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RAMIRL4 Additional Structuring Alternatives, options and Benefits of Proposed Structure Water System CalPERS UAL. 62% of the proposed UAL payoff amount ($391.5 million) is attributable to the City's Safety plan. This is beneficial because the City's water enterprise is responsible for a portion of the miscellaneous plan and the City is considering utilizing a "tax-exempt exchange" to payoff a potion for the Miscellaneous UAL attributable to the water system's employees. In this option, the City uses (PAYG) cash on hand to payoff a portion of a UAL base and, subsequently, funds capital improvements with lower cost tax-exempt bonds. Additional Upfront Cash Flow Relief. The proposed structure optimizes the base case Hybrid structure discussed above. I lowever, various adjustments can be made to deliver even greater cash flow savings. If budget needs require immediate relief, the City may consider structuring ascending debt service in the earlier maturities, thereby moving principal to later maturities. Depending on the amount of deferred principal, this option could marginally increase the borrowing cost of the overall transaction. Smaller Transaction — Dynamic UAL Selection Model. Our proposal is designed to deliver the highest cash flow savings possible and lowest interest rare under the 50% - 90% UAL payoff amounts, however, we understand the City may consider a smaller par amount. The model we designed for the City can be optimized in real time to evaluate alternative options and our team is committed to working with the City and its financing (earn throughout the engagement to assess alternative options that arrount for Changes in interest rates and/or budget needs. Bond Insurance Could Reduce Borrowing Cost and Reduce Risk. Given our activity in the California City POB space, our team has conducted extensive discussions with Build America Mutual (BAM) and Assured Guarantee (AGM) and we are confident In our ability to secure bond Insurance for at least a portion of the City's POBs. The value of bond insurance today is approximately 10 bps in tighter spreads. However, each insurer has a unique view and appetite for POBs. BAM will be our primary focus based on their willingness to insure 'unsecured' POBs for the cities of Chula Vista (AA) and Orange (AA). However, BAM will only insure cities which they believe have zero risk of default and have a minimum rating of 'AA,' based on their internal credit metrics (note: RAM's rating assessment does not always agree with S&P's). Two very important factors in BAM's decision to insure POBs are 1) the size of the City (i.e. general fund size, pnpulatinn, AV, etr.) and ➢) strength of the issuer's pension funding/management pnliries. Thry hclirvc credits for larger cities, such as Santa Ana, are more favorable to insure because of the broader tax base and access to resources/liquidity. BAM is also very focused on the nuances of each issuer's pension policies. Willi the help of UFI, the Cily lids developed a thoughtful pension rnandgemenl policy Owl. includes additional discretionary payments to CalPFRS from excess reserves and a 'tax-exempt exchange' for additional savings. We will reach out to AGM as well, however, they have not insured an unsecured POB since 2017 haled on a commitment from their CEO to not insure "unsecured" municipal bonds. All California POBs insured by AGM have included a pledged of pension lax revenues. Private Placements recommended for smaller financings with a short final maturity where the All -in - TIC is lower than a Public Offering. Ramirez & Co. would recommend a private placement for a financing with a par amount under $5 million and a final maturity under 15 years. The pros to utilizing a private placement are lower issuance cost and lower due diligence requirements. The cons are restrictive credit and structuring requirements (note: very few banks provide loans for POBs). Scale. Below is our indicative scale forthe City's upcoming POBs as of March 5, 2021, based on comparable transactions including recent POBs issued by the cities of Orange, Chula Vista and Downey. City Council 12 23 — 250 5/18/2021