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A. Fee Proposal lnehtde your not -ta- exceed aranagetnent fee, average takedown and detaded oat- of- pockei expenses far fronds at the following tar exempt levels: a)$25- 30million. Cost of underwriting. Ensuring the lowest cost of borrowing is a shared goal of Stifel and the Agency. We believe that Stifel's track record in the tax allocation space, consistent attention to the Agency and the City as well as our ability to provide superior execution in today's marketplace represents a much greater factor in lowering borrowing cost than the underwriting fee. As shown to the right, on a typical financing, the underwriter's tee makes up less than I % of the total interest cost. The borrowing cost is a function of the market, issuer credit and the execution delivered by the Underwriter. An aggressive and appropriate marketing approach, coupled with comprehensive coverage of tax increment investors that Stifel stands ready to mobilize, will have a larger impact on the final borrowing cost than the underwriting fee. To demonstrate this, the table to the right illustrates the incremental impact of the underwriting fee on a generic "AA" general obligation credit. in this case, the borrowing cost increases less than 0.01 %, or a basis point, for every additional dollar included in the underwriter's fee on a per bond basis. We highlight this relationship to make the point that a few dollars more in sales compensation adds minimally to cost and can more than cover that cost if it provides better sales execution. Essentially, if the Agency can achieve even two basis points of better pricing with a dollar higher sales compensation, then that approach would make economic sense to fallow. Stifel's Proposed Fee. The tables on the following page provide our proposed underwriter's discount, assuming a sole managed financing totaling $25.6 million completed by the middle of 2015. Our proposed fee would represent an average takedown of $2.50 /$1,000 on the bonds, plus expenses and an allowance for management. $1 3.79% $2 3.79% $3 3.50% $4 3.81% $5 3.81% $6 3.82% $7 3.83% $8 3.93% $9 3.84% Please note- -the proposed management fee is currently $12,500. This $10 385% acknowledges the time required to direct an aggressive pre - marketing program to our sales staff, conduct proper due diligence on a complex credit and meet the regulatory needs of our current market environment. Depending on the issues encountered in the Financing program, we may want to talk with the Agency and the Financial Advisor about this fee. Our estimate for underwriter's counsel assumes that this party reviews transaction documents but does not prepare the official statement. If that work is included, our sense is that underwriter's counsel costs would range from $25,000 to $35,000 depending on the issues uncovered in the due diligence process. As to the takedown, we have assumed an aggressive institutionally oriented pricing. As we approach Clio underwriting, if we believe that the participation of retail or professional retail buyers could enhance the marketing process and drive down the interest rate, then we may want to revisit the takedowns where those parties could be most active, probably in the first ten years of the amortization schedule. Clearly, any changes will be subject to review and approval of the Financial Advisor and the Agency. Finally, the identified fees do not include the costs associated with a continuing disclosure review. As for the recent Water Enterprise financing, we plan on working with the Financial Advisor and the Agency to ensure appropriate disclosure, noting that we will likely need to add the 2013/14 flings to the work performed last summer. While we believe these fees are competitive for the work involved, we do not want fees to become the determinant of the selection process and are willing to discuss fees further, as necessary. CITY OF SANTA ANA 3-180