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A. Debt Service Savings The City has established a minimum savings threshold goal of 3%of the refunded bond debt service compared to the refunding bonds debt service unless there are other compelling reasons for defeasance. The present value savings will be net of all costs related to the refinancing. The decision to take savings on an upfront or deferred basis must be explicitly approved by the City Council. B. Restructuring The City will refund debt when in its best interest to do so. Refundings will include restructuring to meet unanticipated revenue expectations, achieve cost savings,mitigate irregular debt service payments,release reserve funds or remove unduly restrictive bond covenants. C. Term of Refunding Issues The City will refund bonds within the term of the originally issued debt. The City may also consider shortening the term of the originally issued debt to realize greater savings. The remaining useful life of the financed facility and the concept of inter-generational equity should guide this decision. D. Escrow Structuring The City shall utilize the least costly permitted securities available in structuring refunding escrows. The City will examine the viability of an economic versus legal defeasance on a net present value basis. Generally,the City should look to purchase State and Local Obligations (SLGS)from the federal treasury when structuring refunding escrows. The City may review the purchase of Open Market Securities to fund a refunding escrow. In such a case, a certificate from a third party agent, who is not a broker-dealer, is required stating that the securities were procured through an arms-length, competitive bid process (in the case of open market securities),that such securities were more cost effective than State and Local Government Obligations (SLGS), and that the price paid for the securities was reasonable within Federal guidelines. Under no circumstances shall an underwriter, agent or financial advisor sell escrow securities to the City from its own account. E. Arbitrage The City shall take all necessary steps to optimize refunding escrows and to avoid negative arbitrage. Any resulting positive arbitrage, on funds other than advance refunding escrows (which are not allowed to generate positive arbitrage earnings), will be rebated as necessary according to Federal guidelines. 7.10. PERFORMANCE STANDARDS The City of Pleasanton strives to maintain `investment grade' standings in the municipal market. Below is an Investment Grade Table of the three (3) major rating agencies. Investor's Standard&Poor's Fitch Investors Service Inc. Corporation Service,Inc. Definition Aaa AAA AAA Highest rating assigned. Very strong security.