Ashland School District No. 5

Presentation on General Obligation Bonds

October 5, 2005

2

Debt service is repaid by a levy on all taxable property within issuer’s boundaries. Levy is “unlimited as to rate or amount.”

Must be voter approved within “double majority” rules unless approved at general election.

Proceeds can only be used for “capital construction and improvements” under Measure 50.

General Obligation Bonds in Oregon

3

General Obligation bonds are subject to statutory debt limits.

Statutory Debt Limits (as % of Real Market Value)

K-12 School Districts 7.95%

Note: Only “true” general obligation debt counts towards this legal debt capacity. Full faith and credit obligations and pension obligations do not count.

Legal Debt Capacity

Ashland SD debt capacity: 2004-05 RMV $3,527,773,230 x 7.95% =$280,457,972 Less: Outstanding debt

as of June 1, 2007 ( 0)

$280,457,972

4

Investment Banker and Bond Counsel are key team members.Investment Banker and Bond Counsel are key team members.

Investment Banker Works with Issuer to determine bond size and structure. Assists Issuer in evaluating tax rate impacts. Provides guidance on timing of sale. Assists District in drafting disclosure documentation, procuring bond

ratings and obtaining credit enhancement. Plans and executes the sale and coordinates closing of the Bonds Underwrites bonds and provides proceeds to District.

Bond Counsel Provides guidance on eligible projects under Oregon law Assists Issuer in preparing ballot title Prepares legal documentation authorizing sale of bonds Provides guidance on federal tax law ramifications Provides investors with required validity and tax opinions

Who is the Financing Team?

5

Measure 50 limits the scope of allowable uses of proceeds for G.O. bonds to “capital construction and improvements.”

Capital construction and capital improvements do not include “maintenance and repairs, the need for which could reasonably be anticipated or supplies and equipment that are not intrinsic to the structure.”

60-day use of proceeds resolution and “statute of limitations.”

Use of Proceeds

6

Capital Construction and Improvements?

Maintenance & Repairs Supplies &Supplies & EquipmentEquipment FurnishingsFurnishings OtherOther

AnticipatedAnticipated Street & Highway

Construction,Overlay &

Reconstruction

Unanticipated Intrinsic ExtrinsicExtrinsicPublic Safety

Vehicles with 5 year Useful Life

For acquisition, construction,

remodeling, or because of damage to structure

Not for Not for acquisition, acquisition,

construction, construction, etc.etc.

IneligibleIneligible Eligible Eligible Eligible Eligible Eligible EligibleIneligibleIneligible IneligibleIneligible

Yes

No IneligibleIneligible

Deducted as expense

under IRS code,

doesn’t add to value or

prolong life.

Required by damage, not

expected when

constructed, prolongs life

Necessary to function,

fixture

Determining Project Eligibility

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Step 1:Perform needs analysis and determine project costs

Step 2:Add issuance costs: assume 1.00%-2.00% of issue amount, depending on size

Step 3:Consider whether to adjust for anticipated interest earnings

Step 4:Analyze tax impact and repayment structures

Step 5:“Iterate” to produce desirable tax rate

Sizing Your Issue

8

The size and structure of your issue can have dramatic implications for the resulting levy rate.

Length of Issue — What maturity do you want? Useful life of items being financed Trade-off between annual and overall cost Specific community priorities and relationship with other

outstanding debt

Levy Impact Specific repayment structure could include level debt, level

levy, level principal or some combination thereof. Focus on single issue or combined debt burden? Time of year of bond sale may effect levy

Debt Sizing and Repayments

9

State and Local Government Securities (SLGS):U.S. Treasury Proxy

Market Conditions

Source: Bureau of the Public Debt

0.80%

1.30%

1.80%

2.30%

2.80%

3.30%

3.80%

4.30%

4.80%

5.30%

0 -

1

0 -

3

0 -

5

0 -

7

0 -

9

0 -1

1

1 -

3

1 -

9

2 -

3

2 -

9

3 -

3

3 -

9

4 -

3

4 -

9

5 -

3

5 -

9

6 -

3

6 -

9

7 -

3

7 -

9

8 -

3

8 -

9

9 -

3

9 -

9

11 -

0

13 -

0

15 -

0

17 -

0

19 -

0

21 -

0

23 -

0

25 -

0

27 -

0

29 -

0

Maturity (Year-Month)

Inte

res

t R

ate

(%

)

09/30/05

09/29/04

09/29/03

10

Historic G.O. Bond Buyer Index (20-Yr Maturity)

Source: The Bond Buyer. August 25, 2005.

Market Conditions

4.00

4.50

5.00

5.50

6.00

6.50S

ep-9

5

Jan-

96

May

-96

Sep

-96

Jan-

97

May

-97

Sep

-97

Jan-

98

May

-98

Sep

-98

Jan-

99

May

-99

Sep

-99

Jan-

00

May

-00

Sep

-00

Jan-

01

May

-01

Sep

-01

Jan-

02

May

-02

Sep

-02

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Inte

rest

Rat

e (%

)

11

Sample Financing Scenarios

Scenario 1: $28MM; “Current” level levy rate over 10 years.

Scenario 2: $50MM; “Current” level levy rate over 20 years.

Scenario 3: $30.25MM; $1.50 level levy rate over 10 years.

Scenario 4: $54MM; $1.50 level levy rate over 20 years.

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Par Amount

Amortizaiton

Issue Date

Final Maturity

Levy Rates 1996 96 and New 1996 96 and New 1996 96 and New 1996 96 and New2005-2007 1.40 0.00 1.40 0.00 1.40 0.00 1.40 0.002008-2017 0.00 1.39 0.00 1.39 0.00 1.50 0.00 1.502018-2027 0.00 0.00 0.00 1.39 0.00 0.00 0.00 1.50

Interest Rates

Total Interest Cost

2006 20082007 20092008 20102009 2011

Thereafter Thereafter

$8,416,828

6/15/2017

6/15/2007

Current + 1.00%

6/15/2017

Current + 1.00%

$7,792,273

6/15/2027

$34,237,445

Current + 1.00%

$36,974,675

6/15/2007

6/15/2027

Current + 1.00%

Ashland School District No. 5

Estimated Levy Rate ImpactSummary of Options

Scenario 4

Calculation Factors:

Projections for New General Obligation Bond Issue

Scenario 1

6/15/2007

Scenario 3

10 Years

Scenario 2

20 Years 10 Years 20 Years

6/15/2007

2004-2005 Assessed Value: $1,999,363,472

AV Increase:5.00%4.50%4.00%3.50%3.00%

% Taxes Collected93.00%95.00%97.00%99.00%99.00%

$28,000,000 $50,000,000 $30,250,000 $54,000,000

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Levy Rate Projections – Scenario 1 ($28MM over 10 Years)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Lev

y R

ate

($ p

er t

ho

usa

nd

)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Fiscal Year

G.O. Bonds, Series 1996 G.O. Bonds, Series 2007 (Scenario 1)

14

Three main components must appear in a ballot title:

Projects to be financed

Maximum amount to borrow

Maximum maturity

Drafting the Ballot Title – GO Bonds

15

Maximizing flexibility vs. specifying projects

Separating projects in multiple ballot titles?

Estimating levy impact — yes or no?

Refinancing of existing obligations — needs to be in ballot if that is under consideration

Using the explanatory statement in the voters’ pamphlet 500 words file at same time as ballot title

Review with Bond Counsel before finalizing.

Ongoing Ballot Title Issues

16

State and Federal laws require that interest earnings be used for either:

1)projects allowed under ballot title, or

2)debt service payments (i.e, reduce the tax levy with remaining proceeds).

Maximizing earnings on proceeds is critical.

Changes to (or creating your own) investment policy need to be planned ahead of time.

Construction funds are subject to federal arbitrage/rebate rules.

Investment of Proceeds

17

Assuming proceeds of bonds will be used for public purpose, interest paid to investors will be exempt from federal (and state) taxation.

There are certain tax rules and regulations that should be discussed in detail with bond counsel. Topics to discuss include:

Timing on expenditure of proceeds – typically 3 years

Investment regulations – limitations on your ability to earn interest on proceeds (“arbitrage”)

Reimbursement regulations — limitations on ability to reimburse issuer for prior expenditures related to bond projects

Private use limitations

Federal Tax Exemption

18

Requires issuers of municipal securities and certain “obligated persons” to enter into a written agreement for the benefit of the holders of the securities to provide:

Annual Financial Information Notice of certain Material Events Notice of any failure to provide required Annual Financial

Information

Continuing Disclosure Compliance

Securities and Exchange Commission Rule 15c2-12Securities and Exchange Commission Rule 15c2-12

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Check with your County elections office to verify filing deadlines.

All elections are by mail. There is a validation requirement for tax issues on all 2006

ballots except the November general election.

(1) Pro and con statements. Deadline for voter’s pamphlet explanatory statement is the same as filing deadline.(2) Ballots mailed 14 to 18 days prior to election

2006 Election Schedule

Election DateFiling Deadline

Voters' Pamphlet (Pro and Con Statements)

Deadline(1) Ballots Mailed(2)

March 14 January 12 January 16 February 24-28May 16 (Primary) March 7 March 9 April 28-May 3September 19 July 20 July 24 September 1-5November 7 (General) August 29 August 29 October 20-24

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Failed - 71%

Passed - 29%

Failed - 27%

Passed - 73%

Failed - 44%

Passed - 56%

Failed - 35%

Passed - 65%

What Are Your Odds?Fifty-nine percent of GO Bonds from March 2000 to May 2005 have been approved.

Total: 11

March 2000-2005

Total: 40

May 2000-2005

Total: 7

September 2000-2005

Total: 52

November 2000-2005

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Considerations Bond issues take 2-3 months to prepare and sell. Project timing and construction cash flow Tax levy timing and debt repayment Budgetary impacts

Conclusions?

Carefully consider impact of election date on ability to cash flow both project needs and debt service.

How do your choices impact tax levy and perceived cost to taxpayer?

Election Dates Can Affect Financing and Project Timing

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Seattle-Northwest Securities Corporation

For Additional Information

Dave Taylor 503-275-8303DTaylor@snwsc.com

Carol Samuels 503-275-8301

CSamuels@snwsc.com

Javier Fernandez 503-275-8309JFernandez@snwsc.com