Sacramento Transportation Authority

Floating Index Amendment Presentation

April 9, 2009

Public Financial Management, Inc.50 California Street

Suite 2300San Francisco, CA 94111

(415) 982-5544

PFM Asset Management LLCTwo Logan Square, Suite 1600

18th & Arch StreetsPhiladelphia, PA 19103

(215) 567-6100

• The ratio of tax-exempt to taxable yields remains extremely elevated due

to illiquidity in the market for municipal swaps and bonds

– e.g. the mid-market 20-yr SIFMA swap rate currently exceeds 96% of 20-year LIBOR

2

Tax-Exempt Rates High Relative to Taxable Rates

67% of 3-Mo LIBOR vs. SIFMA Index

• The historical average difference between 67%*3-month LIBOR and SIFMA

Index equals 7 bps

– PFM recommends structuring the swap using 3ML rather than 1ML given depressed level of 1ML (1-month LIBOR is anchored to current Fed Funds target rate of 0.0 – 0.25%)

3-0.75%

0.00%

0.75%

1.50%

2.25%

3.00%

3.75%

4.50%

5.25%

6.00%

6.75%

0.0000%

0.5000%

1.0000%

1.5000%

2.0000%

2.5000%

3.0000%

3.5000%

4.0000%

4.5000%

5.0000%

Dec-93Dec-94Dec-95Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08

Rat

e

6-month Moving Averages of 67% of 3-Month LIBOR & SIFMA Index

Weekly Data, December 24, 1993 to April 3, 2009

Spread 67% of LIBOR SIFMA Index

67% of 3-Mo LIBORAVG: 2.93%MIN: 0.77%MAX: 4.59%

SIFMA IndexAVG: 2.84%MIN: 0.94%MAX: 4.38%

• Issuers who hedged variable-rate debt using a SIFMA fixed-payer swap can convert the

SIFMA floating index received on their swap to a percentage of 3-month LIBOR

• In order for the swap to be integrated with the underlying bonds for tax purposes as a

“Qualified Hedge,” the floating rate received on the swap must “closely correspond” to the

floating rate paid on STA’s tax-exempt bonds (e.g. 67% of LIBOR)

• Tax counsel advises that it expects the swap would still be a Qualified Hedge if amended

in this fashion

• Fair-market adjustment to STA’s fixed swap rate is approximately -95 bps (shown below)

4

Amend Existing Fixed Payer Swap

BSFP

Variable-Rate Bonds

4.3825%

SACTRANS

Variable-Rate

SIFMA Index

JPM

Variable-Rate Bonds

3.43%

SACTRANS

Variable-Rate

67%*LIBOR

Existing Swap Amended Swap

5

Benefits

Risks

SIFMA Index versus % of LIBOR Basis Swap