1. Paul McDonnell April 23, 2009 TEETER 101

2. 1 Teeter is a method for distributing taxes which guarantees that participating agencies receive 100% of levied taxes as opposed to the actual amount of taxes collected. Each year the amount of taxes actually collected is less than the amount levied. Rather than wait for delinquent tax payments, penalties and interest, to be collected; revenues are advanced to the Teeter participants by the county. Once the outstanding taxes, penalties and interest are collected, the Teeter advance is repaid. Teeter Defined

3. TEETER 1012 The TTC is a key player in the Teeter process. Your tax sale strategy could be affected if the process is not managed effectively. Teeter can be a significant county revenue source. Your Pool in many cases is a key component of the funding strategy Why Should You Care?

4. TEETER 1013 The County of Riverside adopted the Teeter Plan in 1993. The advance of unpaid funds was made by selling a note to the Treasurer’s Pooled Investment Fund. In 1997 the County replaced the note with the issuance of tax- exempt commercial paper (TECP). TECP has cut the County’s cost by over $8 million since 1997. The Plan has been a strong source of revenue for the County. In the last five years alone, over $125 million has been transferred to the General Fund. History of Teeter in Riverside County

5. TEETER 1014 The County finances the advance of tax receivables, much like a bank finances credit card receivables, yet the County has a secured first lien position. 1. Estimated. Includes 10% penalty and 24 months of interest at 1.5% per month per California Law. 2. Set aside is a function of tax sale experience. 3. Represents average cost of funds on Teeter Notes. Gross Return 1 23.00% Tax Loss on Uncollectables 2 (1.00%) Net Payment22.00% Cost of Funds 3 (2.00%) Net Return20.00% Teeter Financing Program

6. TEETER 1015 Teeter Cash Flows Investors General Fund CP 1 Tax Collections Taxing Entities Repayment Program Revenues Advance Repay Sale

7. TEETER 1016 Teeter and Tax Sale The County takes on the collection risk in exchange for the penalties and interest. Our ultimate collection tool is the tax sale. The downturn of the 1990’s “stress tested” the viability of our Teeter Program. The total write-down during the last cycle was relatively small.

8. TEETER 1017 Riverside County Properties Subject to Tax Sale Regular tax sales have allowed us to manage the growth of our inventory *Excluding timeshares

9. TEETER 1018 Virtually all counties participate in Teeter. Six to Ten have “stand-alone” programs selling notes to the Pool or to the Public. Most other programs rely on some form of advance from the Pool or the General Fund. In some cases sufficient balances have accumulated to fund additional advances. Observations from 2008 CACTTC Survey

10. TEETER 1019 Observations (cont.) For larger programs an externally funded stand- alone program is the most cost effective. Internal programs are cost effective for small counties, given legal and underwriting expenses, not to mention staff time. No matter what shape the program takes, a consolidated summary of Teeter activities should be develped for reporting and forecasting purposes.

11. TEETER 10110 Recap Most Counties have been well served by their Teeter Programs. Program sizes should grow with increased delinquencies, allowing for greater revenue to the General Fund. Credit enhancement capacity and costs are real concerns for CP programs. Being knowledgeable about Teeter can help you contribute to solving your counties’ revenue shortfall.

12. TEETER 10111 Thank You! Questions? Contact: Paul McDonnell pmcdonnell@rceo.org 951.955.1110