City of Los Angeles 2017 Tax and Revenue Anticipation Notes - PowerPoint PPT Presentation

City of Los Angeles 2017 Tax and Revenue Anticipation Notes Investor Presentation June 9, 2017

Disclaimer The Investor Presentation you are about to view is provided as of June 9, 2017 for a proposed offering of the City of Los Angeles’ (the “Issuer”) 2017 Tax and Revenue Anticipation Notes (the “TRANs”) . If you are viewing this presentation after that date, events may have occurred that have a material adverse effect on the financial information presented. Neither the Underwriters mentioned in this presentation (the “Underwriters”), Municipal Advisor mentioned in this presentation (the “Municipal Advisor”), nor the Issuer have undertaken any obligation to update this presentation. The information presented is not warranted as to completeness or accuracy and is subject to change without notice. You agree not to duplicate, copy, download, screen capture, electronically store, or record this presentation, nor to produce, publish or distribute this presentation in any form whatsoever. This Investor Presentation is provided for your information and convenience only. Any investment decisions regarding the TRANs should be made only after a careful review of the complete Preliminary Official Statement. This Investor Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial instrument or to adopt any investment strategy. Any offer or solicitation with respect to the TRANs will be made by means of a Preliminary Official Statement or Official Statement that will describe the actual terms of the TRANs. In no event shall the Issuer, Municipal Advisors or the Underwriters be liable for any use by any party of, any decision made or action taken by any party in reliance on, any inaccuracies or errors in, or any omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction mentioned herein. These materials have not been prepared with a view toward public disclosure under applicable securities laws or otherwise, and may not be reproduced, disseminated, quoted or referred to, in whole or in part. These materials may not reflect information known to other professionals in other business areas of the Underwriters and their affiliates. The Underwriters make no representations as to the legal, tax, or accounting treatment of any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters. Nothing in these materials constitutes a commitment by the Underwriters or any of their affiliates to enter into any transaction. Past performance is not indicative of future returns, which will vary. Transactions involving the TRANs may not be suitable for all investors. You should consult with your own advisors as to the suitability of such securities or other financial instruments for your particular circumstances. Additional information is available upon request. Clients should contact their salesperson at, and execute transactions through, the Underwriters or their affiliated entities qualified in their home jurisdiction unless governing law permits otherwise. Neither the Issuer, Municipal Advisors, Underwriters or their affiliates provide tax advice. Any statements contained herein as to tax matters were neither written nor intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. 1

Transaction Summary Par Size $1.46 billion* Moody’s: MIG1 Ratings S&P: SP-1+ Proceeds of the Notes will be used to provide effective cash flow management of the City’s General Fund for Fiscal Year 2017- 18 and to prepay the City’s Fiscal Year 2017 -18 annual Use of Proceeds contributions to the Los Angeles Fire and Police Pension Plan (LAFPP) and the Los Angeles City Employees’ Retirement System (LACERS) General obligations of the City payable from Unrestricted Moneys including taxes, income, Security revenue, cash receipts and other moneys received for the General Fund during Fiscal Year 2017-18 Tax Status Federally tax-exempt; California state tax-exempt Amortization One or more maturities with final maturity date no later than June 28, 2018* Pricing Date Week of June 19, 2017* Closing Date July 11, 2017* BofA Merrill Lynch (Book-Running Senior Manager) Siebert Cisneros Shank & Co., LLC (Co-Senior Manager) Underwriters Jefferies (Co-Manager) William Blair (Co-Manager) ____________________ *Preliminary; subject to change 2

Economic Highlights City of Los Angeles Unemployment Rate • Unemployment rate continues to decline in Los 12.1% 13.0% Unemployment Rate 10.9% Angeles 11.0% 8.7% 9.0% • Wages and private employment continue to rise 7.0% 7.0% 5.6% • Significant employment gains in high-wage jobs 5.0% 2012 2013 2014 2015 2016 (e.g., higher education and information sectors) Source: California Employment Development Department City of Los Angeles Quarterly Taxable Sales $11,500 Taxable Sales in $ Millions • Continued job growth and wage gains have $11,000 $10,500 increased personal income for residents and $10,000 boosted taxable sales $9,500 $9,000 • Q1 2016 saw an improvement of 2.2% over the $8,500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 same period in 2015 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 Source: California State Board of Equalization City of Los Angeles Assessed Valuation (Net Total Revenue-Producing Valuations ) Assessed Value (in billions) $600 8.0% Percentage Chage $500 6.0% • Property values continue to rise in Los Angeles $400 4.0% • Fueled by strong homebuyer demand $300 2.0% 2012 2013 2014 2015 2016 Assessed Value YOY Change Source: County of Los Angeles, Office of the Assessor, Annual Reports 3

Fiscal Year 2016-17 Budget Highlights • Strong reserve balances  Began Fiscal Year 2016-17 with Reserve Fund of 5.99% and total reserves of 7.94%  After addressing unanticipated liability expenditures and other shortfalls, Reserve Fund continues to be strong, estimated in the Adopted Budget to be at 6.70% at year-end  Including the Budget Stabilization Fund, total reserves are estimated at 8.40% at year-end • Managed budget challenges through Financial Status Reports  At mid-year, budget shortfall projected at $57 million  At year-end, managed budget shortfalls by identifying surpluses within budgeted funds and additional revenue  Revenues slightly trail revised budget; any shortfall to be addressed primarily from reversions  Reserve Fund was used to pay unexpected liability claims o City considering issuance of Judgment Obligation Bonds o Bonds currently in validation process 4

Fiscal Year 2017-18 Adopted Budget • Budget projects meeting the City’s major policy targets  Appropriated 1.28% of General Fund to capital Budget ($ Millions) improvements, exceeding target of at least 1% Adopted Adopted Percent  Reserve Fund at 5.12% of General Fund revenues, above Budget Component 2016-17 2017-18 Change the 5% policy level  General Fund $ 5,576.4 $ 5,826.5 4.5% Nominal deposits to the Budget Stabilization Fund, but $75 million of growth in economically sensitive tax Special Funds $ 3,200.6 $ 3,465.6 8.3% revenues are budgeted for capital improvements Total $ 8,777.0 $ 9,292.1 5.9%  Applied all one-time revenues ($65 million) for one-time expenditures ($108 million) B UDGET R ESERVES (Reserve Fund, Budget Stabilization Fund, and Unappropriated Balance Reserves) $600.0 12.00% 10.47% 9.10% $500.0 10.00% 8.57% 7.94% 7.09% 6.83% $400.0 8.00% Millions $300.0 6.00% 4.52% 3.49% 4.23% 3.64% $200.0 4.00% 2.00% $100.0 $0.0 0.00% 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (Adopted) Emergency Reserve Contingency Reserve Budget Stabilization Fund UB Reserves Total Percentage of General Fund *Actuals as of July 1 st for each year except 2017-18 5 Source: City of Los Angeles, Office of the City Administrative Officer

General Fund Revenues G ENERAL F UND R EVENUE (2001-2016 Actual, 2017 Estimated, 2018 Adopted Budget, 2019-2022 Projected) 7,000.0 Other Revenues (-6.3%) Parking Users' Tax (2.6%) Documentary Transfer Tax (3.5%) Transient Occupancy Tax (6.9%) 6,000.0 Sales Tax (1.9%) Business Tax (0.4%) Utility Users' Tax (4.7%) License, Permit, Fees, and Fines (16.5%) 5,000.0 Property Tax (includes VLF) (2.2%) Note: % indicates change from Fiscal Year 2016-17 to Fiscal Year 2017-18 4,000.0 $ Millions 3,000.0 2,000.0 1,000.0 0.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Fiscal Year • “Other Revenues” include power revenue transfer, parking fines, Reserve Fund transfer, ex-CRA tax increment, franchise income, Special Parking Revenue Fund transfer, interest, grants, tobacco settlement, Telecommunications Development Account transfer, and residential development tax. Source: City of Los Angeles, Office of the City Administrative Officer 6