$1,450,000 monterey-salinas transit (monterey county ...cdiacdocs.sto.ca.gov/1996-1381.pdf · mst...

NEW ISSUE BOOK-ENTRY ONLY

UNRATED

In the opinion of Kutak Rock, Note Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Notes is exempt from personal income taxes of the State of California under present state income tax laws and is not includable in gross income for federal income tax purposes, provided that MST maintains compliance with certain provisions of the Internal Revenue Code of 1986, as amended, as described herein under "Tax Exemption. "Note Counsel is also of the opinion that interest on the Notes is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, subject to certain limitations as described herein under "Tax Exemption. " See "Tax Exemption" herein regarding certain collateral tax consequences of owning the Notes.

Dated: Date of Delivery

$1,450,000 MONTEREY-SALINAS TRANSIT

(MONTEREY COUNTY, CALIFORNIA) 1996-97 REVENUE ANTICIPATION NOTES

Due: September 16, 1997

The Notes will be issued in fully registered form, without coupons. The Notes will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository of the Notes. Individual purchases of the Notes will be made in book-entry form only, in the minimum denominations of $5,000 or any integral multiple thereof. Purchasers of the Notes will not receive certificates representing their interest in the Notes. Principal of and interest on the Notes will be payable at maturity at the Principal Office (as defined herein) of First Trust of California, National Association, as Fiscal Agent, by wire transfer to DTC which will in turn remit such principal and interest to its Participants, which in turn will remit such principal and interest to the Indirect Participants or the Beneficial Owners of the Notes, as described herein. The Notes will not be subject to redemption prior to maturity.

The Notes are issued pursuant to a Resolution duly adopted by the Board of Directors of the Joint Powers Agency Monterey-Salinas Transit ("MST") on August 12, 1996 under the authorization of Sections 53850 et seq. of the California Government Code. The proceeds of the Notes will be used to pay the costs of issuing the Notes and to provide MST with interim financing for projected operating cash shortfalls due to the timing of receipt of certain revenues for the fiscal year ending June 30, 1997 (the "Fiscal Year").

The Notes are general obligations of MST and are payable from revenues, cash receipts and other moneys of MST attributable to MST's Fiscal Year and legally available for payment thereof. Certain of said moneys have been specifically pledged to the total payment of the principal of the Notes and the interest therein. The Notes are secured by a pledge of (i) an amount equal to one-third (1/3) of the principal amount of the Notes plus an amount equal to one-third (1/3) of the interest due on the Notes at maturity thereof from the first unrestricted revenues received by MST during the month of April 1997; and (ii) an amount equal to two-thirds (2/3) of the principal amount of the Notes plus an amount equal to two-thirds (2/3) of the interest due at maturity thereof; and any deficiency in the amounts to be deposited in the month of April 1997, from the first unrestricted revenues received by MST during the month of June 1997.

Interest Rate: 4.375% Priced to Yield: 3.950%

The Notes are legal investments for commercial banks in California and are eligible to secure deposits of public moneys in California.

THE OBLIGATION TO PAY THE NOTES IS NOT AN OBLIGATION OF THE FEDERAL GOVERNMENT, THE STATE, THE COUNTY OF MONTEREY, THE CITIES OF CARMEL-BY-THE-SEA, DEL RAY OAKS, MARINA, MONTEREY, PACIFIC GROVE, SALINAS, OR SEASIDE, NOR ANY MUNICIPALITY OR POLITICAL ENTITY OTHER THAN MST. NEITHER THE OFFICERS AND EMPLOYEES NOR ANY PERSONS EXECUTING THE NOTES ARE LIABLE PERSONALLY ON THE NOTES BY REASON OF THEIR EXECUTION OR DELIVERY.

The Notes are offered when, as and if issued by MST and accepted by the Underwriter, subject to the approval as to their legality by Kutak Rock, Denver, Colorado, Note Counsel. Certain legal matters will be passed on for MST by William Marsh, General Counsel to MST. It is anticipated that the Notes, in definitive form, will be available for delivery in New York, New York, on or about September 17, 1996.

SUTRO & CO. INCORPORATED

Dated: September 5, 1996.

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No dealer, broker, salesperson or other person has been authorized by MST or the Underwriter to give any information or to make any representations other than those contained in this Official Statement in connection with the offers made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by MST or the Underwriter. The information set forth in this Official Statement has been obtained from MST and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of MST since the date hereof. This Official Statement does not constitute an offer to sell the Notes in any State or other jurisdiction to any person to whom it is unlawful to make such an offer in such state or jurisdiction. This Official Statement is II deemed final II by MST for purposes of Rule 15c2-12 of the Securities and Exchange Commission.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE NOTES AND 11IE TERMS OF 11IE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. TIIESE SECURITIES HAVE NOT BEEN RECOl\WENDED BY ANY FEDERAL OR STATE SECURITIES CO:rv.t:MISSION OR REGULATORY AUTIIORITY. FURTHERMORE, THE FOREGOING AUTIIORITIES HA VE NOT CONFIRMED THE ACCURACY OR DETERMINED 11IE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

IN CONNECTION WITH THIS OFFERING, 11IE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WlllCH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WillCH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF CO:rvt:MENCED, MAY BE DISCONTINUED AT ANY TTh.fE.

MST HAS COVENANTED TO PROVIDE MATERIAL EVENT NOTICES IN THE MANNER REQUIRED BY RULE 15c2-12 OF 11IE SECURITIES AND EXCHANGE COJ\.1MISSION. MST HAS ENTERED INTO AN UNDERTAKING FOR 11IE BENEFIT OF THE HOLDERS OF THE NOTES, PURSUANT TO THE REQUIREMENTS OF SECTION (d)(3) OF THE RULE, TO SEND NOTICE OF MATERIAL EVENTS TO 11IE MUNICIPAL SECURITIES RULEMAKING BOARD AND TO 11IE APPROPRIATE STATE INFORMATION DEPOSITORY, IF ANY.

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TABLE OF CONTENTS

IN'I'R.ODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIIE NOTES ............................................. .

Authority for Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purpose of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Description of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book-Entry-Only System ................................. . References to Owners of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Registration and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SECURITY AND SOURCES OF PAYMENT FOR THE NOTES ............. . General ............................................ . Pledged Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MONTEREY-SAUNAS 1'RANSIT ............................... . General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Governance and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FINANCES OF MST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... .

1 2 2 2 2 2 4 4 5 5 5 6 6 7 7 7 8 8 9

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Operating Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 No Ad V alorem Property Truces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Passenger Fares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Federal, State and Local Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 State Transportation Development Act Funds . . . . . . . . . . . . . . . . . . . . . . 10 FTA Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Cash Flow Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . Reserve Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance ........................................... . I...abor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension System ....................................... .

INVES1MENT POLlCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAX EXEJ\1PTION ......................................... . PENDING LlTIGATION ..................................... . CONTINUING DISCLOSURE OBLlGATION ........................ . UNDERWRITING ......................................... .

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13 13 14 15 15 16 16 16 17 19 19 20

DOCUMENTS ACCOMPANYING DELlVERY OF TIIE NOTES . . . . . . . . . . . . . 21 I..egal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

APPENDIX A-Financial Statements . . . . . . . . . . . . . . . . . . ·. . . . . . . . . . . . . A-1 APPENDIX B-Cash Flow Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 APPENDIX C-Note Counsel Opinion .............................. C-1

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Jim Collins, Chair

MONTEREY-SALINAS TRANSIT (l\fonterey County, California)

One Ryan Ranch Road Monterey, CA 93940

(408) 899-2558 or (408) 424-7695

BOARD OF DIRECTORS

Mike Ventimiglia, Vice Chair Vern Yadon, Member Marshall Haydom, Member

Dave Potter, Member John Wilmot, Member Don Jordan, Member Edith Johnson, Member

AGENCY EXECUTIVE STAFF

Frank J. Lichtanski, General Manager Edwin A. Fincke, Assistant General Manager for Finance and Management

David A. Sobotka, Controllerf.MIS Officer William Marsh, General Counsel

FISCAL AGENT, PAYING AGENT, REGISTRAR & AUTHENTICATING AGENT

First Trust of California, National Association San Francisco, California

UNDERWRITER

Sutro & Co., Incorporated San Francisco, California

NOTE COUNSEL

Kutak Rock Denver, Colorado

11.'-l'I .......... ---------------·----------------------

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OFFICIAL STATEMENT



INTRODUCTION

The purpose of this Official Statement, including the cover page and the appendices hereto, is to set forth certain information concerning the Joint Powers Agency Monterey-Salinas Transit ("MST"), created and existing under Sections 6500 et seq. of the Government Code of the State of California (the "State"), and the $1,450,000 1996-97 Revenue Anticipation Notes (the "Notes"), to be issued by MST. The Notes are being issued pursuant to Section 53850 et seq. of the California Government Code (the "Government Code") and a resolution adopted on August 12, 1996 by MST's Board of Directors (the "Resolution"), to provide for the payment of current operating expenditures prior to the receipt by the Agency of passenger farebox revenues, governmental subsidy funds, including those disbursed by the Federal Transit Administration ("FTA"), the successor to the Urban Mass Transportation Administration pursuant to the Intermodal Surface Transportation Efficiency Act of 1991 ("ISTEA") and the Federal Transit Act, as amended (the "FTA Act"), and State transportation fund subsidies pursuant to the California Transportation Development Act of 1971 ("TDA Funds"), as amended, including State Transit Assistance Program funds, and other revenues and subsidies available to MST.

The Notes are secured as to principal and interest by a pledge by MST of unrestricted moneys received during specified periods (see "Pledged Revenues" herein). Pursuant to the Resolution, MST will deposit the Pledged Revenues equal to the principal of and interest on the Notes payable on September 16, 1997 in the Payment Fund (as hereinafter defined) to be held in trust for the benefit of the holders of the Notes until all the Notes and all interest thereon are paid or otherwise secured. To the extent not paid from Pledged Revenues, the Notes shall be paid from any other moneys of MST lawfully available therefor (see "Security for the Notes" herein). MST's 1996-97 Fiscal Year began on July 1, 1996 and ends June 30, 1997.

Brief descriptions and references to the Resolution and other applicable legislation; the Notes, the Fiscal Agent Agreement; and MST's finances are included in this Official Statement. Such descriptions do not purport to be complete and are qualified in their entirety by reference to such documents, resolutions and laws, copies of which are available for inspection at the administrative offices of MST at One Ryan Ranch Road, Monterey, California 93940. MST's audited financial statements for the twelve-month period ending June 30, 1995 are contained herein as Appendix A.

THE NOTES

Authority for Issuance

The Notes are authorized to be issued pursuant to applicable provisions of the Government Code and the Resolution.

Purpose of the Issue

Imbalances in MST' s cash flow, created by the timing of local, State and federal subsidies, necessitate the issuance of short-term indebtedness to meet expenditures payable prior to receipt of anticipated revenues. Accordingly, the proceeds of the Notes will be used to provide for the payment of current operation expenses prior to the receipt of certain anticipated revenues.

Description of the Notes

The Notes will be dated the date of delivery of the Notes and will mature on September 16, 1997. The Notes shall bear interest at the rate as set forth on the cover page hereof, payable at maturity and computed on a 30-day month/360-day year basis. The Notes are not subject to redemption prior to maturity. The Notes will be issued in the aggregate principal amount of $1,450,000 and will be issued in fully registered form without coupons, and when issued will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Notes. Individual purchases will be made in book-entry form. Purchasers will not receive certificates representing their interests in the Notes purchased. The principal of and interest on the Notes are payable upon maturity of the Notes by First Trust of California, National Association, acting as fiscal agent, paying agent, registrar and authenticating agent (the "Fiscal Agent") to DTC, which will in turn remit such principal and interest to the Indirect DTC Participants or the Beneficial Owners of the Notes, as discussed herein under "TIIE NOTES-Book-Entry-Only System."

Book-Entry-Only System

The information in this section concerning The Depository Trust Company ("DTC'') and DTC's book-entry-only system has been obtained from DTC, and MST and the Underwriter take no responsibility for the accuracy thereof

DTC, New York, New York, is to act as securities depository for the Notes. The Notes are to be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered note certificate is to be issued for the Notes, as set forth on the cover page herein and will be deposited with DTC.

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DTC is a limited-pm.pose 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 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.

Purchases of the Notes under the DTC system must be made by or through Direct Participants, which are to receive a credit for the Notes on DTC's records. The ownership interest of each actual purchaser of each Note ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confmnations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Notes, except in the event that use of the book-entry system for the Notes is discontinued.

To facilitate subsequent transfers, all Notes deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants remain responsible for keeping accounts 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.

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Neither DTC nor Cede & Co. will consent or vote with respect to Notes. 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 Notes are credited on the record date (identified in a listing attached to the omnibus proxy).

DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to MST. Under such circumstances, in the event that a successor securities depository is not obtained, note certificates are required to be printed and delivered.

MST may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, note certificates will be printed and delivered.

References to Owners of Notes

So long as DTC or its nominee is the registered owner of the Notes, references herein to the registered Owners of the Notes will mean Cede & Co. or other nominee of DTC, and will not mean the Beneficial Owners of the Notes. All notices required to be given to the registered Owners, so long as DTC or its nominee is the registered Owner of the Notes, will be sent to DTC. See the caption "THE NOTES-Book-Entry-Only System" herein. None of MST, the Fiscal Agent or the Underwriter is responsible for DTC or its Participants forwarding any such notices.

Registration and Transfer

While the Notes remain in book-entry-only form, transfer of ownership by Beneficial Owners may be made as described under the caption "THE NOTES-Book-Entry-Only System. 11

In the event that DTC ceases to act as securities depository for the Notes, transfers may be effected as described below.

The Notes may be transferred or exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Notes of other authorized denominations of the same maturity and interest rate, upon payment by the transferee of a transfer fee, any tax or governmental charge required to be paid with respect to such transfer or exchange and any cost of printing notes in connection therewith. Upon surrender for transfer of any Note, duly endorsed for transfer or accompanied by an assignment duly executed by the Owner or his or her attorney duly authorized in writing, MST will execute and the Fiscal Agent will authenticate and deliver in the name of the transferee a new Note.

"Principal Office II of the Fiscal Agent means with respect to the payment, registration, surrender, exchange or transfer of any Note or Notes, the principal corporate trust office of the Fiscal Agent at 180 East Fifth Street, St. Paul, Minnesota 55101, in care of First Trust, National

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""' _______________________________________ __

Association, and with respect to all other matters regarding the duties and responsibilities of the Fiscal Agent pursuant to this Agreement, the principal corporate trust office of the Fiscal Agent at 101 California Street, San Francisco, California 94111, or such other offices as the Fiscal Agent may designate.

SECURITY AND SOURCES OF PAYMENT FOR THE NOTES

General

Payments of the principal of and interest on the Notes is secured by a pledge of the frrst available amounts of unrestricted moneys expected to be received in the months as indicated:

Amount Month

$504,420. 00<1> April 1997

$1,008,841.28<2> June 1997

<1>Includes an amount sufficient to pay one-third of the principal and the interest on the Notes at maturity at a rate of interest of 4.375 % . Amount has been rounded. <2>Jncludes an amount sufficient to pay two-thirds of the principal and the interest on the Notes at maturity at the rate of interest of 4.375 % •

Pledged Revenues

The principal amount of the Notes, together with the interest thereon, is payable from income, revenue, cash receipts and other moneys which are received by or accrue to MST for deposit to the General Fund of MST during or allocable to the 1996-97 Fiscal Year. MST's current Fiscal Year began on July 1, 1996 and ends June 30, 1997. As used herein, the term "Unrestricted Moneys" shall mean income, revenue, cash receipts and other moneys to be received by the General Fund of MST and which may lawfully be pledged for the payment of the Notes and interest thereon and which are otherwise not so pledged.

The Notes are secured as to principal and interest by a pledge of an amount equal to onethird (1/3) of the principal amount of the Notes plus an amount equal to one-third (113) of the interest due on the Notes at maturity thereof from the frrst Unrestricted Moneys to be received during the month ending April 30, 1997; and an amount equal to two-thirds (2/3) of the principal amount of the Notes plus an amount equal to two-thirds (2/3) of the interest due on the Notes at maturity thereof, and any deficiency in the amounts required to be deposited during the month of April 1997, from the frrst Unrestricted Moneys to be received during the month ending June 30, 1997 (collectively, the "Pledged Revenues"). Such moneys are pledged to pay the Notes and interest thereon and pursuant to Section 53856 of the Government Code, the Notes are a frrst lien and charge against, and are payable from, such pledged moneys.

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Pursuant to the Resolution, MST will pay the Pledged Revenues to the Fiscal Agent for deposit to the Payment Fund to be held in trust for the benefit of holders of the Notes until all the Notes and all interest thereon are paid or otherwise secured.

The Notes are general obligations of MST and, to the extent not paid from the Pledged Revenues, shall be paid from any other moneys of MST lawfully available therefor (see "Finances of MST"). However, except for the Pledged Revenues, MST is not prohibited under the Resolution from pledging, encumbering or utilizing moneys for other purposes, and there can be no assurance that moneys will be available for the payment of the principal of and interest on the Notes.

THE OBLIGATION TO PAY THE NOTES IS NOT AN OBLIGATION OF THE FEDERAL GOVERNMENT, THE STATE, THE COUNTY OF MONTEREY, THE CITIES OF CARMEL-BY-THE-SEA, DEL REY OAKS, MARINA, MONTEREY, PACIFIC GROVE, SALINAS, OR SEASIDE, NOR ANY MUNICIPALITY OR POLITICAL ENTITY OTIIBR TIIAN MST. NEITHER THE OFFICERS AND EMPLOYEES NOR ANY PERSONS EXECUTING THE NOTES ARE UABLE PERSONALLY ON THE NOTES BY REASON OF THEIR EXECUTION OR DELIVERY.

Proceeds Fund

The Resolution creates a trust fund to be held by the Fiscal Agent and designated the 1996-97 Revenue Anticipation Note Proceeds Fund (the "Proceeds Fund"). Amounts on deposit in the Proceeds Fund will be disbursed to MST upon receipt by the Fiscal Agent of a written request from MST and used and expended by MST for any purpose for which it is authorized to use and expend funds from the General Fund of MST.

Subject to the terms of the Resolution, MST will pledge and assign to the Fiscal Agent a lien on and security interest in amounts deposited in the Proceeds Fund and Payment Fund for the benefit and security for the payment of the Notes.

MST will direct the Fiscal Agent to transfer, on April 1, 1997, amounts, if any, remaining on deposit in the Proceeds Fund to the Payment Fund, to assist in satisfying MST' s sinking fund payment obligation to the Payment Fund.

Payment Fund

The Resolution creates a trust fund designated the 1996-97 Revenue Anticipation Notes Payment Fund (the "Payment Fund"). The Pledged Revenues and any amounts transferred from the Proceeds Fund in accordance with the Resolution are held in the Payment Fund.

Moneys held by the Fiscal Agent in the Payment Fund are pledged to and may be used solely for the benefit of the owners of the Notes and applied to the payment of the Notes until

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the Principal Amount of the Notes is paid in full. MST shall pay the Pledged Revenues upon receipt to the Fiscal Agent for deposit into the Payment Fund.

Upon the written direction of the General Manager, the Fiscal Agent will invest the moneys held under the Resolution in permitted investments as defined in the Resolution. See "SECURI1Y AND SOURCES OF PAYMENT FOR THE NOTES-Permitted Investments."

Permitted Investments

Moneys in the Proceeds Fund and Payment Fund shall be invested pursuant to MST' s internal investment policy. See "INVES1MENT POLlCY." Moneys in the Proceeds Fund and the Payment Fund, to the greatest extent possible, shall be invested in such investment securities as the General Manager shall provide for in written directions to the Fiscal Agent. All investment securities purchased by moneys in the Proceeds Fund and the Payment Fund shall mature not later than the date on which it is estimated that the Fiscal Agent will need such moneys either to pay the Principal Amount of or interest on the Notes or to provide for such payment or to be otherwise used by MST for MST purposes. As of the date of this Official Statement, MST intends to invest moneys in the Proceeds Fund and Payment Fund in LAIF.

MONTEREY-SALINAS TRANSIT

There follows in this Official Statement a brief description of MST, together with current information concerning its economy and governmental organization, its major revenue sources, funds and indebtedness.

General Information

Monterey-Salinas Transit was created July 1, 1981, through the merger of Monterey Peninsula Transit and Salinas Transit System under a Joint Exercise of Powers Agreement pursuant to Section 6500 et seq. of the Government Code of the State of California. MST was formed for the purpose of exercising the common powers of the Member Agencies to own, operate and administer a public transportation system. Member Agencies include the County of Monterey and the cities of Carmel-by-the-Sea, Del Rey Oaks, Marina, Monterey, Pacific Grove, Salinas, and Seaside. MST serves the cities of Carmel-by-the-Sea, Del Rey Oaks, Marina, Monterey, Pacific Grove, Salinas, Seaside, and the County of Monterey.

MST carries approximately 3.8 million passengers annually in a 110 square-mile area. MST uses approximately 68 buses which travel approximately 2.4 million miles annually. The average age of MST transit vehicles is 13 years. MST currently employs approximately 154 bus drivers, maintenance workers, clerical support and administrative employees.

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Governance and Management

MST is governed by a Board of Directors (the "Board") consisting of one representative from each Member Agency. Each member agency appoints its representative director. Directors must be elected officials, or employees or officers of the Member Agency which appointed them. Each director serves solely at the pleasure of the Member Agency which appointed them.

The Board's powers include acquiring, constructing, owning, operating and controlling transit facilities; fixing rates; establishing routes and levels of service; incurring indebtedness; exercising the right of eminent domain; and acceptance of contributions or loans from the federal government, the State, or any agency thereof. Directors are appointed by their member jurisdiction. The membership of the Board is set forth below.

BOARD OF DIRECTORS

Name Position Member Jurisdiction

Jim Collins Chair City of Salinas

Mike Ventimiglia Vice Chair City of Del Rey Oaks

Marshall Haydorn Member City of Carmel-By-The-Sea

Edith Johnson Member County of Monterey

Don Jordan Member \ City of Seaside

Dave Potter Member City of Monterey

John Wilmot Member City of Marina

Vern Yadon Member City of Pacific Grove

Executive Staff

Reporting directly to the Board are the General Manager, the Secretary and the General Counsel. Three department directors report to the General Manager.

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FINANCES OF MST

Revenues

MST relies on passenger fare receipts to meet a portion of its annual operating expenses and utilizes operating assistance grants from the Ff A and the State to fund the balance of its operational requirements. MST's Fiscal Year commences on each July 1 and ends the following June 30.

Operating Subsidies

MST, like most public transit operators, does not receive sufficient farebox revenues to meet its current operating expenditures. To cover such operating deficiencies, MST is dependent upon operating assistance from federal, state and local sources, as more fully described herein.

No Ad Valorem Property Taxes

MST may not levy, nor does it receive, any ad valorem property taxes.

Passenger Fares

MST presently charges its passengers a basic cash fare of $1.50 for peak-hour travel and off-peak hour travel. MST last raised its basic cash fare in October of 1995. Passenger fare receipts may be pledged as a portion of the Payment Fund. (See II SECURITY AND SOURCES OF PAYMENT FOR TilE NOTES-Pledged Revenues").

9

MONTEREY-SALINAS TRANSIT Ridership, Farebox Revenues and Recovery Ratios

Fiscal Years 1991-92 through 1995-96

Total Fiscal Year Passengers<1>

1991-92 3,596,376

1992-93 3,588,522

1993-94 3,570,406

1994-95 3,802,199

1995-96<2> 3,749,871

<1>Qff-peak/peak hour travel. <2>Estimated. Source: MST.

Federal, State and Local Subsidies

Total Base Fare Revenue

$1.25 $2,430,503

1.25 2,505,336

1.25 2,498,831

1.25 2,541,848

1.50 3,357,236

Recovery Ratio

30.42%

31.06

29.68

29.69

32.42

MST receives revenue for operations and capital purchases from various federal, state and local sources, as described below.

State Transportation Development Act Funds

MST receives an allocation of sales tax revenue under the California Transportation Development Act of 1971, as amended, (the "TDA"), under which receipts from a 0.25% sales tax, imposed as part of the State's current six percent sales tax, are reserved for transportation purposes. The TDA provides that revenue for this tax is placed in two funds, the Local Transportation Fund (the "LTF") which was established in 1976 and the State Transit Assistance Program (the "STA") which was established in 1979.

The L TF is used for the deposit of sales tax revenues collected by the State Board of Equalization within the County. LTF Funds are apportioned among individual transportation service entities within the County by the :regional transportation planning entity. LTF Funds for operating assistance are available in amounts of up to fifty percent of the operating budget of any individual transportation service entity, after deduction of federal grants, provided that certain L TF criteria are met.

MST is presently an eligible claimant for L TF Funds allocated by the State to Monterey county. In accordance with procedures and eligibility requirements set forth in the TDA, MST submits a request for LTF Funds to the Transportation Authority of Monterey County

10

t"<'i!l!Blllilfi•>...air,r>-_____________________________________ _

-------------------------------~~~~~~~~~~~~~~~~~~~----------

("TAMC"), the regional transportation planning entity for Monterey county, on each April 1 for the next Fiscal Year. If TAMC approves the request, TAMC directs the auditors of Monterey county to release the LTF Funds to MST.

Under these procedures MST has been allocated $4,488,000 million in LTF Funds for the 1995-96 Fiscal Year. For Fiscal Year 1996-97, MST estimates it will receive $4,601,000 in LTF Funds. LTF Funds are received in substantially equal quarterly installments during the Fiscal Year. MST may submit supplemental claims for LTF Funds during the year. LTF Funds remaining with the County at the end of any Fiscal Year are carried over to the following year.

Below are the amounts of LTF Funds for operations available to MST in the years indicated and the ratio of L TF Funds to total revenues of MST.

Fiscal Year

1991-92

1992-93

1993-94

1994-95

1995-96

Source: MST.

MONTEREY-SALINAS TRANSIT L TF Funding Trends


LTF Funds Distributed

to MST

$4,267,115

4,258,006

4,473,655

4,247,419

4,488,000

Ratio to Total Revenue

52.17%

51.23

51.14

47.97

42.80

The TDA prohibits the pledging of TDA Funds without voter approval. MST has not sought voter approval for a pledge of TDA Funds.

State sales tax revenues devoted to the STA ("STA Funds") are apportioned among the State's counties on the basis of population and operator revenue-based formulas. They are deposited in the County's State Transportation Assistance Fund and are allocated by the TAMC. STA funds allocated to the MST are usually used for capital improvements and are not allocated to operations.

11

FfA Grants

Section 5307 FIA Act Grants. The FTA Act provides substantial federal assistance to enable mass transportation systems to continue to provide transportation services. Federal grants, based on population and population density, authorized by Section 5307 (previously Section 9) of the FT A Act are available for both operating and capital expenditures. The following table shows the amount of Fr A operating fund subsidies received by MST since fiscal year 1991-92, and the ratio of those funds to total revenues received by MST.

Fiscal Year

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97(1)

Cl)Estimated. Source: MST.

MONTEREY-SALINAS TRANSIT Ff A Operating Subsidy Trends


Ratio To Amount Received Total Revenues

$1,341,068 16.40%

1,386,583 16.68

1,608,430 18.38

1,867,083 21.09

1,413,133 15.09

971,000 10.30

MST anticipates filing its application for the 1996-97 Section 5307 FfA operating subsidy in January 1997, in the amount of $971,000. Prior to approval of MST's application, the FT A may request additional information from MST pertaining to MST' s application. If the application is approved by the FTA regional office, it must additionally be reviewed and approved by the FTA office in Washington, D.C., and only after such approval may grant funds and Congestion Management Air Quality (CMAQ) funds be released. MST expects that the grant will be approved, and that the funds will be made available to it in April 1997.

MST's receipt of an FTA Act grant for 1996-97 is subject to a variety of contingencies. The grant has not yet been approved by FT A. In the event that it is approved, grant payments will be subject to the budgetary authority of the United States Congress and of any official or agency with legal or actual control over the disbursement of government funds. Moreover, FTA Act grant payments generally assume the continued operation by MST of its transportation

12

"' _________________ , ____________________ __

system. A significant reduction in the level of service or curtailinent or cessation of MST' s operations could result in a reduction, abatement or delay in the receipt of the Section 5307 FT A grant for fiscal year 1996-97. In addition, if payments to MST made under other agreements with FTA are in excess of actual entitlements, FrA may assert rights of setoff for the excess against the 1996-97 Section 5307 FTA grant. A reduction, abatement or delay in the receipt of the 1996-97 Section 5307 FT A Act grant may also occur if MST fails to comply with the provisions of the Section 5307 FTA Act grant or other FTA Act grants. Moreover, FTA may not fulfill its obligations under the anticipated grant contract as a result of injunctions or restraining orders prohibiting payment of the Section 5307 FT A Act grant, or for other reasons beyond the control of MST.

Cash Flow Forecast

MST has prepared the accompanying monthly cash flow statements (see Appendix B) covering 1995-96 and 1996-97. The 1996-97 cash flow takes into consideration the Note proceeds.

The estimates of amounts and timing of receipts and disbursements in the accompanying table are based on present circumstances and currently available information and are believed to be reasonable. The assumptions may be affected by numerous factors and there can be no assurance that such estimates will be achieved.

Our independent accountants have not audited, compiled, or applied agreed-upon procedures to the forecast and therefore they assume no responsibility for it.

Results of Operations

As a result of its ability to receive intergovernmental operating subsidies, MST has, in general, balanced its revenue and expenses throughout its nearly 24-year existence. The results of financial operations for the past four Fiscal Years are summarized below.

13

Monterey-Salinas Transit Historical Operating Results Fiscal Years Ending 1992-95

(zeros omitted)

1992 1993 1994 1995

REVENUES:

Fares $2,430,503 $2,505,336 $2,498,831 $2,541,848

Operating Assistance:

Federal Grants 1,353,568 1,418,583 1,623,162 1,890,912

Local Transportation Fund 4,267,115 4,258,006 4,473,655 4,247,419

Interest 78,294 94,407 84,203 140,217

Other 50,042 35,999 66,782 33,867

TOTAL REVENUES 8,179,522 8,312,331 8,746,633 8,854,263

EXPENSES:

Salaries and Benefits 6,128,679 6,160,978 6,470,613 6,383,467

Materials and Supplies 953,739 997,642 949,239 1,014,660

Professional and Technical Services 526,036 534,869 591,057 445,114

Purchased Transportation -0- -0- 100,507 377,651

Insurance 202,590 294,595 638,306 293,499

Utilities 100,777 104,412 106,811 125,096

Leases and Rentals 3,230 4,267 3,841 3,133

Other 264,471 215,568 196,548 211,643

TOTAL EXPENSES 8,179,522 8,312,331 9,056,922 8,854,263

NET REVENUES BEFORE -0- -0- (310,289) -0-DEPRECIATION

DEPRECIATION 1,205,855 1,317,207 (1,308,598) (1,272,099)

NET REVENUES ($1,205,855) ($1,317 ,207) ($1,618,887) ($1,272,099)

Source: MST's Audited Financial Statements.

Independent Certified Public Accountants

MST' s operating results should be read in conjunction with the audited financial statements and related notes of MST. Appendix A contains the balance sheets of MST for the period ending June 30, 1995, the related statements of operations, changes in MST equity and capital grants and changes in financial position for the years then ended and the opinion of MST' s independent certified public accountant. The independent certified public accountants for MST are Deloitte & Touche LLP.

14

., _________________________________ .............................................................. -

Reserve Accounts

Pursuant to Resolution No. 97-04, MST has established a comprehensive level of reserves to ensure that MST can withstand local and regional economic disruptions as well as unanticipated expenditure demands and to receive funds from the FT A. The amount of moneys allocated to each reserve account (except for the Capital Reserve Account) is determined annually and any funds required to be deposited are to be deposited into each reserve account at the end of each fiscal year. MST has established the following reserve accounts: Worker's Compensation Reserve Account, Public Liability/Property Damage Reserve Account and Capital Reserve Account. As of August 12, 1996, MST had $1,527,185, $688,596 and $219,000 on deposit in the Worker's Compensation Reserve Account Public Liability /Property Damage Reserve Account and Capital Reserve Account, respectively.

Insurance

MST participates in the California Transit Insurance Pool (CalTIP), a joint powers agreement created to provide liability and physical damage insurance to its members through an insurance pool. MST paid premiums to CalTIP of approximately $33,824, $67,000 and $113,000 in the fiscal years ended June 30, 1996, 1995 and 1994, respectively.

MST has self-insurance programs for the following risks:

• Liability to a maximum of $250,000 per incident, over which coverage is provided to $500,000 per incident by the California Transit Insurance Pool (CalTIP), and from $500, 000 to $5 ,500, 000 per incident coverage is provided by a private carrier through CalTIP.

• Physical damage to a maximum of$5,000 per incident, over which coverage is provided to $100,000 per incident by CalTIP, and from $100,000 to $5,000,000 per incident coverage is provided by a private carrier through Cal TIP.

• Worker's compensation to a maximum of $275,000 per incident, over which coverage is provided to $5,000,000 by a private carrier.

MST does not carry insurance for risks in excess of the above-stated limits.

Estimated self-insurance liabilities are based on the results of actuarial valuations and include amounts for claims incurred but not reported. MST' s frrst such actuarial valuation was performed in 1994. Estimated self-insurance liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of pay-outs, and other economic and social factors.

15

Expenses related to such self-insurance risks are classified on the statement of revenues and expenses as salaries and benefits for worker's compensation and insurance expense for general liability and physical damage.

Labor Relations

As of June 30, 1996, MST employed 118 nonadministrative persons (including bus operators, mechanics and maintenance employees) represented by the Amalgamated Transit Union (the "ATU"). MST's 27 administrative employees are represented by the MontereySalinas Transit Employees Association (the "MSTEA"). Six managers and three part-time employees complete the list of 154 employees.

MST successfully completed contract negotiations with the ATU on January 8, 1996 for the period July 31, 1995 to September 30, 1998. A Memorandum of Understanding with the MSTEA was reached on July 8, 1996 for the period July 1, 1996 to June 30, 1999.

Pension System

All permanent employees are eligible to participate in the Public Employees' Retirement Fund of the State of California's Public Employees' Retirement System ("PERS"). PERS is an agent multiple-employer defined benefit retirement plan that acts as a common investment and administrative agent for various local and state governmental agencies within the State of California. PERS provides retirement, disability, and death benefits based on the employee's years of service, age and fmal compensation. Employees vest after five years of service and may receive retirement benefits at age 50. These benefit provisions and all other requirements are established by State statute and PERS regulations.

MST contributed to PERS 5.795 % in 1995 and 5.967% in 1994 of payroll for covered employees. MST's covered payroll for employees participating in PERS was $4,788,600 in 1995 and $4,767,000 in 1994. MST's payroll for all employees was $4,810,600 in 1995 and $4,922,000 in 1994. Employees have an obligation to contribute 7% of their pay to PERS. For certain employees MST also pays all or part of the employees' contributions, depending on the specific employee's contract.

INVESTMENT POLICY

It is the policy of MST to invest all public funds in a manner which will provide the highest investment return with the maximum security, while meeting daily cashflow demands and conforming to all federal, State and local laws governing the investment of public funds. All financial assets of any funds, including the General Fund and all other funds that may be created, shall be administered in accordance with the provisions of this policy. MST will adhere to a "buy and hold" philosophy, whereby MST invests with the intention of holding the investment until it matures or until it is needed for liquidity. Additionally, investment maturities should be matched with known liability maturities.

16

,,,,tw,ll!l!-,1-·1l----------------·----------------------

Except with respect to the proceeds of the Notes and the reinvestment of amounts held in the Payment Fund, MST has limited its investments to the following:

(a) Certificates of Deposit. CD's are drawn from 14 days with various maturities. Rates change periodically with the money market, and there is an interest penalty for early withdrawal. They must be backed by federal insurance. CD's in financial institutions with local branches shall be made to the extent warranted by the offered yield, liquidity and safety compared to that available from other investments. No more than $100,000 shall be invested in any one institution. All CD's shall have Monterey-Salinas Transit as the registered owner.

(b) Local Agency Investment Fund ("LAIF"). This is a pooled investment group operated by the State of California for public agencies. Funds deposited or withdrawn by 9:30 a.m. will receive interest for that day or will be available for use at the local bank on that day. LAIF allows no more than eight transactions during any one month.

(c) U.S. Treasury Bills. Treasury bills are direct obligations on the United States Government. They are short-term obligations issued with a term of one year or less. They are purchased from the Federal Reserve Bank during their original issue, and are registered in the name of MST. They are held to maturity, and sold at a discount from par. MST does not receive interest payments during the life of the investment. The difference between the purchase price of the bill and the amount which MST is paid at maturity (par) represents the interest on the bill.

Only the MST Treasurer and the Deputy Treasurer have authority to invest funds in accordance with this policy. The Treasurer reports quarterly to the Board of Directors showing, daily treasury transactions during the quarter and the composition of the end-of-quarter balance including financial institutions and interest rates.

TAX EXEMPTION

In the opinion of Kutak Rock, Note Counsel, to be delivered at the time of delivery of the payment for the Notes, under existing laws, regulations, rulings and judicial decisions, interest on the Notes is not includable in gross income for federal income tax putposes and is exempt from all present California taxes on individuals.

Note Counsel is further of the opinion that interest on the Notes is not a specific preference item for the putposes of the alternative minimum tax provisions of the Code; however, interest on the Notes will be included in the "adjusted current earnings" of certain coiporations, and such coiporations are required to include in the calculation of alternative minimum taxable income 75 % of the excess of such coiporation' s adjusted current earnings over

17

its alternative minimum taxable income ( detennined without regard to this adjustment and prior to reduction for certain net operating losses).

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Notes. MST has covenanted in the Resolution and various certificates to comply with certain covenants designed to assure that interest on the Notes will not become includable in gross income. Failure to comply with these covenants may result in interest on the Notes being included in gross income from the date of issue of the Notes. The opinion of Note Counsel assumes compliance with the covenants.

Although Note Counsel is of the opinion that interest on the Notes is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Notes may otherwise affect the income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. Note Counsel expresses no opinion regarding any such consequences. The nature and extent of these other tax consequences will depend upon the recipient's particular tax status and the recipient's other items of income and deduction. Note Counsel expresses no opinion regarding such consequences. Purchasers of the Notes, particularly purchasers that are corporations (including S corporations, and United States branches of foreign co:rporations), property and casualty insurance companies, banks, thrifts or other financial institutions, recipients of Social Security or Railroad Retirement benefits, or taxpayers who may be deemed to have incurred ( or continued) indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors concerning their tax consequences of purchasing and holding the Notes.

A copy of the opinion of Note Counsel approving the validity of the Notes and noting that the interest on the Notes is excluded from gross income for federal income tax purposes will be printed on each Note without charge to the purchasers.

The statements of law and legal conclusion set forth in this Official Statement under the heading "The Notes" have been reviewed by Note Counsel. Note Counsel's employment is limited to a review of the legal proceedings required for the authorization of the Notes and to rendering the opinion set forth above. Such opinion will not consider or extend to any documents, agreements, representations, offering circulars or other material of any kind concerning the Notes not mentioned in this paragraph. Certain legal matters with respect to the issuance of the Notes will be passed upon by MST Counsel.

From time to time, there are legislative proposals in Congress that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Notes. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted, it would apply to notes issued prior to enactment. Each purchaser of the Notes should consult his or her own tax advisor regarding any pending or proposed federal tax legislation. Note Counsel expresses no opinion regarding any pending or proposed federal tax legislation.

18

PENDING LITIGATION

There is no litigation now pending or threatened to restrain or enjoin the issuance or sale of the Notes; questioning or affecting the validity of the Notes, the Resolution or the pledge by MST under the Resolution; or questioning or affecting the validity of any of the proceedings for the authorization, sale, execution or delivery of the Notes.

MST is a party to various legal proceedings seeking damages, injunctive or other relief arising out of operation of the transit system. In the opinion of the general counsel for MST, the probable recoveries and the estimated costs and expenses of defense will be either within MST's applicable insurance policy limits (subject to applicable deductibles) or will not have a materially adverse effect on the financial condition of MST.

CONTINUlNG DISCLOSURE OBLIGATION

MST has agreed (the "Undertaking") for the benefit of the holders of the Notes as follows, pursuant to the requirements of Section (d)(3) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 CFR Part 240, § 240.15c2-12) (the "Rule"):

MST undertakes to provide Material Event Notices as provided in this Section. If a Material Event occurs while any Notes are Outstanding, MST shall provide a Material Event Notice in a timely manner to the Municipal Securities Rulemaking Board and the SID (as defined herein), if any. Each Material Event Notice shall be so captioned and shall prominently state the date, title and CUSIP numbers of the Notes.

"Material Event" means any of the following events, if material, with respect to the Notes:

(a) principal and interest payment delinquencies;

(b) non-payment related defaults;

(c) unscheduled draws on debt service reserves reflecting financial difficulties;

(d) unscheduled draws on credit enhancements reflecting financial difficulties;

(e) substitution of credit or liquidity providers, or their failure to perform;

(f) adverse tax opinions or events affecting the tax-exempt status of the Notes;

(g) modifications to rights of the Noteholders;

(h) Bond calls;

19

(i) defeasances;

(j) release, substitution, or sale of property securing repayment of the Notes; and

(k) rating changes.

"Material Event Notice" means written or electronic notice of a Material Event.

II SID II means a state information depository as operated or designated by the State as such for the purposes referred to in the Rule.

Unless otherwise required by law and subject to technical and economic feasibility, MST shall employ such methods of information transmission as shall be requested or recommended by the designated recipients of MST' s information.

The continuing obligation hereunder of MST to provide Material Event Notices shall terminate immediately once the Notes no longer are Outstanding. This Section or any provision hereof shall be null and void in the event that MST delivers to each then-existing nationally recognized municipal securities information repository ("NRMSIR") and the SID, if any, an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require this Section or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Notes. This Section may be amended without the consent of the holders of the Notes, but only upon the delivery by MST to each then-existing NRMSIR and the SID, if any, of the proposed amendment and an opinion of nationally recognized bond counsel to the effect that such amendment, and giving effect thereto, will not adversely affect the compliance of this Section and by MST with the Rule.

MST has not failed to comply with any prior undertaking under the Rule. Any failure by MST to comply with the Undertaking will not constitute an Event of Default under the Resolution. Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Notes in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Notes and their market price.

UNDERWRITING

The Notes are being purchased initially by Sutro & Co. Incorporated (the "Purchaser") at a price of $1,436,401.50 (being the par amount of the Notes plus a premium in the amount of $5,901.50 minus an Underwriter's fee of $19,500.00). The Contract for Purchase of the Notes provides that the Purchaser will purchase all of the Notes, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Contract for Purchase, the approval of certain legal matters by counsel and certain other conditions. Under the terms of the Contract for Purchase, the Purchaser is obligated to pay to MST accrued interest from the dated date of the Notes to the date of delivery of the Notes.

20

____ , ________________________________ ._. ................................................... ..

The Purchaser may offer and sell the Notes to certain dealers and others at a price lower than the initial public offering price. The offering price may be changed from time to time by the Purchaser.

DOCUMENTS ACCOMPANYING DELIVERY OF THE NOTES

Legal Matters

Legal matters incident to the authorization, issuance and sale of the Notes will be subject to the final approving opinion of Kutak Rock, Note Counsel. Such opinion will be available at the time of delivery of the Notes and will be to the effect that the Notes are valid and legally binding obligations of MST and that interest on the Notes, under existing statutes, regulations, rulings and court decisions, is exempt from personal income taxes imposed by the State of California, and assuming compliance by MST with certain representations and covenants in the Resolution, such interest is excluded from the gross income for federal income tax purposes (see "Tax Exemption"). Said opinion shall contain further statements to the effect that the enforceability of rights or remedies with respect to such Notes may be limited by bankruptcy, insolvency or other laws affecting creditors' rights or remedies heretofore to hereafter enacted. Kutak Rock has not been requested to examine or review and has not examined or reviewed the accuracy or sufficiency of the Official Statement relating to the Notes or any proceedings, reports, correspondence, financial statements or other documents, containing financial or other information relative to MST which have been or may be furnished or disclosed to purchasers of the Notes, and expresses no opinion with respect to such financial or other information, or the accuracy or sufficiency thereof. Certain compensation of Note Counsel is contingent upon the issuance of the Notes.

Closing Certificate

Upon delivery of the Notes, the Underwriter will be furnished with the following items: (a) a Certificate of the General Manager or Assistant General Manager for Finance and Management of MST to the effect that as of the date of this Official Statement and at all times subsequent thereto, up to and including the time of delivery of the Notes, this Official Statement did not and does not contain any untrue statements of material fact or omit to state a material fact necessary to make the statements herein, in light of the circumstances under which they were made, not misleading, and further stating that there has been no adverse material change in the financial condition of MST since the date of the Official Statement to the time of delivery of the Notes; (b) a Certificate signed by the General Manager or Assistant General Manager for Finance and Management of MST evidencing payment for the Notes; and (c) a Certificate by the General Counsel for MST evidencing the due execution of the Notes, including statements that (i) no litigation of any nature is pending nor, to the knowledge of the signer, threatened, restraining or enjoining the issuance and delivery of the Notes or the application of moneys to pay the principal of and interest thereon, nor in any manner questioning the proceedings and authority under which the Notes were authorized or affecting the validity of the Notes thereunder, (ii) neither the corporate existence nor boundaries of MST nor the title of the signers

21

to their respective offices is being contested, and that (iii) no authority or proceedings for the issuance of the Notes have been repealed, revoked or rescinded.

Other Matters

The Official Statement is not construed as a contract or agreement between MST and the purchasers or holders of any of the Notes. Any statements made in the Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as an opinion and not as representation of fact. The information and expressions of opinion herein are subject to change without notice and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of MST since the date hereof.

[RB.1A.INDER OF PAGE INTENTIONALLY LEFr BLANK]

22

fl-'i!.!--------------------·----------------------....

Additional infonnation may be obtained upon request from the administrative offices of MST at One Ryan Ranch Road, Monterey, California 93940.


By Isl Edwin A. Fincke

23

Assistant General Manager for Finance and Management

(THIS PAGE INTENTIONALLY LEFT BLANK)

I

APPENDIX A

FINANCIAL STATEMENTS

A-1

• I

i)> I

N

Deloitte & ToucheLLP

0

MONTEREY-SALINAS TRANSIT Single Audit Report

For The Years Ended June 30, 1995 and 1994

Oefoitteiouitre .~i..,~.•m!Ull.~~~1.JtLl>lt-,-

r w


TABLE OF CONTENTS

Independent Auditors' Report

Financial Statements for the Y cars Ended June 30, 1995 and 1994: Balance Sheets Statements of Revenues and Expenses Statements of Changes in Capital Statements of Cash Flows Notes to Financial· Statements

I I

~

i I

~ +"

Deloitte & ToucheLLP

0 INDEPENDENT AUDITORS' REPORT

The Board of Directors, Monterey-Salinas Transit:

913 Blanco Circle Salinas. California 93901-4401

Telephone: (408) 757-2901 Facsimile: (408) 757-1842

We have audited the balance sheets of Monterey-Salinas Transit as of June 30, 1995 and 1994, and the related statements of revenues and expenses, changes in capital, and cash flows for the years then ended. These financial statements are the responsibility of the management of Monterey-Salinas Transit. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit incJudes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Monterey-Salinas Transit at June 30, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic financial statements taktn as a whole. The supplemental schedule of changes in deferred credits for the year ended June 30, 1995, which is also the responsibility of the management of Monterey-Salinas Transit, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such supplemental schedule has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.

'cb.LA.,) La:i...J 0 \ a~Cl L. L. P August 23, 1995 •

Deloitte Touche Tohmatsu International

;i:,. I

\JI

MONTEREY=SALINAS TRANSIT

BALANCE SHEETS.JUNE_J__Q, 1995 AND .1994

ASSETS

CURRENT ASSETS: Cash and equivalents Investments Operating grants receivable Capital grants receivable Materials and supplies, at cost Prepaid expenses Other receivables Total current assets

INVESTMENTS IN DEFERRED COMPENSATION PLAN

PROPERTY, PLANT, AND EQUIPMENT: Land Buses Shop, office, and other equipment Construction in progress Total , Accumulated depreciation Property, plant, and equipment - net

TOTAL

LIABILITIES AND CAPITAL

CURRENT LIABILITIES: Cash overdraft Accounts payable Accrued liabilities

elf-insurance liabilities Total curierit1ia6ilffies

DEFERRED COMPENSATION LIABILITY

NOTES

2,4 2,5 2,3

2

8

2

4

6

8

1995

$ 1,420,315 500,000

2,698,944 324,320 298,492

54,621 131.766

5,428,458

323,862

975,644 8,159,707 9,666,674

228,615 19,030,640

(10.091,713) 8,938.927

$_14..621.247

$ 97,365 130,459 686,847

11903,710 2,81!;38!"

_323,862

DEFERRED CREDITS i___ 2,248,385 W<~,

CAPITAL: Contributed capital Retained earnings Total capital

TOTAL

See notes to financial statements.

2 8,997,626 302,993 ___ .

9,300,619

$ 14 691 247

1994

$ 3,232,614

1,006,554 59,605

285,810 99,730

127.111 4,811,424

252,289

975,644 8,159,707 7,947,584 1,283,309

18,366,244 (8,897,733) 9,468,511

LI~24

$ 173,352 849,269

1,596,828 2,619,449

252.289

1,830.283

9,527,210 302.993

9.830,203

$ 14 532 224

l I

::i:,-I

(J\


STATEMENTS OF REVENUES AND EXPENSES YEARS ENDED JUNE 30, 1995 AND 1994

REVENUES: Fares Operating assistance:

Federal grants Local Transportation Fund

Interest Other Total

EXPENSES: Salaries and benefits Materials and supplies Professional and technical services Purchased transportation Insurance Utilities Leases and rentals Other Total

EXCESS OF EXPENSES OVER REVENUES BEFORE DEPRECIATION

DEPRECIATION

EXCESSOFEXPENSESOVERREVENUES


NOTE

3

1995 1994

$ 2,551,497 $ 2,511, 102

1,890,912 1,623, 162 4,247,419 4,473,655

140,217 84,203 24,218 54,511

8,854,263 8,746,633

6,383,467 6,470,613 1,014,660 949,239

445, 114 591,057 377,651 100,507 293,499 638,306 125,096 106,811

3,133 3,841 211,643 196,548

8,854,26:l _ 9.056.922

- (310,289)

1,272,099 1,308,598

$ 0 272 099) $ (1,618,887)

~ I

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STATEMENTS OF CHANGES IN CAPITAL YEARS_ENDED JUNE 30. 1995 AND 1994

BALANCE, JULY 1, 1993

EXCESSOFEXPENSESOVERREVENUES

AMORTIZATION OF CAPITAL GRANTS

CAPITAL GRANT FUNDS EARNED

BALANCE, JUNE 30, 1994

EXCESS OF'EXPENSES OVER REVENUES

AMORTIZATION OF CAPITAL GRANTS

CAPITAL GRANT FUNDS EARNED

BALANCE, JUNE 30, 1995


CONTRIBUTED CAPITAL

$ 9,664,864

-(1,308,598)

1 170 944

9,527,210

-

(1,272,099) 1

742 515

$ 8 997 626

RETAINED EARNINGS

$ 613,282

(1,618,887)

1,308,598

-302,993

( 1,272,099)

1,272,099

-

$ 302 993

TOTAL

$ 10,278, 146

( 1,618,887)

1, 170,944

9,830,203

( 1,272,099)

_ 742.515

$ 9 300.619

I MONTEREY-SALINAS TRANSIT

STATEMENTS OF CASH FLOWS YEARSENDED JUNE 30, 1995 AND 1994

CASH FLOWS FROM OPERATING ACTIVITIES: Excess of expenses over revenues Nonoperating revenue:

Operating assistance Interest income

Operating loss Adjustments to reconcile operating loss to net cash used for operating activities:

Depreciation Effect of changes in:

Materials and supplies Prepaid expenses Other receivables Accounts payable Accrued liabilities

~ Sclf-insutance liabilities oo Net cash used for operating activities

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESOperating assistance received Cash overdraft · Net cash provided by noncapital financing activities

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital grant funds received Purchases of property Net cash provided by (used for) capital and related financing activities

CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments Interest received Net cash provided by (used for) investing activities

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

CASH AND EQUIVALENTS, BEGINNING OF YEAR

CASH AND EQUIVALENTS, END OF YEAR

Sec notes to financial statements.

1994

$ (1,618,887)

(6,096,817) (84,203)

(7, 799 ,907)

1,308,598

I 0,551 11,263 41,609

127,455 180,792 528,289

(5,591,350)

7,757,335 -

7,757,335

1,005,133 (1.170,944)

lliJ.Kll)

75.502 75502

2,075,676

1,156,938

$ 3,232 614

:i,.. I \0


NOTES TO FINANCIAL STATEMENTS YEARS ENDED 1UNE_30. 1995 ANDJ994

1. ORGANIZATION

Monterey-Salinas Transit (MST) was created July I, 1981 through the merger of Monterey Peninsula Transit and Salinas Transit System under a joint exercise of powers agreement to provide, either directly or through contract, public transportation services within certain areas of the County of Monterey and the Cities of Carmel-by-the-Sea, Del Rey Oaks, Marina, Monterey, Pacific Grove, Seaside and Salinas. MST is governed by a Board of Directors composed of representatives of the member jurisdictions.

2. SIGNIFICANT ACCOUNTING POLICIES

Gra1Jts for the acquisition of property, plant, and equipment arc credited to contributed capital as the related expenditures are incurred.' Capital grants in contributed capital are amortized as depreciation of related assets is recognized. Grants for operating

· assistance are included in revenue in the period in which the grant was earned. Federal capital grant funds are claimed on a reimbursement basis and receivables for grant funds are recorded as the related expenditures are incurred. Local capital grant funds are received on an advance basis and capital grant funds advanced but not yet credited to capital are treated as deferred credits. Also, operating funds advanced from the Transportation Agency for Monterey County for working capital are treated as

. deferred credits.

Cash equivalents include demand deposits and amounts invested in the State treasurer's investment pool, which are available upon demand.

Investments are stated at cost.

Property, plant, and equipment is stated at cost and depreciated using the straight-line method over the following estimated useful lives:

Buses Shop, office, and other equipment

8 to 12 years 3 to 30 years

I I

il'> I

t--' 0

Self-Insurance Liabilities - Effective July J, 1994 MST adopted Governmental Accounting Standards Board Statement No. 10, "Accounting and Financial Reporting for Risk Financing and Related Insurance Issues". This pronouncement requires claims liabilities, including claims incurred but not reported, to be measured based on the estimated ultimate cost of settling the claims (including the effects of inflation and other societal and economic factors), using past experience adjusted for current trends, and any other factors that would modify past experience. It also requires disclosure of changes in the balance of self-insurance liabilities during the year. Adoption of this pronouncement had no effect on MST' s financial position or results of operations.

3. OPERATING ASSISTANCE

MST has received allocations of local transportation funds pursuant to the Transportation Development Act of 1971. These funds are generated within Monterey County and are allocated based on annual claims filed by MST and approved by the Transportation Agency for Monterey County (T AMC).

MST was also allocated Federal operating assistance funds pursuant to Sections 8 and 9 of the Urban Mass Transportation Act of 1974. Such funds are apportioned to the local urbanized area by the Federal Transit Authority (FTA). Expenditures of Federal operating assistance funds are subject to final audit and approval by the FT A.

Operating grant activity for 1995 is summarized as follows:

Maximum amount

Amount recognized as revenue Amount received prior to

June 30, 1995

Grants receivable at June 30, 1995

Federal Grants

$ 2,463, 153

$ 1,890,912

318,776

$ 1,572, 136

Local Transportation

Fund

$ 4,546 169

$ 4,247,419

3,120,611

$ 1,126,808

~ >-' >-'

Operating grant activity for 1994 is summarized as follows:

Maximum amount

Amount recognized as revenue Amount received prior to

June 30, 1994

Grants receivable at June 30, 1994

4. CASH AND EQUIVALENTS

Federal Grants

$ 2,041,668

$ 1,623, 162

1,386,948

$ 236 214

Local Transportation

Fund

$ 4 514,018

$ 4,473,655

3,703,315

$ 770,340

MST's cash management policy authorizes excess cash to be invested in the State treasurer's investment pool and certificates of deposit in amounts less than $100, 000 per financial institution. Cash and equivalents consist of the following:

. Checking accounts in bank and petty cash State of California Local Agency

Investment Fund

Total

1995

$

1,420,315

$ 1,420,315

1994

$ 1,238,614

1,994,000

$ 3,232 614

At June 30, 1995, the carrying amount ofMST's bank deposits and petty cash was an overdrnft of $97,365 and the bank balance was $117,270. The difference between the carrying amount and the bank balance is due to deposits in transit, outstanding checks and other reconciling items. Of the bank balance, $101,614 was insured by federal depository insurance and $15,656 was collateralized 110% as required by Section 53652 of the California Government Code with securities held by the pledging financial institutions in MST's name.

5. INVESTMENTS

MST's investments at June 30, 1995 consist of U.S. Treasury Bills with a par value of $500,000, maturing in August and September 1995, and are stated at cost (which approximates market value).

t I

::i>-1

....... N

Investments of state and local agencies generally are classified into three categories of credit risks. Category I includes investments that are insured or registered, or for which the securities are held by MST or by MST's agent in MST's name. Category 2 consists of uninsured and unregistered investments for which the securities are held by the counterparty' s trust department or agent in MST' s name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or its trust department or agent but not in MST's name. At June 30, 1995 MST held no Category 2 or Category 3 investments.

6. SELF-INSURANCE

MST has self-insurance programs for the following risks:

Liability to a maximum of $250,000 per incident, over which coverage is provided to $500,000 per incident by the California Transit Insurance Pool (CalTIP) (see Note 7), and from $500,000 to $5,000,000 per incident coverage is provided by a private carrier through CalTIP.

Physical damage to a maximum of $5,000 per incident, over which coverage is provided to $100,000 per incident by CalTIP, and from $100,000 to $5,000,000 per incident coverage is provided by a private carrier through CalTIP.

Wo;kers compensation to a maximum of $275,000 per incident, over which coverage is provided to $5,000,000 by a private carrier.

MST does not carry insurance for risks in excess of the above stated limits.

· Estimated self-insurance liabilities are based on the results of actuarial valuations and include amounts for claims incurred but not reported. MST's first such actuarial valuation was performed in 1994. Estimated self-insurance liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of pay-outs and other economic and social factors.

Expensc3 related to such self-insurance risks are classified on thr. statement of revenues and expenses as salaries and benefits for workers compensation and insurance expense for general liability and physical damage.

Changes in the balance of estimated self-insurance liabilities during the fiscal year ended June 30, 1995 are approximately as follows:

Estimated self-insurance liabilities, beginning of year

Estimated claims incurred Claim payments

Estimated self-insurance liabilities, end ofyear

$ 1,596,828 750,902

(444,020)

$ I 903,710

~ ....... w

7. CalTIP JOINT POWERS AGREEMENT

MST participates in the California Transit Insurance Pool (CalTIP), a joint powers agreement created to provide liability and physical damage insurance to its members through an insurance pool. MST paid premiums to CalTIP of approximately $67, 000 and $113,000 in the fiscal years ended June 30, 1995 and 1994, respectively.

Condensed financial information of CalTIP for the year ended April 30, 1995 is as follows:

Cash and investments Other assets Total assets

Loss reserves Other liabilities Retained earnings Total liabilities and fund equity

. Total revenues Total expenditures Net increase in retained earnings

Basis of accounting

8. DEFERRED COMPENSATION PLAN

(Unaudited)

$ 6,892,000 1,031,000

$ 7,923,000

$ 3,464,000 1,310,000 3,149,000

$ 7 923 000

$ 2,244,000 1,415,000

$ 829,000

Accrual

All nonunion employees of MST are eligible to participate in an MST sponsored deferred compensation plan (Plan) created in accordance with Section 457 of the Internal Revenue Code. The Plan provides for the deferral of a portion of the employees' compensation until retirement, termination, or certain other covered events. The funds are invested at the discretion of the employees, by MST, through an administrator, in various types of mutual funds. The assets of the Plan, under Internal Revenue Service regulations, remain the property of MST and are available to satisfy MST's general creditors until paid or made available to the employee or beneficiary. Participants' rights under the Plan are equal to those of general creditors of MST in an amount equal to the fair market value of the deferred account of each participant. In the opinion of management it is unlikely that assets of the Plan will be used to satisfy the claims of general creditors in the future.

I I

~ ...... _p..

9. EMPLOYEES' RETIREMENT PLAN

Pla11 Description

All permanent employees are eligible to participate in the Public Employees' Retirement Fund (the Fund) of the State of . California's Public Employees' Retirement System. The Fund is an agent multiple-employer defined benefit retirement plan that acts as a common investment and administrative agent for various local and state governmental agencies within the State of California. The Fund provides retirement, disability, and death benefits based on the employee's years of service, age and final compensation. Employees vest after five years of service and may receive retirement benefits at age 50. These benefit provisions and all other requirements are established by State statute and Agency ordinance.

MST contributed to the Fund 5.795% in 1995 and 5.967% in 1994 of payroll for covered employees. MST's covered payroll for employees participating in the Fund was $4,788,600 in 1995 and $4,767,600 in 1994. MST's payroll for all employees was $4,810,600 in 1995 and $4,922,000 in 1994. Employees have an obligation to contribute 7% of their pay to the Fund. For certain employees MST also pays all or part of the employees' contributions, depending on the specific employees' contract.

Funding Status and Progress

The "pension benefit obligation" is determined for each participating employer by the Fund's actuary and is a standardized disclosure measure that results from applying actuarial assumptions to estimate the present value of pension benefits, adjusted for the effects of projected salary increases and step rate benefits, to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of MST's portion of the Fund to which contributions are made on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used.

The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30, 1994. The significant actuarial assumptions used in the 1994 valuation to compute the pension benefit obligation were an assumed rate of return on investment assets of 8.5%, annual payroll increases of 4.50% attributable to inflation and none attributable to merit or s1:niority, and no 1~nstretirement benefit increases. ·

~ ...... v,

Total pension benefit obligation applicable to MST's employees at June 30, 1994 follows:

Pension Benefit Obligation: Retirees and beneficiaries currently

receiving benefits and terminated employees not yet receiving benefits

Current employees: Accumulated employee contributions

and allocated investment earnings Employer-financed, vested Employer-financed, nonvested

Total pension benefit obligation Actuarial value of net assets available for benefits

(market value, $10,629,000)

Funding in excess of pension benefit obligation

$ 1,231,000

3,277,000 2,841,000

180,000 7,529,000

10,660,000

$ 3,131 000

The pension benefit obligation decreased by $501, 000 in 1994 due to changes in actuarial methods and assumption.s.

Actuarially Determined Contributions Required and Contributions Made

The funding policy of the Fund provides for actuarially determined periodic contributions by MST at rates such that sufficient assets will be available to pay Fund benefits when due. MST's contributions to the Fund for the years ended June 30, 1995 and 1994, were made in accordance with the actuarially determined requirements computed as of June 30, 1993 and 1992, respectively. The 1995 contribution consisted of $276,100 normal cost (5.767% of current covered payroll) and $1,400 amortization of the unfunded actuarial liability (.028% of current covered payroll) less $277,500 of PERS credits applied to offset MST's portion of current year contributions to the Fund. The 1994 contribution consisted of $282,400 normal cost (5.923% of current covered payroll) and $2, I 00 amortization of the unfunded actuarial liability (.045% of current covered payroll) less $284,500 of PERS credits applied to offset MST's portion of current year contributions to the Fund. In addition, MST paid $211,900 in 1995, (offset by $131,700 of PERS credits) and $208,900 in 1994 (off~et by $208,900 of PERS credits) of the total required employee contributions to the Fund of $335,000 (7% of current covered payroll) in 1995 and $334,000 in 1994 (7% of current covered payroll). At June 30, 1995, MST had no PERS credits available to offset future contributions to the Fund.

The contribution rate for normal cost is determined using the entry age normal actuarial cost method, a projected benefit cost method. It takes into account those benefits that are expected to be earned in the future as well as those already accrued.

Significant actuarial assumptions used in the 1994 valuation to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation as described above.

E

I I

:» I

....... (j\

Historical Trend Information

Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. Ten year trend information is not yet available.

For MST's share of the Fund, trend information provided by PERS for the eight years ended June 30, 1994 follows:

1994 1993 1992 1991 1990 1989 1988

Net assets available for benefits, at acturial value for 1994 and at cost for years prior to 1994 $ 10,660,000 $ 8,828,300 $ 8,054,300 $ 6,979,200 $ 6,026,900 $ 5,059,IOO $ 4,131,600

Pension benefit obligation $ 7,529,000 $ 7,449,300 $ 6,563,600 $ 5,529,300 $ 5,208,900 $ 4,171,600 S 3,283,000 Net assets available for

benefits as a percentage of pension benefit obligation 142% 119% 123% 126% 116% 12)% )26%

Assets in excess of pension benefit obligation $ 3,131,000 $ 1,379,000 $ 1,490,700 $ 1,449,900 $ 818,000 $ 887,500 $ 848,600

Annual covered payroll $ 4,767,600 $ 4,773,800 $ 4,611,500 $ 4,444,700 $ 4,080,000 $ 3,697,000 $ 3,213,000 Assets in excess of pensiqn

benefit obligation as a percentage of annual covered payroll 66% 29% 32% 33% 20% 24% 26%

Contributions, made in accordance with actuarially - determined requirements as a percentage of annual covered payroll 6.0% 6.0% 7.7% 6.4% 6.1% 6.2% 1.2%

The contributions, made in accordance with actuarially determined requirements, as a percentage of annual covered payroll was 5. 8% for 1995. Other trend information for 1995 is not yet available.

1987

$ 3,620,900 S 2,565,900

141%

$ 1,055,000 $ 2,750,000

38%

7.0%

~ I-' '-.I

10. COMMITMENTS

At June 30, 1995, MST had outstanding various commitments related to the purchase of eight compressed natural gas buses, compressed natural gas fueling equipment, and computer software, totaling approximately $2. 7 million.

[THIS PAGE LEFT BLA.'l'K INTENTIONALLY]

,_, ____________________________________________________________ __

APPENDIXB

CASH FLOW STATEMENTS

B-1

i

MONTEREY-SALINAS TRANSIT MONTHLY CASHFLOW PROJeCTION FISCAL YEAR 1995-96

ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL FORECAST FY 1995-96 Jul-95 Aug-95 Sep-95 Oct-95 Nov-95 Dec-95 Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96 TOTAL

BEGINNING BALANCE 396,628 430,351 1,504,030 951,987 563,606 I ,947,662 1,316,242 1,006,912 1,651,475 1,252,515 317,496 947,800 396,628

RECEIPTS Passenger Revenues 225,080 236,878 237,885 328,439 294,295 240,046 189,448 274,415 247,987 268,220 252,799 268,500 3,063,992 Special Transit Fares 5,676 1,000 85,446 16,262 18,689 2,500 19,000 148,573 Charter Service Revenues 1,193 1,193 2,386 Associated Transit Revenues 772 860 684 620 366 238 400 67 1,837 416 5,921 2,000 14,181 Non-Transportation Revenues 404 452 36,492 108 105,861 89 173,765 4,447 68,744 124,117 32,569 1,000 548,048 Local Cash Grants (LTF) 1,126,808 1,266,460 1,157,874 I, 159,392 4,710,534 State Cash Grants (STAF) 242,604 172,000 243,429 658,033 Federal Cash Grants 7,953 1,789,603 30,734 301,490 127,047 1,627,242 37,549 3,921,618 lnterfund Transfers

TOTAL RECEIPTS 1,603,621 2,028,986 275,061 366,770 2,141,472 325,819 363,613 1,807,279 334,830 2,038,684 1,490,730 290,500 13,()(>7,365

t;d DISBURSEMENTS

I Labor 315,557 315,823 328,495 319,869 320,925 303,552 277,806 463,957 323,110 320,580 330,870 330,900 3,951,444 N Fringe Jlenefits 326,869 317,197 249,316 214,150 214,830 223,467 230,699 360,986 183,819 169,415 159,668 160,000 2,810,416

Services 16,705 24,861 29,746 42,373 35,543 58,036 25,502 35,749 33,461 36,630 59,027 38,000 435,633 Materi3fs & Supplies 87,984 89,704 73,173 90,741 75,052 112,551 78,080 108,294 46,138 79,355 162,439 123,732 1,127,243 Utilities 4,791 8,501 8,025 9,501 9,344 IS,755 9,722 H,869 5,750 9.412 13,176 13,000 115,846 Casualty & Liabiliiy Insurance 21,222 38,794 28,786 19,843 22,029 21,093 13,761 14,373 21,176 13,690 13,716 13,800 242,283 Taxes 3,511 7,848 (1,920) 4,085 4,433 4,388 2,669 4,915 3,036 6,482 6,146 6,000 51,593 Purchased Transportation 35,224 71,316 62,150 15,579 15,458 22,569 14,021 13,362 15,559 33,055 43,202 75,000 416,495 Miscellaneous 12,078 5,704 8,076 7,181 4,121 5,134 6,787 5,040 2,346 6,816 10,589 10,000 83,872 Leases & Agreements 201 201 643 201 201 374 201 201 423 207 400 400 3,653 June '94 Payables & Adjustmts. 182,387 62,192 (2,222) 6,988 32,244 3,741 285,330 Capital llems 63,369 13,166 42,836 24,640 55,480 158,076 13,695 146,970 95,231 2,298,061 61,193 30,000 3,002,717 lnterfund Repayments 500,000 500,000

TOTAL DISBURSEMENTS 1,569,&98 955,307 827,104 755,151 757,416 957,239 672,943 1,162,716 733,790 2,973,703 860,426 800,832 13,026,525

ENDING CASII BALANCE 430,351 1,504,030 951,987 563,606 1,947,662 1,316,242 1,006,912 1,651,475 1,252,515 317,49§_ 947J_QO __ 437,468 437,468

RESERVE ACCOUNTS

Workers' Compensation 778,345 1,279,927 1,374,837 1,400,900 1,410,104 1,434,021 1,470,510 1,497,505 1,511,155 1,524,084 1,532,021 1,527,185 1,027,185 Public Liab. I Property Damage 526,342 544,292 564,514 582,907 603,421 621,393 633,862 647,134 659,440 665,924 677,061 688,596 688,596 Capital 219,000 219,000 219,000 219,000 219,000 219,000 219,000 219,000 219,000 219,000 219,000 219,000 219,000 TOTAL 1,523,687 2,043,219 2,158,351 2,202,807 2,232,525 2,274,414 2,323,372 2,363,639 2,389,595 2,409,008 2,428,082 2,434,781 1,934,781 lnterfund Transfers 500,000 500,000

ENDING RESERVE BALANCES 2,023,687 2,043,219 2,158,15~1 ~.2,202,807 2,232,525 2,274,414 2,323,372 j,363,639 2,389,595 2,409,008 2,428,082 2,434,781 2,'lli_,_781

u:ldas\escellanalysis\ca.,hJlr:,w.xls

FY 1996 PROJECTED Sf21196

l I

I MONTEREY -SAUNAS TRANSIT MONTIILY CASHFLOW PROJECTION Willi FINANCING FISCAL YEAR 1996-97

FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FY 1996-97 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97 TOTAL

BEGINNING BALANCE 437,468 2,037,105 1,389,352 846,792 3,488,536 2,561,384 1,678, 190 394,699 7,986 598 20,987 , 22,798 437,468

RECEIYfS Passenger Revenues 227,897 240,385 240,385 334,041 299,701 243,507 190,435 277,847 249,750 271,604 255,994 290,335 3,121,881 Special Transit Fares 18,021 2,845 272,693 51,693 59,281 7,588 62,126 474,248 Charter Service Revenues 250 250 500 Associated Transit Revenues 2,842 3,158 2,526 2,263 1,316 842 1,474 211 6,789 t,526 21,945 7,736 52,625 Non· Transportation Revenues 510 680 56,100 153 680 136 680 680 105,740 1,700 680 2,261 170,000 Local Cash Grants (LTF) 1.159,392 1,411,595 1,411,595 1,411,595 5,394,178 State Cash Grants (STAF) 127,000 127,000 127,000 381,000 Federal Cash Grants 1,282,327 95,199 189,161 203,997 2.424,100 4,194,784 Short-Term Loan Borrowing 1,415,600 1,415,600 lnterfuru:I Tran.sf ers 380,000 320,000 600,000 1,300,000

TOTAL RECEIPTS 2,672,968 244,472 299,011 3,404,123 304,542 517,177 1,920,345 658,738 733,972 2,076,703 886,207 2,786,558 16,504,816

tp DISBURSF.MENTS I Labor 322,196 322,196 338,510 326,274 330,353 309,961 285,490 477,176 330,353 330,353 338,510 367,059 4,078,428 w

Fringe Benefits 312,612 301,722 241,679 210,208 210,208 218,076 225,943 220,698 181,359 168,246 157,756 174,097 2,622,603 Services 19,733 29,600 35,312 49,852 42,063 69,066 30,119 42,582 39,466 43,621 70,105 47,774 519,293 Materials & Surplies 85,077 86,168 69,807 87,258 71,988 107,982 75,260 104,710 43,629 76,351 157,065 125,434 1,090,730 Utilities 4,812 8,568 8,098 9,624 9,3!\9 15,962 9,741 8,920 5,751 9,507 13,262 13,732 117,365 Casually & Liability Insurance 20,836 38,318 28,260 19,399 21,554 20,836 IJ,411 14,130 20,836 13,411 13,411 15,087 239,489 Taxes 4,429 9,900 (2,410) 5,145 5,536 5,536 3,322 6,187 3,777 8,141 7,750 7,816 65,129 Purchased Transportation 34,437 70,103 61,084 15,169 15,169 22.138 13,529 13,119 15,169 32,387 42,226 75,433 409,961 Miscellaneous 25,243 11,920 16,829 14,901 8,590 10,693 14,024 10,518 4,733 14,199 22,088 21,562 175,300 Leases & Agreements 595 595 1,903 595 595 I, 103 595 595 l,244 606 1,179 1,211 10,814 Prior period expenses 180,000 180,000 Capital Items 63,363 13, 136 42,499 23,954 54,863 157,634 13,136 146,816 95,044 67,999 61,045 33,227 772,717 CNG Bus Purchase - Orion 461,387 461,386 2,519,264 3,442,037 Short-Term Loan Repayment 491,493 982,987 1,474,480 lntcrfund Repayments 800,000 500,000 1,300,000

TOTAL DISBURSEMENTS 1,073,332 892,225 841,571 762,378 1,231,694 1,400,372 3,203,835 1,045,451 741,361 2,056,314 884,396 2,365,418 16,498,346

FNDING CASH BALANCE ~105 __ l,389,352 846,792 _3_._4_88,536 2,561,384 1,678,190 394,699 7,986 598 20,987 22,798 443,938 _ 443,938

RESERVE ACCOUNT BALANCES Workers' Compensation l,527,185 Public Llab, I Property Damag 688,596 Capital 219,000 TOTAL 2,434,781 2,434,781 2,434,781 2,434,781 2,434,781 2,434,781 2,434,781 2,434,781 2,054,781 1,734,781 2,534,781 1,934,781 2,434,7&1 lnterfund Transfers {380,000! {320,000! 800,000 (600,000~ 500,000

FNDING RESERVE BALANCE 2,434,781 2,434,781 _ 2,434,781 2,434,781 2,434,781 2,434,781 2,434,781 -- _2,054,781 1,734,781 2,534,781 1,934,781 2._4!4,'78_1 _ 2,434,781

u:\d!O\cxccllanaly1i,lcashflow,xl, FY 1997 FORECAST with fiuanciog 8127/96

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Board of Directors Monterey-Salinas Transit One Ryan Ranch Road Monterey, CA 93940

APPENDIXC

NOTE COUNSEL OPINION

September 17, 1996



Ladies and Gentlemen:

We have acted as Note Counsel in connection with the authorization and issuance by the Joint Powers Agency Monterey-Salinas Transit ("MST") of its aggregate principal amount of $1,450,000 Monterey-Salinas Transit, (Monterey County, California), 1996-97 Revenue Anticipation Notes (the "Notes"). The Notes are issued pursuant to and by authority of a resolution of MST (the "Resolution") passed and adopted under and by authority of Sections 53850 et seq. of the California Government Code.

The Notes are issued in fully registered form without coupons in the denomination of $5, 000 or any integral multiple thereof and are numbered from one consecutively upward in the order of their issuance, and when issued will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC").

The Notes are dated the date of their delivery and will mature, without option of prior redemption, on September 16, 1997. Interest and principal on the Notes are payable at the maturity of the Notes in lawful moneys of the United States of America upon presentation and surrender at the office of First Trust of California, National Association (the "Fiscal Agent").

In such connection, we have reviewed the record of proceedings submitted to us relative to the Notes including the Resolution, certifications and opinions of counsel to MST and others, and such other records, documents and matters as we deemed necessary to render the opinions set forth herein.

Based on our examination as set forth above, it is our opinion that:

C-1

1. The Notes constitute valid and legally binding obligations of MST, payable from and secured by a pledge of the Pledged Revenues (as that tennis defined in the Resolution) of MST. Pursuant to Section 53857 of the California Government Code, the Notes are general obligations of MST and, to the extent the Notes are not paid from the Pledged Revenues, the Notes are payable from any other moneys of MST lawfully available therefor. The Notes do not constitute a debt, liability or general obligation of the State or any political subdivision of the State other than MST.

2. The Resolution of MST has been duly adopted, and constitutes a valid, legal and binding obligation of MST.

3. Under existing laws, regulations, rulings and judicial decisions, interest on the Notes (a) is excluded from gross income for federal income tax puiposes, (b) does not constitute an item of tax preference for puiposes of determining the federal alternative minimum tax imposed on individuals and coiporations by the Internal Revenue Code of 1986, as amended (the "Code"), and (c) is exempt from all present State of California personal income taxes on individuals.

The opinion set forth above with respect to the exclusion from gross income for federal income tax purposes is subject to continuing compliance by MST with the covenants regarding federal tax law in the Resolution and the certificates of MST. Failure to comply with such covenants could cause interest on the Notes to be so included in gross income retroactive to the date of issue of the Notes. The accrual or receipt of interest on the Notes may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences.

With respect to the opinions expressed herein, the rights and obligations of MST as contained in the Resolution and the Notes may be subject to general equity principles which may pennit the exercise of judicial discretion, and are subject to the provisions of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the limitations on legal remedies against transit districts in the State of California.

Very truly yours,

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