Robert W. Baird & Co. Robert W. Baird & Co. CURRENT - PowerPoint PPT Presentation

Robert W. Baird & Co. Robert W. Baird & Co. CURRENT MUNICIPAL MARKET ENVIRONMENT AND CURRENT MUNICIPAL MARKET ENVIRONMENT AND PROPOSED REFUNDING OF PROPOSED REFUNDING OF THE SERIES 2012 BONDS THE SERIES 2012 BONDS Presented to: November 2017 Brian Brian K Kelso, lso, Managing Director Yoon-Sook Moon, oon-Sook Moon, Vice President 303 303.2 .270.6 .6337 dire direct 303.2 303 .270.6 .6338 dire direct bkelso@rwbaird.com ymoon@rwbaird.com

Table of Contents Section 1: Curren Current Mu Municipa cipal Market Enviro l Market Environmen ent Section 2: Bond Refu Bon Refundin ing Opportu g Opportunity ity Section 3: Outst Outstandin ing Gen g General Obligatio ral Obligation Debt Debt Service Service 2

Current Municipal Market Environment

Historical 15 Yr Maturity AAA Municipal Market Data (“MMD”) Index 15 Year MMD • The Municipal Market Data (“MMD”) (January 1, 2017 to Current ) Index is an industry benchmark 3.20% reflective of “AAA” rated general 15-Year Aaa MMD History Since 2007 obligation bonds nationally. As of 11/01/17 2.640% 3.00% Tax-Exempt interest rates have • Average 3.415% trended down during 2017. Minimum 1.800% 2.80% Maximum 5.740% 2.60% 6.00% 2.40% 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% Aaa GO 15 YR Average 4 Source: Thomson Municipal Market Monitor (TM3) as of November 1, 2017

Six Month Municipal Market Snapshot AAA Municipal Market Data (“MMD”) Index 5 Source: Thomson Municipal Market Monitor (TM3) as of November 2, 2017

Muni Fund Report Net Inflows/Outflows Fund flow data serves as a proxy for investor appetite One Year Snapshot for municipal bonds. $663 MM Date te IC ICI F I Fund F Flow (Oct, 2017) October 25, 2017 $663,000,000 October 18, 2017 $714,000,000 October 11, 2017 $355,000,000 201 2015 A Avg. 2016 A 201 Avg. 201 2017 Y YTD Avg.* $292,505,385 $522,923,077 $544,232,558 15.0 10 Year Historical Net Municipal Bond Flow of Funds ions llio 10.0 Bill $ B 5.0 $663 MM 0.0 (Oct, 2017) -5.0 -10.0 -15.0 -20.0 6 *Source: Investment Company Institute as of November 3, 2017

Municipal Bond Issuance Volume Refundings vs. New Money While refundings were the primary form of issuance in 2015 and 2016; refundings are down 71% year over year. Conversely, 49% of all issues year to date are new money. Refundings vs. New Money 7 Source: The Bond Buyer as of October 31, 2017

Key Economic Indicators Bloomberg Monthly Economic Survey Bloomberg Monthly Economic Survey polls Median R Me Rate Summary financial service economists/analysts on 4Q 1Q 2Q 3Q 4Q 1Q their projection for key economic data. 2017 2018 2018 2018 2018 2019 Interest Rates: 1 Fed Funds Lower 1.25% 1.25% 1.50% 1.75% 1.75% 2.00% US Treasury bonds/notes have risen from their August low with the 2-, 10- and 30- 1 Fed Funds Higher 1.50% 1.50% 1.75% 2.00% 2.00% 2.25% year notes projected to end the year at 2-Year Note 1.60% 1.79% 1.95% 2.15% 2.30% 2.46% 1.60%, 2.48% and 3.03%. Compared to year- end projections just 3 months ago (July 10-Year Note 2.48% 2.58% 2.70% 2.84% 2.95% 3.05% 2017), the 2-year is 10 basis points (bps) 30-Year Note 3.03% 3.15% 3.27% 3.31% 3.40% 3.50% lower and both the 10-year 30-year are 12 2 bps lower. 3-Month Libor 1.56% 1.70% 1.88% 2.10% 2.22% 2.40% Baird’s economists believe the 10-year (1) The interest rate at which a depository institution lends funds maintained at the Federal Reserve Treasury note “has moved in sync with to another depository institution overnight. The higher the federal funds rate, the more expensive copper prices” (which are trending higher). it is to borrow money. The Federal Funds Rate can be viewed as the base rate that determines the In addition, they believe the 10-year note level of all other interest rates in the U.S. Economy. movement will be “dependent on” German (2) London Interbank Offered Rate. A benchmark rate that some of the world's leading banks charge Bund yields. With the continuation of ECB’s each other for short-term loans. QE programs, German yields could struggle Median an E Economic I Indicator S Summar ary to move higher. However, surprises out of the ECB or an abrupt shift from quantitative Q3 Q4 Q1 Q2 Avg Avg Avg easing to quantitative tightening could put 2017 2017 2018 2018 2017 2018 2019 upward pressure on German yields, thus supporting the message of higher Treasury Unemployment 4.4% 4.3% 4.2% 4.1% 4.4% 4.2% 4.1% yields in the future. Consumer Spending 2.1% 2.6% 2.4% 2.5% 2.7% 2.4% 2.2% The Federal Open Market Committee CPI (YOY) 2.0% 1.9% 1.6% 2.2% 2.1% 2.0% 2.2% (FOMC): PCE (YOY) 1.5% 1.6% 1.5% 1.8% 1.7% 1.8% 2.0% The Fed signaled one more interest rate hike in 2017 and potentially three in 2018. Core PCE (YOY) 1.4% 1.5% 1.5% 1.7% 1.5% 1.7% 2.0% The FOMC voted to begin tapering its GDP 2.4% 2.6% 2.2% 2.4% 2.2% 2.4% 2.1% balance sheet in October. The FOMC will first Budget -3.5% -3.6% -3.5% -3.5% -3.5% -3.5% -3.7% allow $10 billion each month to roll off the $4.5 trillion balance sheet by not reinvesting as securities mature. One year from now, tapering will increase by $10 billion a month to a maximum of $50 billion per month. Source: Bloomberg as of October 13, 2017; Baird Market and Investment Strategy Technical Review & Outlook October 12, 2017; 8 Business Insider, “Fed to unwind financial-crisis emergency measures and begin shrinking its $4.5 trillion balance sheet in October,” September 20, 2017

Bond Refunding Opportunity

Hypothetical Tax-Exempt Advance Refunding Illustration - 2012 General Obligation Bonds • The following is a summary of a Summary o of H Hypothetical Potent ntial R Refund unding R Resul sults Hyp ypothe hetical P Potent ntial A Annua nnual S Saving ngs refunding of select callable 10/30/2017 10/30/201 Prior Net Debt Refunding Debt Potential Potential PV maturities of the Series 2012 Bonds. Par Amount $56,345,000 Year Service Service Savings Savings • Assuming estimated current market Premium 11,910,196 interest rates and a closing on Accrued Interest Fund 257,289 2018 $2,637,211 $2,552,478 $84,733 $80,067 Proceeds $68,512,484 2019 $2,894,500 $2,801,500 $93,000 $88,673 January 17, 2018, present value 2020 $2,894,500 $2,801,500 $93,000 $86,164 savings are $3,387,553 or Escrow Deposit 68,133,127 2021 $2,894,500 $2,801,500 $93,000 $83,727 approximately 5.66% of the 2022 $2,894,500 $2,801,500 $93,000 $81,358 refunded par. Series Refunded Series 2012 2023 $4,164,500 $3,731,500 $433,000 $366,006 Maturities Refunded 2023-2028 & 2030-2032 2024 $3,846,000 $3,409,300 $436,700 $358,530 Average Coupon of Refunded Bonds 4.85% 2025 $8,415,250 $7,983,500 $431,750 $344,299 Call Provision 12/15/2022 @ Par 2026 $8,408,500 $7,976,250 $432,250 $334,837 Par Amount of Bonds Refunded $59,900,000 2027 $10,913,000 $10,481,250 $431,750 $324,877 2028 $10,914,500 $10,482,250 $432,250 $316,054 Potential Net PV Savings $3,387,553 2029 $1,411,750 $1,352,500 $59,250 $42,400 Potential Net PV Savings % 5.66% 2030 $8,431,750 $7,997,500 $434,250 $300,090 Potential Negative Arbitrage $1,484,640 2031 $11,410,750 $10,975,250 $435,500 $292,348 2032 $11,408,250 $10,972,500 $435,750 $284,147 All-In TIC 2.89% $93,539,461 $89,120,278 $4,419,183 $3,387,553 Arbitrage Yield 2.47% PV savings discounted at the All-In TIC. Assumed Delivery Date: January 17, 2018 Assumed Rates and Yields As Of: October 30, 2017 10

Outstanding General Obligation Debt Service

Jeffco Public Schools G.O. Bond Debt Service JEFFERSON COUNTY SCHOOL DISTRICT Outstanding Debt Service • The following is a summary of a refunding of select callable $50,000,000 maturities of the Series 2012 Bonds. $45,000,000 • Assuming estimated current market interest rates and a closing $40,000,000 on January 17, 2018, present value savings are $___________ or approximately ____% of the refunded par. $35,000,000 • Average annual cash flow savings are approximately $30,000,000 $_______________. $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Series 2010 Series 2012 Refunding Series 2012 New Money Series 2015 12