WEEKDAY

$18,515,000 and $38,290,000 due in 2026, 2029 and 2034, respective-ly. The District is required to make sinking fund payments on the term. bond due July 1, 2026 beginning on July 1, 2020 and on the term'bond due.July 1, 2029 beginning on July 1, 2027 and on the term bond due July 1, 2034'begmning on July 1, 2030. ,In addition, the 1999 bonds maturing on or after July 1, 2010 may be redeemed prior to their respective maturities on or after July 1, 2009 and at the option of the District at prices ranging from 100% to 101%.

PROGRESS 0'N THE STRAT'EGI'C !PI.A'N lJadopted its Strategic Plan in 1999 (published in full on its award winning website at wwwbart.gov). It sets out BART's mission and vision of its role in Bay Area transit. It focuses on seven key issues that are central to this mission and identifies goals, objectives, and strategies for achieving results in each area. Jam pleased to report that steady progress is being made in every category and we will continue to use the Strategic Plan as our map for navigating the rapidly changing territory of the new millennium.
'BART -AN ECONOMIC ENGINE IN TH.E .BAY AREA Tis past year BART commissioned a study to conduct a comprehensive look at BART's overall economic impact on the Bay Area including an analysis of development trends along the system's corridors. The report, prepared by the Sedway Group, a San Francisco-based real estate and urban economics firm, lists several ways BART contributes to the Bay Area economy. First, it has been a factor in attracting billions of development dollars for the Bay Area. Second, BART invests billions of dollars itself in the community through capital and operating outlays. Third, BART has contributed to regional prosperity by increasing real estate values, both residential and commercial at locations close to BART stations, thus, accentuating BART's integral role as an economic engine as well as a major transportation provider.

COMMUNITY PARTNERSHIPS FORGED
BART has worked with local communities for several years with a view to developing "transit villages" around BART stations. Early this year we launched the first phase of the City of Richmond Transit Village, which will be built on 16 acres of BART, City and Redevelopment Agency land around the Richmond BART Station. The first step is construction of an Amtrak Center platform, which is part of a new intermodal transit center. The later phases of the development will include a mixed-use facility that combines living, working, retail and cultural activities with the multi-modal station.
In keeping with its goal of improving access to BART through integration with other transit systems, work has also begun on intermodal projects at the Fremont, South Hayward, and Union City BART stations in the East Bay. In addition, state funding has been received for similar work at the Balboa Park Station in San Francisco. In the latter case, it is envisioned that the intermodal facility will serve as a catalyst for further neighborhood revitalization.

BART/SFO LINK
The extension from Colma to San Francisco International Airport (SF0) is proceeding at a rapid pace. Now, in the third year of construction, this 8.7-mile extension will add four new stations to the system. More than 3.5 miles of subway have already been built and work is well advanced at the Airport and Millbrae stations. Construction is also progressing on the South San Francisco and San Bruno stations, which are underground. The BART SFO link is due to be completed in 2002. This project reflects an unprecedented regional partnership between BART, SamTrans, San Francisco International Airport, the California Transportation Commission, the Federal Transit Administration and the Metropolitan Transportation Commission.

EXTENSIONS OF DART SERVICE
Further, state money to study various potential BART extensions has been approved by the Legislature and included in the State budget. This exciting initiative led by Assemblyman Tom Torlakson (now a State Senator), Chairman of the Assembly Transportation Committee and state Senator Don Perata, Chairman of the Select Committee on Bay Area Congestion, had requested funds to study two corridors. The two corridors include BART to Livermore along Highway 580, and to Antioch along Highway 4 and other east Contra Costa cities. Meanwhile, the long planned Warm Springs Extension was included for partial funding in Measure B, and the Governor's Transportation Budget also included $725 million for a BART line to San Jose.
In preparation for the proposed connector between BART and Oaldand InternationalAirport, BART and the FederalTransit Administration jointly hosted a public scoping open house to provide information and invite public comment.This was a prelude to the development of an environmental impact statement and report.

SPONSORED FORUMS
BART hosted a Land Use Management and Transportation Forum in Oakland this past fiscal year. Entitled"Where Do We Grow From Here?"The forum took a hard look at the concept of transit-oriented development and future BART Extensions. Attending were leaders from a broad section of the Bay Area including state senators, assembly members, county supervisors, local officials and BART directors, all of whom contributed their unique perspectives.
BART, as the managing agency for the Capitol Corridor Joint PowersAuthority (CCJPA), held several"customer focus"events to draw attention to the 185-mile Capitol Corridor service between Sacramento and San Jose. The service now offers seven round trip trains daily between Sacramento and Oaldand, three round trips daily to San Jose, and one to Auburn. The trains are operated by Amtrak and managed by BART for the CCJPA. Tam pleased to report that ridership for fiscal year 2000 was 42.1% above fiscal year 1999 with 767,749 passenger trips recorded. We will continue to promote ways to augment this patronage through improved service and marketing. Our plans include continual improvement in integrating other transit systems with the service and adding two more round trip trains in fiscal year 2002.
In May of this year, BART sponsored a Welfare to Work workshop to explore ways in which transit can assist people who are entering the workforce. A number of ideas were generated including improving access to BART, providing targeted transit connection information, and encouraging the establishment of childcare facilities near stations.
Helping the communities it serves to celebrate important events is one of the ways BART underscores its role as an integral part of the community. Earlier this fiscal year, BART hosted a public celebration of Dr. Martin Luther Icing Jr's birthday at the Metro Center Auditorium in Oaldand. The featured speaker was Reverend Cecil Williams of Glide Memorial Church. BART also provided special commemorative"FreedomTrains"for passengers attending the annual Icing Holiday Rally at the Bill Graham Civic Auditorium. For the first time, BART celebrated the Chinese New Year on the plaza above the Lake Merritt Station with local singing groups and traditional lion dancers. Cinco de Mayo was the occasion for a lively and colorful ceremony also held at the Lake Merritt location.

GOING THE DISTANCE
BART has come a very long way from its fledgling days as a 71.5-mile system with only 33 stations serving about 4.6 million passengers in the 1972/73 year. That original $1.5 billion investment is now worth about $10 billion, in terms of replacement value, and the system today covers 95 miles with a total of 39 stations in five counties. When the BART/SFO line opens it will bring the total system length to approximately 103 miles with 43 stations. Our present day financial health, investment, and reinvestment in the system all contribute to ensuring the continued high quality of BART service as the system continues to make a unique contribution to the livability and vitality of the Bay Area community. With this much accomplished, and with our careful stewardship and thoughtful planning for the future, we are ready to meet the challenges of 2001 and beyond.

Report of Independent Accountants
To the Board of Directors of San Francisco Bay Area Rapid Transit District In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of San Francisco Bay Area Rapid Transit District (the "District") at June 30, 2000 and 1999, and the results of its operations, changes in fund equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the District's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for our opinion.
In accordance with Government Auditing Standards, we have also issued our report dated October 16, 2000, on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying notes are an integral part of these financial statements. The accompanying notes are an -integral part of these financial statements. The accompanying notes are an integral part of these financial statements. The District has defined its financial reporting entity in accordance with GovernmentAccounting Standards No. 14, which states that the fmancial reporting entity should consist of (a) the primary government, (b) the organizations for which the primary government is financially accountable, and (c) the other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Based on this definition, the financial statements of the District (the primary government) include those of the Transit Financing Authority (the Authority), a component unit.

Basis of accounting and presentation
The accrual basis of accounting is used by the District. Under this method, revenues are recognized when earned and expenses are recognized when incurred.
The financial statements of the District are presented as an enterprise fund and are accounted for in separate funds, principally the Operating Fund, Construction Fund and Debt Service Fund. Such funds are combined for financial reporting purposes in order to present the financial position and results of operations of the District as a whole.

Reclassifications
Certain reclassifications have been made to the prior year financial statements to conform to the current year's presentation. These reclassifications had no effect on previously reported fund equity.

Cash and cash equivalents
The District considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Deposits held by trustee and investments restricted for Board designated purposes are treated as investments.

Investments
Investments are stated at fair value, which is based on quoted market price. As a matter of policy, the District holds investments until their maturity.
Deposits held by trustee Deposits held by trustee, consisting of cash and investments, are held by trustee banks in accordance with the District's various bond and note indentures and for general debt service requirements.
Restricted and designated cash and investments Certain cash and investments are classified as restricted and designated assets on the balance sheets because their use is limited, either by certain bond covenants or by the Board of Directors'designations. The use of these funds is restricted for construction or for debt service payments.

Materials and supplies
Materials and supplies consist primarily of replacement parts for the system and rail vehicles. Materials and supplies are stated at cost, which approximates market, using the average-cost method. Materials and supplies are expensed as consumed.
Facilities, property and equipment Facilities, property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Depreciation expense on assets acquired with capital grant funds is transferred to contributed capital after being charged to operations.
Major improvements and betterments to existing facilities and equipment are capitalized. Costs for maintenance and repairs which do not extend the useful life of the applicable assets are charged to expense as incurred. Upon disposition, costs and accumulated depreciation are removed from the accounts and resulting gains or losses are included in operations.
The District capitalizes certain interest income and expense related to tax-free borrowings. Following the capitalization of interest revenue of $15,605,000 and $8,727,000 for fiscal years 2000 and 1999, respectively, the net effect of interest capitalization was to increase expenditures for facilities, property and equipment by $5,210,000 and $8,593,000 during the years ended June 30, 2000 and 1999, respectively, for the difference between interest income and interest expense from applicable borrowings. Total interest costs amounted to $20,815,000 and $17,320,000 for fiscal years 2000 and 1999, respectively.
Compensated absences Compensated absences are accrued and reported as a liability in the period earned.
Fare operating revenue Fare operating revenues are earned as passengers utilize the train service. Deferred revenue includes unearned passenger revenue which is an estimate of passenger tickets purchased which have not yet been used as well as unearned revenue related to license fees paid by telecommunication companies for the use of the District's right of way for wireless accessibility to their customers.

NOTES TO FINANCIAL STATEMENTS • BART ANNUAL REPORT 2000
Contributed capital The District receives grants from the Federal Transit Administration ("FTA").and other agencies of the US. Department of Transportation, state, and local transportation funds for the acquisition of transit-related equipment and improvements. Capital grants are recognized as donated capital to the extent that project costs under the grant have been incurred. Capital grant funds earned, less amortization equal to accumulated depreciation of the related assets, are included in contributed capital.
Transactions-and use tax (sales tax) revenue State of California legislation authorizes the District to impose a 1/2% transaction and use tax within District boundaries which is collected and administered by the State Board of Equalization. Of amounts available for distribution, 75% is paid directly to the District for the purpose of paying operating expenses, except for a portion which is paid directly to the trustees to cover principal and interest payments of maturing sales tax revenue bonds. The remaining 25% is allocated by the Metropolitan Transportation Commission ("MTC") to the District, the City and County of San Francisco, and theAlameda-Contra CostaTransit District for transit services. The District records the total transactions and use taxes earned (including amounts paid to the trustee) as revenue.
Property taxes, collection-and maximum rates The State of California Constitution Article XIII.A. provides that the general purpose maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined byArticle XIII.A. and maybe adjusted by no more than 2% per year unless the property is sold or transferred. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts, such as the District.
The District receives property tax revenues to meet the debt service requirements of its General Obligation Bonds, which was fully repaid during fiscal year ended June 30, 1999. The District also receives an allocation of property tax revenues for transit operations. San Francisco, Alameda and Contra Costa Counties assess properties and bill for, collect, and distribute property taxes. Property taxes are recorded as revenue and receivables, net of estimated uncollectibles, in the fiscal year of levy.
Financial assistance grants Financial assistance grants are accrued as other revenue in the period to which the grant applies.
Collective bargaining Approximately 87% of the District's employees are subject to collective bargaining.'The current labor contracts expire on June 30, 2001.

Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The District is currently involved in construction of Phase 1 of an extension project that will add 38 miles of track and 10 new stations to the system at a total cost of approximately $3,264,000,000. The District is partially self-insured for workers, compensation, public liability and property damage. The self-insured maximum for workers' compensation is $500,000. The self-insured maximum for public liability and property damage is $2,000,000. Claims in excess of self-insured retentions are covered up to an additional'amountof'$198,000;000.
The self-insurance programs are administered by independent claims adjustment firms. The liability is based, in part, upon the independent adjustment firms'estimate of reserves necessary for the settlement of outstanding claims and related administrative costs, and includes claims that have been incurred but not yet reported. Such reserves are actuarially determined and subject to periodic adjustment as conditions warrant.
The estimated liability for insurance claims at June 30, 2000 is believed to be sufficient to cover any costs arising out of claims filed or to be filed for accidents which occurred through that date.
Claim expenses and liabilities are reported when it is probable that a loss has occurred and the amount of that loss'can be reasonably estimated. These losses 'include an estimate of claims that have been incurred but not yet reported. Transit Financing Authority The Joint Exercise of Powers Agreement (the "Agreement"), dated August 1, 1991, between the District and Metropolitan Transportation Commission MT provided for the creation of the Transit Financing Authority (the "Authority"), a public instrumentality of the State of California. The term of the Agreement is for ten years, unless extended or earlier terminated. The Authority was formed for the purpose of providing financing and contracting for public transit improvements, including the refinancing of prior indebtedness and acquiring, selling and fmancing,public capital improvements, working capital, liability and other insurance needs, and for .the specific purpose of assisting in fmancing the District's East-Bay and West-Bay extensions.
The governing board of the Authority consists of two members each from the District and MTC. Neither the District nor MTC is responsible for any debt, liabilities and obligations of the Authority.
At the end of the term or upon the earlier termination of theAgreement, all assets of the Authority shall be distributed to the two participants, and any surplus money on hand shall be returned to these participants in proportion to their respective contributions to the Authority.
TheAuthority has undertaken a commercial paper program to fund a portion of the costs of acquiring and constructing the District's extension project to the San Francisco International Airport (SFO extension project). Under the program, in December 1998, the Authority issued its Commercial Paper Notes SeriesA and Series B,'in an aggregate amount of $100,000,000. In October 1999 and March 2000,'Commercial Paper Notes Series C and Series D and Commercial Paper Notes Series E and Series F were issued, respectively, in an aggregate amount of $100,000000 per issuance. As of June 30, 2000 and 1999, $300000,000 and $100,000,000.of commercial paper notes, respectively, remained outstanding (refer Note 6).
Also in order to fund a portion of the costs of SFO extension project, in September 1999 the Authority issued a limited liability note (Bridge Toll Note) in an amount of $65,680,000, payable from and collateralized solely by a pledge of certain bridge' toll revenues allocated to the District by MTC. The note has interest rates ranging from 4.25% to 5.75% and matures from August 2000 through February 2007.
At June 30, 2000, the Authority had assets consisting of unused cash proceeds in the amount of $97,339,000 and advances to the ,SFO extension project in the amount of $285,550,000 for the payment of project related costs. The Authority's liabilities consisted entirely of the $300,000,000 of commercial paper notes payable and the $65,680,000~of the Bridge Toll note payable.

NOTES TO FINANCIAL STATEMENTS • BART ANNUAL REPORT 2000
Capitol Corridor Joint Powers Authority The Joint Exercise of Powers Agreement (the "Agreement") dated December 31, 1996, between the District and five other transportation authorities in surrounding counties ("Agencies") provided for the creation of the Capitol Corridor Joint Powers Authority (the "Authority"), a public instrumentality of the State of California. The Authority was formed for the purpose of administering and managing the operation of the Capitol Corridor Rail Service as part of the California intercity passenger rail system. The District is the managing agency of the Authority and in that capacity shall provide all necessary administrative support to the Authority. The Authority entered into an Interagency Agreement with the State of California and assumed the administration and operation commencing at the service on July 1, 1998. The term of the Interagency Agreement is for three years, from July 1, 1998, unless extended or terminated.
The governing board of the Authority consists of six members from the District and two members from each of the five otherAgencies. Neither the District nor the other Agencies are responsible for any debt, liabilities and obligations of the Authority.
At the end of the term or upon the earlier termination of the Agreement, all assets of the Authority shall be distributed to the six participants, and any surplus money on hand shall be returned to these participants in proportion to their respective contributions to the Authority.
The District has not contributed any assets to or invested in the Authority.

Technology Reinvestment Project
In 1994, the District and the joint venture of Hughes Transportation Control Systems, Inc. ("Hughes"), and Morrison KnudsenTrain Control, Inc. ("HMI.") entered into a memorandum of understanding ("MOU") to form an alliance ("Alliance") to develop a cost-effective, highly reliable and safe train control system for passenger and freight-carrying trams. The project is partially funded under theTechnology Reinvestment Project managed by theAdvanced Research Projects Agency ("ARPA"). The FederalTransitAdministration ("FTA") has agreed to manage and oversee the project on behalf of ARPA.
During fiscal year 1998, the Alliance was reorganized. Hughes and HMK withdrew and were replaced by Harmon Industries, Inc. ("Harmon").
In August 1998, a MOU was executed between the District and Harmon which replaced the 1994 MOU between the District and the joint venture of Hughes and HMK.
During the year ended June 30, 1999, the District's participation in this project was in the form of in-kind contributions which consist primarily of labor costs and direct costs that are partially reimbursable by the Alliance. As of June 30, 2000 and 1999, the District had provided the Alliance with approximately $12,758,000 in cumulative in-kind contributions and had incurred $17,915,000 and $13,090,000 of direct costs, respectively, $948,000 of which were reimbursed by the Alliance.

East Bay Paratransit Consortium
In 1994, the District and theAlameda-Contra CostaTransit District ("ACTransit") executed anAgreement establishing the East Bay Paratransit Consortium (the "Consortium"). The purpose of the Consortium is to enable the District and AC Transit to jointly administer ADA paratransit services in the overlapping service area of the District andACTransit. The Consortium receives operating subsidies of StateTransitAssistance funds administered by the MTC. The project receives direction from the Service Review Committee, which consists of the general manager (or designee) from each member agency. The lead agency responsible for administering the Consortium is rotated annually as established by the Agreement. The District was the lead agency in fiscal year 2000. In October 1999, the District issued sales tax revenue bondstotaling $134,945,000 to provide funds for certain capital improvements including rehabilitation of the District's vehicles, initial deposit to a capital reserve account for the SFO extension project and rehabilitation of the District's maintenance facility. The bonds are special obligations of the District, payable from and collateralized by a pledge of sales tax revenues. At June 30, 2000, the 1999 Bonds consist of $44930,000 serial bonds due from 2003. to 2019 with interest rates ranging from 4.15% to 5.25% and three 5.5% term bonds in the amounts•of $33,210,000, $18,515,000 and $38,290,000 due in 2026, 2029 and 2034, respectively. The District is required to make sinking fund payments on the term. bond due July 1, 2026 beginning on July 1, 2020 and on the term'bond due.July 1, 2029 beginning on July 1, 2027 and on the term bond due July 1, 2034'begmning on July 1, 2030. ,In addition, the 1999 bonds maturing on or after July 1, 2010 may be redeemed prior to their respective maturities on or after July 1, 2009 and at the option of the District at prices ranging from 100% to 101%.

Defeased Bonds
No bonds were defeased during fiscal years 2000 and 1999. In March 1998, the District defeased several bonds by placing part of the proceeds of the 1998 SalesTax Revenue Bonds in,an irrevocable trust to provide for future debt service payments on these bonds. The advance refunding met the requirement of an insubstance debt defeasance, and the term bonds were removed from the District's long-term debt. Accordingly, the Trust account assets and liabilities for the defeased bonds are not included in the District's financial statements. As a result of the advance refunding, the' District reduced•-its total debt service requirement by $16,644,000 which resulted in an economic gain (the difference between, the present value of the debt service payments on the old and new debt) of $10,721,000. As of June 30, 1998, the amount of defeased debt outstanding and removed from the long-term debt was as follows (in thousands): The District deferred interest expenses of $7,767,000 related to the defeasance of certain bonds. These deferred charges are recorded as a reduction of the new 1998 bonds and are amortized over 3the life of the defeased 'bonds. ,Amortization-expense on these deferred charges was $2,485,000 for each fiscal year 2000 and 1999.

NOTES TO FINANCIAL STATEMENTS • BART ANNUAL REPORT 2000
Arbitrage Bonds The District is subject to certain bond covenants, including the rules set forth by IRS code section 148a which requires that interest earned on the proceeds of a bond issuance does not exceed the interest expense related to those bonds, which qualifies th6se bonds as arbitrage bonds. Any excess interest income is subject to a 100% tax and is payable to the federal government. As of June 30, 2000, the District had an arbitrage liability related to the 1998 Bonds in the amount of $755,000, payable no later than May 12, 2003.

Construction Loan
In March 1999, the District, MTC and San Mateo CountyTransit District (SamTrans) entered into a Memorandum of Understanding (MOU), which provided additional funds to the extension project at the San Francisco International Airport.
Pursuant to the MOU, the construction loan as of June 30, 2000, consists of funds received from SamTrans for $72,000,000 and MTC for $14,699,000. The District has committed to loan $50,000,000 of its own funds to assist with the financing of the San Francisco International Airport Extension Project costs. The terms and conditions of the MOU provide for the repayment of the loan, without interest, from the future net operating surplus generated by the San Francisco International Airport Extension. Such repayments will commence after SamTrans'capital contribution to the BART system for the Warm Springs extension is fully paid from future net operating surplus.

Commercial Paper Notes
In December 1998, the Board amended the District's existing commercial paper program such that total issuance under this program may not exceed $300,000,000 and any proceeds from the offerings were to be used for the specific purpose of funding a portion of the costs of acquiring and constructing the District's extension project to the San Francisco InternationalAirport. Under this program, the District is able to issue commercial paper notes at prevailing interest rates for periods of maturity not to exceed 270 days.
To provide liquidity for the program, the District maintains three lines of credit facilities with commercial banks, totaling $309,000,000. Drawing under these agreements is restricted to payment of maturing commercial paper notes and related interest. There were no borrowings outstanding under these agreements as of June 30, 2000.
At June 30, 2000 and 1999, $300,000,000 and $100,000,000, respectively, in commercial paper notes was outstanding, with terms of 32 to 160 days and interest rates ranging from 2.60% to 4.25%. Matured notes will be refinanced via the subsequent sale of additional notes until final redemption is due upon the expiration of the letters of credit on June 25, 2002. The notes will be paid from the federal funding grant monies related to the SFO extension. Unused proceeds as of 1999 totaled $19,159,000 and $34,000,000, respectively.

Debt Repayments
The following is a schedule of long-term debt principal payments required as of June 30, 2000 (in thousands): The San Francisco Airport Extension Project is covered by a Federal Full Funding Grant Agreement which authorizes the District to incur costs or expend local funds prior to an award of Federal funding assistance without prejudice to possible future Federal participation.

LOCAL AND STATE FINANCIAL ASSISTANCE
The District receives local operating and capital assistance fromTransportation Development Act Funds ("TDA"). For the years ended June 30, 2000 and 1999,TDA,operating assistance was $696,000 ($245,000 in 1999) and capital assistance was $600,000 (nil in 1999).These funds were received from the counties of Alameda and San Mateo.
The District receives state operating and-capital assistance from StateTransitAssistance Funds ("STA"). For the year ended June 30, 1999, STA assistance was $192,000, all of which was used for,operating assistance. These funds are allocated by MTC based on the ratio of the District's transit operation revenue and local support to the revenue and local support of all state transit agencies. The District did not receive any STA assistance for the year ended June 30, 2000. All investments are reported at fair value. The fair value of investments in securities is generally based on published market-prices and quotations from major investment firms. Many factors are considered in arriving at fair value. In general, .however, corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. Investments in certain restricted common stocks are valued at the quoted market price of the issuer's unrestricted common stock less an•appropriate discount. Investments held in internal investment pools have been reported at fair value.
Mortgages are valued on the basis of their future principal and interest payments discounted at prevailing interest rates for similar instruments. The fair value of real estate investments, principally rental property subject to long-term net leases, are estimated based on -independent appraisals. Short-term investments are reported at fair value, when available, or at cost plus accrued interest, which approximates market value when market values are not available. For investments where no readily ascertainable. market value exists, management in consultation with their investment advisors has determined the fair values for the individual investments.
Each plan issues a publicly available financial report that includes financial statements and required supplementary information for that plan.

Funding Policy
The Plans funding policy provides for periodic District contributions at actuarially-determined, amounts sufficient to accumulate the necessary assets to pay benefits when due as specified by ordinance. The individual entry age normal method is used to determine the normal cost, and beginning on July 1, 1997, the unfunded actuarial accrued surplus or liability (past service liability) is amortized as a level percentage of future covered payroll over 13 years for the Miscellaneous Plan and the Safety Plan. District contributions for the year ended June 30, 2000 to cover normal cost and to amortize the unfunded actuarial accrued surplus approximated 6.539 % (5.495% in 1999) and 11.919% (5.341% in 1999) of covered. payroll for the Miscellaneous Plan and the Safety Plan, respectively.
The' District was not required to make contributions. to the Fund for covered employees for the fiscal year 2000 due to a surplus of the District's portion of the Fund's net assets over the District's pension benefit obligation caused by a change in 1988 in the actuarial valuation method and an actual rate of return on investment assets that exceeded the assumed rate. The required contribution was determined as part of an actuarial valuation performed as of June 30, 1998, the latest available for the Fund. The significant actuarial assumptions used in the 1998 valuation to compute the pension benefit obligation were an assumed rate of return on investment assets of 8.25%, annual payroll increases of 3.50% attributable to inflation, 0.25% attributable to real salary increases, and merit increases that vary by length of service, and no postretirement benefit increases.

Postretirement Health Care Cost
In addition to the retirement benefits described above, as specified in the District's ordinance, the District provides postretirement health care benefits assistance to all employees who retire directly from the District or to their surviving spouses. Substantially all of the District's employees may become eligible for those benefits if they reach age 50 with 5 years of service with the District. Currently, 527 retirees are provided this benefit. The District paid up to $115,000 per month for health insurance premiums for the retirees and surviving spouses during fiscal year 2000. These benefits are fully funded by the District and accounted for on a pay-as-you-go basis through payments to the Plan. Cash reimbursements of these benefits totaled $1,041,000 in 2000.

DEFERRED COMPENSATION PLAN
The District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code ("IRC") Section 457. The deferred compensation plan, available to all officers and employees, permits them to defer receipt of a portion of their salary until future years. The deferred compensation is not available to employees until retirement, termination, or certain other covered events.
On January 1, 1997, the District amended the Plan to conform to the Federal Small Business Protection Act of 1996 ("SBPA"). The amendment provided for the creation of a trust for the deferred compensation plan and all income attributable to those amounts. The funds are not subject to the claims of the District's general creditors. The Plan is no longer considered part of the District's assets.
NOTES TO FINANCIAL STATEMENTS • BART ANNUAL REPORT 2000 11. MONEY PURCHASE PENSION PLAN All District employees participate in the Money Purchase Pension Plan, which is a supplemental retirement program. In January 1981, the District's employees elected to withdraw from the Federal Social Security System ('PICA") and established the Money Purchase Pension Plan. The District contributes, on a pay-as-you-go basis, an amount equal to 6.65% of ,covered employee's annual compensation (up to $29,700,after deducting the first $133 paid during each month) ,up to a maximum annual contribution of $1,868. Non-represented employees, receive an additional 1.627% of annual regular earnings up to $160,000. Each employee's account is available for distribution upon such employee's termination.
The District's total expense and funded contribution for this plan for the year ended June 30, 2000 and 1999 were $7,411,000 and $7,307,000, respectively. Money Purchase Pension Plan assets at June 30, 2000 and 1999 (excluded from the accompanying financial statements) were $231,441,000 and $213,289,000, respectively. At June 30, 2000, there were approximately 199 participants receiving benefits under this plan.

BOARD OF DmEcroRS'EXPENSEs
In May 2000, the annual reporting for the Board of Directors'travel and other business related expenses (Directors'expenses) was changed from a calendar to a fiscal year cycle. The total Directors'expenses for the fiscal year ended.June 30, 2000 amount to $34,000, which include $15,000 expenses incurred from January 1, 2000 through June 30, 2000.

Litigation
The District is involved in various lawsuits, claims and disputes, which for the most part are normal to the District's operations. It is the opinion of the District's management that the costs that might be incurred in the disposition of these matters, if any, would not materially affect the District's financial position.

Lease commitments
The District leases certain facilities under operating leases with original terms ranging from one to five years with options to renew.
Future minimum rental'payments under noncancelable operating leases with initial or remaining lease terms of over one year attune 30, 2000 are as follows (in thousands): Operating Leases

SOURCES AND USES OF OPERATING FUNDS FY 2000
(Dollars in Thousands)