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BACKGROUND In 2002 the Pleasanton Unified School District (PUSD) issued $15.7 million in certificates of participation (the "Capital Improvement Financing Projects, Series K") for the construction of classrooms and facilities at the two comprehensive high schools, construction of a new child care facility and for a portion of the acquisition of land for Hart Middle School. In 2003 the PUSD issued $4.37 million in certificates of participation (the "2003 Financing Project") to construct and acquire infrastructure improvements in the Vineyard Corridor related to the Neal School site. The annual debt payments for both series of certificates of participation are approximately $1.2 million. New homes and commercial properties constructed in Pleasanton pay school development impact fees at the building permit stage. PUSD uses these monies to pay the annual debt service on the COP. These fees have averaged approximately $3.5 million per year for the past five years. As a result of the unprecedented economic times that we find ourselves in today, the PUSD has only collected approximately $300,000 in development impact fees to date this fiscal year. This is a drastic deviation from the historical five year average annual collection of these fees; no one could have predicted this twelve months ago. As a result of this, the PUSD staff approached the City looking for creative ways to bridge the gap in the collection of these fees and the payment of the COP. After several weeks of discussions, it was decided that the best approach would be for the City to loan the District up to $1.2 million on a revolving line of credit basis over the next four years, to accommodate the economic uncertainty of the immediate future. DISCUSSION A revolving line of credit is an agreement where an entity (lender -City of Pleasanton) agrees to lend a specific amount of money (up to a maximum of $1.2 million) to another entity (borrower -PUSD) and to allow that amount to be borrowed again once it has been repaid for a limited period of time (4 years). The draws on the revolving line of credit (Advances) will be used to pay a portion of the lease payments due and payable by the PUSD on the COP. Interest on the Advances will commence on the date of the Advance and the interest rate will be equal to the Bank of America prime rate (currently at 3.25%) and will be calculated based on simple interest. The PUSD will repay the Advances from development impact fees deposited into Fund 25. The revolving line of credit will be secured by a Promissory Note (promise to repay the City for all Advances from Fund 25). The PUSD also uses approximately $203,000 of the monies deposited in Fund 25 for payment of annual lease payments on portable classrooms. Therefore, the Advances under the Promissory Note will be repaid from Fund 25 after the PUSD deposits annually with the trustee (of the leases for the portables) enough monies for the lease payments (estimated to be $203,418). Otherwise, all development impact fees deposited in Fund 25 will be used first to repay any outstanding Advances. Each time an Advance occurs, an Amendment to the Promissory Note will be signed by the parties, and the total of Advances can not exceed $1.2 million at any time. Page 2 of 3