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BACKGROUND The 2011 Bonds are being issued to refinance the LAVWMA 2001 Bonds. The purpose of the refinancing is to save money as a result of lower interest rates. The 2001 Bonds were originally issued in March 2001 in the principal amount of $142,385,000 and are currently outstanding in the principal amount of $124,740,000. The 2001 Bonds will be callable in whole on any date without a premium beginning August 1, 2011. DISCUSSION Results of Refinancing the 2001 Bonds The estimated result of refinancing the 2001 Bonds is nominal dollar savings' of $31.1 million over the twenty-year term of the 2011 Bonds and net present value savings' of $11.8 million. Estimated annual savings are approximately $1.6 million and Pleasanton's portion of the annual savings are estimated to be $525,000. Currently the City's portion of the 2001 Bonds' annual debt service is approximately $3.5 million; therefore, the proposed refunding would result in annual debt service savings of approximately 15%. The 2011 Bonds will mature in 2031, which is the final maturity of the 2001 Bonds. The following are the assumptions under which the 2001 Bonds are being refinanced: • Current tax-exempt Moody's "Aa2" interest rates (reflecting LAVWMA's current underlying rating) were used to determine the estimated savings from the refinancing. LAVWMA will also be requesting a rating from Standard & Poor's. In addition, third party insurance from Assured Guaranty will be requested. Purchase of insurance will be based on an underwriter's evaluation of the cost and benefit of the insurance at the time it prepares a bid to purchase the 2011 Bonds (i.e., insurance will be bidders option). • The 2001 Bonds' Reserve Fund of $9 million will be used to reduce the amount of 2011 refinancing bonds issued. • No new Reserve Fund is assumed in the 2011 Bond issue. Market conditions for essential service utility credits in the current market are such that investors are not seeing a credit benefit to a cash reserve fund. • Optional redemption is allowed beginning on August 1, 2021 with no premium. • Fixed costs of issuance for legal, disclosure, financial advisory, rating, and trustee services are estimated at approximately $200,000. • Underwriter's discount is estimated at 0.6% of the amount of Bonds issued. • Net present value and annual savings calculations take into account the fixed and variable costs of issuing the 2011 Bonds. 'Nominal dollar savings are the savings in current dollars unadjusted for inflation. Net present value savings are the discounted value of the nominal dollar savings today based on a discount rate of 4.06%. Page 2 of 5