1. PFM Asset Management LLC
Sacramento Transportation Authority Floating Index Amendment Presentation April 9, 2009
PFM Asset Management LLC
Two Logan Square, Suite 1600
18th & Arch Streets
Philadelphia, PA
(215)
Public Financial Management, Inc. 50 California Street
Suite 2300
San Francisco, CA
(415)

2. Tax-Exempt Rates High Relative to Taxable Rates
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

3. 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%)

4. Amend Existing Fixed Payer Swap
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)
Existing Swap
Amended Swap
JPM
Variable -
Rate
Bonds
3.43%
SACTRANS
67%*
LIBOR

5. SIFMA Index versus % of LIBOR Basis Swap
Significant expected savings based on historical BMA/LIBOR yield relationship(actual, realized savings may be lower depending on performance)
Immediate positive yield margin if structured using 3-month LIBOR
Significant decrease to the Swap’s fixed rate
Exposes STA to basis and/or limited tax risk and potential reduced, or even negative, savings due to future change in BMA/LIBOR relationship (high % of LIBOR currently available mitigates tax risk)
STA remains exposed to standard swap-related risks (termination risk, counterparty credit risk, etc.)
Benefits
Risks