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RAMIRL4 + Management Team: The City's robust financial policies, that include a formal budget and reserve policy, debt management policy and a pension funding policy, are strong. Notably, the pension funding policy is very thoughtful and includes a strategy to address both the UAL and OPEB liabilities. In addition to emphasizing conservative budgeting results, we recommend including a substantial discussion of the specific actions taken to contain costs during the COVID shutdown. Providing this level of detail helps articulate the sophistication of the City's management team. Economy: As senior manager for the City's last two financings, we helped earn two and three notch rating upgrades to the coveted "AA" category. In part, this success was due to our ability to position the Santa Ana economy as the backbone of its Metropolitan Statistical Area (MSA). Its vitality at the intersection of Orange, LA and Riverside Counties provides the City with unique opportunities. For its general fund credit, it will be important to detail the City's transformational period fueled by substantial new development, opportunities and revenues. For the City's 2019 rating presentation, our team spent a lot of time discussing the following projects: 3"& Broadway, Willowick, YMCA, Tapestry Hotel by Hilton, Central Pointe, The Bowery, First American Title Company, The Heritage (Park and Paseo) and the Main Place Mall Transformation. These developments were and are critical to the City's credit rating because of potential sales taxes and AV increases. In the POB rating presentation, we will detail the progress that has been made. Based on our recent rating successes, we firmly expect that the City should earn a strong 'AA' category POB rating. Additional Thoughts on Rating Strategy. Ramirez & Co. recommends utilizing an S&P rating only. S&P rates POBs based on an issuer's 60 rating due to an acknowledgement that revenue used to pay for PUB debt service is not limited in scope and is not distinct or separate from the issuer's General Fund. Moody's and Fitch rate POBs one to two notches lower and recent POB performance indicates a single S&P rating will not impact pricing. Additionally, S&P is credit neutral on the issuance of POBs and therefore the proposed transaction will not negatively impact the City's credit rating. Structuring Ideas: Ramirez & Co.'s analysis is a multi -step process based on the following: 1. Pension liability shape (including PCB) 2. Amortization Base by Amortization Base CAPERS UAL refunding model 3. POB size optimization, an incremental approach Notably, our pension optimization model is dynamic and we have evaluated a refinancing of all possible UAL base combinations. The structuring recommendation included below is based on current interest rates and a progressive approach that adds incrementally less efficient UAL bases to reach the optimal solution. As we approach pricing, our quantitative support team will continue to monitor the market and we can revise the combination of UAL bases on the day of pricing based on investor demand and real-time interest rate movements. our quantitative support team includes Arthur Chan, Managing Director, who has a Rnrhelor'c degree in Computer .Srienre with a fnrus nn Artifirinl Intelligrnre from the l/niversity of City Council 9 23 — 247 5/18/2021