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BACKGROUND Under the provisions of Proposition 1A adopted by voters in 2004, local revenues are protected from State take -a -ways except the State is allowed to borrow local property taxes in this manner twice within a ten year period but any such borrowing must be repaid with interest within three years. Under that provision, the State is required to repay the borrowing by June 30, 2013. In recognition of the State's taking of local revenues protected by Proposition 1A, the State has worked with the CSCDA to establish a program whereby the CSCDA would issue bonds to generate revenues that would be used to provide local agencies with funding equal to the amount that will be borrowed by the State in early 2010 rather than receiving the payment in June 2013. If the City of Pleasanton participates in the program it will pledge to CSCDA its repayments from the State. Bondholders will have no recourse to the City of Pleasanton if the State does not make the Proposition 1A Repayment. It should be noted that the State used a similar program in 2005 when it borrowed Vehicle License Fee revenue from cities and counties and the program was successful. CSCDA is a joint powers authority sponsored by the California State Association of Counties and the League of California Cities. The member agencies of California Communities include approximately 230 cities and 54 counties throughout California. California Communities have assembled a finance team to execute this transaction which includes Orrick, Herrington Sutcliffe (bond counsel), Goldman Sachs (underwriter), JP Morgan, Morgan Stanley, E.J. De La Rosa, and Stone Youngberg (co- underwriters), Nixon Peabody (underwriter's counsel), Stradling Yocca Carlson Rauth (disclosure counsel), Greencoast Capital Partners (program consultant), and Wells Fargo Bank (trustee). DISCUSSION The benefits to the City of Pleasanton of participation in the Proposition 1A Securitization Program include: Immediate cash relief the sale of the City of Pleasanton's Proposition 1A Receivable will provide the City of Pleasanton with 100% of its Proposition 1A Receivable in two equal installments, on January 15, 2010 and May 3, 2010. Mitigates the loss of 8% of property tax revenue The State will withhold 8% of property tax receivables due to cities, counties, and special districts under Proposition 1A. Bond proceeds to be distributed will coincide with the exact dates that the State will be shifting property tax from local agencies. All costs of financing borne by the State of California. The City of Pleasanton will not have to pay any interest cost or costs of issuance in connection with its participation. Page 2 of 3