• NEW ISSUE-BOOK-ENTRY ONLY

2010-0262 through 2010-0266

\ RATI~S: SERIES 2UIOA NOTE PARTICIPATIO,NS: Standard & Poor'sy''SP-1+" SERIES 2010B NOTE PARTICIPATIONS: Standard & Poor}s: "SP-1+"

~~RATINGS" herein)

In the opinion of Stradling Yocca Carlson & Rauth. a Professional Corporation. San francisco, Cal1jornia. Special Counsel to the Districts and the Authori~y. based upon an analysis of existing laws, statutes. regulations, rulings and judicial decisions. and assuming. among other matters, the accuracy of certain representations and compliance with certain covenants and requirements described herein. interest on the Notes represented by the Note Participations is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tro: imposed on individuals and corporations. In the further opinion of Special Counsel. interest on the Notes represented by the Note Participations is exempt from State qf California personal income tcu. Special Counsel expresses no opinion regarding. any other tru: consequences related to the ownership or disposition of or the accrual or receipt of interest on, the Note Participations. See "TAX MATTERS" herein.

$8,395,000 CALIFORNIA COMMUNITY COLLEGE

FINANCING AUTHORITY TAX AND REVENUE ANTICIPATION NOTE PROGRAM

NOTE PARTICIPATIONS, SERIES 2010A Interest Rate: 2.00%; Yield: 1.10%; CUSIP No.: 130119BT6

Dated: Date of Delivery

$1,420,000 CALIFORNIA COMMUNITY COLLEGE

FINANCING AUTHORITY TAX AND REVENUE ANTICIPATION NOTE PROGRAM

NOTE PARTICIPATIONS, SERIES 2010B Interest Rate: 2.25%; Yield: 1.25%; CUSIP No.: 130119BU3

Due: March I, lOll

The California Community College Financing *'\uthority Tax and Revenue Anticipation Nore Program, Note Participations Series 2010A (the "Series 2010.~ Note Participations") and Series 2010B {the "Series 2010B Note Participations," and together with the Series 2010A Note Participations, the "Note Participations"), arc being executed and delivered pursuant to the terms of a Trust *'\greement, dated as of April!, 2010 (the "Tmst Agreement"), by and among certain California communi[)· college districts (collectively, the-"Distticts"), the California Community College Financing .t\uthority (the "~--\uthority"), as sponsor of the Program (defined herein) and \'Veils Fargo Bank, National Association, as tmstee (the "Trustee"). Each series of Note Participations evidences and represents fractional and undivided interests in certain tax and revenue anticipation notes attributable to such series of Note Participations (individually, a "Note" and collectively, the "Notes"), and debt service payments thereon to be made by the Districts issuing such Notes, in the same aggregate principal amount the related series of Note Participations. The Note Participations are payable by the Districts identified herein. In accordance with State of California (the "State") law and the authorizing resolution of the participating Districts (each a "Note Resolution"), the Note of each Disr.rict is payable only out of the taxes, income, revenue, cash receipts and other moneys intended as receipts for such District's general fund and which are received in or accrued to Fiscal Y car 2009-l 0 and legally available for payment therefor, as further described herein.

The Note Participations will be prepared in fully registered form and, when executed and delivered, will be registered in the name of Cede & Co., as owner of the Note Participations and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Note Participations. Individual purchases and sales of the Note Participations may be made in book-entry form only, in Authorized Denominations. Purchasers will not receive certificates representing their interest in the Note Participations. Principal and interest evidenced by the Nore Participations will be payable by wire transfer to DTC, which in turn is required to remit such principal and interest' ro DTC Participants for subsequent disbursement to the Beneficial Owners of the Note Participations, as more fully described herein. See "DESCRIPTION OF THE NOTE PARTICIPATIONS- Registration and Transfer of Note Participations."

The Note Participations are not subject to prepayment or redemption prior to maturity.

The Note Participations are being sold to provide operating cash for the Districts' respective working capital expenditures and the investment and reinvestment of funds for the Districts prior to the receipt of anticipated tax payments and other revenues received in or accrued to Fiscal Y car 2009-10. Each Note is secured by a pledge of certain unrestricted revenues intended as receipts for the issuing District's general fund which are received in or accrued to Fiscal Year 2009-10, and each Note shall constitute a first lien and charge thereon and shall be payable therefrom. Specifically, each District shall pay its Note from certain State apportionment funding that is expected to be received in July 2010 and which aggregately represents Stare apportionments previously due to such District during Fiscal Year 2009-10 (the "Deferred Revenues"). Pursuant to State Law and its Note Resolution, each District has determined that the Deferred Revenues are unrestricted revenues thereof accmcd to Fiscal \'ear 2009-10 and available to pay its Note. To the extent not so paid, each Note shall be paid from any other taxes, income, revenue, cash receipts and other moneys of such District lawfully aYailable therefor, as further described herein. Sec "SECURITI" AND SOURCES OF PAYMENT' and "RISK FACTOR._'-;'' herein.

Each Note Resolution requires the applicable District to set aside and deposit in a special fund to be established by such District the Deferred Revenues received by· such District at such dates as described herein, so that the amount on deposit in such fund on such dates, taking into consideration acmal investment earnings accmed thereto, is equal to all of the principal of and interest due on such Note, as more fully described herein. The obligation of each District is a several and not a joint obligation and is strictly limited to such District's repayment obligation under its Note Resolution and Note.

THE NOTE PARTICIPATIONS EVIDENCE AND REPRESENT LIMITED OBLIGATIONS OF THE INDIVIDUAL DISTRICTS, PAYABLE SOLELY FROM CERTAIN FUNDS PLEDGED UNDER THE TRUST AGREEMENT THE OBLIGATION OF EACH DISTRICT TO PAY PRINCIPAL AND INTEREST EVIDENCED BY THE NOTE PARTICIPATIONS DOES NOT CONSTITUTE A DEBT OF THE DISTRICTS, THE AUTHORITY 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,

The Note Participations are offered when, as and if executed and delivered and accepted by the Undenvriter. subject to the approval of validity by Stradling Yocca Carlson & Rauth, a Professional Corporation. San Francisco. California. Special Counsel and Disclosure Counsel. Certain legal mailers will be passed upon for the Underwriter by Fulbright & Jaworski LL.P .. Los Angeles. California. The Note Participations in definitive form are expected to be available for delivery through the facilities of DTC in New York, New York on or about April 29, 2010.

RBC CAPITAL MARKETS

,SCANNED Dated: April22, 2010

No broker, dealer, salesman 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 Districts or the Underwriter. 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 District 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 Note Participations 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 Districts and other sources believed by the Authority and the Underwriter to be reliable. The Underwriter has 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 Underwriter does 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 Note Participations. 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.

The Underwriter has provided the following sentence for inclusion in this Official Statement: "The Underwriter has reviewed the information in this Official Statement in accordance with its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such infonnation."

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

Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21 E of the United States Securities Exchange Act of 1934, as amended. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget," "project," "forecast" or other similar words.

.,

Community College Districts Issuing Notes Attributable to the Series 2010A Note Participations

Allan Hancock Joint Community College District Merced Community College District

Palo Verde Community College District San Luis Obispo County Community College District

Community College Districts Issuing Notes Attributable to the Series 2010B Note Participations

Gavilan Joint Community College District

CALIFORNIA COMMUNITY COLLEGE FINANCING AUTHORITY

Scott Lay, Executive Director and Board Member Kimi Shigetani, Board Member Doug Brinkley, Board Member Bonnie Dowd, Board Member

Andrew Suleski, Board Member

SPECIAL SERVICES

Program Sponsor

Community College League of California Sacramento, California

Underwriter

RBC Capital Markets Corporation Los Angeles, California

Special Counsel and Disclosure Counsel

Stradling Yocca Carlson & Rauth, a Professional Corporation San Francisco, California

Trustee

Wells Fargo Bank, National Association Los Angeles, California

[THIS PAGE INTENTIONALLY LEFT BLANK]

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TABLE OF CONTENTS

INTRODUCTORY STATEMENT .......................................................................................................................... I

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

DESCRIPTION OF THE NOTE PARTICIPATIONS ................................................................................................ 2

DENOMINATIONS; PAYMENT OF PRINCIPAL AND INTEREST ...................................................................................... 2 REGISTRATION AND TRANSFER OF NOTE PARTICIPATIONS ....................................................................................... 3 REDEMPTION ............................................................................................................................................................ 3

EST!MA TED SOURCES AND USES OF PROCEEDS ............................................................................................ 3

SECURJTY AND SOURCES OF PAYMENT.. ......................................................................................................... 4

THE NOTES ................................................................................. : ............................................................................. 4 DEPOSIT OF NOTES; APPLICATION OF NOTE PARTICIPATION PAYMENT FUND .......................................................... 5 DEFAULTED NOTES ................................................................................................................................................... 6 INVESTMENT OF NOTE PROCEEDS AND PLEDGED REVENUES ................................................................................... 6

INVESTMENT OF DISTRICT FUNDS ..................................................................................................................... 6

RISK FACTORS ....................... :: .......... : ..................................................................................................................... 7

LiMITED OBLIGATIONS OF THE DISTRICTS ................................................................................................................ 7 LiMITED SOURCE OF REPAYMENT FOR NOTES AND DEFAULTED NOTES ................................................................... 8 DELAY IN THE RECEIPT OF DEFERRED REVENUES .................................................................................................... 8 BANKRUPTCY ........................................................................................................................................................... 8 No JOINT OBLIGATION ............................................................................................................................................. 8

FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA ............................................................. 8

MAJOR REVENUES .................................................................................................................................................... 8 MINIMUM FUNDING GUARANTEES FOR CALIFORNIA COMMUNITY COLLEGE DISTRICTS UNDER

PROPOSITIONS 98 AND I I I .............................................................................................................................. I I STATE ASSISTANCE ............................................................................................................................................... 12

PARTICIPATING DISTRICTS' INFORMATION .................................................................................................. 21

GENERAL INFORMATION REGARDING DISTRICTS ................................................................................................... 22

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ................... 23

ARTICLE Xll!A OF THE CALIFORNIA CONSTITUTION .............................................................................................. 23 LEGISLATION IMPLEMENTING ARTICLE X lilA ....................................................................................................... 23 UNITARY PROPERTY ............................................................................................................................................... 24 ARTICLE Xl!IB OF THE CALIFORNIA CONSTITUTION .............................................................................................. 24 ARTICLE XIIIC AND ARTICLE X!!!D OF TilE CALIFORNIA CONSTITUTION ............................................................. 25 PROPOSITION 46 ...................................................................................................................................................... 26 PROPOSITION 98 ..................................................................................................................................................... 26 PROPOSITION 1 1 1 ... ................................................................................................................................................ 27 PROPOSITION 39 .................................................................................................................................................... 28 PROPOSITION I A .................................................................................................................................................... 28 fUTURE INITIATIVES .............................................................................................................................................. 29

TAX MATTERS ....................................................................................................................................................... 29

L!T!GA T!ON ............................................................................................................................................................ 30

DISTRICTS ............................................................................................................................................................... 30 THE AUTHORITY ..................................................................................................................................................... 30

RA T!NGS .................................................................................................................................................................. 31

UNDERWRITING ................................................................................................................................................... 31

CONTINUING DISCLOSURE ................................................................................................................................ 31

TABLE OF CONTENTS (cont'd)

MATERIAL EVENTS UNDERTAKING ....................................................................................................................... 31 PRIOR CONTINUING DISCLOSURE OBLIGATIONS ..................................................................................................... 32

CERTAIN LEGAL MATTERS ................................................................................................................................ 33

AUTHORIZATION AND APPROVAL ................................................................................................................... 33

APPENDIX A - NOTE AMOUNT BY DISTRICT AND COVERAGE ANALYSIS ...................................... A-1 APPENDIX B - DISTRICT FINANCIAL INFORMATION ............................................................................. B-1 APPENDIX C - CASH FLOWS AND ALTERNA T!VE CASH RESOURCES ............................................... C-1 APPENDIX D - REPAYMENT PERCENTAGES AND AMOUNTS .............................................................. D-1 APPENDIX E - INVESTMENT OF NOTE PROCEEDS ................................................................................. E-1 APPENDIX F - DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE TRUST

AGREEMENT ....................................................................................................................... F-1 APPENDIX G - PROPOSED FORM OF SPECIAL COUNSEL OPINION ..................................................... G-1 APPENDIX H - THE BOOK-ENTRY ONLY SYSTEM .................................................................................. H-1 APPENDIX I - COUNTY TREASURY POOLS ............................................................................................ 1-1 APPENDIX 1 - SELECTED DISTRICT FINANCIAL AND DEMOGRAPHIC INFORMATION ................. J-1

II

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$8,395,000 CALIFORNIA COMMUNITY COLLEGE

FINANCING AUTHORITY

$1,420,000 CALIFORNIA COMMUNITY COLLEGE

FINANCING AUTHORITY TAX AND REVENUE ANTICIPATION NOTE PROGR.\M

NOTE PARTICIPATIONS, SERIES 201 OA TAX AND REVENUE ANTICIPATION NOTE PROGMM

NOTE PARTICIPATIONS, SERIES 20108

INTRODUCTORY STATEMENT

This introduction is not a summary of this Official Statement. It is only a brief description of and is qualified by more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents described herein. References to and summaries of provisions of the Constitution and laws of the State of California and any documents referred to herein do not purport to be complete, and such r~ferences are qualified in their entirety by reference to the complete provisions.

This Official Statement, including the cover page and appendices hereto (the "Official Statement"), sets forth certain information concerning the California Community College Financing Authority (the "Authority") TiL'< and Revenue Anticipation Note Program Note Participations, Series 20 I OA (the "Series 20 I OA Note Participations") and Series 20 I OB (the "Series 201 OB Note Participations," and together with the Series 201 OA Note Participations, the "Note Participations"). The Authority serves as sponsor of the Program (defined below) and as representative of the participating community college districts for certain purposes related to the Program (defined herein).

Pursuant to the Community College League of California Tax and Revenue Anticipation Note Program (the "Program"), the participating community college districts (collectively, the "Districts") in the State of California (the "State") are issuing the tax and revenue anticipation notes (the "Notes") and delivering the Note Participations pursuant to a Trust Agreement, dated as of April 1, 2010 (the "Trust Agreement"), by and among the Districts, the Authority and Wells Fargo Bank, National Association, as trustee (the "Trustee"). Each District participating in the Program is the issuer of its Note which, when combined with the Notes of other Districts participating in the Program, shall be evidenced by the applicable series of Note Participations. Each series of Note Participations evidences and represents fractional and undivided interest in the Note of each District attributable to such series of Note Participations. Each District participating in the Program is severally, not jointly, liable on the series of Note Participations to which its Note is attributable, in the proportion that the face amount of such District's Note bears to the total aggregate face amount the Notes attributable to such series of Note Participations.

The Note Participations will be executed and delivered in an aggregate principal amount equal to the aggregate principal amount of the Notes. The Notes are being issued to provide operating cash for the several Districts' current working capital expenditures, capital expenditures and the investment and reinvestment of funds prior to the receipt of anticipated tax payments and other revenues. The Notes will be delivered to and deposited with the Trustee for the benefit of the registered owners of the Note Participations, and the payments on such Notes will be used for the payment of the principal of and interest evidenced by the Note Participations. The Notes shall not be used for any other purpose while any of the Note Participations remain outstanding. For more specific infonnation on the Districts, see Appendices A, B, C, D, E and J.

The Note of each District is issued under the authority of Article 7.6, Chapter 4, Part I, Division 2, Title 5 (commencing with Section 53850) of the California Government Code (the "Act") and pursuant to a resolution of issuance adopted by the legislative body of each such District (each a "Note

Resolution"). The issuance of a District's Note will provide moneys to meet such District's anticipated cash flow needs for its Fiscal Year ending on June 30, 20 I 0 ("Fiscal Year 2009-1 0") created by timing differences between its anticipated expenditures for Fiscal Year 2009-10 and its estimated receipt of certain revenues for Fiscal Year 2009-10.

The Note Participations enjoy the benefits of a security interest in the money held in certain funds established pursuant to the Trust Agreement, subject to the provisions of the Trust Agreement permitting the disbursement thereof as set forth therein. NEITHER THE OBLIGATION OF EACH DISTRICT TO PAY PRINCIPAL OF AND INTEREST ON ITS RELATED NOTE, NOR THE NOTE PARTICIPATION EVIDENCING SUCH DISTRICT'S OBLIGATION, CONSTITUTES A DEBT OF THE DISTRICTS, THE AUTHORITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IN CONTRA VENTI ON OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

Certain events could affect the ability of the Districts to make payments of principal and interest on the Notes evidenced by the Note Participations. See "SECURITY AND SOURCES OE.PAYMENT" and "RISK FACTORS" for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Note Participations.

Copies of the Trust Agreement and the standard form of the Note Resolution summarized herein are available upon request during the initial offering period from Wells Fargo Bank, National Association, Corporate Trust Services, 707 Wilshire Blvd., 171

h Floor, Los Angeles, California 90017.

All capitalized words, unless otherwise defined herein, shall have the meanings set forth in the Trust Agreement. See APPENDIX F- "DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE TRUST AGREEMENT."

THE AUTHORITY AND THE PROGRAM

Tlte Authority. The Authority serves as sponsor of the Program and as representative of the Districts for certain purposes related to the Program. The Authority is a public entity organized pursuant to a Joint Exercise of Powers Agreement among a number of California Community College districts, entered into pursuant to the provisions relating to the joint exercise of powers contained in Chapter 5 of Division 7 of Title I (commencing with Section 6500) of the California Government Code. The Authority is authorized to issue bonds and to finance working capital and capital projects for Districts within the State of California pursuant to the Marks-Roos Local Bond Pooling Act of 1985, constitt1ting Article 4 (comlllencing with Section 6584) of Chapter 5 of Division 7 of Title I of the California Government Code.

The holders of obligations of the Authority have no claim on the security of the Note Participations, and the Owners of the Note Participations will have no claim on the security of any other obligations issued by the Authority.

DESCRIPTION OF THE NOTE PARTICIPATIONS

Denominations; Payment of Principal and Interest

The Note Participations will be prepared in fully registered form and, when executed and delivered, will be registered in the name of Cede & Co., as registered Owner of the Note Participations and nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Note Participations. Individual purchases may be made in book-entry form only in Authorized Denominations. Purchasers will not receive certificates representing their interest in

2

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the Note Participations purchased. So long as Cede & Co. is the registered Owner of the Note Participations, as nominee of DTC, references herein to the Owners of the Note Participations shall mean Cede & Co. and shall not mean the actual purchasers (the "Beneficial Owners") of the Note Participations.

The Note Participations will be dated the date of initial execution and delivery thereof and each series of Note Participations will evidence and represent principal of the Notes attributable thereto, and interest accrued thereon, from the date of initial issuance of such Notes, at the rates per annum set forth on the cover page hereof. The Note Participations mature on March I, 20 II (the "Maturity Date"). Interest and principal evidenced by the Note Participations is payable as provided herein.

So long as Cede & Co. is the registered Owner of the Note Participations, the principal and interest evidenced by the Note Participations will be payable by wire transfer by the Trustee to Cede & Co., as nominee for DTC, which is expected, in turn, to remit such amounts to DTC Participants (as defined herein) for subsequent disbursement to the Beneficial Owners. See APPENDIX H - "THE BOOK-ENTRY ONLY SYSTEM." Interest payable with respect to the Note Participations will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Registration and Transfer of Note Participations

So long as the Note Participations are subject to the DTC book-entry system, they will be registered, and may be transferred, as described in APPENDIX H - "THE BOOK-ENTRY ONLY SYSTEM."

Redemption

The Note Participations are not subject to redemption prior to their Maturity Date.

ESTIMATED SOURCES AND USES OF PROCEEDS

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

Sources Principal Amount Original Issue Premium

TOTAL SOURCES

Uses Deposit to Proceeds Funds'''

Costs of Issuance''' TOTAL USES

Series 2010A

$8,395,000.00 62.794.60

.$..8 457 794.60

$8,360,348.90 97 445.70

$8 457 794 60

Series 201GB

$1,420,000.00 11.786.00

$1 431.786.00

$1,412,023.44

19,762.56 $! 43 I 786.00

(I) Available to be withdrawn by Districts from their individual subaccounts on and after the closing date. (l) Includes Underwriter·s discount, legal fees and other costs of issuance.

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SECURITY AND SOURCES OF PAYMENT

The Notes

Each series of Note Participations evidences and represents fractional and undivided interests in the Notes attributable to such series of Note Participations, and in debt service payments thereon to be made by the related Districts. The Notes are general obligations of the respective Districts and, to the extent not paid from moneys pledged pursuant to the respective Note Resolution of the related District, will be paid from other moneys of the Districts legally available therefor. However, except for such Pledged Revenues as described herein, the Districts are not prohibited from pledging, encumbering and utilizing their moneys for other purposes and there can be no assurance that such moneys will be available for the payment of each series of Note Participations and the Notes evidenced thereby. No District has any obligation to pay the principal of or interest on the Note of any other District.

Pursuant to Act, the principal amount of each District's Note, together with the interest thereon, is payable from unrestricted.revenues received in or accrued to Fiscal Year 2009-10 and which are legally __ available for the payment thereof. Specifically, each District shall pay its Note from certain State apportionment funding that is expected to be received in July 2010, and which aggregately represents State apportionments previously due to such District during Fiscal Year 2009-1 0, but which were deferred pursuant to State budget legislation (the "Deferred Revenues"). Pursuant to the Act and its Note Resolution, each District has determined that the Deferred Revenues are unrestricted revenues thereof accrued to Fiscal Year 2009-10 and available to pay its Note. The term "unrestricted revenues" means, with respect to a District, all taxes, income, revenue (including, but not limited to, revenue from the State and federal govemments), cash receipts and other moneys, intended as receipts for the general fund of such District received or accrued during Fiscal Year 2009-10 and which generally are available for the payment of current expenses and other obligations thereof.

The table below shows the aggregate amount of State apportionment funding due each District for Fiscal Year 2009-1 0, amounts expected to be received during the period of July 2009 through June 20 I 0, and the Deferred Revenues. No District's Note is being issued in a principal amount which, together with interest thereon, exceeds such District's Deferred Revenues. However, a delay in the receipt of the Deferred Revenues could affect a District's ability to pay the Note as described herein. See "RISK FACTORS" herein.

Deferred State Apportionment Revenue Fiscal Year 2009-10

California Community College Financing Authority Tu and Revenue Note Program Note Participations, Series 2010A

State Apportionments Total State To Be Paid Through Deferred State

District A~~ortionments June 2010 A1mortionments Allan Hancock Joint $32,880.568 $25,960,576 $6,919.992 Community College District

Gavi\an Community $12,022,341 $9.327,532 $2,694.809 College District

Merced Community College $37,609,742 $29,288.174 $8.321.568 District

Palo Verde Community $10.868.732 $8,563,271 $2,305,461 College District

San Luis Obispo $13,275.320 $10.446.618 $2,828,702 Community College District

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See APPENDIX A hereto for a listing of each District, the estimated principal amount of each Note, the allocation of each Note with respect to the aggregate principal amount of the Note Participations, and the projected Note payment coverage for each District.

As security for the payment of the principal of and interest on its Note, each District has pledged the Deferred Revenues (so pledged, the "Pledged Revenues"). The principal of a District's Note, and the interest thereon, constitute a first lien and charge on such Pledged Revenues and are payable from the Pledged Revenues, as and when received, as further described herein.

In order to effect the pledge of the Pledged Revenues, each District has agreed under its Note Resolution to establish and maintain a special account within its general fund (its "Payment Account") and further agrees and covenants to maintain its Payment Account until the payment of the principal of its Note and the interest thereon. A District may establish its Payment Account with the Trustee. Pursuant its Note Resolution and the purchase agreements for the Note Participations, each District has agreed to cause to be set aside that portion of the Pledged Revenues into its Payment Account on either (i) the first business day of the month following the Repayment Month, or (ii) 30 calendar days after the District has received the Pledged Revenues, whichever comes first, until the amount on deposit in its Payment Account, together with the amount, if any, on deposit in any subaccount thereof maintained by the Trustee pursuant to the Trust Agreement (a "Payment Subaccount"), and taking into consideration anticipated investment earnings thereon to be received by the maturity date thereof, is equal the principal and interest due on such Note. The term "Repayment Month" means the month in which the Deferred Revenues are received, except that no Repayment Month may occur later than one month prior to the Maturity Date of a District's Note. Each District currently expects to receive all of its Deferred Revenues during the month of July 2010.

Pursuant to the Trust Agreement, each District is required to file with the Trustee, within seven (7) Business Days following transfer to and deposit in a District's Payment Account of the amounts as described above, a certificate evidencing such transfer and deposit. If the District fails to make or cause to be made such transfer to and deposit in its Payment Account, such failure will constitute an Event of Default, and the Tmstee will have the right, without declaring such District's Note to be immediately due and payable, to require the District to pay to the Trustee an amount equal to the principal of such Note and interest thereon to maturity. Notwithstanding the foregoing, any District for which the Trustee is holding or investing moneys or securities on behalf of said District in a Payment Subaccount (which moneys or securities are intended to be that District's Payment Account deposit) need not present the certificate described above.

Any moneys placed in a District's Payment Account will be for the benefit of the Owners of the series of Note Participations to which such District's Note is attributable. The moneys in such Payment Account will be applied only for the purposes for which such Payment Account is created until the principal of such District's Note and all interest thereon are paid or until provision has been made for the payment of the principal of and interest on the Note.

On or before the date specified in the Trust Agreement, the moneys in such District's Payment Account and Payment Subaccount, if any, will be transferred to the Note Participation Payment Fund described herein, to pay the interest on and principal of such District's Note when due.

Deposit of Notes; Application of Note Participation Payment Fund

Under the Trust Agreement, the Notes, as evidenced and represented by the series of Note Participations related thereto, are irrevocably deposited with and pledged and transferred to the Trustee for the benefit of the Owners of such Note Participations, and the payments on such Notes will be used for the punctual payment of the interest and principal evidenced and represented by such Note

5

Participations, and such Notes shall not be used for any other purpose while such series of Note Participations remains Outstanding. Such deposit, pledge and transfer constitutes a first and exclusive lien on the principal and interest payments of and all other rights under such Notes for the foregoing purpose in accordance with the terms of the Trust Agreement.

All principal and interest payments on a District's Note will be paid directly by such District to the Trustee. All principal and interest payments on a District's Note received by the Trustee will be deposited by the Trustee, as and when received, within the applicable Note Participation Payment Fund and will be held in trust by the Trustee for the benefit and security of the Owners of the applicable series of Note Participations to the extent provided in the Trust Agreement.

Pursuant to the Trust Agreement, the Trustee is required to deposit the moneys contained in the Note Participation Payment Funds at the respective times in the respective funds set forth below, each of which the Trustee agrees to maintain so long as the applicable series of Note Participations is Outstanding, and the money in each of such funds will be disbursed only for the purposes and uses authorized.

(a) Interest Fund. The Trustee shall deposit in separate interest funds for the Series 20 I OA Note Participations and the Series 20 I OB Note Participations, respectively, that amount of money representing the interest due and payable on the Notes attributable to such series of Note Participations on the Maturity Date; and such money shall be used and withdrawn by the Trustee solely for the purpose of paying interest evidenced and represented by the applicable series of Note Participations on such date.

(b) Principal Fund. The Trustee shall deposit in separate principal funds for the Series 2010A Note Participations and Series 20108 Note Participations, respectively, that amount of money representing the principal becoming due and payable on the Notes attributable to such series of Note Participations on the Maturity Date, and such monies shall be used and withdrawn by the Trustee solely for the purpose of paying the principal evidenced and represented by the applicable series of Note Participations on such date.

Defaulted Notes

!fa District fails to pay any of the principal of or interest on its Note on the due date thereof, such Note will become a Defaulted Note. See "APPENDIX F- DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF TRUST AGREEMENT- Default and Limitations of Liability."

Investment of Note Proceeds and Pledged Revenues

The Note proceeds, or an amount related to the Note proceeds, less amounts used to pay costs of issuance, and the Pledged Revenues will be invested either in certain investment agreements (the "Investment Agreements") to be held by the Trustee or in the Treasury Pools (defined herein) of the respective county in which such District is located. For further information on the criteria for investment agreements, see the definition of "Permitted Investments" in APPENDIX F. A description of each District's current intention with respect to the investment of its Note proceeds is provided in APPENDIX E- "INVESTMENT OF NOTE PROCEEDS" and APPENDIX I- "COUNTY TREASURY POOLS."

INVESTMENT OF DISTRICT FUNDS

Most funds of the Districts are deposited into the appropriate county treasury to the credit of the proper fund of the District. Certain moneys not required for the immediate necessities of a District may be invested in investments specified in Sections 16430 or 53601 of the Government Code. Accordingly,

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all funds of each District not subject to the exception, including cash receipts and other moneys received by each District for deposit to the general fund of such District and received in or accrued to fiscal year 2009-10, including such District's Pledged Revenues and unrestricted revenues, are typically deposited with the Treasury Pool for their county, to remain on deposit therein and generally available for the payment of current expenses and other obligations of the Districts, until deposited into their respective Payment Accounts.

The Districts are located in various counties within the State, the treasurer and tax collector (generally, a "Treasurer") for each of which maintains a pooled fund for the investment of surplus, discretionary and other moneys of, among others, special districts located in such county (each, a "Treasury Pool"). While each of the Districts is a community college district of the State is not required to deposit all of its surpluses, operating funds and other revenues with the Treasury Pool of the applicable county, each District is eligible for investment in its Treasury Pool, and all Districts maintain balances with their county Treasurers, including their general funds. For information on the respective county Treasury Pools, see APPENDIX I- "COUNTY TREASURY POOLS."

Each Treasury Pool in the State is subject to statutory restrictions and additional policy restrictions as may be determined by the respective county board of supervisors. Treasury Pools consist of the deposits of the applicable county, cities, special districts and other independent public agencies, with a certain class of "involuntary" depositors, including school districts. Discretionary Treasury Pool participants make up varying percentages of each Treasury Pool, but always comprise a minority of those participants. Decisions as to the investment of a Treasury Pool are made by a county investment officer, often the Treasurer, who establishes policies for such investments, taking into account the restrictions set forth in Section 53601 et seq. of the Government Code of the State, the applicable county board's policies, his or her own judgment, and certain other criteria such as safety of principal, liquidity and return on investment. Monthly reports of investments in the Treasury Pool are made available to the respective boards of supervisors, and investments are subject to internal controls and audits.

Each county maintains a county treasury oversight committee, pursuant to Section 27131 of the Government Code, which meets periodically to review and monitor the investments and investment policies of the Treasurer for compliance.

None of the Districts controls the investments made by its county Treasurer in its Treasury Pool, and each Treasury Pool will fluctuate by the amount invested and compositions of the investments during each fiscal year. Accordingly, the Districts cannot make representations regarding the security afforded by investments in their respective Treasury Pools. For current information on the respective county Treasury Pools, see APPENDIX I- "COUNTY TREASURY POOLS."

RISK FACTORS

ln evaluating a purchase of the Note Participations, potential investors should consider the following factors, together with all other information in this Official Statement. The following, however, do not purport to be an .exhaustive listing of risks and other considerations that may be relevant to an investment in the Note Participations. The following is not presented in an order reflective of their importance or significance to potential investors.

Limited Obligations of the Districts

The Note Participations are the limited obligation of each District, severally and not jointly payable solely from payments of principal and interest with respect to the Notes related thereto. The obligation of each District to pay principal of and interest on the Notes evidenced by the Note

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Participations does not constitute a debt of the related Districts or the Authority or of any member thereof within the meaning of any constitutional or statutory debt limitation or restriction.

Limited Source of Repayment for Notes and Defaulted Notes

The primary source of repayment of each series of Note Participations is payments on the Notes attributable thereto. In order for Owners of such Note Participations to be paid in full in a timely manner, I 00% of the payments with respect to such Notes must be paid as and when due. A District is liable on its Note (even in the event that such Note becomes a Defaulted Note) only to the extent of the Pledged Revenues. If the Pledged Revenues are not sufficient to pay a District's Note or Defaulted Note, as the case may be, such District would not be permitted to pay such Note or Defaulted Note from any other sources, including subsequent fiscal years' revenues. See "SECURITY AND SOURCES OF PAYMENT -The Notes" herein.

Delay in the Receipt of Deferred Revenues

While each District expects to receive its Deferred Revenues in such a time and manner as will permit the payment of principal of and interest on its Note, such expectation is based on facts and circumstances now known to such District, and factors beyond the control of such District may affect the timely receipt of Deferred Revenues. Further, State apportionments are subject to the appropriation of funds in the State's annual budget. Decreases in State revenues may affect appropriations made by the State legislature to the Districts, including the Deferred Revenues, and such apportionments may continue to be affected by ongoing national and State economic concerns and other factors over which the Districts will have no control. If the receipt of the Deferred Revenues is delayed past the maturity date of a District's Note, such District would not be permitted to pay its Note from any other sources, including subsequent fiscal years' revenues. See "FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA- Major Revenues" and"- State Assistance" herein.

Bankruptcy

As described herein, each District agrees under its Note Resolution to cause to be segregated in its Payment Account the Pledged Revenues received in the applicable Repayment Month. The filing of bankruptcy by one or more of the Districts could delay or impair the payment of all or a portion of the Note Participations. Further, the opinion of Special Counsel as to the enforceability of the Notes is expressly qualified by a declaration of bankruptcy.

No Joint Obligation

The obligation of a District to make payments on or in respect to its Note is a several and not a joint obligation and is strictly limited to such District's repayment obligation under its Note Resolution and its Note.

FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA

Major Revenues

General. California community college districts (other than Basic Aid Districts, as described below) receive, on average, approximately 52 percent of their funds from the State, 44 percent from local sources, and 4 percent from federal sources. State funds include general apportionment, categorical funds, capital construction, the lottery (which is less than 3 percent of a District's annual budget), and other minor sources. Local funds include property taxes, student fees, and miscellaneous sources.

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A community college district determines its revenue allocation using a program-based model. The model uses different factors to establish support levels for five different expenditure categories at the community college district: (I) Instruction and Instructional Administration; (2) Instructional Services; (3) Student Services; (4) Operation and Maintenance of Plants; and (5) Institutional Support. Different standards are used in each category to determine fund requirements. The target allocation is obtained by calculating the exact cost of funding the specific standards in each category on a district by district basis. The aggregate total of the financial needs of the five categories establishes the amount of funding a district will receive. State general fund moneys, local property taxes, and certain other local revenues, are allocated to the community college districts based on annual State apportionments of basic and equalization aid to community college districts for general purposes computed up to a revenue limit per unit of full time equivalent students ("FTES"). Such apportionments will, generally speaking, amount to the difference between a district's revenue limit and its local property tax allocation and student enrollment fees. Revenue limit calculations are adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among all community college districts in the State.

SB 361, signed by the Governor on September 29, 2006, establishes a new community college funding system with immediate effect. The new system included allocation of state general apportionment revenues to community college districts based on criteria developed by the Board of Governors of the California Community Colleges (the "Board of Governors") in accordance with prescribed statewide minimum requirements. In establishing these minimum requirements, the Board of Governors are required to acknowledge community college districts' need to receive an annual allocation based on the number of colleges and comprehensive centers in each respective district, plus funding received based on the number of credit and noncredit FTES in each district.

SB 361 also specified that, commencing with the 2006-07 fiscal year the minimum funding per FTES will be: (a) not less than $4,367 per credit FTES (subject to cost of Jiving adjustments funded through the budget act in subsequent fiscal years); (b) at a uniform rate of $2,626 per noncredit FTES (adjusted for the change in cost of living provided in the budget act in subsequent fiscal years); and (c) set at $3,092 per FTES (adjusted for the change in cost of living. provided in the budget act in subsequent fiscal years) for a new instructional category of"career development and college preparation."

Local revenues are first used to satisfy district expenditures. The major local revenue source is local property taxes that are collected from within district boundaries. Student enrollment fees from the local community college district generally account for the remainder of local revenues for the district. Property taxes and student enrollment fees are applied towards fulfilling the district's financial need. Once these sources are exhausted, State funds are used. State aid is subject to the appropriation of funds in the State's annual budget. Decreases in State revenues may affect appropriations made by the Legislature to the Districts. 1l1e sum of the property taxes, student enrollment fees, and State aid generally comprise the district's revenue limit.

State aid is subject to the appropriation of funds in the State's annual budget. Decreases in State revenues may affect appropriations made by the State legislature to the District, including the Deferred Revenues pledged to the repayment of the Notes. See "SECURITY AND SOURCES OF PAYMENT -The Notes," "RISK FACTORS," and "FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA- State Assistance" herein. State apportionments may continue to be affected hy ongoing national and State economic concerns and other factors over which the Districts will have no control.

"Basic Aid" community college districts are those districts whose local property tax and student enrollment fee collections exceed the revenue allocation determined by the program based model. Basic aid districts do not receive any funds from the State. The current law in California allows these districts to keep the excess funds without penalty. The implication for Basic Aid districts is that the legislatively determined annual cost of living adjustment and other politically determined factors are less significant in

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determining such districts primary funding sources. Rather, property tax growth and the local economy become the determining factors. For fiscal year 2009-10, none of the Districts will qualifY as a Basic Aid district.

A small part of each community college district's budget is from local sources other than property taxes and student enrollment fees, such as interest income, donations and sales of property. Every community college district receives the same amount of lottery funds per pupil from the State; however, these are not categorical funds as they are not for particular programs or students. The initiative authorizing the lottery does require the funds to be used for instructional purposes, and prohibits their use for capital purposes.

Tax Shifts and Triple Flip. Assembly Bill No. 1755 ("AB 1755"), introduced March I 0, 2003 and substantially amended June 23, 2003, requires the shifting of property taxes between redevelopment agencies and schools, including community college districts. On July 29, 2003, the Assembly amended Senate Bill No. I 045 to incorporate all of the provisions of AB 1755, except that the Assembly reduced the. amount of the required Education Revenue Augmentation Fund ("ERAF")_shift. to_ $135 million. Legislation commonly referred to as the "Triple Flip" was approved by the voters on March 2, 2004, as part of a bond initiative formally known as the "California Economic Recovery Act." This act authorized the issuance of $15 billion in bonds to finance the 2002-03 and 2003-04 State budget deficits, which are payable from a fund established by the redirection of tax revenues through the "Triple Flip." Under the "Triple Flip," one-quarter of local governments' one percent share of the sales tax imposed on taxable transactions within their jurisdiction is redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, the legislation redirects property taxes in the ERAF to local government. Because the ERAF monies were previously earmarked for schools, the legislation provides for schools to receive other state general fund revenues. It is expected that the swap of sales taxes for property taxes would terminate once the deficit financing bonds are repaid, which is currently expected to occur in approximately 9 to 13 years.

Budget Procedures. On or before September 15 of each calendar year, the respective board of trustees for each community college district is required under Section 58305 of the California Code of Regulations, Title V, to adopt a balanced budget. Each September, every State agency, including the Chancellor's Office of the California Community Colleges (the "State Chancellor"), submits to the Department of Finance ("DOF") proposals for changes in the State budget. These proposals are submitted in the form of Budget Change Proposals ("BCPs"), involving analyses of needs, proposed solutions and expected outcomes. Thereafter, the DOF makes recommendations to the Governor, and by January I 0 a proposed State budget is presented by the Governor to the Legislature. The Governor's Budget is then analyzed and discussed in committees, and hearings begin in the State Assembly and Senate. In May, based on the debate, analysis and changes in the economic forecasts, the Governor issues a revised budget with changes he or she can support. The law requires the Legislature to submit its approved budget by June 15, and by June 30 the Governor should announce his or her line item reductions and sign the State budget.

In response to growing concern for accountability, the statewide governing board of the California community colleges (the "Board of Governors") and the Chancellor's Office have, through enabling legislation (AB 2910, Chapter 1486, Statutes of 1986), established expectations for sound district fiscal management and a process for monitoring and evaluating the financial condition to ensure the financial health of California's community college districts. In accordance with statutory and regulatory provisions, the Chancellor has been given the responsibility to identifY districts at risk and, when necessary, the authority to intervene to bring about improvement in their financial condition. To stabilize a district's financial condition, the Chancellor may, as a last resort, seek an appropriation for an emergency apportionment. Since the enactment of such enabling legislation, only one community college district in the State has sought an appropriation for an emergency apportionment.

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The monitoring and evaluation process is designed to provide early detection and amelioration that will stabilize the financial condition of the district before an emergency apportionment is necessary. This is accomplished by (I) assessing the financial condition of districts through the use of various information sources, and (2) taking appropriate and timely follow-up action to bring about improvement in a district's financial condition, as needed. A variety of instruments and sources of information are used to provide a composite of each district's financial condition, including quarterly financial status reports, annual financial and budget reports, attendance reports, annual district audit reports, district input and other financial records. In assessing each district's financial condition, the Chancellor will pay special attention to each district's general fund balance, spending pattern, and FTES patterns. Those districts with greater financial difficulty will receive follow-up visits from the Chancellor's Office where financial solutions to the district's problems will be addressed and implemented.

Stale Cash Management Legislation. On March I, 20 I 0, the Governor signed into law Assembly Bill No.5 of the Eighth Extraordinary Session of the California Legislature ("ABX8 5") which enacted various provisions to enable the State to effectively manage its cash resources. On March 22, 2010, the Governor signed into law Assembly Bill No. 14 of the Eighth Extraordinary Session of the California Legislature ("ABX8 I 4," and together with ABX8 5, the "Cash Management Legislation"), which bill amended and clarified certain provisions of ABX8 5. With respect to the funding of California community college districts in Fiscal Year 2009-10, the Cash Management Legislation authorized the deferral of all State apportionments due in March 2010 to no earlier than April I 5, 2010 and no later than May I, 20 I 0 (the "March 20 I 0 Deferral"). The March 20 I 0 Deferral would have been in addition to the deferral of apportionments constituting the Deferred Revenues. Prior to making the March 20 I 0 Deferral, the State Controller, Treasurer and Director of Finance were required to compare actual State general fund receipts and disbursements with the cash flow projections contained in the Proposed 2010-11 Budget (defined herein) to determine whether sufficient cash was available to pay the March 2010 apportionment while maintaining a prudent State cash reserve. The Cash Management Legislation also provided for an exemption to the March 2010 Deferral for a community college district for which the proposed deferral would present an imminent threat to such district's fiscal integrity and security.

The March 20 I 0 Deferral was ultimately not implemented, and none of the Districts applied for the exemption thereto provided by the Cash Management Legislation.

Minimum Funding Guarantees for California Community College Districts Under Propositions 98 and 111

General. In 1988, California voters approved Proposition 98, an initiative that amended Article XVI of the State Constitution and provided specific procedures to determine a minimum guarantee for annual K-14 funding. The constitutional provision links the K-14 funding formulas to growth factors that are also used to compute the State appropriations limit. Proposition Ill (Senate Constitutional Amendment I), adopted in June 1990, among other things, changed some earlier school funding provisions of Proposition 98 relating to the treatment of revenues in excess of the State spending limit and added a third funding "test" to calculate the annual funding guarantee. This third calculation is operative in years in which general fund tax revenue growth is weak. The amendment also specified that under Test 2 (see below), the annual cost of living adjustment (COLA) for the minimum guarantee for annual K-14 funding would be the change in California's per-capita personal income, which is the same COLA used to make annual adjustments to the State appropriations limit (Article XIII B).

Calculating Minimum Funding Guarantee. There are currently three tests which determine the minimum level ofK-14 funding. Under implementing legislation for Proposition 98 (AB 198 and SB 98 of 1989), each segment of public education (K-12 districts, community college districts, and direct elementary and secondary level instructional services provided by the State) has separately calculated amounts under the Proposition 98 tests. The base year for the separate calculations is 1989-90. Each

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year, each segment is entitled to the greater of the amounts separately computed for each under Test I or 2. Should the calculated amount Proposition 98 guarantee (K-14 aggregated) be less than the sum of the separate calculations, then the Proposition 98 guarantee amount shall be prorated to the three segments in proportion to the amount calculated for each. This statutory split has been suspended in every year beginning with 1992-93. In those years, community colleges received less than was required from the statutory split.

Test 1 guarantees that K-14 education will receive at least the same funding share of the State general fund budget it received in 1986-87. Initially, that share was just over 40 percent. Because of the major shifts of property tax from local government to community colleges and K-12 which began in 1992-93 and increased in 1993-94, the percentage dropped to 33.0%.

Test 2 provides that K-14 education will receive as a minimum, its prior-year total funding (including State general fund and local revenues) adjusted for enrollment growth (ADA) and per-capita personal income COLA.

A third formula, established pursuant to Proposition Ill as "Test 3," provides an alternative calculation of the funding base in years in which State per-capita General Fund revenues grow more slowly than per-capita personal income. When this condition exists, K-14 minimum funding is determined based on the prior-year funding level, adjusted for changes in enrollment and COLA where the COLA is measured by the annual increase in per-capita general fund revenues, instead of the higher per-capita personal income factor. The total allocation, however, is increased by an amount equal to one­half of one percent of the prior-year funding level as a funding supplement.

In order to make up for the lower funding level under Test 3, in subsequent years K-14 education receives a maintenance allowance equal to the difference between what should have been provided if the revenue conditions had not been weak and what was actually received under the Test 3 fonnula. This maintenance allowance is paid in subsequent years when the growth in per-capita State tax revenue outpaces the growth in per-capita personal income.

The enabling legislation to Proposition 111, Chapter 60, Statutes of 1990 (SB 98, Garamendi), further provides that K-14 education shall receive a supplemental appropriation in a Test 3 year if the annual growth rate in non-Proposition 98 per-capita appropriations exceeds the annual growth rate in per­pupil total spending.

State Assistance

California community college districts' principal funding formulas and revenue sources are derived from the budget of the State of California. The following information concerning the State of California's budgets has been obtainedfrom publicly available iryformation which the Districts believe to be reliable; however, neither the Districts nor the Underwriter take any responsibility as to the accuracy or completeness thereof and has not independently verified such information.

The 2009 Budget Act. On February 19, 2009, the Legislature passed a series of bills (the "2009 Budget Act") designed as a comprehensive solution to the State's budget deficit, which had been projected to grow to approximately $41.6 billion between fiscal years 2008-09 and 2009-10. On March 13, 2009, the Legislative Analyst's Office (the "LAO") released a report analyzing the provisions of the 2009 Budget Act (the "2009 Budget Act Report"). The following infonnation has been adapted from the 2009 Budget Act Report.

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According to the LAO, the 2009 Budget Act is a valid budget for fiscal year 2009-10, adopted nearly five months ahead of the State constitutional budgetary deadline. The 2009 Budget Act, however, contains provisions that are designed to achieve solutions in both fiscal years 2008-09 and 2009-10.

For fiscal year 2008-09, the 2009 Budget Act assumes year-end revenues of approximately $91.7 billion and expenditures of approximately $94.1 billion. The 2009 Budget Act also eliminates the $1.7 billion reserve projected by the 2008-09 Budget, projecting that the State will end fiscal year 2008-09 with a $3.4 billion deficit. For fiscal year 2009-10, the 2009 Budget Act projects total revenues of $97.7 billion and authorizes expenditures of $92.2 billion, allowing the State to build up a $2. I billion reserve. The LAO generally concurs with the 2009 Budget Act's forecast for year-end 2008-09 revenues. For 2009-10, however, the LAO projects year-end revenues that are approximately $8 billion Jess than those assumed by the 2009 Budget Act, reflecting recent negative developments in the State's economic condition. Consequently, the LAO projects that the State will end the 2009-10 fiscal year with a $6 billion deficit. The LAO notes the need for additional budgetary solutions in fiscal year 2009-10 beyond those contained in the 2009 Budget Act.

To address the projected $41.6 billion deficit, the 2009 Budget Act includes $15.7 billion in expenditure reductions, $12.5 billion in revenue increases, and $5.4 billion in borrowings. Approximately $6 billion of theses solutions were rejected by the voters at a May 19, 2009 state election. The 2009 Budget Act also projects the receipt of approximately $8.5 billion in stimulus funds from the federal government as part of the American Recovery and Reinvestment Act of 2009 ("ARRA"), signed into law by the President of the United States on February 17, 2009. Of the solutions included in the 2009 Budget Act, approximately $2.8 billion of expenditure reductions and tax increases can be "triggered off'-meaning they will not go into effect-if the State receives at least $10 billion in combined federal funding pursuant to ARRA during fiscal years 2008-09 and 2009-10.

The 2009 Budget Act includes the following major expenditure reductions:

• No COLAs. $1.2 billion in combined spending-related savings for fiscal years 2008-09 and 2009-10 by suspending COLAs for various programs, including Supplemental Security Income ("SSI"), State Supplementary Payment ("SSP"), California Work Opportunities and Responsibilities to Kids ("CalWORK.s") and Medi-Cal, as well as trial courts and the University of California and California State University systems.

• Deferred Spending. The 2009 Budget Act also defers approximately $500 million in costs for expenses the State will face in future years, including approximately $200 million in tribal revenues to the General Fund that would otherwise have been used to pay off prior transportation loans. The 2009 Budget Act also defers approximately $91 million in mandate reimbursements to local governments.

• Health. $184 million in savings in fiscal year 2009-10 by eliminating certain optional Medi-Cal benefits and reducing reimbursements rates to public hospitals by I 0%. This provision may be triggered off by the receipt of sufficient federal stimulus funds. The 2009 Budget Act also assumes $160 million in savings from reductions to reimbursement rates for developmental health service providers.

• Social Services. $74 million in savings in fiscal year 2009-10 for In-Home Supportive Service ("'HSS") expenditures from the reduction of IHSS provider wages, as well as $4 million in savings by eliminating state assistance with Medi-Cal co-payments for new IHSS participants. The 2009 Budget Act also achieves $147 million in savings by reducing CalWORKs grants by 4% and $268 million in savings by reducing SSI!SSP

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grants by 2.3%. All of these Social Services reductions can be triggered off by the receipt of sufficient federal stimulus funds.

• Transportation. $460 million in combined savings in fiscal years 2008-09 and 2009-10 for transportation services expenditures by reducing state funding of the State Transit Assistance program in fiscal year 2008-09 and eliminating such funding in fiscal year 2009-10.

• Employee Compensalion. $1.2 billion in combined savings for fiscal years 2008-09 and 2009-10, realized primarily tram the continued implementation of monthly one and two­day furloughs for state employees.

• Higher Education Savings. $232 million in unallocated reductions for higher education funding, as well as an additional $100 million unallocated reduction for fiscal year 2009-10 that may be triggered off by the receipt of sufficient federal stimulus funds.

• Other Reductions. The 2009 Budget Act also includes (i) a $171.4 million reduction in judiciary expenditures in fiscal year 2009-10 that may be triggered off by the receipt of sufficient federal stimulus funds, and (ii) $580 million in unspecified correctional services reductions.

The 2009 Budget Act reduces total Proposition 98 funding in fiscal year 2008-09 to $50.7 billion, including $35 billion in General Fund support, and which is approximately $7.3 billion below the level set by the 2008-09 Budget. The bulk of this reduction-approximately $2.4 billion-represents cuts to K-14 programs. Major components of this reduction include (i) $287 million through elimination of the COLA included as part of the 2008-09 budget, (ii) $944 million ofK-12 and county office of education revenue limit payments and (iii) $944 million from K-12 categorical programs.

The 2009 Budget Act retires existing Proposition 98 settle-up obligations ($1.1 billion) and uses special funds to directly support the Home-to-School Transportation program ($619 million). The 2009 Budget Act also defers $3.2 billion in K-14 payments to June 2009, of which $320 million is from California Community College apportionments. Specifically, monthly apportionment payments for February, March and April of 2008 are deferred to July 2009. These deferrals are in addition to an existing $200 million California Community College apportionment that was deferred to October of 2009. Both deferrals are permanent, and will be applied in future fiscal years.

For fiscal year 2009- l 0, the 2009 Budget Act provides for $54.9 billion in Proposition 98 funding, including $39.5 billion in General Fund support, representing an increase of$4.2 billion from the level set for 2008-09. However, $4.6 billion of this funding will be used to backfill programs for one­time solutions enacted as part of the 2008-09 Budget. To accommodate this backfill, as well as fund $253 million in new growth and baseline adjustments-including $185 million for a 3% growth at California Community Colleges-the 2009 Budget Act maintains the programmatic cuts set for 2008-09 and makes additional cuts of $702 million to K-12 and child care programs. Specifically, these additional cuts reflect reductions of (i) $268 million to K-12 and county office of education revenue limit payments, (ii) $268 million to K-12 categorical programs, (iii) $53 million to reimbursement rates and family fees for child care providers and (iv) $114 million through elimination of the High Priority Schools Grant Program.

As mentioned above, the 2009 Budget Act assumes an additional $12.5 billion in revenues, including $1.5 billion in fiscal year 2008-09 and $11 billion in fiscal year 2009-10, through the enactment of the following major revenue and borrowing solutions:

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• Sales Tax. $5.8 billion from a temporary one-cent increase in the state sales tax, including $1.2 billion of additional revenue for fiscal year 2008-09 and $4.6 billion of such revenues for fiscal year 2009-1 0. The increased tax becomes effective April 1, 2009 and is set to lapse on July I, 2011 .

• Vehicle License Fees. $2 billion from a temporary increase in vehicle license fees, including $346 million in additional revenues for fiscal year 2008-09 and $1.7 billion of such revenues in fiscal year 2009-l 0. This increase is set to lapse on July 1, 2011.

• Personal Income Tax. $1.8 billion from a temporary increase of0.125% in each personal income tax rate. The 2009 Budget Act also provides for $1.8 billion from an additional personal income tax increase of 0.125% that may be triggered off if sufficient federal stimulus funds are received. This tax increase is set to lapse after tax year 20 I 0.

• Reduction of Dependent Tax Credit. $1.4 billion from a temporary reduction in the value of dependent credit for income tax purposes. This reduction is set to lapse after tax, year 2010.

• Borrowing The 2009 Budget Act provides for $328 million in borrowing from various State special funds.

Additional information regarding the 2009 Budget Act is available from the LAO's website: www. \ao.ca.gov.

Governor's May Revision to the 2009 Budget Act. On May 14, 2009, the Governor released his May Revision to the 2009 Budget Act (the "May Revision"). On May 21,2009, the Legislative Analysts Office (the "LAO") released its Overview of the May Revision. The following information is adapted from the LAO's Overview of the May Revision.

The May Revision estimates the gap between revenues and expenditures for fiscal year 2008-09 and 2009-20 I 0 has grown to $21.3 billion as a result of negative revenue and expenditure trends, including, the voters' rejection on May 19,2009 of$5.8 billion of budget-balancing measures included in Propositions I C, 1 D, and IE, lower revenue estimates for 2008-09 and 2009-10 of $3.5 billion and $9.0 billion respectively, an increase of $1.1 billion of Proposition 98 spending requirements and $1.1 billion in additional program spending requirements, as well as other changes.

To address the projected $21.3 billion deficit and restore a $2 billion State reserve balance in 2009-2010, the May Revision proposes $21 billion of budget solutions, consisting of about $10 billion of expenditure reductions, $7.5 billion of borrowing, and approximately $3.5 billion of revenue actions.

The May Revision includes the following proposed major expenditure reductions:

• Proposition 98 Reductions. The May Revision proposes to reduce 2008-09 and 2009-10 Proposition 98 spending for K-12 schools and community colleges by more than $5 billion below that required by the 2009 Budget Act.

• Medi-Cal Reductions. $!.1 billion of total reductions to Medi-Cal, including $750 million of reductions that would likely require federal approval.

• University System Reductions. The May Revision proposes reducing General Fund support for the University of California and California State University by a total of $1

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billion and replacing those funds with a like amount of federal stimulus funds. The General Fund savings are on top of $510 million federal funds swap assumed in the 2008-09 Budget Act. Available federal stimulus funds, however, will not be sufficient to fully offset the combined $1.5 billion cut, leaving approximately $230 million net reduction.

• In-Home Supportive Services. The May Revision includes several proposals which would result in a combined General Fund savings of about $500 million in IHSS. Specifically, the May Revision would limit the scope of services and copayments currently provided to the less disabled, reduce state participation in wages to the minimum wage, restrict program eligibility to the more severely disabled, and enhance fraud prevention activities.

• Reductions in General Fund Costs by Using ''Spillover" Revenues. $336 million savings to the General Fund by using spillover sales tax revenues in 2009-10 for transit bond debt service costs.

• Prison System Reductions. The May Revision includes proposals to begin approving applications for prison commutations submitted by undocumented immigrants. The administration's plan would result in their release from state prison and deportation by the United States government. In addition, the May Revision proposes changing sentencing options for specified crimes that may be treated either as felonies or misdemeanors, instead making these offenses punishable by jail and/or probation rather state prison. The proposals would reduce corrections spending by $282 million.

• Supplementa1y Security Income/State Supplementary Program (SSI/SSP) Grant Reductions. The May Revision proposal would reduce the maximum monthly grants under SSI/SSP grant programs to the federal minimum amounts, effective September 2009. This proposal would result in state savings of$249 million in 2009-10.

From levels assumed in February, the May Revision estimates that the Proposition 98 minimum guarantee has fallen by $1.6 billion in 2008-09 and $3.8 billion in 2009-10. The bulk of the 2008-09 reduction is a $1.3 billion decrease in revenue limit funding, with an additional $287 million reduction in 2009-10. For California Community Colleges the May Revision reduces support for categorical programs by $85 million in 2008-09 and an additional $249 million in 2009-10. In addition, for 2009-10, the May Revision proposes to reduce enrollment growth from 3% to 1% for a combined savings of$127 million and lower the funding rate for recreational courses for combined savings of$120 million.

One-third ofthe proposed May Revision K-14 solutions is comprised of two additional deferrals. For California Community Colleges, $115 million in 2008-09 apportionment payments would be deferred until 2009-10, while $1.7 billion in 2009-1 0 K-12 revenue limits payments would be deferred until 201 O­Il.

The May Revision also includes proposals designed to provided greater flexibility in dealing with budgetary reductions. For K-12 school districts, the May Revision proposes changing State law to provide school districts with the option of reducing instructional time the equivalent of up to 7.5 days a year for the next three years. For California Community Colleges, the May Revision proposes consolidating the existing 22 categorical programs into a block grant. This consolidation would allow California Community Colleges discretion to shift funding among existing categorical programs or away ftom these programs to other priorities.

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As mentioned above, the May Revision proposes $7.5 billion of borrowing:

• Revenue Anticipation Warrants. The May Revision proposes counting $5.5 billion of RAW proceeds in 2009-l 0 as a credit towards the 2009-10 budget. Under the May Revision, the State would have to repay the $5.5 billion ofRA Ws with interest by the end of fiscal year 201 0-11.

• Borrowing Local Government Property Taxes. $2 billion from borrowing property tax revenues received by cities, counties, and special districts. The May Revision proposes that the borrowing would be instituted across the board, with each agency lending 8% of its 2008-09 property tax revenues. Repayment would be required within three years with interest. The May Revision also proposes legislation to create an authority that would allow local agencies to borrow against future state payments collectively, rather than just individually.

The May Revision includes no proposed increases in existing tax rates; but does propose the . ····. following revenue related items:

• Increased Personal Income Tax Withholding. The May Revision would accelerate some personal income tax withholding payments from the 2010-11 fiscal year into 2009-10 by increasing withholding schedules for taxpayers by 10%. The administration estimates the measure would result in $1.7 billion of increased 2009-10 receipts.

• Accelerated Estimated Payment Receipts. The May Revision proposes to require an increase in the amount of estimated payments due by individuals and corporations in June from 30% of estimated tax liability to 40%. The administration projects this would accelerate $610 million of payments from the 2010-11 fiscal year into 2009-10.

• Proposed Partial Sale of State Compensation Insurance Fund (SCIF). The May Revision proposes that the state sell parts of SCIF's business. The May Revision assumes that the portion sold could generate $1 billion of proceeds to help address the 2009-10 budget deficit.

• Other Proposals. The May Revision proposes various other revenue proposals, including an additional payment on all residential and commercial property insurance premiums to fund state and local fire and emergency response activities, higher fees for employers to fund occupational safety and health and labor standards enforcement activities, and higher state fees at certain state parks.

The LAO considers the Governor's May Revision revenue forecast reasonable, however under the LAO's updated forecast, combined revenues in 2008-09 and 2009-2010 are approximately $3 billion lower than the Governor's, reflecting a decline in jobs and personal income. The LAO estimates that the structural deficit will remain, with an imbalance between revenues and expenditures of greater than $15 billion in fiscal year 2010-11, with the annual shortfall increasing in the subsequent three fiscal years. Approximately $12 billion of the May Revision's proposed solutions are one-time in nature. The LAO strongly recommends that the State Legislature reject the May Revision proposal to count $5.5 billion of borrowed RAW proceeds toward the 2009-10 budget, noting it would simply defer $5.5 billion of the budget problem one year and would set a terrible precedent for State finances in the future by rendering meaningless constitutional restrictions on State debt obligations and requirements for a balanced budget. In addition, the LAO warns that certain of the measures proposed by the May Revision are risky and that the expected savings related to such measures may not materialize.

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Additional information regarding the May Revision is available from the LAO's website: www.lao.ca.gov.

Governor's Proposed 2010-2011 State Budget. On January 8, 2010, the Govemor released his proposed budget for fiscal year 2010-11 (the "Proposed 2010-11 Budget"). On January 12, 2010, the Legislative Analyst's Office (the "LAO''). released its overview of the Proposed 2010-11 Budget; on February 25, 20 I 0, the LAO also released supplemental reports on the provisions of the Proposed 201 O­Il Budget affecting education funding. The following information is adapted from these reports.

The Proposed 2010-11 Budget estimates that, absent corrective measures, the State will end fiscal year 2009-10 with a $6.6 billion deficit. Also, General Fund expenditures in fiscal year 201 O-Il are projected to exceed revenues by approximately $12.3 billion. The projected budget gap results from an inability of the state to achieve previous budget solutions in several areas, the effects of certain adverse court rulings, and the expiration of various one-time and temporary budget solutions approved as part of the 2009-1 0 State budget.

To address the projected budget gap, the Proposed 2010-11 Budget includes approximately $19.9 billion worth of measures affecting both fiscal year 2009-10 and 2010-11. Specifically, the Proposed 2010-11 Budget includes $7.6 billion of expenditure reductions, $7.9 billion worth of measures requiring either federal government funding or flexibility to change programs funded wholly or in part by the federal government, and $4.5 of additional solutions, comprised primarily of fund shifts.

With the implementation of these measures, the Proposed 20 l O-Il Budget assumes year-end revenues of $88.1 billion for fiscal year 2009-10, an increase of 6.4% from the prior year. The State is projected to end the 2009-10 fiscal year with a $5.4 billion deficit, thus eliminating the $500 million surplus enacted as part of the 2009 Budget Amendments. For fiscal year 2010-11, the Proposed 2010-11 Budget assumes total expenditures of $82.9 billion (reflecting a decrease of 3. 7% from the prior year) and total revenues of $89.3 billion (reflecting an increase of 1.4% from the prior year). The State is also projected to end fiscal year 201 0-11 with a $1 billion surplus.

The proposed 20 l 0-11 Budget makes mid-year adjustments to Proposition 98 funding for fiscal year 2009-10, and which represent a recapturing of K-12 funding that is expected to go unused. The Proposed 2010-11 Budget also delays a significant portion of the $11.2 billion "maintenance factor" payments approved as part of the 2009 Budget Amendments, from which the Proposed 20 I 0-11 Budget recognizes substantial general fund savings in both 2009-10 and 2010-ll.

For fiscal year 2010-11, the Proposed 2010-11 Budget implements approximately $2.2 billion in total reductions, with the largest reduction (approximately $1.5 billion) affecting K-12 revenue limit funding. With respect to community college districts, significant reductions include (i) $23 million by applying a negative 0.38% COLA to apportionments and certain categorical programs, (ii) $28 million reduction to funding for the Career Technical Education Pathways Initiative, and (iii) base cuts of $10 million each to extended opportunity programs and services and part-time faculty compensation. Though the Proposed 2010-11 Budget does provide an increase of $126 million to fund a 2.2% growth in enrollment, student fees are maintained at $26 per unit.

The Proposed 20 I 0-11 Budget would implement new flexibility for school and community college districts to respond to the various proposed cuts. For community college districts, these options include (I) easing restrictions on the contracting out of non-instructional services, (2) removing restrictions on the use of certain protected categorical program funding, and (3) suspending the requirement that prescribes the percentage and number of full-time faculty districts must employ.

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With the implementation of these measures, the Proposed 2010-11 Budget provides for $49.8 billion in Proposition 98 funding for fiscal year 2009-10, including $5.6 billion for community college education. For fiscal year 2010-11, Proposition 98 funding is set at $49.9 billion, including $5.9 billion for community college education, reflecting an increase of3.9% from the prior year. The LAO notes that, while Proposition 98 funding remains virtually flat across fiscal years 2009-1 0 and 2010-11, the State general fund share will increase by approximately 4.1 %, while the share covered by local property tax revenues will decline by approximately 8. 7%. While this is attributable in part to the slumping real estate market, the bulk of the decline in State general fund support results from the one-time $850 million contribution from redevelopment agencies approved as part of the 2009 Budget Amendments.

In addition to the provisions regarding education funding discussed above, the Proposed 20 I 0-11 Budget includes the following major features:

• Transportation Funding. Elimination of most Proposition 42 transportation funding by repealing the State sales tax on gasoline. The State would make up the lost revenues by increasing the per gallon excise tax on gasoline (the "Gas Tax"). For fiscal year 2010-11, this proposal is projected to reduce fuel sales tax revenues by $2.8 billion. The Proposed 2010-11 Budget would partially offset this loss with a 10.8 cents per gallon increase of the Gas Tax, which is projected to generate $1.9 billion in revenues, resulting in a net reduction of transportation revenues of approximately $1 billion. The Proposed 20 I 0-1 I Budget does not provide any additional public transit or rail funding, either in fiscal year 2010-11 or going forward. In addition, by reducing State sales tax revenues, the Proposed 2010- I 1 Budget expects to achieve additional savings by lowering the Proposition 98 minimum funding guarantee.

• State Employees. $1.6 million of anticipated general fund savings by ending the current employee furlough program and instituting (1) a five percent reduction of state employee salaries across the board, (2) a five percent increase in employee pension contributions, and (3) a five percent unallocated reduction of departmental personnel costs.

• Medi-Cal. $750 million of various measures designed to reduce Medi-Cal costs through unspecified limits on services, utilization controls, and increased cost sharing with benefits recipients through copayment requirements or premiums. The Proposed 20 I 0-1 I Budget also anticipates $294 million in savings in fiscal years 2009- I 0 and 2010-11 by eliminating full-scope Medi-Cal services for certain immigrants, eliminating adult day health care benefits, delaying payments to institutional providers, and rescinding family planning rate increases.

• Corrections/Rehabilitation. $8 I 1 million of assumed savings from the reduction of inmate medical costs. The LAO notes that the Proposed 20 I 0-1 I Budget fails to specify the measures of achieving this savings. The Proposed 2010-1 I Budget also assumes savings of $25 million in fiscal year 2009- I 0 and $292 million in 20 I 0-1 I by requiring that certain non-serious, non-violent and non-sex-offense felonies result in one-year county jail sentences in lieu of state prison sentences.

• Department of Developmental Services. $200 million in assumed savings in fiscal year 20 I 0-11 through various cost-control measures for the Department of Developmental Services ("DDS").

• Delay of Local Government Mandate Payments. $137 million in anticipated reductions by suspending mandates not related to elections, law enforcement and property taxes.

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The Proposed 2010-11 Budget also anticipates saving $95 million by deferring scheduled mandates for costs incurred prior to fiscal year 2004-05.

o Social Services. $178 million in reductions to SSl/SSP programs by reducing grants to individuals by $15 per month (or 1.8%). The Proposed 2010-11 Budget also includes a 15.7% reduction in Cal WORKs grants, with assumed general fund savings of $117 million.

o Proposition 10 Ballo! Proposal. The Proposed 2010-ll Budget would place, on the June 20 I 0 election ballot, a measure to allow use of Proposition I 0 early childhood development funds for State general fund-supported DDS and Department of Social Services programs that serve children. It is anticipated that these measures would generate $550 million in general fund savings. The LAO notes that this proposal is similar to the Proposition ID ballot proposal that was unsuccessfully put to the voters as part of the 2009 Budget Act.

o Proposition 63 Ballot Proposal. The Proposed 20 I 0-11 Budget would also place on the June 2010 election ballot a measure shifting $452 million of Proposition 63 mental health funds to pay State general fund costs for specified Department of Mental Health programs in fiscal years 2010-11 and 2011-12. The LAO notes that this proposal is similar to the Proposition IE ballot proposal that was unsuccessfully put to the voters as part of the 2009 Budget Act.

o Other Measures. The Proposed 20 I 0-11 Budget also includes the following measures: (l) elimination of the Cash Assistance Program for Immigrants and the California Food Assistance Program ($200 million); (2) use of automated speed enforcement systems to reduce state costs for trial courts ($297 million); (3) a 4.8% surcharge on residential and commercial property insurance ($200 million) to cover fire protections costs; (4) approval by the Legislature of a lease to mine oil and gas off the Santa Barbara coast ($197 million) to cover costs associated with the State park system.

ln addition to the various expenditures reductions and revenue measures described above, the Proposed 2010-11 Budget relies heavily on the receipt of federal government funding, or operating flexibility for state-federal programs, collectively totaling $7.9 billion. As discussed above, the LAO notes that other portions of the Proposed 2010-11 Budget, including some cuts to education funding, may also require federal approval.

The Proposed 2010-11 Budget identifies $6.9 billion of federal funds to relieve fiscal year 2010-11 general fund costs, many of which, if received, would be of a one-time nature. These funds include the following:

• Medi-Cal/Medicare. Assumed savings of $1.8 billion by having the federal government increase the State's Federal Medical Assistance Percentage ("FMAP") funding ratio. The Proposed 2010-11 Budget also would request the federal government to extend through June 30, 2011 the increased FMAP provided as part of ARRA, resulting in an assumed savings of $1.2 billion. Pursuant to ARRA, this increased FMAP is set to expire during calendar year 2010. Finally, the Proposed 2010-11 Budget assumes $1 billion in Medi­Cal relief from various federal moneys the Governor's administration believes are owed to the State, including funds related to health costs for individuals actually eligible for Medicare and changes to the level of state funding for prescription drug costs.

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• Other Federal Funds. The Proposed 2010-11 Budget assumes State general fund savings in connection with other miscellaneous programs, including: (I) $1 billion of anticipated federal reimbursement for special education services; (2) $538 million from an extension of ARRA funding for the CaiWORKs program; and (3) $880 million of federal funding to fully offset costs of incarcerating undocumented immigrant, which the LAO notes is substantially in excess the federal funding the State has received in past years for such costs (approximately $111 million per year).

The Proposed 20 I 0-11 Budget includes other expenditure and revenue measures that may be triggered in the event some of the above-described federal funds are not received. Possible expenditure reductions ($3.8 billion) include elimination of the CalWORKs, !HSS and Health Families programs, and well as an additional five percent state employee salary reduction. Possible one-time revenue increases ($2.3 billion) include the extension of business tax changes relating to operating losses, extension of the temporary reduction in the dependent personal income tax credit approved as part of the 2009 Budget Act, and the delayed implementation of various other personal and corporate tax breaks.

While generally supportive of the Proposed 2010-11 Budget's revenue forecasts, the LAO perceives some flaws. Beyond questioning some of the assumed savings claimed by the Proposed 20 I O­Il Budget, the LAO notes that many of the proposed measures, such as a unilateral increase in state employee pension contributions or the changes to the fiscal year 2009-10 Proposition 98 maintenance factor discussed above, raise questions regarding their legality. Other proposed cuts to health, social services and transportation funding may face lawsuits. Finally, the LAO cautions that it is highly unlikely that the State will receive all the federal funds or flexibility sought by the Proposed 20 I 0-11 Budget, and advocates more modest assumptions in the receipt of such federal assistance.

Additional information regarding the Proposed 2010-2011 Budget may be obtained from the LAO at www.lao.ca.g,ov.

Future Actions. The Districts cannot predict what actions will be taken in the future by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the Districts will have no control. Certain actions or results could produce a significant shortfall of revenue and cash, and could consequently impair the State's ability to fund schools and community colleges. Continued State budget shortfalls in future fiscal years may also have an adverse financial impact on the financial condition of the Districts.

PARTICIPATING DISTRICTS' INFORMATION

Certain information regarding the Districts is included in the appendices hereto. District formation dates, location and size, population figures (attendance figures for the District), three-year tax and revenue anticipation note borrowing history and financial information for each District are included in APPENDIX B- "DISTRICT FINANCIAL INFORMATION."

Projected cash flows for the coming fiscal year for each District are included in APPENDIX C -"CASH FLOWS AND ALTERNATIVE CASH RESOURCES." The estimates and timing of receipts and disbursements in such Cash Flow Analyses, including the Deferred Revenues, are based on certain assumptions and should not be construed as statements of fact. The cash flow projections represent the current best estimates of the Districts based on information available as of the date of the projections, including the most recent revisions to the State's funding of community college districts. See "FUNDING OF COMMUNITY COLLEGE DJSTRJCTS IN CALIFORNIA - State Assistance." However, due to the uncertainties inherent in the State of California budgeting process, these projections

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are subject to change and may vary considerably from actual cash flows experienced by the Districts during the 2009-10 fiscal year. APPENDIX J contains certain additional financial and demographic information on Merced Community College District, which constitutes the largest participant in the Program, in terms of Note size, with respect to the Note Participations.

Payment of State assistance in the amounts anticipated depends on the State's adhering to its current 2009-10 budget, including the appropriations therein provided for local assistance. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS­PROPOSITION 98" and APPENDIX A - "NOTE AMOUNT BY DISTRICT AND COVERAGE ANALYSIS."

Each District maintains insurance or self-insurance in such amounts and with such retentions and other terms providing coverages for property damage, fire and theft, general public liability and workers' compensation, as are adequate, customary and comparable with such insurance maintained by similarly situated community college districts. In addition, based upon prior claims experience, each District believes that its respective recorded .liabilities for self-insured claims is adequate.

The information regarding the Districts has been taken or constructed from the official records of the District. Such information has been reviewed by an authorized representative of each District acting in his or her official capacity. Such representative has determined that as of the date hereof the infonnation contained herein is, to the best of his or her knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact, or omit to state a material fact, necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

General Information Regarding Districts

Each of the Districts has made the following representations to the Authority with respect to its financial and operational facts:

• During the past 10 years, the District has not failed to deposit moneys in their repayment funds established for the payment of principal of and interest on tax and revenue anticipation notes issued by or on behalf of the District;

• During the past I 0 years, the District has not defaulted on a lease or debt obligation;

• There is no action, suit, proceeding or investigation pending or threatened which, if determined adversely to the District, could materially adversely impact the District's ability to repay its District Note;

• No other conditions or events, including but not limited to labor disputes or hazardous materials, exist or have occurred which may materially adversely affect the finances of the District; and

• The District knows of no other information which should be disclosed in connection with the issuance of the Notes, in order to make the information in this Official Statement, in the light of the circumstances, in which it is presented not misleading.

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I

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

Article X IliA of the California Constitution

On June 6, 1978, the California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIII A limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July I, 1978 and (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July I, 1978 by two-thirds of the voters on such indebtedness. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value,' or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment. Determined in this manner, the "full cash value"_is also referred to the as the "base year value." The full cash value is subjectJo.annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

Article XliiA has been amended to allow for temporary reductions of assessed value in instances where the fair market value of real property falls below the base year value. Proposition 8-approved by the voters in November of 1978-provides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a similar decline. In these instances, the market value is required to be reviewed annually until the market value exceeds the base year value.

Article XIII A requires a vote of two-thirds of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. Article XIIIA exempts from the 1% tax limitation any taxes above that level required to pay debt service (i) on any indebtedness approved by the voters prior to July I, 1978, or (ii) as the result of an amendment approved by State voters on July 3, 1986, on any bonded indebtedness approved by two-thirds of the votes cast by the voters for the acquisition or improvement of real property on or after July 1, 1978, or (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% or more of the votes cast of the proposition, but only if certain accountability measurers are included in the proposition. In addition, Article XIII A requires the approval of two-thirds of all members of the state legislature to change any state taxes for the purpose of increasing tax revenues.

Legislation Implementing Article XIIIA

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

That portion of annual property tax revenues generated by increases in assessed valuations within each tax rate area within a county, subject to redevelopment agency, if any, claims on tax increment and subject to changes in organizations, if any, of affected jurisdictions, is allocated to each jurisdiction within

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the tax rate area in the same proportion that the total property tax revenue from the tax rate area for the prior year was allocated to such jurisdictions.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a District continues as part of its allocation in future years.

Beginning in fiscal year 1981-82, assessors in California no longer record property values on tax rolls at the assessed value of25% of market value which was expressed as $4 per $100 of assessed value. All taxable property is now shown at I 00% of assessed value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Both the United States Supreme .. Court.and the California State Supreme Court have upheld the general validity of Article XIIIA.

Unitary Property

Some amount of property tax revenue of the Districts is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions ("unitary property"). Under the State Constitution, such property is assessed by the State Board of Equalization ("SBE") as part of a "going concern" rather than as individual pieces of real or personal property. State­assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county­wide rates, and the tax revenues distributed to taxing jurisdictions (including the Districts) according to statutory formulae generally based on the distribution of taxes in the prior year.

The California electric utility industry has been undergoing significant changes in its structure and in the way in which components of the industry are regulated and owned. Sale of electric generation assets to largely unregulated, nonutility companies may affect how those assets are assessed, and which Districts are to receive the property taxes. The Districts are unable to predict the impact of these changes on its utility property tax revenues, or whether legislation may be proposed or adopted in respon.se to industry restructuring, or whether any future litigation may affect ownership of utility assets or the State's methods of assessing utility property and the allocation of assessed value to local taxing agencies, including the Districts. See "FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA -Major Revenues" herein.

Article XIIIB of the California Constitution

Article XIIIB of the State Constitution ("Article XlllB"), as subsequently amended by Propositions 98 and \ \ 1, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies, As amended, Article XIIIB defines

(a) "change in the cost of living" with respect to school districts to mean the percentage change in California per capita income from the preceding year, and

(b) "change in population" with respect to a school district to mean the percentage change in the average daily attendance of the school district from the preceding fiscal year.

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For fiscal years beginning on or after December I, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the 1986/87 fiscal year adjusted for the changes made from that fiscal year pursuant to the provisions of Article XIIIB, as amended.

The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. "Proceeds oftaxes" include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.

Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature; (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products.

Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years.

Article XIIJB also includes a requirement that fifty percent of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund pursuant to Section 8.5 of Article XVI of the State Constitution. See "Propositions 98 and Ill" below.

Article XIIIC and Article XIIID of the California Constitution

On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the "Right to Vote on Taxes Act." Proposition 218 added to the California Constitution Articles XlllC and XIIID (respectively, "Article XIIIC" and "Article XlliD"), which contain a number of provisions affecting the ability of Districts, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges.

According to the "Title and Summary" of Proposition 218 prepared by the California Attorney General, Proposition 218 limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Among other things, Article XlllC establishes that every tax is either a "general tax" (imposed for general governmental purposes) or a "special tax" (imposed for specific purposes), prohibits special purpose government agencies such as community college districts from levying general taxes, and prohibits any District from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XlliC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles Xlll and XlllA of the California Constitution and special taxes approved by a two-thirds vote under Article XTIIA, Section 4. Article XlllD deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XI!lC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

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TI1e Districts do not impose any taxes, assessments, or property -related fees or charges which are subject to the provisions of Proposition 218. They do, however, receive a portion of the basic one percent ad valorem property tax levied and collected by the Counties pursuant to Article X TIT A of the California Constitution. The provisions of Proposition 218 may have an indirect effect on the Districts, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the Districts thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the Districts.

Proposition 46

On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the 1% tax limitation imposed by Article XlliA. Under this amendment to Article XIIIA, local governments and school districts may increase the property tax rate above 1% for the period necessary to retire new general obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to purchase or improve real property.

Proposition 98

On November 8, 1988, California voters approved Proposition 98, a combined initiative constitutional amendment and statute called the "Classroom Instructional Improvement and Accountability Act" (the "Accountability Act"). Certain provisions of the Accountability Act, have, however, been modified by Proposition Ill, discussed below, the provisions of which became effective on July I, 1990. The Accountability Act changes State funding of public education below the university level and the operation of the State's appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as "K-14 school districts") at a level equal to the greater of (a) the same percentage of General Fund revenues as the percentage appropriated to such districts in 1986-87, or (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-year period. The current level of guaranteed funding pursuant to Proposition 98 is 34.55% of the State general fund.

The Accountability Act also changes how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act.

Since the Accountability Act is unclear in some details, there can be no assurances that the Legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State's budgets in a different way than is proposed in the Governor's Budget.

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Proposition 111

On June 5, 1990, the voters of California approved the "Traffic Congestion Relief and Spending Limitation Act of 1990 ("Proposition 111 "), which modified the State Constitution to alter the Article XIIIB spending limit and the education funding provisions of Proposition 98. Proposition Ill took effect on July 1, 1990.

The most significant provisions of Proposition 111 are summarized as follows:

a. Annual Adjustments to Spending Limit. The annual adjustments to the Article XlllB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the "change in the cost of living" is now measured by the change in California per capita personal income. The definition of "change in population" specifies that a portion of the State's spending limit is to be adjusted to reflect changes in school attendance.

b. Treatment of Excess Tax Revenues. "Excess" tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, ifthere are excess State tax revenues, 50% of the excess is to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools' minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts' base expenditures for calculating their entitlement for State aid in the next year, and the State's appropriations limit is not to be increased by this amount.

c. Exclusions from Spending Limit. Two new exceptions have been added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, excluded are all appropriations for "qualified capital outlay projects" as defined by the Legislature. Second, excluded are any increases in gasoline taxes above the current nine cents per gallon level, sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January I, 1990.

d. Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Proposition Ill had been in effect.

e. School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (I) a certain percentage of State general fund revenues (the "first test") or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIJTB by reference to per capita personal income) and enrollment (the "second test"). Under Proposition Ill, schools will receive the greater of(!) the first test, (2) the second test, or (3) a third test, which will replace the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income. Under the third test, schools will

27

Proposition 39

receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a "credit" to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth.

On November 7, 2000, California voters approved an amendment (commonly known as Proposition 39) to the California Constitution. This amendment (I) allows school facilities bond measures to be approved by 55 percent (rather than two-thirds) of the voters in local elections and pennits property taxes to exceed the current I percent limit in order to repay the bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another Statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. The local school jurisdictions affected by this proposition. are .. J\-12 school districts, community college districts, including the District, and county offices of education. As noted above, the California Constitution previously limited property taxes to I percent of the value of property. Property taxes may only exceed this limit to pay for (I) any local government debts approved by the voters prior to July I, 1978 or (2) bonds to buy or improve real property that receive two-thirds voter approval after July I, 1978.

The 55 percent vote requirement would apply only if the local bond measure presented to the voters includes: (I) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55 percent of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for a high school or elementary school district), or $25 (for a community college district), per $100,000 of taxable property value. These requirements are not part of this proposition and can be changed with a majority vote of both houses of the Legislature and approval by the Governor.

Proposition lA

On November 2, 2004, California voters approved Proposition I A, which amends the State constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition lA, the State can not (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-third approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Beginning, in 2008-09, the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two­thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition I A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments with in a county. Proposition I A also amends the State Constitution to require the State to suspend certain State laws

28

creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.

Future Initiatives

Article XliiA, Article XliiB, Article XIIIC and Article XIIID of the California Constitution and Propositions l A, 39, 46 and 98 were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the District or the Districts' ability to expend revenues. The nature and impact of these measures cannot be anticipated by the Districts.

TAX MATTERS

In the opinion of Stradling Yocca Carlson & Rauth, A Professional Corporation, San Francisco, California, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Notes represented by the Note Participations is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Special Counsel, interest on the Notes represented by the Note Participations is exempt from State of California personal income tax. Special Counsel notes that, with respect to corporations, interest on the Notes represented by the Note Participations is not included as an adjustment in the calculation of alternative minimum taxable income.

Special Counsel's opinion as to the exclusion from gross income of interest on the Notes represented by the Note Participations is based upon certain representations of fact and certifications made by the Authority, the Districts and others and is subject to the condition that the Authority and the Districts comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Notes to assure that interest on the Notes will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest on the Notes represented by the Note Participations to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Note Participations. The Districts have covenanted to comply with all such requirements.

Although Special Counsel has rendered an opinion that interest on the Notes represented by the Note Participations is excluded from gross income for federal income tax purposes provided that the Districts continue to comply with certain requirements of the Code, the ownership of the Note Participations and the accrual or receipt of interest with respect to the Note Participations may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Notes represented by the Note Participations, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Note Participations.

Jt is possible that subsequent to the issuance of the Note Participations there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Note Participations or the market value of the Note Participations. No assurance can be given that subsequent to the issuance of the Note Participations such changes or interpretations will not occur.

The amount by which a Owner's original basis for determining gain or loss on the sale or exchange of a Note Participation (generally the purchase price) exceeds the amount payable on maturity

29

constitutes amortizable premium which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Owner's basis in the Note Participation (and the amount of tax­exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Owner realizing a taxable gain when the Note Participation is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Note Participation to the Owner. Purchasers should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.

The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Note Participations will be selected for audit by the IRS. It is also possible that the market value of the Note Participations might be affected as a result of such an audit (or by an audit of similar obligations).

Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Special Counsel expresses_no opinion as to the effect on the exclusion fi·mn gross income of interest on the Notes represented by the Note Participations for federal income tax purposes with respect to any Note Participation if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth.

A copy of the proposed form of opinion of Special Counsel is attached hereto as APPENDIX G. Special Counsel expresses no opinion therein on the accuracy, completeness or sufficiency of this Official Statement or other offering material related to the Note Participations.

LITIGATION

Districts

There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the execution or delivery of the Note Participations, the Trust Agreement or the Notes or in any way contesting or affecting the validity of the foregoing or, any action of the Districts taken with respect to any of the foregoing.

There is no litigation pending or, to the knowledge of the respective Districts, threatened, questioning the existence of the Districts, or the title of the officers of the respective Districts to their respective offices, or the power and authority of the Districts to issue and deliver the Notes or the Trustee to execute and deliver the related Note Participations.

The Authority

There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the execution or delivery of the Note Participations, the Trust Agreement or the Notes or in any way contesting or affecting the validity of the 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 the existence of the Authority, or the title of the officers of the Authority to their respective offices, or the power and authority of the Districts to issue and deliver the Notes or the Trustee to execute and deliver the related Note Participations.

30

RATINGS

Standard & Poor's ("S&P") has assigned a rating of "SP-1+" to each of the Series 2010A Note Participations and Series 2010B Note Participations. The Districts supplied certain information to S&P to be considered in evaluating the Note Participations. The ratings reflect only the view of S&P, and any explanation of the significance of such ratings on the Note Participations should be obtained from S&P. There is no assurance that the ratings will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by the rating agency issuing such rating if, in its judgment, circumstances so warrant. The Authority undertakes no responsibility to oppose any downward revision or withdrawal of the ratings. Any such downward revision or withdrawal of any of the ratings may have an adverse effect on the market price of the Note Participations.

UNDERWRITING

RBC Capital Markets Corporation (the "Underwriter"), has contracted to purchase the Series 2010A Note Participations at a price of $8,411,741.21 (representing the principal amount of the Series 2010A Note Participations, plus net original issue premium of$62,794.60, less an Underwriter's discount of $46,053.39).

The Underwriter has contracted to purchase the Series 20 I OB Note Participations at a price of $1,423,296.13 (representing the principal amount of the Series 20 I OB Note Participations, plus net original issue premium of$11,786.00, less an Underwriter's discount of$8,489.87).

The Underwriter may offer and sell Note Participations to certain dealers and others at prices lower than the offering prices stated on the cover page hereof. The offering price may be changed from time to time by the Underwriter.

CONTINUING DISCLOSURE

Material Events Undertaking

Pursuant to the Trust Agreement, the Districts have agreed to give, or cause to be given, to the Municipal Securities Rulemaking Board (the "Repository"), in a timely manner notice of the following "Listed Events" with respect to such District's Note and the Note Participations if determined by the District to be material: (I) principal and interest payment delinquencies; (2) non-payment related defaults, (3) modification to the rights of the Owners; (4) contingent or unscheduled Note or Note Participation calls; (5) defeasances; (6) rating changes; (7) adverse tax opinions or events adversely affecting the tax­exempt status of the Notes or the Note Participations; (8) unscheduled draws on any debt service reserves reflecting financial difficulties; and (9) any release, substitution, or sale of property securing repayment of the Notes or Note Participations. These covenants have been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5) (the "Rule").

The undertakings regarding material event disclosure set forth in the Trust Agreement may be amended, and any provision thereof may be waived, by written agreement of the parties thereto, without the consent of the Owners of the Note Participations (except to the extent required under clause (3)(ii) below), if all of the following conditions are satisfied: (I) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, a change in law, or a change in the identity, nature or status of the Districts or the type of business conducted thereby; (2) the undertakings therein as so amended or waived would, in the opinion of nationally recognized Special Counsel expert in federal securities laws addressed to the Districts and the Trustee, have complied with the requirements of the Rule at the time of the primary offering of the Note Participations, after taking into account any amendments or interpretations of the Rule, as well as any change in

31

circumstances; (3) the proposed amendment or waiver either (i) is approved by the Owners in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of the Owners, or (ii) does not, in the opinion of the nationally recognized Special Counsel or counsel expert in federal securities laws addressed to the Districts and the Trustee, materially impair the interests of the owners of Note Participations; and (4) the Districts shall have delivered copies of such opinions and amendment to each Repository.

The Districts' obligations under the Trust Agreement shall terminate upon the defeasance or payment in full of all of the Notes and the Note Participations. The undertakings in the Trust Agreement relating to continuing disclosure shall inure solely to the benefit of the Districts, the Trustee, the Dissemination Agent, the Underwriter and the Owners and Beneficial Owners, from time to time of the Note Participations, and shall create no rights in any other person or entity.

See also APPENDIX F- "DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE TRUST AGREEMENT."

Prior Continuing Disclosure Obligations

Except as detailed below, the Districts have not failed to file the annual reports and material event notices required to be filed thereby pursuant to such Districts' prior continuing disclosure obligations. Notwithstanding the information summarized below, all of the Districts are currently in compliance with their existing continuing disclosure obligations.

Allan Hancock Joint Community College District. Failed to file certain portions of its required annual reports in a timely manner for the continuing disclosure undertakings entered into in connection with the following issuances: $5,000,000 Certificates of Participation ( 1999 Financing Project); $3,250,000 Certificates of Participation, Series 2005; $68,000,000 Election of 2006 General Obligation Bonds, Series A. For fiscal year 2003-04, a complete annual report was filed in May of 2005. For fiscal years 2004-05 and 2005-06, a complete annual report was filed in May of2007. For fiscal year 2006-07, a complete annual report was filed in June of 2008. For fiscal year 2007-08, a complete annual report was filed in June of2009.

Gavilan Community College District. Failed to file certain portions of its required annual reports in a timely manner for the continuing disclosure undertakings entered into in connection with the issuance of its $29,170,000 Election of 2004 General Obligation Bonds, Series 2004A and $50,000,000 General Obligation Bonds, Election of 2004, Series C. For fiscal years 2003-04 through 2005-06, a complete report was filed on December 12, 2007. For fiscal years 2006-07 and 2007-08, complete reports were filed on March 3, 2009.

32

I

CERTAIN LEGAL MATTERS

At the time of the delivery of the Note Participations, Stradling Yocca Carlson & Rauth, A Professional Corporation, San Francisco, California, Special Counsel, will deliver its final approving opinions substantially in the form set forth in APPENDIX G. Stradling Yocca Carlson & Rauth is also acting as Disclosure Counsel with respect to the execution and delivery of the Note Participations. A copy of such approving opinions will be available for delivery with each certificate representing a beneficial interest in the Note Participations. Certain legal matters will be passed upon for the Underwriter by Fulbright & Jaworski L.L.P., Los Angeles, California.

AUTHORIZATION AND APPROVAL

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority or Districts and the purchasers or Owners of any qftl:!e _Ngte Participations.

This Official Statement, and its distribution and use by the Underwriter, have been duly authorized and approved by and the Authority on behalf of itself and the Districts.

CALIFORNIA COMMUNITY COLLEGE FINANCING AUTHORITY, on behalf of itself and the Districts

By: __________ ~/~s/~S~c~o~tt~L~a~v~--------~----Executive Director and Board Member

Community College League of California

33

\

[THIS PAGE INTENTIONALLY LEFT BLANK]

i

APPENDIX A

NOTE AMOUNT BY DISTRICT AND COVERAGE ANALYSIS

This Appendix contains tables listing the participating Districts, the principal amount of the Note being issued by each such District, the principal amount of the Note of such District as a percentage of the principal amount of the Note Participations, and projected note payment coverage for each District

A-1

'

[Tl-IIS PAGE INTENTIONALLY LEFT BLANK]

California Community College Financing Authority

lax and Revenue Anticipation Note Program Note Participations, Series 2010A and Series 2010B

District Note Anvunts and Cm'erage Atta()lses

Base Amounts (I) Cash Coverage Factors (2)

06/30/11 Cash 2009-10 2010-11 ProjL-cted Cash Balance TRAN as a 2010-11 June 30,2011 Flow Balance

ActuaVEstimated Projected 06/30/11 06/30/10 % of2009-JO Projected Cash Flow + 06/30/10 District Series 2010A Series 20 I OB Cash Receipts Cash Receipts Cash Flow Altern:1ti"'e Cas Receipts Cash Receipts Balance Altcrn:1tin Cash

Allan Hancock Joint C. C. D. $2.145.000 $47.690,704 $50.241.176 $4.260,962 $9,560.000 4.50% 23.42 X 2.99 X 7.44 X

Gavilan Joint C.C.D. $1,420,000 $42.618.904 $42.618.904 SL994.946 $0 3.33% 30.01 X 2.40 X 2.40 X

Merced C.C.D. 3,200,000 $60.811,028 $63,111.028 $339,026 $6,525.000 5.26% 19.72 X I, II X 3.15 X

Palo Verde C.C.D. 1,150,000 $12,306.443 $12,841,638 $114.902 $2,245.607 9.34% 11.17 X J.l 0 X 3.05 X

San Luis Obis(Xl (Cuesta) C.C.D. 1,900,000 $52.463333 ~51.255295 $3.278 896 $675.000 3.62% 26.98 X 2.73 X 3.08 X

Totals & Averages $8,395,000 $1,420,000 $215,890,412 $220,068,041 $9,988,732 $19,005,607 5.21% 22.26 X 2.06 X 3.83 X

~ (1) Base Amounts exclude Note Amount

N (2) 0:ote Amount~ have been uddcd to e~ch B~sc Amount to calculate Cash Coverage Factors.

l>IN\rr8 J_d/:n XTIVNOLlN!:LLNI 39Vd SII-J.LI

APPENDIXB

DISTRICT FINANCIAL INFORMATION

B-1

o:l ' N

INCOME STATEMENT T()tal Revenues T()tal Expenditures l'()IU] Other Financing Sources

Nttlncome Bt!ginning Fund Balance Other Outgo Prior Year Adjustment

Ellding Fund Balance

INCOME STATEME/IlT T(}tal Revenues T()tal Expenditures T()tal Other Financing Sources

Net Income Beginning Fund 13alance

Other Outgo Prior Year Adjustment Ending Fund Balance

INCOME STATEMENT T{)!al Revenues T<Jtal Expenditures TQtal Other Financing Sources

Net Income Beginning Fund Balance Other Outgo Prior Y car Adjustment Ellding Fund Balance

Allan Hancock Joint C.C.D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009- 10**

51,765,804 48.859,808 48,461,223 48,334,799

I 03,055 1,052,800 3,407.636 1,577,809 3,989,725 4,443,152

(2,954,209) (1,633,104)

4,443,152 4,387.857

Gavilan Joint C.C.D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009-1 0**

29,179,330 28,788,432 28,410,292 27,079,464

328,494 l ,097,532 1,708,968 3,589,953 2,676,883

(2,010,604) (I ,773,469)

2,676,881 2,612,382

Merced C.C.D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009-10**

52,379,717 51,517,914 49,852,708 50,609,792

162,089 103,328

2,689,098 1,011,450 7,394,147 7,540,525

(2,542,720) (2,464,052)

7,540,525 6,087,923

*CCFS-31 1 Actuafs for 2008-09 are unrestrictedfunds only. **CCFS-3 11 Quarterly Report Ending December 31, 2010 for unrestricted funds.

Swtement of Revenues, Expenses Total Operating Revenues Total Operating Expenditures Net Income (Loss)

Total Non-Oper. Revenues (Expenses) Capital Revenue

lncreasl;: (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

Statement of Net Assets Total Assets

Total Liabilities Net Assets Total Liabilities+ Net Assets

Statement of Revenues, Expenses Total Operating Revenues

Total Operating Expenditures Net Income (Loss)

Total Non-Oper. Revenues (Expenses) Capital Revenue Increase (Decrease) in Net Assets Net A<;sets Beginning ofYt-ar

Net Assets End of Year Swtement of Net Assers

Total Assets

Total Liabilities Net Assets Total Liabilities+ Net Assets

Statemellf of Revenues, Expenses Total Operating Revenues

Total Operating Expenditures Net Income (Loss)

Total Non-Oper. Revenues (Expenses) Capitnl Revenue

Increase (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

Statement of Net Assets Total Assets Total Liabilities Net Assets Total Liabilities+ Net Assets

06/30/07 Audited

Allan

21,957,611 69,812,386

(47,854,775)

53.137,275 12,718,434 18,000,934

49,250,693 67,251,627

145,394,730 78,143,103 67,251,627

145,394,730

06/30/07 Audited

8,102,552 36,751,632

--·· (28,649,080) 31,90t-:4oo

497,010 3,i49,330

20,165,908 23,915,238

57,819,699 33,904,461 23,915,238

57,819,699

06/30/07 Audited

19,359,871

61.886,801 (42,526,930) 43,766,222

22,519,606 23,758,898 56,975,752 80,734,650

156,607,204 75,872,554

80.734.650 156,607,204

r:p ~'

INCOME S1:·11'HMHl·tr Total Revenues Total Expenditures Total Other Financing Sources Net Income Beginning Fund Balance Other Outgo Prior Year Adjustment Ending Fund Balance

INCOME STATJ:"A.IJ:NT Total Revenues

Total Expenditures Total Other Financing Sources Net Income Beginnmg Fund Balance Other Outgo Pnor Year Adjustment Ending Fund Balance

Palo Verde C.C.O. CCFS-31 I CCFS-31 !Q

Actual 2008-09* Projected 2009-1 0**

13,132,925 12,855,657 13,803,?!81 \3,078,623

(670,956) (222,966) 1,921,790 1,082,874 (167,960) (126,455)

I ,082,874 733,453

San Luis Obispo (Cuesta) C. C. D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009-10**

52,302,5 !0 49,25),2381 50,306,451 47,364,097

3,413 566 1,999,472 1,887,707 3,742,555 4,550,345

(I, 191 ,682) (3,246,872)

4.550,345 3,191,180

*CCF.S-31 I Acwalsfor 2008-09 are unre.wrictedfimds only **CCFS-31 1 QuarlerZv Ueporr J:'ndmg December 31, 2010 jOr unreslriCtedfunds.

Sroremenl of Uevenues, Erpenses Total Operating Revenues Tota~ Operating Expenditures Net Income (Loss) Total Non-Oper. Re\'enues (Expenses) Capital Revenue Increase (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

S!wemenl ofNel A..ue/s

Total Assets Total Liabiltties Net Assets Total Liabilities+ Net Assets

Srutemem of Revenues, Expen,e.1· Total Operating Revenues Total Operating Expenditures Net Income (Loss) Total Non-Oper. Revenues (Expenses) Capital Revenue Increase (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

Stu/ement afNet Assets

Total Assets Total Liabilities Net Assets Total Liabilities+ Net Assets

Palo \'crdc C. CO. 06130/07 06130108 06130109

Audited Audited Audited

I 1,399,880 4,902,692 4,870,448 17,334,261 18,897,882 20,654,064 (5,934,381) ( 13,995, 190) (15,783,616) 12,644,371 13,688,297 12,603,800

891,029 4,090,613 2,272,610 7,601,019 3,783,720 (907,206)

29,175,155 36,776,174 40,559,894 36,776,174 40,559,894 39,652,688

63)70.599 63,370,599 79,650,834 26,594,425 26,594,425 39,998,146 36,776,174 36,776,174 39,652.688 63,370,599 63,370,599 79,650.834

San Luis Obispo (Cuesta) C.C.O. 06/30107 06/30/08 06130109

Audited Audited Audited

19,229,526 19,798,067 9,689, 729 66,120,206 69,609,322 71,581,280

(46,890,680) (49,81 1,255) (61,891,551) 44,352,938 45,791,616 60,374,964 11,700,035 11,370,166 11,263,595 9,162,293 7,350,527 9,747,008

64,740,988 73,903,281 81,253,808 73.903,281 81,753,808 91,000,816

130,053,192 128,762,951 131,782,944 56,149,911 47,509,143 40,782,128 73,903,281 81,253,808 91,000,816

130,053,192 128,762,951 131 '782.944

tJj

' N

JNUJMESFAnll4hNl" Total Revenues Total Expenditures Total Other Financing Sources Net Income Beginnmg Fund Balance Other Outgo Prim Year Adjustment Ending Fund Balance

JNCOMJ;" S7i47EME.NT Total Revenues Total Expenditures Total Other Financing Sources Net Income Beginning Fund Balance Other Outgo Prior Year Adjustment Ending Fund Balance

INCOME STATh'MFNT Total Revenues Total Expenditures Total Other Financing Sources Net Income Beginning Fund Balance Other Outgo Prior Year Adjustment Ending Fund Balance

II Allan Hancock Joint C. C. D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009-10**

51,765.804 48,859,808 48,461,223 48,334,799

103,055 1,052,800 3,407,636 1,577,809 3,989,725 4,443,152

(2,954_209) (1,633,104)

4,443,152 4,387,857

Gavilan Joint C.C.D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009-10**

29,179.330 28,788,432 28,410,2.92 27,079,464

328,494 \,097,532 1,708,968 3,589,953 2:,676,883

(2,010,604) (1,773,469)

2,676,881 2,612,382

Merced C.C.D. CCFS-311 CCFS-311Q

Actual 2008-09* Projected 2009-1 0**

52,379,717 51,517,914 49,852,708 50,609,792

162,089 103,328 2,689,098 1,011,450 7,394,147 7,540,525

(2,542, 720) (2,464,052)

7,540,)25 6,087,923

*CCI·:~'-31 I Actualsfor 2008-{}1) are unreslrictcdfum/1 only ••c_X .. 'J<<.;_J I I Quaner(v ReprJrl Emlmg !Jecembcr 31, 20/0jilf unreslrlcledfimd~.

I

Stmemenl t:{Revenue.\·, !:'xpense.\· Total Operating Revenues Total Operating Expenditures Net Income (Loss) Total Non-Oper. Revenues (Expenses) Capital Revenue lncrea.<;e (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

Slatement t:f,\'r:t Assets Total Assets Total Liabilities Net Assets Total Liabilities+ Net Assets

Sflltement of l?e1'enue.1·, Expense.\ Total Operating Revenues Total Operating Expenditures Net Income (Loss) Total Non-Oper. Revenues (Expenses) Capital Revenue Increase (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

Sta/emenl of Net As.1·ets Total Assets Total Liabilities Net Assets Total Liabilities+ Net Assets

Statement of Revenues, Ltpenses Total Operating Re\ler.ues Total Operating Expenditures Net Income (Loss) Total Non-Oper. Revenues (Expenses) Capital Revenue Increase (Decrease) in Net Assets Net Assets Beginning of Year Net Assets End of Year

Slatenumt oj'Net As.<.e/s Total Assets Total Liabilities Net Assets Total Liabilities~ Net Assets

II Allan ll~nl:'oc::l< .loint C.f'.D. I 06130107 06GOIO& 06130109 Audited Audited Audited

21,957,611 21,257,441 J0,046, 105 69,812,386 75,406,701 73,058,648

(47,854,775) (54,149,260) (43,0 12,543) 53,137,275 55,879,019 49,36S,5<-15 12,718,434 2,427,483 1,101,453 18,000,934 4,157)42 7,457,455 49,250,693 67,251,627 71,408,869 67,251,627 71,408.869 78,866,324

145,394,730 147,588,917 155,731,776 78,143,103 76,180,048 75,534,172 67,25 J ,627 71,408,869 80,197,604

145,394,730 147,588,917 155,731,776

Gavilan .Joint C. C. D. I

06/30/07 06/30/08 06130!09 Audited Audited Audited

8, I 02,552 8,663,622 1,418,712 36,751,632 39,921,009 42,577,127

(28,649,080) (31,257,387) (41,158,415) 31,90!,400 33,491,903 39,803,166

497,010 685,249 244,418 3,749,330 2,919,765 (1,110,831)

20,165,908 23,915,238 26,835,003 23,915,238 26,835,003 25,724,172

57,819,699 109,734,730 106,355,944 33,904,461 82,899,727 80,631,772 '3.915,238 26,835,003 25,724,172 57,819,699 109,734,730 106,355,94..\

Merced C.C.D. 06/30/07 06/30/08 06/30/09 Audited Audited Audited

\9,359,87\ 19,173,530 18,940,457 61,886,801 70,858,502 69,296,499

(42,526,930) (51,684,972) (50,356,042) 43,766,222 48,748,142 48,797,236 22,519,606 10,621,318 4,323,392 23,758,898 7,684,488 2, 764,586 56,975,752 80,734,650 88,419.138 80,734,650 88,419,138 91,183,724

156,607,204 !57,507,005 .153,678,695 75,872,554 69,087,867 62,494,971 80,734,650 88,419,138 91,183,724

156,607,204 157,)07,005 153,678,695

.'

APPENDIXC

CASH FLOWS AND ALTERNATIVE CASH RESOURCES

This Appendix contains current and projected cash flows and a description of alternative cash resources for each District. The projected cash flow amounts are projections only; there can be no assurance that such projections will be realized. Further, investors should note that amounts shown as alternative cash resources for a District will not necessarily be available for the payment of the Note of such District.

C-1

'.

Allan Hancock Community College District

2009-1 0 Actual/Estimated Cash Flow 20119TRAN Mid· Year Adjusted

Beginning (+)plus Hminus Ending ActuaU (+)Amount/ (+)Amount/ Ending Month Cash Balance n.eceipts Disbursements Cash Balance Estimated (-) Pledges (-)Pledges Cash Balance

July, 2009 $3,491,194 $4,682,070 $3,732,251 $4,441,013 A $3,615,000 $8,056,013 August, 2009 4,441,013 3,125,876 4,671,420 2,895,469 A 6,510,469 September 2009 2,895,469 4,244,860 5,250.302 1,890,027 A 5,505,027 October, 2009 1,890,027 82,974 I ,307,352 665,649 A 4,280,649 November, 2009 665,649 10,807,880 7,046,794 4,426,735 A 8,041,73:5 December, 2009 4,426,735 7 ,3!!8, 198 5,545,478 6,269,455 A 9,884,455 January, 2010 6,269,455 I ,696,288 3,109,726 4,856,018 A ( 1,807,500) 6,663,518 February, 2010 4,856,018 I ,696,288 4,637,613 1,914,692 A 3,722,192 March 2010 1,914,692 1,927,374 3,500,000 342,066 E 2,149,566 April, 2010 342,066 7,110,710 3,820,000 3,632,776 E (1,807,500) 2,145,000 5,777,776 May, 2010 3,632,776 3,546, 763 3,700,000 3,479,539 E 5,624,539 June, 2010 3,479,539 1,381,423 2,600,000 2,260,962 E 4,405,962

Total $47,690,704 $48,920,935

2010-11 Projected Cash Flow 20HI TRAJ\' Mid-Year Adjusted

Beginning (+)plus (-)minus Ending Pledge Factor (+)Amount/ (+)Amount/ Ending Month Cash &Janet> ll:cccipl.'t Di.~burscmcnts Cash B.al.ancc (%of repnyment) (-) Pkdgcs H Pledges Cash Balnnce

July, 2010 $4,405,962 $7,000,0()0 $3,702,142 $7,703,820 $620,000 $8,323,820 August, 20 I 0 7,703,820 2,980,644 4,633,735 3,905,729 (2,145,000) 4,525,729 September, 2010 3,905,729 4,303,233 5,207,947 3,00\,016 3,621,016 October, 2010 3,001,016 84,428 1,296,805 1,788,639 2,408,639 November, 2010 1,788.639 6,766,017 2,708,104 5,846,551 6,466,551 Decem her, 201 0 5,846,551 11,443,869 9,497,583 7,792,838 8,412,838 January, 2011 7,792,838 1,726,008 3,084,639 6,434,207 50% (310,000) 6,744,20i February, 2011 6,434,207 1,726,008 4,600,200 3,560,015 3,870,015 March, 2011 3,560,015 1,961,143 3,471,765 2,049,393 2,359,393 April. 2011 2,049,393 7,235,295 3,789,183 5,495,504 50% (310,000) 5,495,504 May, 2011 5,495,504 3,608,905 3,670,151 5,434,258 5,434,258 June, 2011 5,434,258 1,405,627 2.579,025 4,260,859 4,260,859

Total $50,241,176 $48,241,279

Alternative Cash Resources

Audited Projected Projected Cash Balance Cash Balance Cash Balance

Fund Type FUitd Purpose as of 6/30/09 as of 6/30/10 as of 6/30/11 Special Revenue Fund Child Dcv/PCPA ($1,746) $10,000 $10,000 Enterprise Fund Bo()kstore Fund $1,784,806 $1,800,000 $1,800,000 Trust and Agency ASl3G/Districl Trust/Student Fee~ $702,617 $750,000 $800,000 Internal Service Self Insurance Funds (Dental/P&UHeath Exams) $3,628,563 $4,000,000 $4,000,000 Capital Projects Fund Capital Outlay acquitions or construction $3,742,866 $3,000,000 $3,000,000

TOTAL $9,857,106 $9,560,000 $9,610,000

C-2

Gavilan Community College District

2009-10 Actual/Estimated Cash Flow 2009 TRAN Mid-Year Adjusted

Beginning (+)plus (-)minus Ending Actual/ (+)Amount/ (+)Amount/ Ending Month Cash Balance Receipts Disbursements Cash Balance Estimated (-)Pledges (-)Pledges Cash Balance

July, 2009 $1,271,090 $4,037,091 $2,919,071 $2,389,110 A $2,389,110 August, 2009 2,389,110 1,527,640 2,918_.373 998,377 A 998,377 September, 2009 998,377 4,002,037 4,392,097 608,317 A 608,317 October, 2009 608,317 3,492,407 3,311,237 789,487 A 789,487 November, 2009 789,487 3,378,193 4,311,432 (143,752) A (143,752) December, 2009 (143,752} 4,023,598 3,658,629 221,217 A 221,217 January, 2010 221,217 5,640,258 2,818,149 3,043.326 A 3,043,326 February, 20\0 3,043,326 3,171,743 4,022,922 2,192,147 A 2,192,147 March, 2010 2,192,147 1,863,647 4,096,370 (40,576) E (40,576) April, 2010 (40,576) 4,762,295 4,097,193 624,526 E 1,420,000 2,044,526 May, 2010 624,526 2,711,243 3,507,230 (171,461) E 1,248539 June,2010 (171,461) 4,008,752 2,204,273 1,633,018 E 3,053,018

Total $42,618,904 $42,256,976

2010-11 Projected Cash Flow 2010 TRAN Mid-Year Adjust~d

Beginning (+)plus (-}minus Ending Pledge Factor (+)Amount/ (+}Amount/ Ending Month Cash Balance Renipts Disbursements Cash Balance (% of repa~·mcnt) (-}Pledge.~ (-)Pledge.~ Cas:h Bnlance

July, 2010 $3,053,018 $4,037,091 S2,919,071 $4,171,038 $940,000 $5,111,038 August, 2010 4,171,038 1,527,640 2,918,373 1,360,305 (1,420,000) 2,300,305 September, 2010 1,360,305 4,002,037 4,392,097 970,245 1,910,245 October, 2010 970,245 3,492,407 3,311,237 1,151,415 2,091,415 November-, 2010 1,151,415 3,378,193 4,311,432 218,176 1,158,176 December, 2010 218,176 4,023,598 3,658,629 583,145 1,523,145 January, 2011 583,145 5,640,258 2,818,149 3,405,254 50% (470,000) 3,875,254 February, 2011 3,405,254 3,171,743 4,022,922 2,554,075 3,024,075 March, 2011 2,554,075 1,863,647 4,096,370 321,352 791,352 April, 2011 321,352 4,762,295 4,097,193 986,454 50% (470,000) 986,454 May, 201 l 986,454 2,711,243 3,507,230 190,467 190,467 June, 2011 190,467 4,008,752 2,204,273 1,994,946 1,994,946

Total $42,618,904 $42,256,976

Alternative Cash Resources

Audited Projected Pmjected Cash Balance Cash Balance Cash Balance

l;<'und Type Fund Purpose as of 6/30/09 as of 6/30/10 as of 6/30/11

TOTAL

C-3

Merced Community College District

2009-10 Actual/Estimated Cash Flow 2009TRAN Mid·Vear Adjusted

Beginning (+)plus (-)minus Ending Actual/ (+)Amount/ (+)Amount/ Ending Month Cash Balance Receipts Disbursements Cash Balance Estimated H Pledges (-)Pledges Cash Balance

July, 2009 $2,089,974 $7,168,843 $4,781,897 $4,476,920 A $5,000,000 $9,476,920 August, 2009 4,476,920 3,709,316 6,952,915 1,233,321 A 6,233,321 September, 2009 1,233,321 6,535,740 5,044,850 2,724,211 A 7,724,21 [ October, 2009 2,724,211 7,863,478 5,172,858 5,414,831 A 10,414,831 November, 2009 5,414,831 5,599,942 4,885,886 6,128,887 A 11,128,887 December, 1009 6, 128,887 5,023,686 5,823,563 5,329,010 A 10,329,010 January, 2010 5,329,010 1,447,116 4,608,871 2,167,255 A (2,500,000) 4,667,255 February, 2010 2,167,255 8,668,698 4,589,988 6,245,965 E 8,745,96:) March, 2010 6,245,965 2,804,502 5,192,705 3,857,762 E 6,357,762 April, 2010 3,857,762 5,209,837 5,559,099 3,508,500 E (2,500,000) 3,200,000 6, 708,500 May, 2010 3,508,500 4,576,564 5,837,122 2,247,942 E 5,447,942 June, 2010 2,247,942 2,203,306 4,686,748 (135,500) E 2,964,500

Total $60,811,028 S63,136,502

2010-11 Projected Cash Flow 2010 TRAN Mid-Year Adjusted

Beginning (+)plus (-)minus Ending Pledge Factor (+)Amount/ (+)Amount/ Endi.ng Month Cash Balance Receipts Disbursements Cash Balance (%of repayment) (-) Pledges (-)Pledges Cash Balance

July, 2010 $2,964,500 $8,604,600 $4,781,897 $6,787,203 $1,985,000 $8,772,203 August, 2010 6,787,203 3,709,316 6,352,915 943,604 (3,200,000) 2,928,604 September, 2010 943,604 6,435,740 5,044,850 2,334,494 4,319,494 October, 2010 2,334,494 9,563,478 5,172,858 6,725,114 8,710,114 November, 2010 6,725,114 5,599,942 4,885,886 7,439, J 70 9,424,170 December, 2010 7,439,170 5,023,686 5,823,563 6,639,293 8,624,293 January, 2011 6,639,293 3,401,147 4,608,871 5,431,569 50% (992,500) 6,424,069 February, 201! 5,431,569 5,978,910 4,589,988 6,820,491 7,812,991 March, 2011 6,820,491 4,404,502 5,192,705 6,032,288 7,024,788 April, 2011 6,032,288 5,209,837 5,559,099 5,683,026 50% (992,500) 5,683,026 May,20\1 5,683,026 2,976,564 5,837,122 2,822,468 2,822,468 June, 2011 2,822,468 2,203,306 4,686,748 339,026 339,026

Total $63, Ill ,028 $62,536,502

Alternative Cash Resources

Audited Projected Projected Cash Balance Cash Balance Cash Balance

Fund Type Fund Purpose as of 6/30/09 as of 6/30110 as of 6/30/11 Special Revenue Fam11Child Development $132,408 S300,0QQ $300,000 Capital Projects Capital Projects $464,355 $2,000,000 $1,500,00(1 Enterprise Fund Bookstore $94,896 $75,000 $75,000 Internal Service Retirement Fund $3,213,940 $4,150,000 $5,000,000

TOTAL $3,905,599 $6,525,000 $6,875,000

C-4

;

Palo Verde Community College District

2009-10 Actual/Estimated Cash Flow 2009TRAN Mid-Year Adjusted

Beginning (+)plus (-)minus Ending Actual/ (+)Amount/ (+)Amount/ Ending Month Cash Balance ReccifJts Dislmrscments Cash Balance Estimated (-)Pledges (-)Pledges Cash Balance

July, 2009 $1,249,876 $2,193,043 $781,475 $2,661,444 A $2,375,000 $5,036,444 August, 2009 2,661,444 953,706 962,948 1,652,203 A (I ,000,000) 4,027,203 September, 2009 1,652,203 1,386,405 l' 102,026 1,936,581 A 4,311,581 October, 2009 1,936,581 1,857,232 1,385,182 2,408,630 A 4,783,630 November, 2009 2,408,630 1,161,791 I ,305,886 2,264,535 A 4,639,535 December, 2009 2,264,535 992,447 1,367,396 I ,889,585 A 4,264,585 January, 2010 I ,889,585 833,096 973,929 1,748,752 A (1, 187,500) 2,936,252 February, 2010 1,748,752 452,245 1,217,064 983,933 A 2,171,433 March, 2010 983.933 411,070 957,691 437,312 E 1,624,812 April, 2010 437.312 592,599 1,064,582 (34,671) E (1,187,500) 1,150,000 1,115,329 May, 2010 (34,671) 1,134,738 1,024,181 75,886 E 1,225,886 June, 2010 75,886 338,071 911,464 (497,507) E 652,493

Total $12,306,443 $13,053,826

20 I 0-11 Projected Cash Flow 2010TRAN Mid-Year Adjusted

Beginning (+)plus (-)minus Ending Pledge Factor (+)Amount/ (+)Amount/ Ending Month Cash Balance Receipts Disbursements Cash Balance (% of rcpayment) (-) Plcdgcs (-)Pledges Cash Balance

July, 2010 $652,493 $2,335,348 $751,466 $2,236,375 $855,000 $3,091,375 August, 2010 2,236,375 868,535 857,197 1,097,713 (1,150,000) 1,952,713 September, 2010 1,097,713 1,386,405 1,002,026 1,482,092 2,337,092 October, 2010 1,482,092 1.563,543 1,106,497 1,939.138 2,794,138 November, 2010 1,939,138 1,061,791 891,675 2,109,254 2,964,254 December, 2010 2,109,254 992,447 1,350,886 1,750,815 2,605,815 January, 20 II 1,750,815 577,502 946,534 1,381,783 50% (427,500) 1,809,283 February, 2011 1,381,783 542,916 I ,076,026 848,673 1,276,173 March, 2011 848,673 870,999 1,106,691 612,981 1,040,481 April, 2011 612,981 1,050,123 997,582 665,522 50% (427,500) 665,522 May, 2011 665,522 1,031,301 1,049,181 647,642 647,642 June, 2011 647,642 560,728 I ,093,467 114,902 114,902

Total $12,841,638 $12,229,229

Alternative Cash Resources

Audited Projected Projected Cash Balance Cash Balance Cash Balance

Fund Type Fund Purpose as of 6/30/09 as of 6/30/10 as of 6/30/11 Insurance Fund GASB $384,629 $358,639 $332,649 Capital improvement Capital Improvement $735,532 $\,536,281 $789,627 Bookstore Enterprise Fund $332,296 $345,687 $359,451 Revolving Ca<;h Revolving Cash $5,000 $5,000 $5,000

TOTAL $1,457,456 $2,245,607 $1,486,727

C-5

San Luis Obispo Community College District (Cuesta Community College)

2009-1 0 Actual/Estimated Cash Flow 2009 TRAJ\' Mid-Year Adjusted

nc~inning (+)plus (-)minus Ending Actual/ (+) AmounU (+)Amount/ Ending Month Cash Balance Receipts Disbursements Cash Balance Estimated (-)Pledges H Pledges Cash Balance

July, 2009 $3,830,660 $4,117,698 $5,610,924 $2,337,434 A $9,000,000 $11,337,434 August, 2009 2,337,434 2,463,144 3,830.227 (679,649) A (1,650,000) 8,320,351 September, 2009 (679,649) 1,986.283 6,195,953 (4,889,319) A 4,110,681 October, 2009 (4,889,319) 3,989,604 4,545,874 (5,445,589) A 3,554,411 November, 2009 (5,445,589) 3,440,592 5,899,317 (7,904,314) A I ,095,686 December, 2009 (7,904,314) 13,685,486 3,961,009 1,820,163 A 10,820,163 January, 2010 1,820,163 2.526,872 3,845,420 501,615 A (4,500,000) 5,001,615 February, 2010 501,615 2,518,968 3,917,483 (896,900) A 3,603,100 March, 2010 (896,900) 4,129,992 4,884.565 (1,651,473) E 1,900,000 4,748,527 April, 20\0 (\,651,473) 9,354,542 3,722,088 3,980,982 E (4,500,000) 5,880,982 Muy, 2010 3,980,982 .• 1,314,650 3,513,620 1,782,012 E 3,682,012 Junt:, 2010 1.782,012 2,935,502 3,059,688 \,657,826 E 3,557,826

Total $52,463,333 $52,986,167

20 I 0-11 Projected Cash Flow 2010 TRAN Mid~ Year Adjusted

Beginning (+) plu~ (~)minus Ending Pledge Factor (+)Amount} (+)Amount/ Ending Month Cash Balance Receipts Di.~bursements Cash Balance (% of repayment) (~)Pledges H Pledges Cash Balan<~e

July, 2010 $3,557,826 $4,017,263 $5,665,583 $1,909,506 $7,200,000 $9,109,506 August, 2010 1,909,506 2,403,065 . 3, 729,931 (1,317,360) (1,900,000) 5,882,640 September, 2010 (\,317,360) 1,937,835 4,785,180 (4,164,705) 3,035,295 October, 2010 (4,164,705) 3,892,293 4,016,233 (4,288,645) 2,911,355 November, 2010 (4,288,645) 3,356,672 5,448,635 (6,380,609) 819,391 December, 2010 (6,380,609) 13,351,682 3,826,264 3,144,809 10,344,809 January, 2011 3,144,809 2,465,239 3,714,607 I ,895,441 50% (3,600,000) 5,495,441 February, 2011 1,895,441 2,457,528 3,784,219 568,750 4,168,750 March, 2011 568,750 4,029,257 4,718,403 (120,396) 3,479,604 April, 2011 (120,396) 9,126,375 3,595,471 5,410,508 50% (3,600,000) 5,410,503 May, 2011 5,410,508 1,282,584 3,394,094 3,298,998 3,298,993 June, 2011 3,298,998 2,935,502 2,955,604 3,278,896 3,278,896

Total $51,255,295 $49,634,225

Alternative Cash Resources

Audited t•rojected Projected Cash Balance Cash Balance Cash Balance

Fund Type as of 6/30/09 as of 6/30110 as of 6/30/11 Debt Service Fund (Fd 29) $48,054 $100,000 $100,000 Special Revenue (Fd33) Children's Center $114,995 $125,000 $125,000 Enterprise Fund (Fd 51) Bookstore Fund $328,042 $350,000 $350,000 Internal Service Fund (Fd 61) General Liability Insurance $50,000 $50,000 $50,000 Internal Service Fund (Fd 66) Dental insurance $27,994 $50,000 $50,000 Special Revenue (Fd32) Auditorium Fund $133,272

TOTAL $702,357 $675,000 $675,000

C-6

..

APPENDIXD

REPAYMENT PERCENT AGES AND AMOUNTS

D-1

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California Community College Financing Authority Tax and Revenue Anticipation Note Program Note Participations, Series 2010A and Series 2010B

Repayment Table

Series 2010A Series 2010B Set-a-Side Month

District Note Amount Note Amount Month* Percent Amount

Allan Hancock Joint C.C.D. $2,145,000 August 100% $2,180,988

Gavilan Joint C.C.D. 1,420,000 August 100% 1,446,803

Merced C.C.D. 3,200,000 August 100% 3,253,689 Palo Verde C.C.D. I ,150,000 August 100% 1,169,294

San Luis Obispo (Cuesta) C.C.D. 1,900,000 August 100% I 931 878

Totals $8,395,000 $1,420,000 $9,982,652

*Assumes a Repayment Month of July 2010. The term "Repayment Month" means the month in which the Deferred Re\•enues are

received, except that no Repayment Month may occur later !han one month prior to the Maturity Date of a District's Note. Please see "SECURITY AND SOURCES OF PA YMENT"for more infomwtion.

D-2

[TI-llS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX E

INVESTMENT OF NOTE PROCEEDS

This Appendix contains a description of each District's current intention with respect to the investment of its Note proceeds. There can be no assurance that the actual manner in which a District invests its Note proceeds will not differ from the manner in which such District currently anticipates it will invest such proceeds.

E-1

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[THIS PAGE INTENTIONALLY LEFT BLANK]

California Community College Financing Authority Tax and Revenue Anticipation Note Program Note Participations, Series 2010A and Series 2010B

Investment Preferences

Series 2010A Series 2010B Investment in

District Note Amount Note Amount County Pool

Allan Hancock Joint C. C. D. $2,145,000 2,145,000

Gavilan Joint C.C.D. I ,420,000 I ,420,000

Merced C.C.D. 3,200,000 3,200,000

Palo Verde C.C.D. I, 150,000 I, 150,000

San Luis Obispo (Cuesta) C.C.D. I ,900,000 I ,900,000

Totals $8,395,000 $1,420,000 $9,815,000

t;n N

l>INVria .Ld31 KilVNOUN'tl,LNI 39Vd SII-Ui

APPENDIXF

DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF THE TRUST AGREEMENT

The following is a brief summary of certain provisions of the legal documents related to the Note Participations which are not described in the Official Statement to which this Appendix is attached. This summary is not intended to be definitive and is qualified in its entirety by reference to the fully executed Trust Agreement and Note Resolutions for the complete terms thereof. Copies of the Trust Agreement and Note Resolutions are available upon request from the respective Districts.

DEFINITIONS

"Authoritv" means the California Community College Financing Authority, a public entity of the State of California, created pursuant to the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State of California.

"Authorized Authority Representative" means the Executive Director, the President, the Vice President, and the Secretary of the Authority and any member of the Governing Board of the Authority.

"Authorized Denomination" means $5,000 or any multiple thereof

"Authorized Local Agencv Representative" means the person or persons designated as such in the Local Agency Note Resolution or any other person at the time designated to act on behalf of such Local Agency by written certificate furnished to the Trustee, containing the specimen signature of such person and signed on behalf of such Local Agency by an Authorized Local Agency Representative.

"Business Day" means any day except Saturday, Sunday or any day on which banks located in the city in which the designated corporate trust office of the Trustee is 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 signed on behalf of such Local Agency by an Authorized Local Agency Representative, and with respect to the Authority means an instrument in writing signed on behalf of the Authority by an Authorized Authority Representative or other person at the time designated to act on behalf of the Authority by written certificate furnished to the Trustee.

"Code" means the Internal Revenue Code of 1986 and the regulations issued or applicable thereunder.

"Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to a Local Agency or the Authority and related to the authorization, execution and delivery of the Notes and the related sale of the Note Participations, including, but not limited to, costs of preparation and reproduction and delivery of 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 and charges for preparation, execution and safekeeping of the Note Participations and any other costs, charges or fees in connection with the original execution and delivery of the Note Participations and the issuance of the Notes.

"Costs of Issuance Funds" means, collectively, the Series 20 I OA Costs of Issuance Fund and the Series 20 I OB Costs oflssuance Fund.

"Defaulted Note" means a Note any of the principal of or interest on which is not paid when due.

"Default Rate" means the rate of interest per annum payable with respect to the outstanding portion of each Defaulted Note, which rate will equal the Note Rate.

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"Local Agency" or "Local Agencies" means the community college districts listed in the Trust Agreement and in each case their successors and assigns.

"Interest Funds" means, collectively, the Series 20 lOA Interest Fund and the Series 20 I 08 Interest Fund.

"Interest Payment Date" means the Maturity Date.

"Maturity Date" means March I, 20 II.

""Moodv~s" means Moody's Investors Service, a corporation duly organized and existing under any by virtue of the laws of the State of Delaware, and its successors and assigns.

"Note Participations'' means, collectively, the Series 2010A Note Participations and the Series 20108 Note Participations.

"Note Participation Payment Funds" means collectively, the Series 2010A Note Participation Payment Fund and the Series 20 I OB Note Participation Payment Fund.

"Note Pavment Deposit Date" means February 24, 2011.

"Note Rate" means the stated rate of interest payable on the Notes.

"Note Resolutions" means the respective resolutions adopted by the board of trustees of the Local Agencies authorizing the issuance of the Notes and approving the execution and delivery of the Trust Agreement, and the Note Participations.

"Notes" means one or more series of taxable or tax-exempt tax and revenue anticipation notes issued by the Local Agencies in the respective aggregate principal amounts described in the Trust Agreement, which are attributable to either the Series 20 I OA Note Participations or the Series 20 I 08 Note Participations.

"Opinion of Counsel" means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed by the Authority and satisfactory to and approved by the Trustee (who will be under no liability by reason of such approval).

"Outstanding," when used as of any particular time with reference to Note Participations, means (subject to the subheading entitled "AMENDMENT OF OR SUPPLEMENT TO THE TRUST AGREEMENT- Disqualified Note Participations") a1l Note Participations except-

( 1) Note Participations cancelled by the Trustee or surrendered to the Trustee for cancellation;

(2) Note Participations paid or deemed to have been paid within the meaning of the Trust Agreement; and

(3) Note Participations in lieu of or in exchange or substitution for which other Note Participations shall have been executed and delivered by the Trustee under the Trust Agreement.

"Owner" means the registered owner of any Outstanding Note Participation.

"Payment Account Deposit Certification" means a certification of the Local Agency in the form set forth in the Trust Agreement that the deposit required to be made to the Payment Account pursuant to the Note Resolution has been made.

"Payment Accounts" means the accounts created by the Local Agencies pursuant to the Note Resolutions.

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"Payment Subaccount" means any subaccounts held on behalf of the Local Agencies by the Trustee in either of the Note Participation Payment Funds.

"Permitted Investments" means any of the following to the extent then permitted by law:

1. (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 and unconditionally 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 any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated.

2. Obligations of instrumentalities or agencies of the United States of America. These are specifically limited to:

--Federal Home Loan Mortgage Corporation (FHLMC) Participation Certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) Debt Obligations

--Federal Home Loan Banks (FHL Banks) Consolidated debt obligations

-- Federal National Mortgage Association (FNMA) Debt obligations and Mortgage backed securities (Excluding stripped mortgage securities-which are purchased at prices exceeding their principal amounts).

Book entry securities listed in 1 and 2 above must be held in a trust account with the Federal Reserve Bank or with a clearing corporation or chain of clearing corporations which has an account with the Federal Reserve Bank.

3. Federal Housing Administration debentures.

4. Commercial paper, payable in the United States of America, having original maturities of not more than 92 days and which are rated A+ by S&P and Prime-1 by Moody's.

5. Interest bearing demand or time deposits issued by state banks or tmst companies, savings and Joan associations, federal savings banks or any national banking associations, the deposits of which are insured by the Bank Insurance Fund (BIF) or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation (SAIF) or any successors thereto. These deposits: (a) must be continuously and fully insured by BIF or SAIF, or (b) must have maturities of less than 366 days and be deposited with banks the short term obligations of which are rated A+ by S&P and P-1 by Moody's.

6. Money market mutual funds or portfolios investing in short-term US Treasury securities rated AAAm or AAAm-G by S&P and Aaa by Moody's, including those which the Trustee and its affiliates or subsidiaries provide advisory or management services.

7. Investment agreements which are with investment institutions, or with a fmancial entity whose obligations are guaranteed or insured by a financial entity, having long-term obligations which are rated "AA'' or higher by S&P and "Aa" or higher by Moody's as to long term instruments and

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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 will require the Trustee to replace such financial institution or will provide for the investment agreement to be collateralized at levels and under 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).

8. The Local Agency Investment Fund administered by the State of California.

"Pricing Confirmation Supplement" means any of the Pricing Confirmation Supplements attached to each Purchase Agreement as agreed and accepted by each of the respective Local Agencies.

"Principal Funds" means, collectively, the Series 201 OA Principal Fund and the Series 201 OB Principal Fund.

"Principal Office of the Trustee" means the corporate trust office of the Trustee, which, for the Trustee initially appointed under the Trust Agreement, is located in Los Angeles, California, provided that a different office may be designated by the Trustee in writing to the Authority.

"Principal Payment Date" means the date on which principal evidenced and represented by the Note Participations becomes due and payable, being the Maturity Date.

"Proceeds Funds" means, collectively, the Series 2010A Proceeds Fund and the Series 2010B Proceeds Fund.

"Program" means the Authority's Tax and Revenue Anticipation Note Program pursuant to which the Note Participations are executed and delivered to assist Local Agencies in financing cash flow deficits.

"Purchase Agreement" means, collectively, those certain purchase agreements by and between each of the respective Local Agencies and the Purchaser relating to the Notes and the Note Participations.

"Purchaser" means RBC Capital Markets Corporation, as Purchaser of the Note Participations evidencing and representing interests in the Notes.

''Rating Agencv" means each national rating agency then maintaining a rating on the Note Participations.

"Repayment Month" means those months identified as pledge months in the Pricing Confmnation Supplement executed by each Local Agency.

"Series 201 OA Costs oflssuance Fund" means the fund by that name established in the Trust Agreement.

"Series 201 OB Costs of Issuance Fund" means the fund by that name established in the Trust Agreement.

"Series 2010A Interest Fund" means the fund by that name established in the Trust Agreement.

"Series 201 OB Interest Fund" means the fund by that name established in the Trust Agreement.

"Series 201 OA Note Participations" means the $8,395,000 California Community College Financing Authority Tax and Revenue Anticipation Note Program Note Participations, Series 201 OA, as authorized by the Trust Agreement and at any time Outstanding thereunder that are executed and delivered by the Trustee under and pursuant to the Trust Agreement.

"Series 20 I 08 Note Participations" means the $8,395,000 California Community College Financing Authority Tax and Revenue Anticipation Note Program Note Participations, Series 20108, as authorized by the Trust Agreement and at any time Outstanding thereunder that are executed and delivered by the Trustee under and pursuant to the Trust Agreement.

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"Series 20 I OA Note Participations Payment Fund " means the fund by that name established in the Trust Agreement.

"Series 20 I OB Note Participations Pavment Fund " means the fund by that name established in the Trust Agreement.

"Series 20 I OA Principal Fund" means the fund by that name established in the Trust Agreement..

"Series 2010B Principal Fund" means the fund by that name established in the Trust Agreement..

"Series 2010A Proceeds Fund" means the fund by that name established in the Trust Agreement.

"Series 20 I OB Proceeds Fund" means the fund by that name established in the Trust Agreement.

"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill Companies.

"Trust Agreement'' means the Trust Agreement executed and entered into as of April I, 2010, by and between the Trustee and the Local Agencies, as originally executed and entered into and as it may froin time to time be amended or supplemented in accordance therewith.

"Trustee" means Wells Fargo Bank, National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at its principal corporate trust office in Los Angeles, California, or any other bank or trust company at its principal corporate trust office which may at any time be substituted in its place as Trustee as provided in the Trust Agreement.

TRUSTEE'S DUTIES REGARDING NOTES

Return of Paid Notes. Each Note, when paid in full, will be cancelled by the Trustee and returned to the Local Agency that issued such Note.

NOTE PAYMENTS

Deposit of Notes. The Notes, as evidenced and represented by the applicable series ofNote Participations, have been irrevocably deposited with and pledged and transferred to the Trustee, who is the registered owner of each Note for the benefit of the Owners of the Note Participations to which such Notes are attributable, and the payments on such Notes will be used for the punctual payment of the interest and principal evidenced and represented by such Note Participations, and such Notes will not be used for any other purpose while any of such Note Participations remain Outstanding. This deposit, transfer and pledge will constitute a first and exclusive lien on the principal and interest payments of the Notes for the foregoing purpose in accordance with the terms hereof. Each Local Agency has approved and the Trustee has accepted the deposit of the Notes.

All principal and interest payments on the Notes will be paid directly by each Local Agency to the Trustee. All principal and interest payments on each series of Notes received by the Trustee will be held in trust by the Trustee under the tem1s of the Trust Agreement and will be deposited by it, as and when received, in the appropriate payment accounts within the Series 2010A Note Participation Payment Fund and Series 2010B Note Participation Payment Fund, as applicable, which funds the Trustee has agreed to maintain so long as any of the Series 20 I OA Note Participations or Series 201 OB Note Participations, as applicable, are Outstanding, and all money in such funds will be held in trust by the Trustee for the benefit and security of the Owners of such Note Participations to the extent provided in the Trust Agreement. lf the Trustee receives Note repayments fTom a Local Agency which, together with other amounts on deposit in the Note Participation Payment Funds allocable to such Local Agency, are in excess of the amounts required to pay the principal of and interest due on such Local Agency's Note, such excess amounts will remain in such Note Participation Payment Fund and be subject to any rebate requirement as specified in the Trust Agreement, and thereafter will be transferred to such Local Agency following payment of the amount of Note Participations evidencing and representing principal and interest on such Local Agency's Note.

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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.

Deposit of Money in the Note Participation Payment Funds. The Trustee will deposit the money contained in the Note Participation Payment Funds at the following respective times in the following respective funds in the manner provided in the Trust Agreement, each of which funds the Trustee has agreed to maintain so long as the Series 2010A Note Participations or Series 2010B Note Participations, as applicable, are Outstanding, and the money in each of such funds will be disbursed only for the pw-poses and uses authorized in the Trust Agreement:

(a) Interest Funds. The Trustee, on each Interest Payment Date, will deposit in the Series 20 lOA Interest Fund and Series 201 OB Interest Fund, as applicable, that amount of money representing the interest becoming due and payable on the Notes attributable to such series of Note Participations on the Interest Payment Date. All money in the Interest Funds will be used and withdrawn by the Trustee solely for the pw-pose of paying the interest evidenced and represented by the applicable series ofNote Participations on the Interest Payment Date.

(b) Principal Funds. The Trustee, on the PrincipaTPayment Date, will deposit in the Series 2010A Principal Fund and Series 2010B Principal Fund, as applicable, that amount of money representing the principal becoming due and payable on the Notes attributable to such series of Note Participations on the Principal Payment Date. All moneys in the Principal Funds will be used and withdrawn by the Trustee solely for the purpose of paying the principal evidenced and represented by the applicable series of Note Participations on the Principal Payment Date.

Investments. Any money held by the Trustee at any time in any Funds created under the Trust Agreement will, to the fullest extent practicable, be invested as directed in writing by an Authorized Authority Representative 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 under the Trust Agreement. In the absence of any written direction from the Authority, the Trustee will invest any money held in any Funds created under the Trust Agreement in Permitted Investments identified in Section 6 of the definition thereof which will, as nearly as practicable, mature on or before the dates on which such money is anticipated to be needed for disbursement under the Trust Agreement. The amounts held in the Proceeds Funds will be accounted for separately for the respective Local Agencies. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may at its sole discretion, for the purpose of any such investment, commingle any of the money held by it under the Trust At,oreement. The Trustee will not be liable or responsible for any loss suffered in connection with any such deposit or investment made by it under the terms of and in accordance with the Trust Agreement. The Trustee may present for redemption or sell any such deposit or investment whenever it shall be necessary in order to provide money to meet any payment of the money so deposited or invested, and the Trustee will not be liable or responsible for any losses resulting from any such deposit or investment presented for redemption or sold. Any interest or profits on such deposits and investments received by the Trustee will be credited to the fund, account or subaccount from which such investment was made.

Confirmation of Deposits to Payment Accounts. (a) Each Local Agency will file with the Trustee a Payment Account Deposit Certification, substantially in the form attached as Exhibit C to the Trust Agreement, confirm and certifY that it has made the required deposit (in the amount and on the date specified in the Pricing Confmnation Supplement for each Local Agency attached to the Purchase Agreement for the Note Participations) into its Payment Account created pursuant to its Note Resolution. Such Payment Account Deposit Certification will be signed by an Authorized Local Agency Representative and delivered to the Trustee within seven Business Days after the date of such deposit. In the event that the Trustee has not received the Payment Account Deposit Certification from a Local Agency within seven Business Days following the date such Payment Account Deposit Certification was due from a Local Agency, the Trustee will be entitled to conclude that the deposit into such Local Agency's Payment Account has not been made and will immediately notifY each rating agency then rating the Note Participations, the Purchaser and the Underwriter of such event, which constitutes an "Event of Default" under such Local Agency's Note Resolution. Upon the occurrence of such an event, the Trustee will exercise the rights and remedies set forth in the Trust Agreement. Notwithstanding anything to the contrary in the Trust Agreement, any Local Agency for which the Trustee is holding or investing moneys or securities on behalf of said Local Agency

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(which moneys or securities are intended to be that Local Agency's Payment Account deposit, either pursuant to the Trust Agreement or through some other arrangement between the Trustee and the Local Agency) need not present a Payment Account Deposit Certification.

(b) On the Note Payment Deposit Date, the Trustee will transfer all amounts held by it on behalf of each Local Agency to the Note Participation Payment Funds.

COVENANTS

Compliance with Trust Agreement. The Trustee will not execute or deliver any Note Participations in any manner other than in accordance with the provisions of the Trust Agreement; and the Local Agencies will not suffer or permit any default to occur thereunder, but will faithfully observe and perform all the agreements, conditions, covenants and terms contained therein required to be observed and performed by them.

Amendment of Notes. The Local Agencies and the Trustee will not amend or permit the amendment of the Notes without (a)(!) a determination that such amendment does not materially adversely affect the interest of the Owners of the series of Note Participations to which such Notes are attributable, or (2) the written consents of the Owners of a majority in ag&'fegate principal amount of the Note Participations then Outstanding to which such Notes are attributable, and (b) an Opinion of Counsel to the effect that such amendment will not cause interest on such Notes to be included in gross income for federal income tax purposes; provided that no such amendment will reduce the rate of interest or amount of principal or extend the time of payment thereof with respect to any Note.

Observance of Laws and Regulations. The Local Agencies will faithfully observe and perform all lawful and valid obligations or regulations now or hereafter imposed on them by contract, or prescribed by any state or national law, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such observance or performance is material to the transactions contemplated by the Trust Agreement.

Tax Covenants. (a) The Local Agencies will not take any action or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of the interest payable on the Notes, as evidenced and represented by the Note Participations, under Section 103 of the Code. The Local Agencies will not directly or indirectly use or permit the use of any proceeds of the Note Participations or the obligations which they evidence and represent or any other funds held under the Trust Agreement or take or omit to take any action that would cause the Note Participations or the obligation which they represent to be "private activity bonds" within the meaning of Section 14\(a) of the Code or obligations which are "federally guaranteed" within the meaning of Section 149(b) of the Code.

(b) The Local Agencies will not directly or indirectly use or permit the use of any proceeds of the Note Participations or the obligations which they represent or any other funds held under the Trust Agreement or take or omit to take any action that would cause the Note Participations or the obligations which they evidence and represent to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the Local Agencies have covenanted to comply with all requirements of Section 148 of the Code to the extent applicable to the Notes. In the event that at any time any Local Agency is of the opinion (which opinion may be based on an Opinion of Counsel), that for purposes of the Trust Agreement it is necessary to restrict or to limit the yield on the investment of any moneys held by the Trustee under the Trust Agreement with respect to such Local Agency, such Local Agency will so instruct the Trustee in writing, and the Trustee will take such action as may be necessary in accordance with such instructions.

Liens. So long as a series of Note Participations is Outstanding, the Local Agencies to which such Local Agencies' Notes are attributable, will not create or suffer to be created any pledge of or lien on such Notes other than the pledges and liens created by the Trust Agreement.

Accounting Records and Statements. The Trustee will keep proper books of record and account in accordance with industry standards in which complete and correct entries will be made of all transactions made by

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the Trustee relating to the receipt, investment, disbursement, allocation and application of all funds received by the Trustee under the Trust Agreement. Such records will specifY the account or fund to which each investment (or portion thereof) held by the Trustee is to be allocated and will set forth, in the case of each investment: (a) its purchase price; (b) identifYing information, including par amount, coupon rate, and payment dates; (c) the amount received at maturity or its sale price, as the case may be; (d) the amounts and dates of any payments made with respect thereto; and (e) such documentation as is required to be obtained as evidence to establish that all investments have been purchased in arms' length transactions with no amounts paid to reduce the yield on the investments.

Such records will be open to inspection by the Authority and any Local Agency at any reasonable time during regular business hours on reasonable notice.

Recordation and Filing. The Local Agencies will file, record, register, renew, refile and rerecord all such documents, including financing statements (or continuation statements in connection therewith), as may be required by law in order to maintain at all times a security interest in the Notes under and pursuant to the Trust Agreement, all in such manner, at such times and in such places as may be required in order to fully perfect, preserve and protect the benefit, protection and security of the Owners and the rights of the Trustee under the Trust Agreement, and the Local Agencies will do whatever else may be necessary or be reasonably required in order to perfect and continue the pledge of and lien on the Notes as provided in the Trust Agreement.

Further Assurances. Whenever and so often as requested to do so by the Trustee or any Owner, the Local Agencies will promptly execute and deliver, or cause to be executed and delivered, all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Tmstee and the Owners the benefit, protection and security conferred, or intended to be conferred, upon them by the Trust Agreement.

DEFAULT AND LIMITATIONS OF LIABILITY

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 be made by any Local Agency in the performance or observance of any other of the covenants, agreements or conditions on its part contained in the Trust Agreement 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 either (i) the Trustee or (ii) the Owners of not less than a majority in aggregate principal amount of the series of Note Participations at the time Outstanding to which such Note is attributable then such default will constitute an "Event of Default" under the Trust Agreement, and in each and every such case during the continuance of such Event of Default either the Trustee or such Owners will be entitled, upon notice in writing to such Local Agency, but subject to the provisions of the Trust Agreement, to exercise the remedies provided to the owner of such Note then in default or under the Note Resolution pursuant to which it was issued which are necessary or desirable to collect the principal of such Note and the interest thereon to maturity.

The Owners of each series of Note Participations, for purposes of the Trust Agreement and the Note Resolution of the applicable Local Agency, to the extent of their interest, will be treated as owners of the Notes attributable to such Note Participations and will be entitled to all rights and security of the owners of such Notes pursuant to each such Note, the Note Resolution and the Trust Agreement, and will be treated for all purposes as owners of such Notes. Each Local Agency has recognized the rights of the Owners of the Note Participations to which such Local Agency's Note is attributable acting directly or through the Trustee, to enforce the obligations and covenants contained in such Note, its Note Resolution and the Trust Agreement; provided that in no event will a Local Agency be liable for any obligations, covenants or damages except those which arise out of its Note and its Note Resolution, and, in particular, no Local Agency will be liable for any obligations, liabilities, acts or omissions of any other Local Agency.

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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 rights under the Trust Agreement against any Local Agency or any 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 duties under applicable law and the agreements, conditions, covenants and terms contained in the Trust Agreement, or in the 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 the Trustee or the Owners; or ·

(c) by suit in equity upon the happening of any default under the Trust Agreement to require any Local Agency and any supervisor, council member, board member, trustee, member, officer and employee to account as the trustee of any express trust.

Non-Waiver. A waiver by the Trustee of any default under the Trust Agreement or breach of any obligation thereunder will not affect any subsequent default thereunder or any subsequent breach of an obligation thereunder or impair any rights or remedies on any such subsequent default thereunder or on any such subsequent breach of an obligation thereunder. No delay or omission by the Trustee to exercise any right or remedy accruing upon any default under the Trust Agreement will impair any such right or remedy or will be construed to be a waiver of any such default thereunder or an acquiescence therein, and every right or remedy conferred upon the Trustee by applicable law or by this article may be enforced and exercised from time to time and as often as will be deemed expedient by the Trustee.

If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or the Local Agencies, then the Trustee 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.

Application of Funds. (a) All moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Trust Agreement will be deposited into a segregated payment account of the Note Participation Payment Funds relating to the defaulting Local Agency's Note and be applied by the Trustee after payment of all amounts due and payable under the Trust Agreement hereof in the following order upon presentation of the several Note Participations to which such Note is attributable, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid; provided that the Trustee will obtain and follow the instructions contained in an Opinion of Counsel and rebate or set aside for rebate from the specified funds held under the Trust Agreement, subject to the prior payment in full of all amounts applicable to the respective Local Agency specified in clause (ii) above, any amount pursuant to such instructions required 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 the Owners 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 evidenced and represented by the Note Participations to which such Note is attributable then due in the order of the due date of such payments, and, if the amount available will not be sufficient to pay in full any payment or payments coming due on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and

Third, Principal: to the payment to the persons entitled thereto of the unpaid principal evidenced and represented by any Note Participations which shall have become due and to which such Note is attributable which shall have become due, in the order of their due dates, with interest on the overdue principal and interest represented by the Note Participations at a rate equal to the Default Rate and, if the amount available will not be sufficient to pay in full all the amounts due with respect to the Note Participations on any date, together with such

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interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and

Remedies Not Exclusive. No remedy conferred in the Trust Agreement upon or reserved therein to the Trustee is intended to be exclusive and all remedies will be cumulative and each remedy will be in addition to every other remedy given thereunder or now or thereafter existing under applicable law or equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any other applicable law.

Exercise of Remedies; Relative Rights of the Note Participation Owners. Upon the exercise by an Owner or the Trustee, of its right of action to institute suit directly against a Local Agency whose Note is attributable to such Owner's Note Participation to enforce payment of the obligation evidenced and represented by such Owner's Note Participation, any moneys recovered by such action will be deposited with the Trustee and applied as provided in the Trust Agreement.

Limited Liability of the Local Agencies. Except as expressly provided in the respective Notes and Note Resolutions, the Local Agencies will not have any obligation or liability to the Authority, the Trustee or the Owners, with respect to the Trust A!,'feement or the preparation, execution, delivery, transfer, exchange or cancellation of the Note Participations or the receipt, deposit or disbursement of the principal of and interest on the Notes by the Trustee, or with respect to the performance by the Trustee of any obligation contained in the Trust Agreement required to be performed by it.

Notwithstanding anything to the contrary in the Trust Agreement or in any Note or document referred to therein, no Local Agency will incur any obligation under the Trust Agreement, except to the extent payable from unencumbered revenues received in or accrued to the 2009-2010 fiscal year, nor will any Local Agency incur any obligation on account of any default, action or omission of any other Local Agency.

No Liability by the Trustee to the Owners. Except as expressly provided in the Trust Agreement, the Trustee will not have any obligation or liability to the Owners 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 Trust Agreement, the Authority will not have any obligation or liability to the Trustee or the Owners, 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, or with respect to the performance by the Trustee of any obligation contained in the Trust Agreement required to be performed by it. Notwithstanding anything to the contrary contained in the Note Participations, the Trust Agreement or any other document related thereto, the Authority will not have any liability under the Trust Agreement or by reason thereof or in connection with any of the transactions contemplated thereby except to the extent payable from moneys received from or with respect to the Notes and available thereof in accordance with the Trust Agreement.

THE TRUSTEE

Employment and Duties of the Trustee. The Authority has appointed and agreed to employ the Trustee to receive, deposit and disburse the payments on the Notes as provided in the Trust Agreement, to prepare, execute, deliver, transfer, exchange and cancel the Note Participations as provided therein, to pay the interest and principal evidenced and represented by the Note Participations to the Owners thereof as provided therein and to perform the other obligations contained therein; all in the manner provided therein and subject to the conditions and terms thereof By executing and delivering the Trust Agreement, the Trustee has undertaken to perform such obligations (and only such obligations) as are specifically set forth therein, and no implied covenants or obligations will be read therein against the Trustee.

Removal and Resignation of the Trustee. The Authority may at any time remove the Trustee initially a party to the Trust Agreement and any successor thereto by giving written notice of such removal by mail to the

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Trustee, all of the Local Agencies and all Owners of Note Participations, and such Trustee may at any time resign by giving written notice by mail of such resignation to the Authority, the Local Agencies and all Owners of Note Participations. Upon giving any such notice of removal or upon receiving any such notice of removal or resignation, the Authority will promptly appoint a successor Trustee by an instrument in writing; provided, that in the event the Authority does not appoint a successor Trustee within sixty (60) days following the giving of any such notice of removal or the receipt of any such notice of resignation: the removed or resigning Trustee may petition any appropriate court having jurisdiction to appoint a successor Trustee. Any successor Trustee will be a bank or trust company doing business and having a principal corporate trust office either in Los Angeles or San Francisco, California, having a combined capital (exclusive of borrowed capital) and surplus (or the parent holding company of which has a combined capital and surplus)of at least $75,000,000 and subject to supervision or examination by state or national authorities. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the combined capital and surplus of such bank or trust company will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

Any removal or resignation of a Trustee and appointment of a successor Trustee will become effective only upon the written acceptance of the appointment by the successor Trustee.

Compensation of the Trustee. The Authority, solely !Tom amounts held in the Costs oflssuance Funds or paid by the Local Agencies specifically for such purpose, will !Tom time to time, subject to any agreement then in effect with the Trustee, pay the Trustee compensation for its services and reimburse the Trustee for all its advances and expenditures under the Trust Agreement, including, but not limited to, advances to and fees and expenses of accountants, agents, appraisers, consultants, counsel or other experts employed by it in the observance and performance of its rights and obligations under the Trust Agreement; provided, that the Trustee will not have any lien for such compensation or reimbursement against any money held by it in any of the funds established under the Trust Agreement, although the Trustee may take whatever legal actions are available to it directly against the Local Agencies to recover such compensation or reimbursement.

Protection of the Trustee. The Trustee will be protected and will incur no liability in acting or proceeding m good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, telegram, voucher, waiver or other paper or document which it will in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereof, and the Trustee will be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee may consult with counsel, who may be counsel to the Authority or the Local Agencies, with regard to legal questions arising under the Trust Agreement, and the opinion of such counsel will be full and complete authorization and protection in respect to any action taken or suffered by it under the Trust Agreement in good faith in accordance therewith.

The Trustee will not be responsible for the sufficiency of the payments on the Notes, or of the assignment made to it of all rights to receive the payments on the Notes and will not be deemed to have knowledge of any Event of Default unless and until it will have actual knowledge thereof or have received written notice thereof at its principal corporate trust office in Los Angeles, California. The Trustee will not be accountable for the use or application by the Local Agencies, or any other party, of any funds which the Trustee properly releases to the Local Agencies or which the Local Agencies may otherwise receive from time to time. The Trustee makes no representation concerning, and has no responsibility for, the validity, genuineness, sufficiency, or performance by parties other than the Trustee of the Trust Agreement, any Note Participation, any Note, any Note Resolution, or of any other paper or document, or for taking any action on them (except as specifically and expressly stated for the Trustee in the Trust Agreement), or with respect to any obligation of the Local Agencies.

Whenever in the observance or performance of its rights and obligations under the Trust Agreement or under the Note Participations the Trustee will deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Trust Agreement, such matter (unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be conclusively proved and established by a Certificate of the Authority, and such certificate will be full warrant to the Trustee for any action taken or suffered under the

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provisions of the Trust Agreement upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

The Trustee may buy, sell, own, hold and deal in any of the Note Participations and may join in any action which any Owner may be entitled to take with like effect as if it were not a party to the Trust Agreement. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Local Agencies, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Local Agencies as freely as if it were not the Trustee under the Trust Agreement.

The Trustee will not be answerable for the exercise of any of its rights under the Trust Agreement or for the performance of any of its obligations thereunder or for anything whatsoever in connection with the funds established thereunder, except only for its own willful misconduct or negligence.

No provision of the Trust Agreement will require the Trustee to expend or risk its own funds or otherwise incur any financial or other liability or risk in the performance of any of its obligations under the Trust Agreement, or in the exercise of any of its rights thereunder, if it will have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and before taking any remedial action thereunder the Trustee may require that indemnity satisfactory to it be furnished for all expenses to which it may be put and to protect it from all liability thereunder.

The Local Agencies will indemnifY the Trustee for any liability incurred by the Trustee as a result of the Trustee executing fhe Representation Letter on behalf of the Local Agencies.

The Local Agencies agree to indemnifY and hold the Trustee, its officers, directors, employees and agents harmless from and against any loss, liability, cost, expense or claim whatsoever which it may incur without negligence or willful misconduct on the Trustee's part, arising out of the acceptance of the duties of the Trustee under the Trust Agreement and the administration thereof or in the exercise or perfonnance of its powers and duties thereunder, including without limitation those of its attorneys, including the costs and expenses of defending against any claim of liability. Such indemnity should survive the termination and discharge of the Trust Agreement.

The Trustee will have no responsibility with respect to any information statement, recital or the content of any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Notes and Note Participations.

The Trustee will not be liable with respect to any action taken or not taken by it at the direction of the Owners of a majority in aggregate principal amount of the serieS of Note Participations outstanding relating to the exercise of any right or remedy available to the Trustee or the exercise of any trust or power conferred upon the Trustee under the Trust Agreement.

The Trustee has executed the Note Participations solely in its capacity as Trustee under the Trust Agreement and is not liable thereon in its individual or personal capacity and all payments to be made thereon by the Trustee will be made solely from funds held by the Trustee under the Trust Agreement.

Notices to Rating Agencies. The Trustee will notifY each Rating Agency, in writing, upon occurrence of any of the following events: any amendment, supplement or other change to the Tmst Agreement from the form originally executed and entered into, and any amendment, supplement or other change to any Note or Note Resolution (that the Trustee is aware of); provided, however, that the Trustee will incur no liability for failure to so notifY.

AMENDMENT OF OR SUPPLEMENT TO THE TRUST AGREEMENT

Amendment or Supplement of Trust Agreement. The Trust Agreement and fhe rights and obligations of the Owners and the Tmstee thereunder may be amended or supplemented at any time by an amendment thereof or supplement thereto which will become binding when the written consents the Owners of a majority in aggregate principal amount of the Note Participations then Outstanding, exclusive of Note Participations disqualified as

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provided in the Trust Agreement, are filed with the Trustee. No such amendment or supplement will (I) reduce the rate of interest evidenced and represented by any Note Participation or extend the Interest Payment Date or reduce the amount of principal evidenced and represented by any Note Participation or extend the Principal Payment Date thereof without the prior written consent of the Owner of the Note Participation so affected, or (2) reduce the percentage of Owners whose consent is required by the terms of the Trust Agreement for the execution of certain amendments thereof or supplements thereto, or (3) modifY any of the rights or obligations of the Trustee without its prior written consent thereto.

The Tmst Agreement and the rights and obligations of the Owners and the Trustee thereunder may also be amended or supplemented at any time by an amendment thereof or supplement thereto which will become binding without the written consents of any Owners, in order to make any modifications or changes necessary or appropriate in the Opinion of Counsel to preserve or protect the exclusion from gross income of interest on the Notes for federal income tax purposes, or, but only to the extent that such amendment will not materially adversely affect the interests of the Owners, for any purpose including, without limitation, one or more of the following purposes

(a) to add to the agreements, conditions, covenants and terms contained in the Trust Agreement required to be observed or performed by the Local Agencies other agreements, conditions, covenants and terms thereafter to be observed or performed by the Local Agencies, or to surrender any right reserved··therein to or conferred therein on the Local Agencies;

(b) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising thereunder which any Local Agency may deem desirable or necessary; or

(c) to modifY, amend or supplement the Trust Agreement or any supplement thereto in such manner as to permit the qualification thereof and thereof under the Trust Indenture Act of I 939 or any similar federal statute thereafter in effect or to permit the qualification of the Note Participations for sale under the securities laws of the United States of America or of any of the states of the United States of America and, if twenty percent of the Local Agencies or Bond Counsel so determine, to add to the Trust Agreement or any supplement thereto such other terms, conditions and provisions as may be permitted by said Trust Indenture Act of 1939 or similar federal statute.

Disqualified Note Participations. Note Participations held for the account of the Local Agencies (but excluding Note Participations held in any pension or retirement fund of the Local Agencies) will not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Note Participations provided in the Trust Agreement, and will not be entitled to consent to or take any other action provided therein, and the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for therein will be deemed effective, to reveal if the Note Participations as to which such consent is given are disqualified as provided in this Section.

Procedure for Amendment with Written Consent of the Owners. The Trust Agreement may be amended by supplemental agreement as provided in this paragraph in the event the consent of the Owners is required pursuant to the Trust Agreement. A description of the proposed amendment, together with a request to the Owners for their consent thereto, will be mailed by the Trustee to each Owner of a Note Participation at his address as set forth in the Note Participation registration books maintained pursuant to the Trust Agreement, but failure to receive copies of such description and request so mailed will not affect the validity of the supplemental agreement when assented to as in this Section provided. Nothing in the Trust Agreement will be deemed to require the mailing of the supplemental agreement itself to the Owners.

Such supplemental agreement will not become effective unless there will be filed with the Trustee the written consent of the Owners of at least a majority in aggregate principal amount of the Note Participations then Outstanding (exclusive of Note Participations disqualified as provided in the Trust Agreement) and notices will have been mailed as provided in the Trust Agreement. Each such consent will be effective only if accompanied by proof of ownership of the Note Participations for which such consent is given, which proof will be acceptable to the Trustee. Any such consent will be binding upon the Owner of the Note Participation giving such consent and on any

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subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee prior to the date when the Trustee has received the required percentage of consents of the Owners of the Note Participations and acknowledged the same to the Local Agencies.

After the Owners of the required percentage of Note Participations will have filed their consents to such supplemental agreement, the Trustee will acknowledge to the Authority the effectiveness of the agreement and will mail a notice to the Local Agencies and the Owners of the Note Participations in the manner provided in the Trust Agreement for the mailing of such description, stating in substance that such supplemental agreement has been consented to by the Owners of the required percentage of Note Participations and is effective as provided in the Trust Agreement (but failure to mail copies of said notice will not affect the validity of such supplemental agreement or consents thereto). A record, consisting of the papers required by this Section to be filed with the Trustee, will be proof of the matters therein stated until the contrary is proved.

Endorsement or Replacement of Note Participations after Amendment or Supplement. After the effective date of any action taken as provided in the Trust Agreement, the Trustee may determine that the Note Participations may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the Owner ·of any Outstanding Note Participation and presentation of the Note Participation for such purpose at the office of the Trustee a suitable notation as to such action will be made on such Note Participation. If the Trustee will so determine, new Note Participations so modified as in the opinion of the Trustee will be necessary to conform to such action will be prepared, and in that case upon demand of the Owner of any Outstanding Note Participations such new Note Participations will be exchanged without cost to each Owner for Note Participations then Outstanding at the office of the Trustee upon surrender of such Outstanding Note Participations. All Note Participations surrendered to the Trustee pursuant to the provisions of this paragraph will be cancelled by the Trustee and will not be redelivered.

Amendment or Supplement by Mutual Consent. The provisions of the Trust Agreement will not prevent any Owner from accepting any amendment or supplement as to the particular Note Participations owned by him; provided, that due notation thereof is made on such Note Participations.

DEFEASANCE

Discharge of Note Participations and Trust Agreement.

(a) lfthe Trustee will pay or cause to be paid or there will otherwise be paid to the Owners of all Outstanding Note Participations of a series the interest and principal evidenced and represented thereby at the times and in the manner provided in the Trust Agreement, then such Owners will cease to be entitled to the pledge of and lien on the Notes attributable to such series of Note Participations and the attendant Note Payments, and any interest in the funds held under the Trust Agreement as provided therein, and all agreements and covenants of the Local Agencies whose Notes are attributable to such Note Participations to such Owners thereunder and under such Local Agency's Note Resolution will thereupon cease, terminate and become void and will be discharged and satisfied.

(b) Any Outstanding Note Participations will on their Principal Payment Date be deemed to have been paid within the meaning of and with the effect expressed in subparagraph (a) of this heading if there will be on deposit with the Trustee moneys which are sufficient to pay the interest and principal evidenced and represented by such Note Participations payable on and prior to their Principal Payment Date.

(c) Any Outstanding Note Participations will prior to their Principal Payment Date be deemed to have been paid within the meaning of and with the effect expressed in subparagraph (a) of this heading if there will have been deposited with the Trustee either moneys in an amount which will be sufficient or United States Treasury bills, notes, bonds or certificates of indebtedness, or obligations for which the full faith and credit of the United States of America are pledged for the payment of interest and principal, and which are purchased with moneys and are not subject to redemption except by the holder thereof prior to maturity (including any such securities issued or held in book-entry form on the books of the Department of the Treasury of the United States of

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' '

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 to pay when due the interest evidenced and represented by such Note Participations on and prior to their Principal Payment Date and the principal evidenced and represented by such Note Participations.

(d) After the payment of the interest and principal evidenced and represented by all Outstanding Note Participations as provided in this subparagraph, at the Request of an Authorized Authority Representative (if provided), the Trustee will execute and deliver to the Authority and the Local Agencies all such instruments as they may deem necessary or desirable to evidence the discharge and satisfaction of the Trust Agreement, and the Trustee, after payment of all fees and expenses of the Trustee, will pay over or deliver to the Local Agencies all money or deposits or investments held by it pursuant to the Trust Agreement which are not required for the payment of the interest and principal evidenced and represented by such Note Participations.

Unclaimed Money. Anything contained in the Trust Agreement to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of the interest or principal evidenced and represented by any Note Participations which remains unclaimed for two (2) years after the date when the payments evidenced and represented by such Note Participations have become payable, if such money was held by the Trustee on such. date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when the interest and principal evidenced and represented by such Note Participations have become payable, will be repaid by the Trustee to the Authority as its absolute property free from trust, and the Trustee will thereupon be released and discharged with respect thereto and the Owners will look only to the Authority for the payment of the interest and principal evidenced and represented by such Note Participations; provided, that before being required to make any such payment to the Authority, the Trustee may, as a charge on such funds, give notice by mail to all Owners of Note Participations that such money remains unclaimed and that after a date named in such notice, which date will not be less than sixty (60) days after the date of giving such notice, the balance of such money then unclaimed will be returned to the Authority.

MISCELLANEOUS

Content of Certificates; Post-Issuance Legal Opinions. Every Certificate of the Authority or any Local Agency with respect to compliance with any agreement, condition, covenant or tenn contained in the Trust Agreement will include: (a) a statement that the person or persons executing such certificate have read such agreement, condition, covenant or tenn and the definitions in the Trust Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an infonned opinion as to whether or not such agreement, condition, covenant or term has been complied with; and (d) a statement as to whether, in the opinion of the signers, such agreement, condition, covenant or term has been complied with.

Any Certificate of the Authority or any Local Agency may be based, insofar as it relates to legal matters, upon an Opinion of Counsel unless the person or persons executing such certificate know that the Opinion of CoWlsel with respect to the matters upon which his or their certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters and information with respect to which is in the possession of the Local Agency or the Authority, upon a representation by an officer or officers of the Local Agency or the Authority unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous.

Should any of the post-issuance Opinions of Counsel referred to in the Trust Agreement, the Note Resolutions or in any Local Agency Certificate be delivered by bond counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation, or if the Note Participations are prepaid or remain Outstanding in connection with a transaction which is approved by counsel other than Stradling Y occa Carlson & Rauth, a Professional Corporation, the Trustee, promptly after such opinion is delivered, will mail, first-class, postage prepaid, (I) a copy of each said opinion to each Owner at said Owner's address as it appears in the registration book kept by the Trustee and (2) a notice indicating that the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation

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delivered in connection with the delivery of the Note Participations may no longer be relied upon. The Authority and the Local Agencies will cooperate with the Trustee in order to effectuate the provisions of this paragraph.

Funds. Any fund or account required to be established and maintained in the Trust Agreement by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purpose of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such funds will at all times be maintained in accordance with industry practice and with due regard for the instructions, if any, delivered to the Trustee pursuant to the Trust At,'feement and for the protection of the security of the Note Participations and the rights of the Owners.

Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms contained in the Trust Agreement required to be observed or performed by or on the part of the Local Agencies, the Authority or the Trustee will be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms will be null and void and will be deemed separable from the remaining agreements, conditions, covenants and terms thereof and will in no way affect the validity thereof or of the Note Participations, and the Owners will retain all the benefit, protection and security afforded to them thereunder and under all provisions of applicable law. The Local Agencies, the Authority and the Trustee have declared that they would have executed and entered into the Trust Agreement and each and every other article, section, paragraph, subdivision, sentence, clause and phrase thereof and would have authorized the execution and delivery of the Note Participations pursuant thereto irrespective of the fact that any one or more of the articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid.

California Law. The Trust Agreement will be construed and governed in accordance with the laws of the State of California.

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I

APPENDIXG

PROPOSED FORM OF SPECIAL COUNSEL OPINION

Upon execution and delivery of the Note Participations, Stradling Yocca Carlson & Rauth, Special Counsel, proposes to render its final approving opinion with respect to the Note Participations substantially in the following form:

April29, 2010 Participants identified in the Trust Agreement

$8,395,000 CALIFORNIA COMMUNITY COLLEGE

FINANCING AUTHORITY TAX AND REVENUE ANTICIPATION NOTE PROGRAM

NOTE PARTICIPATIONS, SERIES 20IOA

Ladies and Gentlemen:

$I,420,000 CALIFORNIA COMMUNITY COLLEGE

FINANCING AUTHORITY TAX AND REVENUE ANTICIPATION NOTE PROGRAM

NOTE PARTICIPATIONS, SERIES 20IOB

We have acted as special counsel to various Districts (the "Participants"), in cotmection with the execution and delivery of (i) $8,395,000 aggregate principal amount of the California Community College Financing Authority Tax and Revenue Anticipation Note Program, Note Participations, Series 2010A (the "Series 2010A Note Participations") and (ii) $1,420,000 aggregate principal amount of the California Community College Financing Authority Tax and Revenue Anticipation Note Program, Note Participations, Series 2010B (the "Series 2010B Note Participations," and together with the Series 2010A Note Participations, the "Note Participations"), evidencing and representing fractional and undivided interests in the tax and revenue anticipation notes (the "Notes") issued by the Participants identified in the Trust Agreement (as hereinafter defined) and identified in the Official Statement, dated April 22, 20 I 0 (the "Official Statement"), relating to the Note Participations, and tl1e debt service payments on the Notes to be made by the Participants. The Note Participations are executed and delivered pursuant a trust agreement, dated as of April I, 2010, by and among Wells Fargo Bank National Association (1he "Trustee"), the California Community College Financing Authority (the "Authority") and the Participants which are a party to the respective trust agreement ( the "Trust Agreement"). Each Note is issued pursuant to and by authority of a resolution of each respective Participant, each passed and adopted (collectively, the "Resolutions") under and by authority of Article 7.6, Chapter 4, Part I, Division 2, Title 5 of the California Government Code, and designated the respective Participant's "2009-201 0 Tax and Revenue Anticipation Note."

In such connection, we have reviewed the Trust Agreement, the Resolutions, the Notes, the purchase agreements regarding the purchase and sale of the Note Participations, dated as of April 22, 2010, by and among the Participants and RBC Capital Markets Corporation, as underwriter (collectively, the "Purchase Agreements"), opinions of counsel to the Participants regarding issuance of the Notes by the Participants and the adoption, legality, validity and enforceability of the Resolutions, the Notes, and other matters, the opinion of counsel to the Trustee, certificates of the Participants regarding tax and other matters (the "Certificates"), certificates of the Trustee, the Authority and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

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Certain agreements, requirements and procedures contained or referred to in the Resolutions, the Certificates and other relevant documents may be changed and certain actions (including, without limitation, prepayment of the Note Participations) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Note or the effect on the tax-exempt status of the interest thereon evidenced and represented by the Note Participations if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves.

The opinions expressed herein are based on an analysis of existing Jaws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Our engagement with respect to the Note Participations has concluded with their execution and delivery, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or.copies) aryd the due and legal execution and delivery thereof by, and validity .against, .. any parties other than the Participants. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolutions, the Trust Agreement and the Certificates, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest evidenced and represented by the Note Participations to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Resolutions, the Notes, the Trust Agreement and evidenced and represented by the Note Participations, and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar Jaws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public entities such as the Participants in the State of California. We express no opinion with respect to any indemnification, contribution, choice of law, choice of forum, choice of venue, waiver or severability provisions contained 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 Notes or the Note Participations and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. Each Note constitutes the valid and binding obligation of the respective issuing Participant. The principal of and interest on each Note are payable from the Pledged Revenues (as that term is defined in the respective Resolution, and as such term was amended by the Purchase Agreements) of the issuing Participant and, to the extent not so paid, are payable from any other moneys of such Participant lawfully available therefor.

2. The Resolutions have been duly adopted by the Participants and each constitutes a valid and binding obligation of the respective Participant.

3. The Trust Agreement, assuming due authorization, execution and delivery by the Participants and the Trustee, constitutes the valid and binding obligations of, the respective Participants which are a party thereto.

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,

I

4. The Note Participations, upon execution and delivery thereof by the Trustee, are entitled to the benefits of the Trust Agreement.

5. Interest on the Notes paid by the Participants and received by the registered owners of the Note Participations is excluded from gross income for federal income tax purposes under Section I 03 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of such interest represented by, the Note Participations.

Respectfully submitted,

STRADLING YOCCA CARLSON & RAUTH

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APPENDIX H

THE BOOK-ENTRY ONLY SYSTEM

The information in this Appendix concerning The Depository Trust Company ("DTC '), New York, New York, and DTC's book entry system has been obtained from DTC and the Districts and the Authority take no responsibility for the completeness or accuracy thereof The Districts cannot and do not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Note Participations. (b) certificates representing ownership interest in or other confirmation or ownership interest in the Note Participations, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Note Participations, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to 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 the Note Participations. The Note Participations will be prepared in the form of fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered security certificate will be executed and delivered for each maturity of the Note Participations, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest securities depository, 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 Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section I 7 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over I 00 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, tJust companies, clearing corporations, 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 Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Note Participations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Note Participations on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or

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Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Note Participations are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Note Participations, except in the event that use of the book-entry system for the Note Participations is discontinued.

To facilitate subsequent transfers, all Note Participations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Note Participations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Note Participations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Note Participations are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Note Participations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Note Participations, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the Note Participations may wish to ascertain that the nominee holding the Note Participations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Note Participations unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Note Participations are credited on the record date (identified m a listing attached to the Omnibus Proxy).

Payments of principal and interest evidenced by the Note Participations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest evidenced by the Note Participations to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct" Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

THE AUTHORITY, THE DISTRICTS OR THE TRUSTEE WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE

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TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF NOTE PARTICTPA TIONS FOR PREPAYMENT.

None of the Authority, the Districts or the Trustee can give any assurances that DTC, DTC Participants, Indirect Participants or others will distribute payments of principal of, premium, if any, and interest evidenced and represented by the Note Participations paid to DTC or its nominee, as the registered Owner, or any redemption or other notice, to the Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in a manner described in this Official Statement

DTC may discontinue providing its services as depository with respect to the Note Participations at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Note Participation 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 Participation certificates will be printed and delivered.

The information in this appendix concerning DTC and DTC's book-entry system has been obtained from sources that the Districts and the Authority believe to be reliable, but the Districts and the Authority take no responsibility for the accuracy thereof

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APPENDIX I

COUNTY TREASURY POOLS

ALLAN HANCOCK COMMUNITY COLLEGE DISTRICT

SANTA BARBARA COUNTY INVESTMENT POOL SUMMARY OF ASSETS HELD

QUARTERLY REPORT Quarter Ending December 31, 2009

As of December 31, 2009, the securities in the Investment Pool for Santa Barbara County (the "County") had a total par value of $1,018,4 71 ,000.00. The following table shows the portfolio structure of the County Pool as of December 31, 2009:

Percent of Days to Investments Market Value Book Value Portfolio Maturi!Y

Cal Trust $79,885,259.02 $80,000,000.00 7.86% I Local Agency Investment Funds 40,000,000.00 40,000,000.00 3.93 I Negotiable COs 73,046,600.00 73,00,000.00 7.17 132 Medium Term Notes 77,839,185.06 75,967,893.07 7.46 367 Medium Term Notes- Callable 4,999,250.00 4,998,045.28 0.49 42 Medium Term Notes- FDIC 10,214,350.00 9,997,622.36 0.98 539 Commercial Paper Disc. -Amortizing 75,490,160.00 75,487,425.83 7.42 25 Federal Agency Coupon Securities 77,940,841.00 75,919,490.29 7.46 632 Federal Agency Disc.- Amortizing 233,111,982.00 232,911,928.69 22.88 156 Treasury Discounts- Amortizing 52,889,910.00 52,874,675.65 5.19 237 Federal Agency Coupon- Callable 270,948,742.70 271,463,892.25 26.68 1,078 State of California Notes 25,306,506.25 25.315 922.05 2.49 ill

Total $1,021,672,786.03 $1,017,936,895.47 100.00% 431

Source: Santa Barbara County Treasurer.

The composition and value of investments under management in the County pool will vary from time to time depending on cash flow needs of the County and public agencies invested in the pool, maturity or sale of investments, purchase of new securities, and due to fluctuations in interest rates generally.

As reflected in the table above, as of December 31, 2009, the market value of investments credited to the pool was $1,021,672,786.03 and the book value was $1,017,936,895.47. As ofDecember31, 2009, 21.4% of the pool's investments had a maturity between I and 90 days, 31.9% between 91 days and I year, 12.2% between I year and 2 years, 9.6% between 2 and 3 years, 3.4% between 3 and 4 years, 6.8% between 4 and 5 years and the remaining 14.2% would mature overnight. There have not been any unanticipated or unusual withdrawals from the pool in the last six months. County management believes the liquidity in the portfolio is adequate to meet expected cash flow requirements and preclude the County from the need to sell investments at below carrying value. However, the County has in the past and may in the future elect to sell securities below carrying value, issue short-term debt to fund cash flow needs, and take other actions as the Treasurer may deem warranted by prudent fiscal management.

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GA VILAN JOINT COMMUNITY COLLEGE DISTRICT

SANTA CLARA COUNTY INVESTMENT POOL QUARTERLY REPORT

As of December 31, 2009, the book value of the Santa Clara County Investment Pool was $4,174,997,661.09, the par value was $4,170,298,809.15, and the market value was $4,187,560,169.92. The following table summarizes the composition of the Investment Pool as of December 31, 2009.

SANTA CLARA COUNTY INVESTMENT POOL Portfolio Composition

(As of December 31, 2009)

%of Total Tvpe of Maturity Market Value Market Value

Passbook/Checking Accounts Negotiable CO's 49,972,200.00 1.19% Repurchase Agreements 200,000,000.00 4.78 Federal Agency Bonds I ,025,092,696.56 24.48 US Treasury Notes 136,155,263.25 3.25 Corporate Bonds I 0,458,548.22 0.25 FDIC Guaranteed Corporate Bonds 233,045,729.00 5.57 NCUA Guaranteed Corporate Bonds 59,941,450.00 1.43 Asset Backed Securities 50,151,797.00 1.20 Federal Agency Amortizing Bonds 2,153,596.55 0.05 Commercial Paper, Discount Notes 811,585,416.60 19.38 Federal Agency, Discount Notes 809,308,000.00 19.33 Dreyfus Money Market Fund 173,019,736.31 4.13 Other Money Market Funds 265,988,270.97 6.35 Columbia Government Money Market Fund 2,575,438.56 0.06

TOTAL $4,187,560,169.92 100.00%

Source: Santa Clara County Treasurer-Tax Collector.

Average Days to Maturity

I 81 5

665 257 875 644 719 469

55 40

135 1 1

_]

291

As of December 31, 2009, 10.6% of the Investment Pool was invested in cash equivalent-money market funds, 20.9% of its assets were invested in securities maturing in 90 days or less, 3 7.4% of its assets invested in securities maturing between 91 days and one year, 18.2% maturing in one to two years, and 12.9% of its assets invested in securities maturing in over two years, but not more than five years. As of December 31,2009, the Investment Pool's annual yield to maturity was 1.056%

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MERCED COMMUNITY COLLEGE DISTRICT

MERCED COUNTY INVESTMENT POOL PORTFOLIO MANAGEMENT

PORTFOLIO SUMMARY for the Quarter Ending December 31,2009

The portfolio structure of the County Pool as of December 31, 2009, was as follows:

Portfolio Composition: Book Value of Assets Held Market Value of Assets Held Assets Maturing Within 90 Days Percentage of Market to Book Value Weighted Average Maturity

Return on Assets: Total Earnings Quarter Ended Total Earnings Fiscal YTD Rate of Return QTR Rate of Return Fiscal YTD

$669,635,471 $672,880,709 $372,689,401

100.48% 207 days

$2,560,691 $4,976,822

1.57% 1.61%

The entire portfolio is in Full Compliance with the Investment Policy and Government

Source: Merced County Treasurer-Tax Collector.

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PALO VERDE COMMUNITY COLLEGE DISTRICT

RIVERSIDE COUNTY POOLED INVESTMENT FUND MONTHLY REPORT

Month Ending February 28, 2010

The investments in the Pooled Investment Fund ("PIF") as of February 28, 20 I 0 were as follows:

Weighted Average Maturity Book Value

Market Value (Years) Yield Federal Agency Securities $3,910,022,512 1.17 1.09 Money Market Funds 149,000,000 0.09 0.27 Commercial Paper 74,991,063 0.03 0.11 Negotiable Certificates of Deposit Medium Term Notes 30,929,500 1.32 0.14 Municipal Bonds 104,612,771 2.03 0.51 Certificates of Deposit Bond - I. S. Treasury I ,051,608,338 0.81 1.10 Local Agency Obligation 15.660,000 1.32 1.80 Total $5,336,824,184 1.00 0.94%

Source: Riverside County Treasurer-Tax Collector.

As of May 31, 2009, the book value of the PIF was $5,321,146, 126.84, and the market value of the PIF was 100.29% of book value. The Treasurer estimates that sufficient liquidity exists within the portfolio to meet daily expenditure needs without requiring any sale of securities at a principal loss prior to their maturity.

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SAN LUIS OBISPO COUNTY COMMUNITY COLLEGE DISTRICT

SAN LUIS OBISPO COUNTY INVESTMENT POOL COMBINED POOL INVESTMENTS

TREASURY MANAGED FUNDS ONLY QUARTERLY REPORT

Quarter Ending December 31, 2009

The portfolio structure (market value) of the San Luis Obispo County Pool as of December 31, 2009, was as follows:

Investment Tvpe Farm Credit Banks Federal Home Loan Bank Local Agency Investment Fund Repurchase Agreement Treasury Bills Teeter Notes Treasury Notes Total

Market Value $52,260,900.00 114,911,350.00 40,037,913.00 43,049,600.31

203,773,160.00 7,523,479.43

152,870,632.50 $614,427,035.24

A summary of the Treasurer's investment operations for the quarter ending December 31, and a statement of compliance to the currently adopted County Treasurer's Investment Policy are shown below.

CASH ON HAND/BANKS INVESTMENTS

Principal Cost Market Value Weighted Average Days to Maturity

Amortized Cost Cash on Hand/Banks Accrued Interest Total:

$613,658,819.65 5,906,017.77

765,192.92 $620,430,030.34

Participating Dollar Factor: 1.00 I 077020062

Market Value Cash on Hand/Banks Accrued Interest Total:

(Derived by dividing total market value by total amount in Treasury)

$5,906,017.77

$613,642,082.97 $614,427,035.24

238

$614,427,035.24 5,906,017.77

765,192.92 $621,098,245.93

The value of each participating dollar equals the agency's fund balance as of December 31, 2009 (available from the County Auditor-Controller's Office) multiplied by the participating dollar factor. This equates to approximately a $107.70 increase per $100,000.

Source: San Luis Obispo County Treasurer-Tax Collector

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APPENDIXJ

SELECTED DISTRICT FINANCIAL AND DEMOGRAPHIC INFORMATION

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MERCED COMMUNITY COLLEGE DISTRICT

Board of Trustees

Eva De Long, President Jim Glidden, Vice President

Les McCabe, Clerk Lewis Braxton, Member Robert Haden, Member Jinet Troost, Member

Eugene J. Vierra, Member

District Administration

Benjamin T. Duran, Ed.D., Superintendent. President Mazie Brewington, Vice President, Administrative Services

Marvin Smith, Director, Business Services Joseph Allison, Director. Fiscal Sen•ices

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Introduction

Merced Community College District (the "District") serves an area of about 2,377 square miles in California's central San Joaquin Valley. The District's territory is primarily in Merced County (the "County") with smaller portions in Madera and Fresno counties (together with the County, the "Counties"). The District includes the cities of Merced, Los Banos, Atwater, Livingston, Dos Palos, and Chowchilla, as well as adjacent unincorporated areas of the Counties. The District operates two campuses; the main campus is located on a 271-acre site in the city of Merced in the central part of the County, while the Los Banos campus is located on a 10-acre site in the city of Los Banos in the southwestern part of the County.

Administration

The District is governed by a seven-member Board of Trustees, each member of which is elected to a four-year term. Elections for positions to the Board are held every two years, alternating between three and four available positions. Current members of the Board, together with their office and the date their term expires, are listed below:

Board Member Office Term Exgires

Eva De Long President November 20 I 0 Jim Glidden Vice President November 20 I 0 Les McCabe Clerk November 2010

Lewis Braxton Member November 2012 Robert Haden Member November 2012 Jinet Troost Member November 2012

Eugene J. Vierra Member November 2010

District Growth

The following table provides an 12-year history on growth in full time equivalent students ("FTES") for the District.

Ol Projected. (Z) Budgeted.

FULL TIME EQUIVALENT STUDENTS Fiscal Years 2000-01 through 2010-1 I Merced Community College District

Schoo] Year

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-101')

2010-11 121

Full Time Equivalent Students

8,406 8,850 9,077 9,051 9,233 9,068 9,225 10,094 10,290 10,070 10,070

Annual Change

444 227 (26) 182

(165) 157 869 196

(220)

Source: Merced Community College District.

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%Change

5.3% 2.5

(0.3) 2.0

( 1.8) 1.7 9.4 1.9

(2.1)

Labor Relations

The District, as of February 28, 20 I 0, employed I 73 certificated employees, 255 classified employees and 44 managerial employees. The District also employed 509 part-time faculty and employees. These employees, except supervisors, management and some part-time employees, are represented by two bargaining units as noted below:

Employees

255

173

BARGAINING UNITS Merced Community College District

Bargaining Unit

California School Employees Association, Chapter 274 Merced College Faculty Association

Labor Contract Expiration Date June 30, 20 I 0

June 30, 20 19<'>

(l) Members of this bargaining unit arc working under the terms of their existing contract while an~\\; cQ';rti.act is negotiated. Source: Merced Community College District.

Retirement Plans

The District participates in the State of California Teachers' Retirement System ("STRS"). The plan includes basically all certificated employees. The District's contribution to STRS was $1,699,124 in fiscal year 2008-09, is projected to be $1,740,532 in fiscal year 2009-10, and is budgeted to be $1,792,748 in fiscal year 2010-11. The District also participates in the State of California Public Employees' Retirement System ("PERS"). This plan covers basically all regular classified personnel who are employed four or more hours per day. The District's contribution toPERS was $1,047,452 in fiscal year 2008-09, is projected to be $1, I 00,994 in fiscal year 2009-1 0, and is budgeted to be $1,156,490 in fiscal year 20 I 0-11.

The District is currently required by statute to contribute 8.25% of eligible salary expenditures to STRS, while participants contribute 8% of their respective salaries. STRS has a substantial statewide unfunded liability. Since this liability has not been broken down by each school or community college district, it is impossible to determine the District's share. The District was required to contribute to PERS at an actuarially determined rate, which is 9. 709% of eligible salary expenditures for fiscal year 2009-10, while participants contribute 7% of their respective salaries.

Other Post-Employment Benefits

The District provides certain health benefits for retired employees that reach normal retirement age while working for the District (the "Benefits"). Classified and managerial employees hired before February I, 1989 receive lifetime benefits. Classified and managerial employees hired after February I, 1989 and faculty members hired after January I, 2991 can receive benefits until age 65. As of June 30, 2009, the District had 219 retirees receiving benefits and a total of 466 active participants, of which 247 are not yet eligible to receive benefits. During fiscal year ending June 30, 2009, the District realized total expenditures of$5,854,385 for the Benefits, including the ARC discussed below.

The District has completed an actuarial study defining its accrued liability in connection with the Benefits. The actuarial accrued liability ("AAL") for the Benefits was estimated to be $52,359,974 as of August I, 2009. The study also concluded that the annual required contribution ("ARC") was $3,538,670. The ARC is the annual amount that would be necessary to fund the AAL in accordance with the Governmental Accounting Standards Board's Statements No. 43 and 45.

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Insurance

The District participates in joint powers agreements with the Self-Insured Schools of California ("SISC"), which arranges for and provides health benefits coverage for its member school districts, and the Valley Insurance Program Joint Power Agency (together with SISC, the "JPAs"), which arranges for and provides workers' compensation, liability, and property insurance for its member community college districts in northern California. The District pays premiums commensurate with the levels of coverage requested. The relationships between the District and the JPAs are such that the JPAs are not component units of the District for financial reporting purposes.

Assessed Valuation

The following table sets forth the 5-year history of assessed valuations in the District.

2005-06 2006-07 2007-08 2008-09 2009-10

2005-06 2006-07 2007-08 2008-09 2009-10

2005-06 2006-07 2007-08 2008-09 2009-10

2005-06 2006-07 2007-08 2008-09 2009-10

ASSESSED VALUATIONS Fiscal Year 2005-06 through 2009-10 Merced Community College District

Merced County Portion

$12.437,599,160 15,358,898,802 17.203,151.544 16,570,820,986 13.860,460,815

$14,651,309 13,894.624 7,715,278 7,715.278 7,715,278

Madera Countv Portion

$973,588,465 1.251,289.505 I ,556,458, 700 1,678.366.349 1,433,392.550

$2.357.083 2,241.748 1,327.091 1,260,679 1,260,679

Fresno Countv Portion

$90,482.448 97,800,457

106,005,839 79.380,917 79,252,424

$13,501,670,073 16,707,988,764 18,865,616,083 18.328,568,252 15,373,105,789

$167.643 151.206 75,200 75.200 75.200

Total District

$17.176.035 16,287,578 9,117.569 9,051,157 9.051,157

$667,619,774 728,904,386 788.065,627 851,674.013 888,047,759

$73,409,033 76.946.067 69.479,417 86,507,912

Ill ,620,246

$2,247,969 1,912,713 2,367,240

746,512 1.481,079

$743.276,776 807,763,166 859,912,284 938,928,437

1,001.149,084

Source: California Municipal Statistics. Inc.

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$13,119,870.243 16,10L697.812 J 7,998,932,449 17,430.210,277 14,756,223.852

$1,049,354,581 1.330.477.320 1,627.265,208 1.766.134.940 1,546,273,475

$92,898.060 99,864,376

I 08.448.279 80.202.629 80,808,703

$14,262,122,884 17.532,039,508 19.734.645.936 19.276.547.846 16.383.306,030

Tax Rates

For taxing purposes, the State Board of Equalization has divided the area served by the District into separate ta'< rate areas ("TRA"). Typical tax rate areas in the District are Tax Rate Areas 04-00 I and 05-000. The following table reflects the component tax rates levied therein.

SUMMARY OF TAX RATES Typical Tax Rates

2005-06 through 2009-10 Merced Community College District

2005-06 2006-07 TRA 4-001 General Tax Rate 1.0000% 1.0000% Merced Community College District SFID No. 2 .0200 .0250 Los Banos Unified School District .0545 .0369 Total Tax Rate 1.0745% 1.0619%

TRA 5-000 General Tax Rate 1.0000% 1.0000% Merced City School District .0264 .0260 Merced Union High School District .0214 .0140 Merced Community College District SFID No. .0240 .0200 Total Tax Rate 1.0718% 1.0600%

Source: California Municipal Statistics, Inc.

Comparative Financial Statements

2007-08 2008-09 2009-10

1.0000% 1.0000% 1.0000% .0115 .0058 .0112 .0360 .0774 .1099

1.0475% 1.0832% 1.1211%

1.0000% 1.0000% 1.0000% .0189 .0186 .0168 .0135 .0135 .0210 .D200 .0175 .0136

1.0524% 1.0496% 1.0514%

For the fiscal years ended June 30, 2004 and later, the District has implemented Government Accounting Standard Board Statements Nos. 34 and 35. Among the changes implemented under these revised accounting rules is a change in the financial reporting format. The revised reporting format provides a comprehensive entity-wide perspective of the District's assets, liabilities, and cash flows and replaces the fund-group perspective previously required. The table on the following page shows selected financial information for the District for fiscal years 2005-06 through 2008-09.

[REMAINDER OF PAGE LEFT BLANK]

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STATEMENT OF TOTAL REVENUES AND EXPENDITURES AND CHANGES IN NET ASSETS- GENERAL FUND

Fiscal Years 2005-06 through 2008-09 Merced Community College District

OPERATING REVENUES Tuition and fees (gross)

Scholarship Discounts and Allowances Net Tuition and Fees

Grant and Contracts, noncapitaL Federal State Local

Other operating payments Auxiliary Enterprise Sales ;:md Charges

TOTAL OPERATING REVENUES

OPERATING EXPENSES Salaries Employee Benefits Supplies, Materials and Other Operating Expenses and Services Utilities Depreciation Payments to Students

TOTAL OPERATING EXPENSES

OPERATING LOSS

NON-OPERATING REVENUES (EXPENSES) State Apportionments, noncapital Local Property Taxes State Taxes and Other Revenues Investment Income- noncapital Interest Expense- non capital Financial Aid Revenues- Federal Financial Aid Revenues- State Financial Aid Expenses Amortization Expense Other nonoperating revenues-grants/gifts- noncapital

TOTAL NON-OPERATING REVENUES (EXPENSES)

INCOME BEFORE OTHER REVENUES, EXPENSES, GAINS AND LOSSES

OTHER REVENUES, EXPENSES, GAINS AND LOSSES State apportionments- capital Local property taxes and revenues- capital Investment Income- capital Interest expense- capital Losses- disposal of capital assets

TOTAL OTHER REVENUES, EXPENSES, GAINS AND LOSSES

INCREASE IN NET ASSETS

NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR

Source: Merced Community College District.

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Audited Audited 2005-06 2006-07

$5,630.133 $5.611.065 (2.617.452) (2.418.628) 3,012,681 3.192,437

2,142.303 2,083.213 6,368,496 8, 798,987

804.104 1,765.449 491.991 550.459

2.919.496 2.969,326 15.739,071 19.359.871

30,833.773 32.443,390 11.273,946 12,365,107 8,914,490 13.545.528 1.254.250 1,244,600 1,870.541 2,193,725

98.872 94.451 54.245.872 61.886.801

(38,506,801) ( 42,526,930)

28,716,023 31,716,266 7,371,952 8.459,911 1,610,477 1,734,596

301,381 2,424,021 (68,900) (132,262)

7,919.461 7,874.664 765.659 83 Ll68

(9,486,809) (9,436.690) (31.317) (53.681) 368 366 348.229

37,466,293 43,766.222

(I ,040,508) 1.239.292

11.370,095 20,062,461 3,286,402 2,314,162

836.854 1,653.602 (I ,094,636) (2,103.131)

(63 562) 592,512 14,335,153 22,519.606

13,294.645 23,758.898

43 681 107 56.975,752 $~6 27~ 7~2 $80 731 6SQ

Audited 2007-08

$5.676.549 (2.181.852) 3,494,697

2,123,188 8,466.952 1,393.503

601.188 3.094.002

19,173.530

35,918,693 17.479.350 12,486,636

1.566,188 3,279,697

127 938 70,858.502

(51 ,684,972)

36,572,470 10,491,665

1,501,290 632,615

9.253,951 904,667

(10,87LI74) (109,441) 372.099

47.748,142

(2,936,830)

8,529.537 3,256,217

882,063 (2,406,499)

360.000 10.621.318

7,684,488

80.734 650 $88112 138

Audited

~

$5,734,842 (2.517 962) 3,216,880

1,973,237 8,400,355 1,004,357 1,013,626 3.332,002

18,940,457

36.511,450 12,300.650 15,126,003

1,586,264 3,684,132

88,000 69,296.499

(50,356,042)

38.620,929 8.680.883 1,391.290

641.351 (174,514)

12,282,900 1,135.508

(14,031,604) (99.404) 349.897

48.797,236

(I ,558,806)

4, 176,175 2.055.676

252,232 (2.160.691)

-4.323.392

2,764,586

88.419,138 $21 183 121

District Debt Structure

Short-Term Debt. On July 21, 2009, the District issued its first series of tax and revenue anticipation notes for fiscal year 2009·1 0 in the principal amount of $5,000,000 (the "2009 TRANs"). The 2009 TRANs mature on June 30,2010 and bear interest at a rate per annum of2.0%.

Long-Term Debt. A schedule of changes in long-term debt for the year ended June 30, 2009 is shown below:

Beginning Payments/ Ending Balance Additions Reductions Balance

Compensated Absences $876,255 $5,234 $881,489 Capital Leases 2,332,338 1,547,708 $550,679 3,329,367 General Obligation Bonds 50,805,000 I ,050,000 49,755,000 Bond Issuance Premium 1.428.499 140.897 1.287,602

$55 442 092 $1 552 242 $1 741 576 $55 253 458

General Obligation Bontls. At an election held on November 5, 2002, the voters of the Merced Community College District School Facilities Improvement District No. I (Merced Campus Area) ("SF!D No. I") authorized the issuance and sale of noHo·exceed $53,500,000 of general obligation bonds of SFID No. I for improvements to the District's Merced campus, located with the boundaries of SFID No. I (the "SFID No. I Authorization"). At an election held on November 5, 2002, the voters of the Merced Community College District School Facilities Improvement District No. 2 (Los Banos Campus Area) ("SF!D No. 2") authorized the issuance and sale of noHo·exceed $11,930,000 of general obligation bonds of SF!D No. 2 for improvements to the District's Los Banos campus, located with the boundaries of SF!D No. 2 (the "SFID No. 2 Authorization").

In June, 2003, the District caused the issuance of the first series of bonds under the SFID No. Authorization in the aggregate principal amount of $20,000,000 (the "SFID No. I Series 2003 Bonds"). On July 28, 2006, the District caused the issuance of the second series of bonds under the SFID No. I Authorization in the aggregate principal amount of$24,000,000 (the "SFID No. I Series 2006 Bonds").

In June, 2003, the District caused the issuance of the first series of bonds under the SFID No. 2 Authorization in the aggregate principal amount of $5,140,000 (the "SFID No. 2 Series 2003 Bonds"). In August, 2005, the District caused the issuance of the second and final series of bonds under the SFID No.2 Authorization in the aggregate principal amount of $6,790,000 (the "SFID No. 2 Series 2005 Bonds"). On November 16, 2006, the District caused the issuance and sale of its 2006 General Obligation Refunding Bonds (the "2006 Refunding Bonds"), the proceeds of which were used to defease portions of the outstanding SFID No. 2 Series 2003 and Series 2005 Bonds.

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The following table shows the remaining debt service for the District's outstanding general

obligations bonds:

Year Ending (August I)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Total

SPID No. I Series 2003 Bonds

$L337.837.50 9<5.037.50 9$7,637.50 988,437.50

L022.437.50 1,057,137.50 1,094.637.50 1.132.437.50 L 172.837.50 L213,937.50 1.258,937.50 1,300.112.50 L346.862.50 I ,395.000.00 1,44 I ,250.00 I .482.500.00 1518.750.00 L575.000.00

SFID No. I Series 2006 Bonds

$1,171,135.00 1,207,985.00 1,248,035.00 1,296.060.00 1,341,610.00 1,389.685.00 I ,435,060.00 1,487,735.00 1,537,260.00 1,595.603.76 1,649,891,26 1,704,922.50 1.766.235.00 1,828.175.00 1,889.750.00 1,961,250.00 2,041.500.00 2, 109,750.00 3,036,250.00 3,142.750.00 3,252,750.00 3.370.500.00

lli.163 &12.~2

SFID No.2 Series 2003 Bonds

$91,400.00 103.200.00 114.400.00

$309 000.00

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SFIDNo. 2 Series 2005 Bonds

$87.400.00 99.700.00

106,325.00 I I 7.500.00 132.750.00 141,750.00

16&5 425 00

2006 Refunding Bonds

$586.679.38 607,915.14 637.896.14 741.120.50 778,823.94 819.017.88 936.45 L40 982.109.24

1,034.253.80 1,082.383.14 I, 136.497.30 I ,221,094.34 I ,284.417.64 I ,350,0 I 5.06 I ,409, I I 0.30 1,467, I 70.38

116 074 955 58

Total Annual Debt Service

$3.274,451,88 2.943.837.64 3,064,293.64 3,143,118.00 3,275,621,44 3,407,590.38 3.466, I 48.90 3,602.281.74 3, 744,351.30 3,891,924.40 4,045,326.06 4,226,129.34 4,397,515.14 4,573,190.06 4. 740, I I 0.30 4.91 0,920.38 3,560.250.00 3,684.750.00 3,036,250.00 3,142.750.00 3.252.750.00 3 370 500.00

$80 754 060.60

Statement of Direct and Overlapping Debt

Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics, Inc. and dated March I, 20 I 0. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

The first column in the table names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. Column 2 shows the percentage of each overlapping agency's assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in column 3, which is the apportionment of each overlapping agency's outstanding debt to taxable property in the District.

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.. .L l

STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT Merced Community College District

2009-10 Assessed Valuation: Redevelopment Incremental Valuation: Adjusted Assessed Valuation:

$16,383,306,030 (I 570 538 484)

$14,812,767,546

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: J\lerced Communit)· College District School Farilities Improvement District No.1 Merced Community College District School Facilities Improvement District No.2 Delhi Unified School District Los Banos Unified School District Other Unified School Districts Chowchilla Union High School District Merced Union High School District LeGrand and Turlock Joint Union High School Districts Atwater Union School District Merced City School District Weaver Union School District Other School Districts San Luis Water District; J.D. No. 3 Community Facilities Districts City 1915 Act Bonds (Estimate)

TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT

OVERLAPPING GENERAL FUND DEBT: Fresno County General Fund and Pension Obligations Madera County Certificates of Participation Merced County Certificates of Participation Merced County Pension Obligations Merced County Office of Education Certificates of Participation Los Banos Unified School District Certificates of Participation Chowchilla Union High School District Certificates of Participation Other High School District Certificates of Participation Livingston Union School District Certificates of Participation Merced City School District Certificates of Participation Weaver Union School District Certificates ofParticipation Other School District Certificates of Participation City of Chowchilla General Fund Obligations City of Merced Pension Obligations City of Los Banos Certificates of Participation

TOTAL OVERLAPPING GENERAL FUND DEBT Less: City of Chowchilla supported obligations

TOTAL OVERLAPPING GENERAL FUND DEBT

GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT

(l) Excludes issuance of the District's Note.

%Applicable 100.000% 100,000

98.454 99.068 Various

100.000 100.000

0.863 & 100.000 100.000 100.000 100.000

1.044-100.000 100.000 100.000 100.000

0.147% 12.591 85.944 85.944 85.944 99.068

100.000 Various

100.000 100.000 100.000 100.000 100.000 100.000 100.000

Debt 311/10 $37,205,000

11,054,847 1,379,580

47,907,628 2,758,635 7,834,982

39,426,005 2,146,133

10,472,696 23,959,571 11,879,225 8,648,922 ... 949,000·tt

45,100,000 17 204 000

$267,926.224

$857,073 2,452.097

19,466,316 38,588,856

958.276 1,218,536 3,800,000

821,974 4,175.000 4,500.000 5,455,000 5,020,000 8,756.669 7,000,000

700 000 $103,769,797

2 900 554 $100,869,243

$371,696,02l(l) (!) $368,795.467

(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non·bonded capital lease obligations.

Ratios to 2009·10 Assessed Valuation: llirect Debt ($48,259,847) ............................................................................. 0.29% Total Direct and Overlapping Tax and Assessment Debt. . .............. 1.64%

Ratios to Adjusted Assessed Valuation: Gross Combined Total Debt . Net Combined Total Debt ..

. ························· ............................ 2.51% . .. 2.49%

STATE SCHOOL BUILDING AID REPAYABI E AS OF 6/30/09: $0

Source: California Municipal Statistics, Inc.

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