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rating on the 2011 Bonds, As noted earlier, this upgrade will produce a meaningful increase in savings for the Agency and another feather in flee City's cap after the success of last summer's Water Revenue refinancing. Financing Considerations. Following the approach outlined above, we believe the Agency will offer a more compelling package for rating analysts and investors relative to the 2011 Bonds. The following summarizes our rationale: 4i1hy the Elimination of the Housing Set -Aside Matters — The Dissolution Act eliminated the Housing Set -Aside requirement and the Department of Finance has been dogged in enforcing this part of the statute. We reviewed a number of the DOF's ROP's letters relating to the Agency and all note the denial of costs related to the Settlement Agreements (and litigation expenses, unfortunately). We understand that the parties to the Agency's Settlement Agreements sued the Agency and the DOF on this point and that the State has prevailed in two of the three suits. While we are not sure of the final disposition of the third lawsuit, we think the planti£f s clahn would likely become characterized as another "enforceable obligation ", not "Rousing Set - Aside ". All this matters because the "Tax Revenues" securing the 2011 Bonds and any parity bonds are net of amounts "which are required to be deposited into the Low and Moderate Income Housing Fund... pursuant to the Redevelopment Law and the Settlement Agreements ". In Santa Ana's case, the housing deposits exceeded the typical 20% requirement meaning that the increase in "Tax Revenues" for the bond pledge will be significant. Tax Increment Caps — In 2011, the finance team spent a good deal of tune on plan limitation issues and cumulative tax increment caps. Unfortunately, the Dissolution Act did not explicitly eliminate this feature of the Redevelopment Code and we have proposed language to the DOF to fix this problem. Until the DOF decides to act, this disclosure issue remains. However with the reduction in farads allocated to the Agency, we believe an argument exists that the impact of these limits on Inter - City, North harbor Boulevard, South Main and Bristol Corridor are effectively moot. Superior Coverage — Under our proposed approach, the 2011/2015 Bonds will demonstrate 69,450 significant debt service coverage as summarized in 750 the table to the right: 8,736 2,081 Finding of Completion, Incomplete — We note from 57,892 our review of the DOF website that the Agency has VAT 11 noneonon, not yet received its Finding of Completion. While 7.53x this milestone is helpful in simplifying the 13.266 disclosure process —and S &P and some investor 436x (I) Dffin dafvad rmm Orioles report oC2014t13 assessed vntues multiplied by l% analysts will ask about this topic —we have found (2) estimate acing ln,1.1 eel.luted from ToW 6 efthe Awcey's 2013 Continuing Dedosure 2ep.n. that a Cleat' explanation can help with this matter. (3) Estimate per footnote (2). Moybesubordfnuted. The Richmond Successor Agency, for example, had (4)C ... buted 2011 [leads and totunaed 2013 lrefimding Bonds debt service, not yet obtained its Finding of Completion when we ( 1)@ mbined2011Bonds end estimated2015RefatuurgD ondsmuxunmmnnnnanl debt ervice. brought their bonds to market earlier this year. We talked with Richmond staff who explained the status of their work and that the DOF had been approving the relevant items on the RODS. This explanation satisfied the credit analysts. In Santa Ana's case, we understand that the hold -up relates to moneys gathered pursuant to the Settlement Agreements. As this litigation moves to resolution, this matter will also likely move toward resolution. In any case, the contested funds do not represent security for the Bonds. We do not see this as a credit issue. Why We Think Santa Ana Redevelopment is a Great Credit. As noted above, we believe n parity issue with the 2011 Bonds should achieve an "AA" 'A" -AV' "AA-" category rating —the highest realistic rating for a 4 89 xIf' 16297 successor agency credit. We say this with 46.945 53373 s10,061 confidence based on our work with other top tier E-1 19.5% 90. 40.0^4 redevelopment credits and noting the Merged 739x4366 2,24x 2, 77x Project's significant size, moderate base year value t. -, -4 17,3 1. 169% 16 -6 and tax payer diversity. Further, the Santa Ana 3 story is a credit positive - -a central Orange County a_rr� 67° ° hull), steady growth In eCO170tnrC health and a 9UigC ¢, Comnu.r LA516% � 3 rndtutml: 327 n Como real 389% htdu vat 274. Conuv n.al: l_'.ft',b lmiusnal. RIP% of property values back to peak re- Recesston 1 1 y p p `' ad -b ft �ilentuil 15 7% Rua &dental II I% Rv kfentmk 44.1% levels with 2014 /15 reported values. The adjacent senroa: urbfas, omemt%Wouni, CITY OF SANTA ANA 3 -143 Pn [le 6