is approximately the same as the value of the pool shares.

California Asset Management Program Joint Powers Authority Pool

The County Treasurer’s Pool maintains an investment in the California Asset Management Program Joint Powers Authority Pool (CAMP). CAMP is not registered with the Securities and Exchange Commission as an investment company, but is overseen by a Board of Trustees composed of officials of the public agencies that participate in CAMP. CAMP’s investments are limited to those permitted by Government Code Section 53601. The fair value of the County’s position in the pool is approximately the same as the value of the pool shares.

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Note 2: Cash and Investments (continued)

County Investment Pool Condensed Financial Statements The following represents a condensed statement of net assets and changes in net assets for the Treasurer’s investment pool as of June 30, 2010: Statement of net assets

Net assets held for pool participants 962,750,655$

Equity of internal pool participants 340,600,229$ Equity of external pool participants 622,150,426

Total net assets 962,750,655$

Statement of changes in net assets

Net investment earnings 9,934,776$ Investment expenses (810,201) Net contribution from pool participants 1,659,385

Change in net assets 10,783,960

Net assets at July 1, 2009 951,966,695

Net assets at June 30, 2010 962,750,655$

The County has not provided nor obtained any legally binding guarantees during the fiscal year ended June 30, 2010 to support the value of shares in the pool.

Note 3: Interfund Transactions

The composition of interfund balances as of June 30, 2010, is as follows:

Due to/from other Funds

Receivable fund Payable Fund Amount

Other governmental funds Other governmental funds 447,842$ General fund Other governmental funds 23

Totals 447,865$

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Note 3: Interfund Transactions (continued)

Due to/from other Funds (continued)

Amounts due to and from other funds are for tax increment due as of the end of the fiscal year and temporary loans to cover deficit cash.

Advances to/from other Funds

Receivable fund Payable Fund Amount

Community development Other governmental funds $ 150,000 Other governmental funds Other governmental funds 60,295

$ 210,295

The above interfund advances were to advance funds to fund certain redevelopment projects and to fund redevelopment payments to the Supplementary Education Revenue Augmentation Fund as required by legislation. These loans are long-term loans that are not expected to be repaid during the next fiscal year.

Transfers

Transfers are indicative of funding for capital projects, debt service, subsidies of various County operations and re-allocations of special revenues. Transfers between funds for the year ended June 30, 2010, were as follows:

Transfer from Transfer to Amount

General fund Road fund $ 2,087,421 Other governmental funds 16,882,610

18,970,031

Road fund General fund 300,000

Other governmental funds General fund 625,000 Road fund 800,000 Other governmental funds 36,335,421

37,760,421 Totals $ 57,030,452

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Note 4: Receivables

Receivables as of June 30, 2010, for the County’s individual major, nonmajor, internal service, and enterprise funds are as follows:

Other NatividadGeneral Community Road Facility Master Governmental MedicalFund Development Fund Plan Implementation Funds Center

Receivables:Accounts - net 16,917,292$ --$ --$ 345,874$ 1,928,212$ 18,700,372$ Taxes receivable 13,081,630 -- -- -- 1,731,323 -- Due from other agencies 40,506,060 276,804 1,511,897 -- 2,434,286 3,066,707

Totals 70,504,982$ 276,804$ 1,511,897$ 345,874$ 6,093,821$ 21,767,079$

Notes receivable balances of $19,593,980 are not expected to be collected within the next fiscal year.

At June 30, 2010, accounts receivable reported by Natividad Medical Center were reduced by allowances for doubtful accounts and contractual adjustments as follows:

Allowance for doubtful accounts $ 19,982,706 Allowance for contractual adjustments 94,012,423 $ 113,995,129

Governmental funds report deferred revenue in connection with receivables for revenues considered unavailable to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. As of June 30, 2010, the various components of deferred revenue and unearned revenue in the governmental funds were as follows:

Unavailable Unearned TotalNotes receivable issued from grants on a revolving basis --$ 19,023,266$ 19,023,266$Grant drawdowns prior to meeting all eligibility requirements -- 44,468,476 44,468,476Receivables collected after the period of availability 11,717,976 -- 11,717,976

Totals 11,717,976$ 63,491,742$ 75,209,718$

Assembly Bill X4 15 Mandatory Loan

On July 28, 2009, the California legislature and the Governor passed the State budget which included the suspension of the property tax protection provisions of Proposition 1A (2004) for FY 09-10 and required cities, counties and special districts to loan to the State 8% of the amount of property tax revenues apportioned to them in FY 08-09. This loan is known as the AB X4 15 Mandatory Loan (Loan).

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Note 4: Receivables (continued)

Assembly Bill X4 15 Mandatory Loan (continued)

The provision also created an option, known as the Proposition 1A Securitization, for California public agencies to sell their Loan to the California Statewide Communities Development Authority. While the loan to the State was mandatory for all agencies, the participation in the securitization program was voluntary.

The law required the Loan from agencies to the State to be transferred in two equal installments on January 15, 2010 and May 3, 2010. Those agencies participating in the Proposition 1A Securitization program received proceeds from the securitization for the same amounts on the same dates. The County chose to participate in the Proposition 1A Securitization, resulting in the Loan having no significant impact on its current year cash flow or financial statements.

Note 5: Capital Assets

Capital asset activity for the year ended June 30, 2010 was as follows:

Balance Transfers & BalanceJuly 1, 2009 Additions Retirements Adjustments June 30, 2010

Governmental activitiesCapital assets, not being depreciated:

Land 174,834,273$ 2,401,579$ --$ --$ 177,235,852$ Construction in progress 155,972,711 44,792,453 -- (77,072,393) 123,692,771

Total capital assets, not being depreciated 330,806,984 47,194,032 -- (77,072,393) 300,928,623

Capital assets, being depreciated:Infrastructure 491,439,776 -- -- 33,441,522 524,881,298 Structures and improvements 141,718,842 1,759,069 (3,218,446) 33,352,089 173,611,554 Equipment 79,252,710 4,172,420 (1,213,436) 9,311,496 91,523,190

Total capital assets, being depreciated 712,411,328 5,931,489 (4,431,882) 76,105,107 790,016,042

Less accumulated depreciation for:Infrastructure (279,584,597) (13,282,212) -- -- (292,866,809) Structures and improvements (44,722,209) (4,516,988) 1,168,337 -- (48,070,860) Equipment (58,491,088) (7,994,396) 1,052,065 -- (65,433,419)

Total accumulated depreciation (382,797,894) (25,793,596) 2,220,402 -- (406,371,088)

Total capital assets, being depreciated, net 329,613,434 (19,862,107) (2,211,480) 76,105,107 383,644,954

Government activities capital assets, net 660,420,418$ 27,331,925$ (2,211,480)$ (967,286)$ 684,573,577$

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Note 5: Capital Assets (continued) Balance Transfers & Balance

July 1, 2009 Additions Retirements Adjustments June 30, 2010Business-type activitiesCapital assets, not being depreciated:

Construction in progress 1,276,278$ 5,112,555$ --$ (4,691,473)$ 1,697,360$ Total capital assets, not being depreciated 1,276,278 5,112,555 -- (4,691,473) 1,697,360

Capital assets, being depreciated:Structures and improvements 153,297,004 121,320 -- 606,318 154,024,642 Equipment 42,217,572 2,235,657 -- 4,085,155 48,538,384

Total capital assets, being depreciated 195,514,576 2,356,977 -- 4,691,473 202,563,026

Less accumulated depreciation for:Structures and improvements (51,092,606) (4,004,414) -- -- (55,097,020) Equipment (32,077,889) (3,349,649) -- -- (35,427,538)

Total accumulated depreciation (83,170,495) (7,354,063) -- -- (90,524,558)

Total capital assets, being depreciated, net 112,344,081 (4,997,086) -- 4,691,473 112,038,468

Business-type activities capital assets, net 113,620,359$ 115,469$ --$ --$ 113,735,828$

Depreciation

Depreciation expense was charged to governmental functions as follows:

General government 8,342,882$ Public safety and protection 1,638,748 Public ways and facilities 13,904,278 Health and sanitation 373,894 Public assistance 173,984 Education 57,877 Recreation and cultural services 568,978 Capital assets held by the government's internal service funds are charged to the various functions based on their usage of the assets 732,955

Total depreciation expense - Governmental functions 25,793,596$

Depreciation expense was charged to the business-type activities as follows:

Natividad Medical CenterOperationsRental property (netted with rental income in 7,177,782$ non-operating section) 176,281

7,354,063$

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Note 6: Leases

Operating Leases

The County has commitments under long-term and personal property operating lease agreements. During the fiscal year ended June 30, 2010, the County paid rents on these leases of $8,476,132. Future minimum lease payments are as follows:

Governmental Business-TypeActivities Activities

Year Ended June 30:2011 6,578,190$ 304,944$2012 6,243,605 304,9442013 4,245,695 157,1922014 3,947,561 50,2032015 3,641,914 --

2016-2020 14,060,272 --2021-2025 10,274,700 --2026-2027 4,109,880 --

Total minimum lease payments 53,101,817$ 817,283$

However, the County believes that it would be able to terminate the leases early, should the need arise, based on California case City of Los Angeles v. Offner, 19 Cal.2d 483dated February 13, 1942.

Capital Leases

The County leases equipment under certain lease obligations accounted for as capital leases. Included in the governmental and business-type activities are the following capital asset amounts under capital leases:

Governmental Business-TypeActivities Activities

Equipment 672,732$ 4,876,880$Less: accumulated depreciation (416,883) (4,876,880)

Totals 255,849$ --$

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Note 6: Leases (continued)

Capital Leases (continued)

The following is a schedule of future minimum lease payments under capital leases together with the present value of future minimum lease payments as of June 30, 2010:

Governmental Business-TypeActivities Activities

Year Ended June 30:2011 102,512$ 153,337$2012 81,932 --2013 47,559 --2014 41,274 --2015 11,651 --

Totals 284,928 153,337Less: Amount representing interest (29,079) (2,686)Present value of future minimum lease payments 255,849$ 150,651$

Note 7: Rental Income Under Operating Leases

The following is a schedule of minimum future rental income on noncancellable operating leases as of June 30, 2010. These operating leases, for vacant office spaces located on the campus of Natividad Medical Center, contain no material restrictions. All are to be paid to Natividad Medical Center.

Business-TypeActivities

Year Ended June 30:2011 563,591$2012 394,5542013 93,343

Total 1,051,488$

Total rental income under operating lease agreements during the year ended June 30, 2010 was $1,071,834.

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Note 8: Long-Term Liabilities

Legal Debt Limit

The County’s legal debt limit for the year ended June 30, 2010 was $614 million. This limit is based on 1.25% of the net assessed valuation of property within the County. The County’s outstanding long-term issues payable is approximately $281.7 million, but none is applicable to the debt limit. The County has complied with all significant debt covenants.

Summary of Long-Term Liabilities

Interest Principal Date of Amount OutstandingGovernmental activities Maturity Rates Installments Issue Authorized June 30, 2010

Certificates of participation2007 issue 2008-2038 4.0%-5.0% $2,785,000-$6,845,000 2007 $ 144,400,000 $ 132,800,000 (defeased the 1993 sheriff facility and the2001 issue master plan financing issue plusnew monies for completion of public healthand court related facilities)

Judgment obligation bonds 2004-2014 3.0%-4.0% $695,000-$870,000 2004 7,470,000$ $ 3,275,000 (liquidate litigation liabilities)

Revenue bondsAgencies under Board of Supervisors 2004-2036 5.0% $16,000-$37,000 1980-95 $ 56,859,700 993,000$

Revenue bondsAgencies under Board of Supervisors July 30, 2038 4.0%-5.0% $550,000 - $ 2,085,000 2008 $ 32,855,000 32,855,000$

(finance Salinas Valley water project)Notes payable – Redevelopment Agency 2004-2010 5.73%-6.49% $25,000 2001 250,000$ $ 209

(finance redevelopment activities)Notes payable – Redevelopment Agency 2014 3.0% Principal and 2004 936,146$ 36,146$

(finance redevelopment activities) interest due 2014Notes payable – Parks and Recreation

(acquire recreational properties)San Antonio Lakes Resort July 15, 2023 5.0% $33,095 2007 $ 4,185,000 3,650,213$ Lake Nacimento Resort July 15, 2023 5.0% $89,478 2007 $ 11,315,000 9,869,116$

Loans payable – Bureau of ReclamationAgencies under Board of Supervisors 2004-2037 1.65%-7.63% $16,847-$1,207,699 1995 $ 35,035,790 29,785,024$ (infrastructure and facility improvements)

Special assessment bonds with governmental commitment:

General County 2004-2025 4.25%-7.2% $4,000-$26,000 1984-93 257,000$ $ 150,000 (infrastructure and facility improvements)

Business-type activities

Certificate of participation(refunding debt used to make facility improvements)1998 series E refunding 2004-2027 4.5%-4.75% $2,715,000-$4,935,000 1998 $ 77,375,000 $ 16,800,000 2007 refunding 2008-2028 4.0%-5.0% $250,000-$565,000 2007 $ 8,280,000 7,495,000$ 2009 refunding 2010-2023 2.0%-5.25% $2,175,000-$4,225,000 2009 43,700,000$ 43,700,000$

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Note 8: Long-Term Liabilities (continued)

Summary of Long-Term Liabilities (continued)

The following is a summary of long-term liabilities transactions for the year ended June 30, 2010:

AmountsBalance Balance Due Within

July 1, 2009 Additions Deletions June 30, 2010 One YearGovernmental activities:

Certificates of participation 136,260,000$ --$ 3,460,000$ 132,800,000$ 3,630,000$ Unamortized premium 2,123,209 -- 39,900 2,083,309 -- Unamortized refunding loss (2,543,173) -- (46,327) (2,496,846) --

Judgment obligation bonds 4,015,000 -- 740,000 3,275,000 770,000 Unamortized premium 54,414 -- 10,883 43,531 --

Revenue bonds 33,901,000 -- 53,000 33,848,000 607,000 Unamortized premium 752,394 -- 11,613 740,781 --

Notes payable - RDA 2,083 -- 1,874 209 209 Notes payable - RDA CA Housing Finance Agency 416,146 -- 380,000 36,146 -- Loans payable 45,121,624 -- 1,817,270 43,304,354 1,858,866 Special assessment bonds 156,000 -- 6,000 150,000 7,000 Capital leases 253,132 84,761 124,861 213,032 86,154 Compensated absences 30,846,837 22,182,229 20,701,140 32,327,926 13,660,802 Estimated self-insurance liabilities 47,102,549 14,221,882 8,819,552 52,504,879 12,476,124 Estimated landfill postclosure costs 2,915,243 -- 208,227 2,707,016 208,227

Total governmental activities long-term liabilities 301,376,458$ 36,488,872$ 36,327,993$ 301,537,337$ 33,304,382$

Business-type activitiesCertificates of participation 71,265,000$ 43,700,000$ 46,970,000$ 67,995,000 2,425,000$

Unamortized premium (discount) (1,027,241) 2,356,020 (1,136,095) 2,464,874 -- Unamortized refunding loss (4,742,427) -- 825,187 (5,567,614) --

Net certificates of participation 65,495,332 46,056,020 46,659,092 64,892,260 2,425,000 Capital leases 1,399,786 -- 1,249,135 150,651 150,651 Compensated absences 5,873,565 6,056,982 5,335,681 6,594,866 5,935,379

Total business-type activities long-term liabilities 72,768,683$ 52,113,002$ 53,243,908$ 71,637,777$ 8,511,030$

Estimated self-insurance liabilities are liquidated by the General Fund and the internal service funds. Compensated absences are generally liquidated by the General Fund and related special revenue funds. Estimated landfill postclosure costs are liquidated from the General Fund.

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Note 8: Long-Term Liabilities (continued)

Payment Requirements for Debt Service

As of June 30, 2010, annual debt service requirements of governmental activities to maturity are as follows:

Year Ending Bonds Payable Certificates of Participation Loans and Notes PayableJune 30: Principal Interest Principal Interest Principal Interest

2011 1,384,000$ 1,761,052$ 3,630,000$ 6,007,045$ 1,859,075$ 1,542,276$2012 1,435,000 1,703,956 3,795,000 5,839,570 1,902,629 1,387,044 2013 1,498,000 1,647,559 3,980,000 5,645,195 1,948,685 1,318,043 2014 1,558,000 1,588,681 4,180,000 5,441,195 2,033,301 1,256,372 2015 716,000 1,542,396 4,375,000 5,249,195 2,048,166 1,172,670

2016 - 2020 4,125,000 7,163,781 23,010,000 22,994,462 11,104,853 4,655,149 2021 - 2025 5,000,000 6,038,287 24,395,000 17,488,387 8,661,659 2,602,317 2026 - 2030 6,067,000 1,049,675 28,785,000 11,600,887 5,580,543 1,677,804 2031 - 2035 7,740,000 -- 26,745,000 4,725,340 5,799,889 884,826 2036 - 2039 7,750,000 -- 9,905,000 696,263 2,401,909 111,360

37,273,000$ 22,495,387$ 132,800,000$ 85,687,539$ 43,340,709$ 16,607,861$

As of June 30, 2010, annual debt service requirements of business-type activities to maturity are as follows:

Year Ending Certificates of ParticipationJune 30: Principal Interest

2011 2,425,000$ 3,300,839$2012 2,660,000 3,058,3932013 2,755,000 2,959,4182014 2,870,000 2,844,0932015 3,005,000 2,711,643

2016-2020 17,445,000 11,103,1762021-2025 22,340,000 6,181,2572026-2029 14,495,000 985,102

67,995,000$ 33,143,921$

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Note 8: Long-Term Liabilities (continued)

New Debt Issuance

The County of Monterey Public Improvement Corporation issued 2009 Refinancing Project Certificates of Participation on December 1, 2009 in the amount of $43,700,000 to partially refund the 1998 Natividad Medical Center Improvement Project, Series E originally issued in the amount of $77,375,000. The new bonds bear interest from 2% to 5.25% and are due in annual installments ranging from $2,175,000 to $4,225,000 through August 1, 2023. The bonds are payable pursuant to a lease agreement with NMC. The new issue will reduce debt service payments for NMC by $1,495,140 with an economic gain of $1,380,741 or 3.16%.

Irrevocable Trust

In fiscal year 2006-07, the County issued 2007 refunding certificates of participation to refund existing debt. The proceeds of the refunded bonds were placed in an irrevocable trust for the purpose of generating resources for all future debt payments in accordance with the schedule of remaining payments due. As a result, the refunded bonds are considered to be defeased and the liability does not appear on the governmental and business-type activities’ columns of the Statement of Net Assets and the Proprietary Fund Statements for Natividad Medical Center. As of June 30, 2010, certificates defeased had the following outstanding balances:

Governmental activities:2001 master plan financing certificates of participation 70,425,000$

Pledged Revenues

The Monterey County Financing Authority has pledged certain specified assessments, all Hydroelectric Facility net revenues, all ad valorem taxes and all annexation fees to secure the payment of principal and interest on the bonds in accordance with the terms and the provisions of the Indenture. The Indenture provides that the pledge shall constitute a first lien on all such assets. Proceeds from the bonds provided financing for the Salinas Valley Water Project – an effort to halt further seawater intrusion, provide flood protection, and create new water supplies for the Salinas Valley. Total principal and interest remaining on the bonds is $61,966,314, payable through June 2038. Interest paid for the current fiscal year was $1,597,913. No principal was due. Net pledged revenues for the fiscal year ended June 30, 2010 were $1.1 million.

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Note 9: Short-Term Note Payable

On July 1, 2009, the County issued a $55 million tax and revenue anticipation note to manage the temporary cash flow deficits that occur when the timing of required expenditures does not coincide with the timing of the collection of taxes and other revenues. The note was issued in anticipation of collection of taxes and other revenues to be received during the fiscal year ended June 30, 2010, and was repaid with taxes and other revenues on June 30, 2010. The County incurred and paid interest of $0.2 million.

Short-term note payable activity for the year ended June 30, 2010, was as follows:

Balance BalanceJuly 1, 2009 Additions Retirements June 30, 2010

Short-term note payable --$ 55,000,000$ 55,000,000$ --$

Note 10: Net Assets/Fund Balances

Net Assets

The government-wide and business-type activities financial statements utilize a net assets presentation. Net assets are categorized as invested capital assets (net of related debt), restricted and unrestricted. These categories are described below:

Invested in Capital Assets, Net of Related Debt – This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Net assets invested in capital assets, net of related debt, was comprised of the following:

Governmental Business-TypeActivities Activities

Capital assets, net of accumulated depreciation 684,573,577$ 113,735,828$Outstanding principal of capital-related debt (201,975,621) (65,042,911)Unspent debt proceeds 16,759,196 492,396

Net assets, invested in capital assets, net of related debt 499,357,152$ 49,185,313$

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Note 10: Net Assets/Fund Balances (continued)

Net Assets (continued)

Restricted Net Assets – This category represents net assets that are subject to constraints either (1) externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation. As of June 30, 2010, the County did not have any net assets that were restricted by enabling legislation.

Unrestricted Net Assets – This category represents net assets of the County, not restricted for any project or other purpose.

Fund Balances

In the fund financial statements, reserves and designations segregate portions of fund balance that are either not available or have been earmarked for specific purposes. The various reserves and designations are established by actions of the Board and management and can be increased, reduced or eliminated by similar actions.

The term “reserved” is used to indicate that a portion of reported fund balance is (1) legally restricted to a specific use or (2) not available for appropriation or expenditure. The County’s management will sometimes designate portions of unreserved (available) fund balance based on tentative future spending plans. Designated portions of fund balance represent financial resources legally available for uses other than those tentatively planned.

The County has “reserved” fund balances as follows:

Reserved for encumbrances – to reflect outstanding contractual obligations for which goods and services have not been received.

Reserved for unavailable assets – to indicate that certain assets such as imprest cash, inventories, advances, prepaid items and land held for development and resale do not represent available spendable resources.

Reserved for debt service – to indicate that the fund balance is restricted for the retirement of debt.

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Note 10: Net Assets/Fund Balances (continued)

Fund Balances (continued)

The County has designated fund balance as follows to indicate that a portion of the governmental fund balance is designated for the following projects and purposes:

OtherGeneral GovernmentalFund Funds

Strategic $ 37,291,395 $ 734,724 Infrastructure improvements 15,000 9,934,810 Vehicle replacement 3,183,966 -- Health clinics 1,070,000 -- Social services 724,715 -- NGEN radio system design 3,155,563 -- Self-insurance 1,890,532 -- Contingency 11,546,486 -- Miscellaneous 1,804,166 9,706

Total other designations $ 60,681,823 $ 10,679,240

Note 11: Employee’s Retirement Plan and Post Retirement Benefits

Plan Description

The County of Monterey contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees’ Retirement Law. The County selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local County ordinance. CalPERS issues a separate comprehensive annual financial report which is available to the public. Copies of the CalPERS’ annual financial report may be obtained by contacting the CalPERS Executive Office, 400 P Street, Sacramento, CA 95814.

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Note 11: Employee’s Retirement Plan and Post Retirement Benefits (continued)

Funding Policy

Active plan members in PERS are required to contribute a percentage of the annual covered salary of their miscellaneous employees and of their public safety employees. County employees are represented by 18 bargaining units. Of these 18 units, 14 bargaining units represent miscellaneous employees for which the County pays the 7% PERS retirement. The required contribution rates for fiscal year 2009-10 were 9.927% for miscellaneous employees and 25.37% for public safety employees. The contribution requirements of the plan members are established by state statute and the employer contribution rate is established and may be amended by PERS.

Annual Pension Cost

For fiscal year 2009-10, the County’s annual pension cost was $36,331,853, and was equal to the County’s required and actual contributions.

Three-Year Trend Information for PERS

Annual Percentage Fiscal Pension of APC Year Ending Cost (APC) Contributed

06/30/10 $ 36,331,853 100% 06/30/09 35,512,168 100% 06/30/08 32,100,384 100%

The required contribution for fiscal year 2009-10 was determined as part of the June 30, 2007 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 7.75% investment rate of return (net of administrative expenses); (b) projected salary increases that vary by duration of service ranging from 3.25% to 14.45% depending on age, service and type of employment, and (c) 3.25% cost-of-living adjustment. Both (a) and (b) include an inflation component of 3.0%. The actuarial value of plan assets was determined using a technique that smoothes the effect of short-term volatility in the market value of investments over a two to five year period depending on the size of investment gains and/or losses. The unfunded actuarial accrued liability (or excess assets) is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2007 was thirty years.

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Note 11: Employee’s Retirement Plan and Post Retirement Benefits (continued)

Funded Status and Funding Progress

The following is the funded status information (in thousands) for each plan as of June 30, 2009, the most recent actuarial valuation date:

Entry AgeNormal Actuarial Unfunded/ Annual UAAL asAccrued Value (Overfunded) Funded Covered a % ofLiability of Assets Liability Ratio Payroll Payroll

Miscellaneous 1,033,506$ 918,422$ 115,084$ 88.9% 255,212$ 45.09%Safety 395,268 293,618 101,650 74.3% 49,244 206.42%

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

The Monterey County Water Resources Agency (MCWRA) Plan

Plan Description

The MCWRA plan of the County of Monterey contributes to the California Public Employees Retirement System (CalPERS), a cost-sharing multiple-employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees’ Retirement Law. The County selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local County ordinance. Information on this plan is available on a pooled-basis only and may be obtained by contacting the CalPERS Executive Office, 400 P Street, Sacramento, CA 95814.

Funding Policy

Active plan members in CalPERS are required to contribute 7% for employees of their annual covered salary. The County makes the contributions required of MCWRA employees on their behalf and for their account. The County is required to contribute at an actuarially determined rate of 9.927% of annual covered payroll. The contribution requirements of plan members and the County are established and may be amended by PERS.

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Notes to Financial Statements For the Year Ended June 30, 2010

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Note 11: Employee’s Retirement Plan and Post Retirement Benefits (continued)

The Monterey County Water Resources Agency (MCWRA) Plan (continued)

Annual Pension Cost

For fiscal year 2009-10, the County’s annual pension cost for the MCWRA plan was $384,006, and was equal to the County’s required and actual contributions.

Three-Year Trend Information for CalPERS

Annual Percentage Fiscal Pension of APC Year Ended Cost (APC) Contributed

06/30/10 $ 384,006 100% 06/30/09 355,669 100% 06/30/08 346,700 100%

Note 12: Other Post Employment Benefits (OPEB)

Plan Description

The County of Monterey Retiree Healthcare Plan (Plan) is a single-employer defined benefit healthcare plan administered by the County. The Plan provides healthcare insurance benefits to eligible retirees. Benefit provisions are established and may be amended by the County.

The County provides retiree medical benefits through the California Public Employees’ Retirement System healthcare program. The County contributes the Public Employees’ Medical and Hospital Care Act (PEMHCA) minimum required employer contribution ($101 per month in 2010) towards the retiree monthly premium for eligible retirees participating in PEMHCA.

Funding Policy

The contribution requirements of the plan members and the County are established and may be amended by the County. The County prefunds all or a portion of the plan through the California Employers’ Retiree Benefit Trust (CERBT) by contributing up to 100% of the annual required contribution.

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Note 12: Other Post Employment Benefits (OPEB) (continued)

Funding Policy (continued)

The annual required contribution (ARC) is an amount actuarially determined in accordance with the parameters of GASB Statement 45 – Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pension. The County’s ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize the unfunded actuarial liability over a period of 20 years. The fiscal year 2009-10 ARC is $3,202,000.

For fiscal year 2009-10, the amount of healthcare insurance benefits reimbursed to eligible retirees was $1,384,463. Of this amount, $605,223, was paid directly by the CERBT, while the County paid $779,240 to the OPEB trust to fund future retirees’ healthcare benefits.

CERBT is a tax-qualified irrevocable trust organized under Internal Revenue Code Section 115 and established to pre-fund retiree healthcare benefits. CERBT issues a publicly available financial report including GASB 43 – Financial Reporting for Postemployment Benefit Plans Other than Pension Plans disclosure information in aggregate with the other CERBT participating employers. That report may be obtained by contacting CalPERS, Executive Office, 400 P Street, Sacramento, CA 95814.

The following are the components of the County’s annual OPEB cost for the fiscal year ended June 30, 2010:

Annual Required Contribution (ARC) 3,202,000$Interest on net OPEB obligation --Adjustments to ARC --Annual OPEB cost (expense) 3,202,000Contributions made (1,384,463)Increase in net OPEB obligation 1,817,537Net OPEB obligation, beginning of year 6,418,542Net OPEB obligation, end of year 8,236,079$

Annual OPEB Cost and Net OPEB Obligation

For fiscal year 2009-10, the County’s annual OPEB cost (expense) of $3,202,000 was equal to the annual required contribution.

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Notes to Financial Statements For the Year Ended June 30, 2010

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Note 12: Other Post Employment Benefits (OPEB) (continued)

Annual OPEB Cost and Net OPEB Obligation (continued)

The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan (as described in the funding policy above), and the net OPEB obligation for fiscal years 2009-10 and the prior two fiscal years:

FiscalYear

EndedAnnual

OPEB Cost

Percentage of Annual OPEB

Cost Contributed

Net OPEB

Obligation6/30/106/30/09

$3,202,0004,075,360

43.2%19.5%

$ 8,236,079 6,418,542

6/30/08 3,711,000 15.4% 3,140,133

General Fund, Road Fund, Library, In-Home Supportive Services, Office of Employment Training, Community Development, Parks Lakes, and Water Resources funds have been used to liquidate the net other postemployment benefit obligation.

Funded Status and Funding Progress

The funded status of the plan, based on an actuarial valuation as of June 30, 2009, the plan’s most recent actuarial valuation date, was as follows (amounts in thousands):

Actuarial accrued liability (AAL) $23,292 Actuarial value of plan assets 150Unfunded actuarial accrued liability (UAAL) $23,142 Funded ratio (actuarial value of plan assets/AAL) 0.65% Covered payroll (active Plan members) $293,876 UAAL as a percentage of covered payroll 7.87%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

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Notes to Financial Statements For the Year Ended June 30, 2010

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Note 12: Other Post Employment Benefits (OPEB) (continued)

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the June 30, 2009 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 7.75% investment rate of return (net of administrative expenses), which is the expected long-term investment return on CERBT investments, and an annual healthcare minimum cost trend rate of 4.5% after 3 years (actual healthcare minimum costs were used for the first 3 years). This rate includes a 3% inflation assumption. The actuarial value of assets is equal to the market value. The UAAL is being amortized as a level percentage of projected payroll over 20 years on a closed basis. The remaining amortization period at June 30, 2010 was 17 years.

Note 13: Joint Powers Agreement

Natividad Medical Center (NMC) participates in the Beta Healthcare Group (BHG). The purpose of Program Beta (Program), established by a Joint Powers Agreement, is to self-insure member hospital districts for professional liability. The BHG administers the Program pursuant to the joint powers provision of the Government Code of the State of California. After a $5,000 deductible, the BHG provides payment in full on covered individual malpractice claims up to $5,000,000. Claims in excess of $5,000,000 are the responsibility of individual program participants. Also, after a $25,000 deductible, the BHG provides payment on covered directors, officers, and trustee liability claims up to an annual maximum of $500,000. NMC’s contribution to the program was approximately $807,000 in 2010.

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Note 13: Joint Powers Agreement (continued)

Condensed financial information of the Program for the calendar year ended December 31, 2009, (audited by Larson & Rosenberger LLP) is as follows:

Cash and investments $ 378,532,491 Other assets 75,358,007

Total Assets $ 453,890,498

Loss reserves $ 251,050,158 Other liabilities 51,816,635 Fund balance 151,023,705

Total Liabilities and Fund Balance $ 453,890,498

Total Revenues $ 89,434,805 Total Expenses (58,325,343)Revenue in excess of expenses before minority interest,

member surplus funds, and change in unrealized gainson investments $ 31,109,462

Financial statements for the Program can be obtained from Beta Healthcare Group, 1443 Danville Blvd., Suite 200, Alamo, CA 94507-1973.

In January 1997, the County entered into a Joint Powers Agreement with the City of Salinas, the City of Gonzales, the City of Greenfield, the City of King, and the City of Soledad creating the Salinas Valley Waste Authority (Authority). The purpose of the Authority, established by the Joint Powers Agreement, is to undertake and perform: solid waste planning and program management, including collection services and siting; and the transfer and disposal of solid waste generated within each of the parties’ jurisdictional boundaries. The Authority administers the agreement pursuant to the joint powers provision of the Government Code of the State of California.

Financial statements for the Authority can be obtained from Salinas Valley Solid Waste Authority, 337 Melody Lane, Salinas, CA 93901.

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Note 13: Joint Powers Agreement (continued)

Condensed financial information of the Authority for the fiscal year ended June 30, 2009 (the most current available) is as follows:

Cash and investments $ 8,134,014 Other assets 22,110,921 Capital assets, net 27,640,919

Total assets 57,885,854

Closure liability 12,376,496 Other liabilities 57,061,328

Total liabilities 69,437,824

Net assets (deficit) $ (11,551,970)

Total operating revenues $ 15,298,739 Total operating expenses (19,782,305) Other revenues and expenses (1,458,903)

Change in net assets $ (5,942,469)

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Notes to Financial Statements For the Year Ended June 30, 2010

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Note 14: Landfill Closure and Postclosure Costs

State and federal laws and regulations require the County to place a final cover on all landfill sites when closed and, for thirty years after, perform mandated maintenance and monitoring functions at those sites. All County owned landfills are closed, thus only the liability for future maintenance and monitoring activities is shown on the statement of net assets. The estimated liability and total costs for the landfill sites are shown below:

Post Closure Groundwater Post ClosureLandfill Site Activities Monitoring Liability

Bradley 180,146$ 301,852$ 481,998$San Ardo II 180,146 301,852 481,998Lake San Antonio North Shore 180,146 301,852 481,998Lake San Antonio South Shore 180,146 N/A 180,146San Ardo I 180,146 N/A 180,146Parkfield I 180,146 N/A 180,146Parkfield II 180,146 N/A 180,146Chualar 180,146 N/A 180,146Arroyo Seco / Greenfield 180,146 N/A 180,146Lockwood 180,146 N/A 180,146

Totals 1,801,460$ 905,556$ 2,707,016

Landfill costs as of June 30, 2010 11,223,875

Total estimated costs to June 30, 2023 13,930,891$

Post closure activities are comprised of costs which are estimated equally per site for the thirteen remaining years. The liability and total costs are estimated annually based on the premise that all equipment, facilities and services required to monitor and maintain the landfill sites were acquired as of June 30, 2010. Actual total costs may be higher due to future changes in technology or landfill laws and regulations.

The County is required by state and federal laws and regulations to provide annual funding to finance future post closure care costs. The County is in compliance with these regulations, establishing appropriations for these activities, based on the annual estimated liability, in each year’s annual budget.

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Note 15: Commitments and Contingencies

In prior years, the Monterey County Water Resources Agency (MCWRA), a blended component unit of Monterey County, entered into an agreement with the Monterey County Water Pollution Control Agency (MCWPCA) to provide tertiary treated water. The MCWPCA built the tertiary water treatment plant and the MCWRA built the distribution pipelines from the plant to the users. Both projects were financed by loans between each agency and the Bureau of Reclamation and/or State Water Resources Control Board. A special assessment was established and is collected by the MCWRA. Based on the agreement between the MCWRA and the MCWPCA, the financing and operating expenses incurred by the MCWPCA on this project are paid by this special assessment on an advance basis from the MCWRA. The loans entered into directly between the MCWPCA and the lenders are not included in the County’s financial statements.

As of June 30, 2010, the outstanding loan balances of the MCWPCA related to the above project are as follows:

Loan from the Bureau of Reclamation $ 17,249,744 Loan from the State Water Resources Control Board $ 4,417,897

Arbitrage

The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of tax-exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of all tax-exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service (IRS) at least every five years. During the current year, the County performed calculations of excess investment earnings on various bonds and financings, and at June 30, 2010 does not expect to incur a significant liability.

Grant Entitlement

The County is a participant in a number of federal and state assisted programs. These programs are subject to compliance audits by the grantors. The audits of these programs for the fiscal year ended June 30, 2010 and certain earlier years have not been completed. Accordingly, the County’s compliance with applicable program requirements is not completely established. The amount, if any, of expenditures which may be disallowed by the grantors cannot be determined at this time. Management believes it has adequately provided for potential liabilities, if any, which may arise from the grantor’s audits.

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Note 15: Commitments and Contingencies (continued)

Medi-Cal and Medicare Reimbursements

Natividad Medical Center’s Medi-Cal and Medicare cost reports for certain prior years are in various stages of review by the third-party intermediaries and, as such, have not been settled. Management believes it has adequately provided for any potential liabilities which may arise from the intermediaries’ audit.

Construction Commitments

At June 30, 2010, the County had ongoing construction commitments that totaled approximately $16.1 million.

Note 16: Natividad Medical Center – Net Patient Service Revenue and Government Programs

Natividad Medical Center (NMC) has agreements with third party payors to provide for payments to NMC at amounts different from its established rates. A summary of the basis of the payment arrangements with major third-party payors follows:

Medicare

Inpatient acute care services rendered to Medicare program beneficiaries are paid at predetermined prospective rates per discharge. These rates vary according to the diagnostic related group that the patient’s condition is classified under. Services other than inpatient acute care are paid based on a reimbursement methodology specific to the type of service which generally entails reimbursement rates at the lower of costs, charges, or a published limit. NMC is reimbursed at a tentative rate during the year that is later subject to final settlement after submission and audit of an annual cost report.

Medi-Cal

Inpatient acute care services rendered to Medi-Cal program beneficiaries are reimbursed under a cost reimbursement methodology that is limited to a maximum allowable rate per discharge. Outpatient hospital services are reimbursed based on a published fee schedule. Skilled nursing services are reimbursed at a published per diem rate. NMC is reimbursed at a tentative rate during the year that is later subject to final settlement after submission and audit of an annual cost report.

Short Doyle

Inpatient acute care services rendered to County mental health patients under the Short Doyle program are reimbursed based on a per diem rate specified in an agreement between NMC and the Monterey County Health Department.

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Note 16: Natividad Medical Center – Net Patient Service Revenue and Government Programs(continued)

Other Third Party Payors

NMC contracts with numerous employers, other county departments, and health plans to provide health care services to their beneficiaries. Reimbursement varies by contract and can be based on a combination of per diem, fee schedule, or percent of charges payment rates.

During the year ended June 30, 2010, patients for which reimbursement was calculated under the third-party payor programs comprised approximately 100% of NMC’s gross patient services revenues, as follows:

Other third parties 31.6% Medi-Cal 49.5% Medicare 17.3% Short Doyle 1.6% Total 100.0%

The State of California provides funding from tobacco taxes and realignment to cover write-offs of accounts receivable pertaining to qualified indigent care under the California Health Care for Indigents program. NMC recognized funding under this program, net of amounts passed through other providers, of approximately $4.5 million in fiscal year 2010, as net patient services revenue.

NMC participates in the Medi-Cal Redesign Waiver Demonstration Program with the California Medical Assistance Commission.

Note 17: Natividad Medical Center Enterprise Fund – Charity Care

NMC maintains records to identify and monitor the level of charity care it provides. These records include the amount of charges foregone for services and supplies furnished under its charity care policy. The following information measures the level of charity care provided during the fiscal year ended June 30, 2010.

Charges foregone, based on established rate $ 45,582,847

Estimated costs and expenses incurred to provide charity care $ 11,000,115

Equivalent percentage of charity care patients to all patients served 7%

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Note 18: Related Party Transactions

Incorporated in 1988, the Natividad Medical Foundation (Foundation) is a non-profit, non-governmental organization separately incorporated from NMC. Recognizing the need for quality health care and decreased funding from the Federal, State, and local levels, community leaders accepted the responsibility of providing financial assistance to NMC and developed the Natividad Medical Foundation.

The criteria established in GASB 39, Determining Whether Certain Organizations are Component Units, determines whether the Foundation is reported as a component unit of NMC. Since the revenues reported by the Foundation are not significant to NMC, the Foundation is not a component unit of NMC, but is a related party.

Note 19: Insurance and Contingent Liabilities

The County is exposed to various risk of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters; medical malpractice; and unemployment. The County has chosen to establish risk financing internal service funds where assets are set aside for claim settlements associated with such risks of loss up to certain limits.

Excess coverage is provided by the California State Association of Counties Excess Insurance Authority (CSAC), a joint powers authority whose purpose is to develop and fund programs of excess insurance for its member counties. A board of directors consisting of representatives of its member counties govern CSAC. CSAC’s financial statements can be obtained at 3017 Gold Canal Drive, Rancho Cordova, CA 95670. The County paid premiums totaling approximately $1.2 million.

The County participates in the CSAC property program. The County’s deductible is $25,000 per occurrence. The County has primary coverage up to $25 million. Coverage in excess of this is provided by a private insurance carrier to an aggregate limit of $45 million.

On July 1, 1998, the County contracted with Liberty Mutual to provide workers compensation insurance coverage. Claims incurred/reported prior to July 1, 1996, remain a part of the County’s self-insurance program for workers compensation and are administered by Helmsman, a wholly owned subsidiary of Liberty Mutual.

The unpaid claims liabilities are based on the results of actuarial studies and include amounts for claims incurred but not reported and adjustment expenses. Claims liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts, and other economic and social factors. General liability and workers’ compensation liabilities are carried at present value using a discount rate of

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Note 19: Insurance and Contingent Liabilities (continued)

4%. Premiums are charged by the internal service funds using various allocation methods that include actual costs, trends in claims experience, and number of participants. Non-incremental claims adjustments have been included as part of the liability for claims and judgments.

The County accounts for its risk financing activities in internal service funds for General Liability and Workers’ Compensation. All other risk financing activities are accounted for in the General Fund. As such, $656,168 of the County’s total estimated unpaid claims liabilities has been recorded as a current liability of the General Fund since that amount is expected to be paid within the succeeding year from expendable, available financial resources.

Changes in the balance of claims liabilities during fiscal years 2009-10 and 2008-09 for all self-insurance risks are approximately as follows: 2009-10 2008-09

Unpaid claims, beginning of year $ 47,102,549 $ 43,809,601 Estimated claims, incurred 14,221,882 19,907,246 Claim payments (8,819,552) (16,614,298)

Unpaid claims, end of year $ 52,504,879 $ 47,102,549

The County is a defendant in several lawsuits arising in the normal course of business. In the aggregate these claims seek monetary damages in significant amounts. Litigation where loss to the County is reasonably possible has not been accrued in the accompanying financial statements; however, County Counsel estimates that several lawsuits could result in a significant loss. The County exposure in this case is estimated to be in the multi-million dollar range.

Amounts of settlements has not exceeded insurance coverage in each of the past three years.

Note 20: Subsequent Events

Debt Issuance

In August 2010, the County entered into a tax and revenue anticipation note, due April 29, 2011. The note was for $40 million with an interest rate of 1.5%.

In September 2010, the County closed a refunding of the remaining $16,800,000 of 1998 Natividad Medical Center Improvement Bonds Series E which were not refunded in 2009. The refunding resulted in actual cash savings of $1,229,865 and a present value savings of $927,146 or 5.52%.

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

87

Note 20: Subsequent Events (continued)

Debt Issuance (continued)

In December 2010, the County approved a lease financing agreement of $8.5 million to finance the Next Generation Radio System Project. The project will enable Monterey County safety radio and data interconnectivity to comply with the narrowband mandate set by the FCC by January 2013. The County will act as lead borrower pursuant to a MOU among the various cities and safety agencies throughout the County. Each participant will pay their proportionate share of the construction costs determined by radio capacities on the system, which is collateralized by participants’ property tax revenue.

In December 2010, the County approved a $15 million lease financing for Natividad Medical Center to obtain (and reimburse for prior expenditures related to) medical equipment, electronic equipment, electronic health records software, and other projects contained in its five year Capital Improvement Plan.

Note 21: Restatement of Net Assets and Fund Balances

Adjustments resulting from errors or changes to comply with provisions of the accounting standards are treated as adjustments to prior periods. Accordingly, the County reports these changes as restatements of beginning fund balance / net assets.

The impact of the restatements on the fund balances/net assets as previously reported is presented below:

Government-Wide Statement of Activities Fund Statements

Governmental General Internal ServiceActivities Fund Funds

Net assets/fund balances, June 30, 2009, as previously reported 655,514,322$ 88,330,965$ (18,825,435)$

Prior period adjustments:Final recognition of revenue and expenses/expenditures 1,283,124 1,283,124 -- Correct revenue recognition from prior year 312,716 (231,558) 544,274

Net assets/fund balances July 1, 2009, as restated 657,110,162$ 89,382,531$ (18,281,161)$

COUNTY OF MONTEREY

Notes to Financial Statements For the Year Ended June 30, 2010

88

Note 22: Stewardship, Compliance and Accountability

Deficit Fund Balances/Net Assets

The General Liability internal service fund had deficit net assets of $9,863,362 as of June 30, 2010. The County settled for a $15,500,000 Notes Payable in fiscal year 2007-08 from its Lakes Resort which caused the deficit in the fund. The Note amount with interest was approved to be paid in full by the County Board over 15 years. This fund experienced deficit five years ago when the County was on a pay-as-you-go basis. The County approved a 5 year plan to fund the deficit in fiscal year 2004-05. The original 5 year funding plan was successfully completed. The payment of Lakes’ liability will correct the deficit in this fund over the remaining 12 year period.

In addition, the Workers Compensation internal service fund had deficit net assets of $8,657,715 as of June 30, 2010. The County approved a 10 year plan to fund the deficit in fiscal year 2004-05. Prior to that the County was on a pay-as-you-go basis which caused the deficit in the fund. Due to budget constraints, the County approved a one year postponement of the deficit funding plan for fiscal year 2010-11 which will cause the County to go on a pay-as-you-go basis and may increase the deficit in this fund. The County anticipates continuing the funding plan starting in fiscal year 2011-12.

Note 23: Special Item

In compliance with California’s Trial Court Facilities Act of 2002, the County transferred one of four county-owned court facilities to the State of California. At the time of transfer, the County incurred a loss of $2,050,109, consisting of historical costs of $3,218,446 and accumulated depreciation of $1,168,337, for a net book value of $2,050,109.

Note 24: Extraordinary Item

In July 2009, legislation was approved to redirect a portion of redevelopment tax increment revenues to fund schools. For the year ended June 30, 2010, the Redevelopment Agency of the County of Monterey paid $2,170,500 as supplementary Education Revenue Augmentation Funds (ERAF) as required by legislation.

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REQUIRED SUPPLEMENTARY INFORMATION

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COUNTY OF MONTEREY

Required Supplementary Information For the Fiscal Year Ended June 30, 2010

91

COUNTY OF MONTEREY EMPLOYEE’S RETIREMENT PLAN SCHEDULE OF FUNDING PROGRESS

The tables below show a three-year analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability as a percentage of the annual covered payroll as of June 30:

Funded Status of Miscellaneous Plan

Entry Age Normal Actuarial Unfunded/ Annual Valuation Accrued Value (Overfunded) Funded Covered UAAL as a Date Liability of Assets Liability Ratio Payroll % of Payroll

6/30/07 $ 858,405,731 $ 796,726,808 $ 61,678,923 92.8% $ 208,760,671 29.5% 6/30/08 936,249,365 862,966,236 73,283,129 92.2% 235,274,627 31.1% 6/30/09 1,033,505,576 918,422,057 115,083,519 88.9% 255,212,291 45.1%

Funded Status of Safety Plan

Entry Age Normal Actuarial Unfunded/ Annual Valuation Accrued Value (Overfunded) Funded Covered UAAL as a Date Liability of Assets Liability Ratio Payroll % of Payroll

6/30/07 $ 322,496,295 $ 252,069,253 $ 70,427,042 78.2% $ 39,460,056 178.5% 6/30/08 363,113,495 275,250,058 87,863,437 75.8% 45,713,049 192.2% 6/30/09 395,267,914 293,618,315 101,649,599 74.3% 49,244,300 206.4%

COUNTY OF MONTEREY

Required Supplementary Information For the Fiscal Year Ended June 30, 2010

92

COUNTY OF MONTEREY RETIREE HEALTHCARE PLAN SCHEDULE OF FUNDING PROGRESS

Funded Status of Miscellaneous Plan

Unfunded Actuarial Actuarial Actuarial Actuarial Annual Valuation Value of Accrued Accrued Funded Covered UAAL as a Date Assets Liability Liability Ratio Payroll % of Payroll

6/30/07 $ -- $ 28,297,000 $ 28,297,000 0% $ 256,156,000 11.0% 6/30/09 150,000 23,292,000 23,142,000 0.6% 293,876,000 7.9%

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SUPPLEMENTARY INFORMATION

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NONMAJOR GOVERNMENTAL FUNDS

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COUNTY OF MONTEREY

Combining Balance SheetNonmajor Governmental Funds

June 30, 2010

Special Debt CapitalRevenue Service Projects

Funds Funds Funds TotalAssetsCash and investments:

Held in County Treasury 36,259,100$ 4,667,823$ 36,764,525$ 77,691,448$ Held with trustee -- 11,861,794 -- 11,861,794

Receivables 5,578,665 396,070 119,086 6,093,821Due from other funds -- -- 447,842 447,842Advances to other funds 60,295 -- -- 60,295Land held for resale and development -- -- 856,017 856,017Long-term receivables 4,852,693 -- 688,168 5,540,861

Total assets 46,750,753$ 16,925,687$ 38,875,638$ 102,552,078$

LiabilitiesVouchers and accounts payable 1,021,884$ 74,607$ 1,378,128$ 2,474,619$ Due to other funds 335,343 112,522 -- 447,865Accrued salaries and benefits 541,166 -- -- 541,166Accrued expenses 2,799 -- -- 2,799Deposits from others 95,081 -- 172,028 267,109Deferred revenues 7,392,417 193,979 592,856 8,179,252Advances from other funds -- -- 210,295 210,295

Total liabilities 9,388,690 381,108 2,353,307 12,123,105

Fund balancesReserved for:

Encumbrances 3,549,592 -- 3,035,723 6,585,315Unavailable assets 60,295 -- 1,426,731 1,487,026Debt service -- 15,893,401 -- 15,893,401

Unreserved:Designated, reported in:

Special revenue funds 10,679,240 -- -- 10,679,240Undesignated reported in:

Special revenue funds 23,072,936 -- -- 23,072,936Capital projects funds -- -- 32,059,877 32,059,877Debt service funds -- 651,178 -- 651,178

Total fund balances 37,362,063 16,544,579 36,522,331 90,428,973

Total liabilities and fund balances 46,750,753$ 16,925,687$ 38,875,638$ 102,552,078$

97

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures, and Changes in Fund BalancesNonmajor Governmental Funds

For the Year Ended June 30, 2010

Special Debt CapitalRevenue Service Projects

Funds Funds Funds TotalRevenues:

Taxes 8,008,471$ 5,971,254$ 18,032$ 13,997,757$ Licenses, permits and franchises 77,385 -- -- 77,385Fines, forfeitures and penalties 972,395 1,344,836 -- 2,317,231Revenue from use of money and property 820,631 688,286 476,340 1,985,257Aid from other governmental agencies 15,507,678 39,096 94,065 15,640,839Charges for services 17,699,196 1,858,060 735,726 20,292,982Other revenue 562,586 -- 54,770 617,356

Total revenues 43,648,342 9,901,532 1,378,933 54,928,807

Expenditures:Current:

General government 1,243,502 217,926 3,117,877 4,579,305Public ways and facilities 17,989,946 1,500 -- 17,991,446Health and sanitation 3,634,773 -- -- 3,634,773Public assistance 14,728,470 -- -- 14,728,470Education 7,175,649 -- -- 7,175,649Recreation and cultural services 2,852,539 -- -- 2,852,539

Debt service:Principal 357,247 4,562,475 -- 4,919,722Interest and debt service costs 13,428 8,706,139 -- 8,719,567

Capital outlay -- -- 18,164,611 18,164,611

Total expenditures 47,995,554 13,488,040 21,282,488 82,766,082

Excess (deficiency) of revenues over (under) expenditures (4,347,212) (3,586,508) (19,903,555) (27,837,275)

Other financing sources (uses):Inception of leases 61,476 -- -- 61,476Transfers in 7,590,479 18,578,755 27,048,797 53,218,031Transfers out (10,133,612) (18,674,563) (8,952,246) (37,760,421)

Total other financing sources (uses) (2,481,657) (95,808) 18,096,551 15,519,086

Extraordinary Item:Supplemental ERAF payment -- -- (2,170,500) (2,170,500)

Net change in fund balances (6,828,869) (3,682,316) (3,977,504) (14,488,689)

Fund balances, beginning of year 44,190,932 20,226,895 40,499,835 104,917,662

Fund balances, end of year 37,362,063$ 16,544,579$ 36,522,331$ 90,428,973$

98

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SPECIAL REVENUE FUNDS

Special revenue funds are used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to expenditures for specified purposes.

100

SPECIAL REVENUE FUNDS

County Library – Established as a special taxing authority under the County Library Law of 1911 and, as such, is funded primarily through its own share of property tax to provide library services to residents of Monterey County.

In-Home Support Services – Program to provide services to aged, blind and disabled persons who are unable to remain in their homes without assistance.

Fish and Game Propagation – Administration of the County’s Fish and Game Commission, which consists of fifteen members, three from each supervisorial district to oversee allocation of fish and game fine monies.

Office of Employment Training – Receives federal funds for the design, implementation and oversight of youth and adult employment training services.

Community Services – Administration of the Community Services Block Grant for provision of specified programs to advance and advocate for the low-income population.

Inclusionary Housing – To facilitate the development of lower income housing throughout Monterey County through either direct grants or low interest rate loans.

Disaster Assistance – To help minimize the loss of life and property damage throughout the County resulting from the potential impact of any natural, technological or human-conflict related disasters.

Productivity Investment – Established by the Board of Supervisors in February 1996 with $1.1 million allocated from Public Employee Retirement surplus funds to foster innovation and to provide a source of funding for implementation of cost-effective departmental and formal employee organization projects.

Lakes Resort Parks – This fund consists of Lake San Antonio, North and South Shore, and Lake Nacimiento which offers to the public camping, fishing, hiking, equestrian trails, swimming, picnicking, boating and water skiing plus special events are provided. Costs are funded by user fees and, if necessary, by County contribution.

Natural Disaster Assistance – Finances the County General Fund expenditures for March 1995 and Winter Storm of 1997 and reflects the anticipated federal and State reimbursements for nonpersonnel related emergency services.

Emergency Medical Services – Established at the beginning of 1989 to provide for the collection and distribution of fine proceeds authorized by the California State Legislature’s adoption of Senate Bill 612.

Fort Ord Reuse – Implementation of the Fort Ord Redevelopment Project Area A28.

Nacimiento Hydroelectric Operations – Responsible for the management of Nacimiento hydroelectric operations in Monterey County.

Other Water Resources Agencies – Responsible for the management of groundwater resources and flood control protection in Monterey County.

County Service Areas – Provide a variety of services to the unincorporated developments within the County including storm drain and surface water disposal, street and sidewalk maintenance, street lighting, wastewater reclamation and open space maintenance.

Sanitation Districts – Administers and maintains four sanitation districts, operating costs are funded with user fees and property taxes.

Redevelopment Agency Set Aside Fund – Includes the set aside fund of the Redevelopment Agency of the County of Monterey that accounts for tax increment revenues set aside for low to moderate income housing projects.

COUNTY OF MONTEREY

Combining Balance SheetNonmajor Special Revenue Funds

June 30, 2010

In-Home Fish and Office ofCounty Support Game EmploymentLibrary Service Propagation Training

AssetsCash and investments:

Held in County Treasury 2,141,955$ --$ 18,837$ 165,667$ Receivables 413,946 124,480 -- 263,511Advances to other funds -- -- -- -- Long-term receivables -- -- -- --

Total assets 2,555,901$ 124,480$ 18,837$ 429,178$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable 89,916$ 221$ 2,000$ 12,585$ Due to other funds -- 5,761 -- -- Accrued salaries and benefits 111,800 8,923 -- 242,532Accrued expenses 1,578 -- -- 25Deposits from others -- 398 -- -- Deferred revenues 215,490 -- -- --

Total liabilities 418,784 15,303 2,000 255,142

Fund balances:Reserved for encumbrances 32,435 -- -- -- Reserved for unavailable assets -- -- -- -- Unreserved, designated -- -- -- -- Unreserved, undesignated 2,104,682 109,177 16,837 174,036

Total fund balances 2,137,117 109,177 16,837 174,036

Total liabilities and fund balances 2,555,901$ 124,480$ 18,837$ 429,178$

continued101

COUNTY OF MONTEREY

Combining Balance Sheet (continued)Nonmajor Special Revenue Funds

June 30, 2010

Community Inclusionary Disaster ProductivityServices Housing Assistance Investment

AssetsCash and investments:

Held in County Treasury --$ 430,481$ 258,355$ 878,144$ Receivables 464,813 -- -- -- Advances to other funds -- -- -- -- Long-term receivables -- 656,327 -- --

Total assets 464,813$ 1,086,808$ 258,355$ 878,144$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable 122,494$ 10,927$ --$ --$ Due to other funds 169,418 -- -- -- Accrued salaries and benefits 4,924 -- -- -- Accrued expenses -- -- -- -- Deposits from others -- -- -- -- Deferred revenues -- 656,327 -- --

Total liabilities 296,836 667,254 -- --

Fund balances:Reserved for encumbrances -- -- -- -- Reserved for unavailable assets -- -- -- -- Unreserved, designated 9,706 -- -- -- Unreserved, undesignated 158,271 419,554 258,355 878,144

Total fund balances 167,977 419,554 258,355 878,144

Total liabilities and fund balances 464,813$ 1,086,808$ 258,355$ 878,144$

continued102

COUNTY OF MONTEREY

Combining Balance Sheet (continued)Nonmajor Special Revenue Funds

June 30, 2010

Lake Natural EmergencyResort Disaster Medical Fort OrdParks Assistance Services Reuse

AssetsCash and investments:

Held in County Treasury --$ 1,106,473$ 48,857$ 69,986$ Receivables 7,602 -- -- -- Advances to other funds -- -- -- -- Long-term receivables -- -- -- --

Total assets 7,602$ 1,106,473$ 48,857$ 69,986$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable 48,061$ --$ --$ 14,184$ Due to other funds 160,164 -- -- -- Accrued salaries and benefits 28,894 -- -- -- Accrued expenses 528 -- -- -- Deposits from others -- -- -- 72,225Deferred revenues 2 1,106,473 -- --

Total liabilities 237,649 1,106,473 -- 86,409

Fund balances:Reserved for encumbrances 6,975 -- -- -- Reserved for unavailable assets -- -- -- -- Unreserved, designated -- -- -- -- Unreserved, undesignated (237,022) -- 48,857 (16,423)

Total fund balances (230,047) -- 48,857 (16,423)

Total liabilities and fund balances 7,602$ 1,106,473$ 48,857$ 69,986$

continued103

COUNTY OF MONTEREY

Combining Balance Sheet (continued)Nonmajor Special Revenue Funds

June 30, 2010

Agencies Under Boardof Supervisors

Nacimiento Other Water CountyHydroelectric Resources Service Sanitation RDA

Operations Agencies Areas Districts Set-AsideAssetsCash and investments:

Held in County Treasury 483,256$ 13,494,642$ 9,457,829$ 1,810,553$ 5,894,065$ Receivables -- 3,543,454 136,790 115,639 508,430Advances to other funds -- -- -- -- 60,295Long-term receivables -- -- -- -- 4,196,366

Total assets 483,256$ 17,038,096$ 9,594,619$ 1,926,192$ 10,659,156$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable 7,208$ 623,950$ 16,726$ 59,542$ 14,070$ Due to other funds -- -- -- -- -- Accrued salaries and benefits -- 144,093 -- -- -- Accrued expenses -- 668 -- -- -- Deposits from others -- -- (142) 22,600 -- Deferred revenues -- 560,788 89,368 59,173 4,704,796

Total liabilities 7,208 1,329,499 105,952 141,315 4,718,866

Fund balances:Reserved for encumbrances 25,122 955,516 -- 320,722 2,208,822Reserved for unavailable assets -- -- -- -- 60,295Unreserved, designated -- 5,939,867 3,994,943 734,724 -- Unreserved, undesignated 450,926 8,813,214 5,493,724 729,431 3,671,173

Total fund balances 476,048 15,708,597 9,488,667 1,784,877 5,940,290

Total liabilities and fund balances 483,256$ 17,038,096$ 9,594,619$ 1,926,192$ 10,659,156$

continued104

COUNTY OF MONTEREY

Combining Balance Sheet (continued)Nonmajor Special Revenue Funds

June 30, 2010

TotalsAssetsCash and investments:

Held in County Treasury 36,259,100$ Receivables 5,578,665Advances to other funds 60,295Long-term receivables 4,852,693

Total assets 46,750,753$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable 1,021,884$ Due to other funds 335,343Accrued salaries and benefits 541,166Accrued expenses 2,799Deposits from others 95,081Deferred revenues 7,392,417

Total liabilities 9,388,690

Fund balances:Reserved for encumbrances 3,549,592Reserved for unavailable assets 60,295Unreserved, designated 10,679,240Unreserved, undesignated 23,072,936

Total fund balances 37,362,063

Total liabilities and fund balances 46,750,753$

105

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund BalancesNonmajor Special Revenue FundsFor the Year Ended June 30, 2010

In-Home Fish and Office ofCounty Support Game EmploymentLibrary Service Propagation Training

Revenues:Taxes 6,396,674$ --$ --$ --$Licenses, permits and franchises -- -- -- --Fines, forfeitures and penalties -- -- 12,501 --Revenue from use of money and property 25,164 1,449 219 --Aid from other governmental agencies 167,046 480,150 -- 13,021,239Charges for services 140,437 -- -- 8,882Other revenue 297,447 -- -- 7,214

Total revenues 7,026,768 481,599 12,720 13,037,335

Expenditures:Current:

General government -- -- -- --Public ways and facilities -- -- -- --Health and sanitation -- -- -- --Public assistance -- 540,557 -- 13,058,296Education 7,175,649 -- -- --Recreation and cultural services -- -- 21,809 --

Debt service:Principal -- -- -- --Interest -- -- -- --

Total expenditures 7,175,649 540,557 21,809 13,058,296

Excess (deficiency) of revenues over(under) expenditures (148,881) (58,958) (9,089) (20,961)

Other financing sources (uses):Inception of leases -- -- -- --Transfers in 179,621 85,392 10,000 20,961Transfers out -- -- -- --

Total other financing sources (uses) 179,621 85,392 10,000 20,961

Net change in fund balances 30,740 26,434 911 --

Fund balances, beginning of year 2,106,377 82,743 15,926 174,036

Fund balances, end of year 2,137,117$ 109,177$ 16,837$ 174,036$

continued

106

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund Balances (continued)Nonmajor Special Revenue FundsFor the Year Ended June 30, 2010

Community Inclusionary Disaster ProductivityServices Housing Assistance Investment

Revenues:Taxes --$ --$ --$ --$Licenses, permits and franchises -- 54,250 -- --Fines, forfeitures and penalties -- -- -- --Revenue from use of money and property 1,138 18,054 -- 11,680Aid from other governmental agencies 1,093,191 6,846 -- --Charges for services -- 2,000 -- --Other revenue -- 52,107 -- --

Total revenues 1,094,329 133,257 -- 11,680

Expenditures:Current:

General government -- 249,227 -- --Public ways and facilities -- -- -- --Health and sanitation -- -- -- --Public assistance 1,129,617 -- -- --Education -- -- -- --Recreation and cultural services -- -- -- --

Debt service:Principal -- -- -- --Interest -- -- -- --

Total expenditures 1,129,617 249,227 -- --

Excess (deficiency) of revenues over(under) expenditures (35,288) (115,970) -- 11,680

Other financing sources (uses):Inception of leases -- -- -- --Transfers in 780 -- -- --Transfers out -- (7,350) -- --

Total other financing sources (uses) 780 (7,350) -- --

Net change in fund balances (34,508) (123,320) -- 11,680

Fund balances, beginning of year 202,485 542,874 258,355 866,464

Fund balances, end of year 167,977$ 419,554$ 258,355$ 878,144$

continued

107

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund Balances (continued)Nonmajor Special Revenue FundsFor the Year Ended June 30, 2010

Lake Natural EmergencyResort Disaster Medical Fort OrdParks Assistance Services Reuse

Revenues:Taxes --$ --$ --$ --$Licenses, permits and franchises -- -- -- --Fines, forfeitures and penalties -- -- 959,894 --Revenue from use of money and property 371,719 -- 5,224 1,758Aid from other governmental agencies -- -- -- --Charges for services 847,649 -- -- --Other revenue 272 -- -- (103,311)

Total revenues 1,219,640 -- 965,118 (101,553)

Expenditures:Current:

General government -- -- -- 42,003Public ways and facilities -- -- -- --Health and sanitation -- -- 1,100,919 --Public assistance -- -- -- --Education -- -- -- --Recreation and cultural services 2,830,730 -- -- --

Debt service:Principal -- -- -- --Interest -- -- -- --

Total expenditures 2,830,730 -- 1,100,919 42,003

Excess (deficiency) of revenues over(under) expenditures (1,611,090) -- (135,801) (143,556)

Other financing sources (uses):Inception of leases -- -- -- --Transfers in 791,240 -- -- 42,000Transfers out -- -- -- --

Total other financing sources (uses) 791,240 -- -- 42,000

Net change in fund balances (819,850) -- (135,801) (101,556)

Fund balances, beginning of year 589,803 -- 184,658 85,133

Fund balances, end of year (230,047)$ --$ 48,857$ (16,423)$

continued

108

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund Balances (continued)Nonmajor Special Revenue FundsFor the Year Ended June 30, 2010

Agencies Under Boardof Supervisors

Nacimiento Other Water CountyHydroelectric Resources Service Sanitation RDA

Operations Agencies Areas Districts Set-AsideRevenues:

Taxes --$ --$ 1,611,797$ --$ --$Licenses, permits and franchises -- 23,135 -- -- --Fines, forfeitures and penalties -- -- -- -- --Revenue from use of money and property 6,004 161,309 89,271 48,877 78,765Aid from other governmental agencies -- 735,674 2,331 1,201 --Charges for services 55,000 14,609,333 766,444 1,239,451 30,000Other revenue -- 200,010 -- 28,225 80,622

Total revenues 61,004 15,729,461 2,469,843 1,317,754 189,387

Expenditures:Current:

General government -- -- -- -- 952,272Public ways and facilities 642,096 15,678,674 413,027 1,256,149 --Health and sanitation -- -- 1,222,818 1,311,036 --Public assistance -- -- -- -- --Education -- -- -- -- --Recreation and cultural services -- -- -- -- --

Debt service:Principal -- -- -- -- 357,247Interest -- -- -- -- 13,428

Total expenditures 642,096 15,678,674 1,635,845 2,567,185 1,322,947

Excess (deficiency) of revenues over(under) expenditures (581,092) 50,787 833,998 (1,249,431) (1,133,560)

Other financing sources (uses):Inception of leases -- 61,476 -- -- --Transfers in -- 3,195,900 7,350 1,851,000 1,406,235Transfers out -- (10,020,337) -- (105,925) --

Total other financing sources (uses) -- (6,762,961) 7,350 1,745,075 1,406,235

Net change in fund balances (581,092) (6,712,174) 841,348 495,644 272,675

Fund balances, beginning of year 1,057,140 22,420,771 8,647,319 1,289,233 5,667,615

Fund balances, end of year 476,048$ 15,708,597$ 9,488,667$ 1,784,877$ 5,940,290$

continued

109

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund Balances (continued)Nonmajor Special Revenue FundsFor the Year Ended June 30, 2010

TotalsRevenues:

Taxes 8,008,471$Licenses, permits and franchises 77,385Fines, forfeitures and penalties 972,395Revenue from use of money and property 820,631Aid from other governmental agencies 15,507,678Charges for services 17,699,196Other revenue 562,586

Total revenues 43,648,342

Expenditures:Current:

General government 1,243,502Public ways and facilities 17,989,946Health and sanitation 3,634,773Public assistance 14,728,470Education 7,175,649Recreation and cultural services 2,852,539

Debt service:Principal 357,247Interest 13,428

Total expenditures 47,995,554

Excess (deficiency) of revenues over(under) expenditures (4,347,212)

Other financing sources (uses):Inception of leases 61,476Transfers in 7,590,479Transfers out (10,133,612)

Total other financing sources (uses) (2,481,657)

Net change in fund balances (6,828,869)

Fund balances, beginning of year 44,190,932

Fund balances, end of year 37,362,063$

110

COUNTY OF MONTEREY

Budgetary Comparison ScheduleCounty Library Fund

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Taxes 6,652,481$ 6,652,481$ 6,396,674$ (255,807)$ Revenue from use of money and property 16,975 16,975 25,164 8,189Aid from other governmental agencies 155,665 155,665 167,046 11,381Charges for services 143,100 143,100 140,437 (2,663)Other revenue 205,671 205,671 297,447 91,776

Total revenues 7,173,892 7,173,892 7,026,768 (147,124)

Expenditures:Current:

Education 7,601,232 7,601,232 7,138,019 463,213Total expenditures 7,601,232 7,601,232 7,138,019 463,213

Excess (deficiency) of revenues over(under) expenditures (427,340) (427,340) (111,251) 316,089

Other financing sources (uses):Transfers in 179,622 179,622 179,621 (1)

Total other financing sources (uses) 179,622 179,622 179,621 (1)

111

g ( ) , , , ( )

Net change in budgetary fund balances (247,718) (247,718) 68,370 316,088

Budgetary fund balances, beginning 2,106,377 2,106,377 2,106,377 --

Budgetary fund balances, ending 1,858,659$ 1,858,659$ 2,174,747$ 316,088$

111

COUNTY OF MONTEREY

Budgetary Comparison ScheduleIn-Home Support Services

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property --$ --$ 1,449$ 1,449$ Aid from other governmental agencies 563,868 646,610 480,150 (166,460)

Total revenues 563,868 646,610 481,599 (165,011)

Expenditures:Current:

Public assistance 684,939 767,681 539,029 228,652Total expenditures 684,939 767,681 539,029 228,652

Excess (deficiency) of revenues over (under) expenditures (121,071) (121,071) (57,430) 63,641

Other financing sources (uses):Transfers in 121,071 121,071 85,392 (35,679)

Total other financing sources (uses) 121,071 121,071 85,392 (35,679)

Net change in budgetary fund balances -- -- 27,962 27,962

Budgetary fund balances, beginning 82,743 82,743 82,743 --

Budgetary fund balances, ending 82,743$ 82,743$ 110,705$ 27,962$

112

COUNTY OF MONTEREY

Budgetary Comparison ScheduleFish and Game Propagation

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Fines, forfeitures and penalties 2,000$ 2,000$ 12,501$ 10,501$ Revenue from use of money and property 700 700 219 (481)

Total revenues 2,700 2,700 12,720 10,020

Expenditures:Current:

Recreation and cultural services 22,261 22,261 21,809 452Total expenditures 22,261 22,261 21,809 452

Excess (deficiency) of revenues over (under) expenditures (19,561) (19,561) (9,089) 10,472

Other financing sources (uses):Transfers in 20,786 20,786 10,000 (10,786)

Total other financing sources (uses) 20,786 20,786 10,000 (10,786)

Net change in budgetary fund balances 1,225 1,225 911 (314)

Budgetary fund balances, beginning 15,926 15,926 15,926 --

Budgetary fund balances, ending 17,151$ 17,151$ 16,837$ (314)$

113

COUNTY OF MONTEREY

Budgetary Comparison ScheduleOffice of Employment Training

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Aid from other governmental agencies 8,575,951$ 14,716,345$ 13,021,239$ (1,695,106)$ Charges for services -- -- 8,882 8,882Other revenue -- -- 7,214 7,214

Total revenues 8,575,951 14,716,345 13,037,335 (1,679,010)

Expenditures:Current:

Public assistance 8,596,912 14,737,306 13,058,296 1,679,010Total expenditures 8,596,912 14,737,306 13,058,296 1,679,010

Excess (deficiency) of revenues over (under) expenditures (20,961) (20,961) (20,961) --

Other financing sources (uses):Transfers in 20,961 20,961 20,961 --

Total other financing sources (uses) 20,961 20,961 20,961 --

Net change in budgetary fund balances -- -- -- --

Budgetary fund balances, beginning 174,036 174,036 174,036 --

Budgetary fund balances, ending 174,036$ 174,036$ 174,036$ --$

114

COUNTY OF MONTEREY

Budgetary Comparison ScheduleCommunity Services

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 3,000$ 3,000$ 1,138$ (1,862)$ Aid from other governmental agencies 1,163,205 1,500,425 1,093,191 (407,234)

Total revenues 1,166,205 1,503,425 1,094,329 (409,096)

Expenditures:Current:

Public assistance 1,166,985 1,504,205 1,129,617 374,588Total expenditures 1,166,985 1,504,205 1,129,617 374,588

Excess (deficiency) of revenues over (under) expenditures (780) (780) (35,288) (34,508)

Other financing sources (uses):Transfers in 780 780 780 --

Total other financing sources (uses) 780 780 780 --

Net change in budgetary fund balances -- -- (34,508) (34,508)

Budgetary fund balances, beginning 202,485 202,485 202,485 --

Budgetary fund balances, ending 202,485$ 202,485$ 167,977$ (34,508)$

115

COUNTY OF MONTEREY

Budgetary Comparison ScheduleInclusionary Housing

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Licenses, permits and franchises 50,000$ 50,000$ 54,250$ 4,250$ Revenue from use of money and property 7,000 7,000 18,054 11,054Aid from other governmental agencies -- -- 6,846 6,846Charges for services -- -- 2,000 2,000Other revenue 35,125 35,125 52,107 16,982

Total revenues 92,125 92,125 133,257 41,132

Expenditures:Current:

General government 162,322 632,326 99,573 532,753Total expenditures 162,322 632,326 99,573 532,753

Excess (deficiency) of revenues over (under) expenditures (70,197) (540,201) 33,684 573,885

Other financing sources (uses):Transfers out -- -- (7,350) (7,350)

Total other financing sources (uses) -- -- (7,350) (7,350)

Net change in budgetary fund balances (70,197) (540,201) 26,334 566,535

Budgetary fund balances, beginning 542,874 542,874 542,874 --

Budgetary fund balances, ending 472,677$ 2,673$ 569,208$ 566,535$

116

COUNTY OF MONTEREY

Budgetary Comparison ScheduleDisaster Assistance

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Expenditures:Current:

Public safety and protection 258,355$ 258,355$ --$ 258,355$ Total expenditures 258,355 258,355 -- 258,355

Net change in budgetary fund balances (258,355) (258,355) -- 258,355

Budgetary fund balances, beginning 258,355 258,355 258,355 --

Budgetary fund balances, ending --$ --$ 258,355$ 258,355$

117

COUNTY OF MONTEREY

Budgetary Comparison ScheduleProductivity Investment

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 10,000$ 10,000$ 11,680$ 1,680$

Total revenues 10,000 10,000 11,680 1,680

Excess (deficiency) of revenues over (under) expenditures 10,000 10,000 11,680 1,680

Other financing sources (uses):Transfers out (912,197) (912,197) -- 912,197

Total other financing sources (uses) (912,197) (912,197) -- 912,197

Net change in budgetary fund balances (902,197) (902,197) 11,680 913,877

Budgetary fund balances, beginning 866,464 866,464 866,464 --

Budgetary fund balances, ending (35,733)$ (35,733)$ 878,144$ 913,877$

118

COUNTY OF MONTEREY

Budgetary Comparison ScheduleLakes Resort Parks

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 1,150,000$ 1,150,000$ 371,719$ (778,281)$ Charges for services 900,000 900,000 847,649 (52,351)Other revenue -- -- 272 272

Total revenues 2,050,000 2,050,000 1,219,640 (830,360)

Expenditures:Current:

Recreation and cultural services 2,754,366 2,754,366 2,744,459 9,907Total expenditures 2,754,366 2,754,366 2,744,459 9,907

Excess (deficiency) of revenues over (under) expenditures (704,366) (704,366) (1,524,819) (820,453)

Other financing sources (uses):Transfers in -- -- 791,240 791,240

Total other financing sources (uses) -- -- 791,240 791,240

Net change in budgetary fund balances (704,366) (704,366) (733,579) (29,213)

Budgetary fund balances, beginning 589,803 589,803 589,803 --

Budgetary fund balances, ending (114,563)$ (114,563)$ (143,776)$ (29,213)$

119

COUNTY OF MONTEREY

Budgetary Comparison ScheduleEmergency Medical Services

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Fines, forfeitures and penalties 950,000$ 950,000$ 959,894$ 9,894$ Revenue from use of money and property 20,000 20,000 5,224 (14,776)Aid from other governmental agencies 288,806 -- -- --

Total revenues 1,258,806 970,000 965,118 (4,882)

Expenditures:Current:

Health and sanitation 1,184,160 1,184,160 1,100,919 83,241Total expenditures 1,184,160 1,184,160 1,100,919 83,241

Net change in budgetary fund balances 74,646 (214,160) (135,801) 78,359

Budgetary fund balances, beginning 184,658 184,658 184,658 --

Budgetary fund balances, ending 259,304$ (29,502)$ 48,857$ 78,359$

120

COUNTY OF MONTEREY

Budgetary Comparison ScheduleFort Ord Reuse

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 1,500$ 1,500$ 1,758$ 258$ Other revenue -- -- (103,311) (103,311)

Total revenues 1,500 1,500 (101,553) (103,053)

Expenditures:Current:

General government 162,832 162,832 (51,890) 214,722Total expenditures 162,832 162,832 (51,890) 214,722

Excess (deficiency) of revenues over (under) expenditures (161,332) (161,332) (49,663) 111,669

Other financing sources (uses):Transfers in 42,000 42,000 42,000 --

Total other financing sources (uses) 42,000 42,000 42,000 --

Net change in budgetary fund balances (119,332) (119,332) (7,663) 111,669

Budgetary fund balances, beginning 85,133 85,133 85,133 --

Budgetary fund balances, ending (34,199)$ (34,199)$ 77,470$ 111,669$

121

COUNTY OF MONTEREY

Budgetary Comparison ScheduleNacimiento Hydroelectric Operations

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 10,000$ 10,000$ 6,004$ (3,996)$ Charges for services 55,000 55,000 55,000 --

Total revenues 65,000 65,000 61,004 (3,996)

Expenditures:Current:

Public ways and facilities 930,762 1,085,244 635,600 449,644Total expenditures 930,762 1,085,244 635,600 449,644

Net change in budgetary fund balances (865,762) (1,020,244) (574,596) 445,648

Budgetary fund balances, beginning 1,057,140 1,057,140 1,057,140 --

Budgetary fund balances, ending 191,378$ 36,896$ 482,544$ 445,648$

122

COUNTY OF MONTEREY

Budgetary Comparison ScheduleWater Resources Agency

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Licenses, permits and franchises 29,000$ 29,000$ 23,135$ (5,865)$ Revenue from use of money and property 183,050 183,050 161,309 (21,741)Aid from other governmental agencies 2,757,431 3,125,431 735,674 (2,389,757)Charges for services 15,219,715 15,019,715 14,609,333 (410,382)Other revenue 1,116,000 1,116,000 200,010 (915,990)

Total revenues 19,305,196 19,473,196 15,729,461 (3,743,735)

Expenditures:Current:

Public ways and facilities 24,736,003 26,576,460 11,097,840 15,478,620Total expenditures 24,736,003 26,576,460 11,097,840 15,478,620

Excess (deficiency) of revenues over(under) expenditures (5,430,807) (7,103,264) 4,631,621 11,734,885

Other financing sources (uses):Transfers in 3,821,676 3,821,676 3,195,900 (625,776)Transfers out (3 586 589) (3 586 589) (10 020 337) (6 433 748)

123

Transfers out (3,586,589) (3,586,589) (10,020,337) (6,433,748)Total other financing sources (uses) 235,087 235,087 (6,824,437) (7,059,524)

Net change in budgetary fund balances (5,195,720) (6,868,177) (2,192,816) 4,675,361

Budgetary fund balances, beginning 22,420,771 22,420,771 22,420,771 --

Budgetary fund balances, ending 17,225,051$ 15,552,594$ 20,227,955$ 4,675,361$

123

COUNTY OF MONTEREY

Budgetary Comparison ScheduleCounty Service Areas

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Taxes 1,550,000$ 1,550,000$ 1,611,797$ 61,797$ Revenue from use of money and property 123,440 123,440 89,271 (34,169)Aid from other governmental agencies 1,065 1,065 2,331 1,266Charges for services 751,720 751,720 766,444 14,724

Total revenues 2,426,225 2,426,225 2,469,843 43,618

Expenditures:Current:

Public ways and facilities 2,389,944 2,409,944 392,187 2,017,757Health and sanitation 1,680,112 1,680,112 1,222,818 457,294

Total expenditures 4,070,056 4,090,056 1,615,005 2,475,051

Excess (deficiency) of revenues over (under) expenditures (1,643,831) (1,663,831) 854,838 2,518,669

Other financing sources (uses):Transfers in -- -- 7,350 7,350

Total other financing sources (uses) -- -- 7,350 7,350

Net change in budgetary fund balances (1,643,831) (1,663,831) 862,188 2,526,019

Budgetary fund balances, beginning restated 8,647,319 8,647,319 8,647,319 --

Budgetary fund balances, ending 7,003,488$ 6,983,488$ 9,509,507$ 2,526,019$

124

COUNTY OF MONTEREY

Budgetary Comparison ScheduleSanitation Districts

For the Year Ended June 30, 2010Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 52,371$ 52,371$ 48,877$ (3,494)$ Aid from other governmental agencies 2,388,550 2,388,550 1,201 (2,387,349)Charges for services 1,166,700 1,166,700 1,239,451 72,751Other revenues -- -- 28,225 28,225

Total revenues 3,607,621 3,607,621 1,317,754 (2,289,867)

Expenditures:Current:

Public ways and facilities 3,044,260 3,671,260 1,475,962 2,195,298Health and sanitation 1,529,429 1,529,429 1,311,036 218,393

Total expenditures 4,573,689 5,200,689 2,786,998 2,413,691

Excess (deficiency) of revenues over (under) expenditures (966,068) (1,593,068) (1,469,244) 123,824

Other financing sources (uses):Transfer in 1,249,000 1,876,000 1,851,000 (25,000)Transfers out (1,105,925) (1,105,925) (105,925) 1,000,000

Total other financing sources (uses) 143,075 770,075 1,745,075 975,000

Net change in budgetary fund balances (822,993) (822,993) 275,831 1,098,824

Budgetary fund balances, beginning 1,289,233 1,289,233 1,289,233 --

Budgetary fund balances, ending 466,240$ 466,240$ 1,565,064$ 1,098,824$

125

COUNTY OF MONTEREY

Budgetary Comparison ScheduleRedevelopment Agency Set-Aside Fund

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 85,447$ 85,447$ 78,765$ (6,682)$ Other revenue -- -- 80,622 80,622

Total revenues 85,447 85,447 159,387 73,940

Expenditures:Current:

General government 3,342,069 7,026,400 3,098,434 3,927,966Debt service:

Principal -- -- 357,247 (357,247)Interest -- -- 13,428 (13,428)

Total expenditures 3,342,069 7,026,400 3,469,109 3,557,291

Excess (deficiency) of revenues over (under) expenditures (3,256,622) (6,940,953) (3,309,722) 3,631,231

Other financing sources (uses):Transfers in 1,308,279 1,308,279 1,406,235 97,956

Total other financing sources (uses) 1,308,279 1,308,279 1,406,235 97,956

Net change in budgetary fund balances (1,948,343) (5,632,674) (1,903,487) 3,729,187

Budgetary fund balances, beginning, restated 5,667,615 5,667,615 5,667,615 --

Budgetary fund balances, ending 3,719,272$ 34,941$ 3,764,128$ 3,729,187$

126

127

DEBT SERVICE FUNDS

Debt service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. The County debt service funds provide for the repayment of debt, other than those financed by proprietary funds, for certificates of participation, revenue bonds and short-term borrowing.

128

DEBT SERVICE FUNDS

Debt Service County Fund – Created to assure the County meets all the debt service obligations in connection with the County’s adopted financing policies and State statutes so that the County’s credit ratings continue at the current positive levels. The debt is managed by the Auditor-Controller’s Office in coordination with the Chief Administrative Office.

Debt Service Redevelopment Agency (RDA) Fund – Created to account for the debt incurred by the Redevelopment Agency including payments to agencies and the housing set-aside. The debt is managed by the Auditor-Controller’s Office and the Redevelopment & Housing Office of the Resource Management Agency.

County Financing Authority – Established to support the debt service activities funding the County’s portion of the construction of the Salinas Valley Water Project. The fund is managed by the Auditor-Controller’s Office and the Water Resources Agency.

Public Improvement Corporation – The Corporation assists the County in acquiring, purchasing, constructing, improving and financing real property, facilities and equipment needed for County operations. With County assistance, the Corporation acts as a conduit between the County and bond holders. The Auditor-Controller’s office is the oversight agency for all funds provided by the Corporation for capital projects.

Debt Debt County PublicService Service Financing ImprovementCounty RDA Authority Corporation Total

AssetsCash and investments in County Treasury 4,489,770$ 78,185$ --$ 99,868$ 4,667,823$ Cash with fiscal agent -- -- 2,189,255 9,672,539 11,861,794Taxes receivable -- 396,070 -- -- 396,070

Total assets 4,489,770$ 474,255$ 2,189,255$ 9,772,407$ 16,925,687$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable --$ 74,607$ --$ --$ 74,607$ Due to other funds -- 112,522 -- -- 112,522Deferred revenues -- 193,979 -- -- 193,979

Total liabilities -- 381,108 -- -- 381,108

Fund balances:Reserved for debt service 3,931,739 -- 2,189,255 9,772,407 15,893,401Unreserved, undesignated 558,031 93,147 -- -- 651,178

Total fund balances 4,489,770 93,147 2,189,255 9,772,407 16,544,579

Total liabilities and fund balances 4,489,770$ 474,255$ 2,189,255$ 9,772,407$ 16,925,687$

COUNTY OF MONTEREY

Combining Balance SheetNonmajor Debt Service Funds

June 30, 2010

129

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund BalancesNonmajor Debt Service Funds

For the Year Ended June 30, 2010

Debt Debt County PublicService Service Financing ImprovementGeneral RDA Authority Corporation Totals

Revenues:Taxes 6,193$ 5,965,061$ --$ --$ 5,971,254$ Fines, forfeitures and penalties -- -- -- 1,344,836 1,344,836Revenue from use of money and property 49,994 24,295 113,860 500,137 688,286Aid from other governmental agencies -- 39,096 -- -- 39,096Charges for services 1,858,060 -- -- -- 1,858,060

Total revenues 1,914,247 6,028,452 113,860 1,844,973 9,901,532

Expenditures:General government -- 217,926 -- -- 217,926Public ways and facilities -- -- 1,500 -- 1,500Debt service:

Principal 1,102,475 -- -- 3,460,000 4,562,475Interest and debt service costs 931,363 -- 1,597,913 6,176,863 8,706,139

Total expenditures 2,033,838 217,926 1,599,413 9,636,863 13,488,040

Excess (deficiency) of revenues over (under) expenditures (119,591) 5,810,526 (1,485,553) (7,791,890) (3,586,508)

Other financing sources (uses):

Transfers in 105,925 -- 908,533 17,564,297 18,578,755Transfers out (9,673,791) (5,854,536) (3,146,236) -- (18,674,563)

Total other financing sources (uses) (9,567,866) (5,854,536) (2,237,703) 17,564,297 (95,808)

Net change in fund balances (9,687,457) (44,010) (3,723,256) 9,772,407 (3,682,316)

Fund balances, beginning 14,177,227 137,157 5,912,511 -- 20,226,895

Fund balances, ending 4,489,770$ 93,147$ 2,189,255$ 9,772,407$ 16,544,579$

130

COUNTY OF MONTEREY

Budgetary Comparison ScheduleDebt Service - County

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Taxes --$ --$ 6,193$ 6,193$Revenue from use of money and property 70,000 70,000 49,994 (20,006)Charges for services 1,650,000 1,850,000 1,858,060 8,060

Total revenues 1,720,000 1,920,000 1,914,247 (5,753)

Expenditures:Debt service:

Principal 1,052,304 1,052,304 1,102,475 (50,171)Interest and debt service costs 962,425 996,228 931,363 64,865

Total expenditures 2,014,729 2,048,532 2,033,838 14,694

Excess (deficiency) of revenues over(under) expenditures (294,729) (128,532) (119,591) 8,941

Other financing sources (uses):

131

Other financing sources (uses):Transfers in -- -- 105,925 105,925Transfers out -- -- (9,673,791) (9,673,791)

Total other financing sources (uses) -- -- (9,567,866) (9,567,866)

Net change in budgetary fund balances (294,729) (128,532) (9,687,457) (9,558,925)

Budgetary fund balances, beginning 14,177,227 14,177,227 14,177,227 --

Budgetary fund balances, ending 13,882,498$ 14,048,695$ 4,489,770$ (9,558,925)$

131

COUNTY OF MONTEREY

Budgetary Comparison ScheduleDebt Service - RDA

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Taxes 5,137,985$ 7,147,985$ 5,965,061$ (1,182,924)$Revenue from use of money and property 1,000 1,000 24,295 23,295Aid from other governmental agencies -- -- 39,096 39,096

Total revenues 5,138,985 7,148,985 6,028,452 (1,120,533)

Expenditures:General government -- -- 217,926 (217,926)

Total expenditures -- -- 217,926 (217,926)

Excess (deficiency) of revenues over(under) expenditures 5,138,985 7,148,985 5,810,526 (1,338,459)

Other financing sources (uses):Transfers out (5,138,985) (7,372,055) (5,854,536) 1,517,519

Total other financing sources (uses) (5,138,985) (7,372,055) (5,854,536) 1,517,519

Net change in budgetary fund balances -- (223,070) (44,010) 179,060

Budgetary fund balances, beginning 137,157 137,157 137,157 --

Budgetary fund balances, ending 137,157$ (85,913)$ 93,147$ 179,060$

132

COUNTY OF MONTEREY

Budgetary Comparison ScheduleCounty Financing Authority

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property --$ --$ 113,860$ 113,860$

Total revenues -- -- 113,860 113,860

Expenditures:Public ways and facilities 1,500 1,500 1,500 --Debt service:

Interest and debt service costs -- 1,597,913 1,597,913 --Total expenditures 1,500 1,599,413 1,599,413 --

Excess (deficiency) of revenues over(under) expenditures (1,500) (1,599,413) (1,485,553) 113,860

Other financing sources (uses):Transfers in -- -- 908,533 908,533Transfers out (3,146,236) (3,146,236) (3,146,236) --

Total other financing sources (uses) (3,146,236) (3,146,236) (2,237,703) 908,533

Net change in budgetary fund balances (3,147,736) (4,745,649) (3,723,256) 1,022,393

Budgetary fund balances, beginning 5,912,511 5,912,511 5,912,511 --

Budgetary fund balances, ending 2,764,775$ 1,166,862$ 2,189,255$ 1,022,393$

133

COUNTY OF MONTEREY

Budgetary Comparison SchedulePublic Improvement CorporationFor the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 238,330$ 238,330$ 500,137$ 261,807$Fines, forfeitures and penalties 1,500,000 1,500,000 1,344,836 (155,164)

Total revenues 1,738,330 1,738,330 1,844,973 106,643

Expenditures:Debt service:

Principal 3,460,000 5,910,000 3,460,000 2,450,000Interest and debt service costs 6,178,145 9,260,470 6,176,863 3,083,607

Total expenditures 9,638,145 15,170,470 9,636,863 5,533,607

Excess (deficiency) of revenues over(under) expenditures (7,899,815) (13,432,140) (7,791,890) 5,640,250

Other financing sources (uses):Transfers in 7,899,815 7,899,815 17,564,297 9,664,482

Total other financing sources (uses) 7,899,815 7,899,815 17,564,297 9,664,482

Net change in budgetary fund balances -- (5,532,325) 9,772,407 15,304,732

Budgetary fund balances, beginning -- -- -- --

Budgetary fund balances, ending --$ (5,532,325)$ 9,772,407$ 15,304,732$

134

135

CAPITAL PROJECT FUNDS

Nonmajor Capital Project Funds

Capital project funds are used to account for financial resources to be used for implementation and construction of specific Board approved capital equipment or facilities in a timely and cost-effective manner. The following are the County’s nonmajor capital project funds, other than those financed by proprietary funds.

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CAPITAL PROJECT FUNDS

Major Capital Project Fund

Facilities Master Plan Implementation – Established to account for capital projects undertaken with debt in order to adhere to reporting requirements and assure the County is on schedule with project implementation and completion. Current projects include the Courthouse Complete (north, east and west wings), the Government Center Parking Structure and the New Health Headquarters.

Nonmajor Capital Project Funds

Capital Projects Fund – Created to provide for capital improvements, replacement and construction of new County facilities. The fund is administered by the Architectural Services Division within the Resource Management Agency.

Enterprise Resource Planning Fund – Established to account for the implementation of the County’s Enterprise Applications project, including the Financial Accounting, Budget Preparation and the Human Resources/Payroll Systems. The Auditor-Controller’s Office acts as the project manager of the fund.

Facilities Maintenance Projects Fund – Provides for major maintenance including remodeling, improving, renovation, and upgrading of existing County facilities. The fund is administered by the Public Works Department within the Resource Management Agency.

Water Resources Funds – Provides for construction of the Salinas River Diversion Facility portion and Nacimiento Spillway Modification portion of the Salinas Valley Water Project.

NGEN Radio Project – Provides for the design/build project to make the radio system compliant with the Federal Communications Commission mandate.

Redevelopment Capital Projects – Provides for the administration and implementation of the Castroville/Pajaro Redevelopment Plan adopted in 1986, Boronda Redevelopment Plan adopted in 1988, and Fort Ord Redevelopment Project Area.

COUNTY OF MONTEREY

Budgetary Comparison ScheduleFacility Master Plan

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

RevenuesRevenue from use of money and property 889,000$ 889,000$ 783,809$ (105,191)$

Total revenues 889,000 889,000 783,809 (105,191)

ExpendituresCapital outlay 31,351,679 31,351,679 6,449,356 24,902,323

Total expenditures 31,351,679 31,351,679 6,449,356 24,902,323

Net change in budgetary fund balances (30,462,679) (30,462,679) (5,665,547) 24,797,132

Budgetary fund balances, beginning 46,165,624 46,165,624 46,165,624 --

Budgetary fund balances, ending 15,702,945$ 15,702,945$ 40,500,077$ 24,797,132$

137

COUNTY OF MONTEREY

Combining Balance SheetNonmajor Capital Projects Funds

June 30, 2010

Enterprise Facilities Other WaterCapital Resource Maintenance ResourcesProjects Planning Projects Agencies

AssetsCash and investments in County Treasury 15,154,349$ 1,697,878$ 3,411,501$ 2,722,887$Receivables -- -- 24,158 --Due from other funds 335,320 -- -- --Land held for resale and development -- -- -- --Long term receivable 570,714 -- -- --

Total assets 16,060,383$ 1,697,878$ 3,435,659$ 2,722,887$

Liabilities and fund balancesLiabilities:

Vouchers and accounts payable 134,053$ 640,525$ 105,278$ 427,262$Deposits from others -- -- -- --Deferred revenues 200,359 -- -- --Advances payable -- -- -- --

Total liabilities 334,412 640,525 105,278 427,262

Fund balances:Reserved for:

Encumbrances 126,440 -- 486,496 2,374,682Unavailable assets 570,714 -- -- --

Unreserved 15,028,817 1,057,353 2,843,885 (79,057)

Total fund balances 15,725,971 1,057,353 3,330,381 2,295,625

Total liabilities and fund balances 16,060,383$ 1,697,878$ 3,435,659$ 2,722,887$

138

NGEN RedevelopmentRadio CapitalProject Projects Total

AssetsCash and investments

443,556$ 13,334,354$ 36,764,525$ in County Treasury-- 94,928 119,086 Receivables-- 112,522 447,842 Due from other funds-- 856,017 856,017 Land held for resale and development-- 117,454 688,168 Long term receivable

443,556$ 14,515,275$ 38,875,638$ Total assets

Liabilities and fund balancesLiabilities:

3,885$ 67,125$ 1,378,128$ Vouchers and accounts payable-- 172,028 172,028 Deposits from others-- 392,497 592,856 Deferred revenues-- 210,295 210,295 Advances payable

3,885 841,945 2,353,307 Total liabilities

Fund balances:Reserved for:

8,215 39,890 3,035,723 Encumbrances-- 856,017 1,426,731 Unavailable assets

431,456 12,777,423 32,059,877 Unreserved

439,671 13,673,330 36,522,331 Total fund balances

443,556$ 14,515,275$ 38,875,638$ Total liabilities and fund balances

139

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenditures and Changes in Fund BalancesNonmajor Capital Projects FundsFor the Year Ended June 30, 2010

Enterprise Facilities Other WaterCapital Resource Maintenance ResourcesProjects Planning Projects Agencies

Revenues:Taxes --$ --$ --$ --$ Revenue from use of

money and property 231,670 1,916 23,190 53,485Aid from other

governmental agencies -- -- 56,060 -- Charges for services -- -- -- -- Other revenue -- -- 755 --

Total revenues 231,670 1,916 80,005 53,485

Expenditures:Current:

General government -- -- -- -- Capital outlay 2,811,567 5,896,148 2,446,328 6,948,900

Total expenditures 2,811,567 5,896,148 2,446,328 6,948,900

Excess (deficiency) of revenues over (under) expenditures (2,579,897) (5,894,232) (2,366,323) (6,895,415)

Other financing sources (uses):Transfers in 625,000 6,351,505 3,176,324 12,191,040Transfers out (5,952,246) -- -- (3,000,000)

Total other financing sources (uses) (5,327,246) 6,351,505 3,176,324 9,191,040

Extraordinary Item:Supplemental ERAF payment -- -- -- --

Net change in fund balances (7,907,143) 457,273 810,001 2,295,625

Fund balances, beginning 23,633,114 600,080 2,520,380 --

Fund balances, ending 15,725,971$ 1,057,353$ 3,330,381$ 2,295,625$

140

NGEN RedevelopmentRadio CapitalProject Projects Totals

Revenues:--$ 18,032$ 18,032$ Taxes

Revenue from use of 1,339 164,740 476,340 money and property

Aid from other-- 38,005 94,065 governmental agencies

294,578 441,148 735,726 Charges for services-- 54,015 54,770 Other revenue

295,917 715,940 1,378,933 Total revenues

Expenditures:Current:

-- 3,117,877 3,117,877 General government 61,668 -- 18,164,611 Capital outlay 61,668 3,117,877 21,282,488 Total expenditures

Excess (deficiency) of revenues 234,249 (2,401,937) (19,903,555) over (under) expenditures

Other financing sources (uses): 205,422 4,499,506 27,048,797 Transfers in

-- -- (8,952,246) Transfers outTotal other financing

205,422 4,499,506 18,096,551 sources (uses)

Extraordinary Item:-- (2,170,500) (2,170,500) Supplemental ERAF payment

439,671 (72,931) (3,977,504) Net change in fund balances

-- 13,746,261 40,499,835 Fund balances, beginning

439,671$ 13,673,330$ 36,522,331$ Fund balances, ending

141

COUNTY OF MONTEREY

Budgetary Comparison ScheduleCapital Projects

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 219,162$ 219,162$ 231,670$ 12,508$

Total revenues 219,162 219,162 231,670 12,508

Expenditures:Capital outlay 15,067,821 13,159,796 2,466,558 10,693,238

Total expenditures 15,067,821 13,159,796 2,466,558 10,693,238

Excess (deficiency) of revenues over (under) expenditures (14,848,659) (12,940,634) (2,234,888) 10,705,746

Other financing sources (uses):Transfers in -- -- 625,000 625,000Transfers out -- (4,320,329) (5,952,246) (1,631,917)

Total other financing sources (uses) -- (4,320,329) (5,327,246) (1,006,917)

Net change in budgetary fund balances (14,848,659) (17,260,963) (7,562,134) 9,698,829

Budgetary fund balances, beginning 23,633,114 23,633,114 23,633,114 --

Budgetary fund balances, ending 8,784,455$ 6,372,151$ 16,070,980$ 9,698,829$

142

COUNTY OF MONTEREY

Budgetary Comparison ScheduleEnterprise Resource Planning

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property --$ --$ 1,916$ 1,916$

Total revenues -- -- 1,916 1,916

Expenditures:Capital outlay 5,469,334 6,301,505 5,491,781 809,724

Total expenditures 5,469,334 6,301,505 5,491,781 809,724

Excess (deficiency) of revenues over (under) expenditures (5,469,334) (6,301,505) (5,489,865) 811,640

Other financing sources (uses):Transfers in 5,469,334 6,101,505 6,351,505 250,000

Total other financing sources (uses) 5,469,334 6,101,505 6,351,505 250,000

Net change in budgetary fund balances -- (200,000) 861,640 1,061,640

Budgetary fund balances, beginning 600,080 600,080 600,080 --

Budgetary fund balances, ending 600,080$ 400,080$ 1,461,720$ 1,061,640$

143

COUNTY OF MONTEREY

Budgetary Comparison ScheduleFacilities Maintenance Projects

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property 50,000$ 50,000$ 23,190$ (26,810)$Aid from other governmental agencies -- -- 56,060 56,060Other revenue -- -- 755 755

Total revenues 50,000 50,000 80,005 30,005

Expenditures:Capital outlay 4,303,465 4,303,465 2,194,189 2,109,276

Total expenditures 4,303,465 4,303,465 2,194,189 2,109,276

Excess (deficiency) of revenues over(under) expenditures (4,253,465) (4,253,465) (2,114,184) 2,139,281

Other financing sources (uses):Transfers in 750,000 2,288,799 3,176,324 887,525

Total other financing sources (uses) 750,000 2,288,799 3,176,324 887,525

Net change in budgetary fund balances (3,503,465) (1,964,666) 1,062,140 3,026,806

Budgetary fund balances, beginning 2,520,380 2,520,380 2,520,380 --

Budgetary fund balances, ending (983,085)$ 555,714$ 3,582,520$ 3,026,806$

144

COUNTY OF MONTEREY

Budgetary Comparison ScheduleOther Water Resources AgenciesFor the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property --$ --$ 53,485$ 53,485$ Aid from other governmental agencies 559,375 559,375 -- (559,375)

Total revenues 559,375 559,375 53,485 (505,890)

Expenditures:Current:Capital outlay 8,269,296 10,787,082 9,323,582 1,463,500

Total expenditures 8,269,296 10,787,082 9,323,582 1,463,500

Excess (deficiency) of revenues over (7,709,921) (10,227,707) (9,270,097) 957,610(under) expenditures

Other financing sources (uses):Transfers in 8,560,000 8,806,714 12,191,040 3,384,326Transfers out (3,000,000) (3,000,000) (3,000,000) --

Total other financing sources (uses) 5,560,000 5,806,714 9,191,040 3,384,326

Net change in budgetary fund balances (2,149,921) (4,420,993) (79,057) 4,341,936

Budgetary fund balances, beginning -- -- -- --

Budgetary fund balances, ending (2,149,921)$ (4,420,993)$ (79,057)$ 4,341,936$

145

COUNTY OF MONTEREY

Budgetary Comparison ScheduleNGEN Radio Project

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Revenue from use of money and property --$ --$ 1,339$ 1,339$ Charges for services -- 500,000 294,578 (205,422)

Total revenues -- 500,000 295,917 (204,083)

Expenditures:Capital outlay 267,426 267,426 69,883 197,543

Total expenditures 267,426 267,426 69,883 197,543

Excess (deficiency) of revenues over (267,426) 232,574 226,034 (6,540)(under) expenditures

Other financing sources (uses):Transfers in -- -- 205,422 205,422

Total other financing sources (uses) -- -- 205,422 205,422

Net change in budgetary fund balances (267,426) 232,574 431,456 198,882

Budgetary fund balances, beginning -- -- -- --

Budgetary fund balances, ending (267,426)$ 232,574$ 431,456$ 198,882$

146

COUNTY OF MONTEREY

Budgetary Comparison ScheduleRedevelopment Capital Projects

For the Year Ended June 30, 2010

Variance withFinal Budget

Budgeted Amounts Actual Amounts PositiveOriginal Final (Budgetary Basis) (Negative)

Revenues:Taxes --$ --$ 18,032$ 18,032Revenue from use of money and property 104,300 104,300 164,740 60,440Aid from other governmental agencies 100,000 675,000 38,005 (636,995)Charges for services 104,935 144,935 441,148 296,213Other revenue -- -- 54,015 54,015

Total revenues 309,235 924,235 715,940 (208,295)

Expenditures:Current:

General government 14,091,179 17,513,736 2,373,568 15,140,168Debt service:

Principal 55,750 55,750 -- 55,750Interest 26,500 26,500 -- 26,500

Total expenditures 14,173,429 17,595,986 2,373,568 15,222,418

Excess (deficiency) of revenues over (13,864,194) (16,671,751) (1,657,628) 15,014,123(under) expenditures

Other financing sources (uses):Transfers in 3,896,496 3,896,496 4,499,506 603,010Transfers out (65,789) (65,789) -- 65,789

Total other financing sources (uses) 3,830,707 3,830,707 4,499,506 668,799

Net change in budgetary fund balances (10,033,487) (12,841,044) 2,841,878 15,682,922

Budgetary fund balances, beginning 13,746,261 13,746,261 13,746,261 --

Budgetary fund balances, ending 3,712,774$ 905,217$ 16,588,139$ 15,682,922$

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149

INTERNAL SERVICE FUNDS

Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments, or agencies of the County, or to other governments on a cost-reimbursement basis. Financing requirements are based upon actuarial studies that provide several scenarios that estimate ultimate losses. The County has adopted policies to fund each of these funds at the 70% confidence level. Each participant department of the fund’s services contributes to the recovery of expenses based on the participant department’s loss history and exposure to risk. Both funds are managed by the Risk Management Division of the County Administrative Office.

150

INTERNAL SERVICE FUNDS

General Liability Fund – Created to provide for all liability judgments, settlements, and claims against the County, including claims that are not covered by the County’s excess insurance policy.

Workers Compensation Fund – Created to provide for all workers compensation judgments, settlements, and claims against the County, including prevention expenses and the Return-to-Work program.

COUNTY OF MONTEREY

Combining Statement of Fund Net AssetsInternal Service Funds

June 30, 2010

General WorkersLiability Compensation Total

AssetsCurrent assets:

Cash and cash equivalents 7,265,106$ 37,669,868$ 44,934,974$Prepaid expenses 122,573 -- 122,573

Total current assets 7,387,679 37,669,868 45,057,547

Noncurrent assets:Restricted assets:

Held by trustee 500,485 -- 500,485Capital assets:

Depreciable, net 5,051,358 -- 5,051,358Total noncurrent assets 5,551,843 -- 5,551,843

Total assets 12,939,522$ 37,669,868$ 50,609,390$

Liabilities and Net AssetsCurrent liabilities:

Accounts payable and deposits 33,673$ 355,639$ 389,312$Accrued interest 54,583 -- 54,583Current portion of claims liability 2,134,427 9,685,529 11,819,956Current portion of bonds and notes payable 1,583,384 -- 1,583,384

Total current liabilities 3,806,067 10,041,168 13,847,235

Long-term liabilities:Claims liability 3,742,340 36,286,415 40,028,755Bonds and notes payable 15,254,477 -- 15,254,477

Total long-term liabilities 18,996,817 36,286,415 55,283,232Total liabilities 22,802,884 46,327,583 69,130,467

Net assets:Invested in capital assets, net of related debt 303,187 -- 303,187Unrestricted (deficit) (10,166,549) (8,657,715) (18,824,264)

Total net assets (9,863,362) (8,657,715) (18,521,077)

Total liabilities and net assets 12,939,522$ 37,669,868$ 50,609,390$

151

COUNTY OF MONTEREY

Combining Statement of Revenues, Expenses and Changes in Net AssetsInternal Service Funds

For the Year Ended June 30, 2010

General WorkersLiability Compensation Total

Operating revenues:Charges for services 7,805,957$ 12,570,589$ 20,376,546$

Total operating revenues 7,805,957 12,570,589 20,376,546

Operating expenses:Services and supplies 1,341,921 1,675,160 3,017,081Claims expense 786,372 13,458,060 14,244,432Purchased services 139,353 796,786 936,139Insurance 487,533 759,024 1,246,557Depreciation 732,955 -- 732,955

Total operating expenses 3,488,134 16,689,030 20,177,164

Net operating income (loss) 4,317,823 (4,118,441) 199,382

Non-operating revenues (expenses):Interest income 84,159 374,009 458,168Interest expense (897,466) -- (897,466)

Total non-operating revenues (expenses) (813,307) 374,009 (439,298)

Change in net assets 3,504,516 (3,744,432) (239,916)

Net assets - beginning of year (13,724,558) (5,100,877) (18,825,435)Prior period adjustment 356,680 187,594 544,274

Net assets - end of year (9,863,362)$ (8,657,715)$ (18,521,077)$

152

COUNTY OF MONTEREY

Combining Statement of Cash FlowsInternal Service Funds

For the Year Ended June 30, 2010

General WorkersLiability Compensation Total

Cash flows from operating activities:Cash receipts from customers and users 7,805,957$ 12,603,070$ 20,409,027$ Cash paid to suppliers for goods and services (3,529,063) (10,363,641) (13,892,704)

Net cash provided by operating activities 4,276,894 2,239,429 6,516,323

Cash flows from capital and related financing activities:Principal payments on COPS, bonds and loans (1,524,678) -- (1,524,678)Interest payments on COPS, bonds and loans (842,883) -- (842,883)

Net cash provided (used) by capital and related financing activities (2,367,561) -- (2,367,561)

Cash flow from investing activities:Interest payments received 84,159 374,009 458,168 Net cash provided (used) by investing activities 84,159 374,009 458,168

Net increase (decrease) in cash and cash equivalents 1,993,492 2,613,438 4,606,930

Cash and cash equivalents, July 1 5,772,099 35,056,430 40,828,529

Cash and cash equivalents, June 30 7,765,591$ 37,669,868$ 45,435,459$

Reconciliation of operating income to net cashProvided by operating activities:Operating income (loss) 4,317,823$ (4,118,441)$ 199,382$ Adjustments to reconcile operating income to net

Cash provided (used) by operating activities:Depreciation 732,955 -- 732,955 (Increase) decrease in accounts receivable -- 32,481 32,481 Increase (decrease) in accounts payable 38,470 72,963 111,433 Increase (decrease) in claims liability (812,354) 6,252,426 5,440,072

Total adjustments (40,929) 6,357,870 6,316,941

Net cash provided (used) by operating activities 4,276,894$ 2,239,429$ 6,516,323$

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155

AGENCY FUNDS

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COUNTY OF MONTEREY

Combining Statement of Changes in Assets and LiabilitiesAgency Funds

For the Year Ended June 30, 2010

Balance BalanceJuly 1, 2009 Additions Deductions June 30, 2010

Clearing and revolving fundsAssets:

Cash and cash equivalents 1,333,992$ 2,262,908$ --$ 3,596,900$Total assets 1,333,992$ 2,262,908$ --$ 3,596,900$

Liabilities:Accounts payable (49,091)$ 891,523$ --$ 842,432$Assets held as agency for others 1,383,083 1,371,385 -- 2,754,468

Total liabilities 1,333,992$ 2,262,908$ --$ 3,596,900$

Taxes and interestAssets:

Cash and cash equivalents 11,221,340$ --$ 1,756,893$ 9,464,447$Receivables - Taxes 36,008,911 - 2,666,942 33,341,969

Total assets 47,230,251$ --$ 4,423,835$ 42,806,416$

Liabilities:Accounts payable 2,054,997$ --$ 2,054,345$ 652$Assets held as agency for others 45,175,254 -- 2,369,490 42,805,764

Total liabilities 47,230,251$ --$ 4,423,835$ 42,806,416$

DepartmentalAssets:

Cash and cash equivalents 8,023,502$ --$ 434,894$ 7,588,608$Long term receivables 30,000 -- -- 30,000

Total assets 8,053,502$ --$ 434,894$ 7,618,608$

Liabilities:Accounts payable (9,658)$ 5,221$ --$ (4,437)$Assets held as agency for others 8,063,160 -- 440,115 7,623,045

Total liabilities 8,053,502$ 5,221$ 440,115$ 7,618,608$

continued

157

COUNTY OF MONTEREY

Combining Statement of Changes in Assets and LiabilitiesAgency Funds

For the Year Ended June 30, 2010

Balance BalanceJuly 1, 2009 Additions Deductions June 30, 2010

TransitAssets:

Cash and cash equivalents 5,170,945$ 1,316,540$ --$ 6,487,485$Total assets 5,170,945$ 1,316,540$ --$ 6,487,485$

Liabilities:Assets held as agency for others 5,170,945$ 1,316,540$ --$ 6,487,485

Total liabilities 5,170,945$ 1,316,540$ --$ 6,487,485$

Total all agency fundsAssets:

Cash and cash equivalents 25,749,779$ 3,579,448$ 2,191,787$ 27,137,440$Receivables - Taxes 36,008,911 -- 2,666,942 33,341,969Long term receivables 30,000 -- -- 30,000

Total assets 61,788,690$ 3,579,448$ 4,858,729$ 60,509,409$

Liabilities:Accounts payable 1,996,248$ 896,744$ 2,054,345$ 838,647$Assets held as agency for others 59,792,442 2,687,925 2,809,605 59,670,762

Total liabilities 61,788,690$ 3,584,669$ 4,863,950$ 60,509,409$

158

159

DETAILED BUDGET SCHEDULES

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COUNTY OF MONTEREY

General FundSchedule of Expenditures-Budget and Actual on Budgetary Basis

For the Year Ended June 30, 2010

Original Final Actual AmountsGeneral Government

Assessor 5,446,967$ 5,446,967$ 4,992,120$ 454,847$ Auditor-Controller 5,500,334 5,500,334 5,235,728 264,606 Annual County Audit 200,000 200,000 147,682 52,318 County Overhead Recovered (6,235,628) (6,235,628) (6,620,241) 384,613 Short Term Borrowing 95,000 95,000 84,697 10,303 Board of Supervisors 3,073,620 3,073,620 2,910,887 162,733 CAO - Administration / Finance / Budget 2,899,479 2,809,337 2,801,419 7,918 Contracts & Purchasing 912,166 912,166 863,167 48,999 Human Resources 2,759,523 2,759,523 2,458,980 300,543 Intergovernmental / Legislative Affairs 1,188,755 1,218,922 1,133,462 85,460 Office of Emergency Services 1,797,032 1,797,032 1,745,336 51,696 Risk Management 495,793 495,793 199,844 295,949 Contributions 2,597,234 2,597,234 2,421,773 175,461 Courts 8,723,350 8,723,350 8,031,052 692,298 Economic Development 1,619,833 1,619,833 1,444,633 175,200 County Memberships 55,500 55,500 46,881 8,619 Insurance & Other General Expenditures 1,210,431 1,210,431 960,938 249,493 Medical Care Services 8,449,274 8,449,274 8,291,172 158,102 Other Financing Uses 1,010,000 1,010,000 131,068 878,932 Self Insurance 4,286,500 4,286,500 -- 4,286,500 Clerk of the Board 753,200 753,200 667,258 85,942 County Counsel 3,005,665 3,465,665 3,207,243 258,422 Elections 4,930,525 4,930,525 3,817,518 1,113,007 Equal Opportunity Office 619,038 619,038 533,904 85,134 Telecommunications 1,391,498 1,741,498 1,434,860 306,638 Information Technology Systems 1,016,149 1,076,985 (298,290) 1,375,275 Printing & Graphics 349,653 349,653 339,146 10,507 Records Retention 513,322 513,322 508,436 4,886 Planning Services 6,407,596 6,407,596 5,625,487 782,109 Litter Control 1,072,598 1,072,598 1,014,859 57,739 Architectural Services 293,558 293,558 (28,338) 321,896 Courier & Mail Services 199,520 199,520 (73,627) 273,147 Facilities Services 6,459,559 6,459,559 6,437,389 22,170 Fleet Services 749,250 749,250 608,768 140,482 Vehicle Lease Program 826,639 826,639 401,476 425,163 Surveyor 402,468 402,468 349,215 53,253 Building Services 5,906,515 6,114,515 5,296,368 818,147 RMA Administration 275,272 275,272 270,203 5,069 RHO Administration -- -- 45,000 (45,000) County Disposal Sites 408,010 408,010 141,886 266,124 Treasurer - Tax Collector 6,269,536 6,271,508 5,487,294 784,214

Total General Government 87,934,734 88,955,567 73,066,653 15,888,914

continued

Variance with Final Budget

Positive(Negative)

Budgeted Amounts

161

COUNTY OF MONTEREY

General FundSchedule of Expenditures-Budget and Actual on Budgetary Basis

For the Year Ended June 30, 2010

Original Final Actual Amounts

Variance with Final Budget

Positive(Negative)

Budgeted Amounts

Public Safety and ProtectionAgriculture Commissioner 8,579,793$ 8,726,243$ 8,283,881$ 442,362$ Child Support Services 11,059,616 11,059,616 10,738,001 321,615 Clerk-Recorder 1,741,815 1,746,315 1,351,146 395,169 District Attorney 16,892,173 17,412,030 16,462,970 949,060 Emergency Communications 9,103,724 9,206,083 8,261,778 944,305 Probation 33,482,131 34,614,545 34,524,504 90,041 Public Defender 9,499,146 9,872,146 9,872,146 -- Sheriff - Admin & Enforcement Ops 37,776,787 39,003,987 38,260,182 743,805 Sheriff - Coroner Operations 1,820,900 1,860,900 1,759,493 101,407 Sheriff - Custody Operations 31,600,679 31,570,100 29,540,897 2,029,203 Sheriff - Inmate Medical Costs 5,803,042 5,803,042 5,454,329 348,713

Total Public Safety and Protection 167,359,806 170,875,007 164,509,327 6,365,680

Health and SanitationAnimal Services 2,157,277 2,157,277 1,994,175 163,102 Behavioral Health 61,560,346 61,560,346 57,486,108 4,074,238 Public Health 16,232,787 17,559,553 16,819,552 740,001 Children's Medical Services 8,287,549 8,287,549 7,882,851 404,698 Environmental Health 8,719,385 8,719,385 8,313,525 405,860 Emergency Medical Services 1,603,685 1,448,282 1,070,892 377,390 Clinic Services 22,656,822 23,962,148 22,397,283 1,564,865 Public Guardian / Administrator 1,201,306 1,201,306 1,199,644 1,662

Total Health and Sanitation 122,419,157 124,895,846 117,164,030 7,731,816

Public AssistanceEntitlement Programs 73,900,135 73,803,461 69,247,327 4,556,134 Entitlement Programs - Gen. Assistance 764,695 837,695 833,870 3,825 Military & Veterans' Services 658,314 658,314 605,640 52,674 Community Programs 508,871 2,108,871 593,576 1,515,295 Social Services 77,711,034 86,451,694 77,425,481 9,026,213 Child Care Planning Council 548,616 1,413,270 1,244,921 168,349 Senior & Aging Services 3,276,466 3,125,597 2,985,033 140,564

Total Public Assistance 157,368,131 168,398,902 152,935,848 15,463,054

EducationCooperative Extension Service 631,462 631,462 544,921 86,541

Total Education 631,462 631,462 544,921 86,541

continued162

COUNTY OF MONTEREY

General FundSchedule of Expenditures-Budget and Actual on Budgetary Basis

For the Year Ended June 30, 2010

Original Final Actual Amounts

Variance with Final Budget

Positive(Negative)

Budgeted Amounts

Recreation and Cultural ServicesParks 9,751,141$ 9,751,141$ 8,546,183$ 1,204,958$

Total Recreation and Cultural Services 9,751,141 9,751,141 8,546,183 1,204,958

Non-Appropriations UnitDebt service 432,155 432,155 233,951 198,204 Contingency 1,174,230 311,063 -- 311,063

Total General Fund 547,070,816$ 564,251,143$ 517,000,913$ 47,250,230$

163

164

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165

STATISTICAL SECTION

166

STATISTICAL SECTION

The information in this section is not covered by the Independent Auditor’s Report, but is presented as supplemental data for the benefit of the readers of the comprehensive financial report.

Financial Trends These schedules contain trend information to help the reader understand how the County’s

financial performance and well-being have changed over time. (Schedule 1-4)

Revenue Capacity These schedules contain information to help the reader assess the County’s most significant local

revenue sources, property tax and sales tax. (Schedule 5-10)

Debt Capacity These schedules present information to help the reader assess the affordability of the County’s

current levels of outstanding debt and the County’s ability to issue additional debt in the future. (Schedule 11-13)

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the

environment within which the County’s financial activities take place. (Schedule 14-16)

Operating Information These schedules contain service and infrastructure data to help the reader understand how the

information in the County’s financial report relates to the services the County provides and the activities it performs. (Schedule 17-18)

Schedule 1

Fiscal Year Ended June 30,2002 2003 2004 2005 2006 2007 2008 2009 2010

Governmental activities:Invested in capital assets, net of related debt 368,529$ 465,234$ 470,684$ 459,041$ 463,900$ 472,945$ 488,623$ 502,815$ 499,357$Restricted -- 95,272 65,960 75,421 94,186 105,712 103,947 105,250 106,790 Unrestricted 156,552 (7,278) 532 39,461 42,940 67,582 61,497 47,043 27,473 Total governemental activities net assets 525,081 553,228 537,176 573,923 601,026 646,239 654,067 655,108 633,620

Business-type activities:Invested in capital assets, net of related debt 62,635 49,678 46,684 55,814 50,634 47,334 46,079 47,265 49,185 Unrestricted (26,006) (23,307) (19,159) (1,831) 734 12,522 26,513 32,795 44,469 Total business-type activities net assets 36,629 26,371 27,525 53,983 51,368 59,856 72,592 80,060 93,654

Total Primary government Invested in capital assets, net of related debt 431,164 514,912 517,368 514,855 514,534 520,279 534,702 550,080 548,542 Restricted -- 95,272 65,960 75,421 94,186 105,712 103,947 105,250 106,790 Unrestricted 127,546 (30,585) (18,627) 37,630 43,674 80,104 88,010 79,838 71,942 Total primary government net assets 558,710$ 579,599$ 564,701$ 627,906$ 652,394$ 706,095$ 726,659$ 735,168$ 727,274$

Notes:1 Accounting standards require that net assets be reported in the three components in the financial statements:

invested in capital assets, net of related debt; restricted; and unrestricted. Net assets are considered restrictedwhen (1) externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments or (2) imposed by law through constitutional provisioins or enabling legislation.

2.GASB 44 requires this schedule to present information for the last ten years. However, until the county is able toacquire a full ten-year trend, the title will reflect the actual number of years for which data has been accumulated

(accrual basis of accounting)

Net Assets by Component,Last Nine Fiscal Years (in thousands)

County of Monterey

167

Schedule 2

Fiscal Year Ended June 30,2002 2003 2004 2005 2006 2007 2008 2009 2010

Expense (by function)Governmental activities:

General government 85,809$ 118,440$ 76,319$ 46,864$ 69,797$ 74,425$ 78,259$ 77,858$ 89,451$ Public safety and protection 186,131 160,948 127,057 150,392 153,047 144,628 187,688 177,793 168,427 Public ways and facilities 29,686 32,199 50,948 52,600 63,174 44,829 39,158 46,389 47,463 Health and sanitation 117,938 88,817 100,883 100,380 93,290 115,157 130,618 135,229 123,966 Public assistance 136,114 124,209 120,371 126,017 129,735 136,395 150,406 158,130 168,968 Education 6,242 5,722 4,969 5,699 5,958 6,341 7,271 7,562 7,808 Recreation and cultural services 7,975 6,857 7,208 6,041 7,154 8,316 10,156 1,158 10,963 Interest on long-term debt 5,049 5,885 4,430 5,987 4,650 3,216 8,780 10,173 9,750

Total governmental activities expenses 574,944 543,077 492,185 493,980 526,805 533,307 612,336 614,292 626,796 Business-type activities:

Natividad Medical Center 130,515 137,192 130,310 166,433 137,698 135,634 186,121 194,876 205,760 Total busisness type activities expenses 130,515 137,192 130,310 166,433 137,698 135,634 186,121 194,876 205,760

Total primary government expenses 705,459$ 680,269$ 622,495$ 660,413$ 664,503$ 668,941$ 798,457$ 809,168$ 832,556$

Program Revenues (by function)Governmental activities:Charges for services:

General government 39,242$ 37,783$ 42,360$ 34,516$ 24,384$ 38,268$ 29,719$ 36,313$ 25,187$ Public safety and protection 41,939 40,745 9,743 23,586 26,289 11,786 15,015 16,789 18,753 Public ways and facilities 11,441 8,288 26,189 25,790 31,184 24,099 27,436 26,336 19,700 Health and sanitation 11,727 13,283 16,385 19,526 23,342 27,163 31,021 30,835 35,502 Public assistance 23 68 12 9 6 8 2,083 64 1,591 Education 139 159 79 94 110 273 413 493 382 Recreation and cultural services 4,637 4,489 5,545 5,058 7,774 5,994 7,573 6,974 6,353 Operating grants and contributions 310,594 235,457 227,820 244,208 279,696 294,631 286,808 303,095 310,965 Capital grants and contributions 9,720 3,174 1,094 427 7,327 718 -- -- 11,958

Total governmental activities program revenues 429,462 343,446 329,227 353,214 400,112 402,940 400,068 420,899 430,391 Business-type activities:

Charges for services:Patient services 142,807 128,424 147,993 150,638 107,387 133,071 182,947 185,600 219,326

Operating grants and contributions -- -- -- -- -- -- -- 12,921 -- Capital grants and contributions -- -- 255 -- -- -- 10,339 3,158 --

Total business-type activities revenues 142,807 128,424 148,248 150,638 107,387 133,071 193,286 201,679 219,326 Total primary governement program revenues 572,269 471,870 477,475 503,852 507,499 536,011 593,354 622,578 649,717 Net (expense) revenue

Governmental activities (130,367) (199,631) (162,958) (140,766) (126,693) (130,367) (212,268) (203,393) (196,405) Business-type activities (2,563) (8,768) (17,938) (15,794) (30,311) (2,563) 7,165 6,803 13,567

Total primary net expense (132,930)$ (208,399)$ (180,896)$ (156,560)$ (157,004)$ (132,930)$ (205,103)$ (196,590)$ (182,838)$

continued

County of MontereyChanges in Net Assets

Last Nine Fiscal Years (in thousands)(accrual basis of accounting)

168

Schedule 2

Fiscal Year Ended June 30,2002 2003 2004 2005 2006 2007 2008 2009 2010

General Revenues & Other Changes in Net AssetsGovernmental activities:

Taxes:Property taxes 62,771$ 66,809$ 74,994$ 79,088$ 127,363$ 137,625$ 156,088$ 149,239$ 130,817$ Sales tax 7,437 7,555 6,503 6,717 6,552 5,767 6,782 6,565 5,379 Sales tax in-lieu -- -- -- 1,497 -- -- -- -- -- Vehicle license fees and in-lieu 37,463 39,726 33,325 28,493 -- -- 13,773 -- -- Transient occupancy & Other 15,286 15,064 21,679 39,312 23,814 24,627 24,941 24,846 21,170

Unrestricted grants & contributions -- 2,608 -- -- -- -- -- 12,243 11,610 Investment earnings 11,415 10,070 5,641 7,355 12,620 14,366 11,609 2,073 4,091 Other 3,457 6,332 9,934 17,325 10,369 7,213 8,265 5,067 4,070 Transfers 14,361 7,095 18,931 -- (26,776) (10,372) (4,200) -- -- Special item -- -- -- -- -- -- -- -- (2,050) Extraordinary item -- -- -- -- -- -- -- -- (2,171)

Total governemental activities 152,190 155,259 171,007 179,787 153,942 179,226 217,258 200,033 172,915 Business-type activities:

Unrestricted grants & contributions 1,180 608 -- 42,253 920 679 -- -- -- Miscellaneous 2,211 7,997 2,147 -- -- -- 1,371 665 -- Transfers (14,361) 7,095 (18,931) -- 26,776 10,372 4,200 -- --

Total business-type activities (10,970) 15,700 (16,784) 42,253 27,696 11,051 5,571 665 -- Total primary government 141,220 170,959 154,223 222,040 181,638 190,277 222,829 200,698 172,915

Changes in Net AssetsGovernmental activities 6,438 (44,372) 8,049 39,021 27,249 48,859 4,990 (3,360) (23,490) Business type activities 1,322 (7,258) 1,154 26,459 (2,615) 8,488 12,736 7,468 13,567

Total primary government 7,760$ (51,630)$ 9,203$ 65,480$ 24,634$ 57,347$ 17,726$ 4,108$ (9,923)$

Note: GASB 44 Requires this schedule to present information for the last ten years.However until the County is able to compile a full ten - year trend, the title of thewill reflect the the actual number of years for which has been accumulated.

Changes in Net Assets (continued)Last Nine Fiscal Years (in thousands)

(accrual basis of accounting)

County of Monterey

169

Schedule 3

Fiscal Year Ended June 30,2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

General FundReserved 10,657$ 10,639$ 9,959$ 10,618$ 8,316$ 9,756$ 8,789$ 8,524$ 7,600$ 1,891$ Unreserved 36,253 39,886 21,872 41,737 78,701 77,932 92,334 95,308 80,731 74,612

Total general fund 46,910 50,525 31,831 52,355 87,017 87,688 101,123 103,832 88,331 76,503

All Other Governmental FundsReserved 26,797 33,352 26,705 40,071 20,528 5,976 4,581 6,071 20,764 9,819

Debt service 12,536 12,655 10,135 9,592 9,684 8,088 16,352 15,238 13,240 15,893 Other reserves -- -- -- -- 3,816 3,778 -- -- -- --

Unreserved, reported in:Special revenue funds 26,105 53,403 43,409 28,388 29,316 24,860 31,774 34,326 40,372 35,609 Capital project funds 23,962 105,034 92,491 62,362 67,585 86,317 129,255 117,420 73,033 62,225 Debt service funds -- -- -- -- 250 1,500 750 -- 6,986 651

Total all other governemental funds 89,400 204,444 172,740 140,413 131,179 130,519 182,712 173,055 154,395 124,197

Total governmental fund balances 136,310$ 254,969$ 204,571$ 192,768$ 218,196$ 218,207$ 283,835$ 276,887$ 242,726$ 200,701$

Notes:Accounting standards require that net assets be reported in three components in the financial statements:invested in capital assets, net of related debt;restricted; and unrestricted. Net assets are consideredrestricted when 1) externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments or 2) imposed by law through constitutional provisions or enabling legislation.

Fund Balances, Governmental FundsLast Ten Fiscal Years (in thousands)

(modified accrual basis of accounting)

County of Monterey

170

Schedule 4

Fiscal Year Ended June 30,2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Revenues:Taxes 82,094$ 85,013$ 89,910$ 136,501$ 155,107$ 157,728$ 181,923$ 187,810$ 181,287$ 162,220$ Licenses and permits 12,569 17,766 12,400 12,097 14,366 13,840 17,545 13,584 12,114 11,144 Fines,forfeitures & penalties 12,622 16,021 16,354 4,109 5,244 8,634 4,574 8,079 8,795 10,398 Revenues from use of money & property 10,955 11,415 10,030 5,605 7,111 11,653 13,426 10,580 3,872 4,839 Aid from other government agencies 236,727 357,777 278,357 228,914 244,635 281,804 281,075 284,063 306,557 320,663 Charges for services 65,473 75,089 76,062 84,107 88,971 96,596 81,442 97,944 102,163 92,417 Tobacco settlement and miscellaneous 4,094 3,457 6,331 9,934 8,603 10,222 10,576 11,245 9,728 9,055

Total revenues 424,534 566,538 489,444 481,267 524,037 580,477 590,561 613,305 624,516 610,737

Expenditures:Current:

General government 54,997 69,062 110,304 73,832 44,532 74,348 74,491 73,785 74,058 82,245 Public safety and protection 132,399 183,795 159,304 125,849 148,873 154,382 149,144 178,397 174,034 166,184 Public ways and facilities 24,633 43,260 29,591 41,140 39,031 65,207 32,993 24,895 65,068 43,937 Health and sanitation 77,857 117,399 87,970 100,711 100,452 95,321 116,715 130,333 133,964 123,491 Public assistance 104,615 135,566 124,588 119,820 125,181 129,802 136,993 147,789 156,667 167,982 Education 5,093 6,154 5,826 4,953 5,548 5,851 6,278 7,023 7,388 7,721 Recreation and cultural services 6,211 7,737 6,972 8,759 5,755 7,001 8,584 8,455 11,097 11,574

Debt service:Interest 2,401 3,112 5,929 2,856 5,444 4,432 7,266 6,004 4,559 4,920 Principal 14,041 7,934 3,562 4,643 2,310 3,186 3,633 5,744 9,787 8,954

Capital outlay 7,262 11,855 12,547 16,511 25,120 15,976 36,932 31,090 46,535 34,949 Total expenditures 429,509 585,874 546,593 499,074 502,246 555,506 573,029 613,515 683,157 651,956 Excess (dificiency) of revenues over (under) expenditures (4,975) (19,336) (57,149) (17,807) 21,791 24,971 17,532 (210) (58,641) (41,220)

Other financing sources (uses):Inception of capital leases -- -- -- -- -- -- 71 -- 74 85 Transfers in 39,270 128,124 44,488 39,179 32,128 32,395 31,736 23,121 55,215 57,030 Transfers out (26,046) (113,763) (37,393) (20,248) (44,314) (57,390) (42,107) (29,821) (55,215) (57,030) Proceeds from borrowing 5,670 83,658 -- 7,579 853 36 146,598 -- 33,618 -- Sale of receivables -- -- -- -- 8,721 -- -- -- -- -- Sale of capital assets -- -- -- -- -- -- -- -- -- 245 Payment to refund bond escrow agent -- -- -- -- -- -- (87,895) -- -- -- Miscellaneous -- -- 24 -- -- -- -- 241 187 -- Total other financing sources (uses) 18,894 98,019 7,119 26,510 (2,612) (24,959) 48,403 (6,459) 33,879 330

Extraordinary item:Supplemental ERAF payment -- -- -- -- -- -- -- -- -- (2,171)

Net change in fund balances: 13,919$ 78,683$ (50,030)$ 8,703$ 19,179$ 12$ 65,935$ (6,669)$ (24,762)$ (43,061)$

Debt Service as a percentage of non-capital expenditures 3.89% 2.01% 1.82% 1.58% 1.63% 1.46% 2.05% 2.03% 2.39% 2.32%

Changes in Fund Balances, Governmental FundsLast Ten Fiscal Years(in thousands)

(modified accrual basis of accounting)

County of Monterey

171

Schedule 5

Fiscal (1) (2) (3) (4)Year Net Total

Ended Secured Unsecured Assessed DirectJune 30, Roll Roll Exemptions Valuations Tax Rate

2001 27,432,425$ 1,448,301$ (904,216)$ 27,976,510$ 1.00%2002 30,481,587 1,550,890 (1,005,420) 31,027,057 1.00%2003 33,363,333 1,633,842 (989,319) 34,007,856 1.00%2004 35,742,970 1,669,501 (1,157,406) 36,255,065 1.00%2005 38,434,502 1,713,181 (1,235,833) 38,911,850 1.00%2006 42,538,965 1,859,928 (1,329,452) 43,069,441 1.00%2007 47,388,757 1,999,660 (1,471,788) 47,916,629 1.00%2008 51,334,367 2,035,086 (1,525,258) 51,844,195 1.00%2009 52,454,129 2,234,086 (1,608,033) 53,080,182 1.00%2010 48,774,186 2,116,423 (1,770,929) 49,119,680 1.00%

Source: Monterey County Property Tax Records

Notes:(1) Secured property is generally the real property, which is defined as land, mineral, timber,

and improvements such as buildings, structures, crops, trees and vines. Also included insecured roll are unitary properties, including railroads and utilities, which cross the countyand are assessed by the State Board of Equalization.

(2) Unsecured property is generally personal property, including machinery, equipment , office tools, supplies mobile homes and aircraft.

(3) Exempt properties include numerous full and partial exclusions/exemptions provided.(4) Article XIIIA, added to the California Construction by Proposition 13 in 1978, fixed the

base for valuation of property subject to taxes at the full cash value. Additionally,Proposition 13 limits the property tax rate to 1% of assessed value, plus the rate necessary to fund local voter-approved bonds and special assessments.

Assessed Value and Actual Value of Taxable PropertyLast Ten Fiscal Years

(in thousands of dollars)

County of Monterey

172

Schedule 6

County of Monterey

Principal Property TaxpayersFiscal Year Ended June 30, 2010 and June 30, 2001

2010 2001Taxable Percentage of Taxable Percentage of Assessed Total County Assessed Total County

Type of Value Assessed Value AssessedTaxpayer Business ($'000) Rank Value ($'000) Rank Value

Dynergy Moss Landing LLC Utility 653,200$ 1 1.33% 393,900$ 2 1.41%Pebble Beach Company Tourism 545,858 2 1.11% 625,100 1 2.23%Pacific Gas & Electric Company Utility 382,288 3 0.78% 249,168 3 0.89%Texaco Inc. Petroleum 304,249 4 0.62% 104,318 7 -Pacific Bell Company Utility 108,485 5 0.22% 173,209 4 0.62%Pacific Holdings LP ET AL Real Estate 93,794 6 0.19% -- - -D'Arrigo Brothers Company Agriculture 92,248 7 0.19% -- - -California- American Water Company Utility 87,398 8 0.18% -- - -Northridge Fashion Center Retail 75,511 9 0.15% -- - -Dole Fresh Vegetables Inc. Agriculture 65,984 10 0.13% 97,572 5 0.35%Creekbridge Homes LP Construction -- - 97,149 6 0.35%Tanimura Land Company Agriculture -- - 85,703 8 0.31%Basic American Foods Inc Agriculture -- - 80,055 9 0.29%CMP-1 LLC -- - 80,151 10 0.29%Ten Largest Taxpayers' Total 2,409,015 4.90% 1,986,325 7.10%All Other Taxpayers' Total 46,710,665 95.10% 25,990,185 92.90%

Total 49,119,680$ 100% 27,976,510$ 100%

Source : County of Monterey Property Tax Records

Note:For Total Taxable Assessed Value refer to Schedule 5" Assessed Value and Actual Value of Taxable Property".

173

Schedule 7

(1) (3)Fiscal Year Taxes Levied Fiscal Year of the Levy CollectionsEnded for the Percentage in Subsequent Percentage

June 30 Fiscal Year Amount of Levy Years Amount of Levy2001 295,668$ 292,026$ 98.77% 3,199$ 295,225$ 99.85%2002 326,633 320,879 98.24% 4,451 325,330 99.60%2003 360,268 353,783 98.20% 5,127 358,910 99.62%2004 410,453 404,618 98.58% 7,266 411,884 100.35%2005 440,553 434,059 98.52% 8,378 442,437 100.43%2006 487,644 476,758 97.77% 7,098 483,856 99.22%2007 541,741 522,686 96.48% 7,930 530,616 97.95%2008 588,831 556,021 94.43% 15,065 571,086 96.99%2009 603,438 576,924 95.61% 29,000 605,924 100.41%2010 585,686 565,453 96.55% 24,288 589,741 100.69%

Sources: Monterey County Property Tax Records.

Notes:1 Includes Secured , Unsecured, and Unitary Taxes levied for the county itself, school

districts, cities and special districts under the supervision of their own governing boards. Includes adjustments to the tax rolls from the levy date to deliquency date.

2 Includes amounts collected by the County on behalf of itself, school districts, citiesand special districts under the supervision of their own governing boards.

3 Includes adjustments to the levy.Taxes levied less collections to date equal thedeliquent taxes receivable.

County of Monterey

(2)

Total Collections to DateCollected within the

Property Tax Levies and Collections Last Ten Years

(in thousands of dollars)

174

Schedule 8

For Fiscal Year Ended June 30,2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

County Wide 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000

Water Resources 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00409 0.00410 0.00329

Cities & Special DistrictsCarmel 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.01000 0.00911Del Rey Oaks 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Gonzales 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.04495 0.02000 0.00000Greenfield 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.11000 0.22089King City 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.10000 0.16311Marina 0.00439 0.00460 0.00514 0.03559 0.02753 0.00638 0.00624 0.00624 0.04000 0.04041Monterey 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Pacific Grove 0.00400 0.00400 0.00500 0.00500 0.00300 0.00700 0.00700 0.03000 0.02317 0.00700Sand City 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Seaside 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Soledad 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.02320 0.13000 0.12307Boronda County Sanitation Dist 0.00000 0.00000 0.00000 0.00000 0.06534 0.00636 0.00800 0.01738 0.01175 0.02612San Lucas County Water Dist 0.00000 0.00000 0.03349 0.03205 0.03780 0.04472 0.04904 0.05000 0.05099 0.05379Soledad Community Health Care 0.01509 0.01144 0.11520 0.12900 0.01561 0.01776 0.02120 0.02320 0.02554 0.02844Aromas County Water District 0.00100 0.00080 0.01200 0.00090 0.00100 0.00700 0.00140 0.00140 0.00170 0.00200

Schools Districts:Alisal Union 0.21223 0.08780 0.09043 0.09082 0.10008 0.05898 0.06457 0.10415 0.07000 0.08070Aromas/San Juan JT Unif Sch District 0.05270 0.04840 0.04810 0.04890 0.02390 0.04750 0.06870 0.00750 0.02000 0.01200Bradley Union 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.05559 0.07000 0.14146Cabrillo College 0.03598 0.03324 0.00108 0.02669 0.03700 0.03800 0.01900 0.01900 0.02100 0.02100Carmel Unified 0.01807 0.01696 0.01349 0.01784 0.01180 0.01263 0.01324 0.01562 0.01000 0.00911Chualar Unified School District 0.04978 0.03818 0.03622 0.04746 0.04597 0.04915 0.01547 0.03040 0.00000 0.00000Coalinga Joint Unified 0.04121 0.02686 0.01584 0.07010 0.03374 0.03281 0.07979 0.11064 0.10000 0.13141 Gonzales Union 0.02417 0.03044 0.02903 0.04666 0.01934 0.03623 0.02986 0.00000 0.02000 0.00000Graves Elementary School District 0.04077 0.00823 0.02278 0.02305 0.02615 0.00000 0.00000 0.00000 0.00000 0.00000Greenfield Union 0.05441 0.04251 0.02869 0.04451 0.06604 0.03787 0.03853 0.07590 0.11000 0.07943

continued

COUNTY OF MONTEREY

Debt Service Tax Rate For County And Major Overlapping GovernmentPer $100 of Assessed Value

Last Ten Fiscal Years

175

Schedule 8

For Fiscal Year Ended June 30,2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

Hartnell Community College District 0.02104 0.01852 0.01609 0.02023 0.01714 0.01862 0.01737 0.00000 0.00000 0.00000King City Union 0.04902 0.03802 0.04118 0.08329 0.08885 0.09977 0.10291 0.08527 0.10000 0.16311Mission Union Elementary School District 0.01883 0.01945 0.01523 0.01396 0.02767 0.00000 0.00000 0.00000 0.00000 0.00000Monterey Peninsula Community College 0.02241 0.01978 0.01994 0.02066 0.01800 0.02062 0.01232 0.00000 0.00000 0.00000North Monterey County Unified 0.04122 0.03757 0.03406 0.03703 0.04899 0.01340 0.05051 0.00000 0.00000 0.01587Pacific Grove Unified 0.06020 0.04830 0.02780 0.02297 0.02278 0.02550 0.03086 0.01912 0.02000 0.01617Pajaro JT Unified 0.03012 0.02686 0.02323 0.02545 0.02900 0.03000 0.01900 0.01900 0.02000 0.01200Paso Robels JT Unified 0.01120 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Pleasant Valley Joint Union 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.05700 0.18000 0.18000Salinas Union High School District 0.03539 0.29660 0.03372 0.03426 0.03549 0.04312 0.05877 0.03842 0.00000 0.00000San Antonio Union 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.05559 0.07000 0.14146San Ardo Union 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.05559 0.07000 0.14146San Lucas Union 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.05590 0.07000 0.14146San Miguel Elementary School 0.03613 0.03516 0.03517 0.03519 0.03624 0.05122 0.05700 0.00000 0.00000 0.00000Santa Rita Union 0.07224 0.06798 0.06216 0.03136 0.03255 0.03774 0.04563 0.07921 0.01000 0.04441Shandon Joint Unified 0.00480 0.00584 0.00600 0.00642 0.00645 0.00646 0.00860 0.00860 0.01000 0.00970Soledad Unified School District 0.06761 0.06032 0.05209 0.05210 0.06373 0.07575 0.08631 0.09952 0.13000 0.12307Spreckles Union 0.04468 0.03936 0.05316 0.05882 0.03075 0.04955 0.05455 0.06730 0.04000 0.03223Washington Union 0.04963 0.04384 0.05144 0.05136 0.05301 0.06992 0.04240 0.09879 0.03000 0.01815West Hills College 0.01467 0.00000 0.01926 0.00057 0.02086 0.02202 0.02715 0.02087 0.06110 0.01388

Source: Monterey County Records

Debt Service Tax Rate For County And Major Overlapping Government (continued)Per $100 of Assessed Value

Last Ten Fiscal Years

COUNTY OF MONTEREY

176

Schedule 9

Type of Business 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Apparel stores 6,283$ 7,074$ 7,179$ 7,405$ 9,495$ 9,925$ 11,465$ 13,000$ 11,510$ 9,510$ General merchandise 2,508 2,869 2,473 2,572 2,783 2,776 3,007 3,290 3,372 3,591 Food stores 32,088 41,805 40,699 41,811 42,819 42,613 45,968 48,355 49,372 48,232 Eating and drinking places 48,176 61,696 62,847 61,988 65,854 70,276 69,973 73,007 70,039 67,711 Building materials 58,578 79,845 81,548 94,590 104,464 109,928 110,170 103,443 97,273 84,937 Auto dealers and suppliers 30,083 38,112 38,452 34,305 36,113 40,736 42,028 40,176 37,671 25,189 Service stations 56,120 63,571 57,589 65,687 79,455 93,058 104,121 116,676 129,404 102,257 Other retail stores 62,626 76,063 74,353 73,843 79,324 80,454 83,323 84,600 70,959 56,986 All other outlets 323,142 377,520 340,181 283,026 346,743 374,043 392,575 415,640 396,001 320,728

Totals 619,604$ 748,555$ 705,321$ 665,227$ 767,050$ 823,809$ 862,630$ 898,187$ 865,601$ 719,141$

County direct sales tax rate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.08% 0.08% 0.08%

Source: State of California Board of Equalization and The HdL Companies

Notes: 1). Due to confidentiality issues, the names of the ten largest revenue payers are not available . The categories presented are intended to provide alternative information regarding the sources of the county's revenues.2). Prior year data has been updated to include adjustments

Taxable Sales by CategoryLast Ten Calendar Years

(amounts expressed in thousands)

County of Monterey

(Unincorporated)

177

Schedule 10

Fiscal Annual GrowthYear Revenue ($) Rate2001 14,430,000 13.80%2002 13,286,548 -7.92%2003 13,476,749 1.43%2004 13,452,336 -0.18%2005 14,420,192 7.19%2006 15,569,105 7.97%2007 16,912,274 8.63%2008 16,441,176 -0.05%2009 14,533,941 -11.60%2010 12,656,751 -12.92%

COUNTY OF MONTEREYTransient Occupancy Tax

Actual ReceiptsLast Ten Fiscal Years

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

TOT revenue trend for period: 2001-10

Revenue ($)

Source :

Monterey County Treasurer- Tax Collector Transient Occupancy Tax Statements and Advantage System report.

Note: The general decline in transient occupancy tax revenue for fiscal year 2010 can be attributed to fewer guests visiting and lower rates due to the general slow down in business as a result of recession during the year.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Fiscal yr

TOT revenue trend for period: 2001-10

Revenue ($)

178

Schedule 11COUNTY OF MONTEREY

As of Fiscal Year 2009-10

Fiscal Government ActivitiesYear Certificates Special General Judgement Certificates Total Percentage Percentage

Ended of Capital Redevelopm Revenue Longterm Assessment Obligation Obligation of Capital Primary of Assessed Per of PersonalJune 30 Particiaption Leases Notes Bonds Loans Bonds Bonds Bonds Participation Leases Gov (1) Value (2) Capita (3) Income (3)

2001 13,360$ 246$ --$ 13,691$ 48,637$ 834$ 28$ --$ 76,796$ --$ 153,592$ 0.55% 382$ 1.27%2002 92,155 645 205 6,725 51,952 420 24 -- 85,710 -- 237,836 0.77% 576 1.90%2003 91,600 403 165 4,242 35,020 183 19 -- 83,995 -- 215,627 0.63% 516 1.70%2004 91,025 147 140 1,995 35,003 179 15 7,470 82,180 -- 218,154 0.60% 516 1.62%2005 89,285 205 115 1,477 34,986 175 10 6,750 80,260 -- 213,263 0.55% 503 1.52%2006 87,470 252 953 1,177 33,948 171 5 6,095 77,495 -- 207,566 0.48% 489 1.43%2007 144,400 223 621 1,131 32,910 166 -- 5,425 75,950 -- 260,826 0.54% 636 1.66%2008 139,570 158 574 1,082 47,939 161 -- 4,730 73,610 2,624 270,448 0.53% 639 1.67%2009 136,260 253 418 33,901 45,122 156 -- 4,015 71,265 1,449 292,839 0.55% 720 1.71%2010 132,800 256 36 33,848 43,365 150 -- 3,275 67,995 83 281,808 0.57% (4) (4)

Note: Details regarding the County's outstanding debt can be found in the notes to the financial statements(1) Includes general bonded debt, other governmental activities debt, business-type activities debt(2) Property value data can be found in Schedule 5 : Assessed Value and Actual Value of Taxable Property(3) Population and personal income data can be found in Schedule 15 : Economic and Demographic Indicators.(4) Data not available

Activities

Ratios of Outstanding Debt by Type Last Ten Fiscal Years (in thousand, except per capita)

Business -Type

179

Schedule 12

Legal Debt Margin Calculation for Fiscal Year Ended June 30, 2010

Net assessed value 49,119,680Debt Limit 1.25% of net assessed value $613,996Debts applicable to limit:

General Obligation bonds $0Less: Amount set aside for repayment of debt $0

Net debt applicable to limit $0Legal Debt Margin $613,996

2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

Debt Limit 613,996 663,502 648,052 598,958 538,368 486,398 453,188 425,098 387,838 349,706Total Net Debt Applicable to limit 0 0 0 0 5 10 15 19 24 28Legal Debt Margin 613,996 663,502 648,052 598,958 538,363 486,388 453,173 425,079 387,814 349,678

Total net debt applicable to the limitas a percentage of debt limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.004% 0.01% 0.01%

Notes:1). Article XIII A of the California State Constitution and Senate Bill 1656, Statutes of 1978, provided for changing assessed value from 25% of cash value to full cash value. Hence , the 5% limitation on general obligation bond indebtedness imposed by Section 29909 of the Government Code become 1.25% of assessed value2). For net assessed value refer to Schedule 5" Assessed Value and Actual Value of Taxable Property"

Fiscal Year Ended June30

County of Monterey

Legal Debt Margin Information

Last Fiscal Years ( in thousands)

180

COUNTY OF MONTEREYPledged Revenue Coverage

Last Ten Fiscal YearsAs of Fiscal Year 2009-10

Sanitation Revenue Bonds Water Revenue Bonds

Sanitation Less: Net Water Less: Net Special

Fiscal Year Charges Operating Available Charges Operating Available Assessment

Ended June 30 and Other Expenses Revenue Principal Interest Coverage and Other Expenses Revenue Principal¹ Interest Coverage Collections Principal Interest Coverage

2001 2,445,671 1,847,686 597,985 46,100 84,475 4.58 - - - - - - 18,745 4,000 12,304 1.15

2002 1,498,461 1,013,390 485,071 47,650 58,400 4.57 - - - - - - 17,155 4,000 12,049 1.07

2003 1,192,829 1,060,278 132,551 39,000 67,200 1.25 - - - - - - 15,280 4,000 11,794 0.97

2004 1,296,375 1,123,348 173,026 40,000 65,250 1.64 - - - - - - 13,948 4,000 11,539 0.90

2005 898,415 958,726 (60,311) 43,000 63,250 (0.57) - - - - - - 13,737 4,000 11,284 0.90

2006 1,071,888 1,156,509 (84,621) 45,000 61,100 (0.80) - - - - - - 16,836 4,000 11,029 1.12

2007 1,226,772 1,488,878 (262,106) 46,000 58,850 (2.50) - - - - - - 15,402 5,000 10,742 0.98

2008 1,325,204 1,210,923 114,281 49,000 56,550 1.08 - - - - - - 14,211 5,000 10,423 0.92

2009 1,221,319 1,337,849 (116,530) 52,000 54,100 (1.10) 2,120,037 - 2,120,037 - - - 14,560 5,000 10,104 0.96

2010 1,312,106 1,115,506 196,600 53,000 51,500 1.88 2,028,699 912,582 1,116,117 - 1,597,913 0.70 14,696 6,000 9,754 0.93

Note: Details regarding the County's outstanding debt can be found in the notes to the financial statements. Sanitation, Water, and Other charges include property tax revenues and investment

earnings. Where expenses exceed revenues in any one year, excess revenues from prior years (Fund Balance) were used to meet debt requirements

¹ No principal payments are scheduled until FY2011

Debt Service Debt Service Debt Service

Schedule 13

Special Assessment Bonds

181

Schedule 14

2009-10 Assessed Valuation (includes unitary utility valuation): 51,230,774,397$ Less: Redevelopment Incremental Valuation 4,286,136,506 Adjusted Assessed Valuation 46,944,637,891$

(1) Percentage Debt at Overlapping tax and assessment debt Applicable June 30, 2010Hartnell Community College District 99.801% 123,796,150$ Monterey Peninsula Community College District 100 125,988,685 Carmel Unified School District 100 38,273,445 North Monterey County Unified School District 100 17,775,000 Pacific Grove Unified School District 100 44,561,000 Soledad Unified School District 100 3,823,829 King City Joint Union High School District 98.599 13,271,425 Salinas Union High School District and School Facilities Improvement District 100 61,794,025 Alisal Union School District 100 43,236,051 King City Union School District 100 10,199,531 Salinas City School District 100 24,825,000 Santa Rita Union School District 100 23,534,523 Washington Union School District 100 13,735,000 Other School Districts Various 36,000,046 City of Marina 100 8,470,000 City of Pacific Grove 100 625,000 Soledad Community Hospital District 100 1,650,000 Monterey County Water Resources Agency Benefit Assessment District, Zone 2C 100 32,855,000 Community Facilities Districts 100 4,302,542 City 1915 Act Bonds 100 28,115,000 Special District 1915 Act Bonds 100 5,086,000 Total overlapping tax and assessment debt 661,917,252$

Direct and overlapping General Fund debtMonterey County General Fund Obligations 100% 200,795,000$ Monterey County Judgment Obligations 100 3,275,000 Monterey Peninsula Unified School District Certificates of Participation 100 7,130,000 Other School District General Fund Obligations Various 18,065,150 City of Carmel General Fund Obligations 100 7,710,000 City of Marina Pension Obligations 100 3,685,000 City of Monterey General Fund Obligations 100 14,535,000 City of Pacific Grove Pension Obligations 100 15,986,138 City of Salinas Certificates of Participation 100 40,710,000 City of Seaside Pension Obligations 100 6,565,000 Carmel Valley Fire Protection District Certificates of Participation 100 1,430,000 Monterey Bay Unified Air Pollution Control Authority 58.87 1,436,428 Pajaro/Sunny Mesa Community Services District General Fund Obligations 100 475,000 Total Direct and overlapping General Fund debt 321,797,716$

Combined total debt (2) 983,714,968$

Ratios to 2009-10 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.29%Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($204,070,000) 0.43% Combined Total Debt 2.10%

Notes:(1) Percentage of each overlapping agency's assessed valuation located within the boundaries of the county.(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds, and non-bonded capital lease obligations.

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/10: $0

County of Monterey

Direct and Overlapping Bonded Debt

As of June 30, 2009

(amounts expressed in hundreds)

182

Schedule 15

(1) (2) (3) (4) (5) (6)

Calendar Per Capita Total Personal Median School UnemploymentYear Population Income Income Age Enrollment Rate2000 403,065 30,005$ 12,097,144$ 31.7 71,186 7.4%2001 407,065 30,723 12,540,815 32.0 72,529 7.8%2002 409,210 30,800 12,676,027 31.0 73,416 9.0%2003 410,419 32,469 13,455,580 32.7 73,812 9.0%2004 408,867 33,952 14,074,798 34.5 73,863 8.3%2005 405,090 34,172 14,519,770 36.1 71,971 7.4%2006 401,374 38,193 15,667,000 31.9 69,851 7.0%2007 402,116 38,373 15,586,498 32.1 69,838 7.2%2008 405,660 42,144 17,205,000 32.3 69,828 8.4%2009 410,370 42,356 17,381,644 32.4 70,523 12.0%

Sources:(1) U.S. Census Bureau(2) U.S. Department of Commerce, Bureau of Economic Analysis(3) U.S. Department of Commerce, Bureau of Economic Analysis (in thousands).(4) U.S. Census Bureau, American Community Survey(5) California Department of Education, Education Demographics Unit(6) California Employment Development Department; Labor Market Info Division

Notes:Population data estimates are as of July 2009Per capita personal income was computed using preliminary Census Bureau midyear population estimates.Total personal income is in thousand of dollarsSchool enrolment data includes Kindergarten through grade 12Unemployment Rate is based on annual rate

Demographics and Economic StatisticsLast Ten Calendar Years

County of Monterey

183

Schedule 16

2002 2003 2004 2005 2006 2007 2008 2009Total Total Total Total Total Total Total Total

SALINAS MSATotal

No.of Businesses 10,898 11,096 11,270 11,167 11,543 11,547 12,249 11,770No.of Employees 146,325 147,057 149,475 150,590 150,949 150,960 152,283 146,140Payroll (in thousands) $1,063,998 $1,105,746 $1,162,537 $1,253,718 $1,275,051 $1,274,537 $1,354,222 $1,283,015

AgricultureNo. of Businesses 631 630 602 584 577 571 564 546No. of Employees 43,597 45,581 1,078 51,053 51,097 52,341 52,848 54,635Payroll (in thousands) $246,826 $266,179 $307,580 $336,288 $342,021 $369,556 $367,621 $380,582

Mining6

No. of Businesses 9 9 10 9 9 8 7No. of Employees 225 225 213 192 201 195 207Payroll (in thousands) $3,677 $3,677 $2,359 $3,429 $3,742 $3,828 $4,006

UtilitiesNo. of Businesses 23 25 24 25 26 25 23 21No. of Employees 592 589 480 528 569 553 498 500Payroll (in thousands) $9,635 $10,084 $9,756 $9,714 $8,836 $9,265 $10,210 $11,086

Construction and MiningNo. of Businesses 971 977 995 965 1,012 991 972 930No. of Employees 6,588 6,516 6,920 6,886 7,367 7,101 6,032 4,578Payroll (in thousands) $65,749 $68,047 $71,493 $73,121 $80,519 $81,141 $72,734 $59,777

ManufacturingNo. of Businesses 304 302 293 283 281 267 251 255No. of Employees 8,296 7,888 7,043 6,735 6,274 6,163 6,017 5,861Payroll (in thousands) $77,342 $74,410 $73,187 $73,030 $65,346 $64,045 $62,193 $56,038

Wholesale TradeNo. of Businesses 388 398 411 408 429 421 404 402No. of Employees 5,038 5,207 4,710 5,016 4,938 4,987 5,313 4,940Payroll (in thousands) $57,681 $59,362 $59,857 $71,940 $69,628 $72,518 $77,892 $74,947

Retail TradeNo. of Businesses 1,406 1,372 1,358 1,300 1,330 1,290 1,272 1,221No. of Employees 17,058 16,951 16,969 16,828 16,688 17,045 16,661 14,877Payroll (in thousands) $108,210 $109,210 $114,448 $120,898 $120,907 $123,776 $123,527 $107,453

Transportation and WarehousingNo. of Businesses 264 264 240 231 248 250 250 241No. of Employees 2,860 2,860 2,814 2,955 2,925 3,228 3,152 3,032Payroll (in thousands) $23,957 $23,957 $26,107 $28,851 $28,644 $34,636 $36,686 $34,856

InformationNo. of Businesses 123 123 119 117 116 105 107 98No. of Employees 2,440 2,440 2,307 2,310 2,163 2,137 2,052 1,671Payroll (in thousands) $28,549 $28,549 $31,249 $33,578 $33,618 $35,997 $31,165 $24,735

Finance and InsuranceNo. of Businesses 376 376 375 388 389 398 393 363No. of Employees 4,328 4,328 3,711 3,757 3,816 3,819 3,548 2,857Payroll (in thousands) $54,759 $54,759 $50,791 $63,242 $63,144 $69,518 $68,173 $47,648

Real Estate, Rental and LeasingNo. of Businesses 399 414 428 432 445 420 407 393No. of Employees 2,342 2,405 2,313 2,364 2,497 2,243 1,940 1,730Payroll (in thousands) $17,916 $18,598 $20,400 $21,537 $22,315 $21,402 $17,372 $15,087

ServicesNo. of Businesses 6,004 6,220 6,415 6,425 6,681 7,900 7,233 7,300No. of Employees 52,961 52,539 50,917 51,966 52,414 65,328 53,496 51,459Payroll (in thousands) $369,697 $384,284 $395,309 $418,089 $436,331 $598,670 $479,053 $470,805

Source: Employment Development Department , Labor Market Information

Notes:1 Data are confidential if there are fewer than 3 businesses in a category or one employer makes up 80 percent or more of the

employment in a category2 Data are suppressed because confidential data could be extrapolated if these totals were included3 Figures are as per third quarter of the calendar year4 Data do not include totals for government employment5 Rules instituted by the Federal Bureau of Labor Statistics after September 11, prohibit state departments of labor or economic security from

publicly identifying the names of individual employers. County of Monterey has removed the Major Employers' data from the statistical sectioGASB Statement No 44 allows employment by industry data to be published instead of Major Employers' data

6 Mining industry has been combined with the Construction industry starting in 2009

MSA and Industry

COUNTY OF MONTEREYMajor Industries by Number of Businesses, Employees and Payroll

Last Eight Years

184

Schedule 17COUNTY OF MONTEREY

Full-time Equivalent County Government Employees by Function/Program

Approved Budgeted Positions

Last Ten Fiscal Years

Function/Program 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

General government 557.0 581.0 596.0 510.0 462.0 489.0 492.0 485.0 507.0 472.5 Public protection 1,271.0 1,393.0 1,418.0 1,361.0 1,319.0 1,343.0 1,397.0 1,396.0 1,274.0 1,224.5 Public ways and facilities 171.0 178.0 178.0 178.0 150.0 153.0 135.0 135.0 373.0 339.0 Health and sanitation 548.0 599.0 616.0 614.0 688.0 757.0 820.0 814.0 863.0 809.8 Public assistance 784.0 813.0 838.0 772.0 759.0 775.0 781.0 781.0 817.0 806.0 Recreation and Education 123.0 130.0 131.0 130.0 136.0 140.0 145.0 145.0 169.0 153.5 Hospital 740.0 885.0 956.0 795.0 775.0 799.0 754.0 754.0 785.0 770.9 Total governmental positions 4,194.0 4,579.0 4,733.0 4,360.0 4,289.0 4,456.0 4,524.0 4,510.0 4,788.0 4,576.2 Special District:Water Resource Agency 57.0 59.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 63.0 Total Positions: 4,251.0 4,638.0 4,793.0 4,420.0 4,349.0 4,516.0 4,584.0 4,570.0 4,848.0 4,639.2

Source: Monterey County Recommended Budget Book Position Information

Note: Public ways and facilities includes Resources Management Agency.

Fiscal Year Ended June 30,

185

Schedule 18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010GENERAL GOVERNMENT101 Assessment Appeals Board

Applications Reviewed 234 132 265 331 524 212 123 360 825 1,265115 Revenue

Accounts 92,000 90,000 125,000 125,000 125,000 125,000 125,000 91,764 95,000 125,000117 Treasurer- Tax Collector

Number of payments transactions 218,500 285,000 304,000 329,000 350,000 362,000 354,000 362,000 360,000 355,000Treasury deposits processed 9,303 9,529 8,500 9,000 8,500 9,100 9,000 9,200 10,000 13,000

118 AssessorDeeds processed 18,561 19,722 21,712 25,181 26,309 24,903 20,460 16,555 16,527 18,504

151 TelecommunicationsTelephone instruments and radios supported unavail 13,500 7,290 7,330 7,061 7,511 7,625 7,920 8,025 9,262Telephone calls completed unavail 7,300,000 10,000,000 14,000,000 18,000,000 16,300,000 17,750,000 19,000,000 18,500,000 18,100,000

193 Information TechnologyPCs and laptops supported unavail 2,938 3,954 4,149 4,159 4,485 4,643 4,885 5,705 5,189Calls to the Call Center unavail 6,800 7,000 12,000 12,000 15,000 37,000 45,000 45,000 37,604Training classes unavail 1,200 1,350 1,400 1,400 1,650 1,200 2,000 1,400 1,425

291 Recorder -County ClerkDocuments recorded 86,638 110,804 127,597 157,438 138,690 137,348 114,673 94,913 88,153 85,686Marriage licenses issued 3,471 3,776 3,278 3,150 3,123 3,067 2,990 2,913 2,828 2,625Fictitious business names filed 2,580 2,428 2,561 2,810 2,059 3,040 3,097 2,719 2,625 2,664

continued

Fiscal Year

County of MontereyOperating Indicators by Function/ Program

Last Ten Fiscal Years

186

Schedule 18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010PUBLIC PROTECTION152 Emergency Communications

911 and non-emergency calls unavail unavail unavail 600,000 600,000 612,000 650,000 614,295 650,000 650,000CAD incidents unavail unavail unavail 556,059 560,422 560,026 560,000 560,000 560,000 - (1)CAD comments unavail unavail unavail unavail unavail unavail unavail unavail unavail 6,896,906 (2)

224 District Attorney's OfficeFelonies and misdemeanors reviewed 18,400 17,968 17,475 17,612 17,146 18,348 18,250 16,123 16,523 14,139Civil cases opened unavail 197 199 191 231 228 253 298 300 243

225 Child Support ServicesCases 23,728 22,752 22,116 21,280 21,370 20,266 19,860 19,709 19,639 19,366

227 Public DefenderFelonies reviewed 2,255 2,688 2,928 3,306 3,798 4,592 5,289 5,977 4,756 5,689Misdemeanors 4,607 6,192 6,229 6,535 6,859 8,170 7,322 7,834 7,556 10,545Juveniles 2,013 3,612 1,932 1,864 2,143 1,091 999 929 2,632 2,185

228 Court Assigned CounselFelonies reviewed unavail 618 707 918 952 986 991 996 unavail 824Misdemeanors unavail 673 646 537 573 609 640 678 unavail 491Juveniles unavail unavail unavail 194 211 190 198 184 unavail 512

230 Sheriff -Administration and Enforcement BureauWarrants reviewed 12,136 12,500 17,000 13,355 14,538 15,348 15,900 14,890 11,784 10,280Felony and misdemeanor offenses reported 3,500 3,700 4,700 4,935 5,181 5,447 5,475 5,818 5,474 4,816

235 Sheriff- Joint Gang Task ForceFelony and misdemeanor arrests n/a n/a n/a n/a 437 573 653 717 545 656Task Force and/or Gang Awareness n/a n/a n/a n/a 12 20 55 55 52 29

251 Sheriff- Custody Operations BureauPrisoners booked 18,927 18,022 18,397 17,705 17,919 17,144 16,963 17,434 17,252 16,209Average daily prisoner population 972 963 930 1,000 1,100 1,151 1,152 1,085 1,037 1,030Court transportation 19,473 21,000 23,000 23,047 24,848 25,866 25,387 23,770 21,890 21,924

255 ProbationJuvenile referrals unavail unavail unavail 3,113 2,892 3,034 3,034 2,841 2,736 3,102Standard reports unavail unavail unavail unavail 2,652 3,581 3,637 3,460 3,228 3,246Supervision unavail unavail unavail unavail 7,089 7,995 8,079 8,485 8,714 9,011

256 Juvenile Institutions and Alternative ProgramAdmissions 1,680 1,800 1,702 1,611 16,335 1,284 1,285 1,323 1,438 1,376

292 Sheriff-CoronerTotal investigations 1,082 1,155 1,185 1,178 1,064 1,064 1,015 1,039 994 1,025Coroner's cases 284 328 345 388 348 287 279 309 320 335

293 PlanningDiscretionary permits initiated 536 568 635 480 411 748 852 804 691 736

299 Building ServicesBuilding and grading permits 2,760 3,185 3,471 4,252 3,906 3,681 3,425 2,905 2,614 2,273Plan checks 3,278 3,404 3,354 2,252 2,388 2,725 2,468 2,097 1,890 1,141Building inspections 28,615 22,000 23,000 25,154 25,154 26,939 20,901 17,475 15,725 9,685

930 Water ResourcesTotal water deliveries- acre- feet 18,025 19,486 19,628 21,982 17,754 16,663 21,245 23,155 21,598 17,355Nacimiemento Hydro Project kilowatt hours 15,307,481 16,550,656 11,569,402 13,027,168 13,118,178 17,427,225 16,928,820 12,138,366 10,150,151 9,905,705

continued

Operating Indicators by Function/ Program (continued)

Last Ten Fiscal Years

Fiscal Year

County of Monterey

187

Schedule 18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010PUBLIC WAYS AND FACILITIES:300 Public Works

Road miles maintained 1,254 1,243 1,243 1,240 1,240 1,240 1,240 1,240 1,240 1157Bridges maintained 173 173 173 173 173 173 173 173 173 173

HEALTH AND SANITATION296 Animal Field Services

Licenses sold / Citations issued 4,174 3,809 5,991 7,576 7,287 7,724 7,340 7,367 7,400 - (1)Citations issued unavail unavail unavail unavail unavail unavail unavail unavail unavail 3,000 (2)Service calls 7,293 6,951 6,400 4,433 3,684 6,050 7,450 7,220 7,500 7,000Animals admitted to shelter 6,521 5,702 5,452 4,143 4,364 4,083 3,947 3,654 3,750 2,900

411 HealthPublic health nursing home visits 6,828 9,402 10,233 10,516 8,736 9,110 2,805 6,943 9,918 13,380Laboratory tests unavail 46,492 57,500 53,819 59,406 60,553 37,563 37,475 37,489 42,000

413 Clinic ServicesPrimary care clinic visits 40,180 47,439 55,245 60,993 99,971 118,165 150,200 145,705 152,942 166,097

415 Mental HealthInpatient services (days) 18,772 23,762 14,107 11,675 17,572 1,345 1,350 2,663 2,700 1,940Locked facilities (days) 7,452 7,596 7,524 11,122 8,042 13,888 13,888 12,042 12,100 8,130

419 Public GuardianConservatorship cases n/a n/a n/a n/a n/a n/a 239 240 240 263Representative payee cases n/a n/a n/a n/a n/a n/a 370 381 381 394

417 Alcohol and Drug ProgramsMethadone maintenance dosing 36,840 43,302 52,742 54,016 54,958 50,509 49,825 52,416 52,077 46,431Narcotic treatment program counseling 14,280 14,765 19,238 19,086 19,086 23,021 24,338 23,406 22,892 25,292Residential bed days 46,897 50,012 56,344 55,530 55,530 79,426 54,521 54,885 49,686 39,091

440 Children's Medical ServicesCCS Referrals reviewed for medical eligibility 1,750 1,761 2,181 1,504 2,013 2,476 4,641 2,894 2,818 3,000CCS Referrals opened for medical services 550 970 1,196 1,051 1,006 770 1,296 1,810 1,538 1,820CHDP review preventive health screens 26,123 21,082 16,135 15,880 15,557 17,527 15,450 11,711 14,143 14,200CHDP patient tracking for follow-up screens 2,132 3,708 3,390 3,327 2,642 2,718 3,561 2,234 2,174 2,300

PUBLIC ASSISTANCE 501 Social Services

Food Stamps and Medi-Cal 23,554 26,260 25,488 26,071 27,764 29,200 29,913 32,795 36,133 38,743CWS permanent placement 389 104 331 215 306 303 328 299 289 243Adult Protective Services & In- Home Supportive Servic 2,494 93 2,906 2,659 2,694 2,809 3,108 3,361 3,618 3,832

531 CalWORKs/TANF Benefits CaseloadsOngoing 4,832 4,543 4,675 4,811 4,359 4,518 4,389 4,583 5,160 5,708Employment services 1,589 1,935 1,950 1,633 1,373 1,137 2,436 2,538 2,883 3,228Childcare services 445 352 334 286 273 247 334 360 406 412

535 Out-of-Home Care, Average Monthly CaseloadFoster care ongoing 422 371 402 492 462 535 504 534 478 404Court dependent children 19 15 12 5 4 4 4 6 4 5Aid to adoptions 364 437 495 449 578 609 644 702 731 758

continued

Last Ten Fiscal Years

Fiscal Year

County of MontereyOperating Indicators by Function/ Program (continued)

188

Schedule 18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010PUBLIC ASSISTANCE (continued)548 In- Home Support Services- Client Services paid cases

Personal care services program 1,930 2,105 2,296 2,037 2,112 2,418 2,615 2,859 3,129 3,291Residual/ Waiver Plus 564 596 610 621 581 391 382 384 399 424

551 Aid to IndigentsRegular general assistance 221 266 148 178 148 110 125 151 180 206

559 Military and Veterans Affair caseload itemsClaims filed 5,755 5,757 4,489 2,641 2,191 1,878 1,745 1,793 1,409 1,544Veterans transported to VA Medical 2,653 2,134 1,963 1,545 2,790 884 1,350 1,612 1,095 952

EDUCATION611 Library

Customers visiting library 668,324 665,620 637,787 688,246 642,226 694,259 826,716 942,871 1,085,041 996,065Customers using library computers 113,765 124,657 135,458 140,806 162,531 187,651 229,676 245,082 259,731 275,344

621 Cooperative Extension Seminars and presentations organized unavail unavail 174 192 161 200 195 171 126 1324-H Youth development activities unavail unavail 4,727 4,744 4,687 5,827 6,032 4,663 4,201 4,100

RECREATION AND CULTURAL SERVICES750 Parks

Visitors 1,392,823 1,419,565 1,384,571 1,415,262 1,400,000 1,400,000 1,400,000 1,400,000 1,255,235 1,255,235

Notes:Data for prior years may change as more updated information becomes available

(1)discontinued data(2)previously unreported data

Fiscal Year

County of MontereyOperating Indicators by Function/ Program (continued)

Last Ten Fiscal Years

189

Schedule 19COUNTY OF MONTEREY

Capital Asset StatisticsLast Six Fiscal Years

2005 2006 2007 2008 2009 2010General Government

Buildings 19 21 21 15 11 11Vehicles 0 125 134 114 113 112Heavy Equipment 0 17 13 2 7 9Communication Tower - - - - - 6 (1)

Public ProtectionBuildings 20 19 23 27 26 26Vehicles 468 493 484 553 411 453Heavy Equipment 0 36 58 3 0 24

Public Ways & Facilities (Road Dept)Bridges 123 171 171 173 171 173Culverts (ft) 218749 218749 218749 219943 219943 218749Drain System Inlets 226 226 226 977 977 226Drain System Pipe (ft) 68752 68752 68752 68752 68752 68752Fuel Stations 3 3 3 3 3 3Heavy Road Equipment 44 45 44 46 84 76Lift Stations 2 16 21 18 16 21Maintained Road Miles (paved) 1239 1100 1099 1100 1100 1157Maintenance District Facility Buildings 5 5 5 5 5 5Public Parks & Open Space Acreage 4 4 4 8 8 4Road Lane Miles 2611 2611 2611 2480 2480 2611Sanitary Heavy Equipment 2 2 2 1 1 2Sanitary Sewer Lines(miles) 54 44 60 45 30 60Street Light 106 1026 0 835 850 113Traffic Signals 40 20 20 30 24 39Vehicles 0 111 89 125 71 102

Water ResourcesDams 2 2 2 2 2 2Salinas River Diversion Facility - - - - - 1 (2)Heavy Equipment 6 6 7 7 7 7Hydro-Electric Plants 1 1 1 1 1 1Levees 1 1 1 1 1 1Pump Stations 2 5 5 5 5 5Reclamation Ditches 1 1 1 1 1 1Vehicles 24 29 29 30 27 29Petrero Tide Gate 0 1 1 1 1 1Homes 0 2 2 2 2 2Pipe Miles 0 50 50 50 50 50Wells 0 21 21 21 21 21Booster Pumps 0 3 3 3 3 3

HealthBuildings 32 7 15 7 8 15Vehicles 94 131 171 161 33 148

Public AssistanceBuildings 1 1 1 1 1 5Vehicles 75 107 114 114 101 118

continued

For Fiscal Year Ended June 30,

190

Schedule 19

COUNTY OF MONTEREY

Capital Asset Statistics (continued)Last Six Fiscal Years

2005 2006 2007 2008 2009 2010Recreation and Cultural Services

Basketball courts 1 1 1 1 1 1Boats 14 14 14 15 15 15Buildings 159 175 175 178 175 202Heavy Equipment 34 286 317 27 28 34Lakes Acres 10000 10000 10000 10000 10000 10000Land Acres 12155 12155 12155 12750 12750 12750Parks 7 7 7 7 9 9Tennis Courts 1 1 1 1 1 1Vehicles 88 94 85 126 107 130Communication Tower 1 1

EducationBookmobiles 3 3 3 3 3 3Buildings 5 4 5 4 5 6Vehicles 0 15 17 19 17 14

Source:Owned buildings and parcels from General Services "Real Property Specialist Reports".Vehicles & Heavy Equipment from General Services "FleetFocus Equipment Inventory List".

Note:Reporting differences in assets between fiscal years due to updated information sources.GASB 44, implemented in May 2004, requires this schedule to present information for ten years.However, until Monterey County is able to compile a full ten year trend, the title will reflect the actual number of years for which data has been accumulated, as allowed by GASB 44.

(1) information not previously reported(2) new asset completed in FY 0910

For Fiscal Year Ended June 30,

191

(THIS PAGE INTENTIONALLY LEFT BLANK)

APPENDIX C

DETAILED CASH FLOWS OF THE LOCAL AGENCY

This Appendix contains the following cash flow information and analysis for the Local Agency. These tables have been prepared by the Local Agency:

1. 2009-10 Actual Cash Flows;

2. 2010-11 Actual-Estimated Cash Flows;

3. 2011-12 Projected Cash Flows;

4. Variance Analysis comparing 2010-11 Cash Flow Projections (prepared in connection with 2010 TRANs borrowings) to the 2010-11 Actual-Estimated Cash Flows; and

5. Assumptions Analysis comparing 2010-11 Actual-Estimated Cash Flows to 2011-12 Cash Flow Projections

This Appendix contains current and projected cash flows for the Local Agency. It should be noted that cash flows may include general governmental cash receipts and disbursements attributable to funds other than the “General Fund” as disclosed in the Local Agency’s annual financial statements. The projected cash flow amounts are projections only; there can be no assurance that such projections will be realized.

Change in Accounting Software

Prior to June 30, 2009, Monterey County utilized AFIN accounting software which was structured with a flat chart of accounts. The AFIN system did not adequately meet the County’s financial accounting requirements, most notably it did not have cash flow reporting capabilities. Prior years’ cash flows for the County’s TRAN issuances were prepared by compiling monthly trial balances. The trial balance figures often included negative revenue numbers due to the inclusion of accruals. The trial balance numbers were useful for tracking budget, but did not accurately reflect cash on hand. The Auditor-Controller was aware of the financial infrastructure and reporting deficiencies and worked for many years to resolve the system’s shortcomings.

Beginning with fiscal year 2010, the County implemented a new accounting system to account for County finances. The new system is called the Enterprise Resource Project (“ERP”) which uses Advantage III software from CGI, interfacing with Sympro Debt Management and Treasury Management modules. Given the depth and complexity of the implementation, the transition to the new system is being implemented in stages and has been relatively seamless. The ERP system went live on July 9, 2009. Included with the ERP system is a general ledger accounting system, complete with a new chart of accounts and electronic workflow.

The County is currently in the process of its second year end close with the new system. Over the past year, system programmers implemented the payroll system module, again relatively seamless. As a result of priorities (payroll, etc.) work on the cash flow reporting was delayed until June 2011. Once the characteristics of the report were determined, analysts from CGI developed an extracted report using sequel to generate and restate cash flows for the general fund for Fiscal Year 2009-10 and Fiscal Year 2010-11. Those restated numbers are found in the accompanying cash flow statements. With the

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implementation of this report, the County can provide up to date cash flows to investors, monthly, quarterly, annually, and even daily.

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PERIOD 1 PERIOD 2 PERIOD 3 PERIOD 4 PERIOD 5 PERIOD 6 PERIOD 6 PERIOD 7 PERIOD 8 PERIOD 9 PERIOD 10 PERIOD 11 PERIOD 12 FY 2009-10Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 15-Dec-09 31-Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 TOTALSActual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual

Beginning General Fund Cash Balance 69,003,408 57,196,054 40,458,143 27,944,104 7,722,818 4,135,702 (4,401,259) 51,982,593 41,325,296 28,361,414 12,808,024 49,051,937 43,457,080 69,003,408Receipts

Property Taxes 221,829 908,431 1,179,692 302,096 27,970 (67) 63,284,758 1,615,417 1,141,518 1,229,562 45,416,703 5,548,289 124,994 121,001,192Sales and Use Taxes 393,700 466,600 0 473,500 526,000 0 462,529 362,500 483,400 427,574 278,900 407,500 523,851 4,806,054Other Taxes 590,339 2,682,405 17,002 530,493 4,471,473 138,949 0 399,465 2,728,216 11,379 736,425 1,343,546 238,702 13,888,394Licenses and Permits 1,278,276 770,435 712,584 864,258 500,672 372,045 233,638 814,619 1,033,250 1,054,317 3,718,139 818,675 3,312,654 15,483,562Fines, Forfeitures and Penalties 492,284 927,263 570,777 406,762 381,612 5,189 536,449 549,404 536,739 622,988 638,443 835,038 1,704,823 8,207,771Use of Money and Property 49,307 (20,015) 39,092 423,384 519,719 30,298 4,262 358,980 12,027 47,229 369,646 114,247 445,562 2,393,738State Aid 5,990,901 4,123,764 6,245,573 10,501,825 10,048,015 5,188,761 5,246,037 6,560,344 10,326,362 8,811,384 12,055,594 7,813,842 13,245,199 106,157,601Federal Aid 6,176,499 5,162,821 1,170,503 5,045,244 4,688,400 485,584 233,071 5,795,019 3,751,145 2,065,848 5,713,929 2,860,062 8,080,201 51,228,326Charges for Current Services 3,394,336 4,089,400 7,932,495 3,706,926 2,400,482 1,567,947 1,404,003 3,720,677 2,689,823 5,276,259 4,809,308 4,231,221 8,849,546 54,072,424Mis. Revenue 59,414 117,120 978,095 97,129 72,467 129,691 49,473 171,665 164,332 300,316 4,217,293 450,701 1,225,773 8,033,469Other Financing Sources 783,543 8,167 1,478 157,159 15,572 4,451 357 110,649 276 77,152 34,184 3,671 164,758 1,361,417Intrafund Transfers 0 500 1,729,894 1,398,034 2,999,356 475,722 1,711,269 1,519,522 1,463,991 2,298,448 1,436,075 4,054,466 7,015,933 26,103,211Cash from Assets 0 0 138,663 58,220 176,939 0 123,145 0 101,683 104,729 2,808,745 133,215 1,624,176 5,269,515Cash from Liabilities 8,617,768 4,111,064 15,053,008 20,394,768 10,585,571 6,370,404 3,339,686 13,030,513 11,163,130 10,654,022 17,074,593 11,123,418 14,951,449 146,469,393

Total Receipts 28,048,196 23,347,955 35,768,856 44,359,798 37,414,248 14,768,975 76,628,678 35,008,774 35,595,892 32,981,207 99,307,977 39,737,891 61,507,621 564,476,068Disbursements

Salaries and Benefits 25,920,414 25,819,786 25,621,039 34,910,302 23,869,070 11,833,834 13,740,750 26,210,237 25,459,399 29,046,819 37,465,555 25,723,610 26,178,192 331,799,007Services and Supplies 4,151,500 8,598,769 8,871,512 10,626,189 10,019,003 5,560,690 4,505,758 8,947,680 11,097,668 10,265,796 10,007,285 11,356,831 14,215,498 118,224,179Other Charges 5,696 816,949 2,589,979 3,672,851 2,290,743 734,397 696,135 1,590,415 180,323 2,536,233 3,615,773 1,506,696 1,710,707 21,946,898Fixed Assets and Capital Outlay 0 31,996 485,259 783,465 104,196 524,042 83,890 560,115 504,486 329,220 223,380 350,364 609,860 4,590,274Operating Transfers Out 0 0 1,643,205 6,910,587 425,062 5,801 0 5,801 5,454,811 0 712,972 0 6,522,108 21,680,347Cash to Liabilities 7,028,969 2,007,093 1,949,561 2,157,861 2,021,712 1,894,612 576,681 1,925,171 2,067,195 2,542,454 2,044,609 2,870,828 4,879,333 33,966,080Cash to Assets 2,748,972 2,811,273 7,122,340 5,519,830 2,271,578 2,752,559 641,611 6,426,652 3,795,891 3,814,074 8,994,490 3,524,419 8,736,055 59,159,744

Total Disbursements 39,855,551 40,085,866 48,282,894 64,581,085 41,001,364 23,305,936 20,244,826 45,666,072 48,559,774 48,534,597 63,064,064 45,332,748 62,851,754 591,366,529

57,196,054 40,458,143 27,944,104 7,722,818 4,135,702 (4,401,259) 51,982,593 41,325,296 28,361,414 12,808,024 49,051,937 43,457,080 42,112,947 42,112,947

TRANS Borrowing 55,000,000 55,000,000 55,000,000 55,000,000 55,000,000 55,000,000 55,000,000 26,948,472 26,948,472 26,948,472 (1,103,056) (1,103,056)Par Amount 55,000,000Percentage Repayment 50.0% 50.0%Principal Payment on Note (27,500,000) (27,500,000)Interest Set-aside (551,528) (551,528)Net Interest Outlfow 1,103,056Total TRANS Borrowing 55,000,000 55,000,000 55,000,000 55,000,000 55,000,000 55,000,000 55,000,000 26,948,472 26,948,472 26,948,472 (1,103,056) (1,103,056) -

Ending Balance WITH TRANs Borrowing 112,196,054 95,458,143 82,944,104 62,722,818 59,135,702 50,598,741 106,982,593 68,273,768 55,309,886 39,756,496 47,948,881 42,354,024 42,112,947

County of Monterey

ACTUAL MONTHLY CASH FLOW

Ending Balance WITHOUT TRANs Borrowing

FISCAL YEAR 2009-10

C-3

PERIOD 1 PERIOD 2 PERIOD 3 PERIOD 4 PERIOD 5 PERIOD 6 PERIOD 6 PERIOD 7 PERIOD 8 PERIOD 9 PERIOD 10 PERIOD 11 PERIOD 12 FY 2010-11Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 15-Dec-10 31-Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 TOTALS

Indicate Actual "A" or Estimated "E" ---> A A A A A A A A A A A A E

Beginning General Fund Cash Balance 42,112,947 24,922,605 17,909,626 863,063 (6,132,992) (17,853,751) (22,824,784) 34,618,394 23,538,123 17,344,737 5,287,217 68,264,160 60,510,711 42,112,947

ReceiptsProperty Taxes - 721,877 1,087,215 - 632,939 3,176,253 58,405,550 1,089,144 1,585,129 1,375,285 46,203,618 791,599 1,391,148 116,459,758 Sales Taxes 367,200 489,500 882,195 413,600 551,500 - 827,617 377,600 503,400 707,561 307,000 450,300 626,098 6,503,571 Other Taxes 1,147,761 3,116,474 104,940 1,772,546 3,319,973 (3,090) 156,525 257,428 3,342,617 196,920 485,818 2,034,385 207,668 16,139,964 Licenses and Permits 1,727,059 941,847 741,474 632,462 605,592 309,367 399,066 927,163 775,088 765,581 3,017,630 763,645 3,441,259 15,047,234 Fines, Forfeitures and Penalties 428,470 968,442 539,590 326,193 383,550 66,097 391,870 498,874 511,127 588,586 714,281 615,287 936,544 6,968,910 Use of Money and Property 305,920 195,721 23,975 283,218 11,648 20,271 10,587 104,944 14,218 (246,369) 139,506 24,263 73,425 961,328 State Aid 7,490,125 9,124,224 7,962,833 6,263,676 8,002,027 2,822,397 8,249,557 7,363,464 7,966,629 11,923,368 12,747,539 10,309,370 10,350,630 110,575,838 Federal Aid 3,321,924 2,972,054 6,479,897 2,398,920 3,357,539 1,107,774 1,287,068 1,410,408 2,582,318 4,036,228 4,057,769 4,651,737 5,049,155 42,712,791 Charges for Current Services 3,780,904 6,061,711 3,332,847 7,308,343 2,256,230 2,609,389 4,032,942 3,480,098 3,930,070 6,240,767 4,282,050 4,183,439 4,720,550 56,219,341 Miscellanceous Revenue 37,066 262,112 113,933 83,628 253,083 24,807 331,434 210,118 163,249 89,649 3,673,091 213,157 1,010,346 6,465,674 Other Financing Sources 36,123 319,461 579 78,327 114,535 94,794 100,670 830 264 80,235 169 8,457 487 834,930 Interfund Transfers 133,799 278,046 2,512,116 1,367,785 2,006,957 2,105,062 435,807 1,556,150 604,632 8,329,839 12,587,539 2,626,890 2,123,942 36,668,565 Cash from Assets - 105,134 116,019 62,569 47,480 - 56,415 1,107,185 968,845 340,457 45,930 88,380 40,882 2,979,296 Cash from Liabilities 6,362,822 6,885,336 14,342,296 25,946,757 12,777,229 3,951,073 5,018,502 15,567,723 9,183,669 16,058,292 16,508,715 10,194,803 14,511,610 157,308,828

Total Receipts 25,139,172 32,441,940 38,239,909 46,938,026 34,320,281 16,284,195 79,703,610 33,951,129 32,131,255 50,486,398 104,770,656 36,955,710 44,483,745 575,846,028 Disbursements

Salaries and Benefits 25,083,773 24,941,310 14,095,204 36,946,990 25,486,186 12,198,831 14,292,925 27,087,867 25,765,785 37,940,163 25,962,397 26,167,116 26,071,692 322,040,240 Services and Supplies 12,166,118 9,033,197 13,231,464 7,183,788 10,167,238 5,046,148 3,568,632 9,521,469 8,865,871 11,774,008 8,832,474 7,998,556 11,051,263 118,440,226 Other Charges 754,349 366,584 2,299,218 2,352,426 2,774,429 1,736,388 254,450 1,867,038 312,202 2,540,854 3,561,722 1,610,307 689,876 21,119,843 Fixed Assets and Capital Outlay 1,211,735 78,985 610,518 335,986 246,957 279,206 69,104 73,409 181,300 77,162 72,784 375,843 218,063 3,831,051 Operating Transfers Out 51,205 - 6,058,876 5,359 - - - 5,359 - - 555,359 - 5,901,482 12,577,639 Cash to Liabilities 2,551,765 2,524,937 16,572,798 4,563,198 2,716,917 1,380,452 1,146,170 2,414,831 1,858,392 2,770,507 1,943,688 6,353,873 748,854 47,546,383 Cash to Assets 510,569 2,509,907 2,418,395 2,546,333 4,649,314 614,204 2,929,150 4,061,428 1,341,091 7,441,224 865,289 2,203,464 4,284,669 36,375,037

Total Disbursements 42,329,514 39,454,919 55,286,472 53,934,081 46,041,040 21,255,229 22,260,431 45,031,401 38,324,641 62,543,918 41,793,714 44,709,159 48,965,899 561,930,418

24,922,605 17,909,626 863,063 (6,132,992) (17,853,751) (22,824,784) 34,618,394 23,538,123 17,344,737 5,287,217 68,264,160 60,510,711 56,028,557 56,028,557

TRANS Borrowing 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 19,727,778 19,727,778 19,727,778 Par Amount 40,000,000Percentage Repayment 50% 50%Principal Payment on Note (20,000,000) (20,000,000) Interest Set-aside (272,222) (272,222) Net Interest Outflow 544,444 Total TRANS Borrowing - 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 19,727,778 19,727,778 19,727,778 -

Ending Balance WITH TRANs Borrowing 24,922,605 57,909,626 40,863,063 33,867,008 22,146,249 17,175,216 74,618,394 43,265,900 37,072,514 25,014,995 68,264,160 60,510,711 56,028,557

Ending Balance WITHOUT TRANs Borrowing

County of Monterey

ACTUAL/ESTIMATED MONTHLY CASH FLOW

FISCAL YEAR 2010-11

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PERIOD 1 PERIOD 2 PERIOD 3 PERIOD 4 PERIOD 5 PERIOD 6 PERIOD 6 PERIOD 7 PERIOD 8 PERIOD 9 PERIOD 10 PERIOD 11a PERIOD 11b PERIOD 12 FY 2011-12Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 15-Dec-11 31-Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 15-May-12 31-May-12 Jun-12 TOTALS

Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected

Beginning General Fund Cash Balance 56,028,557 34,412,650 24,759,171 (16,469,827) (1,659,420) (15,236,038) (20,632,420) 34,391,807 25,334,024 18,491,260 5,519,758 64,969,656 73,494,209 56,450,080 56,028,557

ReceiptsProperty Taxes - 695,817 1,047,967 - 610,090 3,061,591 56,297,110 1,049,826 1,527,906 1,325,637 44,535,667 529,334 233,688 1,340,928 112,255,561 Sales Taxes 339,293 452,298 815,148 382,166 509,586 - 764,718 348,902 465,142 653,786 283,668 416,077 - 578,514 6,009,299 Other Taxes 1,088,077 2,954,418 99,483 1,680,374 3,147,334 - 148,385 244,041 3,168,801 186,680 460,556 1,928,597 - 196,870 15,303,616 Licenses and Permits 1,719,460 937,703 738,211 629,679 602,928 308,006 397,310 923,084 771,678 762,213 3,004,353 449,718 310,567 3,426,118 14,981,027 Fines, Forfeitures and Penalties 496,554 1,122,327 625,330 378,025 444,496 76,600 454,138 578,145 592,346 682,113 827,780 548,918 164,138 1,085,360 8,076,270 Use of Money and Property 325,835 208,462 25,535 301,656 12,406 21,590 11,276 111,776 15,144 14,000 148,588 17,994 7,849 78,205 1,300,318 State Aid 6,431,702 7,053,056 6,900,723 6,214,819 6,939,611 2,800,383 8,185,211 9,806,029 7,904,490 11,830,365 12,648,108 7,509,555 2,719,402 12,769,895 109,713,347 Federal Aid 3,113,639 2,785,706 6,073,607 2,248,508 3,147,022 1,038,317 1,206,369 1,321,976 2,420,406 3,783,156 3,803,347 1,293,314 3,066,759 4,732,573 40,034,699 Charges for Current Services 3,816,445 6,118,692 3,364,176 7,377,042 2,277,439 2,633,917 4,070,852 3,512,811 3,967,012 6,299,431 4,322,301 2,393,556 1,829,207 4,764,923 56,747,803 Miscellanceous Revenue 31,187 220,541 95,864 70,365 212,944 20,873 278,868 176,793 137,358 75,431 3,090,538 95,509 83,841 850,105 5,440,218 Other Financing Sources 25,484 225,380 409 55,260 80,804 66,877 71,023 586 186 56,605 119 2,290 3,676 344 589,043 Interfund Transfers 125,129 260,029 2,349,331 1,279,153 1,876,906 1,968,654 407,567 1,455,311 565,451 7,790,065 11,771,867 2,096,576 360,092 1,986,311 34,292,442 Cash from Assets - 105,134 116,019 62,569 47,480 - 56,415 1,107,185 968,845 340,457 45,930 88,380 - 40,882 2,979,296 Cash from Liabilities 6,362,822 6,885,336 14,342,296 25,946,757 12,777,229 3,951,073 5,018,502 15,567,723 9,183,669 16,058,292 16,508,715 8,286,803 1,908,000 14,511,610 157,308,828

Total Receipts 23,875,628 30,024,898 36,594,100 46,626,373 32,686,274 15,947,880 77,367,744 36,204,188 31,688,433 49,858,231 101,451,539 25,656,621 10,687,219 46,362,638 565,031,765

DisbursementsSalaries and Benefits 28,083,773 24,941,310 36,348,274 14,693,920 25,486,186 12,198,831 14,292,925 27,087,867 25,765,785 37,940,163 25,962,397 10,961,493 15,205,623 26,071,692 325,040,240 Services and Supplies 12,482,437 9,268,060 13,575,482 7,370,566 10,431,586 5,177,348 3,661,416 9,769,027 9,096,384 12,080,132 9,062,118 3,438,909 4,767,610 11,338,596 121,519,672 Other Charges 751,181 365,044 2,289,561 2,342,546 2,762,776 1,729,095 253,381 1,859,197 310,891 2,530,182 3,546,763 598,345 1,005,198 686,978 21,031,139 Fixed Assets and Capital Outlay 1,060,389 69,120 534,265 294,022 216,112 244,333 60,473 64,240 158,655 67,524 63,693 146,185 182,715 190,827 3,352,553 Operating Transfers Out 51,420 - 6,084,323 5,381 - - - 5,381 - - 557,691 - - 5,926,268 12,630,465 Cash to Liabilities 2,551,765 2,524,937 16,572,798 4,563,198 2,716,917 1,380,452 1,146,170 2,414,831 1,858,392 2,770,507 1,943,688 884,135 5,469,738 748,854 47,546,383 Cash to Assets 510,569 2,509,907 2,418,395 2,546,333 4,649,314 614,204 2,929,150 4,061,428 1,341,091 7,441,224 865,289 1,103,000 1,100,464 4,284,669 36,375,037

Total Disbursements 45,491,534 39,678,377 77,823,097 31,815,967 46,262,891 21,344,263 22,343,516 45,261,971 38,531,198 62,829,733 42,001,641 17,132,067 27,731,348 49,247,884 567,495,488

34,412,650 24,759,171 (16,469,827) (1,659,420) (15,236,038) (20,632,420) 34,391,807 25,334,024 18,491,260 5,519,758 64,969,656 73,494,209 56,450,080 53,564,834 53,564,834

TRANS Borrowing 43,855,000 43,855,000 43,855,000 43,855,000 21,680,222 21,855,000 21,855,000 21,855,000 (299,899) Par Amount 43,855,000Percentage Repayment 50.2% 49.8%Principal Payment on Note (22,000,000) (21,855,000) Interest Set-aside (174,778) (299,899) Net Interest Outflow 174,778 299,899 Total TRANS Borrowing 43,855,000 43,855,000 43,855,000 43,855,000 21,680,222 21,855,000 21,855,000 21,855,000 (299,899) -

Ending Balance WITH TRANs Borrowing 34,412,650 24,759,171 27,385,173 42,195,580 28,618,962 23,222,580 56,072,030 47,189,024 40,346,260 27,374,758 64,669,757 73,494,209 56,450,080 53,564,834

Ending Balance WITHOUT TRANs Borrowing

County of Monterey

PROJECTED MONTHLY CASH FLOW

FISCAL YEAR 2011-12

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County of Monterey

Variance Analysis Comparing 2010-11 Cash Flow Projections to 2010-11 Actual-Estimated Cash Flows

2010-11 Original 2010-11 Actual %Projection Estimated Change Change Explanation

Beginning Balance - July 1 $79,003,426 $42,112,947 ($36,890,479) -47% Due to lack of accurate cash reporting mechanism prior to May 2011

ReceiptsProperty Tax $113,092,846 $116,459,758 $3,366,912 3% Due to collection of delinquenciesSales and Use Tax 5,654,499 6,503,571 849,072 15% Due to unexpected sales taxes spurred by govt incentivesOther Tax 14,186,246 16,139,964 1,953,718 14% Due to $1.5M more TOT than expectedLicense, Permits and Franchises 16,617,978 15,047,234 (1,570,744) -9% Due to unexpected drop in feesFines, Forfeitures, and Penalties 10,453,992 6,968,910 (3,485,082) -33% Due to unexpected drop in fine revenueUse of Money and Property 1,920,762 961,328 (959,434) -50% Due to low rates of return on investment and chargeback of State Aid 173,620,461 110,575,838 (63,044,623) -36% Due to budgetary based projections - timing - deferred rev'sFederal Aid 126,311,078 42,712,791 (83,598,287) -66% Due to budgetary based projections - timing - deferred rev'sCharges for Services 63,224,355 56,219,341 (7,005,014) -11% Due to budgetary based projections - timing - deferred rev'sMisc. Revenues 7,090,066 6,465,674 (624,392) -9% Due to the economyOther Financing Sources 873,993 834,930 (39,063) -4% Due to calculation for higher TRAN coupon 2.0 vs 1.5Interfund Transfers 66,000,634 36,668,565 (29,332,069) -44% Due to change in reporting categoriesNet Cash from Asset Accounts 0 2,979,296 2,979,296 NM Due to change of accounting method from Modified Accrued basis to

Actual Cash Flow basisNet Cash from Liability Accounts 67,271,934 157,308,828 90,036,894 134% Due to change of accounting method from Modified Accrued basis to

Actual Cash Flow basisTOTAL RECEIPTS $666,318,844 $575,846,028 ($90,472,816) -14%

DisbursementsSalaries and Employee Benefits $345,510,318 $322,040,240 ($23,470,078) -7% Due to FYE timing issues and reduced positionsServices and Supplies 151,590,000 $118,440,226 (33,149,774) -22% Due to expectation of excess pass thru - see belowOther Charges 89,800,750 $21,119,843 (68,680,908) -76% Directly related to Charges for Services - no in - no outCapital Assets 4,089,408 $3,831,051 (258,357) -6% Due to cutback on spending of Capital reserves Operating Transfers Out 23,475,181 $12,577,639 (10,897,542) -46% Due to better alignment of needsNet Cash to Liability Account 39,499,259 $47,546,383 8,047,124 20% Due to change of accounting method from Modified Accrued basis to

Actual Cash Flow basisNet Cash to Asset Accounts 0 $36,375,037 36,375,037 NM Due to change of accounting method from Modified Accrued basis to

Actual Cash Flow basisTOTAL DISBURSEMENTS $653,964,916 $561,930,418 ($92,034,498) -14%

Ending Cash Balance - June 30 $91,357,354 $56,028,557 ($35,328,797) -39% Due to Budgetary based assumptions

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County of Monterey

Assumptions Analysis Comparing 2010-11 Actual-Estimated Cash Flows to 2011-12 Cash Flow Projections

2010-11 Actual 2011-12 %Estimated Projection Change Change Assumptions

Beginning Balance - July 1 $42,112,947 $56,028,557 $13,915,610 33% Due to $14.2M contribution from NMC to Strategic Reserve

ReceiptsProperty Tax $116,459,758 $112,255,561 ($4,204,197) -4% Due to decreased AV and delinquent collectionsSales and Use Tax 6,503,571 6,009,299 (494,272) -8% Due to conservative estimatesOther Tax 16,139,964 15,303,615 (836,349) -5% Due to expected decreases in TOT - No US Open this yearLicense, Permits and Franchises 15,047,234 14,981,027 (66,207) 0%Fines, Forfeitures, and Penalties 6,968,910 8,076,270 1,107,360 16% Due to increases in fees and finesUse of Money and Property 961,328 1,300,318 338,990 35% Due to market return expectationsState Aid 110,575,838 109,713,346 (862,492) -1% Due to State CutsFederal Aid 42,712,791 40,034,699 (2,678,092) -6% Due to expiration of ARRACharges for Services 56,219,341 56,747,803 528,462 1% Due to fee increasesMisc. Revenues 6,465,674 5,440,218 (1,025,456) -16% Due to expected continued decline in revenuesOther Financing Sources 834,930 589,043 (245,887) -29% Due to expectation of premium on TRANInterfund Transfers 36,668,565 34,292,442 (2,376,123) -6% Due to TrendNet Cash from Asset Accounts 2,979,296 2,979,296 0 0%Net Cash from Liability Accounts 157,308,828 157,308,828 0 0%TOTAL RECEIPTS $575,846,028 $565,031,765 ($10,814,263) -2%

DisbursementsSalaries and Employee Benefits $322,040,240 $325,040,240 $3,000,000 1% Due to Lump Sum payments to Laid Off EmployeesServices and Supplies 118,440,226 121,519,672 3,079,446 3% Due to expected increases in Charge for ServicesOther Charges 21,119,843 21,031,139 (88,703) 0%Capital Assets 3,831,051 3,352,553 (478,498) -12% Due to cutbacks on spending during financial crisisOperating Transfers Out 12,577,639 12,630,465 52,826 0%Net Cash to Liability Account 47,546,383 47,546,383 (0) 0%Net Cash to Asset Accounts 36,375,037 36,375,037 0 0%TOTAL DISBURSEMENTS $561,930,418 $567,495,488 $5,565,070 1%

Ending Cash Balance - June 30 $56,028,557 $53,564,834 ($2,463,723) -4% Due to expenditure of Capital Cash.

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California Statewide Communities Development Authority2011 Tax And Revenue Anticipation Bonds

Series 2011-A5

Cash Coverage Analysis

Note Amounts ($) Base Amounts1Series 2011 A-5a

Coverage2Series 2011 A-5b

Coverage2Series 2011 A-5

Coverage 2

Series 2011 A-5a (January 31, 2011 Maturity) 22,000,000 Series 2011 A-5b (May 15, 2011 Maturity) 21,855,000 Series 2011 A-5 (Combined Amount) 43,855,000

2011-12 Projected Cash Receipts through January 31, 2012 299,327,085 14.61x 7.83x

January 31, 2012 Cash Flow Balance 25,334,024 2.15x 1.58xJanuary 31, 2012 Alternative Cash Resources 184,232,000 9.37x 5.20xJanuary 31, 2012 Cash Flow Balance + Alt. Cash 209,566,024 10.53x 5.78x

2011-12 Projected Cash Receipts through May 15, 2012 507,981,908 24.24x 12.58x

May 15, 2012 Cash Flow Balance 73,494,209 4.36x 2.68xMay 15, 2012 Alternative Cash Resources 183,267,000 9.39x 5.18xMay 15, 2012 Cash Flow Balance + Alt. Cash 256,761,209 12.75x 6.85x

1) Base Amounts exclude Note Amount2) Cash Coverage Factors are calculated with the Note Amount added to each Base Amount

APPENDIX D

COVERAGE ANALYSIS

This appendix contains cash flow summary information and projected Note payment coverage for theLocal Agency. Such cash flows and payment coverage are projections only; there can be no assurance that suchprojections will be realized.

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APPENDIX E

REPAYMENT DATES AND REPAYMENT MONTHS, PERCENTAGES AND AMOUNTS

California Statewide Communities Development Authority2011-12 Tax and Revenue Anticipation Bonds

Repayment Pledge Table

2011 Note Term Repayment Pledge Month

Local Agency Amount (months) Month Percent Amount(1)

County of Monterey

Series 2011A-5a $22,000,000 4.5 Dec-11 100% $22,174,778

Series 2011A-5b 21,855,000 8 Apr-12 100% 22,154,899

TOTALS $43,855,000 $44,329,677

(1) Amounts of set-asides include interest at a rate of 2.00%.

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APPENDIX F

INVESTMENT OF PROCEEDS AND PAYMENT ACCOUNT

This Appendix F contains a description of the Local Agency’s current intention with respect to theinvestment of its Payment Account. There can be no assurance that the actual manner in which the Local Agencyinvests its Payment Account will not differ from the manner in which the Local Agency currently anticipates itwill invest its Payment Account.

Issuer SeriesTRAN

Amount Proceeds Investment IntentionsInvestment Intentions

for Repayment Amounts

Monterey County A-5 $43,855,000 County Treasury Investment Pool County TreasuryInvestment Pool

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APPENDIX G

DEFINITIONS OF CERTAIN TERMS ANDSUMMARY OF NOTE RESOLUTIONS AND SUMMARY OF INDENTURE

The Bonds are not secured by a Credit Instrument or a Credit Agreement, and accordingly, theprovisions of the Indenture summarized below which relate to a Credit Instrument, a Credit Agreement, aCredit Provider and related terms and provisions should be disregarded by the reader. The following termsshall have the following meanings unless the context expressly or by necessary implications requireotherwise:

“Authority” means the California Statewide Communities Development Authority, a public entityof the State of California, created pursuant to the provisions relating to the joint exercise of powers found inChapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State ofCalifornia.

“Authorized Denomination” means $5,000 or any multiple thereof.

“Authorized Local Agency Representative” means the person or persons designated as such in theLocal Agency Note Resolution or any other person at the time designated to act on behalf of such LocalAgency by written certificate furnished to the Trustee, containing the specimen signature of such personand signed on behalf of such Local Agency by an Authorized Local Agency Representative.

“Authorized Signatory” means any member of the Commission of the Authority and any otherperson as may be designated and authorized to sign on behalf of the Authority pursuant to a resolutionadopted thereby.

“Bond Payment Fund” means the fund by that name established in the Indenture.

“Bond Purchase Agreement” means that certain Bond Purchase Agreement between the Authorityand the Underwriter relating to the purchase of the Bonds by the Underwriter.

“Bonds” means collectively, the Series 2011A-5a Bonds and the Series 2011A-5b Bonds.

“Business Day” means any day except Saturday, Sunday or any day on which banks located in thecity in which the designated corporate trust office of the Trustee and the Principal Office of the CreditProvider are located, or in the City of Los Angeles, California, are required or authorized to remain closed.

“Certificate” or “Request” with respect to a Local Agency means an instrument in writing signedon behalf of such Local Agency by an Authorized Local Agency Representative, and with respect to theAuthority means an instrument in writing signed on behalf of the Authority by an Authorized Signatory ofthe Authority or other person at the time designated to act on behalf of the Authority by written certificatefurnished to the Trustee.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued orapplicable thereunder.

“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable toa Local Agency or the Authority and related to the authorization, execution and delivery of the Notes andthe related sale of the Bonds, including, but not limited to, the Credit Provider’s Credit Instrument fees orpremium or costs of issuance, as applicable, if any, costs of preparation, reproduction and delivery of

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documents, filing and recording fees, fees and charges of the Trustee and its counsel, legal fees and charges,fees and disbursements of consultants and professionals, fees of rating agencies, fees and charges forpreparation, execution, safekeeping and delivery of the Bonds and any other costs, charges or fees inconnection with the original issuance of the Notes or the Bonds.

“Costs of Issuance Fund” means the fund of that name established pursuant to the Indenture.

“Credit Agreement” means the Credit Agreement, if any, identified in the Indenture.

“Credit Fund” means the fund by that name established pursuant to the Indenture.

“Credit Instrument” means the instrument, if any, designated in Schedule III of the Indenture as theLetter of Credit or Policy of Insurance dated the date of issuance of the Bonds, issued by the CreditProvider, if any, designated in Schedule III of the Indenture in favor of the Trustee, as the same may beamended from time to time. If there is more than one Credit Instrument, the term shall refer to each ofthem separately and collectively. Unless otherwise provided in the Credit Instrument, the CreditInstrument shall be deemed to enhance the Notes which secure the Bonds.

“Credit Provider” means the entity, if any, identified as the provider of the Credit Instrument inSchedule III of the Indenture. If there is more than one Credit Provider, the term shall refer to each of themseparately and collectively.

“Defaulted Note” means a Note (i) the principal of and interest on which has been paid in whole orin part with the proceeds of a drawing or claim or payment under or from the Credit Instrument whichremains not fully reimbursed on the Note Maturity Date or (ii) any of the principal of or interest on whichis not paid when due.

“Default Rate” means the rate of interest per annum payable with respect to the outstanding portionof each Defaulted Note which (i) if the Defaulted Note is unpaid and no Credit Instrument is applicablethereto, shall equal the Note Rate, or (ii) if the Defaulted Note is paid in whole or in part by anunreimbursed draw or claim or payment under or from a Credit Instrument, is calculated in accordance withthe applicable provisions of the Credit Instrument or the Credit Agreement; provided, however, if theCredit Instrument or the Credit Agreement, if any contains no such provision or provisions regarding thecalculation of a default rate of interest, “Default Rate” means the Note Rate.

“Fund” shall mean each of the Funds established pursuant to the Indenture.

“Indenture” means the Indenture, dated as of September 1, 2011, by and between the Trustee andthe Authority, as originally executed and entered into and as it may from time to time be amended orsupplemented in accordance therewith.

“Interest Fund” means the fund by that name established in the Indenture.

“Interest Payment Date” means the Maturity Date.

“Local Agency” or “Local Agencies” means the Local Agencies listed in Schedule I attached to theIndenture and in each case their successors and assigns.

“Maturity Date” means the maturity date of each respective series of Bonds, being January 31,2012, with respect to the Series 2011A-5a Bonds, and May 15, 2012, with respect to the Series 2011A-5bBonds.

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“Moody’s” means Moody’s Investors Service, Inc., a corporation duly organized and existingunder and by virtue of the laws of the State of Delaware, and its successors and assigns.

“Note Maturity Date” means the maturity date of each respective series of Notes, being January 31,2012, with respect to the Series A Note, and May 15, 2012, with respect to the Series B Note.

“Note Rate” means the stated rate of interest payable on the Notes.

“Note Resolutions” means the respective resolutions adopted by the legislative bodies of the LocalAgencies authorizing the issuance of the Notes, acknowledging the form of the Indenture and approving theexecution and delivery of such Indenture, the Credit Agreement, if any, and the Bonds by the Authority.

“Notes” means the Series A Notes and the Series B Notes.

“Opinion of Counsel” means a written opinion of counsel of recognized national standing in thefield of law relating to municipal bonds, appointed by the Authority and satisfactory to and approved by theTrustee (which shall be under no liability by reason of such approval).

“Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the

(1) Bonds cancelled by the Trustee or surrendered to the Trustee for cancellation;

(2) Bonds paid or deemed to have been paid within the meaning of the Indenture; and

(3) Bonds in lieu of or in exchange or substitution for which other Bonds shall have beenauthenticated and delivered by the Trustee under the Indenture.

“Owner” means the registered owner of any Outstanding Bond.

“Payment Accounts” means the subaccounts created in the Bond Payment Fund pursuant to theIndenture.

“Permitted Investments” means any of the following to the extent then permitted by law:

(i) (a) Direct obligations (other than an obligation subject to variation in principal repayment)of the United States of America (“United States Treasury Obligations”), (b) obligations fully andunconditionally guaranteed as to timely payment of principal and interest by the United States of America,(c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by anyagency or instrumentality of the United States of America when such obligations are backed by the fullfaith and credit of the United States of America, or (d) evidences of ownership of proportionate interests infuture interest and principal payments on obligations described above held by a bank or trust company ascustodian, under which the owner of the investment is the real party in interest and has the right to proceeddirectly and individually against the obligor and the underlying government obligations are not available toany person claiming through the custodian or to whom the custodian may be obligated.

(ii) Obligations of instrumentalities or agencies of the United States of America. These arespecifically limited to:

-- Federal Home Loan Mortgage Corporation (FHLMC)Participation certificates (excluded are stripped mortgage securities which are purchased at prices

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exceeding their principal amounts)Debt Obligations-- Federal Home Loan Banks (FHL Banks)Consolidated debt obligation-- Federal National Mortgage Association (FNMA)Debt obligations

Mortgage backed securities (Excluded are stripped mortgage securities which are purchased atprices exceeding their principal amounts).

Book entry securities listed in 1 and 2 above must be held in a trust account with the FederalReserve Bank or with a clearing corporation or chain of clearing corporations which has an account withthe Federal Reserve Bank.

(iii) Federal Housing Administration debentures.

(iv) Commercial paper, payable in the United States of America, having original maturities ofnot more than 92 days and which are rated “A+” by S&P and “Prime-1” by Moody’s.

(v) Interest bearing demand or time deposits issued by state banks or trust companies, savingsand loan associations, federal savings banks or any national banking associations, the deposits of which areinsured by the Bank Insurance Fund (BIF) or the Savings Association Insurance Fund of the FederalDeposit Insurance Corporation (SAIF) or any successors thereto. These deposits: (a) must be continuouslyand fully insured by BIF or SAIF, or (b) must have maturities of less than 366 days and be deposited withbanks the short term obligations of which are rated “A+” by S&P and “P-1” by Moody’s.

(vi) Money market mutual funds or portfolios investing in short-term US Treasury securitiesrated “AAAm” or “AAAm G” by S&P and “Aaa” by Moody’s including those which the Trustee and itsaffiliates or subsidiaries provide advisory or management services.

(vii) Investment agreements approved by the Credit Provider which are with investmentinstitutions, or with a financial entity whose obligations are guaranteed or insured by a financial entity,having long-term obligations which are rated not lower than the “AA” category by S&P and the “Aa”category by Moody’s (in each case without regard to numerical or plus or minus modifiers) as to long terminstruments and which are approved by S&P and Moody’s; provided that if such rating falls below “AA-”or “Aa3,” by S&P or Moody’s, respectively, the investment agreement shall require the Trustee to replacesuch financial institution or shall provide for the investment agreement to be collateralized at levels andunder such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A”rated structured financing (with a market value approach).

(viii) The Local Agency Investment Fund administered by the State of California; providedhowever, that any such investment of amounts on deposit in the Payment Accounts must be invested on adate which permits a timely withdrawal to pay the principal of and interest on the Bonds.

(ix) Investment Trust of California, doing business as CalTRUST.

(x) Repurchase Agreements; provided, such investments shall be issued by entities the debtsecurities of which are rated not lower than the “A” category by S&P and the “A” category by Moody’s (ineach case without regard to numerical or plus or minus modifiers) as to long term instruments; providedfurther, that any such repurchase agreements must be fully secured by collateral security described inclause (i) of this definition, which collateral (a) is held by the Trustee or a third party agent during the term

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of such repurchase agreement and in which collateral the Trustee has a perfected first security interest; (b)has a market value determined at least every thirty days at least equal to 103% of the amount so invested;and (c) may be liquidated within seven days if the market value of such collateral is at any time less thanthe amount so invested.

(xi) Such other investments which, if amounts are invested therein, will not as a result of suchinvestment, reduce the rating on the Bonds, or are otherwise, as approved in writing by the Credit Provider.

(xii) The county investment pool for the county in which the Local Agency is located.

“Predefault Obligations” means (i) the respective obligations of the respective Local Agencies tothe Credit Provider under the Credit Instrument and/or the Credit Agreement, if any,, (ii) allindemnification to the Credit Provider by the respective Local Agencies, and (iii) all other amounts due tothe Credit Provider by the respective Local Agencies under the Credit Instrument and the Credit Agreement(including interest on overdue Predefault Obligations to the extent permitted by law), in each casebecoming due prior to an Event of Default under the respective Note Resolutions.

“Pricing Confirmation Supplement” means that certain Pricing Confirmation Supplement attachedto each Purchase Agreement as agreed and accepted by each of the respective Local Agencies.

“Principal Fund” means the fund by that name established pursuant to the Indenture.

“Principal Office of the Credit Provider” means a United States of America office of the CreditProvider to or from which draws under, or claims or payments pursuant to or from the Credit Instrumentare to be made.

“Principal Office of the Trustee” means the corporate trust office of the Trustee, which, for theTrustee initially appointed under the Indenture, is located in Los Angeles, California, provided that adifferent office may be designated by the Trustee in writing to the Authority.

“Proceeds Fund” means the fund by that name established pursuant to the Indenture.

“Program” means the “California Statewide Communities Development Authority Tax andRevenue Anticipation Note Program” pursuant to which the Bonds are issued to assist Local Agencies infinancing cash flow deficits.

“Purchase Agreement” means that certain Purchase Agreement by and between each of therespective Local Agencies and the Authority relating to the Notes.

“Rating Agency” means each national rating agency then maintaining a rating on the Bonds.

“Reimbursement Obligations” means (i) the respective obligations of the respective LocalAgencies under the Credit Instrument and/or the Credit Agreement, including, without limitation,obligations evidenced by Defaulted Notes, (ii) all indemnification to the Credit Provider by the respectiveLocal Agencies, and (iii) all other amounts at any time due to the Credit Provider by the respective LocalAgencies under the Credit Instrument and/or the Credit Agreement (including any Predefault Obligationsand interest on any overdue Reimbursement Obligations to the extent permitted by law), in each casebecoming due as a result of or after an Event of Default under the respective Note Resolutions.

“Repayment Fiscal Year” means each Local Agency’s fiscal year ending June 30, 2012.

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“Repayment Month” has the respective meaning set forth in each Local Agency’s Note Resolution.

“Representation Letter” means the letter or letters of representation from the Authority and theTrustee to, or other instrument or agreement among the Authority and the Trustee with, a securitiesdepository for the Bonds in which the Authority and the Trustee, among other things, make certainrepresentations to such securities depository with respect to the Bonds, the payment thereof, and delivery ofnotices with respect thereto.

“S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc.

“Secured Percentage” means, with respect to any Credit Instrument and the Notes to which itapplies, an amount (i) equal to 100%, if the available amount of the Credit Instrument is greater than orequal to the aggregate amount of principal of and interest on unpaid Notes (or unpaid portions thereof) or(ii) equal to the available amount of the Credit Instrument divided by the aggregate amount of unpaidprincipal of and interest on Notes (or unpaid portions thereof), expressed as a percentage, if the availableamount of the Credit Instrument is less than the aggregate amount of unpaid principal of and interest onNotes (or unpaid portions thereof) as of the Maturity Date.

“Series A Notes” means the Series A tax and revenue anticipation promissory notes issued by theLocal Agencies in the respective aggregate principal amounts described in Schedule I attached to theIndenture.

“Series B Notes” means the Series B tax and revenue anticipation promissory notes issued by theLocal Agencies in the respective aggregate principal amounts described in Schedule I attached to theIndenture.

“Series 2011A-5a Bonds” means the California Statewide Communities Development Authority2011 Tax and Revenue Anticipation Bonds, Series 2011A-5a, authorized by the Indenture and at any timeOutstanding under the Indenture that are issued by the Authority under and pursuant to Article II of theIndenture.

“Series 2011A-5b Bonds” means the California Statewide Communities Development Authority2011 Tax and Revenue Anticipation Bonds, Series 2011A-5b, authorized by the Indenture and at any timeOutstanding under the Indenture that are issued by the Authority under and pursuant to Article II of theIndenture.

“Trustee” means Wells Fargo Bank, National Association, a national banking association dulyorganized and existing under and by virtue of the laws of the United States of America, at its principalcorporate trust office in Los Angeles, California, or any other bank or trust company at its principalcorporate trust office which may at any time be substituted in its place, as Trustee, provided in theIndenture.

SUMMARY OF NOTE RESOLUTIONS

The following is a summary of certain provisions of each of the Note Resolutions of the LocalAgencies not heretofore summarized under the caption “SECURITY AND SOURCE OF PAYMENT.”Reference is made to each Note Resolution in its entirety for a full recital of the provisions thereof.

ALL REFERENCES BELOW TO THE CREDIT PROVIDER AND THE CREDITINSTRUMENT SHALL NOT BE APPLICABLE TO THE BONDS. THE PAYMENT OF THEPRINCIPAL OF AND INTEREST ON THE BONDS ARE NOT GUARANTEED BY ANY CREDIT

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INSTRUMENT OR CREDIT AGREEMENT.

Disposition of Proceeds of Notes

The moneys received from the sale of a Local Agency’s Note allocable to such Local Agency’sshare of the Costs of Issuance will be deposited in the Costs of Issuance Fund held and invested by theTrustee under the related Indenture and will be expended as directed by the Authority on Costs of Issuanceas provided in the related Indenture. The remaining net amount received by each Local Agency from thesale of its Note will be available to be used and expended by such Local Agency for any purpose for whichit is authorized to expend funds.

Additional Payments

Each Local Agency agrees to pay, or cause to be paid, in addition to the amounts payable under itsNote, any fees or expenses of the Trustee and, to the extent permitted by law, any Predefault Obligationsand Reimbursement Obligations (to the extent not payable under its Note), (i) arising out of an “Event ofDefault” under its Note Resolution or (ii) arising out of any other event (other than an event arising solelyas a result of or otherwise attributable to a default by any other Local Agency). In the case described in (ii)above with respect to Predefault Obligations, each Local Agency will owe only the percentage of such fees,expenses and Predefault Obligations equal to the ratio of the principal amount of its Note over theaggregate principal amount of all Notes (including such Local Agency’s Note) related to the Series ofBonds to which such Note is related, at the time of original issuance of such Series of Bonds. Suchadditional amounts will be paid by each Local Agency within twenty-five (25) days of receipt by suchLocal Agency of a bill therefor from the Trustee.

No Joint Obligation

The Note of each Local Agency will be marketed and sold simultaneously with the Notes of otherLocal Agencies and will be assigned to secure the related Series of Bonds. The obligation of each LocalAgency to make payments on or in respect to its Note is a several and not a joint obligation and is strictlylimited to such Local Agency’s repayment obligation under its Note Resolution and its Note.

Parity Notes

A Local Agency may at any time during the Repayment Fiscal Year issue an additional parity note(the “Parity Note”), in an amount not in excess of the maximum principal amount of such Local Agency’sNote authorized to be issued in such Local Agency’s Note Resolution, secured by a first lien and charge onPledged Revenues; provided that (i) the Local Agency shall have received confirmation from each ratingagency rating the outstanding Note or Series of Bonds related to the Note, that the issuance of such ParityNote (or related series of bonds if sold into a pool) will not cause a reduction or withdrawal of such ratingagency’s rating on the outstanding Note or Series of Bonds related to the Note, (ii) the maturity date of anysuch Parity Note shall be later than the outstanding Note and (iii) the Local Agency shall have received thewritten consent of the Credit Provider, if any, to the issuance of the Parity Note. In the event that a LocalAgency issues a Parity Note, the Local Agency shall make appropriate deposits into the Payment Accountwith respect to such Parity Note, and in such event, the Payment Account shall also be held for the benefitof the Holders of the Parity Note.

Defaults and Remedies

Defaults. If any one of the following events occurs under a Note Resolution, it is an “Event ofDefault” under such Note Resolution:

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(a) Failure by the Local Agency to make, or cause to be made, the deposits to its PaymentAccount when due or any other payment required to be paid under its Note Resolution, including paymentof principal and interest on its Note, on or before the date on which such deposit or other payment is dueand payable;

(b) Failure by the Local Agency to observe and perform any covenant, condition or agreementon its part to be observed or performed under its Note Resolution, for a period of fifteen (15) days afterwritten notice, specifying such failure and requesting that it be remedied, is given to such Local Agency bythe Trustee or the Credit Provider, unless the Trustee and the Credit Provider agree in writing to anextension of such time prior to its expiration;

(c) Any warranty, representation or other statement by or on behalf of the Local Agencycontained in its Note Resolution or the Note Purchase Agreement pursuant to which the Authority agrees topurchase the Note from the Local Agency (each such agreement, a “Note Purchase Agreement”) or in anyrequisition or financial report delivered by such Local Agency or in any instrument furnished in compliancewith or in reference to its Note Resolution or the Note Purchase Agreement or in connection with its Note,is false or misleading in any material respect; and

(d) The occurrence of certain bankruptcy or insolvency matters with respect to the LocalAgency.

Remedies. Whenever any Event of Default shall have happened and be continuing under a NoteResolution, the Trustee will, in addition to any other remedies provided in the Note Resolution or by law orunder the applicable Indenture, have the right, at its option without any further demand or notice, to takeone or any combination of the following remedial steps:

(a) Without declaring the Note of the defaulting Local Agency to be immediately due andpayable, require such Local Agency to pay to the Trustee, as holder of such Note, an amount equal to theprincipal of such Note and interest thereon to maturity, plus all other amounts due under its NoteResolution, and upon notice to such Local Agency, the same will become immediately due and payable bysuch Local Agency without further notice or demand; and

(b) Take whatever other action at law or in equity (except for acceleration of payment on theNote) which may appear necessary or desirable to collect the amounts then due and thereafter to becomedue under the Note Resolution and under the Note or to enforce any other of its rights under the NoteResolution.

If the Credit Provider is not reimbursed on the maturity date of the Series of Bonds related to suchNote for any drawing upon the Credit Instrument used to pay principal of and interest on the Note due to adefault in payment on such Note by the applicable Local Agency, or if any principal of or interest on anyNote remains unpaid after the maturity date of the Note, such Note will be a Defaulted Note, and the unpaidportion (including the interest component, if applicable) thereof (or the portion to which the CreditInstrument applies for which reimbursement on a Drawing has not been made) will be deemed outstandingand will bear interest at the Default Rate until such Local Agency’s obligation on its Defaulted Note is paidin full or payment is duly provided for, subject to such Local Agency’s Note Resolution.

Certain Representations and Covenants of the Local Agencies

Each Local Agency has represented or covenanted under its Note Resolution, among other things,that:

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(a) It will (i) duly, regularly and properly prepare and adopt its final budget for RepaymentFiscal Year, (ii) provide to the Trustee, the Credit Provider, if any, and the Underwriter (or holder of theSeries of Bonds in the event of a private placement), promptly upon adoption, copies of such final budgetand of any subsequent revisions, modifications or amendments thereto and (iii) comply with all applicablelaws pertaining to its budget;

(b) The sum of the principal amount of such Local Agency’s Note plus the interest payablethereon, on the date of its issuance, will not exceed 85% of the estimated amount of such Local Agency’suncollected taxes, income, revenue (including, but not limited to, revenue from the State and federalgovernments), cash receipts, and other moneys to be received or accrued by such Local Agency for thegeneral fund of such Local Agency attributable to the Repayment Fiscal Year all of which will be legallyavailable to pay principal of and interest on its Note;

(c) Such Local Agency (i) has not defaulted within the past twenty (20) years, and is notcurrently in default, on any debt obligation, and (ii) to the best of its knowledge, has never defaulted on anydebt obligation;

(d) Such Local Agency’s most recent audited financial statements present fairly the financialcondition of such Local Agency as of the date thereof and the results of operation for the period coveredthereby. Except as has been disclosed to the Underwriter, and the Credit Provider, if any, and in thePreliminary Official Statement and to be set forth in the final Official Statement, there has been no changein the financial condition of such Local Agency since the date of such audited financial statements that will,in the reasonable opinion of such Local Agency, materially impair its ability to perform its obligationsunder its Note Resolution and its Note;

(e) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before orby any court, arbitrator, governmental or other board, body or official, pending or, to the best knowledge ofsuch Local Agency, threatened against or affecting such Local Agency questioning the validity of anyproceeding taken or to be taken by such Local Agency in connection with the Note, the Note PurchaseAgreement, the applicable Indenture, the Credit Agreement, if any, or its Note Resolution, or seeking toprohibit, restrain or enjoin the execution, delivery or performance by such Local Agency of any of theforegoing, or wherein an unfavorable decision, ruling or finding would have a materially adverse effect onsuch Local Agency’s financial condition or results of operations or on the ability of such Local Agency toconduct its activities as presently conducted or as proposed or contemplated to be conducted or wouldmaterially adversely affect the validity or enforceability of, or the authority or ability of such Local Agencyto perform its obligations under, its Note, the Note Purchase Agreement, the applicable Indenture, theCredit Agreement, if any, or its Note Resolution; and

(f) Except for Parity Notes as described above, such Local Agency will not incur anyindebtedness secured by a pledge of its Pledged Revenues unless such pledge is subordinate in all respectsto the pledge of Pledged Revenues under its Note Resolution.

Each Local Agency also covenants under its Note Resolution that it will not take any action or failto take any action if such action or failure to take such action would adversely affect the exclusion fromgross income of the interest payable on its Note or the related Series of Bonds under Section 103 of theCode. Without limiting the generality of the foregoing, each Local Agency will not make any use of theproceeds of its Note or the related Series of Bonds or any other of its funds which would cause its Note orthe related Series of Bonds to be an “arbitrage bond” within the meaning of Section 148 of the Code, a“private activity bond” within the meaning of Section 141(a) of the Code, or an obligation the interest onwhich is subject to federal income taxation because it is “federally guaranteed” as provided in Section149(b) of the Code. Each Local Agency, with respect to the proceeds of its Note, will comply with all

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requirements of such sections of the Code and all regulations of the United States Department of theTreasury issued or applicable thereunder to the extent that such requirements are, at the time, applicableand in effect.

SUMMARY OF INDENTURE

The following is a summary of certain provisions of the Indenture not heretofore summarizedunder the captions “DESCRIPTION OF THE BONDS” and “SECURITY AND SOURCE OFPAYMENT.” Reference is made to the Indenture in its entirety for a full recital of the provisions thereof.

THE BONDS ARE NOT SECURED BY A CREDIT INSTRUMENT OR A CREDITAGREEMENT, AND ACCORDINGLY, THE PROVISIONS OF THE INDENTURE SUMMARIZEDBELOW WHICH RELATE TO A CREDIT INSTRUMENT, A CREDIT AGREEMENT, A CREDITPROVIDER AND RELATED TERMS AND PROVISIONS SHOULD BE DISREGARDED BY THEREADER.

Funds and Accounts

Under the Indenture, the Trustee agrees to establish and maintain under the Indenture, in trust, theCosts of Issuance Fund, the Proceeds Fund, the Bond Payment Fund and the Payment Accounts therein, theInterest Fund, the Principal Fund, the Credit Fund, if applicable, and the Rebate Fund.

Costs of Issuance Fund

The moneys in the Costs of Issuance Fund will be used and withdrawn by the Trustee to pay theCosts of Issuance upon receipt of (i) a Request of an Authorized Signatory of the Authority, which Requestshall be sequentially numbered, stating the person to whom payment is to be made, the amount to be paid,the purpose for which the obligation was incurred and that such payment is a proper charge against saidfund, and (ii) an original invoice or invoices or evidence of the Authority’s or Underwriter’s payment of aninvoice when such requisition is in reimbursement thereof. On February 1, 2012, or on such earlier dateupon Request of an Authorized Signatory of the Authority, amounts, if any, remaining in the Costs ofIssuance Fund (and not required to pay identified Costs of Issuance, including any additional fees orexpenses of the Credit Provider or the Trustee, or any identified Predefault Obligations and ReimbursementObligations) will be transferred to the Proceeds Fund and credited to and returned by the Trustee by checkto each Local Agency in proportion to the amounts initially deposited in the Costs of Issuance Fundattributable to each such Local Agency.

Proceeds Fund

All money in the Proceeds Fund will be held by the Trustee in trust and applied as provided in theIndenture and, pending such application, are pledged to the payment of the Bonds and will be subject to alien and charge in favor of the Owners and for the further security of the Owners. Funds in the ProceedsFund will be credited to each of the Local Agencies initially in amounts set forth in the schedule attached tothe Indenture. Moneys in the Proceeds Fund will be disbursed to each Local Agency in the amounts setforth in the Indenture relating to such Local Agency, as soon as practical, pursuant to a Request of anAuthorized Signatory of the Authority and a written requisition of such Local Agency in substantially theform set forth in Exhibit B attached to the Indenture, submitted in advance of the requested payment date(by facsimile, hand delivery or mail), and once disbursed, will be held and invested by the Local Agency aspermitted by law and used and expended for any purpose for which the Local Agency is authorized to useand expend moneys.

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Bond Payment Fund and Payment Accounts

All principal and interest payments on the Notes shall be paid directly by each Local Agency to theTrustee. All principal and interest payments on the Notes received by the Trustee will be held in trust bythe Trustee under the terms of the Indenture and will be deposited by it, as and when received, in theappropriate Payment Account within the Bond Payment Fund, which fund the Trustee agrees to maintain solong as any Bonds are Outstanding, and all money in such fund will be held in trust by the Trustee for thebenefit of the Local Agency submitting such money until deposited in the funds specified in the Indenture,whereupon such money will be held in trust in such funds by the Trustee for the benefit and security of theOwners and the Credit Provider, if any, to the extent provided in the Indenture. Pursuant to each LocalAgency’s Note Resolution, each Local Agency is required to deposit with the Trustee an amount on the lastBusiness Day of the Repayment Months (and, if necessary, any amounts received thereafter attributable tothe Repayment Fiscal Year) so that the amount on deposit in such Local Agency’s Payment Account, isequal in the respective Repayment Month to the percentage of the principal and interest due on the Notespecified in the Pricing Confirmation Supplement. Any such deposit may take into considerationanticipated investment earnings on amounts deposited in an Investment Agreement through the MaturityDate. If any Local Agency fails to make the required deposits, the Trustee shall as soon as practical (but inany event within three Business Days) notify such Local Agency, the Credit Provider, if any, and eachRating Agency of such failure. If the Trustee receives Note repayments from a Local Agency, whichtogether with other amounts on deposit in the Bond Payment Fund allocable to such Local Agency, are inexcess of the amounts required to pay the principal of and interest due on such Local Agency’s Note, suchexcess amounts will remain in the Bond Payment Fund and, subject to any rebate requirement, will betransferred to such Local Agency following payment of the amount of Bonds corresponding to such LocalAgency’s Note and reimbursement of the Credit Provider for drawings, if any, under or payments pursuantto or from the Credit Instrument and payment to such Credit Provider of any Reimbursement Obligationsand Predefault Obligations applicable to such Local Agency.

Moneys received by the Trustee attributable to a Local Agency will not be used in any manner(directly or indirectly) to make up any deficiency in any other Local Agency’s Note repayments.

Payment of Principal and Interest

The Trustee shall deposit the money contained in the Bond Payment Fund at the followingrespective times in the following respective funds in the manner and priority hereinafter provided, each ofwhich funds the Trustee hereby agrees to maintain so long as any Bonds are Outstanding, and the money ineach of such funds shall be disbursed only for the purposes and uses hereinafter authorized:

(a) Interest Fund. The Trustee shall deposit in the Interest Fund that amount of moneyrepresenting the interest becoming due and payable on the Bonds on such Interest Payment Date. Allmoney in the Interest Fund shall be used and withdrawn by the Trustee solely for the purpose of payinginterest on the Bonds on each Interest Payment Date.

(b) Principal Fund. The Trustee, on the Maturity Date, shall deposit in the Principal Fund thatamount of money representing the principal becoming due and payable on the Bonds on such MaturityDate. All moneys in the Principal Fund shall be used and withdrawn by the Trustee solely for the purposeof paying the principal of the Bonds on the Maturity Date.

(c) Rebate Fund. The Trustee shall deposit in the Rebate Fund that amount of moneyrepresenting the amount of interest earned on funds deposited in the Bond Payment Fund in excess of thepermissible arbitrage yield as set forth in the Tax Certificate. All moneys in the Rebate Fund shall be usedand withdrawn by the Trustee solely in accordance with the provisions of the Indenture.

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Subject to the rebate requirements set forth in the Indenture, moneys held in the Bond PaymentFund, the Principal Fund or the Interest Fund on the Maturity Date after the payment by the Trustee of allof the principal of and interest on the Bonds shall be returned by the Trustee to each Local Agency (otherthan a Local Agency which is in default in the payment of the principal of and interest on its Note) bycheck in an amount equal to the proportion of the amount initially received from each Local Agency anddeposited in the Bond Payment Fund over all amounts received from all Local Agencies and deposited inthe Bond Payment Fund multiplied by the remaining balance in the Bond Payment Fund.

Defaults and Remedies

Action on Default. If any default in the payment of principal of or interest on a Note or any other“Event of Default” defined in a Note Resolution shall occur and be continuing, or if any default shall bemade by a Local Agency in the performance or observance of any other of the covenants, agreements orconditions on its part contained in the Indenture and such default shall have continued for a period of thirty(30) days after written notice thereof shall have been given to such Local Agency by the Trustee or theOwners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, thensuch default will constitute an “Event of Default” under the Indenture, and in each and every such caseduring the continuance of such Event of Default the Trustee or the Owners of not less than a majority inaggregate principal amount of the Bonds at the time Outstanding will be entitled, upon notice in writing tosuch Local Agency, but subject to the provisions of the Indenture, to exercise the remedies provided to theowner of the Note then in default under the Note Resolution pursuant to which it was issued which arenecessary or desirable to collect the principal of the Note and the interest thereon to maturity.

Other Remedies of the Trustee. The Trustee will have the right:

(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rightsagainst any Local Agency or any director, supervisor, council member, board member, trustee, member,officer or employee thereof, and to compel such Local Agency or any such supervisor, council member,board member, trustee, member, officer or employee thereof to observe or perform its or his or her dutiesunder applicable law and the agreements, conditions, covenants and terms contained in the Indenture, or inthe applicable Note and Note Resolution, required to be observed or performed by it or him or her;

(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of theTrustee, the Owners or the Credit Provider; or

(c) by suit in equity upon the happening of any default under the Indenture to require anyLocal Agency and any director, supervisor, council member, board member, trustee, member, officer andemployee thereof to account as the trustee of any express trust.

Non-Waiver. A waiver by the Trustee of any default under the Indenture or breach of anyobligation under such Indenture will not affect any subsequent default under such Indenture or anysubsequent breach of an obligation under such Indenture or impair any rights or remedies on any suchsubsequent default thereunder or on any such subsequent breach of an obligation thereunder. No delay oromission by the Trustee to exercise any right or remedy accruing upon any default under such Indenturewill impair any such right or remedy or will be construed to be a waiver of any such default thereunder oran acquiescence therein, and every right or remedy conferred upon the Trustee by applicable law or by suchIndenture may be enforced and exercised from time to time and as often as shall be deemed expedient bythe Trustee.

If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned ordetermined adversely to the Trustee, the Credit Provider, the Authority or the Local Agencies, the

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Authority, the Trustee, the Credit Provider and the Local Agencies will be restored to their former positions,rights and remedies as if such action, proceeding or suit had not been brought or taken.

Notwithstanding anything to the contrary, no waiver by the Trustee of any default under theIndenture or breach of any obligation under the Indenture with respect to any Local Agency will beeffective without the prior written consent of the Credit Provider.

Application of Funds. (a) All moneys received by the Trustee pursuant to any right given oraction taken under the provisions set forth under the caption “Defaults and Remedies” above, will bedeposited into the segregated Payment Account of the Bond Payment Fund relating to the defaulting LocalAgency’s Note and be applied by the Trustee after payment of all amounts due and payable under theIndenture in the following order upon presentation of the several Bonds, and the stamping thereon of thepayment if only partially paid, or upon the surrender thereof if fully paid; provided that (i) all amounts inthe Credit Fund will be applied solely to payment of the principal of and interest on the Bonds, and (ii) allmoneys in the defaulting Local Agency’s Payment Account in the Bond Payment Fund allocable toreimbursement of the Credit Provider for drawings or payments under the Credit Instrument will be appliedsolely to reimburse the Credit Provider; and provided, further, that the Trustee will obtain and follow theinstructions contained in an Opinion of Counsel and will rebate or set aside for rebate from the specifiedfunds held under the applicable Indenture, subject to the prior payment in full of all amounts applicable tothe respective Local Agency specified in clause (ii) above, any amount pursuant to such instructionsrequired to be paid to the United States of America under the Code:

FIRST, Costs and Expenses: to the payment of the costs and expenses of the Trustee and of theOwners in declaring such Event of Default, including reasonable compensation to its or their agents,attorneys and counsel;

SECOND, Interest: to the payment to the persons entitled thereto of all payments of interest on theBonds then due in the order of the due date of such payments, and, if the amount available will not besufficient to pay in full any payment or payments coming due on the same date, then to the payment thereofratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination orpreference, subject to paragraph (b), below;

THIRD, Principal: to the payment to the persons entitled thereto of the unpaid principal of theBonds, which shall have become due, in the order of their due dates, with interest on the overdue principaland interest on the Bonds at a rate equal to the Default Rate and, if the amount available will not besufficient to pay in full all the amounts due with respect to the Bonds on any date, together with suchinterest, then to the payment thereof ratably, according to the amounts of principal due on such date to thepersons entitled thereto, without any discrimination or preference; and

FOURTH, Predefault Obligations and Reimbursement Obligations: to the payment of allPredefault Obligations and Reimbursement Obligations applicable to such Local Agency.

(b) If, upon the drawing or payment under the Credit Instrument then in effect, in the fullamount permitted under the Credit Instrument, any Owner (other than the Credit Provider by right ofsubrogation) remains unpaid in full, no moneys received by the Trustee pursuant to any right given oraction taken under the provisions of the Indenture will be transferred to the Credit Provider until all Owners(other than the Credit Provider by right of subrogation) are paid in full.

Remedies Not Exclusive; Credit Provider’s Control of Remedies. No remedy conferred in theIndenture upon or reserved therein to the Trustee is intended to be exclusive and all remedies will becumulative and each remedy will be in addition to every other remedy given thereunder or now or hereafter

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existing under applicable law or equity or by statute or otherwise and may be exercised without exhaustingand without regard to any other remedy conferred by any other applicable law.

Notwithstanding anything to the contrary in the Indenture, the Credit Provider, so long as it has notfailed to comply with its payment obligations under the Credit Instrument, will have the right to direct theremedies upon any Event of Default under the Indenture but only with respect to any Note or Notes securedby the Credit Instrument and only so long as such action will not materially adversely affect the rights ofany Owner; and the Credit Provider’s prior consent shall be required to any remedial action proposed to betaken by the Trustee hereunder with respect to such Note or Notes, except that this consent requirementshall not affect or impair in any way the right of action of any Owner to institute suit directly against aLocal Agency to enforce payment of the Note and such Local Agency shall be directly obligated to eachOwner of the Bonds. The Trustee shall immediately notify such Credit Provider of any Event of Default ofwhich the Trustee has actual knowledge.

Limited Liability of the Local Agencies

Except as expressly provided in the respective Notes and Note Resolutions, the Local Agencieswill not have any obligation or liability to the Authority, the Trustee, the Owners or the Credit Provider,with respect to the Indenture or the preparation, execution, delivery, transfer, exchange or cancellation ofthe Bonds or the receipt, deposit or disbursement of the principal of and interest on the Notes by theTrustee, or with respect to the performance by the Trustee of any obligation contained in the Indenturerequired to be performed by it.

No Liability by the Trustee to the Owners

Except as expressly provided in the Indenture, the Trustee will not have any obligation or liabilityto the Owners or Credit Provider with respect to the payment when due of the Notes by the Local Agencies,or with respect to the observance or performance by the Local Agencies of the other agreements, conditions,covenants and terms contained in the Notes and the Note Resolutions.

Limited Liability of the Authority

Except as expressly provided in the Indenture, the Authority will not have any obligation orliability to the Trustee, the Owners or the Credit Provider, with respect to the payment when due of theNotes by the Local Agencies, or with respect to the observance or performance by the Local Agencies ofthe other agreements, conditions, covenants and terms contained in the Notes and the Note Resolutions, orwith respect to the performance by the Trustee of any obligation contained in the Indenture required to beperformed by it. Notwithstanding anything to the contrary contained in the Bonds, the Indenture or anyother document related thereto, the Authority will not have any liability under the Indenture or by reasonthereof or in connection with any of the transactions contemplated thereby except to the extent payablefrom moneys received from or with respect to the Notes and available therefor in accordance with theIndenture.

Amendment or Supplement of Indenture

The Indenture and the rights and obligations of the Owners and the Trustee under the Indenturemay be amended or supplemented at any time by an amendment thereof or supplement thereto which willbecome binding when the written consents of the Credit Provider, if any, and of the Owners of a majority inaggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided inthe Indenture, are filed with the Trustee. No such amendment or supplement may (1) reduce the rate ofinterest on any Bond or reduce the amount of principal of any Bond or extend the Maturity Date thereof (it

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being understood, however, that any such extension will have no effect on the duration of the CreditInstrument) without the prior written consent of the Owner of the Bond so affected, or (2) reduce thepercentage of Owners whose consent is required by the terms of such Indenture for the execution of certainamendments thereof or supplements thereto, or (3) modify any of the rights or obligations of the Trusteewithout its prior written consent thereto.

The Indenture and the rights and obligations of the Owners and the Trustee thereunder may also beamended or supplemented at any time by an amendment thereof or supplement thereto which will becomebinding upon execution with the prior written consent of the Credit Provider, if any, but without the writtenconsents of any Owners, in order to make any modifications or changes necessary or appropriate in theOpinion of Counsel to preserve or protect the exclusion from gross income of interest on the Bonds forfederal income tax purposes or, but only to the extent that such amendment will not materially adverselyaffect the interests of the Owners, for any purpose including, without limitation, one or more of thefollowing purposes:

(a) to add to the agreements, conditions, covenants and terms contained in theIndenture required to be observed or performed by the Authority, other agreements, conditions,covenants and terms thereafter to be observed or performed by the Authority, or to surrender anyright reserved in the Indenture to or conferred therein on the Authority;

(b) to make such provisions for the purpose of curing any ambiguity or of correcting,curing or supplementing any defective provision contained in the Indenture or in regard toquestions arising thereunder which the Authority may deem desirable or necessary; or

(c) to modify, amend or supplement the Indenture or any supplement thereto in suchmanner as to permit the qualification thereof under the Trust Indenture Act of 1939 or any similarfederal statute hereafter in effect or to permit the qualification of the Bonds for sale under thesecurities laws of the United States of America or of any of the states of the United States ofAmerica and, if the Authority or Bond Counsel so determine, to add to the Indenture or anysupplement thereto such other terms, conditions and provisions as may be permitted by said TrustIndenture Act of 1939 or similar federal statute.

Defeasance

If the Trustee shall pay or cause to be paid or there shall otherwise be paid to the Owners of allOutstanding Bonds the interest and principal thereof at the times and in the manner provided in theIndenture, then such Owners will cease to be entitled to the pledge of and lien on the Notes and Notepayments and any interest in the funds held under the Indenture as provided therein, and all agreements andcovenants of the Authority to such Owners under the Indenture and the Note Resolution will thereuponcease, terminate and become void and will be discharged and satisfied.

Any Outstanding Bonds will on the Maturity Date be deemed to have been paid within the meaningof and with the effect expressed in the preceding paragraph if there shall be on deposit with the Trusteemoneys which are sufficient to pay the interest on and principal of such Bonds payable on and prior to theMaturity Date.

Any Outstanding Bonds will prior to the Maturity Date be deemed to have been paid within themeaning of and with the effect expressed in the second preceding paragraph if there shall have beendeposited with the Trustee either moneys in an amount which will be sufficient or United States Treasurybills, notes, bonds or certificates of indebtedness, or obligations for which the full faith and credit of theUnited States of America are pledged for the payment of interest and principal, and which are purchased

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with moneys and are not subject to redemption except by the holder thereof prior to maturity (including anysuch securities issued or held in book-entry form on the books of the Department of the Treasury of theUnited States of America), the interest on and principal of which when paid will provide money which,together with the moneys, if any, deposited with the Trustee at the same time, will be sufficient, in theopinion of an independent expert delivered to the Trustee and the Credit Provider, to pay when due theinterest on such Bonds and the principal of such Bonds on the Maturity Date.

After the payment of the interest on and principal of all Outstanding Bonds as provided in theIndenture and payment of all Predefault Obligations and Reimbursement Obligations, at the Request of anAuthorized Signatory of the Authority (if provided), the Trustee will execute and deliver to the Authorityand the Local Agencies all such instruments as they may deem necessary or desirable to evidence thedischarge and satisfaction of the related Indenture, and the Trustee, after payment of all fees and expensesof the Trustee, will pay over or deliver to the Local Agencies all money or deposits or investments held byit pursuant thereto which are not required for the payment of the interest on and principal of such Bondsand the Trustee will surrender the Credit Instrument to the Credit Provider, for cancellation by the same.

Notwithstanding anything to the contrary in the Indenture, the Indenture will not be dischargedwithout the prior written consent of the Credit Provider until all Predefault Obligations and ReimbursementObligations have been paid or payment duly provided for by the Trustee’s retention of sufficient funds topay all Predefault Obligations and Reimbursement Obligations due or to become due as of the date of suchdischarge.

Investments

Any money held by the Trustee at any time in any fund created under the Indenture (other than theCredit Fund and the Rebate Fund) will, to the fullest extent practicable, be invested as directed in writingby an Authorized Signatory of the Authority in Permitted Investments which will, as nearly as practicable,mature on or before the dates on which such money is anticipated to be needed for disbursement. TheTrustee may act as principal or agent in the acquisition or disposition of any such deposit or investment andmay at its sole discretion, for the purpose of any such deposit or investment commingle any of the moneyheld by it under such Indenture. The Trustee will not be liable or responsible for any loss suffered inconnection with any such deposit or investment made by it under the terms of and in accordance with suchIndenture. The Trustee may present for redemption or sell any such deposit or investment whenever it willbe necessary in order to provide money to meet any payment of the money so deposited or invested, andthe Trustee will not be liable or responsible for any losses resulting from any such deposit or investmentpresented for redemption or sold. Any interest or profits on such deposits and investments received by theTrustee will be credited to the fund or account from which such investment was made.

Moneys in the Credit Fund will be invested in certain Permitted Investments as specified in theapplicable Indenture. Moneys in the Rebate Fund will not be invested.

Removal and Resignation of Trustee

The Authority, with the consent of the Credit Provider may at any time remove the Trustee bygiving written notice of such removal by mail to the Trustee, the Credit Provider, all of the Local Agenciesand all Owners of Bonds of such Series and the Trustee may at any time resign by giving written notice ofsuch resignation by mail to the Authority, the Credit Provider, the Local Agencies and all Owners of Bondsof such Series.

Any removal or resignation of a Trustee and appointment of a successor Trustee will becomeeffective only upon the written acceptance of the appointment by the successor Trustee.

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Continuing Disclosure

(a) The Authority will give, or cause to be given, notice of the occurrence of any ofthe following events with respect to the Bonds in a timely manner not later than 10 Business Daysafter the occurrence of the event:

1. Principal and interest payment delinquencies;

2. Unscheduled draws on debt service reserves reflecting financial difficulties;

3. Unscheduled draws on credit enhancements reflecting financial difficulties;

4. Substitution of credit or liquidity providers, or their failure to perform;

5. Issuance by the Internal Revenue Service of proposed or final determination oftaxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

6. Tender offers;

7. Defeasances;

8. Rating changes; or

9. Bankruptcy, insolvency, receivership or similar event of an obligated person.Note: for the purposes of the event identified in subparagraph (9), the event is

considered to occur when any of the following occur: the appointment ofa receiver, fiscal agent or similar officer for an obligated person in aproceeding under the U.S. Bankruptcy Code or in any other proceedingunder state or federal law in which a court or governmental authority hasassumed jurisdiction over substantially all of the assets or business of theobligated person, or if such jurisdiction has been assumed by leaving theexisting governmental body and officials or officers in possession butsubject to the supervision and orders of a court or governmental authority,or the entry of an order confirming a plan of reorganization, arrangementor liquidation by a court or governmental authority having supervision orjurisdiction over substantially all of the assets or business of the obligatedperson.

(b) Pursuant to the Indenture, the Authority shall also give, or cause to be given, noticeof the occurrence of any of the following events with respect to the Bonds, if material, in a timelymanner not later than 10 Business Days after the occurrence of the event:

1. Unless described in subsection (a)(5) above, adverse tax opinions or other materialnotices or determinations by the Internal Revenue Service with respect to the taxstatus of the Bonds or other material events affecting the tax status of the Bonds;

2. Modifications to rights of Bondholders;

3. Optional, unscheduled or contingent Bond calls;

4. Release, substitution, or sale of property securing repayment of the Bonds;

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5. Non-payment related defaults;

6. The consummation of a merger, consolidation, or acquisition involving anobligated person or the sale of all or substantially all of the assets of the obligatedperson, other than in the ordinary course of business, the entry into a definitiveagreement to undertake such an action or the termination of a definitive agreementrelating to any such actions, other than pursuant to its terms; or

7. Appointment of a successor or additional trustee or the change of name of a trustee.

(c) The Trustee shall, within 3 Business Days of obtaining actual knowledge of theoccurrence of any of the Listed Events, without making any determination as to materiality, contactthe Disclosure Representative, inform such person of the event, and request that the Authoritypromptly notify the Dissemination Agent in writing whether or not to report the event pursuant toparagraph (g) below. For purposes of this obligation, “actual knowledge” of such Listed Eventsshall mean knowledge by an officer of the Trustee at the Principal Office of the Trustee withregular responsibility for matters related to the Indenture and Bonds.

(d) Whenever the Authority obtains knowledge of the occurrence of a Listed Event,whether because of a notice from the Trustee pursuant to paragraph (c) or otherwise, the Authorityshall as soon as possible determine if such event would be material under applicable federalsecurities laws.

(e) If the Authority learns of the occurrence of a Listed Event described in paragraph(a) above, or determines that knowledge of a Listed Event described in paragaraph (b) above wouldbe material under applicable federal securities laws, the Authority shall pursuant to paragraph (g)promptly notify the Dissemination Agent in writing so that within 10 Business Days of suchoccurrence the Dissemination Agent can cause to be filed a notice of such occurrence with EMMA.

(f) If in response to a request under paragraph (c), the Authority determines that aListed Event specified in subsection (b) would not be material under applicable federal securitieslaws, the Authority shall so notify the Dissemination Agent in writing and instruct theDissemination Agent not to report the occurrence pursuant to paragraph (g).

(g) If the Dissemination Agent has been instructed by the Authority to report theoccurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence withEMMA. Notwithstanding the foregoing, notice of Listed Events described in clauses (a)(7) and(b)(3) shall not be given under this paragraph any earlier than the notice (if any) of the underlyingevent is given to Owners of affected Bonds pursuant to the Indenture unless otherwise directed bythe Authority in writing.

The Authority and the Local Agencies have no obligation to provide continuing disclosure withrespect to the Notes.

In the event of a failure of the Authority or the Trustee to comply with any provision of theIndenture with respect to continuing disclosure, the Trustee will at the written request of any ParticipatingUnderwriter or the Owners or beneficial owners of at least 25% aggregate principal amount of OutstandingBonds, but only to the extent indemnified to its satisfaction from any liability or expenses, includingwithout limitation fees and expenses of its attorneys, or any Owner or beneficial owner of a Bond may takesuch actions as may be necessary and appropriate, including seeking mandate or specific performance bycourt order, to cause the Authority or the Trustee, as the case may be, to comply with its obligations under

such Indenture with respect to continuing disclosure.

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APPENDIX H

PROPOSED FORM OF BOND COUNSEL OPINION

Upon the issuance of the Bonds, Orrick, Herrington & Sutcliffe LLP, Bond Counsel to theAuthority and Special Counsel to the Local Agency, proposes to render its approving opinion insubstantially the following form:

[Delivery Date]

California Statewide CommunitiesDevelopment Authority

Sacramento, California

California Statewide Communities Development Authority2011 Tax and Revenue Anticipation Bonds

Series 2011A-5(Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the California Statewide Communities DevelopmentAuthority (the “Authority”) and Special Counsel to the Local Agency in connection with issuance of$43,855,000 aggregate principal amount of California Statewide Communities Development Authority2011 Tax and Revenue Anticipation Bonds, Series 2011A-5 (the “Bonds”), consisting of $22,000,000aggregate principal amount of California Statewide Communities Development Authority 2011 Tax andRevenue Anticipation Bonds, Series 2011A-5a and $21,855,000 aggregate principal amount of CaliforniaStatewide Communities Development Authority 2011 Tax and Revenue Anticipation Bonds, Series2011A-5b, issued pursuant to the Indenture, dated as of September 1, 2011 (the “Indenture”), by andbetween the Authority and Wells Fargo Bank, National Association, as trustee (the “Trustee”) and aresolution (the “Bond Resolution”) passed and adopted by the Authority under Article 4, Chapter 5,Division 7, Title 1 of the California Government Code (commencing with Section 6584 thereof).Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Bond Resolution, the TaxCertificate of the Authority, dated the date hereof (the “Tax Certificate”), resolutions and certificates ofthe Local Agency (the “Local Agency Certificates”), the Authority, the Trustee and others, and such otherdocuments, opinions and matters to the extent we deemed necessary to render the opinions set forthherein.

The opinions expressed herein are based on an analysis of existing laws, regulations,rulings and court decisions and cover certain matters not directly addressed by such authorities. Suchopinions may be affected by actions taken or omitted or events occurring after the date hereof. We havenot undertaken to determine, or to inform any person, whether any such actions are taken or omitted orevents do occur or any other matters come to our attention after the date hereof. Accordingly, thisopinion speaks only as of its date and is not intended to, and may not, be relied upon in connection withany such actions, events or matters. Our engagement with respect to the Bonds has concluded with theirissuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of alldocuments and signatures presented to us (whether as originals or as copies) and the due and legalexecution and delivery thereof by, and validity against, any parties other than the Authority. We have

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assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted orcertified in the documents, and of the legal conclusions contained in the opinions, referred to in thesecond paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreementscontained in the Indenture, the Tax Certificate and the Local Agency Certificates, including (withoutlimitation) covenants and agreements compliance with which is necessary to assure that future actions,omissions or events will not cause interest on the Bonds to be included in gross income for federalincome tax purposes. We call attention to the fact that the rights and obligations under the Bonds, theIndenture, the Tax Certificate and the Local Agency Certificates and their enforceability may be subjectto bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and otherlaws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise ofjudicial discretion in appropriate cases and to the limitations on legal remedies against joint powersauthorities in the State of California. We express no opinion with respect to any indemnification,contribution, penalty, choice of law, choice of forum, choice of venue, waiver or severability provisionscontained in the foregoing documents. Finally, we undertake no responsibility for the accuracy,completeness or fairness of the Official Statement or other offering materials relating to the Bonds andexpress no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, weare of the following opinions:

1. The Bonds constitute the valid and binding limited obligations of the Authority.

2. The Indenture has been duly executed and delivered by, and constitute the validand binding obligation of, the Authority.

3. Interest on the Bonds is excluded from gross income for federal income taxpurposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of Californiapersonal income taxes. The amount treated as interest on the Bonds (which have a maturity of one year orless) and excluded from gross income will depend upon the taxpayer’s election under Internal RevenueService Notice 94-84. Interest on the Bonds is not a specific preference item for purposes of the federalindividual and corporate alternative minimum taxes, although it is included in adjusted current earningswhen calculating corporate alternative minimum taxable income. We express no opinion regarding othertax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, theBonds.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

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APPENDIX I

THE BOOK-ENTRY-ONLY SYSTEM

The information in this Appendix concerning The Depository Trust Company (“DTC”), NewYork, New York, and DTC’s book entry system has been obtained from DTC and the Local Agency andthe Authority take no responsibility for the completeness or accuracy thereof. The Local Agency cannotand does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute tothe Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds,(b) certificates representing ownership interest in or other confirmation or ownership interest in theBonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registeredowner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTCIndirect Participants will act in the manner described in this Appendix. The current “Rules” applicableto DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTCto be followed in dealing with DTC Participants are on file with DTC.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for theBonds. The Bonds will be prepared in the form of fully registered securities registered in the name ofCede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorizedrepresentative of DTC. One fully registered security certificate will be executed and delivered for eachmaturity of the Bonds, each in the aggregate principal amount of such maturity, and will be depositedwith DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a“banking organization” within the meaning of the New York Banking Law, a member of the FederalReserve System, a “clearing corporation” within the meaning of the New York Uniform CommercialCode, and a “clearing agency” registered pursuant to the provisions of Section 17A of the SecuritiesExchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. andnon-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates thepost-trade settlement among Direct Participants of sales and other securities transactions in depositedsecurities, through electronic computerized book-entry transfers and pledges between Direct Participants’accounts. This eliminates the need for physical movement of securities certificates. Direct Participantsinclude both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearingcorporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust& Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities ClearingCorporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCCis owned by the users of its regulated subsidiaries. Access to the DTC system is also available to otherssuch as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearingcorporations that clear through or maintain a custodial relationship with a Direct Participant, eitherdirectly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. TheDTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. Moreinformation about DTC can be found at www.dtcc.com and www.dtc.org; nothing contained in suchwebsites is incorporated into this Official Statement.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actualpurchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and IndirectParticipants’ records. Beneficial Owners will not receive written confirmation from DTC of theirpurchase. Beneficial Owners are, however, expected to receive written confirmations providing details ofthe transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participantthrough which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the

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Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting onbehalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownershipinterests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC areregistered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may berequested by an authorized representative of DTC. The deposit of the Bonds with DTC and theirregistration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficialownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflectonly the identity of the Direct Participants to whose accounts such Bonds are credited, which may or maynot be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keepingaccount of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by DirectParticipants to Indirect Participants, and by Direct Participants and Indirect Participants to BeneficialOwners will be governed by arrangements among them, subject to any statutory or regulatoryrequirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to takecertain steps to augment the transmission to them of notices of significant events with respect to theBonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. Forexample, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds fortheir benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, BeneficialOwners may wish to provide their names and addresses to the registrar and request that copies of noticesbe provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’spractice is to determine by lot the amount of the interest of each Direct Participant in such issue to beredeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect tothe Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usualprocedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. TheOmnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whoseaccounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal of, premium, if any, and interest evidenced by the Bonds will be made toCede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’spractice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detailinformation from the Authority or the Trustee, on payable date in accordance with their respectiveholdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed bystanding instructions and customary practices, as is the case with securities held for the accounts ofcustomers in bearer form or registered in “street name,” and will be the responsibility of such Participantand not of DTC (nor its nominee), the Trustee, or the Authority, subject to any statutory or regulatoryrequirements as may be in effect from time to time. Payment of principal of, premium, if any, and interestevidenced by the Bonds to Cede & Co. (or such other nominee as may be requested by an authorizedrepresentative of DTC) is the responsibility of the Authority or the Trustee, disbursement of suchpayments to Direct Participants will be the responsibility of DTC, and disbursement of such payments tothe Beneficial Owners will be the responsibility of Direct and Indirect Participants.

THE AUTHORITY, THE PARTICIPANTS OR THE TRUSTEE WILL NOT HAVE ANYRESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS ORBENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE

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TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THESELECTION OF BONDS FOR PREPAYMENT.

None of the Authority, the Participants or the Trustee can give any assurances that DTC, DTCParticipants, Indirect Participants or others will distribute payments of principal of, premium, if any, andinterest evidenced and represented by the Bonds paid to DTC or its nominee, as the registered Owner, orany redemption or other notice, to the Beneficial Owners or that they will do so on a timely basis or thatDTC will serve and act in a manner described in this Official Statement.

DTC may discontinue providing its services as depository with respect to the Bonds at any timeby giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that asuccessor depository is not obtained, Security certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC(or a successor securities depository). In that event, Note certificates will be printed and delivered.

The information in this appendix concerning DTC and DTC’s book-entry system has beenobtained from sources that the Local Agency and the Authority believe to be reliable, but the LocalAgency and the Authority take no responsibility for the accuracy thereof.

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