AWARD CONTRACTS TO REPLACE EXPIRING LIQUIDITY FACILITY

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1 @ Metro Los Angeks County Metropolitan Transportation Authority One Gateway Plaza Los Angeles, CA gooi2-2g52 FINANCE, BUDGET AND AUDIT COMMITTEE NOVEMBER 16,2011 I, SUBJECT: PROP C BONDS ACTION: AWARD CONTRACTS TO REPLACE EXPIRING LIQUIDITY FACILITY RECOMMENDATION A. Adopt a resolution authorizing the replacement of the expiring liquidity facility for the Prop C 2009-A bonds, Attachment A. B. Authorize the Chief Executive Officer to finalize negotiations with the proposing banks short-listed in Attachment B and enter into any combination of agreements as provided for in the resolution for three year terms or less. C. Authorize the Chief Executive Officer to negotiate with each successively ranked proposer from the lists provided in Attachment B if unable to reach agreement with one or more of the recommended proposers. (Requires separate, simple majority Board vote.) ISSUE We currently have $166 million of the 2009-A bonds outstanding in variable rate mode with an interest rate swap hedging them to a synthetic fixed rate. The current standby bond purchase agreement ("SBPAn) with Bank of Nova Scotia expires in March 2012 and must be replaced in order to maintain the bonds in a variable rate mode and avoid incurring swap termination costs. DISCUSSION Based on the pricing of the top ranked providers, we estimate a cost of $3.2 million for a three year term. Costs will be greater than that listed in the recommendation if lower ranked providers need to be used. Costs would also be greater if the ratings of our Prop C lien were downgraded in the future or the agreement was in default. The resolution authorizes us to replace the expiring facilities with one or more products and techniques, separately or in combination, including use of SBPAs, direct pay letters of credit ("LOC"), direct purchase arrangements, converting to a new interest rate mode, or refunding the bonds to a variable rate mode or to fixed rate bonds.

2 Subsequent to the 2008 bankruptcy of Lehman Brothers and ensuing financial crisis, credit ratings of banks declined and the number of banks offering liquidity facilities declined resulting in increased costs. In the post-financial crisis market it is in our interest to diversify the products and institutions we use to manage risk and cost as well as to build relationships with additional banks to increase our list of future proposers. On August 30, 201 1, we issued an RFP soliciting proposals for the replacement of our expiring liquidity facility. Commercial banks and the credit divisions of investment banks were requested to provide proposals offering traditional liquidity products and additionally to consider direct purchase arrangements. We received 12 proposals. Several offered multiple products. Two proposals were not deemed to be responsive because they did not offer the requested range of terms or failed to provide required information. If we cannot reach agreement with the top rated proposers, staff will determine whether to replace the lost capacity using a SBPA, LOC or direct purchase agreement and the next highest ranked provider of that product listed in Attachment B will be engaged in negotiations. FINANCIAL IMPACT Funding of $1.6 million for the Prop C 2009A SBPA is included in the FYI2 budget in cost center #0521, Treasury Non-Departmental under project # , Prop C Debt Service. Since this is a multi-year contract, the cost center manager and the Chief Financial Services Officer will be accountable for budgeting the cost in future years. Impact on Enterprise Fund Bus and Rail Operations Budnet Prop C bonds were issued mainly for rail capital activities. Principal and interest payments are made from Prop C 40% Discretionary funds. The recommended action decreases FYI2 costs as a result of lower fees in the bank liquidity market compared to FYI0 when we entered into the current SBPA. ALTERNATIVES The Board could elect to not replace the expiring bank facility. A decision to not replace the liquidity facility would result in the need to refund the variable rate obligation to a higher cost fixed rate financing, including incurring a swap termination cost. This alternative is not recommended.

3 NEXT STEPS Negotiate final terms and conditions with the highest ranked proposers. If satisfactory terms, pricing and timing cannot be agreed upon, we will negotiate with each of the next highest ranked proposers in order to obtain the best combination of products, terms and pricing. Prepare necessary legal and financing documents, including bond disclosure documents, reimbursement agreements and direct purchase documents. Obtain updated credit ratings for the bonds. Execute documents in early 2012 prior to the expiration date in March ATTACHMENT A. Authorizing Resolution for Restructuring and Replacement B. Recommendation Summary Prepared by: Michael J. Smith, Assistant Treasurer LuAnne Edwards Schurtz, Debt Manager

4 chief ~inahsdal services Officer and Treasurer Arthur T. Leahy Chief Executive Officer 11

5 Attachment A RESOLUTION OF THE LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY AUTHORIZING THE RESTRUCTURING OF ITS PROPOSITION C SALES TAX REVENUE REFUNDING BONDS, SENIOR BONDS, SERIES 2009-A1 AND 2009-A2 AND APPROVING OTHER RELATED MATTERS (PROPOSITION C SALES TAX) WHEREAS, THE LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY (the "LACMTA), as successor to the Los Angeles County Transportation Commission (the "Commission"), is authorized, under Chapter 5 of Division 12 of the California Public Utilities Code (the"w), to issue bonds to finance and refinance the acquisition, construction or rehabilitation of facilities to be used as part of a countywide transportation system; and WHEREAS, pursuant to the provisions of Section of the California Public Utilities Code, the Commission was authorized to adopt a retail transactions and use tax ordinance applicable in the incorporated and unincorporated territory of the County of Los Angeles (the "Countv") subject to the approval by the voters of the County; and WHEREAS, the Commission, by Ordinance No. 49 adopted August 28,1990 ("Ordinance No. 4911), imposed a 112 of 1% retail transactions and use tax upon retail sales of tangible personal property and upon the storage, use or other consumption of tangible personal property in the County, the proceeds of the tax to be used for public transit purposes (the "Proposition C Tax"), and such tax was approved by the electors of the County on November 6, 1990; and WHEREAS, the revenues received by the LACMTA from the imposition of the Proposition C Tax are, by statute, directed to be used for public transit purposes, which purposes include a pledge of such tax to secure any bonds issued pursuant to the Act and include the payments or provision for the payment of the principal of the bonds and any premium, interest on the bonds and the costs of issuance of the bonds; and WHEREAS, the LACMTA is planning and engineering a Countywide public transportation system (the "Public Trans~ortation Svstem") to serve the County and has commenced construction of portions of the Public Transportation System; and WHEREAS, to facilitate the development and construction of the Public Transportation System, the LACMTA, as authorized by the Act, pursuant to the terms of a Trust Agreement, dated as of October 1, 1992, as amended and supplemented (the "Proposition C Trust Agreement"), by and between the Commission, as predecessor to the LACMTA, and Bank of America National Trust and Savings Association, the predecessor trustee of U.S. Bank Trust National Association, as succeeded by merger by U.S. Bank National Association (the "Proposition C Trustee"), including as amended and supplemented by the Fifteenth Supplemental Trust Agreement, dated as of April 1, 2009 (the "Fifteenth Supplemental Trust Agreement"), by and between LACMTA and

6 the Proposition C Trustee, has incurred various indebtedness and issued several series of bonds, including its Proposition C Sales Tax Revenue Refunding Bonds, Senior Bonds, Series 2009-A1 (the "Series 2009-A1 Bonds") and Proposition C Sales Tax Revenue Refunding Bonds, Senior Bonds, Series 2009-A2 (the "Series 2009-A2 Bonds" and together with the Series 2009-A1 Bonds, the "Series 2009-A Bonds"); and WHEREAS, the LACMTA has pledged the Proposition C Tax (less the 20% local allocation and the State Board of Equalization's costs of administering such tax) to secure the senior lien bonds heretofore issued pursuant to the Proposition C Trust Agreement (collectively, the "Prior Senior Lien Bonds") and certain subordinate indebtedness described in supplements to the Proposition C Trust Agreement; and WHEREAS, the Series 2009-A Bonds were issued as multi-modal bonds and currently bear interest at rates that are reset daily; and WHEREAS, the holders of the Series 2009-A Bonds have the right to tender their bonds on any business day and the Series 2009-A Bonds are subject to mandatory tender in certain circumstances specified in the Fifteenth Supplemental Trust Agreement; and WHEREAS, if remarketing proceeds are insufficient, payment of the purchase price of the Series 2009-A Bonds is payable from amounts available under a Standby Bond Purchase Agreement, dated as of March I, 2010 (the "Series 2009-A Liauiditv Facilitv"), by and among the LACMTA, the Proposition C Trustee, and The Bank of Nova Scotia, acting through its New York Agency; and WHEREAS, the Series 2009-A Liquidity Facility expires on March 26, 2012; and WHEREAS, the LACMTA now desires to provide for the restructuring of the Series 2009-A Bonds to address the scheduled expiration of the Series 2009-A Liquidity Facility (the "Restructurinc("'; and WHEREAS, such Restructuring may take the form of (a) the extension of the Series 2009-A Liquidity Facility (any such extension, the "Extension"); (b) the replacement of the Series 2009-A Liquidity Facility with replacement standby bond purchase agreement(@, standby letter@) of credit or other replacement Liquidity Facility or Facilities (as defined in the Fifteenth Supplemental Trust Agreement) (any such replacement standby bond purchase agreement@) or other liquidity facility or facilities, the "Replacement Liauiditv Facilitv") or direct-pay letter@) of credit (any such replacement letter@) of credit, the "Replacement Letter of Credit"); (c) the conversion of some or all of the Series 2009-A Bonds to a different interest rate mode (which may be a mode contemplated by the Fifteenth Supplemental Trust Agreement or a new interest rate mode added to the Fifteenth Supplemental Trust Agreement at the time of such conversion) (the "Conversion"); (d) the issuance of fixed rate or variable rate bonds to refund all or a portion of the Series 2009-A Bonds, to fund or make provision for one or more reserve funds and to pay certain costs related thereto (any such bonds, the "Refunding Bonds"); (e) arranging for a bank or banks or other financial institution or

7 institutions to purchase all or any portion of the Series 2009-A Bonds andlor all or any portion of any Refunding Bonds pursuant to a direct purchase arrangement (any such arrangement, a "Direct Purchase Arrangement"); or (9 some combination thereof, as determined to be in the best interests of the LACMTA by a Designated Officer as provided below; and WHEREAS, the Restructuring is being undertaken for the purpose of addressing the scheduled expiration of the Series 2009-A Liquidity Facility rather than to achieve cost savings and is being undertaken in a manner to achieve the original purpose of the Series 2009-A Bonds; and WHEREAS, the LACMTA has determined that it best serves the public transportation needs of the County to provide for the Restructuring, including through the issuance of the Refunding Bonds if such issuance is determined by a Designated Officer to be in the best interests of the LACMTA; and WHEREAS, the LACMTA has entered into with Wells Fargo Bank N.A., as successor to Wachovia Bank, National Association, an ISDA Master Agreement, dated as of October 9, 2003, the related Schedule, the related Credit Support Annex and the related Confirmation, all as heretofore amended (collectively, the "Series 2009-A Swap"), which relate to the Series 2009-A Bonds; and WHEREAS, the LACMTA desires to authorize the modification of the provisions of the Proposition C Trust Agreement relating to the valuation and qualification of Reserve Fund Insurance Policies (as defined in the Proposition C Trust Agreement) on deposit in the Reserve Fund established thereunder; and WHEREAS, the Proposition C Tax, less the 20% allocated to local jurisdictions and less the costs of the State Board of Equalization for administering the Proposition C Tax, is herein referred to as the "Pledged Taxes"; and WHEREAS, terms used in this Resolution and not otherwise defined herein shall have the meanings assigned to them in the Proposition C Trust Agreement; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY, AS FOLLOWS: 1. Findings. The LACMTA hereby finds and determines that: (a) The Restructuring, including the issuance of the Refunding Bonds if determined by a Designated Officer to be in the best interest of the LACMTA, is in the public interest. (b) Under the provisions of Ordinance No. 49, all of the Pledged Taxes are revenues of the LACMTA available for public transit purposes and are available to be and are, by the terms of the resolutions and the Proposition C Trust Agreement under which the Prior Senior Lien Bonds were issued, pledged

8 to secure the Prior Senior Lien Bonds and are pledged to secure the Refunding Bonds (if issued), and, by this Resolution, such pledge is reaffirmed. (c) The provisions contained in the Proposition C Trust Agreement, as previously amended and supplemented, and to be set forth in one or more supplements to the Proposition C Trust Agreement (each, a "Su~~lement") are reasonable and proper for the security of the holders of the Refunding Bonds. (d) Any Swap Agreement (as defined in Section 17) is designed to reduce the amount or duration of payment, currency, rate, spread, or similar risk or result in a lower cost of borrowing when used in combination with the issuance of the Refunding Bonds, pursuant to California Government Code Section 5922, and will be used to alter interest rate risk andlor alter the cost of borrowing in a beneficial manner, and when used in combination with the Refunding Bonds, will enhance the relationship between risk and return or achieve other policy objectives consistent with the LACMTA's Interest Rate Swap Policy (except as described herein). 2. Form of Restructuring. The Chair of the LACMTA, any Vice Chair of the LACMTA, any Chief Executive Officer ("CEO") of the LACMTA, any Chief Financial Services Officer of the LACMTA, any Treasurer, any Assistant Treasurer of the LACMTA, or any such officer serving in an acting or interim capacity, and any written designee of any of them (each a "Desianated Officer") are each hereby authorized to determine whether the Restructuring shall take the form of (a) an Extension; (b) one or more Replacement Liquidity Facilities or Replacement Letters of Credit; (c) a Conversion; (d) the issuance of Refunding Bonds; (e) one or more Direct Purchase Arrangements; or (9 some combination thereof. 3. Extension of Series 2009-A Liquidity Facility. If any Designated Officer determines that an Extension is in the best interests of the LACMTA, the Designated Officers are authorized to enter into such documents necessary or desirable to enter into such Extension, including, but not limited to, any requests or certifications required under the Series 2009-A Liquidity Facility and any amendments to the Series 2009-A Liquidity Facility, the Proposition C Trust Agreement, the Fifteenth Supplemental Trust Agreement, the remarketing agreement relating to the Series 2009-A Bonds and the Series 2009-A Swap, in each case in the form, with the terms, and to the extent as is determined by the Designated Officer executing such document; 4. Replacement of Series 2009-A Liquidity Facility. If any Designated Officer determines that it is in the best interests of the LACMTA to replace the Series 2009-A Liquidity Facility with one or more Replacement Liquidity Facilities or Replacement Letters of Credit, the Designated Officers are authorized to arrange for the provision of one or more Replacement Liquidity Facilities andlor one or more Replacement Letters of Credit, including arranging for the payment of fees and other costs associated with such Replacement Liquidity Facilities andlor Replacement Letters of Credit and entering into any documents necessary or desirable in connection with such Replacement Liquidity Facilities andlor Replacement Letters of Credit, including,

9 but not limited to, any Replacement Liquidity Facility, any reimbursement or similar agreements, and any amendments to the Series 2009-A Liquidity Facility, the Proposition C Trust Agreement, the Fifteenth Supplemental Trust Agreement, the remarketing agreement relating to the Series 2009-A Bonds and the Series 2009-A Swap, in each case in the form, with the terms, including without limitation, the maximum interest rate on any Series 2009-A Bonds held by the provider of such Replacement Liquidity Facility or Replacement Letter of Credit, and to the extent as is determined by the Designated Officer executing such document. Notwithstanding the Debt Policy of the LACMTA, each of the Designated Officers is hereby authorized and directed to determine the process of procuring the provider of any Replacement Liquidity Facility andlor Replacement Letter of Credit and such process may be, at the determination of such Designated Officer, either a competitive bidding process or a privately negotiated process. 5. Conversion of Series 2009-A Bonds to Different Interest Rate Mode. If any Designated Officer determines that a Conversion is in the best interests of the LACMTA, the Designated Officers are authorized to enter into such documents necessary or desirable to enter into such Conversion, including, but not limited to, any documents required by the Fifteenth Supplemental Trust Agreement; any Supplements; any standby bond purchase agreements, reimbursement agreements or similar agreements; remarketing agreements between one or more investment banks and the LACMTA; a continuing disclosure certificate to assist the underwriters in complying with Rule 15~2-12(b)(5) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended; any amendments to the Series 2009-A Liquidity Facility, the Proposition C Trust Agreement, the Fifteenth Supplemental Trust Agreement, the remarketing agreement relating to the Series 2009-A Bonds and the Series 2009-A Swap; and any documents necessary or desirable to terminate the Series 2009-A Liquidity Facility, the remarketing agreement relating to the Series A Bonds or the Series 2009-A Swap, in each case in the form, with the terms, including, without limitation, the maximum interest rate on any Converted Series 2009-A Bonds, and to the extent as is determined by the Designated Officer executing such document; provided, however, that the Conversion shall not, as of the date thereof, result in costs, expenses, fees, premiums and the like such that the True lnterest Cost of the Refunding Bonds exceeds 6% calculated as set forth in Section Issuance of Refunding Bonds. If any Designated Officer determines that the issuance of Refunding Bonds for the purposes of refunding all or a portion of the Series 2009-A Bonds, funding or making provision for one or more reserve funds and the payment of certain costs related thereto is in the best interests of the LACMTA, the LACMTA hereby authorizes the issuance of one or more Series of Refunding Bonds, to be designated as Proposition C Sales Tax Revenue Refunding Bonds, Senior Bonds, Series (with such additional or other designation as may be determined by a Designated Officer); provided, however, that the True lnterest Cost (as defined below) of the Refunding Bonds shall not exceed 6%, as such shall be calculated by the Financial Advisor of the LACMTA as of the date of delivery of the Refunding Bonds. The LACMTA hereby specifies that the aggregate principal amount of the Refunding Bonds shall be an amount sufficient, but not in excess of, the amount required (taking -5-

10 into account any original issue discount), to refund the Series 2009-A Bonds being refunded, to fund or provide for one or more debt service reserve funds and to provide for the underwriters' discount and payment of costs of issuance (including, as provided below, including, as provided below, the payment of any termination payment related to the termination of the Series 2009-A Swap and any payment required in connection with an amendment of the Series 2009-A Swap). The LACMTA hereby specifies that the Refunding Bonds shall not mature later than July 1, Each Designated Officer, acting in accordance with this Section 6, is hereby authorized to determine the actual aggregate principal amount of Refunding Bonds to be issued (not in excess of the maximum amount set forth above) and to direct the execution and authentication of the Refunding Bonds in such amount. Such direction shall be conclusive as to the principal amounts hereby authorized. The Refunding Bonds shall be in fully registered form and shall be issued as Book-Entry Bonds as provided in the Supplement pursuant to which the Refunding Bonds are issued. Payment of principal of, interest on and premium, if any, on the Refunding Bonds shall be made at the place or places and in the manner provided in the applicable Supplement. As used herein, the term "True lnterest Cost" shall be the interest rate (compounded semiannually) necessary to discount the debt service payments from their respective payment dates to the dated date of the Refunding Bonds and to the principal amount, and premium or discount if any, of the Refunding Bonds. For the purpose of calculating the True lnterest Cost, the principal amount of Refunding Bonds scheduled for mandatory sinking fund redemption as part of a term bond shall be treated as a serial maturity for such year. If any Refunding Bonds bear interest at a variable rate, then, to the extent that the LACMTA has entered into a swap agreement related to such Refunding Bonds, the interest rate that shall be used to calculate the True lnterest Cost shall equal the fixed rate payable by the LACMTA under such swap agreement and shall include any on-going fees and costs on any standby bond purchase agreement, reimbursement agreement or similar agreement related to the Refunding Bonds. If any Refunding Bonds bear interest at a variable rate, then, to the extent that the LACMTA has not entered into a swap agreement related to such Refunding Bonds, the interest rate that shall be used to calculate the True lnterest Cost shall reflect an assumed rate calculated by the Financial Advisor of LACMTA and include any on-going fees and costs on any standby bond purchase agreement, reimbursement agreement or similar arrangement relating to the refunding bonds. The calculation of the True lnterest Cost shall include such other reasonable assumptions and methods as determined by the Financial Advisor of the LACMTA. 7. Terms of Refunding Bonds. The Refunding Bonds shall be available in denominations of not less than $5,000. The Refunding Bonds shall, when issued, be in the aggregate principal amounts and shall be dated as shall be provided in the final form of the Supplement pursuant to which they are issued. The Refunding Bonds may bear interest at either a fixed or variable interest rate, as specified in the applicable Supplement. The Refunding Bonds may be issued as serial bonds or as term bonds or as both serial bonds and term bonds, all as set forth in the applicable Supplement. lnterest on the Refunding Bonds shall be paid on the dates set forth in the applicable Supplement. The Refunding Bonds shall be subject to redemption at the option of the LACMTA on such terms and conditions as shall be set forth in the applicable

11 Supplement. The Refunding Bonds shall also be subject to mandatory sinking fund redemption as shall be set forth in the applicable Supplement. Execution and delivery of one or more Supplements, which document contains the maturities, interest rates and the fixed or variable interest payment obligations of the LACMTA within parameters set forth in this Resolution, shall constitute conclusive evidence of the LACMTA's approval of such maturities, interest rates and payment obligations. 8. Pledge of Pledged Taxes. The Pledged Taxes are hereby irrevocably pledged in accordance with the terms of the Proposition C Trust Agreement to secure the Prior Senior Lien Bonds, any Refunding Bonds and any additional bonds which may subsequently be issued under and secured by the terms of the Proposition C Trust Agreement. Except for the Prior Senior Lien Bonds, the LACMTA hereby confirms that it has not previously granted any prior or parity interest in such Pledged Taxes, and the LACMTA hereby agrees that, except as permitted by the Proposition C Trust Agreement (as amended in accordance with its terms), it will not, as long as any of the Refunding Bonds remain outstanding, grant or attempt to grant any prior or parity pledge, lien or other interest in the Pledged Taxes to secure any other obligations of the LACMTA. 9. Special Obligations. The Refunding Bonds shall be special obligations of the LACMTA secured by and payable from the Pledged Taxes and from the funds and accounts held by the Trustee under the Proposition C Trust Agreement. The Refunding Bonds shall also be secured by and be paid from such other sources as the LACMTA may hereafter provide. 10. Form of Refunding Bonds. The Refunding Bonds and the Trustee's Certificate of Authentication to appear thereon shall be in substantially the form set forth in the Supplement pursuant to which such Refunding Bonds are issued, with such necessary or appropriate variations, omissions and insertions as permitted or required by the Proposition C Trust Agreement or the applicable Supplement or as appropriate to adequately reflect the terms of such Refunding Bonds and the obligation represented thereby. 11. Execution of Refunding Bonds. Each of the Refunding Bonds shall be executed on behalf of the IACMTA by any Designated Officer and any such execution may be by manual or facsimile signature, and each bond shall be authenticated by the endorsement of the Trustee or an agent of the Trustee. Any facsimile signature of such Designated Officer(s) shall have the same force and effect as if such officer(s) had manually signed each of such Refunding Bonds. 12. Approval of Documents Related to Refunding Bonds, Authorization for Execution. If any Designated Officer determines that the issuance of Refunding Bonds is in the best interests of the LACMTA, the Designated Officers are authorized to enter into such documents necessary or desirable to issue the Refunding Bonds and to refund all or a portion of the Series 2009-A Bonds, including, but not limited to, one or more Supplements; one or more escrow agreements; one or more standby bond

12 purchase agreements, reimbursement agreements or similar agreements; one or more purchase agreements between one or more investment banks and the LACMTA; one or more remarketing agreements between one or more investment banks and the LACMTA; a continuing disclosure certificate to assist the underwriters in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended; any amendments to the Series 2009-A Liquidity Facility, the Proposition C Trust Agreement, the Fifteenth Supplemental Trust Agreement, the remarketing agreement relating to the Series 2009-A Bonds and the Series 2009-A Swap; and any documents necessary or desirable to terminate the Series 2009-A Liquidity Facility, the remarketing agreement relating to the Series A Bonds and the Series 2009-A Swap (all such documents shall be collectively referred to as the "Related Documents" and each a "Related Document"), in each case, to the extent, in the form, and with the terms and provisions as the Designated Officer executing the same shall determine is appropriate and necessary for the issuance of the Refunding Bonds including, but not limited to, affirmative and negative covenants relating to the Refunding Bonds and the finances and operations of the LACMTA and the maximum interest rate on such Refunding Bonds; provided, however, that (a) the terms and provisions of the Related Documents shall not, as of the date of the delivery of the Refunding Bonds, provide for costs, expenses, fees, premiums and the like such that the True Interest Cost of the Refunding Bonds exceeds 6% as provided and calculated in Section 6 above and (b) the aggregate principal amount of the Refunding Bonds shall be an amount sufficient, but not in excess of, the amount required (taking into account any original issue discount), to refund the Series 2009-A Bonds being refunded, to fund or provide for one or more debt service reserve funds and to provide for the underwriters' discount and payment of all other costs of issuance (including, as provided below, the payment of any termination payment related to the termination of the Series 2009-A Swap and any payment required in connection with an amendment of the Series 2009-A Swap). 13. Sale of Bonds. (a) The LACMTA hereby authorizes the sale of the Refunding Bonds through a competitive sale or a private, negotiated sale to one or more underwriters, as determined by a Designated Officer. (b) The Refunding Bonds, if sold to the underwriter or underwriters, shall be sold subject to an underwriters' discount (excluding original issue discount) not to exceed $5 per $1,000 of principal amount of Refunding Bonds and subject to the terms and conditions set forth in the purchase agreement or the published bid notice. (c) If a Designated Officer determines to sell the Refunding Bonds in a competitive sale, the Designated Officers are each authorized to: (i) Choose such times and dates to receive proposals for the purchase of the Refunding Bonds to be received from qualified bidders (through the receipt of sealed written bids andlor the receipt of bids

13 through the use of computerized bidding systems) upon the terms and in the matter set forth in the Notice lnviting Bids (defined below). (ii) Prepare or cause to be prepared a Notice lnviting Bids (a "Notice Inviting Bids"), execute such Notice lnviting Bids and call for bids for the sale of the Refunding Bonds from qualified bidders in accordance with such Notice lnviting Bids. (iii) Cause the Notice lnviting Bids to be published at least once in the Los Angeles Daily Journal (or such other publication as may be selected by a Designated Officer) not less than five days prior to the sale of the Refunding Bonds. (iv)cause the Notice lnviting Bids to be printed and distributed (including via electronic methods) to such municipal broker-dealers, banking and financial institutions and other persons as the Designated Officer deems necessary or desirable. (v) Prepare or cause to be prepared a Notice of lntention to Sell Bonds (a "Notice to Sell Bonds") and to cause such Notice of lntention to Sell Bonds to be published from time to time in The Bond Buyer (or such other publication as may be selected by a Designated Officer), a financial publication generally circulated throughout the State of California, at least 15 days prior to the sale of the Refunding Bonds in accordance with Section of the Government Code of the State of California. (vi)accept the best bid for the Refunding Bonds received from qualified bidders pursuant to and subject to the terms and conditions set forth in this Resolution and the Notice lnviting Bids herein approved and to award the Refunding Bonds to such respective best bidder(s). (vii) Take any other action a Designated Officer determines is necessary or desirable to cause any such competitive sale to comply with the Debt Policy or applicable law. (d) If a Designated Officer determines to sell the Refunding Bonds in a negotiated sale, each Designated Officer shall be authorized to appoint an Underwriter or Underwriters following a competitive request for proposal process or competitive request for proposal processes conducted by the LACMTA's Financial Advisor or another process deemed appropriate by a Designated Officer. (e) Any Designated Officer, on behalf of the LACMTA, is further authorized and directed to cause written notice to be provided to the California Debt and Investment Advisory Commission ("CDIAC") of the proposed sale of the

14 Refunding Bonds, said notice to be provided in accordance with Section 8855 a sea. of the California Government Code, to file the notice of final sale with CDIAC, to file the rebates and notices required under section 148(f) and 149(e) of the Internal Revenue Code of 1986, as amended, and to file such additional notices and reports as are deemed necessary or desirable by such Designated Officer in connection with the Refunding Bonds, and any prior such notices are hereby ratified, confirmed and approved. 14. Direct Purchase Arrangements. If any Designated Officer determines that it is in the best interests of the LACMTA to enter into Direct Purchase Arrangements, the Designated Officers are authorized (a) to effect such Direct Purchase Arrangements either through a Conversion of the Series 2009-A Bonds or through the issuance of Refunding Bonds, or a combination of both, and (b) to enter into such agreements and documents necessary or desirable to enter into such Direct Purchase Arrangements, including, but not limited to, any Supplements; any direct purchase agreements, bond purchase agreements, remarketing agreements, issuer acknowledgement letters, continuing covenant agreements, supplemental covenants agreements, andlor any other agreements or documents to effect such Direct Purchase Arrangements; a continuing disclosure certificate or agreement pursuant to which the LACMTA would agree to provide continuing disclosure; any amendments to andlor restatements of the Series 2009-A Liquidity Facility, the Proposition C Trust Agreement, the Fifteenth Supplemental Trust Agreement, the remarketing agreement relating to the Series 2009-A Bonds andlor the Series 2009-A Swap; and any documents necessary or desirable to terminate the Series 2009-A Liquidity Facility, the remarketing agreement relating to the Series 2009-A Bonds andlor the Series 2009-A Swap, in each case in the form, with the terms, including without limitation, the maximum interest rate on any Series 2009-A Bonds subject to a Direct Purchase Arrangement, and to the extent as is determined by the Designated Officer executing such document. 15. Offering Documents. In connection with the Restructuring, the LACMTA hereby authorizes the circulation of one or more official statements, reoffering statements, remarketing memoranda, purchaser's memoranda andlor other offering documents relating to the Series 2009-A Bonds andlor the Refunding Bonds, in preliminary andlor final form, as determined by a Designated Officer. Such offering documents shall be substantially in the form of the remarketing memorandum made available to the members of the Board prior to the adoption of this Resolution, with such changes as are appropriate or necessary to reflect the structure of the transaction and any other changes that any Designated Officer determines are appropriate or necessary. The LACMTA also authorizes the circulation of any supplements or amendments to offering documents that are approved by a Designated Officer. Each offering document, supplement andlor amendment shall be circulated at such time or times as a Designated Officer (after consultation with the underwriter or underwriters or remarketing agent or agents, the LACMTA's Financial Advisor and Bond Counsel and such other advisors as the Designated Officer believes to be useful) determines. Each Designated Officer is authorized to deem any offering document final within the meaning of Rule 15~2-12 promulgated under the Securities Exchange Act of 1934, as amended.

15 16. Series 2009-A Swap. In connection with or related to the Restructuring, each of the Designated Officers is hereby severally authorized and directed to terminate or to amend the provisions of the Series 2009-A Swap that such Designated Officer determines is appropriate or necessary. In connection with any amendment of the Series 2009-A Swap, each of the Designated Officers are hereby severally authorized and directed (a) to provide for a lower or higher fixed rate payment by the LACMTA under such Series 2009-A Swap, provided that such fixed interest rate shall not exceed the rate of 6% per annum, (b) to provide for such other terms that such Designated Officer determines is appropriate or necessary and consistent with LACMTA's Interest Rate Swap Policy and (c) to pay any fee associated with such amendment. In connection with any termination of the Series 2009-A Swap, each of the Designated Officers is hereby severally authorized to incur and to pay any termination payment payable to the counterparty thereto. In addition, in connection with any such termination payment, each of the Designated Officers are hereby authorized and directed to increase the aggregate principal amount of the Refunding Bonds to permit for the payment of such termination payment from the proceeds of the Refunding Bonds or to provide for the payment of such termination payment from such source or sources as such Designated Officer shall determine is appropriate or necessary. 17. lnterest Rate Swap Agreements. In connection with or related to the Refunding Bonds andlor the Series 2009-A Bonds, each of the Designated Officers is hereby severally authorized and directed to execute and deliver on behalf of the LACMTA one or more interest rate swap agreements (each, a "Swap Aareement") with one or more institutional parties (each, a "Counterparty") if the Designated Officers or any of them determine that it is appropriate or necessary to do so. In connection with each Swap Agreement: (a) The Designated Officers are each hereby authorized and directed to arrange for the competitive bid of the Swap Agreement and, if the Designated Officers determine it to be appropriate and necessary under the market and competitive conditions, to privately negotiate the terms of a Swap Agreement without a competitive bid process, among one or more Counterparties (or the guarantors thereof) whose long-term, unsecured and unsubordinated obligations as of the date on which the LACMTA enters into such Swap Agreement are (i) rated AA- or better by Standard & Poor's Rating Services ("S&Pl1) or Fitch, Inc. ("Fitch") or Aa3 or better by Moody's Investors Service Inc. ("Moodv's") and (ii) not rated below A by S&P or Fitch or A2 by Moody's, or (iii) have a "AAA subsidiary that is appropriately rated by at least one nationally recognized credit rating agency on such terms as any such Designated Officer determines is appropriate or necessary, with such changes thereto as may be determined by any Designated Officer, upon consultation with the Financial Advisor and Bond Counsel. (b) The Designated Officers and each of them are hereby authorized and directed to determine the advisability of entering into the Swap Agreement with a Counterparty or Counterparties and to negotiate and determine the terms, conditions and provisions of such Swap Agreement consistent with the

16 LACMTA's lnterest Rate Swap Policy (except as described herein) and the terms set forth in this Resolution; provided, however, that the obligations of the LACMTA shall not cause the True lnterest Cost on the Refunding Bonds or the Series 2009-A Bonds, as applicable, to exceed 6%, as such is calculated and determined as set forth in Section 6. (c) The Designated Officers are, and each of them is, hereby authorized and directed to execute, acknowledge and deliver the Swap Agreement including counterparts thereof, in the name and on behalf of the LACMTA and the LACMTA's corporate seal is hereby authorized (but not required) to be affixed or imprinted on each of such documents. From and after the execution and delivery of the Swap Agreement the officers, agents and employees of the LACMTA are, and each of them is, hereby authorized and directed to take all such actions and to execute all such documents as may be necessary to carry out and comply with the provisions of the Swap Agreement. (d) The Designated Officers and each of them are hereby authorized and directed to determine the advisability of obtaining credit enhancement for all or certain of the payments to be made in connection with the Swap Agreement and to accept the terms and provisions and price of such credit enhancement, to select a provider or providers thereof (the "Credit Enhancer") and to determine such other matters related thereto as in the opinion of such Designated Officer or Officers shall be considered necessary or appropriate. (e) The Designated Officers and each of them are hereby authorized and directed to pledge or caused to be pledged, to the Counterparty or Counterparties collateral in the form of cash or securities to secure its obligations under the Swap Agreement when required by and in accordance with the terms thereof. (f) The Designated Officers and each of them are hereby authorized and directed to amend, supplement or otherwise modify the Swap Agreement at any time and in any manner determined to be necessary or desirable by the Designated Officer executing such amendment, supplement or modification, upon consultation with the Swap Advisor and Bond Counsel, the execution of such amendment, supplement or other modification being conclusive evidence of LACMTA's approval thereof. In addition, the Designated Officers and each of them are authorized to optionally terminate the Swap Agreement in whole or in part in accordance with the terms of the Swap Agreement. 18. Paying Agent and Registrar. The LACMTA hereby appoints the Proposition C Trustee as Paying Agent for the Refunding Bonds, appoints the Proposition C Trustee as Registrar for the Refunding Bonds, and appoints the Proposition C Trustee as escrow agent under any escrow agreement. Such appointments shall be effective upon the issuance of the Refunding Bonds and shall remain in effect until the LACMTA, by supplemental agreement, resolution or other action, shall name a substitute or successor thereto.

17 19. Liquidity Facility; Direct-Pay Letter of Credit; Bond Insurance. In connection with the Restructuring, the Designated Officers are hereby authorized to purchase or otherwise arrange for the provision of on behalf of the LACMTA, including the payment of such premiums, fees and other costs and expenses as such Designated Officer determines is acceptable) one or more policies of municipal bond insurance, stand by bond purchase agreements, standby letters of credit or similar agreements andlor direct-pay letters of credit ("Credit Support Documents") to support the payment of the purchase price in connection with the tender of some or all of the Series 2009-A Bonds andlor the Refunding Bonds andlor to support the timely payment of principal and interest on the Series 2009-A Bonds andlor Refunding Bonds, said Credit Support Documents to contain such terms and conditions as such Designated Officer(s) shall determine is appropriate or necessary for the Series 2009-A Bonds andlor the Refunding Bonds. Notwithstanding the Debt Policy of the LACMTA, each of the Designated Officers is hereby authorized and directed to determine the process of procuring the provider of Credit Support Documents and such process may be, at the determination of such Designated Officer, either a competitive bidding process or a privately negotiated process. 20. Modifications of Proposition C Trust Agreement. The LACMTA hereby authorizes each Designated Officer to execute, acknowledge and deliver any documentation (including any Supplement appropriate or necessary to modify the provisions of the Proposition C Trust Agreement or the Fifteenth Supplemental Trust Agreement) in a manner determined by such Designated Officer to be beneficial to the LACMTA, such determinations to be conclusively evidenced by the execution and delivery of such documentation or the taking of such actions. 21. Additional Authorization. The Designated Officers and all officers, agents and employees of the LACMTA, for and on behalf of the LACMTA, be and they hereby are authorized and directed to do any and all things necessary to effect the Restructuring and the other transactions contemplated by this Resolution and to carry out the terms of the documents related thereto. The Designated Officers and all other officers, agents and employees of the LACMTA are further authorized and directed, for and on behalf of the LACMTA, to execute all papers, documents, certificates and other instruments that may be required in order to carry out the authority conferred by this Resolution or the provisions of the Proposition C Trust Agreement, any documents necessary or desirable to effect the Restructuring and the other transactions contemplated by this Resolution or to evidence said authority and its exercise. The foregoing authorization includes, but is in no way limited to, the direction (from time to time) by a Designated Officer of the investments in Permitted Investments (defined in the Proposition C Trust Agreement) of the proceeds of the Refunding Bonds and of the Pledged Taxes including the execution and delivery of investment agreements related thereto, the execution by a Designated Officer and the delivery of a tax certificate for the purpose of complying with the rebate requirements of the Internal Revenue Code of 1986, as amended; and the execution and delivery of documents required by The Depository Trust Company in connection with the Book-Entry Bonds. All actions heretofore taken by the officers, agents and employees of the LACMTA in furtherance of this Resolution are hereby confirmed, ratified and approved.

18 22. Continuing Authority of Designated Officers. The authority of any individual serving as a Designated Officer under this Resolution by a written designation signed by the Chair of the LACMTA, any Vice Chair of the LACMTA, any CEO, any Chief Financial Services Officer, any Treasurer, or any Assistant Treasurer shall remain valid notwithstanding the fact that the individual officer of the LACMTA signing such designation ceases to be an officer of the LACMTA, unless such designation specifically provides otherwise. 23. Further Actions. From and after the Restructuring, the Designated Officers and each of them are hereby authorized and directed to amend, supplement or otherwise modify any documents related thereto at any time and from time to time and in any manner determined to be necessary or desirable by the Designated Officer executing such amendment, supplement or modification, upon consultation with the Financial Advisor and Bond Counsel, the execution of such amendment, supplement or other modification being conclusive evidence of LACMTA's approval thereof. The Designated Officers and each of them are hereby authorized and directed to terminate, amend or replace any remarketing agreement, Credit Support Document, Replacement Liquidity Facility or Replacement Letter of Credit and to enter into one or more remarketing agreements, Credit Support Documents, Replacement Liquidity Facility, Replacement Letters of Credit or associated reimbursement agreements (or similar agreements) as any such Designated Officer shall determine is appropriate or necessary. 24. Costs of Issuance. The LACMTA authorizes funds of the LACMTA together with the proceeds of any Refunding Bonds to be used to pay costs of the Restructuring, including but not limited to costs of attorneys, accountants, verification agents, financial advisors, the costs associated with rating agencies, bond insurance and surety bonds, printing, publication and mailing expenses, any related filing fees and the payment of any termination payment incurred in connection with the termination of the Series 2009-A Swap and any payment required in connection with an amendment of the Series 2009-A Swap or other document. 25. Investment Agreements. Each of the Designated Officers is hereby authorized and directed to enter into, terminate, amend, assign or otherwise dispose of any investment agreement relating to the Series 2009-A Bonds or any Refunding Bonds in such manner and on such terms and provisions as any such Designated Officer shall determine is appropriate or necessary. 26. Severability. The provisions of this Resolution are hereby declared to be severable, and, if any section, phrase or provision shall for any reason be declared to be invalid, such declaration shall not affect the validity of the remainder of the sections, phrases and provisions hereof. 27. Effective Date. This Resolution shall be effective upon adoption.

19 28. Contract. This Resolution and the pledge of the Pledged Taxes contained herein shall constitute a contract between the LACMTA and the holders of the Refunding Bonds and any Counterparty of any Swap Agreement. CERTIFICATION The undersigned, duly qualified and acting as Board Secretary of the Los Angeles County Metropolitan Transportation Authority, certifies that the foregoing is a true and correct copy of the Resolution adopted at a legally convened meeting of the Board of Directors of the Los Angeles County Metropolitan Transportation Authority held on,2011. DATED: LACMTA Board Secretary

20 Attachment B Recommendation Summarv Standby Bond Purchase Agreement and Direct Purchase Arranaements Supporting Prop C2009-A Bonds CategorylRan k Bank Product Term First Year Cost Estimated Costs US Bank Surnitorno Mitsui Mizuho JP Morgan Bank of Tokyo Mitsui State Street Citi Bank of America Scotia KBC SBPA LOC SBPA SBPA SBPA SBPA LOC SBPA SBPA (did not offer 3 yrs) LOC (did not offer 3 yrs) 2 Yrs. 2 Yrs. $1,047,325 $1,128,925 $1,172,200 $1,280,425 $1,285,425 $1,416,950 $1,198,800 $992,375 $1,332,000 $1,488,550 $3,061,975 $3,276,775 $3,436,600 $3,761,275 $3,766,275 $4,180,850 $3,596,400 $2,907,125 $3,063,600 $2,937,100 3 JP Morgan Direct Purchase 4 Citi Direct Purchase 5 Union Bank Direct Purchase 6 Goldrnan Sachs Direct Purchase Note: Currently targeted proposers are indicated in bold. $1,080,625 $1,082,250 $1,127,250 $1,450,750 $3,161,875 $3,246,750 $3,291,750 $4,114,750 Total costs of liquidity over the three year term are anticipated to be about $3.2 million based on a par amount of $166 million and using pricing of the top ranked providers. Pricing will be greater if lower ranked providers are used. Costs would also be greater if the ratings of the Prop C lien were downgraded in the future or the agreement was in default. The table above provides estimated costs that have been normalized for evaluation purposes and assumes the full $166 million facility amount and related upfront costs. Unacceptable credit quality, terms or conditions can significantly lower a bank's ranking or eliminate it from further consideration, regardless of price.