1. MINNEAPOLIS | BOSTON | CHICAGO | LONDON | LOS ANGELES | NEW YORK | SAN FRANCISCO | ZURICH February 10, 2016 Brendan Watkins ASSOCIATE Tel: +1 503-275-8307 Email: brendan.p.watkins@pjc.om Key Credit Rating Metrics Tax Supervising and Conservation Commission Quarterly Meeting

2. Table of Contents I.Introduction – Credit Rating Background II.Economic & System Characteristics III.Management IV.Debt & Debt Provisions V.Financial Strength VI.Contact Information

3. Section I Credit Rating Background

4. PIPER JAFFRAY | 4 Credit Rating Background Publicly sold bonds often caring a credit rating, but what is a credit rating and why do I need one? A credit rating is one rating agency’s opinion on the debtor’s ability to pay back its debt. While having a rating is not a requirement, many investors expect or require a minimum credit rating before buying bonds. Typically, investors are willing to pay more (AKA offer lower interest rates) for higher rated bonds. Who are the rating agencies? There are three main rating agencies operating today: Moody’s, Standard & Poor’s (S&P), and Fitch. What are the ratings? The ratings generally breakdown between two categories: Investment grade and Speculative grade. Investment grade is reserved for bonds rated between Baa/BBB and higher, while Speculative grade is for bonds rated lower.

5. PIPER JAFFRAY | 5 Credit Rating Background Investment GradeSpeculative Grade Aaa / AAAPrime Ba1 / BB+ Ba2 / BB Ba3 / BB- Speculative Aa1 / AA+ Aa2 / AA Aa3 / AA- High B1/ B+ B2 / B B3 / B- Highly Speculative A1 / A+ A2 / A A3 / A- Upper Medium Caa1 / CCC+ Caa2 / CCC Caa3 / CCC- Extremely Speculative Baa1 / BBB+ Baa2 / BBB Baa3 / BBB- Lower Medium Ca / CC Ca / C C / D Default imminent

6. PIPER JAFFRAY | 6 Credit Rating Background Every type of bond has its own ratings criteria! Here is an example of the breakdown between two ratings scorecards used by a rating agency: Tax Secured BondsRevenue Secured Bonds Local Economy30%System Characteristics30% Management20%Management20% Debt20%Debt Provisions10% Financial Strength30%Financial Strength40%

7. Section II Economic & System Characteristics

8. PIPER JAFFRAY | 8 Economic and System Characteristics Tax Secured BondsRevenue Secured Bonds Median Family Income10%Median Family Income12.5% Real Market Value10%Asset Condition10% RMV per Capita10%System Size7.5% Rating Breakdown (MFI as % of U.S. Median) Aaan > 150% Aa150% > n > 90% A90% > n > 75% Baa75% > n > 50% < Ban < 50%

9. PIPER JAFFRAY | 9 Economic and System Characteristics Tax Secured BondsRevenue Secured Bonds Median Family Income10%Median Family Income12.5% Real Market Value10%Asset Condition10% RMV per Capita10%System Size7.5% Rating Breakdown Aaan > $12B Aa$12B > n > $1.4B A$1.4B > n > $240M Baa$240M > n > $120M < Ba$120M > n

10. PIPER JAFFRAY | 10 Economic and System Characteristics Tax Secured BondsRevenue Secured Bonds Median Family Income10%Median Family Income12.5% Real Market Value10%Asset Condition10% RMV per Capita10%System Size7.5% Rating Breakdown Aaan > $150,000 Aa$150,000 > n > $65,000 A$65,000 > n > $35,000 Baa$35,000 > n > $20,000 < Ba$20,000 > n

11. PIPER JAFFRAY | 11 Economic and System Characteristics Tax Secured BondsRevenue Secured Bonds Median Family Income10%Median Family Income12.5% Real Market Value10%Asset Condition10% RMV per Capita10%System Size7.5% Rating Breakdown (Net Fixed Assets / D&A Expense) Aaan > 75 years Aa75 years > n > 25 years A25 years > n > 12 years Baa12 years > n > 9 years < Ba9 years > n

12. PIPER JAFFRAY | 12 Economic and System Characteristics Tax Secured BondsRevenue Secured Bonds Median Family Income10%Median Family Income12.5% Real Market Value10%Asset Condition10% RMV per Capita10%System Size7.5% Rating Breakdown (O&M Expense) AaaWater/Sewer > $65M Stormwater > $30M Aa$65M > Water/Sewer > $30M $30M > Stormwater > $15M A$30M > Water/Sewer > $10M $15M > Stormwater > $8M Baa$10M > Water/Sewer > $3M $8M > Stormwater > $2M < Ba$3M > Water/Sewer $2M > Stormwater

13. Section II Management

14. PIPER JAFFRAY | 14 Management Tax Secured BondsRevenue Secured Bonds Institutional Framework10%Billing rate management10% Operating History10%Compliance and Capital Planning 10% Rating Breakdown (Operating Revenues / Operating Expenses) Subjective assessment of legal ability to match Resources to Expenditures

15. PIPER JAFFRAY | 15 Management Tax Secured BondsRevenue Secured Bonds Institutional Framework10%Billing rate management10% Operating History10%Compliance and Capital Planning 10% Rating Breakdown (Operating Revenues / Operating Expenses) Aaan > 1.05x Aa1.05x > n > 1.02x A1.02x > n > 0.98x Baa0.98x > n > 0.95x < Ba0.95x > n > 0.92x

16. PIPER JAFFRAY | 16 Management Tax Secured BondsRevenue Secured Bonds Institutional Framework10%Billing rate management10% Operating History10%Compliance and Capital Planning 10% Rating Breakdown (Operating Revenues / Operating Expenses) Subjective assessment of rate setting record (political, practical, or regulatory limits on rate increases)

17. PIPER JAFFRAY | 17 Management Tax Secured BondsRevenue Secured Bonds Institutional Framework10%Billing rate management10% Operating History10%Compliance and Capital Planning 10% Rating Breakdown (Operating Revenues / Operating Expenses) Subjective assessment of compliance history (i.e. continuing disclosure) and manageable Capital Improvement Plan (10 to 5 years is ideal)

18. Section IV Debt and Provisions

19. PIPER JAFFRAY | 19 Debt and Provisions Tax Secured BondsRevenue Secured Bonds Debt to RMV5%Rate Covenant5% Debt to General Fund Rev.5%Debt Service Reserve Req. 5% Pension Liability to RMV5% Pension Liability to Rev.5% Rating Breakdown Aaan < 0.75% Aa0.75% < n < 1.75% A1.75% < n < 4.00% Baa4.00% < n < 10.00% < Ba10.00% < n

20. PIPER JAFFRAY | 20 Debt and Provisions Tax Secured BondsRevenue Secured Bonds Debt to RMV5%Rate Covenant5% Debt to G.F. Revenues5%Debt Service Reserve Req. 5% Pension Liability to RMV5% Pension Liability to Rev.5% Rating Breakdown Aaan < 0.33x Aa0.33x < n < 0.67x A0.67x < n < 3.00x Baa3.00x < n < 5.00x < Ba5.00x < n

21. PIPER JAFFRAY | 21 Debt and Provisions Tax Secured BondsRevenue Secured Bonds Debt to RMV5%Rate Covenant5% Debt to G.F. Revenues5%Debt Service Reserve Req. 5% Pension Liability to RMV5% Pension Liability to Rev.5% Rating Breakdown (Net Pension Liability / RMV) Aaan < 0.9% Aa0.9% < n < 2.1% A2.1% < n < 4.8% Baa4.8% < n < 12.0% < Ba12.0% < n

22. PIPER JAFFRAY | 22 Debt and Provisions Tax Secured BondsRevenue Secured Bonds Debt to RMV5%Rate Covenant5% Debt to G.F. Revenues5%Debt Service Reserve Req. 5% Pension Liability to RMV5% Pension Liability to Rev.5% Rating Breakdown (Net Pension Liability / RMV) Aaan < 0.4x Aa0.4x < n < 0.8x A0.8x < n < 3.6x Baa3.6x < n < 6.0x < Ba6.0x < n

23. PIPER JAFFRAY | 23 Debt and Provisions Tax Secured BondsRevenue Secured Bonds Debt to RMV5%Rate Covenant5% Debt to G.F. Revenues5%Debt Service Reserve Req. 5% Pension Liability to RMV5% Pension Liability to Rev.5% Rating Breakdown (Net Revenues / Debt Service) Aaan > 1.30x Aa1.30x > n > 1.20x A1.20x > n > 1.10x Baa1.10x > n > 1.00x < Ba1.00x > n

24. PIPER JAFFRAY | 24 Debt and Provisions Tax Secured BondsRevenue Secured Bonds Debt to RMV5%Rate Covenant5% Debt to G.F. Revenues5%DSRF Requirement5% Pension Liability to RMV5% Pension Liability to Rev.5% Rating Breakdown (Debt Service Reserve Fund) AaaDSRF funded at Maximum Annual Debt Service (MADS) AaDSRF funded at less than “Tax Max” ADSRF funded at less than “Tax Max” or Springing DSRF BaaNo DSRF < BaNo DSRF

25. Section V Financial Strength

26. PIPER JAFFRAY | 26 Financial Strength Tax Secured BondsRevenue Secured Bonds Fund Balance10%Debt Service Coverage15% 5-Yr Fund Balance Trend5%Days Cash on Hand15% Cash Balance10%Debt to Operating Rev.10% 5-Yr Cash Balance Trend5% Rating Breakdown (as % of Revenues) Aaan > 30% School > 25% Aa30% > n > 15% 25% > School > 10% A15% > n > 5% 10% > School > 2.5% Baa5% > n > 0% 2.5% > School > 0% < Ba0% > n 0% > School

27. PIPER JAFFRAY | 27 Financial Strength Tax Secured BondsRevenue Secured Bonds Fund Balance10%Debt Service Coverage15% 5-Yr Fund Balance Trend5%Days Cash on Hand15% Cash Balance10%Debt to Operating Rev.10% 5-Yr Cash Balance Trend5% Rating Breakdown (as % of Revenues) Aaan > 25% School > 10% Aa25% > n > 10% 10% > School > 5% A10% > n > 5% 5% > School > 2.5% Baa5% > n > 0% 2.5% > School > 0% < Ba0% > n 0% > School

28. PIPER JAFFRAY | 28 Financial Strength Tax Secured BondsRevenue Secured Bonds Fund Balance10%Debt Service Coverage15% 5-Yr Fund Balance Trend5%Days Cash on Hand15% Cash Balance10%Debt to Operating Rev.10% 5-Yr Cash Balance Trend5% Rating Breakdown (Net Revenues / Debt Service) Aaan > 2.00x Aa2.00x > n > 1.70x A1.70x > n > 1.25x Baa1.25x > n > 1.00x < Ba1.00x > n

29. PIPER JAFFRAY | 29 Financial Strength Tax Secured BondsRevenue Secured Bonds Fund Balance10%Debt Service Coverage15% 5-Yr Fund Balance Trend5%Days Cash on Hand15% Cash Balance10%Debt to Operating Rev.10% 5-Yr Cash Balance Trend5% Rating Breakdown (Cash x 365 / O&M Expense) Aaan > 250 days Aa250 days > n > 150 days A150 days > n > 35 days Baa35 days > n > 15 days < Ba15 days > n

30. PIPER JAFFRAY | 30 Financial Strength Tax Secured BondsRevenue Secured Bonds Fund Balance10%Debt Service Coverage15% 5-Yr Fund Balance Trend5%Days Cash on Hand15% Cash Balance10%Debt to Operating Rev.10% 5-Yr Cash Balance Trend5% Rating Breakdown (Debt / Operating Revenues) Aaan < 2.00x Aa2.00x < n < 4.00x A4.00x < n < 7.00x Baa7.00x < n < 8.00x < Ba8.00x < n

31. Section VI Contact Information

32. PIPER JAFFRAY | 32 Carol Samuels, Managing Director 1300 SW 5 th Avenue, Suite 3650 Portland, OR 97201 503.275.8301 carol.e.samuels@pjc.com John Peterson, Vice President 1300 SW 5 th Avenue, Suite 3650 Portland, OR 97201 503.275.2865 john.d.peterson@pjc.com Jennifer Wilson, Associate 1300 SW 5 th Avenue, Suite 3650 Portland, OR 97201 503.275.8309 jennifer.l.wilson@pjc.com Lauren MacMillan, Vice President 1300 SW 5 th Avenue, Suite 3650 Portland, OR 97201 503.275.8302 lauren.m.macmillan@pjc.com Brendan Watkins, Associate 1300 SW 5 th Avenue, Suite 3650 Portland, OR 97201 503.275.8307 brendan.p.watkins@pjc.com Alex Bowers, Associate 1300 SW 5 th Avenue, Suite 3650 Portland, OR 97201 503.275.8304 alexander.j.bowers@pjc.com Contact Information

33. Piper Jaffray is providing the information contained herein for discussion purposes only in anticipation of being engaged to serve as underwriter or placement agent on a future transaction and not as a financial advisor or municipal advisor. In providing the information contained herein, Piper Jaffray is not recommending an action to you and the information provided herein is not intended to be and should not be construed as a "recommendation" or "advice" within the meaning of Section 15B of the Securities Exchange Act of 1934. Piper Jaffray is not acting as an advisor to you and does not owe a fiduciary duty pursuant to Section 15B of the Exchange Act or under any state law to you with respect to the information and material contained in this communication. As an underwriter or placement agent, Piper Jaffray's primary role is to purchase or arrange for the placement of securities with a view to distribution in an arm's-length commercial transaction, is acting for its own interests and has financial and other interests that differ from your interests. You should discuss any information and material contained in this communication with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material. The information contained herein may include hypothetical interest rates or interest rate savings for a potential refunding. Interest rates used herein take into consideration conditions in today's market and other factual information such as credit rating, geographic location and market sector. Interest rates described herein should not be viewed as rates that Piper Jaffray expects to achieve for you should we be selected to act as your underwriter or placement agent. Information about interest rates and terms for SLGs is based on current publically available information and treasury or agency rates for open-market escrows are based on current market interest rates for these types of credits and should not be seen as costs or rates that Piper Jaffray could achieve for you should we be selected to act as your underwriter or placement agent. More particularized information and analysis may be provided after you have engaged Piper Jaffray as an underwriter or placement agent or under certain other exceptions as describe in the Section 15B of the Exchange Act. Required Regulatory Disclosure