Salinas Valley Solid Waste Authority

NEW ISSUE - BOOK- ENTRY ONLY Insured S&P Rating: “AA-”Underlying S&P Rating: “A+”

See “RATINGS” herein.

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel to the Authority, under existing statutes, regulations, rulings and judicial decisions and assuming certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Series 2014A Bonds is excluded from gross income for federal income tax purposes (except during any period while a Series 2014A Bond is held by a “substantial user” or a “related person”, within the meaning of Section 147(a) of the Code, of the property financed by proceeds of the Series 2014A Bonds), and is a specific preference item for purposes of calculating the federal alternative minimum taxes imposed on individuals and corporations. In the opinion of Bond Counsel, interest on the Series 2014B Bonds is not excluded from gross income for federal income tax purposes. In the further opinion of Bond Counsel, interest on the Series 2014A Bonds and Series 2014B Bonds is exempt from State of California personal income tax. See “Tax Matters” herein.

$31,390,000SALINAS VALLEY SOLID WASTE AUTHORITY

REFUNDING REVENUE BONDS, SERIES 2014

$27,815,000SERIES 2014A (AMT)

$3,575,000SERIES 2014B (Taxable)

Dated: Date of Delivery Due: August 1, as shown on inside cover

The Series 2014 Bonds are being executed and issued pursuant to, and are secured under, a Master Indenture, dated as of January 1, 2014, as supplemented (the “Master Indenture”), by and between the Salinas Valley Solid Waste Authority (the “Authority”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), to (i) refund the Authority’s Outstanding Revenue Bonds Series 2002 (the “Prior Bonds”), (ii) prepay the balance of an Installment Purchase Agreement dated as of September 1, 1997, by and between the Authority and the City of Salinas (the “Crazy Horse Purchase Agreement”) pursuant to which the Authority purchased the Crazy Horse Landfill from the City of Salinas; and (iii) pay costs of issuance. See “THE PLAN OF REFUNDING.” The Authority is a joint exercise of powers authority, created pursuant to an agreement dated as of January 1, 1997 (as amended from time to time, the “Authority Agreement”) among the County of Monterey, and the Cities of Salinas, Gonzales, Greenfield, King City and Soledad (the “Members”). Pursuant to the Authority Agreement, the Authority was established to, among other things, acquire and manage the landfill assets of each Member, ensure long term landfill capacity for the Authority service area, and provide a unified and coordinated solid waste management system for the Members.

The principal, premium, if any, and interest due with respect to the Series 2014 Bonds are payable solely from amounts pledged therefor, including certain revenues of the Authority’s solid waste transfer and disposal system (the “System”), pursuant to the Master Indenture, and will be on a parity with additional Bonds and certain other obligations of the Authority (as described herein) issued or executed under the Master Indenture, subject to the application of such revenues as permitted by the Master Indenture. The revenues of the System so pledged consist primarily of the Net Revenues (as defined herein) of the System, which generally consist of the tipping fees, service charges, user charges and income received by or imposed by the Authority in connection with the operation of the System and the provision of solid waste disposal services, less the Maintenance and Operation Costs (as defined herein) of the System.

THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL AND INTEREST ON THE SERIES 2014 BONDS IS A LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY FROM THE AMOUNTS PLEDGED THEREFOR AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY OR THE MEMBERS FOR WHICH THE AUTHORITY OR THE MEMBERS ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY OR THE MEMBERS HAVE LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. THE SERIES 2014 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE MEMBERS, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF THE CONSTITUTION OF THE STATE OF CALIFORNIA, ANY STATUTORY DEBT LIMITATIONS OR OTHERWISE, OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY OR THE MEMBERS.

Interest on the Series 2014 Bonds is payable semiannually on February 1 and August 1 of each year, commencing on August 1, 2014. The Series 2014 Bonds will be issued in book-entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Series 2014 Bonds. Individual purchases of the Series 2014 Bonds will be made in book-entry form only. Purchasers of the Series 2014 Bonds will not receive certificates representing their ownership interests in the Series 2014 Bonds purchased. The Series 2014 Bonds will be issuable in the denominations of $5,000 and any integral multiple thereof. Principal and interest payments on the Series 2014 Bonds are payable directly to DTC by the Trustee. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Series 2014 Bonds.

The scheduled payment of principal of and interest on the Series 2014 Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Series 2014 Bonds by ASSURED GUARANTY MUNICIPAL CORP. See “BOND INSURANCE” herein.

The Series 2014A Bonds are subject to redemption prior to maturity, as described herein. The Series 2014B Bonds are not subject to redemption prior to maturity.

See the table on the inside cover page for interest rates and maturity dates of the Series 2014 Bonds.

This cover page contains certain information for quick reference only and is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See “CERTAIN RISK FACTORS” herein for a description of certain of the risks associated with an investment in the Series 2014 Bonds.

The Series 2014 Bonds will be offered when, as and if executed and delivered, and received by the Underwriter, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Underwriter by its counsel, Hawkins Delafield & Wood LLP, San Francisco, California and for the Authority by the Law Offices of Thomas M. Bruen, P.C., Walnut Creek, California, in its capacity as counsel to the Authority. It is anticipated that the Series 2014 Bonds in definitive form will be available for delivery to DTC in New York, New York, on or about January 28, 2014.

Dated: January 15, 2014

SALINAS VALLEY SOLID WASTE AUTHORITY REFUNDING REVENUE BONDS, SERIES 2014

MATURITY SCHEDULE

SERIES 2014A BONDS (AMT)

Maturity

(August 1,) Principal Amount

Interest Rate Yield

CUSIP† (Base 795036)

2017 $ 145,000 5.000% 1.350% BK7 2018 1,265,000 5.000 1.770 BL5 2019 1,330,000 5.000 2.200 BM3 2020 1,400,000 5.000 2.730 BN1 2021 1,470,000 5.000 3.190 BP6 2022 1,545,000 5.000 3.580 BQ4 2023 1,630,000 5.000 3.870 BR2 2024 2,155,000 5.000 4.120 BS0 2025 2,265,000 5.500 4.340* BT8 2026 2,395,000 5.500 4.500* BU5 2027 2,335,000 5.500 4.620* BV3

$9,880,000 5.50% Series 2014A Term Bond due August 1, 2031; Price: 104.547* CUSIP†: 795036 BW1

SERIES 2014B BONDS (TAXABLE)

Maturity (August 1,)

Principal Amount

Interest Rate Yield

CUSIP† (Base 795036)

2014 $315,000 0.990% 0.990% BX9 2015 320,000 1.490 1.490 BY7 2016 325,000 2.119 2.119 BZ4 2017 335,000 2.675 2.675 CA8 2018 345,000 3.225 3.225 CB6 2019 355,000 3.676 3.676 CC4 2020 370,000 4.076 4.076 CD2 2021 385,000 4.391 4.391 CE0 2022 405,000 4.641 4.641 CF7 2023 420,000 4.841 4.841 CG5

_____________________ * Yield or Price to par call on August 1, 2024. † CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by

CUSIP Global Services, managed by Standard and Poor's Financial Services LLC on behalf of the American Bankers Association. CUSIP numbers are provided for convenience of reference only.

SALINAS VALLEY SOLID WASTE AUTHORITY BOARD OF DIRECTORS

Fernando Armenta, President Elizabeth Silva, Vice President

Jyl Lutes, Board Member Gloria De La Rosa, Board Member

Louis Calcagno, Board Member Robert S. Cullen, Board Member Annie Moreno, Board member

Richard J. Perez, Board Member Tony R. Barrera, Board Member

General Manager/Chief Administrative Officer/Secretary R. Patrick Mathews

Finance Manager/Treasurer Roberto Moreno

General Counsel Thomas M. Bruen, Esq.

___________________________________

SPECIAL SERVICES

BOND COUNSEL

Stradling Yocca Carlson & Rauth a Professional Corporation Newport Beach, California

TRUSTEE/ESCROW AGENT

The Bank of New York Mellon Trust Company, N.A. Los Angeles, California

VERIFICATION AGENT

Causey Demgen & Moore P.C. Denver, Colorado

This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2014 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the Members or the Underwriter.

This Official Statement is not to be construed as a contract with the purchasers of the Series 2014 Bonds. Statements contained in this Official Statement which involve estimates, projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts.

In accordance with its responsibilities under the federal securities laws, the Underwriter has reviewed the information in this Official Statement but does not guarantee its accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither 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 the Authority, the System or the Members since the date hereof. This Official Statement is submitted with respect to the sale of the Series 2014 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the Authority. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions.

Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the Series 2014 Bonds or the advisability of investing in the Series 2014 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “Bond Insurance” and APPENDIX G – “SPECIMEN BOND INSURANCE POLICY”.

IN CONNECTION WITH THE OFFERING OF THE SERIES 2014 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2014 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES 2014 BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” expect,” “estimate,” “project,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under “THE AUTHORITY AND THE SYSTEM - Projected Revenues and Financial Results” herein.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

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TABLE OF CONTENTS

Page INTRODUCTION ........................................................................................................................................ 1

Purpose ..................................................................................................................................................... 1 Security and Source of Payment for the Series 2014 Bonds .................................................................... 1 Redemption ............................................................................................................................................... 2 The Authority ........................................................................................................................................... 2 Rate Covenant .......................................................................................................................................... 2 Limited Obligation ................................................................................................................................... 3 Continuing Disclosure Information .......................................................................................................... 3 Miscellaneous ........................................................................................................................................... 3

THE PLAN OF REFUNDING ..................................................................................................................... 4 Refunding of Prior Bonds ......................................................................................................................... 4 The Crazy Horse Installment Purchase Agreement .................................................................................. 5

ESTIMATED SOURCES AND USES OF BOND PROCEEDS ................................................................. 5 THE SERIES 2014 BONDS ......................................................................................................................... 5

General ..................................................................................................................................................... 5 Redemption ............................................................................................................................................... 6

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS ..................................... 8 Master Indenture ....................................................................................................................................... 8 Pledge of Master Indenture; Net Revenues .............................................................................................. 9 Rate Covenant ........................................................................................................................................ 11 No Reserve Fund for Series 2014 Bonds ................................................................................................ 11 Conditions Precedent to Execution of Additional Bonds and Other Obligations ................................... 11 Non-Recourse to Members or State of California .................................................................................. 13

BOND INSURANCE ................................................................................................................................. 13 Bond Insurance Policy ............................................................................................................................ 13 Assured Guaranty Municipal Corp. ........................................................................................................ 13

THE AUTHORITY AND THE SYSTEM ................................................................................................. 15 The Authority; History of the System .................................................................................................... 15 Organization and Management ............................................................................................................... 16 Existing System ...................................................................................................................................... 17 Required Permits .................................................................................................................................... 22 Closure and Postclosure Liabilities ........................................................................................................ 22 Disposal Capacity in the System ............................................................................................................ 23 Waste Delivery Agreement and Waste Collection Practices of Members ............................................. 25 South Valley Agreement ........................................................................................................................ 27 Historical Waste Deliveries to the System ............................................................................................. 28 Projected Waste Deliveries to the System .............................................................................................. 29 Major Sources of Revenues .................................................................................................................... 29 Competition ............................................................................................................................................ 31 Capital Plan ............................................................................................................................................ 33 Financial and Management Aspects of the System ................................................................................ 33 Historical Debt Service Coverage .......................................................................................................... 35 Projected Revenues and Financial Results ............................................................................................. 35 Pension Benefits ..................................................................................................................................... 36 Other Post-Employment Benefits (OPEB) ............................................................................................. 39 IRS Audit ................................................................................................................................................ 39

REGULATION ........................................................................................................................................... 40

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California Integrated Waste Management Act of 1989 .......................................................................... 40 Federal and Other State Laws Governing Solid Waste Disposal ........................................................... 41 Air and Water Quality Regulations ........................................................................................................ 42 Compliance with Current Operating Standards ...................................................................................... 42

CERTAIN RISK FACTORS ...................................................................................................................... 42 Certain Factors Affecting Solid Waste Disposal Facilities Generally .................................................... 43 Rate Covenant Not a Guarantee; Failure to Meet Projections ................................................................ 43 Competition ............................................................................................................................................ 43 Disposal Capacity ................................................................................................................................... 44 Withdrawal of Members ......................................................................................................................... 44 Statutory and Regulatory Impact ............................................................................................................ 45 Hazardous Waste .................................................................................................................................... 45 Earthquake or Other Natural Disasters ................................................................................................... 45

TAX MATTERS ......................................................................................................................................... 46 Tax-Exempt Bonds ................................................................................................................................. 46 Federally Taxable Series 2014B Bonds .................................................................................................. 47

CERTAIN LEGAL MATTERS.................................................................................................................. 48 LITIGATION .............................................................................................................................................. 49 VERIFICATION OF MATHEMATICAL COMPUTATIONS ................................................................. 49 RATINGS ................................................................................................................................................... 49 UNDERWRITING ..................................................................................................................................... 49 CONTINUING DISCLOSURE .................................................................................................................. 49 MISCELLANEOUS ................................................................................................................................... 50 APPENDICES: APPENDIX A – BASIC FINANCIAL STATEMENTS FOR THE SALINAS VALLEY SOLID WASTE

AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2013 APPENDIX B – SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE APPENDIX C – PROPOSED FORM OF LEGAL OPINION APPENDIX D – FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX E – FORM OF WASTE DELIVERY AGREEMENT APPENDIX F – BOOK-ENTRY ONLY SYSTEM APPENDIX G – SPECIMEN BOND INSURANCE POLICY

[THIS PAGE INTENTIONALLY LEFT BLANK]

Service Area

128 Sun Street, Suite 101

Salinas, CA 93901

(831) 775-3000

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$31,390,000 SALINAS VALLEY SOLID WASTE AUTHORITY

REFUNDING REVENUE BONDS, SERIES 2014 $27,815,000

SERIES 2014A (AMT) $3,575,000

SERIES 2014B (Taxable)

INTRODUCTION

This introduction contains only a brief summary of certain of the terms of the Series 2014 Bonds being offered and a brief description of the Official Statement. All statements contained in this introduction are qualified in their entirety by reference to the entire Official Statement. References to, and summaries of, provisions of the Constitution and laws of the State of California and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions. The information and expressions of opinion herein speak only as of their date and are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Master Indenture. See APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE – Definitions.”

Purpose

This Official Statement, including the cover and the Appendices attached hereto (the “Official Statement”), provides certain information concerning the sale and delivery of the Salinas Valley Solid Waste Authority Refunding Revenue Bonds, Series 2014A (AMT), in an aggregate principal amount of $27,815,000 (the “Series 2014A Bonds”) and the Salinas Valley Solid Waste Authority Refunding Revenue Bonds, Series 2014B (Taxable), in an aggregate principal amount of $3,575,000 (the “Series 2014B Bonds” and together with the Series 2014A Bond, the “Series 2014 Bonds”). The Series 2014 Bonds will be issued pursuant to a Master Indenture between the Authority and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of January 1, 2014, supplemented by a First Supplemental Indenture, dated as of January 1, 2014 and a Second Supplement Indenture, dated as of January 1, 2014 (collectively, the “Master Indenture”). The Series 2014 Bonds are being issued to (i) refund the Authority’s Outstanding Revenue Bonds Series 2002 (the “Prior Bonds”), (ii) prepay the balance of an Installment Purchase Agreement dated as of September 1, 1997, by and between the Authority and the City of Salinas (the “Crazy Horse Purchase Agreement”) pursuant to which the Authority purchased the Crazy Horse Landfill from the City of Salinas and (iii) pay costs of issuance. See “THE PLAN OF REFUNDING.”

Security and Source of Payment for the Series 2014 Bonds

The Authority’s obligation to make payments of principal and interest on the Series 2014 Bonds is a special obligation of the Authority payable solely from amounts pledged therefor under the Master Indenture, including certain revenues of the Authority’s solid waste transfer and disposal system (the “System”), and will be on a parity with additional Bonds and other Contracts and Repayment Obligations (as hereinafter defined) of the Authority issued or executed under the Master Indenture subject to the application of such revenues as permitted by the Master Indenture. The revenues of the System so pledged consist primarily of the Net Revenues of the System. The Net Revenues consist generally of Revenues, less the Maintenance and Operation Costs (as herein defined) of the System for such Fiscal Year.

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“Revenues” include all fees, tipping fees, charges and all amounts paid under any contracts received or owed by the Authority in connection with the operation of the System; also includes investment earnings except interest earned on project funds, trust funds and insurance funds.

“Maintenance and Operation Costs” include reasonable and necessary costs paid or incurred by the Authority for maintaining and operating the System, determined in accordance with GAAP; also includes closure costs which are mandated by State or Federal law to be paid on a current basis; excludes any bond payments, depreciation/amortization, and post-closure maintenance costs which are accrued, but not mandated by State or Federal law to be paid on a current basis.

The Authority may issue additional Bonds, or execute Contracts or Repayment Obligations the payment of which will be on a parity with the Series 2014 Bonds, on the terms and upon satisfaction of the conditions specified in the Master Indenture. The Authority may also incur indebtedness on a subordinate basis to the Series 2014 Bonds and any other Bonds and Contracts. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS” herein.

The scheduled payment of principal of and interest on the Series 2014 Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Series 2014 Bonds by ASSURED GUARANTY MUNICIPAL CORP. See “BOND INSURANCE” herein.

The Series 2014 Bonds will not be secured by a reserve fund.

Redemption

The Series 2014A Bonds are subject to optional redemption and mandatory sinking fund redemption prior to their stated maturities. The Series 2014B Bonds are not subject to redemption prior to their stated maturities. See “THE SERIES 2014 BONDS – General.”

The Authority

The Authority is a joint exercise of powers authority created pursuant to Section 6500 et seq., of the California Government Code and a joint exercise of powers agreement, dated as of January 1, 1997 (as amended from time to time, the “Authority Agreement”) among Monterey County (the “County”) and the Cities of Salinas, Gonzales, Greenfield, King City and Soledad (the “Members”). Pursuant to the Authority Agreement, the Authority was established to, among other things, acquire and manage the landfill assets of each Member; ensure long-term landfill capacity for the Authority service area; and provide unified and coordinated solid waste management system for the Members. The City of Salinas has substantial influence over the activities of the Authority. See “THE AUTHORITY AND THE SYSTEM” herein. A copy of the Authority’s audited financial statements for the period ending June 30, 2013, is attached hereto as Exhibit A.

Rate Covenant

Pursuant to the Master Indenture, the Authority has agreed, while any of the Bonds remain Outstanding, to fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts during such Fiscal Year: (1) all current Maintenance and Operation Costs; (2) the interest on and principal of and Sinking Fund Installments for the Bonds, the payments for the Contracts and the Repayment Obligations; (3) all payments required for compliance with the terms of the Master Indenture, including any deposits required to the Master Reserve Fund or any Series Reserve Funds and (4) all payments to meet any other

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obligations of the Authority which are charges, liens or encumbrances upon, or payable from, the Net Revenues, excluding Subordinate Obligations. In addition, pursuant to the Master Indenture, the Authority has also agreed, at all times while any of the Bonds remain Outstanding, to fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Net Revenues during such Fiscal Year equal to at least one hundred fifteen percent (115%) of the Annual Debt Service in such Fiscal Year; provided, that for purposes of this requirement the Authority may consider amounts withdrawn from the Rate Stabilization Fund in a Fiscal Year as Net Revenues for such Fiscal Year as provided in the Master Indenture.

Limited Obligation

THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL AND INTEREST ON THE SERIES 2014 BONDS IS A LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY FROM THE AMOUNTS PLEDGED THEREFOR AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY OR THE MEMBERS FOR WHICH THE AUTHORITY OR THE MEMBERS ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY OR THE MEMBERS HAVE LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. THE SERIES 2014 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE MEMBERS, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF THE CONSTITUTION OF THE STATE OF CALIFORNIA OR ANY STATUTORY DEBT LIMITATIONS OR OTHERWISE, OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY OR THE MEMBERS.

Continuing Disclosure Information

The Authority has agreed to provide, or cause to be provided, in accordance with Securities Exchange Commission Rule 15c2-12(b)(5), certain annual financial information and operating data, including audited financial statements, and an update of certain information relating to the System. See “CONTINUING DISCLOSURE” herein.

Miscellaneous

When delivered, the Series 2014 Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”) which will act as Depository for the Series 2014 Bonds. Purchases of the Series 2014 Bonds may be made in book-entry form only, through brokers and dealers who are, or who act through, DTC Participants. Beneficial Owners of the Series 2014 Bonds will not receive physical delivery of certificated securities. Principal of and interest on the Series 2014 Bonds will be payable by the Trustee to DTC, which will in turn remit such payments to the DTC Participants, which will in turn remit such payments to the Beneficial Owners of the Series 2014 Bonds. In addition, so long as Cede & Co. is the registered owner of the Series 2014 Bonds, the selection of Series 2014 Bonds held by Beneficial Owners in book-entry form for redemption will be made pursuant to the procedures of DTC. See “THE BONDS – Redemption” and APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”

The descriptions herein of the Master Indenture, the Authority Agreement and any other agreements relating to the Series 2014 Bonds are qualified in their entirety by reference to such documents, and the descriptions herein of the Series 2014 Bonds are qualified in their entirety by the form thereof and the information with respect thereto included in the aforementioned documents. See APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE.” Copies of the documents are on file and available for inspection at the principal corporate trust office of the Trustee at The Bank of New York Mellon Trust Company, N.A., Attention Corporate Trust Services, 700 South Flower Street, Suite 500, Los Angeles, California 90017.

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All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Master Indenture. See APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE” for definitions of certain words and terms used but not otherwise defined herein.

The information and expressions of opinion herein speak only as of their date and are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof.

THE PLAN OF REFUNDING

The Series 2014 Bonds are being issued and delivered to provide funds to: (i) refund the Authority’s Outstanding Revenue Bonds Series 2002 (the “Prior Bonds”), the proceeds of which were used to finance the acquisition and construction of certain improvements to the Authority’s System as further described below (the “2002 Project”), (ii) prepay the balance of an Installment Purchase Agreement dated as of September 1, 1997, by and between the Authority and the City of Salinas (the “Crazy Horse Purchase Agreement”) pursuant to which the Authority purchased the Crazy Horse Landfill from the City of Salinas and (iii) pay costs of issuance. See “ESTIMATED SOURCES AND USES OF BOND PROCEEDS” herein.

The proceeds of the Prior Bonds were used to (a) pay certain costs incurred by the Authority in connection with the acquisition and construction of certain improvements to the Authority’s System (including a variety of projects at the Authority landfills - Crazy Horse, Lewis Road, Jolon Road and Johnson Canyon), (b) refund the Authority’s Revenue Bonds, Series 1997 and (c) prepay a portion of the Crazy Horse Purchase Agreement, (d) fund a reserve account for the Prior Bonds and (e) pay costs of issuance of the Prior Bonds (collectively, the “2002 Project”).

Refunding of Prior Bonds

Upon the issuance and delivery of the Series 2014 Bonds, a portion of the proceeds thereof, together with certain cash deposits held by the Authority or the Trustee, will be deposited in a separate escrow account held by The Bank of New York Mellon Trust Company, N.A., as escrow holder for the Prior Bonds (the “Escrow Holder”) under an escrow agreement (the “Escrow Agreement”) that will require the Escrow Holder to apply the moneys held by the Escrow Holder, to the redemption of the Prior Bonds on February 27, 2014. The Prior Bonds consist of the following:

Outstanding Salinas Valley Solid Waste Authority Revenue Bonds, Series 2002

Maturity Date (August 1)

Amount Interest Rate

Redemption Price

2014 $ 1,085,000 5.625 100% 2015 1,150,000 5.625 100 2016 1,215,000 5.625 100 2017 1,285,000 5.625 100 2018 1,360,000 5.625 100 2022 6,210,000 5.125 100 2027 9,815,000 5.250 100 2031 9,930,000 5.250 100

TOTAL $32,050,000

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For information on mathematical verification for the sufficiency of scheduled payments with respect to such funds held by the Escrow Holder to make such payments, see “VERIFICATION OF MATHEMATICAL COMPUTATIONS.” Upon such irrevocable deposit with the Escrow Holder and the receipt by the Prior Trustee of irrevocable prepayment instructions from the Authority, the Prior Bonds will be defeased and will be payable solely from amounts available pursuant to the Escrow Agreement. The Crazy Horse Installment Purchase Agreement

On September 1, 1997, the Authority and the City of Salinas entered into the Crazy Horse Purchase Agreement, pursuant to which the Authority purchased the Crazy Horse Landfill for $8,000,000. The final payment date for this agreement is September 1, 2027 and the interest rate associated with this agreement is 7.9105%. As of June 30, 2013, the remaining amount owed by the Authority was $3,287,588. As of September 1, 2013 the outstanding balance is $3,225,071. The accrued interest through the next payment date of March 1, 2014 is $127,559.35. On or around the date of issuance of the Series 2014B Bonds, a portion of the proceeds thereof will be applied to the prepayment of the remaining principal amount owed by the Authority pursuant to the Crazy Horse Installment Purchase Agreement, together with the accrued interest described above.

ESTIMATED SOURCES AND USES OF BOND PROCEEDS

The estimated sources and uses of funds with respect to the Series 2014 Bonds are set forth below:

Sources of Funds Series 2014A Bonds Series 2014B Bonds Total Par Amount of the Series 2014 Bonds $27,815,000.00 $3,575,000.00 $31,390,000.00 plus Original Issue Premium 2,254,048.60 – 2,254,048.60 Prior Bonds Reserve Fund/Interest Fund 3,678,573.03 – 3,678,573.03

Total Sources $33,747,621.63 $3,575,000.00 $37,322,621.63 Uses of Funds

Prior Bond Escrow $33,021,472.40 – $33,021,472.40 Crazy Horse Acquisition Prepayment – $3,352,630.35 3,352,630.35 Costs of Issuance(1) 726,149.23 222,369.65 948,518.88

Total Uses $33,747,621.63 $3,575,000.00 $37,322,621.63 ____________ (1) Includes Underwriter’s discount, fees and expenses of rating agency, bond insurance premium, Bond Counsel, Underwriter’s Counsel, Trustee, Escrow Agent and others.

THE SERIES 2014 BONDS

General

The Series 2014 Bonds shall be dated as of their date of issuance, shall bear interest (computed on the basis of a 360-day year consisting of twelve 30-day months) at the rates per annum (payable semiannually on February 1 and August 1 in each year, commencing on August 1, 2014) and shall mature and become payable on August 1 in each of the years in the principal amounts set forth on the inside cover hereof.

The Series 2014 Bonds shall be issued as fully registered bonds in denominations of five thousand dollars ($5,000) or any integral multiple of five thousand dollars ($5,000) (not exceeding the principal amount of Series 2014 Bonds maturing at any one time).

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The Series 2014 Bonds will be delivered in fully registered form, will be transferable and exchangeable as set forth in the Master Indenture and, when delivered, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as Depository for the Series 2014 Bonds. Ownership interests in the Series 2014 Bonds may be purchased in book-entry form only, in authorized denominations. So long as the Series 2014 Bonds are registered in the name of Cede & Co., all payments with respect to principal of and interest on the Series 2014 Bonds will be made by the Trustee to DTC, which is obligated in turn to remit such payments to its Direct Participants for subsequent disbursement to the Beneficial Owners of the Bonds. See APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”

Redemption

The Series 2014A Bonds are subject to redemption prior to maturity as described below.

Optional Redemption. The Series 2014A Bonds maturing by their terms on or after August 1, 2025, are subject to optional redemption by the Authority on any date on or after August 1, 2024, prior to their respective stated maturity dates, as a whole or in part in such principal amounts and from such maturity dates as selected by the Authority, from funds derived by the Authority from any lawful source and deposited with the Trustee not later than five (5) days prior to the date of redemption, upon mailed notice as provided in the Master Indenture, at a redemption price equal to the principal amount of the Series 2014A Bonds or the portions thereof called for redemption, together with interest accrued thereon to the date fixed for redemption.

The Series 2014B Bonds are not subject to optional redemption prior to maturity.

Mandatory Redemption. Sinking Fund Installments are established in the Master Indenture for the mandatory redemption and payments of the Series 2014A Term Bonds shall become due on the dates and in the amounts set forth in the following schedules (except that if any Series 2014A Term Bonds have been optionally redeemed pursuant to the Master Indenture, the amounts of such Sinking Fund Installments shall be reduced by the principal amount of all such Series 2014A Term Bonds so optionally redeemed as provided therein):

Series 2014A Term Bonds due August 1, 2031 Date Sinking Fund

(August 1) Installment 2028 $2,270,000 2029 2,400,000 2030 2,535,000 2031* 2,675,000

______________ *Final Maturity

All such Sinking Fund Installments shall be deposited in the Sinking Fund, and all money in the Sinking Fund resulting from such deposits on August 1 of each year as described above, shall be used and withdrawn by the Trustee on each such August 1 for the mandatory redemption or payment of such Series 2014 Term Bonds.

Selection of Bonds for Redemption. The Authority may select which maturities of Outstanding Series 2014 Bonds to redeem. Whenever less than all the Outstanding Series 2014 Bonds maturing on any one date are called for redemption at any one time, the Trustee shall select the Series 2014 Bonds to be redeemed (from the Outstanding Series 2014 Bonds maturing on such date not previously selected for

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redemption) by lot in any manner which the Trustee deems fair; provided, that if less than all the Outstanding Term Series 2014 Bonds maturing on any one date are called for redemption from proceeds other than Sinking Fund Installment payments at any one time, the Authority shall specify in a Certificate of the Authority filed with the Trustee a reduction in the Sinking Fund Installment payments required to be made with respect to such Term Bonds (in an amount equal to the amount of Outstanding Term Bonds to be redeemed).

Notwithstanding anything herein to the contrary, so long as Cede & Co. as the nominee of DTC or any substitute Depository for the Series 2014 Bonds is the registered owner of the Bonds, the selection of Bonds held by Beneficial Owners in book-entry form for redemption will be made by DTC or such substitute Depository for the Series 2014 Bonds pursuant to the procedures of DTC or the substitute Depository for the Series 2014 Bonds. The procedures of DTC or the Substitute Depository for the Series 2014 Bonds may not be consistent with the procedures outlined above. See “INTRODUCTION – Miscellaneous” and APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”

Purchase in Lieu of Redemption. In lieu of redemption of any Series 2014 Bonds that are Term Bonds, amounts on deposit in the Sinking Fund allocable to Term Bonds shall be used and withdrawn by the Trustee at any time, upon receipt of a Written Request of the Authority, for the purchase of such Term Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Fund) as the Authority may in its discretion determine, but not in excess of the principal amount thereof plus accrued interest to the purchase date.

Notice of Redemption. Except for the redemption of Bonds at maturity and the redemption of Term Bonds on any Sinking Fund Payment Date, notice of redemption of any Series 2014 Bonds or any portions thereof shall be mailed by first class mail, postage prepaid, by the Trustee not less than thirty (30) nor more than sixty (60) days prior to the redemption date of such bonds to the Depository and to the respective Owners of the Series 2014 Bonds designated for redemption at their addresses appearing on the bond registration books kept by the Trustee. Each notice of redemption shall state the date of such notice, the Series 2014 Bonds to be redeemed, the date of issue of such Series 2014 Bonds, the redemption date, the redemption price, whether funds are then on deposit sufficient to pay the redemption price, the place of redemption (including the name and appropriate address), the CUSIP number (if any) of the maturity or maturities, and, if less than all Series 2014 Bonds of any such maturity are to be redeemed, the distinctive numbers of the Series 2014 Bonds of such maturity to be redeemed and, in the case of the Series 2014 Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on such redemption date there will become due and payable on each of such Series 2014 Bonds the redemption price thereof or of the specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Series 2014 Bonds be then surrendered at the Corporate Trust Office of the Trustee specified in the redemption notice as the place of redemption.

Failure by the Trustee to give notice pursuant to the Master Indenture to the Depository, or the insufficiency of any such notice or the failure of any Owner to receive any redemption notice mailed to such Owner or any immaterial defect in the notice so mailed shall not affect the sufficiency of the proceedings for the redemption of any Series 2014 Bonds.

From and after the date fixed for redemption of any Series 2014 Bonds or any portions thereof, if notice of such redemption shall have been duly given and funds available for the payment of such redemption price of the Series 2014 Bonds or such portions thereof so called for redemption shall have been duly provided, no additional interest shall accrue on such Series 2014 Bonds or such portions thereof from and after the redemption date specified in such notice.

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With respect to any notice of optional redemption of Series 2014 Bonds, unless, upon the giving of such notice, such Bonds are deemed to have been paid within the meaning of the Master Indenture, such notice shall state (1) that redemption will be conditional upon the receipt by the Trustee on or before the date fixed for redemption of amounts sufficient to pay the principal of, and premium (if any) and interest on, such Bonds to be redeemed and (2) that if such amounts are not so received, then the notice shall be of no force and effect and the Authority shall not be required to redeem such Bonds. The Authority shall also instruct the Trustee to provide conditional notice of optional redemption, which may be conditioned on the occurrence of any other event if such notice states that if such event does not occur then the notice shall be of no force and effect and the Authority shall not be required to redeem such Bonds. If a notice of optional redemption contains such a condition and such amounts are not so received or such event does not occur, then the optional redemption shall not be made, and the Trustee shall, within a reasonable time thereafter, give notice to the Holders to the effect that such amounts were not so received or such event did not occur and such redemption was not made, such notice to be given by the Trustee in the manner in which the notice of redemption was given. Such failure to optionally redeem such Bonds shall not constitute an Event of Default.

The Authority may rescind any notice of optional redemption by giving the Trustee notice in writing or by electronic means at least five Business Days before the date specified for redemption. As soon as practicable thereafter, the Trustee shall give a notice of rescission in the same manner, and to the same Persons, as notice of such redemption was given.

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS

Master Indenture

The Master Indenture authorizes the execution of and secures the payment of Bonds, Contracts and Repayment Obligations, including the Series 2014 Bonds. “Bonds” consist of all Series of bonds authorized, executed and delivered under all Supplemental Indentures (including the Series 2014 Bonds). “Contracts” are all obligations of the Authority authorized and executed by the Authority, the Contract Payments under which are secured by a pledge of the Net Revenues on a parity with Bonds as provided in the Master Indenture. “Repayment Obligations” are obligations under a written agreement between the Authority and a credit provider to reimburse the credit provider for amounts paid under or pursuant to a credit facility for the payment of the principal amount or purchase price of and interest on any Bonds or any Contract Payments.

The Master Indenture contains various covenants and agreements of the Authority relating to financial and operational aspects of the System, including covenants relating to the provision of solid waste management services by the Authority and the setting and collection of rates and charges at specified levels. See “Rate Covenant” below. The Master Indenture also contains covenants relating to the following matters, among others: the establishment of accounts and payment priorities for Maintenance and Operation Costs and other expenses of the System; the preparation of an annual budget and reconciliation thereof; conditions precedent to the issuance or execution of additional Bonds, Contracts or Repayment Obligations; the prudent operation and maintenance of the System; compliance with laws; and adherence to insurance requirements.

The Master Indenture provides that the Authority may, subject to the terms of the Master Indenture (including, with certain exceptions, certain financial tests), issue one or more series of additional Bonds, or execute one or more Contracts or Repayment Obligations, as necessary or desirable to discharge the Authority’s purposes in connection with solid waste management and any amount payable in accordance with such additional Bonds, Contracts or Repayment Obligations would be payable on a parity with the Series 2014 Bonds. See “Conditions Precedent to Execution of Additional Bonds and

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Certain Other Obligations” below. The Authority may also issue Subordinate Obligations as provided in the Master Indenture.

Pledge of Master Indenture; Net Revenues

Pursuant to the Master Indenture, in order to secure the payment of Bonds, Contracts and Repayment Obligations, including the Series 2014 Bonds, the Authority has pledged the Net Revenues (and all money in the Revenue Fund and in the funds and accounts specified in the Master Indenture, other than the Rebate Fund), subject only to the provisions permitting the application thereof for or to the purposes and on the terms and conditions set forth in the Master Indenture. Net Revenues for any period consist of the Revenues of the System less the Maintenance and Operation Costs of the Authority of operating and maintaining the System (all as more particularly defined in Appendix B hereto). Revenues consist generally of the gross income and revenue received or receivable by the Authority from the ownership or operation of the System, including all tipping fees, AB 939 Fees, contract payments, and other amounts received from users of the System. See “THE AUTHORITY AND THE SYSTEM – Major Sources of Revenues” herein. Revenues exclude interest earnings on Project Funds and certain other restricted funds of the Authority. See APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE.”

Pursuant to the provisions of the Master Indenture, the Authority is required to deposit all Revenues into the Revenue Fund upon receipt. The Revenue Fund is held by the Authority. The Authority is required to pay Maintenance and Operation Costs from amounts on deposit in the Revenue Fund as they become due and payable. The Master Indenture provides that money remaining in the Revenue Fund after payment of Maintenance and Operation Expenses shall be set aside monthly by the Authority in the Debt Service Account within the Revenue Fund into the following specified funds at the specified times and in the following order of priority:

First, the Authority shall transfer to the Interest Fund on or before each February 1 and August 1 in each year (and on such other dates as may be provided in a Supplemental Indenture) an amount of money which, together with any money contained in the Interest Fund, is equal to the aggregate amount of interest becoming due and payable on such Interest Payment Date. In the event there shall be insufficient money on deposit in the Interest Fund to make in full all such interest payments required to be made on such date, then the available money in the Interest Fund shall be applied pro rata to the making of interest payments for each Series of Bonds in the proportion which all such interest payments bear to each other. Pursuant to the terms of a Supplemental Indenture, the Authority may provide for the payment of interest with respect to Contracts or to pay or reimburse a credit provider for Repayment Obligations from the Interest Fund.

Second, the Authority shall transfer to the Principal Fund on or before each August 1 in each year (and on such other dates as may be provided in a Supplemental Indenture), beginning August 1, 2014, an amount of money which, together with any money contained in the Principal Fund, is equal to the aggregate amount of principal becoming due and payable on such Principal Payment Date. In the event there shall be insufficient money or deposit in the Principal Fund to make in full all such principal payments required to be made on such date, then the available money in the Principal Fund shall be applied pro rata to the making of principal payments for each Series of Bonds in the proportion which all such principal payments bear to each other. Pursuant to the terms of a Supplemental Indenture, the Authority may provide for the payment of principal with respect to Contracts or to pay or reimburse a credit provider for Repayment Obligations from the Principal Fund.

Third, the Authority shall transfer to the Sinking Fund for receipt on or before each Sinking Fund Payment Date an amount of money equal to the Sinking Fund Installments payable on such Sinking Fund

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Installment Date. In the event that there shall be insufficient money in the Sinking Fund to make in full all such Sinking Fund Installments required to be made on such date, then the available money on deposit in the Sinking Fund shall be applied pro rata to the making of such Sinking Fund Installments for each Series of Term Bonds in the proportion which all such Sinking Fund Installments bear to each other. Pursuant to the terms of a Supplemental Indenture, the Authority may provide for payment of sinking fund installments with respect to Contracts or to pay or reimburse a credit provider for Repayment Obligations from the Sinking Fund.

Fourth, the Authority shall transfer to the Trustee for deposit in the Master Reserve Fund for receipt on or before February 1 and August 1 of each year, beginning on the February 1 or August 1 next succeeding the determination of a deficiency in the Reserve Fund, an amount of money from the Revenue Fund necessary to restore the amount in the Master Reserve Fund to the Master Reserve Fund Requirement over the next twelve (12) months; provided, that if there has been a draw upon any policy of insurance, surety bond, letter of credit or other comparable credit facility used to provide all or a portion of the Master Reserve Fund Requirement or Series Reserve Requirement, a sum sufficient to reimburse the provider of such instrument on the next succeeding February 1 or August 1, as the case may be, for payments made under such draw plus its expenses in connection therewith shall be withdrawn from the first Net Revenues available to the Authority on such date after first satisfying (or reasonably evidencing the ability to satisfy) the next occurring payment requirements of the Interest Fund, the Principal Fund and the Sinking Fund, and such withdrawal shall be used for such reimbursement. The Master Indenture permits the Authority to determine that a particular Series of Bonds or Contracts will not be secured by the Master Reserve Fund and establish a separate account (such account constituting a “Series Reserve Fund”) to secure one or more Series of Bonds or Contracts and may establish a separate reserve fund securing an obligation to make Contract Payments so long as such account or reserve fund is initially funded and maintained at an amount at least equal to the Series Reserve Fund Requirement as applied to such Bonds or Contracts. Any deficiencies in any Series Reserve Funds will be replenished at the same time and in the same manner as deficiencies in the Master Reserve Fund as described above in the events that, on any date insufficient funds are available for replenishment of the Master Reserve Fund and any Series Reserve Fund, replenishment shall be made pro rata based on the respective amounts to be replenished.

Fifth, the Authority shall transfer to the Trustee (or such other trustee or fiscal agent as designated in a Supplemental Indenture or Contract) for deposit in the Subordinated Payment Fund for receipt on or before February 1 and August 1 of each year (or on such other dates as provided in a Supplemental Indenture), beginning on the date designated in a Supplemental Indenture, an amount of money from the Revenue Fund which, together with any money contained in the Subordinated Payment Fund, is equal to the aggregate amount of interest and principal due and payable on such date on all Subordinate Obligations.

All money remaining in the Revenue Fund after making the aforesaid payment may be withdrawn from the Revenue Fund by the Authority and used by the Authority for any lawful purpose.

The Master Indenture also provides for the creation of a Rate Stabilization Fund, into which the Authority may make deposits. The Master Indenture provides that Revenues so deposited into the Rate Stabilization Fund in any Fiscal Year shall not be taken into account as Net Revenues for such Fiscal Year; and amounts withdrawn from the Rate Stabilization Fund shall constitute Revenues during the Fiscal Year in which such withdrawal is made for purposes of the rate covenant and financial tests which are conditions precedent to the execution of additional Bonds and other obligations, provided further however, that for purposes of the calculation required under the Master Indenture regarding additional Bonds, the amount of Net Revenues before any credits for withdrawals from the Rate Stabilization Fund

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may not be less than 100% of Maximum Annual Debt Service for Outstanding Bonds and the proposed additional Series of Bonds. The Rate Stabilization Fund is not currently funded at this time.

See “Conditions Precedent to Execution of Additional Bonds and Other Obligations” and “Rate Covenant” below.

Rate Covenant

Pursuant to the Master Indenture, the Authority has agreed, at all times thereafter while any of the Bonds remain Outstanding, to fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts during such Fiscal Year: (1) all current Maintenance and Operation Costs; (2) the interest on and principal of and Sinking Fund Installments for the Bonds, the payments for the Contracts and the Repayment Obligations; (3) all payments required for compliance with the terms of the Master Indenture, including any required deposits to the Master Reserve Fund or any Series Reserve Funds and (4) all payments to meet any other obligations of the Authority which are charges, liens or encumbrances upon, or payable from, the Net Revenues, excluding Subordinate Obligations. In addition, pursuant to the Master Indenture, the Authority has also agreed, at all times while any of the Bonds remain Outstanding, to fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Net Revenues during such Fiscal Year equal to at least one hundred fifteen percent (115%) of the Annual Debt Service in such Fiscal Year; provided, that for purposes of this requirement the Authority may consider amounts withdrawn from the Rate Stabilization Fund in a Fiscal Year as Net Revenues for such Fiscal Year as provided in the Master Indenture.

No Reserve Fund for Series 2014 Bonds

The Series 2014 Bonds are not secured by the Master Reserve Fund or any Series Reserve Fund. Future obligations issued under the Master Indenture may be secured by a Master Reserve Fund or by a Series Reserve Fund. See APPENDIX B –“SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE” attached hereto.

Conditions Precedent to Execution of Additional Bonds and Other Obligations

The Master Indenture provides that the Authority may at any time issue or execute additional Bonds payable from the Net Revenues and secured by a lien and charge upon the Net Revenues equal to and on a parity with the lien and charge securing the Series 2014 Bonds issued thereunder, subject to the satisfaction of certain conditions specified in the Master Indenture. The Master Indenture also provides that the Authority may at any time execute any Contracts the Contract Payments under which are payable on a parity with the Bonds; provided, that such Contracts meet the conditions and requirements applicable for the issuance of additional Bonds under the Master Indenture (with the reference to Bonds being construed to mean Contracts, as appropriate, and any provision not applicable to Contracts being disregarded) at the time of the execution thereof. In addition, the Master Indenture provides that a Repayment Obligation (other than a Repayment Obligation with respect to a credit facility on deposit in the Reserve Fund) may be accorded the status of an obligation payable on a parity from Net Revenue with the Bonds solely for purposes of securing such Repayment Obligation under the Master Indenture; provided, that such Repayment Obligations meet the financial conditions and requirements relating to the issuance of additional Bonds (with reference to Bonds being construed to mean Repayment Obligations, as appropriate) at the time of entering into such Repayment Obligation. These conditions applicable to the issuance of additional Bonds (and Contracts or Repayment Obligations, as described above) include the following:

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(a) The Authority shall be in compliance with all agreements, conditions, covenants and terms contained in the Master Indenture and in all Supplemental Indentures and Contracts required to be observed or performed by it (provided, however, that this condition shall not apply where the purpose of the Series of Bonds proposed to be issued is to cure such noncompliance), including a determination by the Authority as to whether such obligations will be secured by the Master Reserve Fund or a Series Reserve Fund or not be secured by any reserve fund;

(b) The Net Revenues for the most recent audited Fiscal Year or, alternatively, any 12 consecutive months within the last 18 months preceding the date of issuance of such Series of the additional Bonds, plus

(1) An allowance for Net Revenues for such Fiscal Year or 12 month period from any additions, betterments, extensions or improvements to the System or expansions to the service area of the System (including any material increase in the solid waste expected to be delivered to the System based on an executed contract providing therefor), which during any part of such Fiscal Year or 12 month period, were not in service or not in effect, as the case may be, all in an amount equal to the estimated additional average annual Net Revenues to be derived from such additions, betterments, extensions or improvements or expansions for the first thirty-six (36) months or shorter period in which each addition, betterment, extension or improvement is respectively to be in operation or expansion is to be in effect all as shown by a certificate of the Authority; and

(2) An allowance for increased Net Revenues arising from any increase in the rates, fees and charges of the System which were adopted by the Authority prior to the date of the execution of such Supplemental Indenture but which, during all or any part of such Fiscal Year or 36 month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in rates, fees and charges had been in effect during the whole of such Fiscal Year or 36 month period;

shall have produced a sum equal to at least one hundred fifteen per cent (115%) of the Maximum Annual Debt Service as calculated after the issuance of such Series of the Bonds; provided, that in the event that all or a portion of such Series of the Bonds is to be issued for the purpose of refunding and retiring any Bonds then Outstanding, interest and principal payments on the Bonds to be so refunded and retired from the proceeds of such Series of the Bonds being issued shall be excluded from the foregoing computation of Maximum Annual Debt Service; and provided further, that the Authority may at any time issue a Series of the Bonds without compliance with the foregoing conditions if the Annual Debt Service for each Fiscal Year during which such Series of the Bonds is Outstanding will not be increased by reason of the issuance of such Series of the Bonds; and provided, further that an adjustment may be made in the amount of Net Revenues to reflect the withdrawal of moneys from the Rate Stabilization Fund pursuant to the Master Indenture for the purpose of meeting the 115% coverage requirement, provided further however, that for purposes of the calculation required under the Master Indenture regarding additional Bonds, the amount of Net Revenues before any credits for withdrawals from the Rate Stabilization Fund may not be less than 100% of Maximum Annual Debt Service for Outstanding Bonds and the proposed additional Series of Bonds.

The Authority is not required to comply with the provisions relating to additional bonds in connection with the issuance of the Series 2014 Bonds.

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Non-Recourse to Members or State of California

THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL AND INTEREST ON THE SERIES 2014 BONDS IS A LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY FROM THE AMOUNTS PLEDGED THEREFOR AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY OR THE MEMBERS FOR WHICH THE AUTHORITY OR THE MEMBERS ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY OR THE MEMBERS HAVE LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. THE SERIES 2014 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE MEMBERS, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF THE CONSTITUTION OF THE STATE OF CALIFORNIA OR ANY STATUTORY DEBT LIMITATIONS, OR OTHERWISE OR A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY OR THE MEMBERS.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Series 2014 Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Series 2014 Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Series 2014 Bonds when due as set forth in the form of the Policy included as Appendix G to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Assured Guaranty Municipal Corp.

AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

AGM’s financial strength is rated “AA-” (stable outlook) by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

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Current Financial Strength Ratings

On June 12, 2013, S&P published a report in which it affirmed AGM’s “AA-“ (stable outlook) financial strength rating. AGM can give no assurance as to any further ratings action that S&P may take.

On January 17, 2013, Moody’s issued a press release stating that it had downgraded AGM’s insurance financial strength rating to “A2” (stable outlook) from “Aa3”. AGM can give no assurance as to any further ratings action that Moody’s may take.

For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Capitalization of AGM

At September 30, 2013, AGM’s consolidated policyholders’ surplus and contingency reserves were $3,458,464,281 and its total net unearned premium reserve was $1,902,038,053, in each case, in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference

Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (filed by AGL with the SEC on March 1, 2013);

(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 (filed by AGL with the SEC on May 10, 2013);

(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 (filed by AGL with the SEC on August 9, 2013); and

(iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (filed by AGL with the SEC on November 12, 2013).

All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Series 2014 Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding AGM included herein under the caption “BOND INSURANCE – Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein

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(collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

Miscellaneous Matters

AGM or one of its affiliates may purchase a portion of the Series 2014 Bonds or any uninsured bonds offered under this Official Statement and such purchases may constitute a significant proportion of the bonds offered. AGM or such affiliate may hold such Series 2014 Bonds or uninsured bonds for investment or may sell or otherwise dispose of such Series 2014 Bonds or uninsured bonds at any time or from time to time.

AGM makes no representation regarding the Series 2014 Bonds or the advisability of investing in the Series 2014 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “BOND INSURANCE”.

THE AUTHORITY AND THE SYSTEM

The Authority; History of the System

The Authority is a joint exercise of powers authority, created pursuant to an agreement dated as of January 1, 1997 (the “Authority Agreement”) among the County of Monterey, and the Cities of Salinas, Gonzales, Greenfield, King City and Soledad (the “Members”). Pursuant to the Authority Agreement, the Authority was established to, among other things, acquire and manage the landfill assets of each Member, ensure long term landfill capacity for the Authority service area, and provide a unified and coordinated solid waste management system for the Members. Since its formation in January 1997, the Authority has acquired the Crazy Horse, Lewis Road, Jolon Road and Johnson Canyon landfills and the related facilities. Although, prior to the formation of the Authority, these facilities were independently owned and operated by the City of Salinas and Monterey County, historically these facilities collectively served as the disposal location for virtually all solid waste generated in the Authority service area. As further described below, the Crazy Horse, Lewis Road and Jolon Road Landfills have been closed and all waste generated in the service area is currently delivered to Johnson Canyon Landfill.

In November 1997, the Authority issued $9,060,000 of Revenue Bonds (the “1997 Bonds”) to finance improvements to its Crazy Horse and Johnson Canyon Road landfills. In connection with the 1997 Bonds, each Member of the Authority entered into Waste Delivery Agreements (as amended, the “Waste Delivery Agreements”) which legally required waste to be directed to the System. A form of a Waste Delivery Agreement and Amendment to the Waste Delivery Agreement is attached hereto as APPENDIX E – “FORM OF WASTE DELIVERY AGREEMENT”. The Waste Delivery Agreements and the Authority Agreement contain provisions that would require any withdrawing member to retain its fair share of liability for the Authority’s closure and postclosure remediation costs and that any bonds issued by the Authority be paid or adequate provisions for payment of such bonds be made. See “– Waste Delivery Agreement and Waste Collection Practices of Members” below and “CERTAIN RISK FACTORS – Withdrawal of Members” and “– Competition” herein. The Members affirmed the Waste Delivery Agreements in 2002 in connection with the issuance of the Prior Bonds in the principal amount of $39,845,000. The proceeds of the Prior Bonds were used to (a) pay certain costs incurred by the

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Authority in connection with the acquisition and construction of certain improvements to the Authority’s System (including a variety of projects at the Authority landfills - Crazy Horse, Lewis Road, Jolon Road and Johnson Canyon), (b) refund the Authority’s Revenue Bonds, Series 1997 and (c) prepay a portion of the Crazy Horse Purchase Agreement, (d) fund a reserve account for the Prior Bonds and (e) pay costs of issuance of the Prior Bonds.

The County delivered a notice of intention to withdraw from the Authority on July 13, 2012, and a notice to withdraw from its Waste Delivery Agreement on July 16, 2012. According to the County’s notice it issued the notices of intent to withdraw because “Monterey County has been concerned for some time regarding the direction of the Authority with respect to its finances, and the collection and disposal of waste within its jurisdictional boundaries.” The Authority believes it is managing the System in an efficient and cost effective manner. Over the past year, members of the Authority Board, County Board of Supervisors and their respective staffs met to discuss the County’s concerns. Subsequent to those discussions, a joint working group of city/county managers representing the County, Member cities, and other and cities within the County suggested development of a regional solid waste management study that would review solid waste delivery issues within the County (the “Regional Solid Waste Study”). The County rescinded its notices of intent to withdraw on December 5, 2013 and each Member, including the County, amended and reaffirmed its Waste Delivery Agreement prior to the issuance of the Series 2014 Bonds.

In addition, the County resolution providing for approvals required in connection with the issuance of the Series 2014 Bonds and rescission of the County’s withdrawal notice was conditioned on the Authority approving a resolution resolving that a) to the extent permitted by law and barring unforeseen exigent circumstances, the Authority shall not raise rates or impose new rates for the disposal or processing of waste of any kind at any facilities owned, controlled, managed or leased by the Authority (including without limitation tipping fees or AB 939 fees) through and including June 30, 2015, without the express approval of the County’s representatives to the Authority’s Board of Directors in attendance at a meeting of the Authority’s Board where such action is considered, other than implementation of the previously approved rate increase effective July 1, 2013; b) the Authority will participate in and fund its fair share of a Regional Solid Waste Study; and c) the Authority shall not pursue an autoclave, or other developmental or experimental waste disposal technologies, including but not limited to the expenditure of funds on planning or siting activities, except for the biomethane pilot program, and economic and environmental analyses for alternate locations for a future transfer station and a materials processing and recovery facility. The Authority adopted a resolution containing the provisions described above with modifications approved by the County’s Board on December 17, 2013 that allow the Authority to pursue and expend funds for an autoclave or other developmental or experimental waste disposal technologies after June 30, 2015 or sooner with the approval of the County’s representatives to the Authority’s Board of Directors in attendance at a meeting where such matters are considered. Furthermore, on December 19, 2013, the Authority’s Board approved a form of Request for Proposal for the Regional Solid Waste Study. The Regional Solid Waste Study is expected to be completed in 12 to 18 months.

Organization and Management

The Authority is governed by a nine member governing board, consisting of three members of the Salinas City Council, two members of the Monterey County Board of Supervisors, and one City Council member each from the Cities of Gonzales, Greenfield, King City and Soledad. The Chief Administrative Officer of the Authority is R. Patrick Mathews.

Pursuant to the Authority Agreement, the City of Salinas (3 out of 9 members on the Authority Board) and the County (2 out of 9 members on the Authority Board) have substantial influence over the activities of the Authority. Pursuant to the Authority Agreement, the affirmative vote of at least one

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member of the Authority Board who is a member of the Salinas City Council is required to approve Board actions.

Service Area

The waste shed currently served by the System consists of the Cities of Salinas, Gonzales, Greenfield, King City and Soledad, and all areas of the County not serviced by the Monterey Regional Waste Management District. A map of the Authority service area and facilities appears on the back inside cover of this Official Statement.

Economy in the Authority Service Area. Major employers in the Authority service area include those in county government, financial services, education, health care, electronics and food production and food services.

Population in the Authority Service Area. As of January 1, 2013 the population of the Authority service area is estimated to be approximately 267,000 with approximately 57% of the population residing in the City of Salinas.

Existing System

The System currently consists of one operating landfill and two transfer stations. The Authority is also responsible for postclosure maintenance costs associated with three closed landfills owned by the Authority. Below is a description of the Authority’s facilities. In addition, the Authority at times contracts with a privately owned transfer station facility in the City of Salinas to transfer waste to the landfill when the amount of incoming waste exceeds the Sun Street Transfer Station permit limit. The Authority may also in the future contract with other landfills for disposal of waste.

The descriptions below of the Authority’s System (including operating and closed landfills and transfer stations) contain detailed information on permits and environmental issues. While there have been some minor permit or environmental violations in the past they have all been resolved. The Authority believes that the level of violations is very low for a heavily regulated industry and are typical for solid waste disposal operations of the same scope as the System. The Authority believes any remediation or mitigation measures required to resolve violations in the past have not had a material impact on the Authority’s finances or operations.

Johnson Canyon Road Landfill

Description. Johnson Canyon Road Landfill (“Johnson Canyon Landfill”) is located on Johnson Canyon Road, in an unincorporated County area approximately 2 miles northeast of the City of Gonzales in the Salinas Valley. The landfill is located on a 163-acre parcel with a permit for a refuse fill area of 96.3 acres. The original parcel of 122 acres was increased when the Authority purchased adjacent property in 1999. The landfill is a designated Class III site for municipal solid waste disposal. For a discussion of the remaining capacity of Johnson Canyon Landfill for acceptance of solid waste, see “Disposal Capacity in the System”

Recology Waste Solutions, a private company, is contracted to manage the day-to-day operations of the landfill site. While their contract could be extended to December 31, 2017 at the Authority’s sole discretion, it is currently set to expire on December 31, 2014. The Authority has issued a Request for Proposals to select a landfill operator effective January 1, 2015 with a revised scope of work that reflects new objectives to increase diversion activities at the landfill. The Authority will compare the cost of a new contractor to the cost of using Authority employees to manage landfill operations. The Authority

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will select the most cost efficient option. In either case the Authority expects to reduce operating costs by at least $600,000 annually. This reduction is reflected in the projected operating results set forth under “– Projected Revenues and Financial Results” herein. The current landfill operations contract was originally executed on October 6, 2000. The Authority believes it is no longer cost efficient due to the reduction of tonnage over the years.

The Authority contracts with Vision Services to process the yard waste at Johnson Canyon Landfill as part of the organics program. The current contract is due to expire on June 30, 2015.

Regulatory Status. The landfill is in material compliance with all significant regulatory requirements. On September 20, 2013, the Monterey County Local Enforcement Agency (LEA) confirmed that the Solid Waste Facility Permit Number 27-AA-0005 (the “SWFP”)for Johnson Canyon Landfill is in good standing with Monterey County and the California Department of Resource, Recycling and Recovery, formerly the California Integrated Waste Management Board (“CalRecycle”). The SWFP was originally issued in 1978 by the LEA and concurred with by CalRecycle. The most recent permit revision was issued February 1, 2008. The Authority submitted its permit renewal application in August 2012. This permit has a stated expiration date of February 1, 2013. The LEA has deemed the site’s Joint Technical Document - Five Year Review on January 24, 2013 (“Joint Technical Document”), as complete and is working with the Authority to issue a permit renewal. The renewed permit is pending approval from the County of Monterey Health Department. In the meantime the LEA has confirmed that the permit is in good standing and that the landfill may continue operating under the conditions in the permit. The renewed SWFP was submitted by the LEA to CalRecycle for concurrence on December 23, 2013.

While there have been some minor violations in the past they have all been resolved. The Authority believes that the level of violations is very low for a heavily regulated facility and are typical for a landfill operation.

The current SWFP allows for 1,574 tons per day of diverted and refuse material and 265 vehicle round trips per day. The landfill receives an average of 785 tons per day and 74 vehicle round trips per day.

The Joint Technical Document also notes other permits which are in good standing and listed below.

• RWQCB Waste Discharge Requirements (WDRs) R3-2008-0011, adopted March 20, 2008.

• RWQCB Storm Water Discharge Notice of Intent WDID No. 3 27I013452.

• Monterey Bay Air Pollution Control District, Title V Operating Permit TV57-01, adopted September 1, 2011.

• Monterey Bay Air Pollution Control District, Permit to Operate 11977, adopted July 1, 2004.

• Certified Unified Program Agency, Monterey County Environmental Health Division, Permit to Operate FA0817334 annual renewal date of July 1st.

• County of Monterey, Conditional Use Permit adopted May 30, 2007.

• Monterey Regional Water Pollution Control Agency, Long Term Special Liquid Waste Discharge Permit, revised September 1, 2011.

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• Department of Fish and Game, Special Species Mitigation Area Deed Restriction, recorded March 5, 2000

Environmental Issues. Below is a summary of permit violations and related litigation that have been recorded during the past three years.

• One (1) Notice of Violation (administrative in nature) was recorded pertaining to accepting tonnage over the permit limit (August 2010). The Authority generally accepts tonnage above the permit limit from time to time in order to prevent possible illegal dumping. These occurrences do not occur on a regular basis.

• The Authority contracts out the compost operation and works to assure that operation complies with the permit. However, the Authority received one (1) Notice of Violation relating to a fire at the chip and grind operation (July 2013). The Authority subsequently gave the contractor a ‘notice to cure’ resulting in compliant operations.

• Two (2) Notice of Violations were issued by the Monterey Bay Unified Air Pollution Control District. One pertained to failure to submit a copy of the USEPA Annual Certification Report to the District (March 2012). The other violation pertained to the landfill gas to energy project operation. That violation was related to construction activities where recording equipment was not correctly installed resulting in the recording of false data for the landfill gas flare operation for a brief period (June 2013).

• The Authority continues to work with regulators to address any issues in a timely manner, and does not believe any violations have had a material impact on its finances or operations.

Sun Street Transfer Station and Household Hazardous Waste Collection Facility

Description. The site is located on two parcels which total 6.75 acres of property that is zoned General Industrial (IG) at 131 and 139 Sun Street in the City of Salinas. Access is provided via Sun Street and Griffin Street. Interstate 101 lies to the east and Union Pacific Railroad tracks are located directly west of the site. The transfer station portion of the facility receives and transfers self-hauled waste and franchise waste collected by Republic Services of Salinas to the Johnson Canyon Landfill via large capacity trailers. Recyclable materials are also collected and consolidated at the facility and appropriately transported elsewhere. The facility also houses the Household Hazardous Waste facility which collects household hazardous waste from residential customers and some commercial customers where it is appropriately transported elsewhere.

In 2012 the City of Salinas requested that the Authority relocate the transfer station in order to make room for a proposed development project currently known as the Alisal Marketplace. The Authority and the City have begun discussions to potentially swap the Authority’s Sun Street site for another City-owned parcel on which the Authority would develop a new transfer station. The Authority’s Board of Directors have indicated the Authority will relocate this facility only if it does not create a financial hardship for the Authority. Preliminary siting costs are encumbered. See “THE AUTHORITY AND THE SYSTEM – Capital Plan” for more information.

Regulatory Status. While the Authority is working to revise its permit with the City to address operational activities, the facility operates under Solid Waste Facility Permit 27-AA-0110 which allows 400 tons per day and 296 vehicle round trips per day. This facility receives an average of 310 tons per day and 164 vehicle round trips per day. The permit was revised to the current limits on October 19, 2012 by the Local Enforcement Agency of CalRecycle which is the Monterey County Health Department. The

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permit will need to be renewed in 2017. The Household Hazardous Waste Facility is regulated by the Monterey County Health Department with oversight from CalRecycle and the Department of Toxic Services.

Environmental Issues. For the Sun Street Transfer Station Household Hazardous Waste Facility, there have been no violations recorded in over ten years. For the Sun Street Transfer Station, four (4) Notice of Violations were recorded pertaining to accepting tonnage over the permit limit (February, August, October 2011, and July 2012). Other violations were administrative in nature. They pertained to completing a Business Response Plan using the revised format.

The Authority has entered into a Consent Decree with the California Sportfishing Protection Alliance (“CSPA”) in a Clean Water Act suit brought by CSPA in the United States District Court against the Authority. The Consent Decree requires that the Authority implement certain structural and non-structural best management practices at the Sun Street transfer facility to reduce and monitor potential pollutants in storm water run-off discharging from the Sun Street facility during rain events.

The Authority continues to work with regulators to address any issues in a timely manner, and does not believe any violations have had a material impact on its finances or operations.

Jolon Road Transfer Station

Description. The Jolon Road Transfer Station and Recycling Transfer Center is located approximately 3.5 miles southwest of King City, in Monterey County, California. Jolon Road Transfer Station is located within the Jolon Road Landfill property and it is located outside the former landfill refuse footprint. The facility is owned by the Authority and operated by Waste Management under contract with the Authority. The facility receives waste from King City, Fort Hunter-Liggett and the surrounding unincorporated South Monterey County area, which is then transported to Johnson Canyon Landfill. Recyclable materials are also collected and consolidated at the facility and appropriately transported elsewhere.

The contract with Waste Management terminates on September 1, 2016 at which time the Authority plans on either operating the transfer station with Authority staff or contracting out its operations under a different arrangement which is expected to reduce the operating costs in half, a savings of approximately $350,000 (these cost savings are included in the projected operating results under “– Projected Revenues and Financial Results” herein). The current fee arrangement is twice the cost of other transfer stations in the area because it includes an element related to a settlement agreement between the Authority and Waste Management which was executed in 2006.

Regulatory Status. All of the permits associated with this facility are in good standing. This facility receives an average of 56 tons per day and 27 vehicle round trips per day. The facility’s Solid Waste Facility Permit 27-AA-0115 allows the transfer station to handle 135 tons per day and 128 vehicle round trips per day. This permit was issued on April 23, 2010, and will need to be renewed in 2017.

Environmental Issues. For the Jolon Road Transfer Station two violations were received for exceeding the permitted daily tonnage limit (May 2010 and April 2013). These violations occur from time to time when the Authority decides to not turn away waste to prevent illegal dumping elsewhere. So long as these violations are not a regular occurrence, the Authority does not expect there will be any fines or penalty associated with such violations.

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Crazy Horse Landfill - Closed

Description. The Crazy Horse Landfill, located at 350 Crazy Horse Canyon Road, approximately 9 miles north of Salinas and 2 miles northeast of Prunedale in an unincorporated area of Monterey County, is undergoing closure and is expected to be fully closed by June 2014. The landfill is located on a 160-acre parcel. The permitted refuse area for the Class III waste disposal facility is 72 acres. Out of an approximate $11.0 million closure budget, the Authority estimates that approximately $330,000 of additional work remains to be completed, primarily for liner testing, liner repairs, drainage pipe work, sump removal and additional construction quality control inspection of the cover system. This work is expected to be paid from closure funds already set aside by the Authority. The annual postclosure maintenance budget for this landfill for Fiscal Year 2013-14 is $553,100, which will be paid as a Maintenance and Operation Cost pursuant to the Indenture.

Regulatory Status. All of the permits associated with this facility are in good standing. The landfill operates under a Solid Waste Facility Permit which will be revised after all closure activities are complete. The landfill also operates under the RWQCB WDRs R3-2013-0016 for groundwater monitoring.

Limited amounts of designated and hazardous waste were historically placed in Module I of the Crazy Horse Landfill which was determined in 1985 to be releasing hazardous substances into the environment. A groundwater extraction and treatment system was constructed to mitigate the effects of groundwater contamination and the module was closed in March 1989. On August 24, 1990 the U S Environmental Protection Agency (the EPA) placed the Crazy Horse Landfill on the National Priorities List. Through a negotiated agreement with the EPA the Authority currently cleans up contamination at the site and performs ongoing monitoring and remediation of the groundwater. In response to the detection of perimeter gas migration, the LEA issued a Stipulated Order of Compliance to the Authority to construct a perimeter gas control system at the landfill. The Authority completed the construction of the perimeter gas collection and control system in April 1998. The system includes a network of gas collection wells surrounding the previously installed privately operated gas collection system which previously extracted methane for the generation of electricity. The perimeter gas collection system includes an enclosed flare where landfill gases are burned under controlled conditions to meet regulatory standards.

Environmental Issues. The Authority has received notices of violations related to the Crazy Horse Landfill. One is for a gas monitoring probe that did not meet the State minimum standards (January 2010). Another violation pertained to a drainage pipe failure (December 2012). The third violation is for failure to manage the leachate system per the permit requirements (February 2013). As with other issues, the Authority continues to work with the agencies with the goal to resolve the issues and put in-place additional safeguards and/or protocols to prevent reoccurrence in the future. The Authority continues to work with regulators to address any issues in a timely manner, and does not believe any violations have had a material impact on its finances or operations.

Jolon Road Landfill - Closed

Description. Jolon Road Landfill is a closed Class III waste disposal facility, located in a remote canyon area in Monterey County toward the southwestern end of Salinas Valley, approximately 3.5 miles southwest of King City. The landfill stopped receiving waste in 1997, was closed on May 18, 2009, and is in the postclosure maintenance period. The 496-acre parcel was purchased by the Authority from USA Waste of California, a wholly owned subsidiary of Waste Management, Inc. (USA Waste) as part of a settlement of litigation between the Authority and USA Waste over responsibility for closure and post-closure of the Jolon Road Landfill. The facility occupies about 57 acres of which the refuse disposal area

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was about 17 acres. The Authority is responsible for maintenance of the closed landfill. The annual postclosure maintenance budget for this landfill for Fiscal Year 2013-14 is $168,800, which will be paid as a Maintenance and Operation Cost pursuant to the Indenture.

Regulatory Status. All of the permits associated with this facility are in good standing. The current permit was issued on October 3, 2012 and will need to be renewed in 2017.

Environmental Issues. The closed Jolon Road Landfill cover system experienced damaged due to rodent habitation. Both the Water Board and the Health Department issued a notice of violation to address the rodent issue (October 2011/November 2012). The issue has been resolved where rodent control is now part of the on-going maintenance program. The Authority continues to work with regulators to address any issues in a timely manner, and does not believe any violations have had a material impact on its finances or operations.

Lewis Road Landfill - Closed

Description. Lewis Road Landfill, a closed Class III waste disposal facility, is located approximately 4 miles southeast of Watsonville and 3.5 miles west of Aromas in northern Monterey County. The landfill stopped receiving waste in 2003, was closed on December 8, 2005, and is in the postclosure maintenance period. The site is located on a 124-acre parcel, of which about 14 acres were used for waste disposal. Ownership of the landfill was assigned to the Authority from Monterey County in September 1997. The annual postclosure maintenance budget for this landfill for Fiscal Year 2013-14 is $214,400, which will be paid as a Maintenance and Operation Cost pursuant to the Indenture.

Regulatory Status. All of the permits associated with this facility are in good standing.

Environmental Issues. This site has no known environmental issues. The Authority is in material compliance with all significant regulatory requirements. The Authority continues to work with regulators to address any issues in a timely manner.

Required Permits

Several local, state, and federal permits govern the operation and potential expansion of the Johnson Canyon Landfill and any other landfills owned by the Authority in the future. Several state and local regulatory agency permits and approvals must be obtained including, but not limited to, the following: the Solid Waste Facility Permit as overseen by CalRecycle and the Monterey County Health Department, the Waste Discharge Requirements Order as overseen by the Regional Water Quality Control Board, and the Title V Permit to Operate as regulated by the Monterey Bay Unified Air Pollution Control District. In addition, local land use permits are required by the respective city or county. As of December 11, 2013, the Authority reports that it has obtained all permits required to operate the System, and is in material compliance with the terms of such permits.

Closure and Postclosure Liabilities

The Authority has certain liabilities related to its operating landfill (Johnson Canyon Landfill) and closed landfills (Crazy Horse, Lewis Road and Jolon Road). As further described below, the Authority sets aside funds annually to pay for a portion of the expected closure costs of Johnson Canyon Landfill. As of June 30, 2013, the Authority has set aside $2,848,013 to cover the estimated closure liabilities of $2,399,481. The Authority also has liabilities associated with the postclosure maintenance of its active and closed landfills. The Authority has not set aside funds for postclosure maintenance of its

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active or closed landfills. These costs are paid on a pay-as-you-go basis as Maintenance and Operation Costs pursuant to the Indenture, as further described below.

The Authority’s landfills are regulated by CalRecycle which requires the Authority to set-aside funds annually for landfill closure and to fund postclosure maintenance for at least 30 years after closure. On June 19, 1998, CalRecycle, approved the Authority’s financial assurance mechanisms for closure and postclosure maintenance for the Authority’s four landfills. Since then, CalRecycle and the Authority have also agreed to the financial assurance mechanism for corrective action for the Jolon Road, Johnson Canyon and Crazy Horse Landfills. CalRecycle found that the Enterprise Fund and Pledge of Revenue Agreement met the requirements of Title 27 of the California Code of Regulations and Federal Title 40 regulations.

Under the terms of the enterprise fund financial assurance mechanism, the Authority is to annually set-aside funds for the closure of the landfills. Closure costs are determined and funded annually based on landfill capacity used. Although postclosure maintenance costs will be paid near or after the date that the landfills stop accepting waste, the Authority reports a portion of these costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. Estimated current costs of closure and postclosure care are evaluated annually as required by Generally Accepted Accounting Principles (GAAP). The results of the annual evaluation can increase or decrease closure and postclosure costs depending on the various components here described. For Fiscal Year 2013-14 the amount set aside for closure for the Johnson Canyon Landfill is based on an estimated cost of $1.15 per ton (approximately $277,000) buried at the Johnson Canyon Landfill.

The postclosure maintenance and corrective action costs will be funded on a pay-as you go basis when they are actually incurred and are secured by a pledge of revenue. Postclosure maintenance costs are based on the level of service required to maintain the landfill final closure cover and maintain and operate the landfill environmental monitoring and control systems, such as leachate and gas collection systems, during the postclosure period. Postclosure maintenance costs extend over a minimum 30 year period of time as required by California regulations. For this reason, it is likely there will be unforeseen repair or replacement costs during the postclosure period. Some of these variances are due to changes in technologies, changes in operational conditions and physical changes at the landfills.

The Authority is required to recognize annually an expense for postclosure maintenance for the Johnson Canyon Landfill even though the actual expenditure of the funds will not take place until after the landfill is closed. (Amounts recognized, but not required to be paid on a current basis, do not constitute Maintenance and Operation Costs pursuant to the Indenture.) The postclosure maintenance expense is offset by a liability since the Authority does not fund this item at present. The Authority has entered into a financial assurance agreement with CalRecycle whereby the Authority has pledged its revenues to fund the future postclosure maintenance costs.

See note 10 in the Authority’s Basic Financial Statements attached hereto as Appendix A for more information on closure and post closure liabilities in connection with the Johnson Canyon Landfill and the Authority’s closed landfills.

Disposal Capacity in the System

The Authority has one operating landfill remaining, Johnson Canyon Landfill. As of June 30, 2013, the Johnson Canyon Landfill had 5.8 million tons of remaining permitted capacity. At the current tonnage disposal rate the landfill has 29 years of capacity left (until approximately 2042), well beyond the final maturity of the Series 2014 Bonds on August 1, 2031.

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In Fiscal Year 2012-13, 236,521 tons of solid waste were buried at Johnson Canyon Landfill. For Fiscal Year 2013-14, the Authority expects 245,700 tons to be buried (consisting of 166,500 from the Authority service area and 79,200 imported from southern Santa Clara County pursuant to the South Valley Agreement described below). The importation of waste under the South Valley Agreement is expected to end on June 30, 2014. The Authority has decided to not seek new agreements for the importations of waste as a means to generate revenue. See “– South Valley Agreement” herein.

Assembly Bill 341, adopted in October of 2011 (“AB 341”), requires commercial, industrial and multi-family complex customers to implement recycling services. Although the Authority expects AB 341 to reduce landfill tonnage in the future, reductions in tonnage have not been seen yet. As such, the Authority is projecting that tonnage from the Authority service area will continue at the current level of 166,500 tons annually. It is anticipated that any reductions to landfill tonnage due to AB 341 will be offset by additional disposal tonnage as a result of the improvement in the economy.

The Authority has been pursuing the development of conversion technologies which will reduce the landfill tonnage. The expected decrease in landfill tonnage would extend the projected lifespan of the Johnson Canyon Landfill well beyond 2042 Conversion technologies are thermal, chemical, mechanical and/or biological processes capable of converting post recycled solid waste into chemicals, biofuels such as ethanol or diesel, and renewable energy for fuel cells or electricity. Such technologies are not expected to impact the amount of waste delivered to the System, only the amount of waste buried in the landfill. As a result, revenues based on fees for tonnage delivered to the Authority should not be affected.

Based on four years of research with the USDA, the Authority has entered into a nonbinding agreement with a technology vendor, Global Organics Energy (“GOE”), to consider the development of a commercial steam autoclave for the purposes of reducing the volume of garbage needing to be landfilled and, after cleansing, producing a material suitable as a paper manufacturing feedstock. The use of the autoclave technology could reduce the amount of landfill tonnage by at least 60 percent with a corresponding increase in the landfill lifespan. At this time no site has yet been selected for this potential project. Fiscal year 2015-16 is the earliest the Authority could consider moving forward with this project. See THE AUTHORITY AND THE SYSTEM – The Authority; History of the System” herein. A demonstration autoclave project may be built by GOE at its expense at Johnson Canyon Landfill to fully test the waste volume reduction capabilities of this technology before the Authority Board will give this technology serious consideration.

In order to fully utilize the permitted capacity, the Authority estimates the Johnson Canyon Landfill will require capital improvements totaling approximately $17.5 million over the life of the landfill for the construction of additional landfill modules. As described herein in “- Capital Plan,” the Authority expects to set aside funds and pay for these improvements on a pay-as-you-go basis. No new modules are expected to be constructed during the next five years. No additional permits are required in connection with the future construction of the modules.

Johnson Canyon Landfill Capacity as of June 30, 2013

Cubic Yards Tons Permitted Capacity 10,512,541 7,463,620 Cumulative Capacity Used (2,310,648) (1,640,560)

Remaining Capacity 8,201,493 5,823,060 ____________ Source: Authority

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The Authority has covenanted in the Master Indenture to continue to provide capacity for the disposal of a sufficient amount of solid waste so as to enable the Authority to meet the Rate Covenant. The Master Indenture provides that the Authority may provide such capacity by making available disposal facilities owned and operated by the Authority, or by making contractual or other arrangements for the use of disposal facilities (either inside or outside of the geographical boundaries of the Authority) owned or operated by entities other than the Authority. However, there can be no assurance that the cost of expanding the System or the use of alternative disposal sites would not significantly increase the Maintenance and Operation Costs of the System. See “RISK FACTORS -- Disposal Capacity” herein.

Waste Delivery Agreement and Waste Collection Practices of Members

Each of the Members of the Authority has entered into a Waste Delivery Agreement with the Authority, pursuant to which (i) the Member agrees to exercise all legal and contractual authority it may possess to cause the delivery of non-recycled solid waste generated in the Member’s jurisdiction to the System and (ii) the Authority agrees to provide solid waste disposal capacity to the Members. The Waste Delivery Agreements obligate each Member (i) to amend any existing franchise, contracts or agreements to provide the Member with the right to designate the disposal location for solid waste collected pursuant to the franchise, contract or agreements and (ii) to designate the System as the disposal location pursuant to such authority. The Waste Delivery Agreements also provide that the Members will include the right to designate the disposal location in any future contracts, agreements or other arrangements into which they enter.

Waste delivered to the System pursuant to the Waste Delivery Agreements comprises approximately 91% of all Authority solid waste tipping fees. The remaining tonnage delivered to the Authority (9%) is delivered by self-haul customers. The percentage of tonnage from WDA-guaranteed and self-haul deliveries has historically been substantially the same from year-to-year and the Authority expects these percentages to be consistent in future years.

The Authority directly bills users of the System, the majority of which are franchise hauling companies. Approximately 78% of the total revenue of the system is collected from franchise haulers. The remaining 22% is collected from the cities of Soledad, Greenfield and Gonzales (which bill their solid waste customers directly) and self-haul customers. The historical level of customer payment delinquencies is small. As of June 30, 2013, the Authority recorded $13,332 as an allowance for uncollectible accounts (see Note 3, Page 17 of Appendix A) versus total charges for services of $15,438,514. The Authority reports this is the in line with its historical level of delinquencies.

In connection with the issuance of the Series 2014 Bonds, each Member of the Authority has reaffirmed its Waste Delivery Agreement and approved an amendment to its Waste Delivery Agreement. The amended Waste Delivery Agreement allows for the addition of facilities not owned by the Authority (and with respect to which the Authority has made contractual arrangements) to the System in the event the Authority chooses in the future to use other facilities for waste disposal or processing.

Each Member of the Authority makes its own arrangements for solid waste collection within its jurisdiction. The Authority does not provide collection services to the Members. Following is a description of waste collection arrangements in each of the Member’s jurisdictions:

Salinas: The collector responsible for solid waste services within the City of Salinas is Republic Services of Salinas (Republic). This company has local staff resources of about 60 employees. Republic serves approximately 24,000 to 25,000 residential households and approximately 2,500 commercial and multi-family customers in the City of Salinas.

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The City of Salinas, on November 1, 2010, approved a Revised and Restated Franchise Agreement with Republic. The exclusive agreement terminates on June 30, 2025. Under the terms of the agreement the City directs where the waste must be delivered. The City authorized the Authority to exercise that right under the Waste Delivery Agreement. The majority of the waste collected is delivered to Sun Street Transfer Station. Yard waste collected is delivered to Johnson Canyon organics programs for processing. All curbside recyclable materials collected are processed by Republic through its own facilities.

Monterey County: Solid waste collection services in the unincorporated area of the County within the Authority service area (i.e., the portion of Monterey County not included in the Monterey Regional Waste Management District) are regulated by the County through (i) the County’s waste collection ordinance and permits issued by the County thereunder; and (ii) a franchise agreement between Monterey County and Carmel Marina Corporation. The ordinance, permits and agreement address collection, transportation, and disposal of solid waste within certain areas of the County. The ordinance (and permits) and the agreement are described below. Waste collected in the western part of the County, in the Monterey Regional Waste Management District area, is delivered directly to the Monterey Peninsula Landfill located just north of the City of Marina.

On November 1, 2010 the County entered into a unified franchise agreement with USA Waste, d/b/a Carmel Marina Corporation (Waste Management, Inc.) for collection, transport, processing and disposal of solid waste and recyclables in unincorporated Monterey County through June 30, 2020 (with the County having the right to extend the agreement for up to five additional years).

The unified agreement calls for all non-recycled solid waste generated within the boundaries of the Authority to be disposed of at an Authority disposal facility. Pursuant to the agreement, the waste hauler directly bills waste generators for services provided by Waste Management, at rates approved by the County. Waste Management then directly pays Authority the landfill disposal fee.

Gonzales, Greenfield, and Soledad: These three Members on July 1, 1997 jointly entered into a refuse, recycling, and yard waste services franchise contract with Tri-Cities Disposal and Recycling (“Tri-Cities”), pursuant to which Tri-Cities became the exclusive hauler of solid waste (subject to certain limited exceptions) generated in the cities. Tri-Cities is a wholly owned subsidiary of Monterey City Disposal Service, Inc., which provides residential and commercial refuse and recycling services within the city of Monterey. The contract, which expired on June 30, 2004, was extended through December 31, 2016 to correspond with the King City agreement termination date (described below). The agreement specifically provides that the cities have the right to designate the disposal location for solid waste collected pursuant to the agreement. This waste is delivered to the Johnson Canyon Landfill.

Each of these cities performs its own billing for solid waste collection and disposal services through City issued utility bills and includes separately itemized disposal and collection charges. Pursuant to interagency agreements between the Authority and each of these cities, each City pays the Authority for each ton of waste disposed of by its franchised collector. The ability of these Cities to impose fees for solid waste collection (and to thereby pay the Authority for solid waste disposal service provided by the Authority) may be limited in the future by the provisions of Proposition 218, which contains many interrelated provisions affecting the ability of municipalities to levy and collect existing and future taxes, assessments, fees and charges.

King City: King City has an exclusive franchise agreement for the collection, transportation, recycling and disposal of solid waste generated in the city with the Carmel Marina Corporation (doing business as King City Disposal Service), (a wholly-owned subsidiary of Carmel Marina Corporation, now owned by USA Waste). The franchise agreement was amended and extended in July 2004 and will

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terminate on December 31, 2016. The agreement specifically allows the City to designate the disposal site for all non-recyclable waste generated within its borders. King City Disposal delivers solid waste to the Jolon Road Transfer Station. Source-separated recyclables are to be delivered to a materials recovery facility owned or operated by Carmel Marina Corporation. All other recyclables are to be delivered, if feasible, to a facility capable of processing such materials. The franchise agreement requires the hauler to bill each customer’s share of disposal expenses. The Authority bills King City Disposal for tipping fees.

South Valley Agreement

The Authority entered into a Waste Disposal and Capacity Agreement, dated as of October 8, 2003 (the “South Valley Agreement”), with South Valley Disposal & Recycling, Inc. (“South Valley”), a wholly owned subsidiary of Recology Waste Systems. Pursuant to the South Valley Agreement, South Valley delivers waste collected in the Cities of Gilroy and Morgan Hill and certain unincorporated areas of the County of Santa Clara (none of which are members of the Authority) to the Authority’s Johnson Canyon Landfill. The South Valley Agreement has a current termination date of June 30, 2014, and is subject to extension in one year increments at the Authority’s election. However, the Authority was notified on June 19, 2013 that the cities of Gilroy and Morgan Hill are looking for a less expensive waste disposal solution for their waste. Under certain conditions in the South Valley Agreement, the cities may have the right to direct South Valley to deliver waste to the disposal site of the cities’ choosing. The cities issued a Request for Proposal (RFP) for waste disposal. On August 13, 2013 the Authority was notified that its proposal was not selected. The cities will likely direct the waste that is currently coming to the Authority between January 1, 2014 and January 1, 2015 to the new facility that they select.

When the new facility is selected, the Authority will lose approximately $2.0 million in annual net revenue after associated expenses. When importation of waste under the South Valley Agreement ends, the Authority has decided to not seek new agreements for the importation of waste as a means to generate revenue. The adoption of an AB939 fee effective July 1, 2013 which will generate $1.7 million, is designed to offset this loss in revenue. See “Major Source of Revenues - AB 939 Fee” below.

The Authority is expecting to offset the remaining $300,000 reduction in annual revenue with a reduction in operating costs for the Johnson Canyon Landfill. The Authority is issuing a Request for Proposals for a new operator of the landfill, and the Authority expects to reduce operating costs by $600,000 annually with a new operator of the landfill (the reduced cost projections have been included in the projected operating results under “– Projected Revenues and Financial Results” herein). The current contract expires December 1, 2014. See “Existing System - Johnson Canyon Landfill” above.

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Historical Waste Deliveries to the System

The following table shows landfilled tonnage history from Fiscal Year 2002-03 through Fiscal Year 2012-13. The table reflects a decrease in 2008 when Crazy Horse Landfill was closed. Soon thereafter, the then current national economic recession started to impact waste disposal. The Authority believes tonnage for its service area has leveled off at approximately 166,500 tons per Fiscal Year.

TABLE 1 SALINAS VALLEY SOLID WASTE AUTHORITY

HISTORICAL WASTE DISPOSAL INFORMATION

Fiscal Year Service Area South Valley Total 2002-03 219,583 - 219,583 2003-04 227,207 23,622 250,829 2004-05 234,709 84,571 319,280 2005-06 235,852 89,536 325,388 2006-07 222,906 85,327 308,233 2007-08 205,534 86,739 292,273 2008-09 187,486 84,322 271,808 2009-10 173,907 79,615 253,522 2010-11 171,082 79,552 250,634 2011-12 166,943 69,215 236,248 2012-13 166,500 70,021 236,521

______________________________

Source: Authority.

The following table shows the historical population for each Member and the percentage of waste each Member delivered to the System in 2013.


Population and Waste Origin

2013 Percentages Population Waste

Authority Service Area* 2010 2011 2012 2013 Percent Origin Monterey County* 50,107 50,372 50,689 51,043 19% 18% Gonzales 8,187 8,220 8,247 8,296 3 4 Greenfield 16,330 16,396 16,465 16,729 6 4 King City 12,874 12,942 12,992 13,073 5 5 Salinas 150,441 150,989 151,994 153,215 57 63 Soledad 25,738 26,285 26,196 25,430 9 6 Total 263,677 265,204 266,583 267,786 100 100

______________________________

*Monterey County totals include unincorporated areas of Monterey County for both the Authority and Monterey Regional Service Areas. Approximately 50% of the County’s population is in the Authority’s service area. Source: Authority.

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Projected Waste Deliveries to the System

The following table shows the Authority’s projected waste deliveries to the System through Fiscal Year 2020-21. The Authority’s service area projections assume that landfill tonnage from South Valley will no longer be delivered after Fiscal Year 2013-14 and waste deliveries from the Authority service area will remain flat. While it appears that the local economy is rebounding as can be seen by an increase in construction and demolition material, that increase is expected to be offset by an increase in recycling due to the implementation of mandatory commercial recycling. Fiscal year 2012-13 waste deliveries basically stayed flat in comparison to Fiscal Year 2011-12. For Fiscal Year 2013-14 the Authority’s budget is based on 166,500 tons, although projected tonnage is higher, as show below.

The South Valley tonnage projections are based on the contractual amounts in the South Valley Agreement.


PROJECTED WASTE DELIVERIES TO THE SYSTEM

Fiscal Year Service Area South Valley* Total 2013-14 166,500 79,226 245,726 2014-15 166,500 - 166,500 2015-16 166,500 - 166,500 2016-17 166,500 - 166,500 2017-18 166,500 - 166,500 2019-20 166,500 - 166,500 2020-21 166,500 - 166,500

__________ * South Valley waste delivered to the System is expected to cease in 2014. See “South Valley Agreement” above. Source: Authority.

Major Sources of Revenues

The Authority generates revenues from several sources, primarily landfill tipping fees, green waste tipping fees and the recently approved AB 939 Fee. A description of each revenue source is provided below.

Billing Methodology Generally. In Greenfield, Gonzales and Soledad, the cities bill their residents and businesses for waste services and then pay the Authority for disposal charges. For all other Members (including the City of Salinas, King City and the unincorporated area of the County served by the System), the Authority bills the individual hauler of waste then the hauler remits the amount due for disposal to the Authority. All funds are deposited into an Authority account. It is the Authority’s practice to close credit accounts and pursue collections against any customer that is more than 90 days overdue.

Landfill Tipping Fee. Landfill tipping fees constitute the largest source of Authority revenue. Fees are collected on the refuse received at the Authority’s landfills and transfer stations on a per-ton basis. The current (Fiscal Year 2013-14) tonnage fees collected by the Authority are $67-per-ton on all refuse that is landfilled. The Authority has a discounted rate schedule for certain recyclable materials.

AB 939 Fee. On May 16, 2013, the Authority approved a new $1.73 million fee for services that supports waste reduction and recycling programs to comply with state mandates pursuant to Assembly

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Bill 939 (“AB 939 Fee”). The AB 939 Fee is used to pay for development, implementation and administration of recycling plans and educational activities related to resource recovery, recycling and disposal of household hazardous waste and compliance with AB 939 annual reporting requirements. The fee is calculated as the eligible expenses divided among the franchise haulers based on their landfill tonnage contributed to the System the previous year. While the AB 939 Fee is a fixed amount, for FY 2013-14 it is the equivalent of almost $12 per ton. This fee will offset 85% of the lost income from revenues related to the South Valley Agreement when that agreement expires. The AB 939 Fee is expected to increase over time as the costs of providing AB 939 related services increase.

Transfer Station Self-Haul Tipping Fees. For self-haul solid waste, the Authority charges self-haul fees of $67-per-ton for loads over 1,000 pounds.

Transportation Surcharge. The Authority charges the franchise hauler for the City of Salinas, Republic Services of Salinas, a transportation surcharge to pay the Authority to transport waste from Sun Street Transfer Station in the City of Salinas to the Johnson Canyon Landfill. For Fiscal Year 2013-14, the per-ton surcharge is $11.00 and is projected to increase by $3.00 each Fiscal Year until it reaches $17.00 in Fiscal Year 2015-16, the full cost of transporting Salinas waste to the Johnson Canyon Landfill. Franchise haulers for the other Members have their waste delivered directly to the Johnson Canyon Landfill at their own expense.

Green-Wood Waste Tipping Fees/Diverted Materials. Green-Wood wastes are accepted at the Authority’s active landfill and transfer stations. The Authority accepts only clean, separated Green-Wood waste loads. Green-Wood waste loads are charged $36-per-ton for loads over 1,000 pounds. The Authority also has contracts with Republic Services of Salinas and Waste Management to receive green waste at a reduce rate ($16.54/ton in FY 2013-14). The Authority estimates that 27,100 tons of Green-Wood waste will be received in Fiscal Year 2013-14 which will be processed by Vision Recycling and turned into compost feedstock or wood chips.

South Valley Agreement. The South Valley Agreement generates approximately $2.0 million in net revenues to the Authority each Fiscal Year. It is likely that deliveries of South Valley waste will end sometime in 2014 as described under “South Valley Agreement” above.

Interest on Funds. For Fiscal Year 2013-14, the Authority is anticipating receiving about $80,200 in interest.

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Total Gross Revenues. The following table shows the total gross revenues for the last five Fiscal Years.


GROSS REVENUES BY SOURCE FOR FISCAL YEARS ENDING JUNE 30,

2009 2010 2011 2012 2013

Tipping Fees - Solid Waste $11,654,886 $11,414,097 $10,723,504 $10,708,388 $11,168,304

Tipping Fees - Transportation Surcharge(1) - 555,997 451,248 493,893 738,669

Tipping Fees - Diverted Materials(2) 932,616 963,645 1,096,359 1,069,755 1,072,891

Tipping Fees - South Valley 2,333,494 2,215,711 2,211,254 2,243,315 2,340,962

Charges for Services 93,000 93,000 117,000 117,916 118,620 $15,013,996 $15,242,450 $14,599,365 $14,633,267 $15,439,446

____________________ (1) Republic Services of Salinas pays an additional surcharge for the Authority’s costs related to transporting waste from the City of Salinas to the Johnson Canyon Landfill. (2) Diverted materials tipping fees are for material that is not buried in the landfills, including but not limited to green waste, wood waste, sludge and mattresses. The majority of this revenue comes from franchise haulers. Source: The Authority.

Competition

The Members of the Authority currently maintain franchise agreements with their respective haulers that give the Members the power to specify the disposal facility to be used by the hauler. The Members are obligated through their executed Waste Delivery Agreements to direct their waste to the System. In this regard, the Authority has legal flow control over the waste generated within its region. However, if a major price differential between Authority and non-Authority landfills were to develop, it is conceivable that one or more Members may consider other, more cost-effective disposal options. The competing alternative would likely need to be a significant savings for a jurisdiction to consider withdrawing from the Authority and breaching its contractual obligations or complying with prepay obligations, which would be a substantial cost to a withdrawing member. The Authority’s facilities are, to a limited extent, still subject to competition from other facilities in Monterey County and the region based on the liberty of self-haulers to uses competing facilities. See “CERTAIN RISK FACTORS – Competition” and “ – Withdrawal of Members” herein.

The Authority believes that the tipping fee increases proposed by other landfill sites as well as the additional transportation costs and loss of productivity for haulers to dispose of waste at other sites will allow the Authority to be competitive with other waste disposal sites outside the Authority service area. However, currently the tipping fees at other landfills are significantly less that the Authority’s tipping fees. The nearest disposal facilities are the Monterey Peninsula Landfill located 14 miles west of Salinas outside of Marina (with a tipping fee of $51.75 per ton as of January 1, 2014) and John Smith Landfill located 35 miles northeast of Salinas, outside of Hollister (with a tipping fee of $61.00 per ton as of January 1, 2014).

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Following is a table showing historical tipping fees of the Authority:


TIPPING FEE HISTORY

Fiscal Year Ending June 30th Tipping Fee

Rate Increase Percent Increase

1998 $ 39.00 1999 $ 39.00 $ - 0.0% 2000 $ 39.00 $ - 0.0% 2001 $ 43.00 $ 4.00 10.3% 2002 $ 43.00 $ - 0.0% 2003 $ 44.00 $ 1.00 2.3% 2004 $ 46.00 $ 2.00 4.5% 2005 $ 48.00 $ 2.00 4.3% 2006 $ 50.00 $ 2.00 4.2% 2007 $ 54.50 $ 4.50 9.0% 2008 $ 58.00 $ 3.50 6.4% 2009 $ 63.00 $ 5.00 8.6% 2010 $ 63.00 $ - 0.0% 2011 $ 64.00 $ 1.00 1.6% 2012 $ 64.00 $ - 0.0% 2013 $ 67.00 $ 3.00 4.7% 2014(1) $67+ AB939 Fee $ 12.00 17.9%

____________________ (1) Effective July 1, 2013, the Authority will collect an additional $1,732,000 of AB 939 fees

which is apportioned to each franchise hauler/member agency by prior year tonnage and charged to each customer based on their pro-rata waste deliveries. This new AB 939 fee is the equivalent of an estimated $12 per ton increase in the Authority’s tipping fee. See “Major Sources of Revenues – AB 939 Fees” herein.

Source: The Authority.

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Capital Plan

The table below is a summary of the Authority’s estimated capital expenditures for the next five Fiscal Years.


CAPITAL PLAN

Description 2013-14 2014-15 2015-16 2016-17 2017-18 Total Crazy Horse Closure $ 331,421 - - - - $ 331,421 Equipment Replacement 159,400 $ 80,000 $ 118,500 $ 135,000 $ 211,500 704,400 Landfill Improvements 810,295 2,529,760 1,238,040 - 250,000 4,828,095 Materials Recovery Facility 738,479 - - - - 738,479 Transfer Station Improvements 130,230 - - - - 130,230 Total Capital Plan 2,169,825 2,609,760 1,356,540 135,000 461,500 6,732,625 Projected Net Income After

Debt Service 2,120,648 1,464,633 2,120,460 2,443,013 2,380,809 10,529,563 Projected Net Income After

Capital Plan $(49,177) $(1,145,127) $763,920 $2,308,013 $1,919,309 $3,796,938

Beginning Cash Balance $8,576,010 $8,526,833 $7,381,706 $8,145,626 $10,453,639 Ending Cash Balance $8,526,833 $7,381,706 $8,145,626 $10,453,639 $12,372,948

____________ Source: Authority.

The $6.7 million capital plan represents Authority projects which have been Board-approved and for which financial provisions and commitments have been made. Over the next five Fiscal Years, the Authority projects operating surpluses totaling about $10.5 million. The Authority expects to use these operating surpluses to pay for its five-year capital plan and does not anticipate issuing any additional debt at this time.

The Authority is also considering other capital improvements, in addition to the projects discussed above, however the scope, cost and timing of such projects remain uncertain at this time. The Authority is considering building a new Salinas-area transfer station facility and relocating their current Sun Street Transfer Station. In May 2008, the Authority Board agreed conceptually to relocate its transfer station facility to accommodate the City of Salinas future economic development activities. However, the Board has required that the Authority receive adequate compensation and that the new site be satisfactory to the Authority. No future site has been selected for this project and the project scope, costs, implementation and funding sources are still in the early planning stages. See “– Existing System – Sun Street Transfer Station and Household Hazardous Waste Collection Facility” herein.

Financial and Management Aspects of the System

In accordance with the Master Indenture, all revenues of the System are deposited in the Revenue Fund for application in accordance with the Master Indenture. The Master Indenture contains detailed provisions relating to the financial and operational aspects of the System. See APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF MASTER INDENTURE.” A copy of the Authority’s audited financial statements for the period ending June 30, 2013 is attached hereto as Appendix A.

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Below is a table summarizes the Authority’s Statement of Revenues, Expenses and Changes in Net Assets for the last five Fiscal Years.


STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

Operating Revenues 2009 2010 2011 2012 2013 Charges for Services $15,038,687 $15,612,328 $14,621,695 $14,654,565 $15,438,514 Sales of Materials 186,521 405,466 433,359 419,613 392,958 Operating Grants and Contributions 73,531 117,801 15,510 199,614 149,473

Total Operating Revenues 15,298,739 16,135,595 15,070,564 15,273,792 15,980,945 Operating Expenses

Personnel Services 2,704,352 3,273,906 3,697,152 3,593,200 3,763,121 Contractual Services 1,916,644 1,561,532 1,136,289 1,390,036 1,454,029 Operating Contracts 5,539,953 5,326,363 4,422,103 4,804,124 4,783,575 Supplies 230,557 319,130 361,401 382,533 454,034 Insurance 233,477 216,358 189,062 220,868 219,004 Building Rent 99,190 96,814 99,310 99,606 104,508 Taxes and Permits 735,705 733,494 685,116 742,681 728,267 Utilities 134,839 155,503 160,573 133,416 137,788 Depreciation 2,341,946 482,624 496,778 628,648 1,289,903 Amortization 69,508 69,508 69,508 69,508 69,508 Closure/Postclosure Maint. (1) 5,435,843 556,332 641,333 897,535 712,257 Hazardous Waste 168,862 174,899 171,496 173,359 192,176 Other 171,429 195,970 156,574 116,902 288,533

Total Operating Expenses 19,782,305 13,162,433 12,286,695 13,252,415 14,196,703 Operating Income (Loss) (4,483,566) 2,973,162 2,783,869 2,021,376 1,784,242 Non-Operating Revenues (Expenses)

Investment Earnings 764,812 289,760 233,542 52,658 39,180 Other Non-Operating Revenue 1,481 43,678 149,793 168,493 17,619 Loss on Disposition of Capital Assets - - (848,017) - Interest Expense (2,225,196) (2,177,895) (2,132,513) (2,085,322) (2,026,114)

Total Non-Operating Revenues (Expenses)

(1,458,903) (1,844,457) (2,597,195) (1,864,171) (1,969,315)

Change in Net Assets (Deficit) (5,942,469) 1,128,705 186,674 157,205 (185,073) Total Net Assets (Deficit) - Beginning

of Year(1) (2) (5,609,501) (11,551,970) (10,423,265) (10,236,591) (10,079,386)

Total Net Assets (Deficit) - End of Year(1) (2)

$(11,551,970) $(10,423,265) $(10,236,591) $(10,079,386) $(10,264,459)

________________ (1) Decrease in net assets in Fiscal Year 2008-09 attributed to one time extraordinary expenses relating to the closure of the Crazy Horse Landfill on May 31, 2009, consisting of an increase of $5,139,328 in closure/postclosure expenses and $432,001 in depreciation. See “APPENDIX A – Basic Financial Statements for the Authority for the Fiscal Year Ending June 20, 2013” herein. See also, “REGULATIONS – Closure and Postclosure Costs” herein. (2) The Authority’s continuing net asset deficits are primarily due to: (1) a $13.7 million postclosure maintenance liability which was assumed at the Authority’s formation and remains unfunded, and (2) capital assets depreciating at a faster rate than the related debt is being paid. See Notes 6, 8 and 10 in APPENDIX A – “BASIC FINANCIAL STATEMENTS FOR THE SALINAS VALLEY SOLID WASTE AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2013” attached hereto. Source: Authority’s Basic Financial Statements for Fiscal Years Ending June 30, 2009, 2010, 2011, 2012 and 2013.

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Historical Debt Service Coverage

The Authority has agreed in connection with the Prior Bonds and, at all times while any of the Series 2014 Bonds remain Outstanding, to fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Net Revenues during such Fiscal Year equal to at least one hundred fifteen per cent (115%) of the Annual Debt Service in such Fiscal Year; provided that withdrawals from the Rate Stabilization Fund may be taken into account for purposes of such calculation, as described under “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS – Rate Covenant” herein.

The following table, prepared by the Authority, shows debt service coverage for the Prior Bonds for Fiscal Years 2008-09 through 2012-13.


DEBT SERVICE COVERAGE FOR FISCAL YEARS 2008-09 THROUGH 2012-13

2008-09 2009-10 2010-11 2011-12 2012-13 Revenues(1) 15,948,957 16,555,867 15,304,106 15,213,552 16,020,125 Less: (Maintenance and Operation Costs) (2) (12,754,602) (12,296,730) (11,248,669) (11,814,031) (12,626,539) Net Revenues 3,194,355 4,259,137 4,055,437 3,399,521 3,393,586 Debt Service on Prior Bonds(3) 2,754,916 2,753,154 2,753,091 2,754,554 2,754,954 Debt Service Coverage on Prior Bonds 116% 155% 147% 123% 123%

________________ (1) Includes total operating revenues plus investment earnings on all funds excluding project, insurance and trust funds. (2) Excludes depreciation, amortization and post-closure maintenance costs which are not mandated by State/Federal law to be paid on a current basis. (3) Maximum annual debt service on Prior Bonds was approximately $2.82 million. Source: The Authority

Projected Revenues and Financial Results

The Authority has prepared projections of the revenues and overall financial results of the System from Fiscal Year 2013-14 through Fiscal Year 2017-18. The key assumptions in the projections are 1) Fiscal Year 2014-15 will see no rate increases as requested by the County of Monterey; 2) thereafter rates will increase annually by CPI currently estimated at 1.5%; 3) the Salinas Transportation Surcharge increases $3.00 per year until reaching $17.00; 4) revenue from importation of waste from South Valley ends on June 30, 2014 along with the associated revenue and expenses; 5) landfill operations costs start decreasing when the current landfill operations contract expires on 12/31/14; 6) transfer station operations expenses decrease further on 8/31/16 when the operating contract for Jolon Road transfer station ends. None of the assumed fee increases have been introduced or approved. While the Authority believes these

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assumptions to be reasonable, the assumptions may vary significantly from actual future conditions due to unanticipated events and circumstances. Actual results will vary from those projected below.


PROJECTED REVENUES AND FINANCIAL RESULTS FOR FISCAL YEARS 2013-14 THROUGH 2017-18

2013-14 Budget

2014-15 Estimate

2015-16 Estimate

2016-17 Estimate

2017-18 Estimate

Assumptions Landfilled Tonnage 166,500 166,500 166,500 166,500 166,500 Estimated Tipping fee $ 67.00 $ 67.00 $ 68.00 $ 69.00 $ 70.00 CPI 1.5% 1.5% 1.5% 1.5% 1.5% Salinas Transfer Surcharge per ton $ 11.00 $ 14.00 $ 17.00 $ 17.00 $ 17.00 Revenues Tipping Fees - Solid Waste $11,141,800 $11,142,300 $11,308,700 $11,475,100 $11,641,500 Tipping Fees - Transport Surcharge 1,034,000 1,316,000 1,598,000 1,598,000 1,598,000 Tipping Fees - Diverted Materials 956,800 956,800 956,800 956,800 956,800 AB939 Service Fee 1,732,000 1,732,000 1,757,980 1,784,350 1,811,120 Tipping Fees - South Valley 2,318,800 - - - - Charges for Services 117,000 118,320 119,650 121,000 122,360 Sales of Materials 572,500 572,500 572,500 572,500 572,500 Investment Earnings 80,200 50,000 50,000 50,000 50,000 Total Revenues (A) 17,953,100 15,887,920 16,363,630 16,557,750 16,752,280 Expenditures Administration 2,165,700 2,199,000 2,229,900 2,262,400 2,295,300 Resource Recovery 2,349,400 2,384,300 2,419,300 2,454,800 2,491,000 Transfer Stations 2,820,955 2,862,600 2,904,550 2,642,217 2,618,950 JC Landfill Operations 3,901,565 3,477,611 3,178,772 3,222,200 3,266,150 Environmental Control Systems 427,410 434,000 440,600 447,200 453,800 Postclosure Maintenance 941,170 955,100 968,800 982,600 996,600 Closure Set-Aside 277,000 189,800 192,600 195,500 198,400 Total Expenditures (B) 12,883,200 12,502,411 12,334,522 12,206,917 12,320,200 Net Revenues (C)(A-B) 5,069,900 3,385,509 4,029,108 4,350,833 4,432,080 New Debt Service Total Debt Service (D) 2,949,252 1,920,876 1,908,648 1,907,820 2,051,271 Debt Coverage Ratio (E)(C/D) 172% 176% 211% 228% 216% Total Expenditures (F)(B+D) 15,832,452 14,423,287 14,243,170 14,114,737 14,371,471 Net Income After Debt Service (G)(A-F)

$2,120,648 $ 1,464,633 $2,120,460 $ 2,443,013 $ 2,380,809

_________________ Source: The Authority Pension Benefits

The Authority contributes to the California Public Employees Retirement System ("CalPERS"), an agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement

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and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and their beneficiaries. CalPERS acts as a common investment and administrative agent for participating public employers within the State of California. All permanent full and part-time Authority employees working at least 1,000 hours per year are eligible to participate in CalPERS. Under CalPERS, benefits vest after five years of service. Upon retirement, participants are entitled to an annual retirement benefit, payable for life, in an amount equal to a benefit factor (ranging from 2% at age 55 to a maximum of 2.418% at age 63 and beyond), based on years of service, multiplied by their single highest year’s salary. Since the Authority has fewer than 100 active members (currently 35), CalPERS has placed the Authority’s plan in a larger risk pool - the Miscellaneous 2% at 55 pool. The Authority also has a separate “side fund” which accounts for differences between the funded status of the Authority’s plan and the risk pool before it joined the risk pool, and any costs associated with additional optional benefits offered to employees in the Authority’s plan. Copies of the CalPERS annual financial report may be obtained from their Executive Office, 400 Q Street, Sacramento, CA 95811.

The Authority is required to contribute at an actuarially determined rate. Based on the latest CalPERS actuarial valuation as of June 30, 2012 prepared in October 2013, the minimum employer contribution rate rate for Fiscal Year 2013-14 will be 10.695% and for Fiscal Year 2014-15 will be 11.435%. Active plan members are required to contribute 7% of their annual covered salary, which the Authority contributes on behalf of Authority employees and for their account. Contributions made by the Authority for Fiscal Year 2012-13 totaled $426,483, consisting of $251,378 related to the employer’s cost and $175,105 related to the members’ contribution paid by the Authority. The contribution requirements of plan members and the Authority are established and may be amended by CalPERS.

The required contribution was determined as part of the June 30, 2012 actuarial valuations using entry age actuarial cost method. The actuarial assumptions included (a) 7.50% investment rate of return; (b) projected salary increases that vary in duration of service ranging from 3.30% to 14.20% for miscellaneous members; (c) 2.75% annual inflation and (d) 3.00% payroll growth. The actuarial value of the plan's assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a 15 year period (smoothed market value). The plan's unfunded liability is being amortized as a level percentage of projected payroll on a closed basis. The average remaining amortization period at June 30, 2008 was 24 years.

Other recent changes affecting the CalPERS pension plans and employer contribution rates include:

• On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of most of the PEPRA changes will first show up in the assumptions and the benefit provision listings of the June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA, please refer to the CalPERS website.

• On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy which spread investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year period. After this change, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. The new amortization and smoothing policy will be used for the first time in the June 30, 2013 actuarial valuations. These valuations will be performed in the fall of 2014 and will set employer contribution rates for the Fiscal Year 2015-16.

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• CalPERS will be conducting a review of the preferred asset allocation mix for CalPERS investment portfolio in late 2013 which will influence future discount rates. In addition CalPERS will review economic and demographic assumptions, including mortality rate improvements that are likely to increase employer contribution rates in future years. For more information on PEPRA, CalPERS actuarial assumptions and the Miscellaneous 2% at

55 Risk Pool, please refer to the CalPERS website.

A summary of the funded status of the Authority’s pension plan for the past two years is shown below:


PENSION PLAN FUNDED STATUS FOR JUNE 30, 2011 AND JUNE 30, 2012

June 30, 2011 June 30, 2012 1. Present Value of Projected Benefits (PVB) $ 5,489,811 $ 6,069,717

2. Entry Age Normal Accrued Liability $ 2,389,735 $ 2,986,601

3. Plan’s Actuarial Value of Assets (AVA) $ 2,197,290 $ 2,735,124

4. Unfunded Liability (AVA Basis) [(2) - (3)] $ 192,445 $ 251,477

5. Funded Ratio (AVA Basis) [(3) / (2)] 92.0% 91.6%

6. Plan’s Market Value of Assets (MVA) $ $ 1,966,867 $ 2,314,841

7. Unfunded Liability (MVA Basis) [(2) - (6)] 422,868 671,760

8. Funded Ratio (MVA Basis) [(6) / (2)] 82.3% 77.5%

________________________ Source: CalPERS Actuarial Valuation Report as of June 30, 2012 for the Miscellaneous Plan of the Salinas Valley Solid Waste Authority

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A summary of the Risk Pool that the Authority participates in (Miscellaneous 2% at 55 pool) is below:


RISK POOL FUNDED STATUS FOR JUNE 30, 2011 AND JUNE 30, 2012

June 30, 2011 June 30, 2012 1. Present Value of Projected Benefits (PVB) $ 4,531,905,824 $ 5,060,957,695

2. Entry Age Normal Accrued Liability $ 3,619,835,876 $ 4,175,139,166

3. Plan’s Actuarial Value of Assets (AVA) $ 3,203,214,899 $ 3,686,598,343

4. Unfunded Liability (AVA Basis) [(2) - (3)] 416,620,977 488,540,823

5. Funded Ratio (AVA Basis) [(3) / (2)] 88.5% 88.3%

6. Plan’s Market Value of Assets (MVA) $ $ 2,867,303,802 $ 3,120,110,130

7. Unfunded Liability (MVA Basis) [(2) - (6)] $ 752,532,074 $ 1,055,029,036

8. Funded Ratio (MVA Basis) [(6) / (2)] 79.2% 74.7%

________________________ Source: CalPERS Actuarial Valuation Report as of June 30, 2012 for the Miscellaneous Plan of the Salinas Valley Solid Waste Authority

See Note 12 to the Authority’s Basic Financial Statements attached hereto as Appendix A for more information on the Authority’s pension plan.

Other Post-Employment Benefits (OPEB)

The Authority provides post-employment healthcare benefits to its retirees (“OPEB”), which are currently funded on a pay-as-you-go basis. The OPEB offered to employees is the minimum required under the CalPERS administered plan, and the Authority is required to contribute a minimum amount of $51.75 per month for each retired participant in the plan. The Authority’s GASB 45 OPEB Actuarial Valuation as of June 30, 2012 was dated February 27, 2013 and performed by Bartel Associates LLC. Based on the actuarial report the Authority’s actual actuarial accrued liability (AAL) as of June 30, 2012 is $246,100 and the annual required contribution (ARC) for Fiscal Years 2012-13, 2013-14 and 2014-15 are $63,600, $68,500 and $73,800 respectively. Under the pay-as-you-go method the Authority paid $580 for its one retiree. Effective January 1, 2014 the Authority is required to contribute the minimum amount of $59.50 per month toward the health premium of each retiree that is covered under the Authority’s health plan administered by CalPERS.

The City has not set up an irrevocable OPEB trust fund to pre-fund its OPEB obligations. For more information on the City’s post-employment health benefits, see Note 12 and 13 in the Authority’s Basic Financial Statements attached hereto as Appendix A.

IRS Audit

As a result of an examination of the Prior Bonds by the Internal Revenue Service in 2008, the Authority and the Commissioner of Internal Revenue (“IRS”) entered into a Closing Agreement dated

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December 3, 2008 resolving all issues raised during the examination. Pursuant to the Closing Agreement, the Authority agreed to pay the IRS the amount of $681,336 and to place into escrow the then-unexpended proceeds of the Prior Bonds. The Authority agreed to defease Prior Bonds to the extent of any amounts remaining in the escrow not expended for qualifying project costs of the Prior Bonds within one year of the date of the Closing Agreement. All unexpended proceeds were spent within one year period. No Prior Bonds were called.

REGULATION

Construction, operation and maintenance of the System are subject to federal, state and local regulation. Following are brief descriptions of certain statutes and regulations relating to the System. It is not intended to be an exhaustive list of all applicable regulatory requirements relating to the System.

California Integrated Waste Management Act of 1989

Integrated Waste Management Plans. Among other requirements, the California Integrated Waste Management Act of 1989, California Public Resources Code Section 40000 et. seq, (“CIWMA”), which became effective on January 1, 1990, directs all California cities and counties to maximize all feasible source reduction, recycling and composting options in order to reduce the amount of solid waste that must be disposed of by transformation (through waste-to-waste energy projects or other processes) and land disposal. As a result of CIWMA, solid waste management has been changed to an integrated solid waste management approach in which source reduction and recycling play an integral role in the waste management strategy.

Under CIWMA, each city and county (a “local agency”) in the State were mandated to achieve a 25 percent diversion in solid waste disposed of in landfills or by incineration through waste reduction or recycling by January 1, 1995, and a 50 percent reduction by the year 2000. Furthermore, under AB 341, the State’s diversion goal will increase to 75 percent by 2025. Local agencies are responsible for these goals whether or not they control disposal of waste generated within their jurisdiction. Local agencies could face monetary fines of up to $10,000 per day if the CalRecycle deems local plans to be inadequate or if localities fail to satisfactorily implement plans to achieve the 25 percent and 50 percent reduction goals. The Members of the Authority are responsible for undertaking any recycling or diversion activity required by CIWMA. The Authority is not directly responsible for providing recycling or diversion within the Authority service area. The waste delivery projections included herein anticipate continuing reductions in waste deliveries, reflecting further continuing diversion efforts by the Members, assisted by the waste haulers and the Authority. No assurances can be made as to the actual level of diversion, or as to whether Member’s diversion efforts will result in compliance with the CIWMA.

CIWMA requires quarterly payments by the Authority to CalRecycle in an amount adjusted annually for administering CIWMA. The current amount is based on $1.40 per ton of garbage buried at the landfill. The amount for Fiscal Year 2013-14 is budget at $233,100. Such fees are included in the financial projections prepared by the Authority.

Closure and Postclosure Costs. For landfills closed on or after January 1988, state law requires counties in the State to provide for closure and postclosure maintenance costs of their landfills. This may be accomplished through a variety of specified means. In general, closure costs relate to final cover and other costs associated with closing a landfill. Postclosure costs relate to leachate control, groundwater monitoring, drainage control and maintenance, final cover and vegetation. New or increased regulations could substantially increase the requirements and costs associated with closure and postclosure of landfills. See “CERTAIN RISK FACTORS – Statutory and Regulatory Impact” herein. The Authority’s estimates for closure and postclosure costs are based on current regulatory requirements, including

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Subtitle D of the federal Resource Conservation and Recovery Act of 1976 (“RCRA”). There can be no assurance that the actual costs will not be greater or less than the Authority’s estimated costs that are based upon current regulations and requirements.

A closure fund has been established for the Johnson Canyon Landfill to accumulate monies required for construction closure in response to state regulations. Title 14 of the California Code of Regulations (14 CCR) 18267(b), requires that the closure fund is sized so that monies in the fund at any given time will cover the portion of the closure costs attributed to the percentage of the total permitted landfill capacity that has been used. When 100 percent of the landfill capacity is reached, the closure fund should be fully funded. The closure cost estimate for each landfill is to be submitted to and reviewed by the CalRecycle. The projected operating results for the Authority shows an annual expense for closure fund transfer, which represents the annual contribution to the closure fund account. This expense continues until the landfill capacity is exhausted. When the capacity is exhausted, it is anticipated that adequate funds will have been accumulated in the closure fund to cover estimated closure costs including closure design, engineering, and construction. The projected operating results for the Authority also includes expenditures for postclosure expenses when such expenditures are anticipated to be incurred. See “THE SYSTEM – Financial and Management Aspects of the System” herein.

The Governmental Accounting Standards Board (“GASB”) issued a statement which requires state and local entities which are required by law to incur postclosure liabilities to recognize a prorated portion of those postclosure liabilities as a current expenditure (even though Subtitle D and related state law do not require municipalities to set aside funds for postclosure). Although GASB requires the current recognition of pro rata closure and postclosure costs for financial reporting purposes, it does not require the Authority to reserve postclosure costs in separate trust funds (as is required by state and federal law with respect to closure costs). See “THE SYSTEM -- Financial and Management Aspects of the System” herein.

Federal and Other State Laws Governing Solid Waste Disposal

The System is regulated at the local, state and federal levels. CalRecycle has primary oversight and regulatory responsibilities of the System and has designated the County Health Department – Environmental Health Division as the local enforcement agency (“LEA”). The Health Department makes regular inspections of the landfills and transfer facilities to ensure that they are complying with state health and safety codes. The System also must comply with regulatory requirements as set forth by the local Regional Water Quality Control Board, the Monterey Bay Unified Air Pollution Control District (“MBUAPCD”), and the Environmental Protection Agency.

On October 9, 1991 the U.S. Environmental Protection Agency (“EPA”) promulgated changes to RCRA. The regulations provide for nationwide minimum standards for land filling municipal solid waste and became effective on October 9, 1993. The regulations include requirements relating to daily cover, disease and gas control, record keeping, groundwater monitoring, and closure and postclosure maintenance. Individual states must apply to the EPA to become an “Approved State,” demonstrating that their state waste management plan is in compliance with federal Subtitle D requirements. After the EPA approves a state plan, the regulations permit discretion on the part of state regulators to grant some flexibility to landfill operators in implementing Subtitle D regulations. California has been designated an “Approved State.”

Subtitle D, and the corresponding changes to state law, will have a significant financial impact on the design, operation and maintenance of landfills. The Authority has indicated that the estimated cost requirements for compliance with Subtitle D have been included in the financial projections contained herein.

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The U.S. Congress and the California State legislature are currently considering a variety of bills involving solid waste and recycling issues. The Authority is unable to predict which, if any, of the pending State or federal legislation may be successful and how any particular proposed legislation may impact the solid waste collection and disposal services provided by the Authority. Such legislation could adversely affect the Authority’s ability to operate the System or meet its Rate Covenant. See “CERTAIN RISK FACTORS.”

Air and Water Quality Regulations

Solid waste management facilities are closely monitored to protect air and water quality. Under the Porter-Cologne Water Quality Control Act (California Water Code Section 13000 et. seq) (“Porter-Cologne”), the Authority is required to report waste discharges that could affect water quality. Porter-Cologne is administered and enforced by the State Water Resources Control Board and Regional Water Quality Control Boards. The Authority’s landfills are regulated by the Regional Water Quality Control District and the regional Monterey Bay Unified Air Pollution Control District.

Pursuant to Porter-Cologne, the Regional Board issues waste discharge requirements (“WDRs”) containing terms and conditions of permitted discharges for the landfills. The WDRs typically mandate a regular self-monitoring program to detect pollutants. In the event of a violation of a WDR, the Regional Board may issue either a cease and desist order or a cleanup and abatement order which mandate deadlines for remedial action. A landfill operator’s failure to comply with a Regional Board order or reporting requirements may result in administrative or judicial civil liabilities ranging up to $25,000 a day.

Porter-Cologne also instituted the Solid Waste Assessment Testing program which requires an analysis of surface and groundwater under and within a one mile radius of a designated landfill for leakage of hazardous waste. If leakage outside of the landfill occurs, operators of the landfill must notify the State Department of Health Services and the California Integrated Waste Management Board. These agencies will impose remedial action upon the landfill.

The California Clean Air Act and the Lewis-Presley Air Quality Management Act authorize the adoption of rules and regulations for air quality permits and govern the enforcement of those permits and rules. These Acts are both administered and enforced by the regional Monterey Bay Unified Air Pollution Control District. Various rules apply to landfill operations, including rules which relate to methane gas monitoring and migration, as well as rules which relate to specific equipment and machinery, above ground fuel tanks and fugitive dust emissions. The District conducts periodic inspections of the Authority’s landfills and, in a fashion similar to the Regional Board’s, may impose civil liabilities for permit violations.

Compliance with Current Operating Standards

The Authority believes it is materially compliant with all significant regulatory requirements. above for a discussion of regulatory requirements relating to the System and the compliance of the Authority with such requirements.

CERTAIN RISK FACTORS

The following factors, which represent certain major risk factors, should be considered along with all other information in this Official Statement by potential investors in evaluating the Series 2014 Bonds. There can be no assurance made that other major risk factors do not currently exist or will not become evident at any future time.

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Certain Factors Affecting Solid Waste Disposal Facilities Generally

In the solid waste service industry there are often unforeseeable risks and potentially substantial cost exposures associated with the establishment, ownership and operation of solid waste sanitary landfill sites and other types of waste processing and disposal facilities. These risk factors include, but are not limited to: (i) the difficulty of obtaining permits to expand or establish new sites and facilities and public and private opposition to the location, expansion and operation of these facilities, (ii) increasing political activities at all levels that seek to restrict the operation of disposal facilities as well as the movement of waste for disposal, (iii) costs associated with liner requirements, leachate and methane gas control, post-closure monitoring, site cleanup, other remedial work and maintenance and perpetual care obligations, (iv) alleged possible adverse effects on groundwater and the environment, (v) substantial regulatory compliance expenditures, fines or other sanctions and civil damage liabilities, (vi) demonstrating financial responsibility and conforming to prescribed or changing standards and methods of operation, (vii) judicial and administrative proceedings regarding alleged possible adverse environmental and health effects of landfills or treatment and disposal facilities, and (viii) legislation that requires additional waste recycling, minimizing and incineration.

Rate Covenant Not a Guarantee; Failure to Meet Projections

The Authority has agreed, at all times while any of the Series 2014 Bonds remain Outstanding, to fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Net Revenues during such Fiscal Year equal to at least one hundred fifteen percent (115%) of the Annual Debt Service in such Fiscal Year; provided, that for purposes of this requirement the Authority may consider amounts withdrawn from the Rate Stabilization Fund in a Fiscal Year as Net Revenues for such Fiscal Year as provided in the Master Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS” above. The ability of the Authority to make debt service payments with respect to the Series 2014 Bonds depends on the ability of the System to generate Net Revenues in the levels required by the Master Indenture. Although, as more particularly described herein, the Authority expects that sufficient revenues will be generated through the imposition and collection of tipping fees, contract payments and other Revenues described herein, there is no assurance that such imposition of tipping fees or other Revenues will result in the generation of Net Revenues in the amounts required by the Master Indenture. As a result, the Authority may be unable to comply with the covenants under the Master Indenture regarding generation of revenues and the Authority’s covenant does not constitute a guarantee that sufficient Net Revenues will be available to make debt service payments on the Series 2014 Bonds. In addition, the Authority’s financial projections are based on a number of assumptions, including timely receipt of various payments from private waste haulers and landfill operators under contract with the Authority. Changes in circumstances, including but not limited to failure of these private haulers or landfill operators to make these payments in a timely manner (for any reason, including but not limited to the bankruptcy of such private hauler or landfill operators or the existence of a contract dispute between the private haulers or landfill operators and the Authority or its Members) could have a material adverse impact on the ability of the Authority to make debt service payments with respect to the Series 2014 Bonds.

Competition

Generally, the ability of the Authority to generate Net Revenues in the amounts contemplated by the Master Indenture depends on the continuing delivery to the System of solid waste generated in the Authority in the amounts anticipated by the Authority. Substantially all of the solid waste generated in the Authority service area has for many years been disposed at the facilities which now comprise the System. In addition, each Member of the Authority has entered into Waste Delivery Agreements pursuant to which each Member is obligated to use any legal or contractual authority they possess from time to time

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to cause the delivery of solid waste to the System. In addition, a number of alternative transfer or disposal sites outside the System currently exist. While other transfer sites could potentially be located within the Authority service area, the Authority still retains flow control over all franchise waste. It is very unlikely that any alternative disposal sites will ever be located in the Authority service area due to the regulatory environment. In the event that competing transfer or disposal sites in the future represent a more economical or convenient alternatives for collectors and generators of a significant amount of waste generated in the Authority service area and Members elect not leave the System, the use of alternative transfer or disposal sites outside of the System by such waste collectors and generators could have a material adverse impact on the ability of the Authority to generate Net Revenues in the amounts required by the Master Indenture and to pay Debt Service on the Series 2014 Bonds.

Disposal Capacity

As of the date hereof, the Authority estimates that the currently permitted System has sufficient capacity for the disposal of solid waste generated in the Authority service area for approximately 29 years (assuming members of the Authority continues to achieve a 50% diversion rate each year).

The Authority has covenanted in the Master Indenture to provide for or cause the provision of sufficient capacity for the disposal of solid waste generated in the Authority so as to enable the Authority to comply with the Rate Covenant contained in the Master Indenture. The Master Indenture provides that the Authority may provide such capacity by making available disposal facilities owned and operated by the Authority, or by making contractual arrangements for the use of disposal facilities (either inside or outside the geographical boundaries of the Authority) owned or operated by persons other than the Authority. However, there can be no assurances that the cost of expanding the System or the use of alternative disposal sites would not significantly increase the Maintenance and Operation Costs of the System and materially adversely affect the ability of the Authority to generate Net Revenues in the amounts required by the Master Indenture and to pay Debt Service on the Series 2014 Bonds.

Withdrawal of Members

The Authority Agreement provides that Members may withdraw from the Authority with one year of advance notice 15 years after such member executed the Authority Agreement, so long as any outstanding bonds of the Authority be paid or adequate provision for payment of such bonds has been made. All Members executed the Authority Agreement over 15 years ago and may withdraw as described above. The Authority Agreement also provides that any withdrawing member will retain its fair share of financial liability for closure, post-closure maintenance and site remediation costs based on the tons of solid waste landfilled in the System. The Waste Delivery Agreements have similar provisions.

The County delivered a notice of intention to withdraw from the Authority on July 13, 2012, and a notice to withdraw from its Waste Delivery Agreement on July 16, 2012. Such notices were rescinded by the County on December 3, 2013. In addition, the resolution of the County containing its approvals required in connection with the issuance of the Series 2014 Bonds and the rescission of its withdrawal notice contained certain conditions that had to be agreed to by the Authority. See “THE AUTHORITY AND THE SYSTEM – The Authority; History of the System” herein.

In accordance with the Authority Agreement and Waste Delivery Agreements the County or other Members could decide to withdraw from the Authority in the future. The actual withdrawal of a Member would likely be the subject of litigation and could have a material adverse impact on the finances and operations of the Authority and a negative impact on the ratings of any Authority bonds and the market price of such bonds (including the Series 2014 Bonds).

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Statutory and Regulatory Impact

Laws and regulations governing solid waste management are enacted and promulgated by government agencies on the federal, state and local levels. These laws and regulations address the design, construction, operation, maintenance, closure and post-closure maintenance of various types of facilities; acceptable and prohibited waste types; and inspection, permitting, environmental monitoring and solid waste recycling requirements. Laws and regulations at both the State and federal levels impose retroactive liability, particularly with respect to cleanup activities, relating to any landfill site operated by the Authority, whether or not owned by the Authority. Thus the Authority has potential liability with respect to every landfill ever operated by the Authority. Compliance with these laws and regulations may be costly, and, as more stringent standards are developed to protect the environment, these costs will likely increase. Claims against the Authority with respect to Authority-operated sites and closed sites may be significant. Such claims are payable from assets of the System or from other legally available sources. Although tipping fees are the major source of funding for regulatory costs and the Authority has covenanted in the Master Indenture to establish such tipping fees as are necessary to enable the Authority to make all payments required to be made pursuant to Bonds, Contracts and Repayment Obligations, including debt service with respect to the Series 2014 Bonds, no assurance can be given that the cost of compliance with such laws and regulations will not materially adversely affect the ability of the Authority to generate Net Revenues in the amounts required by the Master Indenture and to pay Debt Service with respect to the Series 2014 Bonds.

Hazardous Waste

Although the Authority has implemented a hazardous waste inspection program at the System to monitor the waste stream and prevent the inadvertent or intended disposal of hazardous wastes, hazardous waste may be delivered to and inadvertently accepted at the System. In the event that hazardous waste is discovered at any facility within the System, the Authority, as owner of the System, would have primary financial responsibility for the clean up of such hazardous waste under various state and federal laws, including the Comprehensive Environmental Responsibility Compensation and Liability Act (i.e., “Superfund”). In addition, on August 24, 1990, the U.S. Environmental Protection Agency placed Crazy Horse Landfill on the National Priorities List pursuant to Superfund. In addition, the State Water Resources Control Board (“RWQCB”) regulations for landfills (Title 23, Chapter 15, Article 5) require that the landfill owner obtain and maintain assurances of financial responsibility for initiating and completing corrective action for all known or reasonably foreseeable releases from the landfill. The financial assurance requirements are developed based on a Correction Action Program and estimated costs of implementing such a corrective action. Regulatory requirements of the RWQCB include financial assurance requirements in accordance with applicable law. There can be no assurances that future expenses required to be incurred by the Authority for remediation of environmental conditions at one or more locations within the System (which constitute Operating Expenses pursuant to the Master Indenture) will not materially exceed the Authority’s estimates of such expenses. Significantly increased costs relating to remediation of environmental conditions in the System could materially adversely effect the ability of the Authority to generate Net Revenues at the levels required by the Master Indenture.

Earthquake or Other Natural Disasters

Potential damage to landfills from earth movement or other natural disasters includes landslides and possible reconfiguration of landfill surfaces. Under these circumstances, a landfill may not meet regulatory requirements and may not be operable for some period of time. The occurrence of an earthquake or other natural disaster which resulted in the temporary or permanent closure of major components of the System or resulted in significantly increased costs could materially adversely effect the

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ability of the Authority to operate the System or to generate Net Revenues at the levels required by the Master Indenture.

TAX MATTERS

Tax-Exempt Bonds

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, interest on the Series 2014A Bonds (the “Tax-Exempt Bonds”) is excluded from gross income for federal income tax purposes (except during any period while a Series 2014A Bond is held by a “substantial user” or a “related person”, within the meaning of Section 147(a) of the Code, of the property financed by proceeds of the Series 2014A Bonds), and is an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Tax-Exempt Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Tax-Exempt Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations.

The difference between the issue price of a Tax-Exempt Bond (the first price at which a substantial amount of the Tax-Exempt Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Tax-Exempt Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a beneficial owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a beneficial owner will increase the beneficial owner’s basis in the applicable Tax-Exempt Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the beneficial owner of the Tax-Exempt Bond is excluded from gross income of such beneficial owner for federal income tax purposes, is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Tax-Exempt Bonds is based upon certain representations of fact and certifications made by the Authority and others and is subject to the condition that the Authority comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Tax-Exempt Bonds to assure that interest (and original issue discount) on the Tax-Exempt Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Tax-Exempt Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Tax-Exempt Bonds. The Authority has covenanted to comply with all such requirements.

The amount by which a beneficial owner’s original basis for determining loss on sale or exchange in the applicable Tax-Exempt Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the beneficial owner’s basis in the applicable Tax-Exempt Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a beneficial owner realizing a taxable gain when a Tax-Exempt Bond is sold by the beneficial owner for an amount equal to or less (under certain circumstances) than the original cost of the Tax-

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Exempt Bond to the beneficial owner. Purchasers of the Tax-Exempt Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.

Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the tax certificate relating to the Tax-Exempt Bonds permit certain actions to be taken or to be omitted if a favorable opinion of a bond counsel is provided with respect thereto. Bond Counsel’s engagement with respect to the Tax-Exempt Bonds terminates upon their issuance and Bond Counsel disclaims any obligation to update the matters set forth in its opinion. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (or original issue discount) on any Tax-Exempt Bond if any such action is taken or omitted based upon the advice of counsel other than Bond Counsel.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Tax- Exempt Bonds is excluded from gross income for federal income tax purposes provided that the Authority continues to comply with certain requirements of the Code, the ownership of the Tax- Exempt Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Tax- Exempt Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Tax-Exempt Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Tax-Exempt Bonds.

The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Tax-Exempt Bonds will be selected for audit by the IRS. It is also possible that the market value of the Tax-Exempt Bonds might be affected as a result of such an audit of the Tax-Exempt Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Tax-Exempt Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Tax- Exempt Bonds or their market value.

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

Federally Taxable Series 2014B Bonds

In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Series 2014B Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code but is exempt from State of California personal income tax.

Except for certain exceptions, the difference between the issue price of a Series 2014B Bond (the first price at which a substantial amount of the Series 2014B Bonds of the same maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Series 2014B Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method. The amount of original issue discount deemed received by the beneficial owner of a Series 2014B Bond will increase the beneficial owner's

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basis in the Series 2014B Bond. Beneficial owners of Series 2014B Bonds should consult their own tax advisor with respect to taking into account any original issue discount on the Series 2014B Bonds.

The amount by which a Series 2014B Bond beneficial owner's original basis for determining loss on sale or exchange in the applicable Series 2014B Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which the beneficial owner of a Series 2014B Bond may elect to amortize under Section 171 of the Code. Such amortizable bond premium reduces the Series 2014B Bond beneficial owner's basis in the applicable Series 2014B Bond (and the amount of taxable interest received) and is deductible for federal income tax purposes. The basis reduction as a result of the amortization of Series 2014B Bond premium may result in the beneficial owner of a Series 2014B Bond realizing a taxable gain when a Series 2014B Bond is sold by the beneficial owner for an amount equal to or less (under certain circumstances) than the original cost of the Series 2014B Bond to the beneficial owner. The beneficial owners of the Series 2014B Bonds that have a basis in the Series 2014B Bonds that is greater than the principal amount of the Series 2014B Bonds should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code.

The federal tax and State of California personal income tax discussion set forth above with respect to the Series 2014B Bonds is included for general information only and may not be applicable depending upon a beneficial owner's particular situation. The ownership and disposal of the Series 2014B Bond and the accrual or receipt of interest with respect to the Series 2014B Bond may othe1wise affect the tax liability of ce1iain persons. Bond Counsel expresses no opinion regarding any such tax consequences. ANY FEDERAL TAX ADVICE CONTAINED HEREIN WITH RESPECT TO THE 2013B BONDS IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE CODE. THE FEDERAL TAX ADVICE CONTAINED HEREIN WITH RESPECT TO THE 2013B BONDS WAS WRITTEN TO SUPPORT THE PROMOTING AND MARKETING OF THE 2013B BONDS. BEFORE PURCHASING ANY OF THE 2013B BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR INDEPENDENT TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES RELATING TO THE 2013B BONDS AND THE TAXPAYER'S PARTICULAR CIRCUMSTANCES.

A copy of the proposed form of opinion of Bond Counsel with respect to the 2014B Bonds is attached hereto in Appendix C.

CERTAIN LEGAL MATTERS

Legal matters incident to the authorization, issuance, sale and delivery by the Authority of the Series 2014 Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel. (Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California also serves as bond counsel to the City of Salinas from time to time.) Bond Counsel has assumed no responsibility for the accuracy, completeness or fairness of this Official Statement. The proposed form of the opinion of Bond Counsel is set forth in Appendix C to this Official Statement. The opinion is based on existing laws, regulations, rulings and court decisions. Certain legal matters will be passed upon for the Underwriter by its counsel, Hawkins Delafield & Wood LLP, San Francisco, California, and for the Authority by the Law Offices of Thomas M. Bruen, P.C., Walnut Creek, California, in its capacity as counsel to the Authority.

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LITIGATION

To the best knowledge of the Authority there is no action, suit or proceeding known to be pending or threatened restraining or enjoining the execution or delivery of the Series 2014 Bonds, the Master Indenture or any other document relating to the Series 2014 Bonds, or in any way contesting or affecting the validity of the foregoing.

The Authority is not aware of any pending litigation or claims against the Authority that could have a material adverse impact on its finances or operations.

VERIFICATION OF MATHEMATICAL COMPUTATIONS

The accuracy of the mathematical computations relating to the adequacy of cash and securities deposited with the Trustee to provide for the payment, when due, of all principal and interest with respect to the Prior Bonds to and including February 27, 2014, will be verified by Causey Demgen & Moore P.C. (the “Verification Agent”), Denver, Colorado. The Verification Agent will express no opinion on the assumptions provided to them, nor as to the exemption from taxation of the interest on the Series 2014 Bonds. See "PLAN OF REFUNDING" above.

RATINGS

Standard & Poor’s Ratings Service, a division of the McGraw-Hill Companies, Inc. (“S&P”) has assigned the Series 2014 Bonds a rating of “AA-” (Stable Outlook) conditioned upon the issuance of the Policy. S&P has assigned the Series 2014 Bonds an underlying rating of “A+” based on credit of the Authority. Such ratings reflect only the view of S&P and an explanation of the significance of such rating may be obtained only from S&P at: Standard & Poor’s, 55 Water Street, 38th Floor, New York, New York 10007. There is no assurance that such ratings will continue for any given period of time or that any or all of such ratings will not be revised downward or withdrawn entirely by the respective rating agency, if in the judgment of such rating agency circumstances so warrant. Any such downward revision or withdrawal of either or both such ratings may have an adverse effect on the market price of the Series 2014 Bonds.

UNDERWRITING

The Series 2014 Bonds are being purchased by De La Rosa & Co. (the “Underwriter”). The Underwriter has agreed, subject to certain conditions, to purchase the Series 2014 Bonds at an aggregate purchase price of $33,082,167.60, which represent the principal amount of the Series 2014 Bonds plus an original issue premium of $2,254,048.60 less an underwriter’s discount of $561,881.00. The purchase contract relating to the Series 2014 Bonds provides that the Underwriter will purchase all of the Series 2014 Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Series 2014 Bonds to certain dealers and others at prices lower than the offering prices stated on the cover page. The offering prices may be changed from time to time by the Underwriter.

CONTINUING DISCLOSURE

The Authority will covenant for the benefit of the Bondholders and beneficial owners of the Bonds to cause to be provided to the Municipal Securities Rulemaking Board (the “MSRB”) (i) certain financial information and operating data relating to the Authority by no later than 270 days following the end of each Fiscal Year (which Fiscal Year currently begins on July 1 of each year and ends on the next

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succeeding June 30), commencing with the report for the June 30, 2014 Fiscal Year, and (ii) notice of the occurrence of certain enumerated events. These covenants have been made in order to assist the Underwriter in complying with the Rule. Except as set forth in the next sentence, the Authority has not failed during the previous five years to comply in all material respects with any previous undertakings in a written continuing disclosure contract or agreement. The Authority’s annual financial and operating data for Fiscal Years ending June 30, 2009 and 2012 were posted a couple of days late. The Authority’s audited financial statements for Fiscal Year ending June 30, 2009 were not completed until March 2010, and filed with the MSRB’s Electronic Municipal Market Access system on March 29, 2010. For a form of the continuing disclosure agreement, see APPENDIX D – “FORM OF CONTINUING DISCLOSURE AGREEMENT” attached hereto.

MISCELLANEOUS

Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the Series 2014 Bonds.

The execution and delivery of this Official Statement has been duly authorized by the Authority.

SALINAS VALLEY SOLID WASTE AUTHORITY

By: /s/ R. Patrick Mathews R. Patrick Mathews General Manager/Chief Administrative Officer/Secretary

APPENDIX A

BASIC FINANCIAL STATEMENTS FOR THE SALINAS VALLEY SOLID WASTE AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2013



Salinas, California

BASIC FINANCIAL STATEMENTS

For the Fiscal Year Ended June 30, 2013


BASIC FINANCIAL STATEMENTS For the Fiscal Year Ended June 30, 2013

PREPARED BY

THE AUTHORITY’S FINANCE DIVISION

Roberto Moreno Finance Manager/Treasurer

J.D. Black, Accountant

Ray Hendricks, Business Services Supervisor Christine Casey, Accounting Technician

AUDITORS

McGilloway, Ray, Brown & Kaufman Accountants and Consultants

379 W. Market Street Salinas, CA 93901

INTRODUCTORY SECTION:

Transmittal Letter ...................................................................................................... i List of Principal Officials ............................................................................................ iv

FINANCIAL SECTION:

Independent Auditor’s Report ................................................................................ 1

Management’s Discussion and Analysis

(Required Supplementary Information) ..................................................................... 3

Basic Financial Statements Statement of Net Position ......................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Position ............................ 9

Statement of Cash Flows ......................................................................................... 10

Notes to Basic Financial Statements 1. Summary of Significant Accounting Policies ............................................. 11 2. Cash and Investments .............................................................................. 15 3. Accounts Receivable ................................................................................ 17 4. Unamortized Bond Issuance Costs ........................................................... 17 5. Restricted Cash ......................................................................................... 17 6. Capital Assets ........................................................................................... 18 7. Accrued Leave .......................................................................................... 18 8. Long Term Liabilities ................................................................................. 18 9. Unamortized Bond Discount ..................................................................... 20

10. Landfill Closure and Postclosure Requirements ....................................... 20 11. Deferred Compensation Plan………………………………. ........................ 23 12. Retirement Programs……………………………………… .......................... 23 13. Postemployment Healthcare Plan……………………………………………. 25 14. Concentrations .......................................................................................... 26 15. Commitments and Contingencies ............................................................. 27 16. Restricted Net Position .............................................................................. 29 17. Net Position ............................................................................................... 29 18. Bond Rate Covenant ................................................................................. 29 19. Reclassification ......................................................................................... 30 20. Subsequent Events ................................................................................... 30

Required Supplementary Information

Schedule of Funding Progress – Public Employees’ Retirement System……….. ....... 32 Schedule of Funding Progress – Postemployment Health Insurance Benefits Plan …33

““TToo mmaannaaggee SSaalliinnaass VVaalllleeyy ssoolliidd wwaassttee aass aa rreessoouurrccee,, pprroommoottiinngg ssuussttaaiinnaabbllee,, eennvviirroonnmmeennttaallllyy ssoouunndd aanndd ccoosstt eeffffeeccttiivvee pprraaccttiicceess tthhrroouugghh aann iinntteeggrraatteedd ssyysstteemm ooff wwaassttee rreedduuccttiioonn,, rreeuussee,, rreeccyycclliinngg,, iinnnnoovvaattiivvee tteecchhnnoollooggyy,,

ccuussttoommeerr sseerrvviiccee aanndd eedduuccaattiioonn”” October 10, 2013 President and Board of the Salinas Valley Solid Waste Authority: We are pleased to submit the Salinas Valley Solid Waste Authority’s (Authority) Basic Financial Statements for the fiscal year ended June 30, 2013. These statements combined with other information are analyzed in the narrative section called Management’s Discussion and Analysis (MD&A). The MD&A provides “financial highlights” and interprets the financial reports by analyzing trends and by explaining changes, fluctuations, and variances in the financial data. In addition, the MD&A is intended to disclose any known significant events or decisions that affect the financial condition of the Authority.

This report consists of management’s representations concerning the financial position of the Authority. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, the management of the Authority has established a comprehensive internal control framework that is designed both to protect the Authority’s assets from loss, theft, or misuse, and to compile sufficient reliable information for the preparation of the Authority’s financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the Authority’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The Authority’s financial statements have been audited by McGilloway, Ray, Brown & Kaufman, a firm of certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the Authority for the fiscal year ended June 30, 2013, are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used, and significant estimates made by management, and evaluating the overall financial statement presentation. Based upon the audit, the independent auditor concluded that there was a reasonable basis for rendering an unqualified opinion that the Authority’s financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Authority’s MD&A can be found immediately following the report of the independent auditors.

Reporting Entity On January 1, 1997, the Salinas Valley Solid Waste Authority was created through a joint powers agreement among the cities of Salinas, Gonzales, Greenfield, King City, and Soledad, and the unincorporated area of the eastern portion of Monterey County, to provide solid waste disposal services to the member cities and the unincorporated area in the eastern and southern portion of the county. The Authority is governed by a nine-member board consisting of three members of the Salinas City Council, two members of the Monterey County Board of Supervisors, and one City Council member each from the cities of Gonzales, Greenfield, King City, and Soledad.

Operating Results Generally Accepted Accounting Principles require that depreciation, estimated closure costs and estimated postclosure maintenance costs be charged as a current expense. These expenses are allocated over the estimated remaining capacity of the landfills within the Authority’s disposal system. Based on these requirements, the Salinas Valley Solid Waste Authority reports operating income of $1,784,242 and a decrease in net position of $185,073 for the fiscal year ended June 30, 2013.

As part of its adopted policy, the Authority does not set aside funds for postclosure maintenance. Per agreement with the California Integrated Waste Management Board, dated June 19, 1998, the Authority has pledged future revenue to cover the cost of postclosure maintenance. Authority tipping fees are not expected to cover the accrual of postclosure expenses in the current period. At June 30, 2013 the Authority has accrued postclosure liabilities totaling $13,796,385 which will be paid out of future revenues over the next 30 years.

The Authority’s policy is to set aside funds for closure costs. Closure liabilities of $2,399,481 are fully funded at June 30, 2013.

The Authority’s tipping fees are set at an amount sufficient to provide for operations, closure set-aside requirements, postclosure maintenance on a pay-as-you-go basis, capital requirements and debt service on bonds issued for capital replacement. Authority’s tipping fees are not expected to recover depreciation expense.

The Statement of Cash Flows for the fiscal year ended June 30, 2013, provides a detailed reconciliation of the Authority’s decrease in cash of $832 to $8,576,010.

Cash Management Policies and Practices The Authority invests all idle funds daily. In accordance with the provisions of California Government Code Section 53600 et seq, an investment and cash management policy is adopted annually by the Board of Directors of the Salinas Valley Solid Waste Authority.

Investment income includes changes in the fair value of investments. Calculation of gains and losses in fair value of investments is unrealized and only measures the fair value at a point in time. Decreases in fair value of $12,627 during the current year, however, do not necessarily represent trends that will continue. During the fiscal year ended June 30, 2013 the Authority’s investment earnings were $57,989, an increase of $6,782 from the previous year.

Risk Management The Authority purchases commercial insurance for general liability, automobile liability, pollution liability, public official’s bonds and property damage. Additional information on the Agency’s risk management activity can be found in Note 15 of the financial statements.

Financial Management The Authority carefully monitors its gate rates. On July 1, 2012, the tipping fee increased $3.00 to $67.00 per ton which was necessary to keep up with operating expenses. The decreases in tonnage experienced in the past appear to be leveling off. Effective July 1, 2013 the Board adopted an AB939 Fee which will generate $1.7 million regardless of tonnage received. This will reduce the impact on revenue due to changes in tonnage.

Bond Issue 2002 On May 15, 2002, the Salinas Valley Solid Waste Authority issued Revenue Bonds, Series 2002 in the amount of $39,845,000. The bonds were sold to pay off the Authority’s existing 1997 Revenue Bonds, payoff a portion of the Crazy Horse installment purchase agreement, provide for the cost of bond issuance, capitalized interest and a bond reserve, and to finance various capital projects at the landfill sites, including the completion of the Regional Environmental Impact Report. Maximum annual debt service is $2,756,524, including interest at 5.56% for thirty (30) years. Management is working on refunding this bond issue at a lower interest rate which should achieve at least $1.5 million in savings. The refunding is expected to take place before the end of calendar year 2013.

Expansion Fund The “Expansion Fund” was established to collect proceeds from the sale of outside waste, pay costs associated with increased tonnage generated by outside waste and pay the costs related to locating and permitting a new landfill site and other long-term expansion costs. Over the ten-year term of the revised agreement with South Valley Disposal, revenue from the sale of outside waste is estimated at $23.3 million, with costs estimated at $4.9 million to operate Crazy Horse, $1.8 million for liners at Johnson Canyon, $2.2 million in closure set-asides, $1.8 million in taxes and fees and $0.8 million on conversion technology projects with the balance to be used for locating and permitting a new landfill site. In order to avoid tipping fee increases during the Great Recession the Board of Directors decided to use these funds for a couple of years for operations. At June 30, 2013, the Expansion Fund had unrestricted net position of $6,186,756.

Summary The Authority’s operating expenses have been reduced to their lowest point. However, due to decreasing tonnage leading to decreased revenues, the Authority has not been able to benefit from the reduced operating expenses.

The deficit Net Position is expected to diminish over time as the Postclosure Payable and Bonds Payable are paid down with future revenues.

With the adoption of the AB939 fee for FY 2013-14 the Authority will have a more stable revenue base.

Acknowledgements I would like to take this opportunity to thank the members of the Salinas Valley Solid Waste Authority’s Board of Directors for their interest and support in the financial operations of the Authority. It is the responsible and progressive manner in which business is conducted that makes the Authority successful. I would also like to extend special recognition to the Authority staff for their day-to-day involvement in the operations. In addition, I would like to offer special thanks to J. D. Black, Accountant, Ray Hendricks, Business Services Supervisor, and Christine Casey, Accounting Technician, without whom this presentation would not be possible. I would also like to thank the Authority’s auditors McGilloway, Ray, Brown & Kaufman. It is the combined effort of all participants that resulted in the issuance of this document in October, the earliest the audit has ever been produced since the Authority was formed.

Respectfully submitted,

Roberto Moreno Finance Manager/Treasurer


List of Principal Officials

As of June 30, 2013

Fernando Armenta, County of Monterey President

Elizabeth Silva, City of Gonzales Gloria De La Rosa, City of Salinas Vice President Board Member

Lou Calcagno, County of Monterey Tony Barrera, City of Salinas Board Member Board Member

Robert Cullen, City of King City Annie Moreno, City of Greenfield Board Member Board Member

Jyl Lutes, City of Salinas Richard Perez, City of Soledad Board Member Board Member

R. Patrick Mathews General Manager/CAO

David Meza Thomas M. Bruen Engineering Manager General Counsel

Susan Warner Roberto Moreno Division Manager Finance Manager/Treasurer

Cesar Zuniga Rose Gill Operations Manager Administrative Manager

SALINAS VALLEY SOLID WASTE AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2013

This analysis of the Salinas Valley Solid Waste Authority’s (Authority) financial performance provides an overview of the Authority’s financial activities for the fiscal year ended June 30, 2013. Please read it in conjunction with the accompanying transmittal letter and the accompanying basic financial statements.

Financial Highlights • The Authority’s deficit net position increased by $185,073 to a deficit of $10,264,459. • Operating revenues increased $707,153 (4.6%), as the result of $3.00 (4.7%) increase in tipping

fees. • Landfill tonnage increased 273 tons (0.1%) during the year from 236,248 tons in fiscal year

2011-12 to 236,521 tons in fiscal year 2012-13. • Operating expenses increased $944,287 (7.1%) to $14,196,703 due primarily to increases of

$774,843 in depreciation for Johnson Canyon Landfill. • The Authority’s total liabilities decreased by $3,114,172 to $55,413,286 due to debt principal

payments of $1,089,724 and the balance was the continued construction of the Crazy Horse Landfill closure which is carried as a liability until completed.

• The closure of Crazy Horse Landfill is underway and expected to be completed by December 2013. This is the single largest project of the Authority since being formed in 1997.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Authority’s basic financial statements, which are comprised of three components: 1) Management Discussion and Analysis (this document), 2) Basic Financial Statements, and 3) Notes to the Basic Financial Statements. This report also contains other supplementary information in addition to the basic financial statements for further information and analysis. Basic Financial Statements The Financial Statements of the Authority report information about the Authority using accounting methods similar to those used by private sector companies. These statements offer short and long-term financial information about its activities. The Statement of Net position includes all of the Authority’s assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to Authority creditors (liabilities). It also provides the basis for computing rate of return, evaluating the capital structure of the Authority and assessing the liquidity and financial flexibility of the Authority.

All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net position. This statement measures the success of the Authority’s operations over the past year and can be used to determine the Authority’s credit worthiness and whether the Authority has successfully recovered all its costs through its user fees and other charges.

The final required Financial Statement is the Statement of Cash Flows. The primary purpose of this statement is to provide information about the Authority’s cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations and investments. It also provides answers to such questions as where did the cash come from, what was the cash used for, and what was the change in the cash balance during the reporting period.

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JUNE 30, 2013

Notes to the Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Required Supplementary Information In addition to the basic financial statements, this report also presents certain Required Supplementary Information that presents the funding progress of the Authority’s retirement plan. FINANCIAL STATEMENTS ANALYSIS Statement of Net Position Net position is a good indicator of the Authority’s financial position. At the end of this fiscal year, the Authority had a deficit net position of $10,264,459 which is a decrease in net position of $185,073. The following is the condensed Statement of Net Position for the fiscal years ended June 30, 2013 and 2012:

2013 2012 Change % ChangeAssets

Current Assets 10,465,344$ 13,021,243$ (2,555,899)$ -19.6%Other Assets 6,904,589 6,709,526 195,063 2.9%Capital Assets, Net 27,778,894 28,717,303 (938,409) -3.3%

Total Assets 45,148,827 48,448,072 (3,299,245) -6.8%

LiabilitiesCurrent Liabilities 4,229,899 7,275,202 (3,045,303) -41.9%Long-term Liabilities 51,183,387 51,252,256 (68,869) -0.1%

Total Liabilities 55,413,286 58,527,458 (3,114,172) -5.3%

Net Position Invested in Capital Assets Net of Related Debt (8,341,693) (8,493,008) 151,315 -1.8%Restricted 3,419,936 3,438,482 (18,546) -0.5%Unrestricted (5,342,702) (5,024,860) (317,842) 6.3%

Total Net Position (Deficit) (10,264,459)$ (10,079,386)$ (185,073)$ 1.8%

Salinas Valley Solid Waste AuthorityCondensed Statement of Net Position

June 30, 2013 and 2012

The change in Current Assets is the result of restricted cash being used to pay the Crazy Horse closure project. Unrestricted net position is a deficit of $5,342,702. This deficit is due in large part to the postclosure maintenance liability of $13,796,385 that is not funded. The Authority assumed the postclosure liability when it was formed. It is to be paid from current rates when the actual maintenance activities take place. The deficit of $8,341,693 in Invested in Capital Assets, Net of Related Debt is the result of capital assets depreciating at a faster rate than the related debt is being paid.

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JUNE 30, 2013

Statement of Revenues, Expenses and Changes in Net Position The following is the Condensed Statement of Revenues, Expenses and Changes in Net Position for the fiscal years ended June 30, 2013 and 2012.

2013 2012 Change % Change

Operating Revenues 15,980,945$ 15,273,792$ 707,153$ 4.6%Operating Expenses (14,196,703) (13,252,416) (944,287) 7.1%

Operating Income/(Loss) 1,784,242 2,021,376 (237,134) -11.7%

Non-operating Revenues 56,799 221,151 (164,352) -74.3%Non-operating Expenses (2,026,114) (2,085,322) 59,208 -2.8%

Change in Net Position (185,073) 157,205 (342,278) -217.7%

Net Position - Beginning (10,079,386) (10,236,591) 157,205 -1.5%

Net Position - Ending (10,264,459)$ (10,079,386)$ (185,073)$ 1.8%

Salinas Valley Solid Waste AuthorityCondensed Statement of Revenues, Expenses and Changes in Net Position

For the years ended June 30, 2013 and 2012

The Authority’s activities increased the net deficit by $185,073. Key elements of this change are as follows:

Operating revenues increased $707,153 (4.6%) primarily due to a $3 increase in tipping fees.

Operating expenses increased $944,287 (7.1%) primarily due to a $661,255 (105.2%) increase in depreciation.

The single biggest expense for the year was the $2,913,601 paid to Recology Waste Systems for operation of the Johnson Canyon landfill, diversion services and air space conservation adjustment.

The $2,026,114 in non-operating expenses is interest paid on the Authority’s long term debt.

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JUNE 30, 2013

CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of fiscal year, the Authority had $27,778,894 invested in capital assets, primarily in landfills as summarized below. During this fiscal year the Authority added $351,494 in capital assets and recorded depreciation expense of $1,289,903. Additional information on the Authority’s capital assets can be found in Note 6 on page 18 of this report.

2013 2012

Land 42,600$ 42,600$ Building 456,484 456,484Improvements other than building 53,773,249 53,421,755Equipment 2,799,196 2,799,196Construction in progress 281,864 281,864

57,353,393 57,001,899Accumulated Depreciation (29,574,499) (28,284,596)

Total 27,778,894$ 28,717,303$

Salinas Valley Solid Waste AuthorityCondensed Statement of Capital Assets


Long-Term Debt At the end of this fiscal year, the Authority had $36.1 million in long-term debt as shown below. No new debt was incurred during this fiscal year. Principal payments of $1,102,987 were paid on the debt. Additional information on the Authority’s long-term debt can be found in Note 8 on page 18 of this report.

Standard & Poor’s Corporation (S&P) assigned the revenue bonds a rating of “AAA”. Moody’s Investors Service assigned the same bonds a rating of “Aaa”. The Authority’s credit rating was recently affirmed by Standard & Poors as “A+” with a stable outlook.

2013 2012

Revenue Bonds, Series 2002 33,085,000$ 34,070,000$ Bond Discount (252,002) (265,265)Installment Purchase Agreement 3,287,588 3,405,575

Total 36,120,586$ 37,210,310$

Salinas Valley Solid Waste AuthorityCondensed Statement of Long-Term Debt


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JUNE 30, 2013

ECONOMIC FACTORS AND NEXT YEAR’S RATES The Authority’s operations are dependent on the amount of solid waste that is received at the landfills. For FY 2013-14 management is anticipating tonnage to remain constant. The tipping fees remain at $67.00 per ton. However, the Authority implemented an AB939 Service Fee which generates $1.7 million regardless of tonnage received. CONTACTING THE AUTHORITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, customers, grantors, and creditors with a general overview of the Authority’s finances and to show the Authority’s accountability for the money it receives. If you have questions about this report or need additional financial information, please contact the Authority’s Finance Department, at the Salinas Valley Solid Waste Authority, P.O. Box 2159, Salinas, California 93902-2159.

7

2013 2012Assets

Current AssetsCash and Investments 8,576,010$ 8,576,842$ Restricted Cash 225,734 2,992,471 Accounts Receivable, Net 1,659,316 1,441,464Interest Receivable 4,284 10,466

Total Current Assets 10,465,344 13,021,243

Noncurrent AssetsUnamortized Bond Issuance Costs 1,320,640 1,390,148Restricted Cash 5,583,949 5,319,378Capital Assets, Net 27,778,894 28,717,303

Total Noncurrent Assets 34,683,483 35,426,829

Total Assets 45,148,827 48,448,072

LiabilitiesCurrent Liabilities

Accounts Payable 1,629,204 1,482,684Wages Payable 97,938 74,245Accrued Leave 343,881 350,960Interest Payable 803,891 828,103Closure Payable 34,202 3,198,605Postclosure Payable - Current 171,540 250,880Installment Purchase Agreement 127,506 117,988Bonds Payable - Current 1,021,737 971,737

Total Current Liabilities 4,229,899 7,275,202

Long Term LiabilitiesOPEB Liability 221,920 159,000Closure Payable 2,365,279 1,637,919Postclosure Payable 13,624,845 13,334,752Installment Purchase Agreement 3,160,082 3,287,587Bonds Payable, Net 31,811,261 32,832,998

Total Long Term Liabilities 51,183,387 51,252,256

Total Liabilities 55,413,286 58,527,458

Net Position Invested in Capital Assets, Net of Related Debt (8,341,693) (8,493,008)Restricted for Debt Service 2,820,700 2,820,700Restricted for Grant 196,309 112,906 Restricted for Closure Reserve 402,927 504,876Unrestricted (5,342,702) (5,024,860)

Total Net Position (Deficit) (10,264,459)$ (10,079,386)$

With Comparative Totals as of June 30, 2012

SALINAS VALLEY SOLID WASTE AUTHORITYSTATEMENT OF NET POSITION

JUNE 30, 2013

The accompanying notes are an integral part of this financial statement

8

2013 2012Operating Revenues

Charges for Services 15,438,514$ 14,654,565$ Sales of Materials 392,958 419,613Operating Grants and Contributions 149,473 199,614

Total Operating Revenues 15,980,945 15,273,792

Operating ExpensesPersonnel Services 3,763,121 3,593,200Contractual Services 1,454,029 1,390,036Operating Contracts 4,783,575 4,804,124Supplies 454,034 382,533Insurance 219,004 220,868Building Rent 104,508 99,606Taxes and Permits 728,267 742,681Utilities 137,788 133,416Depreciation 1,289,903 628,648Amortization 69,508 69,508Closure/Postclosure Maint. 712,257 897,535Hazardous Waste 192,176 173,359Other 288,533 116,902

Total Operating Expenses 14,196,703 13,252,416

Operating Income (Loss) 1,784,242 2,021,376

Non-Operating Revenues (Expenses)Investment Earnings 39,180 52,658Other Non-Operating Revenue 17,619 168,493Interest Expense (2,026,114) (2,085,322)

Total Non-Operating Revenues (Expenses) (1,969,315) (1,864,171)

Change in Net Position (185,073) 157,205

Total Net Position - Beginning (10,079,386) (10,236,591)

Total Net Position - End of Year (10,264,459)$ (10,079,386)$

SALINAS VALLEY SOLID WASTE AUTHORITYSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

FOR FISCAL YEAR ENDED JUNE 30, 2013With Comparative Totals for fiscal year ended June 30, 2012


9

2013 2012Cash Flows from Operating Activities:

Receipts from Customer and Users 15,763,071$ 15,527,496$ Payments to Suppliers (11,153,925) (15,246,156) Payments to Employees (3,683,581) (3,621,968)

Net Cash Provided (Used) by Operating Activities 925,565 (3,340,628)

Cash Flows from Non-Capital Financing Activities:Other Non-Operating Revenue/(Expense) 17,619 90,976

Cash Flows from Capital and Related Financing Activities:Acquisition of Capital Assets (351,494) (660,687) Principal paid on Capital Debt (1,102,987) (1,049,180) Interest paid on Capital Debt (2,037,063) (2,090,476)

Net Cash Provided (Used) by Capital and Related Financing Activities (3,491,544) (3,800,343)

Cash Flows from Investing Activities:Interest Received 57,989 51,207 Increase (Decrease) in Fair Value of Investments (12,627) 14,945 Transfer (to) from Restricted Cash 2,502,166 6,891,686

Net Cash Provided (Used) by Investing Activities 2,547,528 6,957,838

Net Increase (Decrease) in Cash and Cash Equivalents (832) (92,157)

Cash and Cash Equivalents at Beginning of Year 8,576,842 8,668,999

Cash and Cash Equivalents at End of Year 8,576,010$ 8,576,842$

Reconciliation of Operating Income to Net CashProvided (used) by Operating Activities:Operating Income (Loss) 1,784,242$ 2,021,376$ Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 1,289,903 628,648 Amortization 69,508 69,508 (Increase) Decrease in Accounts Receivable (217,852) 253,696 Increase (Decrease) in Accounts Payable 146,520 282,713 Increase (Decrease) in Wages Payable 23,693 (117,726) Increase (Decrease) in Accrued Leave (7,079) 27,855 Increase (Decrease) in OPEB Payable 62,920 61,100 Increase (Decrease) in Closure/Postclosure Payable (2,226,290) (6,567,798)

Total Adjustments to Net Income (858,677) (5,362,004)

Net Cash Provided (Used) by Operating Activities 925,565$ (3,340,628)$

SALINAS VALLEY SOLID WASTE AUTHORITYSTATEMENT OF CASH FLOWS

FOR FISCAL YEAR ENDED JUNE 30, 2013With Comparative Totals for fiscal year ended June 30, 2012


10

SALINAS VALLEY SOLID WASTE AUTHORITY NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2013

1. Summary of Significant Accounting Policies: Financial Reporting Entity: The Salinas Valley Solid Waste Authority (Authority) is a joint exercise of powers authority, created pursuant to an agreement dated as of January 1, 1997, (the “Authority Agreement”) among the County of Monterey, and the cities of Salinas, Gonzales, Greenfield, Soledad, and King City (the “Members”). The Authority was established to acquire and manage the landfill assets of each member, ensure long-term landfill capacity of the Authority service area, and provide unified and coordinated solid waste management for the member agencies.

The Authority is governed by a nine member governing board, consisting of three members of the Salinas City Council, two members of the Monterey County Board of Supervisors, and one City Council member each from the cities of Gonzales, Greenfield, King City and Soledad. Pursuant to the Authority Agreement, the affirmative vote of at least one member of the Authority Board who is a member of the Salinas City Council is required to approve Board actions.

Basis of Presentation: The financial activities of the Authority are accounted for in a single enterprise fund that reports the operations of the solid waste system, which is financed primarily by tipping fees. The solid waste system includes landfills, transfer stations and resource recovery facilities located in Monterey County. Solid waste collection services are provided by local municipalities and private companies.

Basis of Accounting: The Authority's single enterprise fund is accounted for using the accrual basis of accounting. Revenue is recognized when earned, and expenses are recognized when they are incurred.

Measurement Focus: The Authority's single enterprise fund is accounted for on a cost of service or "economic resources" measurement focus. This means that assets and all activities are included on the statement of net position. Operating statements present increases (revenues) and decreases (expenses) in net total assets. The financial statements distinguish operating revenue and expenses from nonoperating items. Operating revenue and expenses generally result from providing services and producing and delivering services in connection with the Authority's principal ongoing operations. The principal operating revenues of the Authority are charges to residents and customers for waste collection and disposal and the revenues from the sale of processed waste materials. Operating expenses include the cost of waste disposal and recycling services, administrative expenses, closure and post closure maintenance and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses.

Budgets: The Authority adopts an annual, operating budget as a financial plan for the year, pursuant to the legal requirements of the Authority's bond documents. The budget is adopted by the governing Board as an operating plan and budgetary basis financial statements are not presented because there is no legal requirement to report budgetary basis financial information.

11


JUNE 30, 2013

1. Summary of Significant Accounting Policies (continued): Accounting Changes: The Authority applies all applicable GASB pronouncements for certain accounting and financial reporting guidance.

In December, 2010, GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements issued on or before November 30, 1989 into GASB authoritative literature. This included pronouncements by the Financial Accounting Standards Board (FASB), Accounting Principles Board (APB), and the Accounting Research Bulletins of the American Institute of Certified Public Accountants (AICPA) Committee on Accounting Procedures, unless those pronouncements conflict or contradict with GASB pronouncements. This statement became effective for period effective beginning after December 15, 2011 and did not have a significant impact on the Authority’s financial statements for 2012.

GASB has issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The requirement of this statement standardizes the presentation of deferred inflows and outflows of resources, and their effect on a government’s net position. This statement became effective for period beginning after December 15, 2011. The implementation of this statement to the Authority is limited to renaming of “Net Assets” to Net Position”.

GASB has issued Statement No. 65, Items Previously Reported as Assets and Liabilities. This statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflow of resources, certain items that were previously reported as assets and liabilities. The statement is effective for periods beginning after December 15, 2012. The Authority is evaluating the impact of this standard on the financial statements. GASB has issued Statement No. 68, Accounting and Financial Reporting for Pensions. The primary objective of this statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This statement is effective for periods beginning after June 15, 2014. The Authority is evaluating the impact of this standard on the financials. Cash and Cash Equivalents: Cash and cash equivalents consist of petty cash, deposits in non-interest bearing checking accounts, money market mutual funds, and investments with Local Authority Investment Fund (LAIF) managed by the State of California. Deposits in LAIF are generally available for withdrawal by the Authority on a next day basis and are therefore considered cash equivalents. For purposes of determining cash equivalents, the Authority has defined its policy concerning the treatment of short-term investments to include investments with a maturity of three months or less when purchased, as cash equivalents if management does not plan to reinvest the proceeds. Short-term investments that management intends to rollover into similar investments are considered part of the investment portfolio and are classified as investments.

12


JUNE 30, 2013

1. Summary of Significant Accounting Policies (continued): Investments: Investments consisted of deposits in open end, money market mutual funds and deposits with the LAIF, an investment pool with restricted withdrawals, and BNY, which is restricted for debt service. All investments are stated at fair value.

Accounts Receivable: Accounts receivable are composed primarily of monthly 'billings for tipping fees, services and contractual amounts receivables. All accounts receivable are uncollateralized.

The Authority sets aside an allowance for uncollectible accounts based on an analysis of those accounts considered to be uncollectible at year-end. Accounts receivable are reported net of the allowance for uncollectible accounts.

Capital Assets: Capital assets are defined by the Authority as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Capital assets are recorded at cost or, if donated, fair value at the date of donation. Expenses, which materially extend the useful life of existing assets, are capitalized. Certain costs for professional services and interest associated with the acquisition and construction of capital assets have been capitalized. The cost of capital assets sold or retired is removed from the appropriate accounts and any resulting gain or loss is included in the increase in net position. Depreciation of capital assets is computed using the straight-line method over the estimated useful lives of the assets, which are summarized as follows:

Buildings 20-40 years Other Improvements 4-50 years Equipment 5-10 years Depletion and depreciation of the Authority’s landfill sites has been provided over the estimated remaining capacity of its landfills. By the time a landfill stops accepting waste that landfill must be fully depreciated. This may lead to larger amounts of depreciation charged at the end of the landfill’s life for projects capitalized in those latter years.

The cost of normal maintenance and repair that do not add to the value of the asset or materially extend asset lives are not capitalized.

Restricted Cash: Restricted cash of the Authority represent bond proceeds legally required by the Authority's bond covenants and trust indenture to be set aside for debt service and funds required to be set-aside for the eventual closure of the landfills under state law. Restricted resources are used first to fund expenses incurred for restricted purposes.

Net Position: The statement of net position reports all financial and capital resources. The difference between assets and liabilities is net position. There are three components of net position.

13


JUNE 30, 2013

1. Summary of Significant Accounting Policies (continued): Invested in Capital Assets, Net of Related Debt - This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balance of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent, related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net position component as the unspent proceeds.

Restricted - This component of net position consists of constraints placed on the use of net position by external restrictions imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. There are no net positions restricted by enabling legislation.

Unrestricted - This component of net position consists of net position that do not meet the definition of Invested in Capital Assets, Net of Related Debt or Restricted.

Revenue Recognition: Revenue from tipping fees is recognized when the service is provided for customers using the Authority's facilities. Credit customers are billed monthly and non-credit customers pay at the transfer station, landfill or resource recovery facility. Amortization: Premium, discount and issue costs on long-term debt are amortized on the straight-line method over the life of the related debt issues. Landfill Expenses: Landfill expenses include the cost to design and construct landfill "cells" on property permitted and approved as a landfill site. The design and construction costs for each cell are recorded as capital assets and amortized to expense based on the cell capacity used in each year. Landfill expenses also include accruals for landfill closure and postclosure care costs based on the landfill capacity used in each year. Compensated Absences: Authority employees accumulate Paid Time Off (PTO) which is payable to employees upon termination or retirement at the pay rate on that date. The Authority accrues unused PTO and related taxes and benefits on the statement of net position as current liabilities. Estimates: Management uses estimates and assumptions in preparing financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

14


JUNE 30, 2013

2. Cash and Investments: Cash and Cash Equivalents: The bank balance and carrying value of the Authority's cash and cash equivalents, including restricted balances, at June 30, 2013 were as follows:

Cash and Investments 8,576,010$ Restricted Cash 5,809,683

Total 14,385,693$

The Authority’s cash and investments at June 30, 2013, were held as follows:

Cash managed by the Authority's Treasurer 316,106$

Investments managed by the Authority's Treasurer 11,239,882Investments managed by the Fiscal Agent 2,829,705

Investments Subtotal 14,069,587

Total 14,385,693$

The Authority follows the practice of pooling cash and investments of all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. The Authority’s investment policy conforms to state law (Government Code Sections 53601 through 53659). The investment of bond proceeds is governed by the specific Indenture of Trust. The investment policy is reviewed annually. Investments shown at fair value are for information only to assess the actual value if the Authority were to liquidate the investments before maturity. The Authority intends to hold all investments to maturity.

The Authority participates in the Local Authority Investment Fund (LAIF), an investment pool managed by the State of California. At June 30, 2013, LAIF had invested a portion of the pool funds in Structured Notes and Asset-Backed Securities. These Structured Notes and Asset-Backed Securities are subject to market risk as a result of changes in interest rates. Custodial Credit Risk: Custodial credit risk is defined as the risk that the Authority may not recover the securities held by another party in the event of a financial failure. The Authority's investment policy for custodial credit risk requires all investment securities to be held in the Authority's name by a third party safekeeping institution. All deposits with financial institutions are considered fully insured or collateralized pursuant to the custodial credit risk categories of GASB Statement No. 3. According to the investment policy investment of bond proceeds are restricted by the provisions of relevant bond documents. Funds held by Bank of New York (BNY) the Fiscal Agent of the 2002 Revenue Bonds are held in the Trustee’s name, BNY, for the benefit of the Authority. This custodial credit risk exists due to the requirements of the bond indenture.

Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.

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JUNE 30, 2013

2. Cash and Investments (continued): The Local Agency Investment Fund (LAIF) managed by the State Treasurer, representing 65.0% of the investment portfolio, is not rated. Investments in money market funds are limited by Government Code Section 53601 to those that have attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations.

Concentration of Credit Risk

Concentration of credit risk is defined as the risk of loss attributed to the magnitude of an investment in a single issuer. The Authority's investment policy addresses the concentration of credit risk by limiting the maximum amount that may be invested in certain investments and in any one issuer, except for investments in LAIF and those made by Bank of New York (BNY). The investment in LAIF and the Public Investment Money Market Account, representing 60.3% and 7.1%, respectively, of the portfolio are not considered a concentrated risk. The BNY investment, the bond reserve represents 20.1% of the investment portfolio and exceeds 5% of the Authority’s investment portfolio. The investment is made in accordance with the Indenture of Trust of the 2002 Revenue Bonds and is invested in U.S. Treasuries Money Market Fund and, therefore, does represent a concentration of credit risk. The Rabobank Certificates of Deposit represents 12.5% of the portfolio. They are fully collateralized at 110% of value. The Authority was in compliance with these limitations at June 30, 2013. At June 30, 2013 certain individual investments exceeded 5% of the total investment portfolio (including cash and cash equivalents) as follows:

Investment Type

State of CaliforniaLocal Agency Investment Fund 8,486,955$ -$ 8,486,955$ -$ 60.3

Bank of New YorkJP Morgan US Treasury Plus Premier #3920 2,829,705 2,829,705 20.1

Public Investment Money Market Account 1,002,927 1,002,927 7.1

Rabobank Certificates of Deposit 1,750,000 1,750,000 12.5 14,069,587$ 3,832,632$ 8,486,955$ 1,750,000$ 100.0

Investment Maturities

Fair Value 0-6 Mths 6-12 Mths 1-5 years% of Total

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JUNE 30, 2013

3. Accounts Receivable: Accounts receivable and the related allowance for doubtful accounts at June 30, 2013 are summarized as follows:

Billed Receivables:

Tipping Fee Accounts Receivable 1,333,231$ Recology - Tonnage Band 127,351Intergovernmental Grants Receivable 69,402Sales of Recycling Materials 58,026Franchise Administration 33,405LFG Gas Royalties 32,696ECS - Sales of E-Waste 9,457Employees' Flexible Spending Account 6,075PG&E Rent 2,000Vision Recycling Fuel Purchase 711Refund - Safety Program 294

Total Accounts Receivable 1,672,648

Allowance for Doubtful Accounts (13,332)

1,659,316$

4. Unamortized Bond Issuance Costs: The Authority incurred bond issuance costs of $2,085,228 in connection with the issuance of the Revenue Bonds, Series 2002. The issuance costs are being amortized over 30 years, the life of the 2002 Revenue Bonds, at an annual amortization expense of $69,508. The following is a summary of unamortized bond issuance costs at June 30, 2013, reported on the Statement of Net Position as deferred charges:

2012 Increases Decreases 2013Revenue Bonds, Series 2002 1,390,148$ -$ (69,508)$ 1,320,640$

5. Restricted Cash:

Cash and investments of $5,809,683 are recorded as restricted assets at June 30, 2013.

Cash and investments of $2,848,013 are restricted by the California Integrated Waste Management Board for the eventual closure of the landfills.

Cash and investments of $2,820,700 held by the fiscal agent are restricted to cover expenses of debt service.

Cash and investments of $74,889 are restricted for the California Department of Conservation grant for recycling activities and $66,081 are restricted for the United States Department of Agriculture grant for the 2 anaerobic basins at Crazy Horse landfill.

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JUNE 30, 2013

6. Capital Assets: The changes in capital assets of the Authority for the year ended June 30, 2013 are summarized as follows:

2012 Increases Decreases 2013Business-type activitiesNondepreciable assets:

Land 42,600$ -$ -$ 42,600$ Construction in Progress 281,864 - - 281,864 Total nondepreciable assets 324,464 - - 324,464

Depreciable Assets:Buildings 456,484 - - 456,484 Other Improvements 53,421,755 351,494 - 53,773,249 Machinery and Equipment 2,799,196 - - 2,799,196 Total depreciable assets 56,677,435 351,494 - 57,028,929

Less Accumulated Depreciation (28,284,596) - (1,289,903) (29,574,499)

Total Depreciable Assets, Net 28,392,839 351,494 (1,289,903) 27,454,430

Total Capital Assets, Net 28,717,303$ 351,494$ (1,289,903)$ 27,778,894$

Construction in progress at June 30, 2013, consists of $281,864 in costs associated with various landfill projects.

7. Accrued Leave: Employees are eligible to receive their entire unused paid time off upon termination, or can elect to be paid annually for a maximum of fifteen days of annual leave, depending on years of service. At June 30, 2013, the liability for this accrued leave is $343,881.

8. Long Term Liabilities: The following is a summary of long term liabilities for the fiscal year ended June 30, 2013:

June 30, June 30,2012 Increases Decreases 2013

Long Term Debt:2002 Revenue Bonds 34,070,000$ -$ 985,000$ 33,085,000$ 1,035,000$ Bond Discount (265,265) - (13,263) (252,002) (13,263) Installment Purchase Agreement 3,405,575 - 117,987 3,287,588 127,506

Long term Debt Subtotal 37,210,310 - 1,089,724 36,120,586 1,149,243

Other Long Term Liabilities:Post Employment Benefits 159,000 62,920 - 221,920 - Closure Payable 4,836,524 - 2,437,043 2,399,481 34,202 Postclosure Payable 13,585,632 210,753 - 13,796,385 171,540

Total Long Term Liabilities 55,791,466$ 273,673$ 3,526,767$ 52,538,372$ 1,354,985$

Due Within One year

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JUNE 30, 2013

8. Long Term Liabilities (continued): Revenue Bonds, Series 2002

On May 15, 2002, the Authority issued Revenue Bonds, Series 2002 in the amount of $39,845,000 to finance capital improvement projects, refund the Authority’s 1997 Revenue Bonds, payoff a portion of the Crazy Horse installment purchase agreement and provide capitalized interest and a debt service reserve fund. Maximum annual debt service is $2,756,524, including interest at 5.56% for 30 years. The annual debt service requirements are as follows:

Principal Interest Total

1,035,000$ 1,721,524$ 2,756,524$ 1,085,000 1,667,203 2,752,2031,150,000 1,604,344 2,754,3441,215,000 1,537,828 2,752,8281,285,000 1,467,516 2,752,5167,570,000 6,196,600 13,766,6009,815,000 3,948,394 13,763,3949,930,000 1,076,775 11,006,775

33,085,000$ 19,220,184$ 52,305,184$

2029-2032

Fiscal year Ended June 30,

20142015201620172018

2019-20232024-2028

Installment Purchase Agreement

The Authority purchased Crazy Horse Sanitary Landfill from the City of Salinas for $8,000,000. On August 12, 1997, the Authority and the City entered into an installment purchase agreement. The installment payments to the City were $701,244 per year, including interest at 7.91% for 30 years.

On August 28, 2002, principal of $3,470,438 was paid to the City reducing the outstanding balance on the installment purchase agreement to $4,168,269. The installment payments to the City are reduced to $385,097 per year, including interest at 7.91% for the remaining 27 years. At June 30, 2013, the remaining balance due was $3,287,588. The annual debt service requirements are as follows:

Principal Interest Total

127,506$ 257,591$ 385,097$ 137,792 247,306 385,098148,907 236,190 385,097160,919 224,178 385,097173,901 211,197 385,098

1,103,976 821,509 1,925,4851,434,587 298,350 1,732,937

3,287,588$ 2,296,321$ 5,583,909$

2018

Fiscal year Ended June 30,

2019-20242025-2027

2014201520162017

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JUNE 30, 2013

9. Unamortized Bond Discount: The 2002 Revenue Bonds were sold at a discount of $397,895. The discount is being amortized over the life of the bond issue (30 years) at an annual rate of $13,263. The following is a summary of the 2002 Revenue Bonds unamortized discount at June 30, 2013:

2012 Increases Decreases 2013Revenue Bonds, Series 2002 265,265$ -$ (13,263)$ 252,002$ Total bonded debt outstanding at June 30, 2013 net of the unamortized bond discount is as follows: Bonds payable 33,085,000$ Less unamortized bond discount (252,002)

Net bonds payable 32,832,998$

10. Landfill Closure and Postclosure Requirements: The Salinas Valley Solid Waste Authority operates a solid waste disposal system serving the waste shed of the cities of Salinas, Gonzales, Greenfield, Soledad and King City, and the eastern and southern portions of the unincorporated area of the County. The system currently consists of one active landfill (Johnson Canyon), two transfer stations (Sun Street and Jolon Road) and three closed landfills (Lewis Road, Jolon Road and Crazy Horse).

The landfills are regulated by the California Department of Resources, Recycling, and Recovery (CalRecycle) which requires the Authority to set-aside funds annually for landfill closure and to fund postclosure maintenance for at least 30 years after closure. On June 19, 1998, the CalRecycle, approved the Authority’s financial assurance mechanisms for closure and postclosure maintenance for the Authority’s four landfills. Since then, the CalRecycle and the Authority have agreed to the financial assurance mechanism for corrective action for the Jolon Road, Johnson Canyon and Crazy Horse Landfills. The State found that the Enterprise Fund and Pledge of Revenue Agreement met the requirements of Title 27 of the California Code of Regulations and Federal Title 40 regulations. Under the terms of these agreements the Authority is to annually set-aside funds for the closure of the landfills. The postclosure maintenance and corrective action costs will be funded on a pay-as-you go basis when they are actually incurred and are secured by a pledge of revenue.

Closure costs are determined and funded annually based on landfill capacity used. Although postclosure maintenance costs will be paid near or after the date that the landfills stop accepting waste, the Authority reports a portion of these costs as an operating expense in each period based on landfill capacity used as of each balance sheet date.

Postclosure maintenance costs are based on the level of service required to protect the environment during the postclosure period. These include the cost of equipment and facilities, such as leachate collection systems and final cover maintenance. Postclosure care costs extend over a 30 year period of time. For this reason, it is likely there will be unforeseen repair or replacement costs during the postclosure period. Some of these variances are due to changes in technologies, changes in operational conditions and physical changes at the landfills. Estimated current costs of closure and postclosure care are evaluated annually as required by Generally Accepted Accounting Principles (GAAP). The results of the annual evaluation can increase or decrease closure and postclosure costs depending on the various components here described.

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JUNE 30, 2013

10. Landfill Closure and Postclosure Requirements (continued): The system estimated capacity at June 30, 2013 is presented as follows:

Permitted Capcity (cu. yd.) 100.0%Cumulative Capcity Used (cu. yd.) 22.0%

Remaining Capacity (cu. yd.) 78.0%

Johnson Canyon

10,512,141(2,310,648)

8,201,493

System Capacity

As of June 30, 2013, the Authority has 78.0% of its system capacity remaining. System capacity is based on the capacity of the one active landfill, Johnson Canyon. During the fiscal year ended June 30, 2013, the Authority landfilled a total of 236,521 tons of solid waste. As of June 30, 2013 the Authority has 29 years remaining landfill capacity.

Johnson Canyon Landfill

On February 1, 2008 Johnson Canyon was granted a revised permit by the California Integrated Waste Management Board increasing its landfill capacity. It has capacity to the year 2040 based on the assumption that the goal of 75% is reached by the year 2015. The site capacity estimates and closure and postclosure costs were revised as part of the permit process.

Closed Landfills

Crazy Horse Landfill closed on May 31, 2009. It is now undergoing the closure process.

Jolon Road Landfill is accepting waste only as a transfer station. The landfill was closed in October 2007. No refuse is being landfilled on this site.

Lewis Road Landfill is a closed landfill. No refuse is being landfilled on this site.

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JUNE 30, 2013

10. Landfill Closure and Postclosure Requirements (continued): Closure and Postclosure Maintenance Costs

Estimated closure and postclosure maintenance costs and amounts set-aside for closure as of June 30, 2013, are presented as follows:

Crazy Johnson Lewis JolonTotal Horse Canyon Road Road

Estimated:Closure Cost 9,315,521$ 451,076$ 8,864,445$ -$ -$ Postclosure Maintenance Cost 16,249,079$ 10,963,269$ 3,143,673$ 957,999$ 1,184,138$

Expense (Income):Closure 368,061$ 57,575$ 310,486$ -$ -$ Postclosure Maintenance 344,196 193,850 110,110 18,769 21,467

Total Expense (Income) 712,257$ 251,425$ 420,596$ 18,769$ 21,467$

Outstanding Liability:Closure 2,399,481$ 451,076$ 1,948,405$ -$ -$ Postclosure Maintenance 13,796,385 10,963,269 690,979 957,999 1,184,138

Total Liability 16,195,866$ 11,414,345$ 2,639,384$ 957,999$ 1,184,138$

Assets Set-Aside for Closure-Cash 2,848,013$ 84,764$ 2,763,249$ -$ -$

Cash over/(under) Closure Liability 448,532$ (366,312)$ 814,844$ -$ -$

June 30, 2013

Johnson Canyon Landfill estimated closure costs increased $156,739 as a result of the CalRecycle inflation factor of 1.8%. After taking into account the capacity used at the landfill, the Authority recognized a closure expense of $310,486 for Johnson Canyon.

Johnson Canyon Landfill estimated postclosure costs increased $55,586 as a result of the CalRecycle inflation factor of 1.8%. After taking into account the remaining capacity of the landfill, the Authority recognized a postclosure expense of $110,110.

The postclosure maintenance liability of $13,796,385 will be funded from future revenues as expenditures take place.

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JUNE 30, 2013

11. Deferred Compensation Plan: Effective July 1, 2004, the Authority established a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Small Business Job Protection Act of 1996 requires the establishment of a trust or similar vehicle to ensure that the assets of the deferred compensation plans under the Internal Revenue Code Section 457 are protected and used exclusively for the benefit of plan participants and/or their beneficiaries. All employees are eligible to participate through voluntary salary reduction. The Authority’s adopted Plan Document includes the provision for such a Trust. The existence of the trust does little to change the Plan structure except to add a layer of protection for money set aside for the employee against claims of the Employer’s creditors.

The Authority’s deferred compensation plan is administered by the ICMA Retirement Corporation. The ICMA Deferred Compensation plan has a balance of $465,037 as of June 30, 2013. Since these funds are held by the ICMA Retirement Corporation under a trust arrangement for the benefit of the employees, these funds are not reported on the financial statements.

12. Retirement Programs: Effective July 1, 2004, the Authority entered into a contract with the California Public Employees’ Retirement System (CalPERS) for the provision of retirement benefits under the Public Employees’ Retirement Law. The total pension expense for the fiscal year was $426,483 which included normal costs, annual amortization of prior service costs and Employer Paid Member Contributions.

Public Employees Retirement System

Plan Description The Authority’s defined benefit pension Miscellaneous Plan, provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public Employees Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. Menus of benefit provisions as well as other requirements are established by State statues within the Public Employees’ Retirement Law. The Authority selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance. CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS’ annual financial report may be obtained from the CalPERS Executive Office – 400 Q Street – Sacramento, CA 95811.

The Authority entered into a contract with CalPERS effective July 1, 2004, to provide 2% at 55 for Local Miscellaneous Members. All CalPERS participant benefits vest after five years of service. Miscellaneous employees under CalPERS who retire at or after age 55 with five years of credited service are entitled to an annual retirement benefit, payable monthly for life, in an amount that varies from 2% at age 55 to a maximum 2.418% at age 63, of the single highest year’s salary for each year of credited service.

Funding Policy Active plan members are required to contribute 7% of their annual covered salary. Effective January 1, 2010 the Authority began contributing the 7% as Employer Paid Member Contributions. The Authority is also required to contribute an actuarially determined rate. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2012-13 was 10.152% for miscellaneous employees of annual covered payroll. The contribution requirements of the plan members are established by State statute and employer contribution rate is established and may be amended by CalPERS.

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JUNE 30, 2013

12. Retirement Programs (continued): Annual Pension Cost For fiscal year 2012-13, the Authority’s annual pension cost of $426,483 was equal to the Authority’s required and actual contributions of $251,378 and $175,105 as Employer Paid Member Contributions. The required contribution for fiscal year 2012-13 was determined as part of the original actuarial valuation using the Entry Age Actuarial Cost Method with the contributions determined as a percent of pay. The actuarial assumption included (a) 7.75% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by duration of service ranging from 3.55% to 14.45% for miscellaneous members, and (c) 3.25% payroll growth. Both (a) and (b) include an inflation component of 3.0%. The actuarial value of CalPERS assets was determined using techniques that smooth the effects of short term volatility in the market value of investments spreading the unrealized and realized gain/(loss) over a 15 year period (smoothed market value). CalPERS unfunded actuarial accrued liability is being amortized as a level percentage of assumed future payroll on a closed basis. All pension costs are paid upon receipt of invoices.

Trend Information – Following is the three-year trend information for CalPERS:

Annual Pension Cost Percentage of Net PensionFiscal Year (APC) APC Contributed Obligation

6/30/2011 383,979$ 100% -$ 6/30/2012 388,253 100% - 6/30/2013 426,483 100% -

The Authority has less than 100 active members; therefore, it is required to participate in a risk pool.

The schedule of funding progress, presented as required supplementary information (RSI) following the notes to the financial statements, presents the risk pool multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Plan Description and Funding Policy The Authority participates in an agent multiple-employer defined benefit postemployment healthcare plan administered by CalPERS. Employees who retire directly from the Authority under the California Public Employee's Retirement System (CalPERS) at the minimum age of 50 with at least 5 years of CalPERS service (or disability) are eligible to receive up to $105/month for medical insurance premiums paid to CalPERS. This same benefit may continue to a surviving spouse depending on the retirement plan election. Currently, there is one retiree from the Authority. This retiree declined this benefit. CalPERS issues a publicly available financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, P.O. Box 942701, Sacramento, CA 94229-2701.

Annual OPEB Costs and Net OPEB Obligation The Authority funds the payment of current retirees health costs on a pay-as-you go basis. For the fiscal year ended June 30, 2013, the Authority’s pay-as-you-go contributions for health care benefits for retirees are $580. There was 1 retiree on the health insurance.

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JUNE 30, 2013

13. Postemployment Healthcare Plan: The Authority’s annual Other Post Employment Benefit (OPEB) cost (expense) is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The components of the Authority’s annual OPEB costs for the year, the amount actually contributed to the plan, and changes in the Authority’s net OPEB obligation (NOO) for the year ended June 30, 2013 and June 30, 2012 are as follows:

June 30, 2013 June 30, 2012

Annual required contribution 63,600$ 56,900$ Interest on net OPEB obligation 6,800 4,200 Adjustments to net OPEB obligation (6,900) -

Annual OPEB expense 63,500 61,100 Contribution under "pay-as-you-go" Payment for CalPers (580) -

Increase in OPEB obligation 62,920 61,100

Net OPEB obligation - beginning of year 159,000 97,900

Net OPEB obligation - end of year 221,920$ 159,000$

Funded Status and Funding Progress As of June 30, 2012, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability for benefits as well as the unfunded actuarial accrued liability (UAAL) was $234,100. The covered payroll (annual payroll of active employees covered by the plan) was $2,252,000 and the ratio of the UAAL to the covered payroll was 10.4%. The plan has no segregated assets.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are about the future. The Schedule of Funding Progress, presented as Required Supplementary Information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

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JUNE 30, 2013

13. Postemployment Healthcare Plan (continued): Actuarial Methods and Assumptions In the June 30, 2012 actuarial valuation, the actuarial cost method used is Entry Age Normal (EAN) cost method. Under the EAN cost method, the plan’s Normal Cost is developed as a level percent of payroll throughout the participants’ working lifetime. Entry age is based on current age minus years of service. The Actuarial Accrued Liability (AAL) is the cumulative value on the valuation date of prior Normal Cost. For the retirees, the AAL is the present value of all projected benefits. The Unfunded AAL is being amortized as a level dollar closed 30 year basis, as a level percent of payroll with a remaining amortization period at June 30, 2013 for 27 years. GASB 45 requires the interest rate to represent the underlying expected return for the source of funds used to pay benefits. The actuarial methods and assumptions included 4.5% interest rate, representing the long term expected rate of return on the Authority’s pooled investments. Annual inflation assumed to increase at 3% per annum and Aggregate Payroll assumed to increase at 3.25% per annum. The study also used assumptions for the salary merit and longevity increases, and demographic assumptions such as mortality withdrawal, and disability based on CalPERS 1997-2007 Experience Study. Retirement assumption was also based on CalPERS 1997-2002 Experience Study of the Miscellaneous Plan 2.0% at 55 years, with expected retirement age of approximately 62.78.

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

14. Concentrations The Authority received 78.8% of its Charges for Services (tipping fees) from three haulers: Republic Services, Waste Management and Recology South Valley. These three haulers comprised approximately as $1,024,317 (76.8%) of accounts receivable balances at June 30, 2013. A major reduction in revenue from any of the above sources may have a significant effect on the future operations of the Authority, however this is very unlikely.

Under the Waste Delivery Agreements that support the Revenue Bonds and under the Joint Powers Agreement, establishing the Authority, each member agency is required to direct all garbage to Authority facilities. They do this by means of the Franchise Agreements with their respective haulers. Republic Services, serving the City of Salinas, and Waste Management, serving Unincorporated Monterey County and the City of King City, are required to bring their garbage and yard waste to Authority facilities.

Recology South Valley brings their waste to Johnson Canyon Landfill, under the Waste Disposal and Capacity Guarantee Agreement approved in 2003. This agreement has a termination date of December 31, 2013, but can be extended for up to four 1-year extensions at the Authority’s sole discretion. Their revenue is guaranteed for as long as the agreement is in place.

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JUNE 30, 2013

15. Commitments and Contingencies: Recology Waste Systems Long-Term Contract On October 23, 2003, the Authority entered into a revised long-term contract with Norcal Waste Systems (Norcal) for the operation of scalehouses Sun Street Transfer Station and diversion services. Norcal has since become Recology Waste Systems (Recology). All services are provided based on a minimum flat monthly fee along with additional fees based on tonnages/quantities processed at each of the sites and landfill compaction. The Authority has taken over several of the operations. The basic contract terms, at June 30, 2013, were as follows:

Contract Ending Date Service

Basic Annual Fee

Future Minimum Contractual Amount

12/31/2014 Johnson Canyon Landfill Basic Facility Fee 1,988,880$ 2,983,320$ For the fiscal year ended June 30, 2013, the Authority paid Recology Waste Systems $2,913,601 for operations of Johnson Canyon landfills, diversion services, excess tonnage, and air space conservation adjustment.

USA Waste Long-Term Contract

As part of the Settlement Agreement and Release on the Jolon Road litigation, the Authority entered into an Amended and Restated Operating Agreement for the Jolon Road Transfer Station. The initial term of this Amended Agreement commenced on June 3, 2004 and ends on September 1, 2016, however, it may be extended for up to three (3) additional one-year renewal terms. Effective June 1, 2013, the base compensation consists of a fuel component of $2,874 and a non-fuel component of $54,905. The base compensation is adjusted annually on the anniversary date of the Amended Agreement based on changes in the Retail On-Highway Diesel Prices and Consumer Price Index. The basic contract terms at June 30, 2013, were as follows:

Contract Ending Date Service

Basic Annual Fee

Future Minimum Contractual Amount

9/1/2016 Jolon Road Transfer Station 680,736$ 2,195,602$ Lease Obligations

On October 19, 2006, the Authority entered into a ten year lease commencing January 1, 2007, for office space at 128 Sun Street in Salinas. Effective January 1, 2012, the monthly lease payments were $7,194. The lease has an option to extend for two five-year periods.

The future minimum lease payments through December 2016 are as follows:

Ended June 30 Amount

2014 86,328$ 2015 86,3282016 86,3282017 43,165

302,149$

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JUNE 30, 2013

15. Commitments and Contingencies (continued): Risk Management

The Authority is exposed to various risks of losses related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. Effective July 1, 2009 the Authority has purchased worker’s compensation insurance through the Zurich American Insurance Company for its employees. The Authority has the following commercial insurance policies:

Detail Limits DeductibleEnvironmental impairment liability Per occurrence 10,000,000$ 25,000$

Additional pollution liability limited occurence 1,000,000 10,000General liability Aggregate 1,000,000 - Automobile liability Per accident 1,000,000 1,000Property damage Per occurrence 3,530,565 5,000Public officials/employment practices Each act 1,000,000 10,000Excess liability Each act 2,000,000 - Crime - 1,000,000 5,000 Equipment Floater - 10,000,000 5,000

Coverage

There have been no significant reductions in any insurance coverage, nor have there been any insurance related settlements that exceeded insurance coverage during the past three fiscal years.

Corrective Action Plan The California Code of Regulations requires landfill owners and operators to demonstrate the availability of financial resources to conduct corrective action activities for all known or reasonably foreseeable releases from the disposal facility affecting water quality.

The Authority has conducted studies to determine the site remediation cost to mitigate those releases. These cost estimates are incorporated into the Final Closure and Postclosure Maintenance Plan for each of the landfills. These amounts have been reviewed and approved by CalRecycle and the Regional Water Quality Control Board.

The estimated cost of capital improvements and operations and maintenance costs to mitigate a potential release at the Authority landfills is estimated as follows:

Maintenance Total ContigencyJohnson Canyon 385,106$ 377,220$ 762,326$ -$ Crazy Horse 2,908,200 6,583,500 9,491,700 - Jolon Road - 1,302,000 1,302,000 - Lewis Road 122,700 226,000 348,700 35,000

Total Corrective Actions 3,416,006$ 8,488,720$ 11,904,726$ 35,000$

Landfill - ActionCapital

Improvements

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JUNE 30, 2013

15. Commitments and Contingencies (continued): The capital improvements costs are one-time costs. The maintenance costs are the total estimated cost ranging from 19 years for Lewis Road to 57 years for Johnson Canyon. If there should be a release at one of the landfill sites the Authority would have to spend up to the amounts shown on capital improvements. If the capital improvements have to be made, the Authority would be obligated to spend the maintenance amounts shown on the table for maintenance of the improvements.

These amounts have not been recorded as a liability because while some releases are possible, they are not considered probable or if they are considered probable, they are not sufficiently measureable.

16. Restricted Net Position: At June 30, 2013, the statement of net position reports restricted net position of $3,419,936. None of the net positions are restricted by enabling legislation. This consists of $2,820,700 for the debt service reserve which cannot be used until the bonds are paid in full in 2031, $196,309 of unspent grant monies, and $402,927 for closure reserve.

17. Net Position: Deficit Invested in Capital Assets, Net of Related Debt

The deficit of $8,341,693 Invested in Capital Assets, Net of Related Debt is the result of the Authority issuing 30-year debt to purchase and improve assets that depreciated at a much faster rate than the debt is being repaid. Three of the Authority’s landfills are closed and fully depreciated, however, the debt associated with those assets will not be paid in full until 2032.

Unrestricted Net Deficit

The deficit of $5,342,702 in Unrestricted Net Deficit is the result of accrued operating expenses such as postclosure that will be paid from future revenues. Per Board policy tipping fees are set at an amount such that postclosure maintenance is funded on a pay-as-you-go basis. Thus far $13,796,385 in operating expenses has been accrued as a long term liability which will be funded over the next 30 years from tipping fees. This is in accordance with the Pledge of Revenue that is part of the Financial Assurances agreement between the Authority and CalRecyle.

18. Bond Rate Covenant: Pursuant to the Master Indenture of the Revenue Bonds, Series 2002, the Authority has agreed to at all times while any of the Bonds remain Outstanding to set fees and charges and manage operations so as to yield Net Revenues during the fiscal year equal to at least one hundred fifteen percent (115%) of the bond’s annual debt service for the fiscal year.

This calculation is based on Net Revenues as described in the Master Indenture. The calculation is based on operating income increased by investment earnings on all funds other than bond project funds and reduced by postclosure expense, depreciation and amortization, all non-cash items. At June 30, 2013, the calculation is 123%.

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JUNE 30, 2013

18. Bond Rate Covenant (continued): Net revenue available for debt service for the year ended June 30, 2013 is determined as follows:

RevenuesOperating revenues 15,980,945$ Interest not on Project funds 39,180

Revised Revenues 16,020,125

Maintenance & Operations CostsGAAP Operating Expenses 14,196,703 Less the following items per Master Indenture

Postclosure maintenance (344,196) ClosureDepreciaiton (1,289,903) Amortization (69,508)

Add Postclosure liability being paidLewis Road 103,497 Jolon Road 29,946

Revised Maintenance and Operations Expenses per Master Indenture 12,626,539

Net Revenues 3,393,586$

Annual Debt ServiceDebt service on 2002 bonds 2,754,954$ Use of capitalized interest - Revised Annual Debt Service 2,754,954$

19. Reclassification:

Certain amounts reported at June 30, 2012 have been reclassified to reflect information and assumptions existing at June 30, 2013. These reclassifications had no effect on net position or the change in net position as previously reported.

20. Subsequent Events: Refunding of Revenue Bonds, Series 2002

On August 16, 2012 the Authority Board of Directors authorized staff to pursue the refunding of the Revenue Bonds, Series 2002. It is expected to take place in the early part of 2013.

County of Monterey Notice of Intent to Withdraw from the Joint Powers Agreement

On August 16, 2012 the Authority Board of Directors received the County’s Notice of Intent to Withdraw from the Authority and to terminate its Waste Delivery Agreement. The Notice begins a one-year period at the end of which the County could withdraw if the existing bonds and other Authority debts are paid off or alternative arrangements are made. The County would also continue to be responsible for its share of postclosure maintenance and corrective action plans for Authority facilities.

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JUNE 30, 2013

20. Subsequent Events (continued): Date of Management Review

Management has evaluated subsequent events through October 2, 2013, the date which these financial statements were available to be issued.

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SALINAS VALLEY SOLID WASTE AUTHORITY REQUIRE SUPPLEMENTARY INFORMATION

JUNE 30, 2013

(a)Actuarial [(a-b)/c]Accrued (b) (a-b) UAAL as a

Actuarial Liability- Actuarial Unfunded (b/a) © PercentageValuation (AAL) Value of AAL Funded Covered of Covered

Date Entry Age Assets (UAAL) Ratio Payroll Payroll

6/30/2005 2,891,460,651$ 2,588,713,000$ 302,747,651$ 89.5% 755,046,679$ 40.1%

6/30/2006 2,754,396,608$ 2,492,226,176$ 262,170,432$ 90.5% 699,897,835$ 37.5%

6/30/2007 2,611,746,790$ 2,391,434,447$ 220,312,343$ 91.6% 665,522,859$ 33.1%

6/30/2008 2,780,280,768$ 2,547,323,278$ 232,957,490$ 91.6% 688,606,681$ 33.8%

6/30/2009 3,104,798,222$ 2,758,511,101$ 346,287,121$ 88.8% 742,981,488$ 46.6%

6/30/2010 3,309,064,934$ 2,946,408,106$ 362,656,828$ 89.0% 748,401,352$ 48.5%

California Public Employees' Retirement SystemSchedule of Funding Progress

Miscellaneous 2% at 55 Risk Pool

Since the Authority has less than 100 active members, it is required to participate in a risk pool. The above data is for the Miscellaneous 2% at 55 Risk Pool which the Authority participates in. Prior to July 1, 2004, the Authority’s employees were covered with the City of Salinas under a separate contract with the California Public Employees’ Retirement System (CALPERS). There is no outstanding liability from that plan to the Authority.

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SALINAS VALLEY SOLID WASTE AUTHORITY REQUIRE SUPPLEMENTARY INFORMATION

JUNE 30, 2013

ActuarialAccrued UAAL as aLiability Actuarial Unfunded Percentage

Actuarial (AAL) - Value of AAL Funded Covered of CoveredValuation Entry Age Assets (UAAL) Ratio Payroll Payroll

Date (a) (b) (a-b) (b/a) ( c ) ((a-b)/c)

6/30/2009 84,600$ -$ 84,600$ 0.00% 2,096,000$ 4.04%6/30/2012 234,100$ -$ 234,100$ 0.00% 2,252,000$ 10.40%

Postemployment Health Insurance Benefits PlanSchedule of Funding Progress

Note: Fiscal year 2010 was the year of implementation of GASB No. 45 and the Authority elected toimplement prospectively, therefore, prior year comparative data is not available. The Authority is required tohave a valuation triennially.

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APPENDIX B

SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE

The following is a brief summary of certain provisions of the Master Indenture (as supplemented, the “Indenture”), by and between the Authority and the Trustee, including pertinent provisions of the Second Supplemental Indenture related thereto. The Master Indenture is supplemented by the First Supplemental Indenture and the Second Supplemental Indenture, each dated as of January 1, 2014 (the “First Supplemental Indenture”), by and between the Authority and the Trustee. This summary is not intended to be comprehensive or definitive, and reference is made to the actual documents for the complete terms thereof.

DEFINITIONS

The following are summaries of certain of the definitions in the Indenture. This summary is not intended to be comprehensive or definitive, and reference is made to the actual documents for the complete terms thereof.

“Annual Debt Service” means, for any Fiscal Year, the sum of (1) the interest accruing on all Outstanding Bonds during such Fiscal Year, assuming that all Outstanding Serial Bonds are retired as scheduled and that all Outstanding Term Bonds are redeemed from the Sinking Fund as scheduled, plus (2) the principal amount allocable to all Outstanding Serial Bonds in such Fiscal Year, calculated as if such principal amounts were deemed to accrue daily during such Fiscal Year in equal amounts from, in each case, each Principal Payment Date or the date of delivery of such Series of Bonds (provided that principal shall not be deemed to accrue for greater than a 365-day period prior to any Principal Payment Date), as the case may be, to the next succeeding Principal Payment Date, plus (3) the principal amount of all Outstanding Term Bonds allocable to such Fiscal Year, calculated as if such principal amounts were deemed to accrue daily during such Fiscal Year in equal amounts from, in each case, each Sinking Fund Installment Date or Principal Payment Date (provided that principal shall not be deemed to accrue for greater than a 365-day period prior to any Sinking Fund Installment Payment Date), as the case may be, to the next succeeding Sinking Fund Installment Date, plus (4) that portion of the Contract Payments required to be made at the times provided in all the Contracts that would have accrued during such Fiscal Year if such Contract Payments were deemed to accrue daily in equal amounts from, in each case, the next preceding Contract Payment Date or the date of the pertinent Contract, as the case may be, plus (5) Repayment Obligations scheduled to become due during such Fiscal Year; provided, that the following adjustments shall be made to the foregoing amounts in the calculation of Annual Debt Service:

(A) with respect to any such Bonds or Contracts bearing or comprising interest at other than a fixed interest rate, the rate of interest used to calculate Annual Debt Service shall be (i) with respect to such Bonds or Contracts then outstanding, one hundred ten per cent (110%) of the greater of (1) the daily average interest rate on such Bonds or Contracts during the twelve (12) calendar months next preceding the date of such calculation (or the portion of the then current Fiscal Year that such Bonds or Contracts have borne interest) or (2) the most recent effective interest rate on such Bonds or Contracts prior to the date of such calculation or (ii) with respect to such Bonds or Contracts then proposed to be issued, the Index Rate;

(B) with respect to any such Bonds or Contracts having twenty-five per cent (25%) or more of the aggregate principal amount thereof due in any one Fiscal Year, Annual Debt Service shall be calculated for the Fiscal Year of determination as if the interest on and principal of such Bonds or Contracts were being paid from the date of incurrence thereof in substantially

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equal annual amounts over a period of twenty-five (25) years from the date of such Bonds or Contracts;

(C) with respect to any such Bonds or Contracts or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Bonds or Contracts or portions thereof, such accreted discount shall be treated as due when scheduled to be paid;

(D) the amount on deposit in a debt service reserve fund for any Bonds or Contracts on any date of calculation of Annual Debt Service shall be deducted from the amount of principal due at the final maturity of such Bonds or Contracts and in each preceding year until such amount is exhausted;

(E) Annual Debt Service shall not include interest on Bonds or Contracts which is to be paid from amounts constituting capitalized interest;

(F) if an interest rate swap agreement is in effect with respect to, and is payable on a parity with, any Bonds or Contract to which it relates, no amounts payable under such interest rate swap agreement shall be included in the calculation of Annual Debt Service unless the sum of (i) the interest payable on such Bonds or Contract, plus (ii) the amounts payable by the Authority under such interest rate swap agreement, less (iii) the amounts receivable by the Authority under such interest rate swap agreement, are greater than the interest payable on such Bonds or Contract, in which case the amount of such payments to be made that exceed the interest to be paid on such Bonds or Contract shall be included in such calculation, and for this purpose, the variable amount under any such interest rate swap agreement shall be determined in accordance with the procedure set forth in subparagraph (A) of this definition;

(G) if any Bonds or Contracts are Paired Obligations, the interest rate on such Bonds or Contracts shall be the resulting fixed interest rate to be paid by the Authority with respect to such Paired Obligations; and

(H) repayment Obligations proposed to be entered into which are secured by Net Revenues on a parity with the Bonds shall be deemed to be payable at the scheduled amount due under the Bonds or Contracts to which such Repayment Obligation relates as calculated under this definition.

“Authorized Investments” means, if and to the extent permitted by law and by any policy guidelines promulgated by the Authority (with respect to which the Trustee may rely conclusively, and has no obligation to independently verify compliance with such law or policy guidelines) for all purposes other than defeasance investments in refunding escrow accounts:

(1) Cash;

(2) Direct obligations of the Department of the Treasury of the United States of America;

(3) Obligations of any of the following federal agencies, which obligations represent the full faith and credit of the United States of America:

– Export-Import Bank – Farm Credit System Financial Assistance Corporation

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– Rural Economic Community Development Administration (formerly the Farmers Home Administration)

– General Services Administration – U.S. Maritime Administration – Small Business Administration – Government National Mortgage Association (GNMA) – U.S. Department of Housing & Urban Development (PHA’s) – Federal Housing Administration – Federal Financing Bank; and

(4) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America:

– Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC)

– Obligations of the Resolution Funding Corporation (REFCORP) – Senior debt obligations of the Federal Home Loan Bank System – Senior debt obligations of other government sponsored agencies approved by

each Credit Enhancement Provider then providing Credit Enhancement for a Series of Bonds.

(5) U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks (including the Trustee and its affiliates) that have a rating (ratings on holding companies are not considered as the rating of the banks) on their short-term certificates of deposit on the date of purchase of “A-1” or “A-1+” by Standard & Poor’s and “P-1” by Moody’s and mature no more than 365 days after the date of purchase;

(6) Commercial paper that is rated at the time of purchase in the single highest classification, “A-1” by Standard & Poor’s or “P-1” by Moody’s, and matures not more than 270 days after the date of purchase;

(7) Investments in a money market fund rated at the time of investment “AAAm” or “AAAm-G” or better by Standard & Poor’s, including funds for which the Trustee or an affiliate provides investment advice or other services;

(8) Pre-refunded Municipal Obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality, or local governmental unit of any such state, which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and

(a) which are rated at the time of purchase, based on an irrevocable escrow account or fund (the “escrow”), in the highest rating category of Standard & Poor’s and Moody’s or any successors thereto; or

(b) (i) which are fully secured as to principal and interest and prepayment premium, if any, by an escrow consisting only of cash or obligations described in paragraph A(2) of this definition, which escrow may be applied only to the payment of such principal of and interest and prepayment premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified prepayment

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date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and prepayment premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate;

(9) General obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state with a rating, at the time of purchase, of “Baa1/BBB+” or higher by both Moody’s and Standard & Poor’s;

(10) Any investment agreement with a financial institution or insurance company which has at the date of execution thereof an outstanding issue of unsecured, uninsured, and unguaranteed debt obligations or a claims paying ability rated (or the parent company or guarantor of which is rated) in either of the two highest long-term Rating Categories by Moody’s and Standard & Poor’s;

(11) The Local Agency Investment Fund managed by the Treasurer of the State of California, as referred to in Section 16429.1 of the Government Code of the State, but only to the extent such investment is registered in the name of the Trustee;

(12) Shares in a common law trust established pursuant to Title 1, Division 7, Chapter 5 of the Government Code of the State which invests exclusively in investments permitted by Section 53601 of Title 5 Division 2, Chapter 4 of the Government Code of the State, as it may be amended; and

(13) Any other forms of investments that relate solely to a Series of Bonds, as specified in a Supplemental Indenture providing for the issuance of such Series of Bonds.

(14) Other forms of investments (including repurchase agreements) approved in writing by any Bond Insurer.

The value of the above investments shall be determined as follows:

A. as to investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or if not there, then in The New York Times): the average of the bid and asked prices for such investments so published on or most recently prior to such time of determination;

B. as to investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times: the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service;

C. as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest;

D. as to any investment not specified above: the value thereof established by prior agreement between the City, the Trustee and, if applicable, any Bond Insurer; and

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E. alternatively, the value of the above investments shall be determined as of the end of each month by the manner currently employed by the Trustee or any other manner consistent with corporate trust industry standard.

“Average Annual Debt Service” means, as of any date of calculation, the average Annual Debt Service during the period from the date of such calculation through the final maturity date of all Outstanding Bonds or the final Contract Payment Date of all Contracts, whichever date is later.

“Bond Insurer” means any issuer of a Municipal Bond Insurance Policy obtained by the Authority.

“Bonds” means all Series of the Bonds authorized, executed and delivered under all Supplemental Indentures.

“Bond Year” shall be defined in the manner set forth in the Tax Certificate.

“Contract Payment Date” means any date on which Contract Payments are scheduled to be paid by the Authority under and pursuant to any Contract.

“Contract Payments” means the payments scheduled to be paid by the Authority under and pursuant to the Contracts, which payments are secured by a pledge of Net Revenues on a parity with the Bonds as provided in the Indenture.

“Contracts” means all obligations of the Authority authorized and executed by the Authority, the Contract Payments under which are secured by a pledge of the Net Revenues on a parity with the Bonds as provided in the Indenture.

“Escrow Agreement” means that certain Escrow Agreement entered into by and between the Authority and the Escrow Bank in connection with the defeasance of the Prior Bonds.

“Escrow Bank” means The Bank of New York Mellon Trust Company, N.A., as Escrow Agent with respect to the Prior Bonds and any successor thereto.

“Escrow Fund” means that certain fund by the name Escrow Fund established under the Escrow Agreement.

“Federal Securities” means (i) United States of America Treasury bills, notes, bonds or certificates of indebtedness, or (ii) obligations for which the full faith and credit of the United States of America are pledged for the payment of interest and principal, or (iii) evidences of ownership of proportionate interests in future interest and principal payments on securities described in (i) or (ii) of this definition held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying securities are not available to any person claiming through the custodian or to whom the custodian may be obligated.

“Index Rate” means the rate equal to the rate published by the Bond Buyer as the 25-Bond Revenue Index of revenue bonds maturing in thirty (30) years, or if such index ceases to be published, a comparable index published by the Bond Buyer or, if no comparable index then exists, eighty percent (80%) of the interest rate on actively traded thirty (30) year United States Treasury obligations.

“Interest Fund” means the fund by that name established pursuant to the Indenture that is held by the Trustee.

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“Maintenance and Operation Costs” means the reasonable and necessary costs paid or incurred by the Authority for maintaining and operating the System, determined in accordance with Generally Accepted Accounting Principles, including all reasonable expenses of management and repair and all other expenses necessary to maintain and preserve the System in good repair and working order, and including all administrative costs of the Authority that are charged directly or apportioned to the operation of the System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-insurance funds), closure and post-closure costs related to the System which are mandated to be paid, and including all other reasonable and necessary costs of the Authority or charges required to be paid by it to comply with the terms hereof or of any Supplemental Indenture or of any resolution authorizing the execution of any Contract or of such Contract, such as compensation, reimbursement and indemnification of the Trustee and fees and expenses of Independent Certified Public Accountants; but excluding in all cases (i) the principal of and interest on Bonds, Contract Payments, Repayment Obligations and payment of Subordinate Obligations, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under Generally Accepted Accounting Principals are chargeable to a capital account, (iii) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles and (iv) closure and post-closure costs related to the System which are required to be accrued, but not currently paid.

“Master Reserve Fund” means the fund by that name established pursuant to Section 3.03 hereof that is held by the Trustee.

“Master Reserve Fund Requirement” means, as of any date of calculation by the Authority, an amount equal to the least of (a) with respect to any particular Series of Bonds or Contract to be secured by the Master Reserve Fund as of its issuance or delivery date, ten per cent (10%) of the proceeds (within the meaning of Section 148 of the Code) of such Series of Bonds or Contract, (b) one hundred twenty-five per cent (125%) of Average Annual Debt Service of all the Bonds or (c) the Maximum Annual Debt Service of all the Bonds.

“Maximum Annual Debt Service” means, as of any date of calculation, the largest Annual Debt Service during the period from the date of such calculation through the final maturity date of all Outstanding Bonds or the final Contract Payment Date of all Contracts, whichever date is later.

“Municipal Bond Insurance Policy” means a municipal bond insurance policy issued by a Bond Insurer insuring the payment of the interest on and principal of a Series of the Bonds (or any portion thereof) issued hereunder when due otherwise than by acceleration, as provided therein.

“Net Revenues” means for any period Revenues less Maintenance and Operation Costs for such period; provided that certain adjustments in the amount of Net Revenue deemed collected during a Fiscal Year may be made in connection with amounts deposited in the Rate Stabilization Fund as provided in the Indenture.

“Paired Obligations” means any one or more Series (or portion thereof) of Bonds or Contracts, designated as Paired Obligations in a Supplemental Indenture or a Certificate of the Authority, which are simultaneously issued, executed or delivered and (i) the principal or notional amount of which, as applicable, is of equal amount and (ii) the interest rates on which, taken together, result in an irrevocably fixed rate obligation of the Authority for the term of such Bonds or Contracts.

“Principal Fund” means the fund by that name, established pursuant to the Indenture that is held by the Trustee.

“Prior Bonds” means the Salinas Valley Solid Waste Authority Revenue Bonds Series 2002 in the original aggregate principal amount of $39,845,000.

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“Project” means any improvements to the System financed or refinanced with the proceeds of Bonds, as more specifically identified in a Supplemental Indenture.

“Project Funds” means a Project Fund that is held by the Trustee established with respect to a Series of Bonds pursuant to the Indenture.

“Qualified Reserve Fund Credit Instrument” means a surety bond, a letter of credit or other comparable credit facility, or a combination thereof, which, together with money on deposit in the Master Reserve Fund or Series Reserve Fund, as applicable, provide an aggregate amount equal to the Master Reserve Fund Requirement or Series Reserve Fund Requirement, as applicable, so long as (i) the provider of any such policy of insurance, surety bond, letter of credit or other comparable credit facility is rated in one of the two highest rating categories (at all times) by Moody’s and by S&P, (ii) the Trustee has received an opinion of counsel of recognized standing in the field of law relating to municipal bonds substantially to the effect that such substitution is authorized or permitted under this Indenture and will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes, (iii) the Trustee has received written confirmation from Moody’s and S&P that such substitution will not cause a lowering or withdrawal of any ratings on the Bonds, and (iv) the Trustee has received an opinion of counsel to the effect that the credit facility to be substituted is a valid, binding and legally enforceable obligation; and provided further, that in the event that any portion of the Master Reserve Fund Requirement or Series Reserve Fund Requirement, as applicable, is satisfied by the provision of such a policy of insurance, surety bond, letter of credit or other comparable credit facility, or a combination thereof, the amount of money then in the Master Reserve Fund Requirement or Series Reserve Fund Requirement, as applicable, equal to the portion of the Master Reserve Fund Requirement or Series Reserve Fund Requirement, as applicable, then being satisfied by such credit facility shall (upon receipt of a Written Request of the Authority) be withdrawn by the Trustee from the Master Reserve Fund or Series Reserve Fund, as applicable, and transferred to the Authority.

“Rate Stabilization Fund” means the fund by that name established pursuant to the Indenture.

“Rebate Fund” means the fund by that name, established pursuant to the Code and the Indenture that is held by the Trustee.

“Repayment Obligation” means an obligation under a written agreement between the Authority and a credit provider to reimburse the credit provider for amounts paid under or pursuant to a credit facility for the payment of the principal amount or purchase price of and/or interest on any Bonds or any Contract Payments.

“Revenue Fund” means the fund by that name established pursuant to the Indenture that is held by the Authority.

“Revenues” means all gross income and revenue received or receivable by the Authority from the ownership or operation of the System, determined in accordance with Generally Accepted Accounting Principles, including all fees (including fees for services that support waste reduction and recycling programs to comply with state mandates pursuant to Assembly Bill 939), tipping fees, rates, charges and all amounts paid under any contracts received or owed by the Authority in connection with the operation of the System and all proceeds of insurance covering business interruption loss relating to the System and all other income and revenue howsoever derived by the Authority from the ownership or operation of the System or arising from the System. Revenues shall not include interest earnings on Project Funds, self-insurance funds and, to the extent interest earnings thereon are required by law to remain therein, trust funds of the Authority, including but not limited to landfill closure and landfill post-closure trust funds

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established under Article IV of Part 4 of Division 30 of the Public Resources Code of the State of California, or any similar state or federal law.

“Second Supplemental Indenture” means the Second Supplemental Indenture, dated as of January 1, 2014, by and between the Authority and the Trustee.

“Series of the Bonds,” when used with reference to the Bonds, means all of the Bonds authenticated and delivered on original issuance and delivery in a simultaneous transaction and identified pursuant to a Supplemental Indenture authorizing such Bonds as a separate Series of the Bonds, and any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to the Indenture.

“Series Reserve Fund” means the reserve fund held by the Trustee for a particular Series of Bonds which may be established from time to time by pursuant to Section 3.03 hereof.

“Series Reserve Fund Requirement” means, for any particular Series of Bonds issued from time to time that will not be secured by the Master Reserve Fund, the amount, if any, established in the Supplemental Indenture providing of the issuance of such Bonds.

“Sinking Fund” means the fund by that name established pursuant to the Indenture that is held by the Trustee.

“Sinking Fund Installment” means the amount of money required by any Supplemental Indenture to be deposited in the Sinking Fund by the Authority on any Sinking Fund Payment Date for the redemption of any particular Term Bonds of any Series of the Bonds on or prior to their respective stated maturity dates.

“Subordinate Obligations” means all obligations of the Authority that are subordinate in payment to the Bonds and Contracts and that are payable from the Subordinated Payment Fund.

“Subordinated Payment Fund” means the fund by that name established pursuant to the Indenture that is held by the Trustee.

“Supplemental Indenture” means any indenture then in full force and effect which has been entered into by the Authority and the Trustee, amendatory of or supplemental to the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture.

“System” means all land and facilities owned by the Authority for the collection, disposal and processing of solid waste by the Authority, together with all additions, betterments, extensions or improvements to such land and facilities or any part thereof hereafter acquired or constructed by the Authority. “System” shall also include the Authority’s disposal, capacity or other rights in any facilities (including transfer stations, landfills, or other waste management or recycling facilities) with respect to which the Authority has made contractual arrangements for the processing or disposal of solid waste.

“Tax Certificate” means collectively all the certificates, each dated the date of the original issuance and delivery of the Series of the Bonds to which it relates, with respect to the requirements of certain provisions of the Code, as each such certificate may from time to time be modified or supplemented in accordance with the terms thereof.

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“2014 Bond Insurer” means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto or assignee thereof. The 2014 Bond Insurer shall constitute a Bond Insurer as such term is defined and used in the Master Indenture.

“2014 Closing Date” means the date upon which there is a physical delivery of the Bonds in exchange for the amount representing the purchase price of the Series 2014 Bonds by the original purchaser thereof.

“2014 Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate of the Authority dated as of the 2014 Closing Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

“2014 Policy” means the insurance policy issued by the 2014 Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2014 Bonds when due. The 2014 Policy shall constitute a Municipal Bond Insurance Policy as such term is defined and used in the Master Indenture.

“2014 Tax Certificate” means the Tax Certificate of the Authority dated the 2014 Closing Date.

THE INDENTURE

The Indenture sets forth the terms of the Bonds, the nature and extent of the security for the Bonds, various rights of the Bond Owners, rights, duties and immunities of the Trustee and the rights and obligations of the Authority. Certain provisions of the Indenture are summarized below. This summary is not intended to be comprehensive or definitive, and reference is made to the actual document for the complete terms thereof.

Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, the Indenture shall be deemed to be and shall constitute a contract between the Authority and the Trustee for the benefit of the owners from time to time of all the Bonds under the Indenture and then outstanding to secure the full and final payment of the interest on and principal of and redemption premiums, if any, on all Bonds authorized, executed, issued and delivered under the Indenture, subject to the agreements, conditions, covenants and terms contained in the Indenture; and all agreements, conditions, covenants and terms contained in the Indenture required to be observed or performed on behalf of the Authority shall be for the equal and proportionate benefit, security and protection of all Owners of the Bonds from time to time without preference, priority or distinction as to security or otherwise of any Bonds over any other Bonds.

Execution of Contracts; Repayment Obligations.

(a) The Authority may at any time execute any Contracts the Contract Payments under which are payable on a parity with the Bonds; provided, that such Contracts meet the conditions and requirements in the Indenture for the issuance of additional Bonds (with the reference to Bonds being construed to mean Contracts, as appropriate, and any provision not applicable to Contracts being disregarded) at the time of the execution thereof.

(b) If so provided in the applicable Supplemental Indenture and in the written agreement between the Authority and a credit provider, a Repayment Obligation (other than a Repayment Obligation with respect to a credit facility on deposit in the Reserve Fund as described under the definition of Reserve Fund Requirement in the Indenture) may be accorded the status of an obligation payable on a parity from Net Revenue with the Bonds solely for purposes of securing such Repayment Obligation under the Indenture; provided, that such Repayment Obligations meet the conditions and

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requirements in the Indenture for the issuance of additional Bonds (with reference to Bonds being construed to mean Repayment Obligations, as appropriate) at the time of entering into such Repayment Obligation.

Conditions for the Issuance of Bonds. The Authority may at any time issue a Series of the Bonds payable from the Net Revenues and secured by a lien and charge upon the Net Revenues equal to and on a parity with the lien and charge securing the Outstanding Bonds theretofore issued under the Indenture, but only subject to specific conditions, which are made conditions precedent to the issuance of any such Series of the Bonds, including:

(a) The Authority shall be in compliance with all agreements, conditions, covenants and terms contained in all Supplemental Indentures and Contracts required to be observed or performed by it, and a Certificate of the Authority to that effect shall have been filed with the Trustee (this condition shall not apply where the purpose of the Series of Bonds proposed to be issued is to cure such non-compliance).

(b) The issuance of such Series of the Bonds shall have been duly authorized pursuant to all applicable laws, and the issuance of such Series of the Bonds shall have been provided for by a Supplemental Indenture duly adopted by the Authority which shall specify whether or not such Series of Bonds is to be secured by the Master Reserve Fund or a Series Reserve Fund or not be secured by a reserve fund, and, if applicable, the amount, if any, to be deposited from the proceeds of such Series of the Bonds in the Master Reserve Fund or Series Reserve Fund; provided, that the amount on deposit in the Reserve Fund shall be increased at the time such Series of the Bonds become Outstanding to an amount at least equal to the Reserve Fund Requirement as calculated after the issuance of such Series of the Bonds.

(c) The Net Revenues for the most recent audited Fiscal Year, or alternatively, any 12 consecutive months within the last 18 months preceding the date of issuance of such Series of the Bonds, as shown by a Certificate of the Authority on file with the Trustee, plus

(1) An allowance for Net Revenues for such Fiscal Year or 12 month period from any additions, betterments, extensions or improvements to the System or expansions to the service area served by the System (including any material increase in the solid waste expected to be delivered to the System based on an executed contract providing therefor), which during any part of such Fiscal Year or 12 month period, were not in service or not in effect, as the case may be, all in an amount equal to the estimated additional average annual Net Revenues to be derived from such additions, betterments, extensions or improvements or expansions for the first thirty-six (36) months or shorter period in which each addition, betterment, extension or improvement is respectively to be in operation or expansion is to be in effect, all as shown by a Certificate of the Authority on file with the Trustee; and

(2) An allowance for increased Net Revenues arising from any increase in the rates, fees and charges of the System which were adopted by the Authority prior to the date of the execution of such Supplemental Indenture but which, during all or any part of such Fiscal Year or 12 month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in rates, fees and charges had been in effect during the whole of such Fiscal Year or 12 month period, as shown by a Certificate of the Authority on file with the Trustee;

shall have produced a sum equal to at least one hundred fifteen percent (115%) of the Maximum Annual Debt Service as calculated after the issuance of such Series of the Bonds; provided, that in the event that all or a portion of such Series of the Bonds is to be issued for the purpose of refunding and retiring any Bonds then Outstanding, interest and principal payments on the Bonds to be so refunded and retired from

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the proceeds of such Series of the Bonds being issued shall be excluded from the foregoing computation of Maximum Annual Debt Service; provided further, that the Authority may at any time issue a Series of the Bonds without compliance with the foregoing conditions if the Annual Debt Service for each Fiscal Year during which such Series of the Bonds is Outstanding will not be increased by reason of the issuance of such Series of the Bonds; and provided further, an adjustment shall be made in the amount of Net Revenues for withdrawals from and deposits to the Rate Stabilization Fund as provided in the Indenture.

Nothing contained in the Indenture shall limit the issuance of any revenue bonds of the Authority payable from the Net Revenues and secured by a lien and charge on the Net Revenues if, after the issuance and delivery of such revenue bonds, none of the Bonds theretofore issued under the Indenture will be Outstanding and none of the Contracts shall be unpaid.

Pledge of Net Revenues. All the Net Revenues and all money in the Revenue Fund and in the funds or accounts so specified and provided for in the Indenture (except the Rebate Fund) are irrevocably pledged by the Authority to the punctual payment of the interest on and principal of and redemption premiums, if any, on the Bonds and the payment of any Contract Payments and Repayment Obligations, and the Net Revenues and such other money shall not be used for any other purpose while any of the Bonds remain Outstanding; subject to the provisions of the Indenture permitting the application thereof for the purposes and on the conditions and terms set forth therein. The Indenture provides that this pledge constitutes a first lien on the Net Revenues and such other money for the payment of the Bonds, the Contract Payments and the Repayment Obligations in accordance with the terms of the Indenture.

Project Funds. There is established for each Series of Bonds (other than Bonds issued solely for the purpose of refunding other Bonds) a separate fund with the Trustee, with each such fund to be designated for the Series of Bonds for which it is established and to be known as the “Salinas Valley Solid Waste Authority Series ____ Project Fund,” all of which such funds the Trustee hereby covenants to maintain, and all of which such funds shall collectively be known as the “Project Funds.” The Authority shall transfer to the Trustee for deposit into the fund established for each Series of Bonds the amount required to be paid therein by the provisions of this Indenture or the Supplemental Indenture authorizing such Series of Bonds, and the amount in such fund shall be applied to the purpose specified in the Indenture or the Supplemental Indenture authorizing the Series of Bonds for which such fund was established.

Before any payment of money is made from any of the Project Funds, the Authority shall file with the Trustee a sequentially numbered Written Request of the Authority showing with respect to each payment of money to be made--

(a) the name and address of the person to whom payment is due;

(b) the amount of money to be paid and the Project Fund from which such payment is to be made; and

(c) the purpose for which the obligation to be paid was incurred.

Each such Written Request of the Authority shall state (other than requests to pay Costs of Issuance which shall state only the items provided for by paragraphs (w) and (x) below) and shall be conclusive evidence to the Trustee --

(w) that such payment complies with the requirements of the Indenture and the Supplemental Indenture;

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(x) that an obligation in the stated amount has been properly incurred and that such obligation is a proper charge against the appropriate Project Fund;

(y) that there has not been filed with or served upon the Authority a stop notice or any other notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the money payable to the person named in such Written Request of the Authority which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by operation of law, or if such a stop notice or any other notice has been filed with or served upon the Authority, the Authority has provided satisfactory assurances to the Trustee, including an indemnity or bond, if appropriate, that such lien, right to lien or attachment upon, or claim will not adversely affect the operation of the System or the security of the Owners in and to the Net Revenues; and

(z) that there is enough money remaining in the applicable Project Fund to complete the acquisition of the Project for which the applicable Series of Bonds were issued, or the Authority has provided satisfactory assurances to the Trustee, including an indemnity or bond, if appropriate, that such Project will be completed.

Upon receipt of each Written Request of the Authority, so long as the Authority is not then in default hereunder, the Trustee shall pay the amount set forth therein as directed by the terms thereof.

When the acquisition and construction of the Project for which the applicable Series of Bonds was issued has been completed, the Authority shall deliver to the Trustee a Certificate of the Authority stating the fact and date of the completion of such Project and stating that all of the costs of such Project and the expenses incidental thereto have been determined and paid (or that all such costs and expenses have been paid less specified claims which are subject to dispute and for which a retention in the appropriate Project Fund is to be maintained in the full amount of such claims until such dispute is resolved). Upon the receipt by the Trustee of such Certificate, the Trustee shall transfer any remaining balance of money in the appropriate Project Fund (but less the amount of any such retention) to the Interest Fund for payment of interest on the applicable Series of Bonds (or as otherwise provided in any Supplemental Indenture pursuant to which such Series of Bonds are issued).

Other than with respect to the transfer of remaining moneys in a Project Fund to the Interest Fund upon completion of the applicable Project, all investment earnings on funds held in a Project Fund shall be deposited as provided in the Indenture or the Supplemental Indenture pursuant to which a Series of Bonds is issued.

Rate Stabilization Fund. There is established a special fund to be known as the “Rate Stabilization Fund” which shall be held by the Authority. The Authority may, during or within 210 days after a Fiscal Year, deposit Net Revenues attributable to such Fiscal Year (on the basis of Generally Accepted Accounting Principles) into the Rate Stabilization Fund. The Authority may at any time withdraw moneys from the Rate Stabilization Fund. Notwithstanding anything to the contrary provided in the Indenture, Net Revenues deposited into the Rate Stabilization Fund shall not be taken into account as Net Revenues for purposes of the calculations made with respect to the covenants in the Indenture (regarding additional Bonds or the 115% Net Revenue rate covenant in the Fiscal Year to which such deposit is attributable), and amounts withdrawn from the Rate Stabilization Fund, during or within 210 days after a Fiscal Year, may be taken into account as Revenues for purposes of the calculations in the Indenture and in such Fiscal Year, including computations described under paragraph (a) of “—Amounts of Rates, Fees and Charges” below; provided that, for purposes of the calculation required under the Indenture, the amount of Net Revenues before any credits for withdrawals from the Rate Stabilization

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Fund may not be less than 100% of Maximum Annual Debt Service for Outstanding Bonds and the proposed additional Series of Bonds.

Legal Existence. The Authority will use all means legally available to maintain its existence so long as any of the Bonds are Outstanding.

Against Encumbrances. The Authority will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Revenues except as provided in the Indenture, and (except for the Bonds, the Contracts and the Repayment Obligations) will not issue any obligations secured by Net Revenues on a parity with, or senior to, the Bonds and Contracts; provided, that the Authority may at any time issue any Subordinate Obligations.

Against Sale or Other Disposition of the System. The Authority will not sell or otherwise dispose of the System or any part thereof essential to the proper operation of the System or to the maintenance of the Net Revenues, unless the Bonds have been fully paid or provision has been made therefor in accordance with the Indenture. The Authority will not enter into any lease or agreement which impairs the operation of the System or any part thereof necessary to generate Net Revenues in the amounts required under the Indenture, or which would otherwise materially impair the operation of the System.

Maintenance and Operation of System. The Authority will maintain and preserve the System in good repair and working order at all times from the Revenues or other funds available for such purpose, and will operate the System in an efficient and economical manner.

Insurance.

(a) The Authority will procure and maintain at all times while any of the Bonds shall be Outstanding insurance on the System against such risks (including accident to or destruction of the System) as are usually insured in connection with operations similar to the System and, to the extent such insurance is available for reasonable premiums from a reputable insurance company, such insurance shall be adequate in amount and, as to the risks insured against, shall be maintained with responsible insurers; provided, that such insurance coverage may be satisfied under a self-insurance program which is actuarially sound as evidenced by a written report of a risk manager to be delivered to the Trustee on or before September 1 of each year.

(b) The Authority shall procure and maintain or cause to be procured and maintained public liability insurance covering claims against the Authority (including its directors, officers and employees) for bodily injury or death, or damage to property occasioned by reason of the Authority’s operations, including any use of the System, and such insurance shall afford protection in such amounts as are usually covered in connection with operations similar to the System; provided, that such insurance coverage may be satisfied under a self-insurance program which is actuarially sound as evidenced by a written report of a risk manager to be delivered to the Trustee on or before September 1 of each year.

Eminent Domain Proceeds. If all or any part of the System shall be taken by eminent domain proceedings, the net proceeds realized by the Authority therefrom shall be deposited by the Authority with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the Authority to the cost of acquiring and constructing additions, betterments, extensions or improvements to the System if (A) the Authority first secures and files with the Trustee a Certificate of the Authority showing (i) the loss in annual Revenues, if any, suffered, or to be suffered, by the Authority by reason of such eminent domain proceedings, (ii) a general description of the additions, betterments, extensions or improvements to the System then proposed to be acquired and constructed by the Authority from such

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proceeds, and (iii) an estimate of the additional Revenues to be derived from such additions, betterments, extensions or improvements; and (B) the Trustee has been furnished a Certificate of the Authority, certifying that such additional Revenues will sufficiently offset the loss of Revenues resulting from such eminent domain proceedings so that the ability of the Authority to meet its obligations under the Indenture will not be substantially impaired, and such Certificate of the Authority shall be final and conclusive, and any balance of such proceeds not required by the Authority for such purpose shall be deposited in the Revenue Fund and applied as provided in the Indenture, provided, that if the foregoing conditions are not met, then such proceeds shall be deposited by the Trustee in the Interest Fund, Principal Fund and Sinking Fund on a pro rata basis so as to pay principal of and interest on the Bonds and with respect to unpaid Contracts as they shall become due and applied as provided in the Indenture.

If such eminent domain proceedings have had no effect, or at most an immaterial effect, upon the Revenues and the security of the Bonds, and a Certificate of the Authority to such effect has been filed with the Trustee, then the Authority shall forthwith deposit such proceeds in the Revenue Fund, to be applied as provided in the Indenture.

Amounts of Rates, Fees and Charges.

(a) The Authority will, commencing in Fiscal Year 2013-14 and at all times thereafter while any of the Bonds remain Outstanding, fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts during such Fiscal Year:

(1) all current Maintenance and Operation Costs;

(2) the interest on and principal of and Sinking Fund Installments for the Bonds, the payments for the Contracts and the Repayment Obligations;

(3) all payments required for compliance with the terms hereof, including any required deposits to the Master Reserve Fund or any Series Reserve Fund; and

(4) all payments to meet any other obligations of the Authority which are charges, liens or encumbrances upon, or payable from, the Net Revenues, excluding Subordinate Obligations.

(b) In addition to the requirements of the foregoing subsection (a) above, the Authority will, at all times while any of the Bonds remain Outstanding, fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield Net Revenues during such Fiscal Year equal to at least one hundred fifteen per cent (115%) of the Annual Debt Service in such Fiscal Year; provided, an adjustment shall be made to the amount of Net Revenues for withdrawals from and deposits to the Rate Stabilization Fund.

The Authority may make or permit to be made adjustments from time to time in such rates, fees and charges and may make or permit to be made such classification thereof as it deems necessary, but shall not reduce or permit to be reduced such rates, fees and charges below those then in effect unless the Revenues from such reduced rates, fees and charges will at all times be sufficient to meet the requirements of paragraphs (a) and (b).

Enforcement of and Performance Under Contracts. The Authority shall enforce all material provisions of any contracts to which it is a party, an assignee, successor in interest to a party or third-party beneficiary, in any case where such contracts provide for solid waste to be delivered to the System or

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provide for payments or services to be rendered to the Authority. Further, the Authority shall enforce the material provisions of all such contracts until such time, if ever, as such provisions are expressly held invalid by a court of law. Further, so long as any of the Bonds are Outstanding, the Authority will not consent to or permit any rescission of or amendment to or otherwise take any action under or in connection with any such contracts entered into previous to or after the Indenture, if such consent, rescission, amendment or other action would reduce the supply of solid waste to be delivered to the System or moneys or services to be provided to the Authority thereunder, unless the governing board of the Authority determines by resolution that such consent, rescission, amendment or other action will not materially adversely affect the ability of the Authority to fulfill its obligations under the Indenture. Further, the Authority will comply with, keep, observe and perform all material agreements, conditions, covenants and terms, express or implied, required to be performed by it, contained in all contracts affecting or involving the System, to the extent that the Authority is a party thereto.

Collection of Charges, Fees and Rates. The Authority will have in effect at all times rules and regulations requiring each user of the System to pay the applicable charges, fees and rates and providing for the billing thereof and for a due date and a delinquency date for each bill. In each case where such bill remains unpaid in whole or in part after it becomes delinquent, the Authority will enforce the collection procedures contained in such rules and regulations.

No Free Service. The Authority will not permit any part of the System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or person, or by any public agency (including the State of California and any city, county, district, political subdivision, public corporation or agency thereof), unless otherwise required by law.

Provision of Solid Waste Services and No Voluntary Withdrawal from System. While any Bonds remain Outstanding, the Authority, to the extent permitted by law, will use its best efforts and take whatever actions are within the scope of its powers at all times to provide solid waste disposal and processing services within the service area of the System and to maintain capacity in the System for disposal of sufficient amounts of solid waste to maintain Net Revenues as required under the Indenture. Except as otherwise permitted by the covenant summarized above relating to sale or lease of the System, the Authority shall not voluntarily withdraw from or abandon the System while any Bonds remain Outstanding. In the event of loss or damage to any material portion of the System or the occurrence of any other event which prevents the Authority from accepting solid waste at the System or any portion thereof, the Authority will use its best efforts and take whatever actions are within its powers to provide the solid waste management services necessary to maintain Net Revenues as required under the Indenture. Such actions shall include making contractual or other arrangements for the use of disposal facilities (either inside or outside of the geographical boundaries of the Authority) owned or operated by entities other than the Authority.

Flow Control. While any Bonds remain Outstanding, the Authority shall, to the extent permitted by law, use its best efforts and take whatever actions are within the scope of its powers to insure that sufficient solid waste is processed and disposed of through the System to generate Net Revenues as required by the Indenture.

Against Competitive Facilities. The Authority will not, to the extent permitted by law, acquire, purchase, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, district or political subdivision or any person whomsoever to acquire, purchase, maintain or operate any solid waste management system competitive with the System, unless the governing board of the Authority determines by resolution that any such actions with respect to competitive facilities will not materially adversely affect the ability of the Authority to fulfill its obligations under the Indenture.

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Prompt Acquisition and Construction of the Projects. The Authority will acquire and construct the Projects with all practicable dispatch, and such acquisition and construction will be made in an expeditious manner and in conformity with the law so as to complete the same as soon as possible. Without limiting the generality of the foregoing, prior to the expenditure of any proceeds of any Series of Bonds for any particular components of Projects, the Authority shall assure compliance with all applicable environmental and land use regulations, including without limitation, the California Environmental Quality Act.

Competitive Tipping Fees. The Authority will, to the extent permitted by law, use its best efforts and take whatever actions are within the scope of its powers to insure that the tipping fees charged by the Authority for the disposal of solid waste remain competitive with the tipping fees charged by other operations similar to the System in the vicinity of the System; provided, however, that in no event shall this covenant be construed to limit or affect the obligation of the Authority to set rates, charges and tipping fees to generate Net Revenues as required by the Indenture.

Payment of Claims. The Authority will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the System or upon the Net Revenues or any part thereof, or upon any funds held by the Trustee, or which might impair the security of the Bonds; provided, that nothing contained in the Indenture shall require the Authority to make any such payments so long as the Authority in good faith shall contest the validity of any such claims and such nonpayment will not materially adversely affect the Authority’s ability to perform its obligations under the Indenture.

Procedure for Amendment of the Indenture. The Indenture and the rights and obligations of the Authority and of the Owners may be amended at any time by a Supplemental Indenture which shall become binding when the written consents of the Owners of at least sixty per cent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in the Indenture) and the written consents of the Bond Insurers (if any) are filed with the Trustee. No such amendment shall (1) extend the maturity of or reduce the interest rate on, or otherwise alter or impair the obligation of the Authority to pay the interest or principal or redemption premium, if any, at the time and place and at the rate and in the currency provided in the Indenture of any Bond, without the express written consent of the Owner of such Bond, or (2) permit the creation by the Authority of any mortgage, pledge or lien upon the Net Revenues superior to or on a parity with the pledge and lien created under the Indenture for the benefit of the Bonds and the Contracts, or (3) reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify the rights or obligations of the Trustee without its prior written assent thereto.

The Indenture and the rights and obligations of the Authority and of the Owners may also be amended at any time by a Supplemental Indenture which shall become binding upon execution, without the consent of any Owners or Bond Insurers (if any), but only to the extent permitted by law and only for any one or more of the following purposes:

(a) To add to the agreements and covenants of the Authority contained in the Indenture other agreements and covenants thereafter to be observed, or to surrender any right or power under the Indenture reserved to or conferred upon the Authority;

(b) To make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Indenture, or in regard to questions arising under the Indenture, as the Authority may deem necessary or desirable and not inconsistent with the Indenture, and which shall not materially adversely affect the interests of the Owners of the Outstanding Bonds;

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(c) To provide for the issuance of any Series of the Bonds, and to provide the terms and conditions under which such Series of the Bonds may be issued, subject to and in accordance with the provisions of the Indenture;

(d) To modify, amend or supplement the Indenture in such manner as to permit the qualification under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds;

(e) To maintain the exclusion under the Code of interest on the Bonds from gross income for federal income tax purposes;

(f) To the extent necessary to obtain a Municipal Bond Insurance Policy, to maintain any then existing rating by Moody’s (if Moody’s is then rating the Bonds) or S&P (if S&P is then rating the Bonds)

(g) In connection with obtaining a Qualified Reserve Fund Credit Instrument (to the extent consistent with the provisions of the Indenture)

(h) To provide for the issuance of Subordinate Obligations;

(i) To modify, amend or supplement the Indenture in connection with the execution of a Contract so long as such modifications, amendments or supplements to the Indenture do not materially adversely affect the interests of the Owners of the Outstanding Bonds; or

(i) For any other purpose that does not materially adversely affect the interests of the Owners of the Outstanding Bonds.

Events of Default and Acceleration of Maturities. If one or more of the following events (herein an “Event of Default”) shall happen, that is to say:

(a) If default shall be made in the due and punctual payment of the interest on any Bond or with respect to any Contract when and as the same shall become due and payable;

(b) If default shall be made in the due and punctual payment of the principal of or redemption premium, if any, on or of any Sinking Fund Installment for any Bond or with respect to any Contract when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise;

(c) If default shall be made by the Authority in the observance or performance of any of the other agreements, conditions, covenants or terms on its part contained in the Indenture or in the Bonds or in any Contract, and such default shall have continued for a period of thirty (30) days after the Authority shall have been given notice in writing of such default by the Trustee, which may give notice in its discretion and shall give notice at the written request of the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding; provided, that such default shall not constitute an Event of Default under the Indenture if the Authority shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith shall proceed to cure such default within a reasonable period of time; or

(d) If the Authority shall file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent

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of the Authority, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property;

then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and upon the written request of the Owners of not less than twenty-five per cent (25%) in aggregate principal amount of the Bonds at the time Outstanding, shall, by notice in writing to the Authority, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything contained in the Indenture or in the Bonds to the contrary notwithstanding; provided, that any such declaration shall be subject to the prior written consent of the Bond Insurers (if any); and provided further, that if, at any time after the principal of the Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or entered, the Authority shall deposit with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest at the rate of twelve per cent (12%) per annum on such overdue installments of interest and principal, and the expenses of the Trustee, including attorneys’ fees, together with interest on any such amounts advanced as provided in the Indenture, and any and all other defaults known to the Trustee (other than in the payment of interest and principal on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured or provision shall have been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Authority and to the Trustee, may, on behalf of the Owners of all the Bonds, rescind and annul such declaration and its consequences; except that no such rescission or annulment shall occur without the prior written consent of the Bond Insurers (if any), and no such rescission or annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon.

Application of Funds Upon Default. All money in the accounts and funds provided for herein upon the date of the declaration of acceleration by the Trustee as provided in Section 7.01 hereof, and all Net Revenues thereafter received by the Authority hereunder, shall be transmitted to the Trustee and shall be applied by the Trustee in the following order:

First, to the payment of the costs, fees and expenses of the Trustee, if any, including reasonable compensation to its agents, attorneys and counsel, and any outstanding fees and expenses of the Trustee and thereafter to the payment of the costs and expenses of the Owners in providing for the declaration of such Event of Default, including reasonable compensation to their agents, attorneys and counsel;

Second, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with interest on the overdue interest and principal at the rate of twelve per cent (12%) per annum and to any amounts then owing under any Contracts, and in case such money shall be insufficient to pay in full the whole amount so owing and unpaid upon such Bonds and Contracts, then to the payment of such interest, principal, interest on overdue interest and principal and Contract Payments without preference or priority among such interest, principal, interest on overdue interest and principal and Contract Payments, ratably to the aggregate of such interest, principal, interest on overdue interest and principal and Contract Payments.

Discharge of Bonds. If the Authority shall pay or cause to be paid, or there shall otherwise be paid, to the Owners of all or a portion of the Outstanding Bonds the interest thereon and principal thereof and redemption premiums, if any, thereon at the times and in the manner stipulated therein and in the

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Indenture then the owners of such Bonds shall cease to be entitled to the pledge of Net Revenues as provided in the Indenture, and all agreements, covenants and other obligations of the Authority to the Owners of such Bonds under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied; provided, that notwithstanding under the Indenture anything contained in the Indenture to the contrary, in the event that the interest on or principal of any Bonds shall be paid by a Bond Insurer pursuant to a Municipal Bond Insurance Policy, then such Bonds shall remain Outstanding for all purposes of the Indenture and shall not be defeased or otherwise satisfied and shall not be considered paid by the Authority, and the assignment and pledge under the Indenture and all agreements and covenants of the Authority to the Owners of such Bonds shall continue to exist and shall run to the benefit of such Bond Insurer, and such Bond Insurer shall be subrogated to the rights of such Owners. In such event, the Trustee shall execute and deliver to the Authority all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the Authority all money or securities held by it which secure only such Bonds (or are properly allocable to such Bonds to be defeased) which are not required for the payment of such interest, principal and redemption premiums, if any, on such Bonds, other than the money, if any, in the Rebate Fund.

Any Outstanding Bonds for the payment of which money shall have been set aside (through deposit by the Authority or otherwise) to be held in trust by the Trustee for such payment at the maturity or redemption date thereof shall be deemed, as of the date of such setting aside, to have been paid within the meaning and with the effect expressed in the paragraph above.

Any Outstanding Bonds shall prior to the maturity date thereof be deemed to have been paid within the meaning and with the effect expressed in the first paragraph above if (1) there shall have been deposited with the Trustee either money in an amount which shall be sufficient, or Federal Securities which are not subject to redemption prior to maturity (including any Federal Securities issued or held in book-entry form on the books of the Department of Treasury of the United States of America) the interest on and principal of which when paid will provide money which, together with the money, if any, deposited with the Trustee at the same time, shall be sufficient (as evidenced by a report of an Independent Certified Public Accountant obtained by the Authority and filed with the Trustee) to pay when due the interest due and to become due on such Bonds on and prior to the maturity date or redemption date thereof, and the principal of and redemption premiums, if any, on such Bonds on the maturity date or redemption date thereof, and (2) the Authority shall have given the Trustee a Written Request of the Authority containing irrevocable instructions to mail, as soon as practicable, a notice to the Owners of such Bonds that the deposit required by (1) above has been made with the Trustee and that such Bonds are deemed to have been paid and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Bonds(3) the Trustee has received an opinion of counsel of recognized standing in the field of law relating to municipal bonds substantially to the effect that such Bonds are no longer Outstanding under the Indenture; and (4) the Trustee shall execute an acknowledgement that it has received the deposit and verification report described in clause (1), the Written Request of the Authority described in clause (2), and the opinion described in clause (3), and the requirements for defeasance set forth in the Indenture have been satisfied. Neither the Federal Securities nor any money deposited with the Trustee pursuant to the Indenture nor any interest or principal payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and such Federal Securities shall be held in trust for, the payment of the interest on and principal of and redemption premiums, if any, on such Bonds as provided herein; and any cash received from such interest or principal payments on such Federal Securities deposited with the Trustee, if not then needed for such purpose, shall, to the extent practicable, be reinvested as specified in a Written Request of the Authority in Federal Securities maturing at times and in amounts sufficient to pay when due the interest on and principal of and redemption premiums, if any, on such Bonds on and prior to such maturity date or redemption date thereof, and interest earned from such reinvestments shall be deposited in the Revenue Fund.

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Liability of Authority Limited to Net Revenues and Other Funds. Notwithstanding anything contained in the Indenture, the Authority shall not be required to advance any money derived from any source of income other than the Net Revenues and the other funds as provided in the Indenture for the payment of the interest on or the principal of or the redemption premiums, if any, on the Bonds or for making the Contract Payments or the Repayment Obligations or for the observance or performance of any agreements, conditions, covenants or terms contained in the Indenture. The Authority may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose.

The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof and redemption premiums, if any, thereon, exclusively from the Net Revenues and such other funds as provided under the Indenture, and the Authority is not obligated to pay them except from the Net Revenues and such other funds. All of the Bonds are equally secured by a pledge of, and charge and lien upon, all of the Net Revenues, and the Net Revenues constitute a trust fund for the security and payment of the interest on and the principal of and redemption premiums, if any, on the Bonds as provided in the Indenture.

Neither the faith and credit nor the taxing power of the State of California or any public agency thereof or any member of the Authority is pledged to the payment of the Bonds. The Bonds do not constitute a debt, liability or obligation of the State of California or any public agency thereof (other than the Authority) or any member of the Authority, and neither the governing board of the Authority nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance.

Investment of Money in Funds and Accounts. Upon receipt of a Written Request of the Authority by the Trustee at least two (2) Business Days prior to the date of such investment, all money in the Project Fund, the Interest Fund, the Principal Fund, the Sinking Fund, the Reserve Fund, the Subordinated Payment Fund (if held by the Trustee) or the Rebate Fund shall be invested by the Trustee in those Authorized Investments specified in such Written Request of the Authority.

The Authorized Investments in the Project Fund, the Interest Fund, the Principal Fund, the Sinking Fund, the Reserve Fund, the Subordinated Payment Fund and the Rebate Fund shall mature or otherwise have provisions for liquidity prior to the date on which such money is estimated to be required to be paid out under the Indenture. Any interest, income or profits from the deposits or investments of money in the Rebate Fund shall remain in the Rebate Fund.

Interest Rate Agreements. The Authority is authorized under the Indenture to enter into any interest rate or interest swap agreements, caps, collars or other hedging mechanisms with regard to any of the Bonds; provided, that any such interest rate or interest swap agreement, cap, collar or other hedging mechanism shall: (i) not exceed a notional amount of one hundred million dollars ($100,000,000); (ii) bear interest or be payable at an interest rate not exceeding the maximum amount then permitted by law; (iii) be entered into only with (A) a bank or trust company organized under the laws of any state of the United States of America or any national banking association (including the Trustee) or government bond dealer reporting to, trading with and recognized as a primary dealer by, the Federal Reserve Bank of New York, having a combined capital and surplus of at lease one hundred million dollars ($100,000,000), or any corporation that is organized and operating within the United States of America and that has total assets in excess of five hundred million dollars ($500,000,000) and that has an “AA” or higher rating (at all times) for its debt, other than commercial paper, as provided by Moody’s and S&P or (B) an entity the debt securities of which are rated (at all times) in at least the third highest long-term rating categories by Moody’s and S&P’s or whose obligations are guaranteed or insured by an entity so rated and the obligations of which under such finance agreement are continuously and fully secured by the Authorized Investments described in paragraphs (i), (ii) and (iii) of the definition thereof which shall have a market

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value determined, by the party designated in such agreement, at least monthly (exclusive of accrued interest) to be at least equal to the termination value, if any, that would be payable by such counterparty under such financing agreement and would be deposited with a custodian acceptable to the Authority and is approved by Moody’s (if Moody’s is then rating the Bonds) and S&P (if S&P is then rating the Bonds) (this subclause (B) not to be available if there is no rating on the Bonds) and (iv) not exceed the final maturity of the Bonds or any bonds or other obligations issued to refinance or repay the Bonds.

Provisions Relating to Bond Insurance. The First Supplemental Indenture and the Second Supplemental Indenture include a number of provisions relating to the 2014 Policy, including the following:

(a) The 2014 Bond Insurer shall be deemed to be the sole holder of the Series 2014 Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders of the Series 2014 Bonds are entitled to take pursuant to the section or article of the Indenture pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Trustee.

(b) In the event the 2014 Bond Insurer consents to the acceleration of the Series 2014 Bonds pursuant to Section 7.01 of the Master Indenture, the 2014 Bond Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the Authority) and the Trustee shall be required to accept such amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the 2014 Bond Insurer's obligations under the 2014 Policy with respect to such Bonds shall be fully discharged.

(c) The Authority and the Trustee acknowledge and agree that the 2014 Bond Insurer is a third party beneficiary to the Indenture.

(d) Any purchase of Series 2014 Bonds in lieu of redemption pursuant to Section 2.04 of the Master Indenture shall require the prior written approval of the 2014 Bond Insurer if any Series 2014B Bond so purchased is not cancelled upon purchase.

(e) Any amendment, supplement, modification to, or waiver of, the Master Indenture that requires the consent of Holders or adversely affects the rights and interests of the 2014 Bond Insurer shall be subject to the prior written consent of the 2014 Bond Insurer.

(f) The rights granted to the 2014 Bond Insurer under the Master Indenture to request, consent to or direct any action are rights granted to the 2014 Bond Insurer in consideration of its issuance of the 2014 Policy. Any exercise by the 2014 Bond Insurer of such rights is merely an exercise of the 2014 Bond Insurer’s contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Holders and such action does not evidence any position of the 2014 Bond Insurer, affirmative or negative, as to whether the consent of the Holders or any other person is required in addition to the consent of the 2014 Bond Insurer.

(g) Claims Upon the 2014 Policy and Payments by and to the 2014 Bond Insurer:

(i) If, on the third Business Day prior to the related scheduled interest payment date or principal payment date (“Payment Date”) there is not on deposit with the Trustee, after making all transfers and deposits required under the Indenture, moneys sufficient to pay the principal of and interest on the Series 2014 Bonds due on such Payment Date, the Trustee shall give

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notice to the 2014 Bond Insurer and to its designated agent (if any) (the “Insurer's Fiscal Agent”) by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2014 Bonds due on such Payment Date, the Trustee shall make a claim under the 2014 Policy and give notice to the 2014 Bond Insurer and the 2014 Bond Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2014 Bonds and the amount required to pay principal of the Series 2014 Bonds, confirmed in writing to the 2014 Bond Insurer and the 2014 Bond Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the 2014 Policy.

(ii) The Trustee shall designate any portion of payment of principal on Bonds paid by the 2014 Bond Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Holder, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the 2014 Bond Insurer, registered in the name of Assured Guaranty Municipal Corp., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Authority on any Bond or the subrogation rights of the 2014 Bond Insurer.

(iii) The Trustee shall keep a complete and accurate record of all funds deposited by the 2014 Bond Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Bond. The 2014 Bond Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee.

(iv) Upon payment of a claim under the 2014 Policy, the Trustee shall establish a separate special purpose trust account for the benefit of Holders referred to herein as the "Policy Payments Account" and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the 2014 Policy in trust on behalf of Holders and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Holders in the same manner as principal and interest payments are to be made with respect to the Series 2014 Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything herein to the contrary, the Authority agrees to pay to the 2014 Bond Insurer (i) a sum equal to the total of all amounts paid by the 2014 Bond Insurer under the 2014 Policy (the “Insurer Advances”); and (ii) interest on such Insurer Advances from the date paid by the 2014 Bond Insurer until payment thereof in full, payable to the 2014 Bond Insurer at the Late Payment Rate per annum (collectively, the “Insurer Reimbursement Amounts”). “Late Payment Rate” means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3% (not to exceed 12%), and (ii) the then applicable highest rate of interest on the Series 2014 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The Authority hereby

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covenants and agrees that the 2014 Bond Insurer Reimbursement Amounts are secured by a lien on and pledge of the Net Revenues and payable from such Net Revenues on a parity with debt service due on the Series 2014 Bonds.

(v) Funds held in the Policy Payments Account shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Bond payment date shall promptly be remitted to the 2014 Bond Insurer.

(h) The 2014 Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2014 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2014 Policy. Each obligation of the Authority to the 2014 Bond Insurer under the Master Indenture and the First Supplemental Indenture shall survive discharge or termination of the Master Indenture and First Supplemental Indenture.

(i) The Authority shall pay or reimburse the 2014 Bond Insurer any and all charges, fees, costs and expenses that the 2014 Bond Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in the Master Indenture and the First Supplemental Indenture; (ii) the pursuit of any remedies under the Master Indenture and the First Supplemental Indenture or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Master Indenture and the First Supplemental Indenture whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Master Indenture and the First Supplemental Indenture or the transactions contemplated thereby, other than costs resulting from the failure of the 2014 Bond Insurer to honor its obligations under the 2014 Policy. The 2014 Bond Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Master Indenture and the First Supplemental Indenture.

(j) After payment of reasonable expenses of the Trustee, the application of funds realized upon default shall be applied to the payment of expenses of the Authority or rebate only after the payment of past due and current debt service on the Series 2014 Bonds.

(k) The 2014 Bond Insurer shall be entitled to pay principal or interest on the Series 2014 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Authority (as such terms are defined in the 2014 Policy) and any amounts due on the Series 2014 Bonds as a result of acceleration of the maturity thereof in accordance with the Indenture, whether or not the 2014 Bond Insurer has received a Notice of Nonpayment (as such terms are defined in the 2014

(l) Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in the Indenture, no such issuance may occur if an Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists unless such default shall be cured upon such issuance.

(m) In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Indenture would adversely affect the security for the Series 2014 Bonds or the rights of the Holders, the Trustee shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no 2014 Policy.

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(n) No contract shall be entered into or any action taken by which the rights of the 2014 Bond Insurer or security for or sources of payment of the Series 2014 Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the 2014 Bond Insurer.

(o) Any interest rate exchange agreement (“Swap Agreement”) entered into by the Authority shall meet the following conditions: (i) the Swap Agreement must be entered into to manage interest costs related to, or a hedge against (a) assets then held, or (b) debt then outstanding, or (iii) debt reasonably expected to be issued within the next twelve (12) months, and (ii) the Swap Agreement shall not contain any leverage element or multiplier component greater than 1.0x unless there is a matching hedge arrangement which effectively off-sets the exposure from any such element or component. Unless otherwise consented to in writing by the 2014 Bond Insurer, any uninsured net settlement, breakage or other termination amount then in effect shall be subordinate to debt service on the Series 2014 Bonds and on any debt on parity with the Series 2014 Bonds. The Authority shall not terminate a Swap Agreement unless it demonstrates to the satisfaction of the 2014 Bond Insurer prior to the payment of any such termination amount that such payment will not cause the Authority to be in default under the Master Indenture and First Supplemental Indenture, including but not limited to, any monetary obligations thereunder. All counterparties or guarantors to any Swap Agreement must have a rating of at least “A-” and “A3“ by Standard & Poor’s (‘S&P”) and Moody’s Investors Service (“Moody’s”). If the counterparty or guarantor’s rating falls below “A-“ or “A3” by either S&P or Moody’s, the counterparty or guarantor shall execute a credit support annex to the Swap Agreement, which credit support annex shall be acceptable to the 2014 Bond Insurer. If the counterparty or the guarantor’s long term unsecured rating falls below “Baa1” or “BBB+” by either Moody’s or S&P, a replacement counterparty or guarantor, acceptable to the 2014 Bond Insurer, shall be required.

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APPENDIX C

PROPOSED FORM OF LEGAL OPINION

[Closing Date]

Salinas Valley Solid Waste Authority Salinas, California

Members of the Authority:

We have acted as bond counsel to the Salinas Valley Solid Waste Authority (the “Authority”) in connection with the issuance by the Authority of its $27,815,000 Revenue Bonds, Series 2014A (the “Series 2014A”) and $3,575,000 Revenue Bonds, Series 2014B (the “Series 2014B Bonds” and together with the Series 2014A Bonds, the “Bonds”), pursuant to the provisions of Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code and certain other statutory provisions, and pursuant to a Master Indenture, dated as of January 1, 2014, as supplemented by a First Supplemental Indenture, dated as of January 1 (authorizing the issuance of the Series 2014A Bonds), and a Second Supplemental Indenture, dated as of January 1, 2014 (authorizing the issuance of the Series 2014B Bonds), each by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (collectively, the “Indenture”). We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the officers of the Authority and others contained in the Indenture and in certificates furnished to us, without undertaking to verify the same by independent investigation.

Based upon the foregoing we are of the opinion, under existing law, as follows:

1. The Authority is a joint exercise of powers authority duly organized and validly existing under the laws of the State of California with the full power to enter into the Indenture, to perform the agreements on its part contained therein and to issue the Bonds.

2. The Indenture has been duly approved by the Authority and constitutes the valid and binding obligation of the Authority enforceable against the Authority in accordance with its terms. The Indenture creates a valid pledge of the Net Revenues (as defined in the Indenture) and certain of the funds held under the Indenture to secure the payment of the Bonds, subject to the provisions of the Indenture permitting the application thereof for the purposes and subject to the terms and conditions set forth in the Indenture.

3. The Bonds have been duly authorized and issued by the Authority and are valid and binding special obligations of the Authority, payable solely from the Net Revenues and certain other funds as provided in the Indenture. Neither the faith and credit nor the taxing power of the members of the Authority, the State of California or any political subdivision thereof is pledged to the payment of the Bonds.

4. Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Series 2014A Bonds is excluded from gross income for federal income tax purposes (except during any period while a Bond is held by a “substantial user” or a “related person,” within the meaning of Section 147(a) of the Code, of the property financed by proceeds of the Bonds) and

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is an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations.

5. Interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.

6. The difference between the issue price of a Series 2014A Bond (the first price at which a substantial amount of the Series 2014A Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Series 2014A Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Series 2014A Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Series 2014A Bondowner will increase the Series 2014A Bondowner’s basis in the applicable Series 2014A Bond. Original issue discount that accrues for the Series 2014A Bondowner is excluded from the gross income of such owner for federal income tax purposes (except during any period while a Series 2014A Bond is held by a “substantial user” or a “related person,” within the meaning of Section 147(a) of the Code, of the property financed by proceeds of the Series 2014A Bonds) and is exempt from State of California personal income tax, but is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations.

7. The amount by which a Series 2014A Bondowner’s original basis for determining loss on sale or exchange in the applicable Series 2014A Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Series 2014A Bond premium which must be amortized under Section 171 of the Code; such amortizable Series 2014A Bond premium reduces the Series 2014A Bondowner’s basis in the applicable Series 2014A Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Series 2014A Bond premium may result in a Series 2014A Bondowner realizing a taxable gain when a Series 2014A Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Series 2014A Bond to the owner.

The opinions set forth in paragraphs 4, 6 and 7 above are subject to the condition that the Authority complies with certain covenants and the applicable requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Series 2014A Bonds to assure that interest (and original issue discount) on the Series 2014A Bonds will remain excludable from gross income for federal income tax purposes. Failure to comply with such covenants and requirements may cause interest (and original issue discount) on the Series 2014A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2014A Bonds. The Authority has covenanted to comply with all such requirements. We express no opinion regarding other tax consequences with respect to the Bonds except as expressly stated herein.

Certain requirements and procedures contained or referred to in the Indenture and the Tax Certificate relating to the Series 2014A Bonds may be changed, and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. We express no opinion as to the exclusion of interest (and original issue discount) on the Series 2014A Bonds from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.

The opinions expressed herein are based on an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions

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may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Such actions or events may adversely affect the value or tax treatment of the Series 2014A Bonds and we express no opinion with respect thereto.

With respect to the opinions expressed herein, the rights and obligations under the Indenture and the Bonds are subject to bankruptcy, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public agencies in the State of California.

We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the Bonds or other offering material relating to the Bonds, and purchasers of the Bonds should not assume that we have reviewed the Official Statement on their behalf.

Respectfully submitted,


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APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate dated as of January 1, 2014 (the “Disclosure Certificate”) is executed and delivered by Salinas Valley Solid Waste Authority (the “Issuer”) in connection with the issuance and delivery by the Issuer of its Refunding Revenue Bonds, Series 2014A (AMT), in an aggregate principal amount of $27,815,000 (the “Series 2014A Bonds”) and the Refunding Revenue Bonds, Series 2014B (Taxable), in an aggregate principal amount of $3,575,000 (the “Series 2014B Bonds” and together with the Series 2014A Bond, the “Bonds”). The Series 2014 Bonds will be issued pursuant to a Master Indenture between the Authority and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of January 1, 2014, supplemented by a First Supplemental Indenture, dated as of January 1, 2014 and a Second Supplemental Indenture, dated as of January 1, 2014 (collectively, the “Master Indenture”).

The Issuer covenants as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (as defined below).

SECTION 2. Definitions. In addition to the definitions set forth in the Master Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income purposes.

“Dissemination Agent” shall mean, initially, Willdan Financial Services, or any successor Dissemination Agent designated in writing by the Issuer which has filed with the then current Dissemination Agent a written acceptance of such designation.

“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB.

“Issuer” shall mean Salinas Valley Solid Waste Authority.

“Listed Events” shall mean any of the events listed in Section 5(a) and (b) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule.

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“Official Statement” means the Official Statement for the Bonds dated January 15, 2014.

“Participating Underwriter” shall mean E. J. De La Rosa & Co., Inc.

“Repository” shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) The Issuer shall, or shall cause the Dissemination Agent by written direction to such Dissemination Agent to, not later than the April 1 after the end of the Issuer’s fiscal year (which currently ends on June 30), commencing with the report for the fiscal year ending June 30, 2014, provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issue may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report.

An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Issuer’s fiscal year is currently effective from July 1 to the immediately succeeding June 30 of the following year. The Issuer will promptly notify the Repository of a change in the fiscal year dates.

(b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report.

(c) If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository, in the form required by the Repository.

(d) If the Dissemination Agent is other than the Issuer, the Dissemination Agent shall:

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(i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB; and

(ii) promptly after receipt of the Annual Report, file a report with the Issuer certifying that the Annual Report has been provided to the Repository and the date it was provided.

(e) If the Issuer is unable to provide an Annual Report to the Repository by the date required in subsection (a), the Issuer shall send to the Repository a notice in substantially the form attached hereto as Exhibit A.

(e) Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in accordance with the MSRB’s EMMA system or in another manner approved under the Rule.

SECTION 4. Content of Annual Reports.

The Annual Report shall consist of the financial statements described in (a) below and the financial and operating data described in (b) below.

(a) Financial Statements. The audited financial statements of the Issuer for the most recent fiscal year then ended shall be provided in the Annual Report. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Issuer shall be audited by such auditor as shall then be required or permitted by State law and shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide the information referenced in Section 8(d) below.

(b) Financial and Operating Data. In addition to the financial statements, the Annual Report shall contain or incorporate by reference an update of the following information (all stated as of the end of the most recently completed fiscal year or later):

1. The amount of remaining capacity at the Johnson Canyon Landfill (as shown on page 22 of the Official Statement)

2. The information in Table 1 - Historical Waste Disposal Information 3. The information in Table 4 - Gross Revenues By Source 4. The information in Table 5 - Tipping Fee History 5. The information in Table 8 - Debt Service Coverage

(c) Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to the Repository. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Issuer shall clearly identify each such other document so included by reference.

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SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) business days after the event:

1. principal and interest payment delinquencies;

2. unscheduled draws on debt service reserves reflecting financial difficulties;

3. unscheduled draws on credit enhancements reflecting financial difficulties;

4. substitution of credit or liquidity providers, or their failure to perform;

5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB);

6. tender offers;

7. defeasances;

8. ratings changes;

9. bankruptcy, insolvency, receivership or similar proceedings; and

10. modification or amendment of the Joint Powers Agreement Between the City of Salinas, the City of Gonzales, the City of Greenfield, the City of King, the City of Soledad, and the County of Monterey creating the Issuer.

Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

(b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

1. unless described in paragraph 5(a)(5) above, notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds;

2. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than

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in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms;

3. appointment of a successor or additional trustee or the change of the name of a trustee;

4. nonpayment related defaults;

5. modifications to the rights of Owners of the Bonds;

6. notices of redemption; and

7. release, substitution or sale of property securing repayment of the Bonds.

(c) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event under Section 5(b) above, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws.

(d) If the Issuer determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the Issuer shall file a notice of such occurrence with the Repository in a timely manner not more than 10 business days after the event.

(e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and that the Dissemination Agent shall not be responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule.

SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5.

SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Issuer. The Dissemination Agent may resign by providing (i) thirty days written notice to the Issuer, and (ii) upon appointment of a new Dissemination Agent hereunder.

SECTION 8. Amendment.

(a) This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby; (ii) this Disclosure Certificate as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Certificate,

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after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (iii) the Issuer shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the same effect as set forth in clause (ii) above; (iv) the Issuer shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners; and (v) the Issuer shall have delivered copies of such opinion and amendment to the Repository.

(b) This Disclosure Certificate also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Bond Indenture for amendments to the Bond Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(i), (ii), (iii) and (v) have been satisfied.

(c) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

(d) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Bond Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.

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SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the Issuer is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (i) compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, provided that such payments shall be made only from funds available for such purpose in the Administrative Expense Fund established under the Master Indenture. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Certificate. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate.

SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriters and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

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SECTION 13. Notices. Notices with respect to this Disclosure Certificate should be sent in writing to:

Salinas Valley Solid Waste Authority 128 Sun Street, Suite 101 Salinas, California 93901 Facsimile: (831) 755-1322 Attention: Chief Administrative Officer

SALINAS VALLEY SOLID WASTE AUTHORITY By: Authorized Officer

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: SALINAS VALLEY SOLID WASTE AUTHORITY

Name of Issue: $27,815,000 Salinas Valley Solid Waste Authority Refunding Revenue Bonds, Series 2014A (AMT)

$3,575,000 Salinas Valley Solid Waste Authority Refunding Revenue Bonds, Series 2014B (Taxable)

Date of Issuance: January 28, 2014

NOTICE IS HEREBY GIVEN that the Salinas Valley Solid Waste Authority (the “Authority”) has not provided an Annual Report with respect to the above-named Bonds as required by a Master Indenture between the Authority and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of January 1, 2014, supplemented by a First Supplemental Indenture, dated as of January 1, 2014 and a Second Supplement Indenture, dated as of January 1, 2014 (collectively, the “Master Indenture”). The Authority anticipates that the Annual Report will be filed by ___________________________.

Dated:

SALINAS VALLEY SOLID WASTE AUTHORITY By


APPENDIX E

FORM OF WASTE DELIVERY AGREEMENT


WASTE DELIVERY AGREEMENT

THIS WASTE DELIVERY AGREEMENT (this" Agreement") is made and entered

into as of the _ of September, 1997 by and between Monterey County ("County"), a political

subdivision of the State of California, and the Salinas Valley Solid Waste Authority

("Authority"), a joint exercise of powers entity.

RECITALS:

The Authority owns, manages and operates a sanitary landfill system for the disposal of

municipal solid waste generated by the cities and the unincorporated area within the Authority

boundaries (the "Disposal System "). The Disposal System includes four landfills and one

transfer station.

In December 1996, Monterey County and the cities of Gonzales, Greenfield, King,

Salinas and Soledad ("Member Agencies ") fonned the Authority for the express purpose of

managing the Disposal System and ensuring long-tenn disposal capacity for its Member

Agencies.

In the Joint Powers Agreement which created the Authority, the Member Agencies

transferred to the Authority the right to exercise flow control of solid waste within the Disposal

System.

In order to meet its obligations under the Joint Powers Agreement and in reliance on this

agreement, the Authority intends to issue certain long-term revenue bonds.

The County and the Authority hereby agree to enter into this Agreement for the purpose

of ensuring that all solid waste controlled by the County may be directed by the Authority to the

Disposal System.

NOW, THEREFORE, taking into account the foregoing Recitals and for good and

valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties

agree as follows:

ARTICLE I Definitions

1.1 Dermitions. Except as otherwise herein expressly provided, the following terms

and phrases shall have the meanings set forth below:

"Acceptable Waste" shall mean all garbage, refuse, rubbish and other materials and

substances discarded or rejected as being spent, useless, worthless or in excess to the owners

at the time of such discard or rejection and which are nonnally disposed of by or collected from

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residential (singly family and multi-family), commercial, industrial, governmental and institutional establishments which are acceptable at Class III landfills under Applicable Law, and within the jurisdictional limits of the Authority.

"Act" shall mean the California Integrated Waste Management Act of 1989 (Division 30 of the California Public Resources Code), as amended, supplemented, superseded and replaced from time to time.

"Agreement" shall mean the Waste Delivery Agreement, as originally executed and as amended, modified, supplemented or restated from time to time, as the context requires.

"Applicable Law" shall mean the Act; the Monterey County Code; the Authority Code; and Legal Entitlement and any federal or state rule, regulation, requirement, guideline, permit, action, determination or order of any Govemmental Body having jurisdiction, applicable from time to time to the siting, design, permitting, acquisition, construction, equipping, financing, ownership, possession, operation or maintenance of the Disposal System, the transfer, handling, transportation and disposal of Acceptable Waste or any other transaction or matter contemplated hereby (including any of the foregoing which concern health, safety, fire, environmental protection, mitigation monitoring plans and building codes).

"County Acceptable Waste" shall mean all Acceptable Waste which was originally discarded by the first generator thereof within the geographical limits of the unincorporated areas of the County, and Residue from the foregoing wherever produced, whether within or outside the unincorporated areas of the County.

"Controllable Waste" shall mean all Acceptable Waste with respect to which the County has the legal or contractual ability to determine the disposal location therefor and which is:

(1) Non-Recycled County Acceptable Waste; (2) not generated from the operations of the Governmental Bodies which, under Applicable

Law, have the independent power to arrange for the disposal of the waste they generate; and (3) collected and hauled by Franchise or Permitted Haulers.

"Disposal Fees" shall mean the tipping fees or charges imposed by the Authority for acceptance of Acceptable Waste in the Disposal System ..

"Disposal System" shall mean the Salinas Valley Solid Waste Authority Waste Disposal System which includes, as of the date of this agreement, solid waste disposal operations at four landfills (Crazy Horse Landfill, Johnson Canyon Landfill, Jolon Road Landfill, and Lewis Road Landfill) and one transfer station (Jolon Road Transfer Station). The Salinas Valley Solid Waste Authority Waste Disposal System shall include such other facilities as the Authority may own, operate or maintain during the term of this Agreement.

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"Effective Date" shall mean the date when this Agreement is signed by both parties.

"Franchise or Permitted Hauler" means any hauler or collector who provides

Acceptable Waste collection services within the County pursuant to, or under authority granted

by a contract, franchise, pennit or other agreement within the County. The term Franchise or

Pennined Hauler includes the County itself if Acceptable Waste collection and transportation

services are provided directly by County crews.

"Governmental Body" shall mean any federal, state, county, city or regional legislative,

executive, judicial or other governmental board, agency, authority, commission, administration,

court or other body, or any officer thereof acting within the scope of his or her authority.

"Legal Entitlement" shall mean all pennits, licenses, approvals, authorizations, consents

and entitlements of whatever kind and however described which are required under Applicable

Law to be obtained or mamtained by any person with respect to the Disposal System or the

perfonnance of any obligation under this Agreement.

"Legal Proceeding" shall mean every action, suit, litigation, arbitration, administrative

proceeding, and other legal or equitable proceeding having a bearing upon this Agreement.

"Non-Recycled County Acceptable Waste" shall mean all County Acceptable Waste

other than Recycled County Acceptable Waste.

"Recycled County Acceptable Waste" shall mean any otherwise Controllable Waste

which is separated from Acceptable Waste by the generator thereof or by processing and which

is "recycled" within the meaning of Section 40180 of the Public Resources Code.

"Term" shall mean the Tenn of this Agreement.

1.2 References. All references in this Agreement to particular sections or actions

shall, unless expressly otherwise provided, or unless the context otherwise requires, be deemed

to refer to the specific sections or articles in this Agreement, and any references to "Exhibit"

or "Schedule" shall, unless otherwise specified, refer to one of the exhibits or schedules attached

hereto, each of which is hereby incorporated by reference and made a part hereof. The words

"hereinio, "hereof', "hereunder", "hereinafter", "hereinabove" and other words of similar

import refer to this Agreement as a whole and not to any particular section, subsection or article

hereof. Whenever the words "including", "include" or "includes" are used in this Agreement,

they should be interpreted in a non-exclusive manner as though the words "without limitation"

immediately followed the same.

1.3 Gender and Number. Words of any gender shall include the other gender and

the neutral. Whenever the singular is used, the same include the plural wherever appropriate,

and whenever the plural is used, the same shall also include the singular.

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ARTICLE n Deliverv and Acceptance of Waste

2.1 Delivery of Waste.

(a) Waste Disposal Covenant. Commencing on the Effective Date and throughout

the term of this Agreement, the County shall, in accordance with Applicable Law, exercise all

legal and contractual'power and authority which it may possess from time to time to deliver or

cause the delivery of all Controllable Waste to the Disposal System in accordance herewith.

(b) Recycled County Acc~table Waste. The parties hereto acknowledge the

responsibility of the County to meet the recycling and landfill diversion goals contained in the

Act. Nothing in this Agreement is intended or shall be interpreted to prohibit or impair the

ability of the County to meet such responsibilities, or to restrict the right of the residents,

businesses or organizations in the County to practice source separation, recycling, composting

or other materials recovery activities, or to restrict the right of the County to conduct, sponsor,

encourage or require such activities in any form. No reduction in the amount of Controllable

Waste generated in the County and delivered to the Disposal System by or on behalf of the

County which may result from any such source separation diversion or recycling program shall

cause the County any liability hereunder and shall not constitute a breach of this Agreement.

(c) Power to Obligate Waste Disposal and Comply with this Agreement. On or

before the Effective Date, (i) any County franchise, contract, lease, permit or other agreement

which is lawfully in effect relating to or affecting Controllable Waste shall provide, or shall have

been amended to provide, that the County shall have the right without material restriction on and

after the Effective Date to direct the delivery of all Controllable Waste to a disposal location

selected by the County and otherwise to comply with its obligations under this Agreement with

respect to Controllable Waste and Franchise or Permitted Haulers, and (ii) the County shall

designate the Disposal System as the disposal location pursuant to such franchise, contract, lease,

permit or other agreement. On and after the Effective Date and throughout the Term of this

Agreement the County (a) shall not enter into any franchise, contract, lease, agreement or

obligation, issue any permit, license or approval which is materially inconsistent with the

requirements of the Waste Disposal Covenant, and (b) shall maintain non-exclusive or exclusive

franchises or other contractual arrangements over any County Acceptable Waste which, as of

the Effective Date, is subject to non-exclusive or exclusive franchise or contractual

arrangements. The County agrees that the Authority shall be a third party beneficiary of the

obligation of Franchise or Permitted Haulers to deliver Controllable Waste to the Disposal

System, and may directly enforce such obligation through any legal means available. The

County shall notify in writing each Franchise or Permitted Hauler of the Authority's third party

beneficiary rights.

(d) Waste Flow Enforcement. The County, ·in cooperation with the Authority, shall

establish, implement, carry out and enforce a waste flow enforcement program which is

sufficient to assure the delivery of all Controllable Waste to the Disposal System pursuant to and

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in accordance with the Waste Disposal Covenant for disposal at the times and in the manner provided herein. The waste flow enforcement program shall consist of amending County franchises or permits with Franchise or Permitted Haulers, to the extent required by this Section, and shall include in addition, to the extent necessary and appropriate in the circumstances to assure compliance with the Waste Disposal Covenant, but shall not be limited to: (1) licensing or permitting Franchise or Permitted Haulers, upon the condition of compliance with the Waste Disposal Covenant, and (2) providing for and taking appropriate enforcement action under any such franchise, license or permit, such as but not limited to the suspension, revocation and termination of collection rights and privileges, the imposition of fmes or collection of damages, and the exercise of injunctive relief against non-complying Franchise or Permitted Haulers.

(e) Legal Challenges to Franchise System. The County shall use its best efforts to preserve, protect and defend its rights to exercise and comply with the Waste Disposal Covenant against any challenge thereto, legal or otherwise (including any lawsuits against the County or the Authority, whether as plaintiff or defendant), by a Franchise or Permitted Hauler or any other person, based upon breach of contract, violation of law or any other legal theory. At the option of the Authority or at the request of the County, the County may assign its rights and obligations pursuant to this paragraph to the Authority and the Authority shall accept such assignment and the Authority shall defend the County at the Authority'S cost and expense andlor indemnify the County for the payment of any costs incurred by the County in defense of any such challenge.

(f) Franchise or Permitted Haulers. The County shall immediately notify the Authority of any changes in the franchise, license or permit with its Franchise or Pennitted Haulers which would affect the hauler, the area of collection and transportation, or franchise and permit tenns.

(g) Waste Information System. The County shall cooperate with the Authority in collection information and otherwise monitoring Franchise or Permitted Haulers in order to assure compliance with this Agreement. Such information may include, to the extent practicable, data pertaining to Controllable Waste collected, transported, stored, processed and disposed of; Recycled County Acceptable Waste collected, transported, stored, processed and marketed or disposed of; Franchise or Permitted Haulers' franchise, permit or license terms, collection areas, transportation routes and compliance with Applicable Law; and all other information which may reasonably be required by the Authority in connection with this Agreement.

(h) Annexations and Restructuring. It is the intention of the parties that this Agreement and the obligations and rights of the County hereunder, including particularly the Waste Disposal Covenant shall, to the extent pennitted by Applicable Law, extend to any territory annexed by the County and shall bind any successor or restructured Governmental Body which shall assume or succeed to the rights of the County under Applicable Law.

2.2 Provision of Disposal Services.

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(a) Service Covenant. Commencing on the Effective Date and throughout the tenn of this Agreement, the Authority shall provide or cause the provision of the service of receiving and disposing of all Controllable Waste at the Disposal System (or other such facilities, including transfer stations, at the Authority may detennine to use). The Authority shall do and perfonn all acts and things which may be necessary or desirable in connection with its covenants in this subsection, including without limitation all planning, development, administration, implementation, construction, operation, maintenance, management, fInancing and contract work related thereto and undertaken in connection herewith. The Authority shall exercise all reasonable efforts to minimize the costs incurred in complying with the Service Covenant consistent with its responsibilities hereunder and under this Agreement, Applicable Law and prudent solid waste management practice and environmental considerations.

2.3 Charging and Securing Payment of Disposal Fees. The County acknowledges that the Authority shall have the right to charge and collect Disposal Fees for the acceptance and disposal of Controllable Waste delivered to the System. The Disposal Fees shall be calculated and established, and may be modified from time to time at the discretion of the Authority. The Authority shall provide the County thirty (30) days written notice of any proposed Disposal Fee modifications. In addition, the County ac1r.nowledges that the Authority shall have the right to establish as part of the operating rules and regulations reasonable measures to secure the payment of all Disposal Fees.

ARTICLEID Term

3.1 Effective Date and Tenn. This Agreement shall be effective when signed by each party and shall continue for so long as may be necessary to carry out the pUIpOse of this Agreement or until tenninated by mutual consent of the governing bodies of the parties, whichever is earlier; provided, however, that:

(a) The County may not withdraw from this Agreement so long as it remains a member of the Authority.

(b) Should the County cease to be a member of the Authority, the County may withdraw from this Agreement by a majority vote of the governing body thereof giving to the Authority one year's written notice of such intention to withdraw, so long as all revenue bonds or other fonns of indebtedness issues pursuant hereto, and the interest thereon, shall have been paid or adequate provision for such payment shall have been made in accordance with the resolution (or indenture) adopted by the Authority governing board pursuant to the law authorizing the issuance thereof or the approval of the debt.

ARTICLE IV General Provisions

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4.1 Further Instruments. Each party will, whenever and as often as it shall be reasonably requested so to do by the other, cause to be executed, acknowledged or delivered, any and all such further instruments and documents as may be necessary or proper, in the reasonable opinion of the requesting party, in order to carry out the intent and, purpose of this Agreement.

4.2 Limitation of Liability. No advisor, trustee, director, supervisor, officer, employee, accountant, attorney, beneficiary, shareholder, partner, participant or agent of or in Authority or County shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter. The limitations of liability provided in this Section are in addition to, and not in limitation of, any limitation on liability applicable to County or Authority, as applicable, provided by law or by any other contract, agreement or instrument.

4.3 Entire Agreement; Amendments; Captions. This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior or contemporaneous agreements or understandings, verbal or written, between the parties hereto respecting such matters. This Agreement may be amended by written agreement of amendment executed by both parties hereto, but not otherwise. Section headings shall not be used in construing this Agreement.

4.4 Time of the Essence; Non-Business Days. Subject to the next full sentence, time is of the essence of this Agreement. Whenever action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a certain period of time or by a particular date that ends or occurs on a non-business day, then such period or date shall be extended until the immediately following business day. As used herein,. "business day" means any day other than Saturday, Sunday or a holiday when the offices of County are closed for business.

4.5 Governing Law. This Agreement shall be construed and enforced in accordance with the internal laws of the State of California~. without regard to the rules governing choice of law.

4.6 Successors and Assigns. Neither Authority nor County may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other party (in which event ·such transferee shall assume in writing all of the transferor's obligations hereunder, but such transferor shall not ,be released from its obligations hereunder). No consent given by either party hereto to any transfer or assignment of. the other party's rights or obligations hereunder shall be construed as a consent to any other transfer or assignment of such other party's rights or obligations hereunder. No transfer or assignment in violation of the provisions hereof shall be valid or enforceable. Subject to the foregoing, this Agreement and

7

the tenns and provisions hereof shall inure to the benefit of and be binding upon the successors and assigns of the parties.

4.7 Notices. Any notice which a party is required or may desire to give the other shall be in writing and shall be sent by person3J delivery or by either (i) United States registered or . certified mail, return receipt requested, postage prepaid, or (ii) Federal Express or similar generally recognized overnight carrier regularly providing proof of delivery, addressed as follows:

To County: Monterey County 240 Church Street Salinas, California 93901 Attention: Chief Administrative Officer

To Authority: Salinas Valley Solid Waste Authority c/o City of Salinas 200 Lincoln Avenue Salinas, California 93901 Attention: Chief Administrative Officer

Any notice so given by mail shall be deemed to have been given as of the date of delivery established by U.S. Post Office return receipt or the overnight carrier's proof of delivery, as the case may be, whether accepted or refused. Any such notice not so given shall be deemed given upon receipt of the same by the party to whom the same is to be given. Any party hereto may designate a different address for itself by notice to the other party in accordance with this Section 4.7. In the event a party is not a natural person, delivery to an officer, director or partner of such party shall be deemed delivery to such party.

4.8 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

4.9 Severability. If any provision of this Agreement, or the application of such provision to any person or circumstances, shall be held invalid by a court of competent jurisdiction, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid by such court, shall not be affected thereby.

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IN WITNESS WHEREOF, the parties hereto have executed this agreement on the date first above written.

A1TIS~

CLERK m::-nm BOARD OF SUPERVISORS

ATTEST:

~~-AU1HORITY

9

MONTEREY COUN1Y /--~ .. '0

~meIT OR lilii ;SOJ\RI:' OF !UPSt'lISOItS tfoUIJ.,y 4aI1JIAlI SJ~I vI: ~c.e7L

»~OF


AMENDMENT TO WASTE DELIVERY AGREEMENT

by and between

COUNTY OF MONTEREY

and


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AMENDMENT TO WASTE DELIVERY AGREEMENT

THIS AMENDMENT TO WASTE DELIVERY AGREEMENT, dated _____ __, 2014, by and between County of Monterey (“County”), a political subdivision of the State of California, and the Salinas Valley Solid Waste Authority (“Authority”), a joint exercise of powers entity, amends the Waste Disposal originally entered into as of the __ day of September, 1997.

RECITALS:

The Authority owns, manages and operates a sanitary landfill system for the disposal of municipal solid waste generated by the cities and the unincorporated area within the Authority boundaries (the “Disposal System” as defined herein).

In December 1996, Monterey County and the cities of Gonzales, Greenfield, King, Salinas and Soledad (“Member Agencies”) formed the Authority for the express purpose of managing the Disposal System and ensuring long-term disposal capacity for its Member Agencies.

In the Joint Powers Agreement which creates the Authority (the “JPA Agreement”), the Member Agencies transferred to the Authority the right to exercise flow control of solid waste within the Disposal System.

In order to meet its obligations under the Joint Powers Agreement and in reliance on this agreement, the Authority issued certain revenue bonds, and may issue additional revenue bonds to finance or refinance Authority facilities from time to time in the future.

In 1997, the County and the Authority entered into a Waste Disposal Agreement for the purpose of ensuring that all solid waste controlled by the County may be directed by the Authority to the Disposal System.

The Authority is issuing its revenue bonds (the “Refunding Bonds”) pursuant to the JPA Agreement, the Marks-Roos Local Bond Pooling Act of 1985 as amended (California Government Code Section 5084, et seq.) (the “Bond Act”) and pursuant to a Master Indenture, as supplemented by a First Supplemental Indenture and Second Supplemental Indenture, each dated as of January 1, 2014 (collectively, the “Indenture”) to refund certain existing obligations of the Authority.

The MEMBER and the Authority have determined to amend the Waste Disposal Agreement as provided herein.

NOW, THEREFORE, taking into account the foregoing Recitals and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1. The Definition of “Disposal System” is amended by inserting the following at the end thereof:

“Disposal System” shall also include any facilities (including transfer stations, landfills, or other waste management facilities) with respect to which the Authority from time to time may make contractual or other arrangements for the processing or disposal of solid waste.

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Section 2. The Members acknowledge the issuance of the Refunding Bonds by the Authority pursuant to the Bond Act and the Indenture and further acknowledge that the Refunding Bonds shall constitute revenue bonds issued pursuant to the Waste Delivery Agreement for purposes of Section 3.1(b) of the Waste Delivery Agreement.

Section 3. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

Section 4. This Amendment shall become effective immediately upon execution by the parties.

IN WITNESS WHEREOF, the parties hereto have executed this agreement on the date first above written.

ATTEST: COUNTY OF MONTEREY

______________________________________ _________________________ CLERK OF THE BOARD OF SUPERVISORS

APPROVED AS TO FORM:

_____________________________________ CHARLES J. MCKEE, County Counsel

ATTEST: SALINAS VALLEY SOLID WASTE AUTHORITY

______________________________________ _________________________ CLERK OF THE AUTHORITY PRESIDENT OF THE

BOARD OF DIRECTORS

APPROVED AS TO FORM:

_____________________________________ AUTHORITY COUNSEL


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APPENDIX F

BOOK-ENTRY ONLY SYSTEM

THE INFORMATION HEREIN CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE AUTHORITY, THE TRUSTEE AND UNDERWRITER BELIEVE TO BE RELIABLE, BUT THE AUTHORITY, THE TRUSTEE AND THE UNDERWRITER TAKE NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE BENEFICIAL OWNERS SHOULD CONFIRM THE FOLLOWING INFORMATION WITH DTC OR THE DTC PARTICIPANTS (AS DEFINED HEREIN).

The Depository Trust Company (“DTC”), New York, NY, will act as Depository for the Bonds. The Series 2014 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each maturity of the Series 2014 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Series 2014 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2014 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2014 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2014 Bonds, except in the event that use of the book-entry system for the Series 2014 Bonds is discontinued.

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To facilitate subsequent transfers, all Series 2014 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2014 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2014 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2014 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2014 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2014 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2014 Bond documents. For example, Beneficial Owners of Series 2014 Bonds may wish to ascertain that the nominee holding the Series 2014 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2014 Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2014 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority 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 Series 2014 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Series 2014 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Beneficial Owner shall give notice to elect to have its Series 2014 Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Series 2014 Bonds by causing the Direct Participant to transfer the Participant's interest in the Series 2014 Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Series 2014 Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the

F-3

Series 2014 Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Series 2014 Bonds to the Trustee's DTC account.

DTC may discontinue providing its services as depository with respect to the Series 2014 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered.

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

The foregoing information concerning DTC and DTC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.

BENEFICIAL OWNERS WILL NOT RECEIVE PHYSICAL DELIVERY OF SERIES 2014 BONDS AND WILL NOT BE RECOGNIZED BY THE TRUSTEE AS OWNERS THEREOF UNDER THE TERMS OF THE INDENTURE, AND BENEFICIAL OWNERS WILL BE PERMITTED TO EXERCISE THE RIGHTS OF OWNERS ONLY INDIRECTLY THROUGH DTC AND THE PARTICIPANTS. THE AUTHORITY WILL HAVE NO RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS.

The Authority and the Underwriter cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, redemption price (if any) and interest with respect to the Series 2014 Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices, notices of mandatory tender or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Authority and the Underwriter are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Series 2014 Bonds or any error or delay relating thereto.

The foregoing description of the procedures and record-keeping with respect to beneficial ownership interests in the Series 2014 Bonds, payment of principal, redemption price (if any) and interest with respect to the Series 2014 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Series 2014 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.


APPENDIX G

SPECIMEN BOND INSURANCE POLICY


MUNICIPAL BOND INSURANCE POLICY

ISSUER: BONDS: $ in aggregate principal amount of

Policy No: -N

Effective Date:

Premium: $ ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the

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Page 2 of 2 Policy No. -N United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer. ASSURED GUARANTY MUNICIPAL CORP.

By

Authorized Officer

Form 500NY (5/90)

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