Finance Department Presentation to the City of Houston

Finance Department Presentation to the City of Houston Budget and Fiscal Affairs Committee Upcoming Financial Transactions March 1 st 2016 Presented By: Jennifer Olenick, CFA - Deputy Director 1

Agenda • Combined Utility System – Pricing Update - First Lien Revenue and Refunding Bonds, Series 2016 B – Variable Rate Demand Bonds, Series 2004 B-2, B-4 & B-5 • General Obligation – Commercial Paper Program Series E-2 – Public Improvement Refunding Bonds, Series 2016 2

Pricing Update CUS Series 2016 B System: Total Par Amount: Refunding Par Amount: Use: Average Life (Years): Present Value Savings: Percentage Savings: All-In True Interest Cost (%): Anticipated Closing Date: Combined Utility System $955. 105 Million $739. 625 Million Capital Improvement Program 16. 969 $116, 762, 674 15. 787% 3. 252% March 8, 2016 (1) Wells Fargo, serving as the lead underwriter, supported the transaction by purchasing an estimated $131 million in unsold bonds. Note: This presentation constitutes the written recommendation of the Finance Working Group. 3

CUS Variable Rate Exposure Summary Liquidity Type Commercial Paper Variable Rate Demand Bonds SIFMA Index Floater Series B-1 B-2 B-3 B-4 B-5 B-6 Subtotal 2004 B-2 2004 B-3 2004 B-4 2004 B-5 2004 B-6 Subtotal 2012 A 2012 B 2012 C Subtotal Size ($ millions) Bank / Dealer Expiration 100. 00 Bank of America 1/8/2019 (3) 75. 00 Morgan Stanley 3/13/2022 75. 00 Bank of Tokyo-Mitsubishi 1/16/2018 100. 00 State Street 7/15/2016 (1) 250. 00 RBC 10/30/2018 100. 00 US Bank 7/15/2016 700. 00 100. 00 Bank of New York Mellon 4/4/2016 75. 00 Sumitomo 4/3/2018 75. 00 Bank of Tokyo 4/4/2016 100. 00 Wells Fargo 4/4/2016 78. 33 Sumitomo 4/3/2018 428. 33 125. 00 Bank of America 5/1/2020 100. 00 Wells Fargo Securities 6/1/2017 249. 08 RBC 8/1/2016 (2) $6, 156. 49 474. 08 Total Debt Outstanding (2) Total Commercial Paper Outstanding $120. 00 Total Unhedged Variable Rate Debt (2) 1. 95% Requires Bank Facility Y N Y Y Y Y N N N (1) The RBC facility B-5 is a Forward Purchase Agreement. (2) As of December 31, 2015 Monthly Financial Report. (3) The Morgan Stanley B-2 is an Extendible Commercial Paper product. Note: This presentation constitutes the written recommendation of the Finance Working Group. 4

CUS Variable Rate Demand Bonds, Series 2004 B-2, B-4 & B-5 • The 2004 B-2, B-4, B-5 bonds are three of five (5) tranches of tax-exempt variable rate demand bonds supported by bank letters of credit. • The facilities are set to expire on April 4, 2016. • In February, the City issued a request for proposals from qualified financial institutions to provide a credit facility. • The Finance Working Group recommends we explore renewal or replacement of the existing letter of credit as they come due. • An RCA can be expected to be presented to City Council March 23, 2016. Note: This presentation constitutes the written recommendation of the Finance Working Group. 5

GO Variable Rate Exposure Summary Liquidity Type Commercial Paper Series Size ($ millions) Bank Expiration Requires Bank Facility E-1 100 Citigroup 7/13/18 Y E-2 100 Wells Fargo 4/28/2016 Y G-1 75 Mizuho 2/19/2018 Y G-2 125 Sumitomo 11/28/2017 Y H-2 100 Mizuho 10/13/2017 Y J 125 State Street 5/20/2017 Y K-1 150 RBC 2/2/2022 N K-2 100 Citibank 12/27/2018 Y Total 875 Total Debt Outstanding (1) $3, 225, 240 Total Commercial Paper Outstanding (1) $166, 900 Total Current Variable Rate Exposure 5. 17% (1) As of December 31, 2015 Monthly Financial Report. 6

GO Commercial Paper Program Series E-2 • Commercial paper (CP) has provided an expedient, cost –effective method of accessing cash and providing interim financing. • The current liquidity facility for the General Obligation Commercial Paper Program, Series E-2 is set to expire on April 28, 2016. • The Series E-2 supports the City’s capital improvement program. • The Finance Working Group recommends renewing with the current provider, Wells Fargo Note: This presentation constitutes the written recommendation of the Finance Working Group. 7

Annual Financing Plan Size ($ Millions) 210 Actual or Anticipated Closing July 2, 2015 PV Savings ($ Millions) N/A True Interest Cost (%) 0. 29 119 July 9, 2015 10. 12 3. 71 64 January 20, 2016 N/A 1. 40 2016 B 955 March 8, 2016 116. 76 3. 26 GO Subtotal PIB 2015 $329 800(1) April 2016 $126. 88 63(1) 2. 75 --- HAS 2016 TBD June 2016 --- FY 2016 FY 2015 FY 2014 Subtotal Total $800 $1, 129 $1, 353 $2, 390 $63. 00 $189. 88 $44. 13 $209. 23 Department Series GO CUS TRANS 2015 D & 2007 A Exchange Bonds 2016 A CUS (1) Estimated. Preliminary, subject to change. Note: This presentation constitutes the written recommendation of the Finance Working Group. 8

Public Improvement Refunding Bond Series 2016 • Commercial paper (CP) has provided an expedient, cost– effective method of accessing cash and providing interim financing. The CP notes are later refinanced into fixed rate bonds that match the useful life of the project or equipment being financed. • This transaction represents the normal refunding of these commercial paper notes. • Additionally we will be refinancing some currently outstanding bonds at lower current market interest rates which result in present value savings currently estimated at $60 -65 Million. Note: This presentation constitutes the written recommendation of the Finance Working Group. 9

Public Improvement Refunding Bond Series 2016 • Below is a breakdown of proposed components: Component being Refunded Refund CP Series E Total Advance Refundings Up To Use $110, 000 Equipment $110, 000 $690, 000 Total $690, 000 Grand Total $800, 000 • Additional bonds produce savings, but do not meet the City’s criteria as set out in the Financial Policies. • As standard course of business, in conjunction with this transaction, the FWG will review possibilities to refinance existing debt if prudent opportunities to achieve present value savings exists. • An RCA is expected to be brought before Council March 2, 2016. Note: This presentation constitutes the written recommendation of the Finance Working Group. 10

Public Improvement Refunding Bond Series 2016 System: New Money or Refunding? : Par Amount: Use of the Debt Proceeds : Revenue Source Securing Debt : Estimated Weighted Average Life of the Debt Being : Refunded (other than Commercial Paper) Estimated Change to the Weighted Average Life of : Debt Being Refunded (other than Commercial Paper) Estimated Net Present Value Savings : Estimated Percentage Savings : Estimated True Interest Cost (%) : Anticipated Council Agenda Date : Anticipated Date of Pricing : Anticipated Date Closing : General Obligation Both $800 Million (maximum) Capital Improvement Program Ad Valorem Property Taxes 7. 7 Years 0. 7 Years $63 Million 10. 7% 2. 2% March 2, 2016 March 22, 2016 April 13, 2016 All figures are as of February 17, 2016 and are subject to market adjustments. Note: This presentation constitutes the written recommendation of the Finance Working Group. 11

Finance Department Questions? 12