City and County of HonoluluWastewater System Revenue BondsInvestor Presentation

May 16, 2012

Timothy Houghton, Executive Assistant, City and County of Honolulu, Department of Environmental Services

1

Wastewater System Facilities

The Department Serves Nine Wastewater Basins on the Island of Oahu

Source: City and County of Honolulu, Department of Environmental Services. As of June 30, 2011.

Service Area: Nearly 600 sq. miles

Population: Approximately 640,000 (73% of the City and County)

Customer Accounts: Approximately 144,100 (136,600 of which are residential)

Major Facilities:

9 wastewater treatment plants (combined FY 2011 average flow of 105 MGD)

70 pump stations

Approximately 2,100 miles of collection lines

N

S

EW

Each of the Department’s 10 treatment facilities has adequate capacity to meet projected flows.

2

Historical Customer Base

The Department’s Customer Base is Predominately Residential and Stable

Historical Accounts by Customer Type

0

25

50

75

100

125

150

2003 2004 2005 2006 2007 2008 2009 2010 2011

Residential Non-Residential

Fiscal Year

(In 000’s)

Source: City and County of Honolulu, Department of Environmental Services.

Growth in Equivalent Single-Family Dwelling Units is projected at 0.5% per annum through 2035, and it is not a significant driver of projected revenues or capital needs

3

Historical Sewer Service Charges

The City has Demonstrated its Strong Commitment to the Wastewater System by Repeatedly Passing and Implementing Multi-Year Rate Increases

10% 10% 10% 10%

15%

8% 8%5%

4% 4% 4% 4% 5%8%

10%

25%

0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Adopted in July 2011Adopted in June 2007Adopted in June 2005

25%

18% 18%15%

Adopted Sewer Service Charge Increases

Fiscal Year

Source: City and County of Honolulu, Department of Environmental Services.

The City has adjusted rates as needed to meet funding requirements for its 20-year Capital Improvement Program – including those projects mandated in its 2010 Consent Decree with the United States EPA

4

Comparative Utility Rates

Honolulu’s Water & Wastewater Rates Compare Favorably to Other Metropolitan Utilities

$67.72 $64.66 $65.52$83.87 $82.23

$98.02$116.98

$133.64

$186.53$28.33 $35.79 $41.21

$36.65$66.29

$68.11$63.50

$63.35

$75.39

$95.13

$33.74

$0

$50

$100

$150

$200

$250

$300

Detro it, M I Salem, OR New York City, NY Austin, TX Honolulu San Diego, CA Portland, OR San Francisco, CA Seattle, WA Atlanta, GA

Monthly Water Bill Monthly Wastewater Bill

Average Monthly Residential Bill(1)

Service Provider

(1) Monthly bill figures are current for calendar year 2011 or FYE 2012. (2) Comparison of residential wastewater bills is based on minimum meter size and average billable flows of 10,000 gallons per month or 13 hundred cubic feet (HCF). Source: Respective utility websites.

Detroit, MI

Salem, OR

New York, NY

Austin, TX

Honolulu, HI

San Diego, CA

Portland, OR

San Francisco, CA

Seattle, WA

Atlanta, GA

$96.04$100.45 $106.73

$120.52 $128.87

$148.52$166.13

$180.48$196.99

$261.92

(2)

5

System Delinquency Rates

The Wastewater System’s Delinquency Rates Have Been Consistently Low

Delinquencies as a Percentage of Total Revenues*

Fiscal Year

* Includes accounts that are greater than 60 days past due.Source: City and County of Honolulu, Department of Environmental Services.

0.79%0.83%0.90%0.97%0.87%0.75%0.71%0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

2005 2006 2007 2008 2009 2010 2011

Average = 0.83%

Should bills not be paid, the authority exists, and has been exercised, to terminate City water service for nonpayment.

6

Debt Service Coverage

Historical and Projected Debt Service Coverage Ratios are Robust

0.01.02.03.04.05.06.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Actual/ProjectedPolicy Target (1.6x)Legal Requirement (1.2x)

Senior Lien Coverage Ratio

Fiscal Year

0.01.02.03.04.05.06.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Actual/ProjectedPolicy Target (1.25x)Legal Requirement (1.1x)

Senior & Junior Lien Coverage Ratio

Fiscal Year

Historical Projected

Note: Projected revenues include BABs/RZEDBs subsidies. Source: City and County of Honolulu, Wastewater System Revenue Bonds, Senior Series 2011A Official Statement (page 23).

Current = 4.52x

Current = 2.88x

System Facility Charges (connection fees) are not pledged and are not included in coverage calculations.

Historical Projected

7

System Reserves

Strong Financial Margins have Allowed the Department to Build Liquidity($ Millions)

(1) The amount shown represents cash deposits in the common and series debt service reserve funds.(2) Equal to 50 percent of following fiscal year’s debt service obligation (due July 1).(3) Equal to 3 months of current year operating expenses (as required by policy).(4) Equal to ending cash balance less operating and bond reserves. Includes federal BABs/RZEDBs subsidy in the rate stabilization fund.Source: City and County of Honolulu, Department of Environmental Services.

$41.5

$241.7 $241.1

$28.7

$34.5

$46.8

$51.7

$60.7 $69.1

$86.7

$93.8

$100.6$114.9

$140.9

$26.3

$28.3

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2009 (Actual) 2010 (Actual) 2011 (Unaudited) 2012 (Budgeted)

Common and Series DSRFsBond Payment AccountOperating ReserveUnrestricted Reserve

Fiscal Year

$203.7

$312.7

$431.3

(1)(2)

(3)(4)

The Department has increased the use of net income for capital projects going forward

$459.6

$0

$50

$100

$150

$200

$250

$300

$350

$400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

O&M Debt Service Revenues

8

Conservative Financial Management

Conservative Financial Management Has Produced Predictable and Strong Financial Results

100% conventional fixed rate bonds

All DSRFs are cash funded

No derivatives exposure

Pro-active use of low-cost SRF funding (subordinate to revenue bonds)

Build America Bonds subsidy collected in the fiscal year prior to expenditure

Budgeting Practices($ Millions)

Fiscal Year

(1)

* Unaudited.(1) Includes Revenue Bonds, SRF Loans and Reimbursable G.O. Bonds.(2) Excludes Wastewater System Facility Charge revenues.Source: City and County of Honolulu, Department of Environmental Services.

(2)

Debt Management

9

Outstanding Debt

Wastewater System Outstanding Principal

The City expects to sell approximate $___ million of senior lien Wastewater System Revenue Bonds in _____ 2012.

Outstanding Principal

[$1,275,799] Reimbursable City G.O. Bonds

[$200,391,918] State Revolving Fund Loans

$422,684,910Junior Lien Revenue Bonds

$1,170,430,000Senior Lien Revenue Bonds

Source: City and County of Honolulu, Department of Environmental Services. As of April 2012.

10

Outstanding Debt

Wastewater System Debt Service Profile

$0.0

$25.0

$50.0

$75.0

$100.0

$125.0

$150.0

$175.0

$200.0

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

Reimbursable G.O. BondsSRF LoansJunior Lien Debt ServiceSenior Lien Debt Service

Note: Debt service shown is gross of BABs subsidy.

Fiscal Year

($ in millions)

11

Department’s Website

For Additional Information About the Wastewater System…

http://www.envhonolulu.org/