1. Ashland School District No. 5 Presentation on General Obligation Bonds October 5, 2005

2. 2  Debt service is repaid by a levy on all taxable property within issuer’s boundaries. Levy is “unlimited as to rate or amount.”  Must be voter approved within “double majority” rules unless approved at general election.  Proceeds can only be used for “capital construction and improvements” under Measure 50. General Obligation Bonds in Oregon

3. 3 General Obligation bonds are subject to statutory debt limits. Statutory Debt Limits (as % of Real Market Value) K-12 School Districts7.95% Note: Only “true” general obligation debt counts towards this legal debt capacity. Full faith and credit obligations and pension obligations do not count. Legal Debt Capacity Ashland SD debt capacity: 2004-05 RMV$3,527,773,230 x 7.95% =$280,457,972 Less: Outstanding debt as of June 1, 2007 ( 0) $280,457,972

4. 4 Investment Banker and Bond Counsel are key team members.  Investment Banker  Works with Issuer to determine bond size and structure.  Assists Issuer in evaluating tax rate impacts.  Provides guidance on timing of sale.  Assists District in drafting disclosure documentation, procuring bond ratings and obtaining credit enhancement.  Plans and executes the sale and coordinates closing of the Bonds  Underwrites bonds and provides proceeds to District.  Bond Counsel  Provides guidance on eligible projects under Oregon law  Assists Issuer in preparing ballot title  Prepares legal documentation authorizing sale of bonds  Provides guidance on federal tax law ramifications  Provides investors with required validity and tax opinions Who is the Financing Team?

5. 5  Measure 50 limits the scope of allowable uses of proceeds for G.O. bonds to “capital construction and improvements.”  Capital construction and capital improvements do not include “maintenance and repairs, the need for which could reasonably be anticipated or supplies and equipment that are not intrinsic to the structure.”  60-day use of proceeds resolution and “statute of limitations.” Use of Proceeds

6. 6 Capital Construction and Improvements? Maintenance & Repairs Supplies & Equipment FurnishingsOther Anticipated Street & Highway Construction, Overlay & Reconstruction Unanticipated IntrinsicExtrinsic Public Safety Vehicles with 5 year Useful Life For acquisition, construction, remodeling, or because of damage to structure Not for acquisition, construction, etc. IneligibleEligible IneligibleIneligible Yes NoIneligible Deducted as expense under IRS code, doesn’t add to value or prolong life. Required by damage, not expected when constructed, prolongs life Necessary to function, fixture Determining Project Eligibility

7. 7 Step 1:Perform needs analysis and determine project costs Step 2:Add issuance costs: assume 1.00%-2.00% of issue amount, depending on size Step 3:Consider whether to adjust for anticipated interest earnings Step 4:Analyze tax impact and repayment structures Step 5:“Iterate” to produce desirable tax rate Sizing Your Issue

8. 8  The size and structure of your issue can have dramatic implications for the resulting levy rate. Length of Issue — What maturity do you want?  Useful life of items being financed  Trade-off between annual and overall cost  Specific community priorities and relationship with other outstanding debt Levy Impact  Specific repayment structure could include level debt, level levy, level principal or some combination thereof.  Focus on single issue or combined debt burden?  Time of year of bond sale may effect levy Debt Sizing and Repayments

9. 9 State and Local Government Securities (SLGS): U.S. Treasury Proxy Market Conditions Source: Bureau of the Public Debt

10. 10 Historic G.O. Bond Buyer Index (20-Yr Maturity) Source: The Bond Buyer. August 25, 2005. Market Conditions

11. 11 Sample Financing Scenarios Scenario 1: $28MM; “Current” level levy rate over 10 years. Scenario 2: $50MM; “Current” level levy rate over 20 years. Scenario 3: $30.25MM; $1.50 level levy rate over 10 years. Scenario 4: $54MM; $1.50 level levy rate over 20 years.

12. 12

13. 13 Levy Rate Projections – Scenario 1 ($28MM over 10 Years)

14. 14 Three main components must appear in a ballot title:  Projects to be financed  Maximum amount to borrow  Maximum maturity Drafting the Ballot Title – GO Bonds

15. 15  Maximizing flexibility vs. specifying projects  Separating projects in multiple ballot titles?  Estimating levy impact — yes or no?  Refinancing of existing obligations — needs to be in ballot if that is under consideration  Using the explanatory statement in the voters’ pamphlet  500 words  file at same time as ballot title  Review with Bond Counsel before finalizing. Ongoing Ballot Title Issues

16. 16  State and Federal laws require that interest earnings be used for either: 1)projects allowed under ballot title, or 2)debt service payments (i.e, reduce the tax levy with remaining proceeds).  Maximizing earnings on proceeds is critical.  Changes to (or creating your own) investment policy need to be planned ahead of time.  Construction funds are subject to federal arbitrage/rebate rules. Investment of Proceeds

17. 17 Assuming proceeds of bonds will be used for public purpose, interest paid to investors will be exempt from federal (and state) taxation. There are certain tax rules and regulations that should be discussed in detail with bond counsel. Topics to discuss include:  Timing on expenditure of proceeds – typically 3 years  Investment regulations – limitations on your ability to earn interest on proceeds (“arbitrage”)  Reimbursement regulations — limitations on ability to reimburse issuer for prior expenditures related to bond projects  Private use limitations Federal Tax Exemption

18. 18  Requires issuers of municipal securities and certain “obligated persons” to enter into a written agreement for the benefit of the holders of the securities to provide:  Annual Financial Information  Notice of certain Material Events  Notice of any failure to provide required Annual Financial Information Continuing Disclosure Compliance Securities and Exchange Commission Rule 15c2-12

19. 19  Check with your County elections office to verify filing deadlines.  All elections are by mail.  There is a validation requirement for tax issues on all 2006 ballots except the November general election. (1) Pro and con statements. Deadline for voter’s pamphlet explanatory statement is the same as filing deadline. (2) Ballots mailed 14 to 18 days prior to election 2006 Election Schedule

20. 20 What Are Your Odds? Fifty-nine percent of GO Bonds from March 2000 to May 2005 have been approved. Total: 11 March 2000-2005 Total: 40 May 2000-2005 Total: 7 September 2000-2005 Total: 52 November 2000-2005

21. 21 Considerations Bond issues take 2-3 months to prepare and sell. Project timing and construction cash flow Tax levy timing and debt repayment Budgetary impacts Conclusions? Carefully consider impact of election date on ability to cash flow both project needs and debt service. How do your choices impact tax levy and perceived cost to taxpayer? Election Dates Can Affect Financing and Project Timing

22. 22 Seattle-Northwest Securities Corporation For Additional Information Dave Taylor503-275-8303 DTaylor@snwsc.com Carol Samuels503-275-8301 CSamuels@snwsc.com Javier Fernandez503-275-8309 JFernandez@snwsc.com