State of LouisianaFinancing Tools for Managing Budgetary Stress

February 4, 2015

Citigroup Global Markets Inc. | Municipal Securities Division

Citigroup is providing the information contained in this document for discussion purposes only in anticipation of serving as underwriter to the State of Louisiana (the “State”). The primary role of Citigroup, as an underwriter, is to purchasesecurities, for resale to investors, in an arm’s-length commercial transaction between the State and Citigroup and that Citigroup has financial and other interests that differ from those of the State. Citigroup is not acting as a municipal advisor,financial advisor or fiduciary to the State or any other person or entity. The information provided is not intended to be and should not be construed as “advice” within the meaning of Section 15B of the Securities Exchange Act of 1934. TheState should consult with its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent it deems appropriate. The State should consider whether to engage an advisor to act in a fiduciary capacity onits behalf in connection with this transaction.

Table of Contents

1. Citi’s Understanding of Louisiana’s Budget Situation 1

2. State Financial Toolkit 2

3. Debt Refinancings 8

4. Tobacco Securitization Market Update 12

5. Oil & Gas Royalty Securitization (GOMESA) 19

6. Transportation Financing 29

7. Lottery & Gaming Revenue Bonds 40

8. PPP Solutions 43

Appendix A - State Rating Landscape 48

1. Citi’s Understanding of Louisiana’s Budget Situation

Citi’s Understanding of the State’s Budget Situation

Fiscal Year 2015

Continued economic pressures and limited areas to trim expenses have created a need for a two midyear budget cuts

The most recent adjustment was attributed largely to the drop in oil prices

Thanks to several non-recurring items, the FY2015 budget has been impacted less than anticipated

Fiscal Year 2016

Continued oil price weakness has put additional strain on Fiscal Year 2016, which has been projected to incur a shortfall of well in excess of $1.0 billion

All parties agree that those areas that are easiest to cut are the least appealing, including education and healthcare

Economic and political realities make it challenging to raise taxes or meaningfully increase revenues, therefore the State may wish to utilize the capital markets to bridge this structural gap

Potential for Capital Markets Solutions

The financing tools outlined herein could potentially “buy more runway” for Louisiana to restore structural budgetary balance

It is critical for maintaining the State’s strong ratings that such tools are used as part of a balanced overall strategy aimed at reaching a structurally balanced budget

Many of the tools available have been used by other states, including Louisiana, during prior periods of fiscal strain

The following sections outline several alternatives that may warrant the State’s consideration

Like many other states, Louisiana is facing budgetary hurdles related to continued revenue weakness and additional pressure from the recent drop in oil prices.

1

2. State Financial Toolkit

Financial Alternative ToolkitBelow are financial strategies that have been used by public sector entities to address budget challenges and finance long-term capital needs.

High Grade Rating Low Investment Grade Rating

Strong and stable revenue base Stable revenue base Stable and narrow revenue base Volatile and narrow revenue base

Sales Taxes / Gross Receipts Lottery Securitization Transit Grant Anticipation Notes ("GANs") Tobacco Settlement Revenues

Personal Income Tax Transportation Lease Revenue BondsPublic/Private Partnerships ("PPP" or "P3s") Cigarette Tax

Payroll Tax Motor Fuel Tax Public/Public Parternships ("P2Ps") Vehicle Registration/Tags Alcoholic Beverage Taxes Vehicle Weight/Mileage taxes Enhanced Tobacco Settlement Revenues Petroleum Business Tax Hotel Taxes

Gaming and RacingTolls Tax Increment Financings Existing Highways and Bridges Beverage Container Fees HOV/HOT Lanes Tax Liens Support from Toll Agencies Telephone Surcharge

Parking/Meter ReceiptsGARVEEs / Corp. Income/Franchise TaxesFederal Transportation Revenue Taxi Surcharge

Severance TaxesEmployer Assessments Car Rental Surcharge Unemployment Compensation Documentary Stamp Taxes / Workers Comp / Second Injury Mortgage Recording Taxes / Tribal Gaming Compact

Stock Transfer TaxAppropriation Bonds (Notch below G.O.)

Baa/BBB

Medium Investment Grade Rating

Aaa/AAA Aa/AA A/A

Note: These strategies consider a diverse array of assets and revenue streams and therefore vary greatly in value and financial efficiency (rating, structure, cost of funds, etc.)

2

State Toolkit: Sources of Revenue Bond Security

* Combined with other taxes or security provisionsN/A = not applicable

Assessment of ABT / Debt Revenue Source Revenue Source Comment Service Coverage Selected Financing Examples

Sales Tax / Gross Receipts Strong - Stable The most commonly used pledge by states, 1.25x COFINA,regions, cities, and transportation agencies California Economic Recovery Bonds, BART

Massachusetts School Building Authority

Personal Income Tax Strong - Stable Broad based pledge of second largest tax 1.25x - 2.00x New York State Personal Income Tax Bonds,source for states District of Columbia

Payroll Tax Strong - Stable Strong security due to tax's wage-based nature 1.50x - 4.00x Tri-County Metropolitan Transportation Dist.,excluding more volatile capital gains component Proposed for NY Metropolitan Transportation Author

GARVEE / Federal GANs Strong - Stable Payable from federal highway trust fund or transit 1.50x - 3.00x GARVEEs used in 27 statesfunds, subject to periodic reauthorization risk

Lottery Receipts Strong - Stable Limited history of use 7.00x / 4.00x Florida, Oregon, West Virginia and Arizona

Utility Surcharge Strong - Stable Overcollateralization of a stranded cost 1.005x Connecticut used surcharge in 2004 for deficitsurcharge on utilities financing

Motor Fuel Taxes * Stable Gasoline and diesel fuel taxes used by most 1.50x MTA DTF, Dedicated Highway and Bridge Trust transportation revenue bond issuers nationwide Fund Bonds ("DHBTF") in New York State

Petroleum Business Tax/ Stable Typically used in a basket of pledged revenues 1.75x MTA DTF, Thruway DHBTF, Puerto Rico Oil Import Tax * Transportation and Highway Authority (Crudita)

Vehicle Registration / Stable Future receipt trends depend on population 1.75x Wisconsin Transportation Revenue Bonds License / Tag Receipts * and vehicle use

Contributions from Toll Agencies Stable Subordinate pledge of tolls from authorities N/A MTA, NJ Transportation Trust Fund Bondsafter paying debt service on toll revenue bonds

Tolls / HOV Toll Lanes Stable Highway, bridge and mass transit systems 1.35x - 1.75x Bay Area Toll Authority,Triborough Bridge and Tunnel Authority,North Texas Tollway Authority

Unemployment Compensation Stable Employer assessments 1.20x - 1.50x Texas, Illinois and Connecticut UnemploymentRevenue Bonds

Workers Compensation Stable Similar to unemployment compensation paid 1.20x - 1.50x West Virginia and Montanafrom employer assessments

Beverage Container Fees Stable Dependent on consumer use Proposed 1.50x Securitization of a fee, not a tax, in- 1.60x California; rejected by A.G.

3

State Toolkit: Sources of Revenue Bond Security

* Combined with other taxes or security provisionsN/A = not applicable

Assessment of ABT / Debt Revenue Source Revenue Source Comment Service Coverage Selected Financing Examples

Vehicle Weight Tax * Stable - Narrow Paid by commercial truck traffic (but subject to 3.00x Maryland, Montana, and New Mexico bundled withresistance/litigation) other taxes

Second Injury Fund Stable - Narrow Employer assessment paid by insurers, Proposal stage Proposed in NY through Dormitory Authorityself insurers and state insurance funds

Corporate Income / Franchise TaxVolatile Typically included in a basket of pledged 10.00x MTA DTF (with other revenues), Maryland Dept. of revenues; requires additional security Transportation (with other revenues)

Severance Tax Volatile Short maturities and closed flow of funds mitigates 2.00x States of New Mexico and Montanainherent volatility of revenues derived from severing oil, natural gas, and coal

Documentary Stamp Tax * Volatile Mainly real estate and other documentary transfers 1.50x Used extensively in Florida as security for EvergladeRestoration Bonds and Florida Forever Bonds

Mortgage Recording Tax * Volatile Used in regions with high property 5.00x Triborough Bridge and Tunnel Authority (defeased)values; requires additional security

Stock Transfer Tax * Volatile Considered to be both volatile and substantial, 5.00x NY Municipal Assistance Corporation (defeased)with a certain degree of predictability; wouldrequire additional security

Violation Receipts * Volatile Used as a replacement revenue source on 2.00x Miami-Dade and Hillsborough Counties (FL),existing bonds State of Minnesota, State of New Jersey Motor

Vehicle Surcharge Bonds

Court Fines and Fees in Volatile Combined with debt service and supplemental 5.50x Iowa Special Obligation Prison Infrastructure BondsCriminal Cases * reserves and a state moral obligation

Tax Liens Narrow Securitization of unpaid taxes; lax controls Lien-to-value and Philadelphia, City of New York, Puerto Ricoand record keeping are problems expected loss

Tobacco Settlement Revenues Narrow Tobacco company payments; declining Revising assumptions Significant use by many states in last recessionconsumption, litigation and other risks and criteria Enhanced TSR in States of NY and California

Cigarette Tax Narrow Declining consumption mitigated by high 1.75x and higher New Jersey, Tampa (FL), Alabama,debt service coverage and bond structures University of Nebraska

Alcoholic Beverage Taxes Narrow Rum excise taxes have been used as 1.50x - 2.50x Puerto Rico Infrastructure Finance Authority,a revenue source in cases with a long Virgin Islands Public Finance Authorityand established history of revenues

4

State Toolkit: Sources of Revenue Bond Security

* Combined with other taxes or security provisionsN/A = not applicable

Assessment of ABT / Debt Revenue Source Revenue Source Comment Service Coverage Selected Financing Examples

Liquor Enterprise Revenues Narrow Profits from State-run liquor monopoly 2.00x State of Ohio Revitalization Project Bonds

Parking / Meter Receipts Narrow Combined parking facility and on-street parking 1.25x - 1.50x New Haven, Miami, Chicago, Union Station (DC)

Taxi Surcharge * Narrow Used for convention center bonds, bundled with N/A Component of Trust Aid revenues that may beother pledged revenues combined with payroll taxes for the NY MTA,

Metropolitan Pier and Exposition Authority, coupled with Illinois state sales tax

Car Rental Surcharge * Narrow Used for convention center bonds, bundled with 2.00x Used by Hawaii DOT along with statewideother pledged revenues transportation pledge

Component of Trust Aid revenues that may becombined with Payroll tax for NY MTA

Tax Increment Revenues Narrow Highway improvements linked to higher property 2.00x Commonwealth Transportation Board Route 28values used by Virginia also subject to state appropriation

Hotel / Accommodations Tax * Narrow Used for convention center bonds, bundled 2.00x Metropolitan Pier and Exposition Authority, with other pledged revenues coupled with Illinois state sales tax

Unclaimed Property * Narrow Used as school bond bank, bundled with GO N/AVirginia Public School Authority

pledge of local borrowers State of Louisiana

Indian Compact Securitization Narrow Pledge of revenues from Indian Gaming N/A Proposed in Connecticut and CaliforniaCompacts related to Indian casinos in states.

Telephone Surcharge Narrow Technological risks, such as elimination of 3.20x State of Minnesota 911 telephone surcharge revenueland lines due to voice-over-internet providers bondsand federal legislative risks

5

Economic Recovery Deficit Funding LoanDeficit borrowing has been used by some states to bridge the gap.

The following parameters would likely meet rating agency acceptance:– Bond term under 10 years would clearly be acceptable - other highly rated states have bonded deficits for 20 years

or more (example: New York State – 2003)– Deficit borrowing could produce up-front proceeds to the State depending on the ultimate structure of the debt

issuance Two year principal deferral and interest could be capitalized depending on ultimate goals Will produce additional debt service requirements over the life of the deficit financing

A portion of the offering could be sold with staggered short calls or as variable rate debt to enhance early redemption flexibility

National Precedents

State of Connecticut Economic Recovery Notes (“ERN”)– Series 2002 & 2004

2009 Connecticut ERN offering ($1 billion)

Citi was Book-runner on 2009 CT offering – Sized to fund $947.5 million FY2009 budget deficit– Maturing 2012 through 2016– General Obligation credit– Interest capitalized through and including 2011– Statute requires pre-payment from future surpluses– Citi utilized innovative short call structure

Commonwealth of Massachusetts– 1989-1990 Fiscal Recovery Loan Act of 1990– Pledge of incremental income taxes with bonds amortized

over 7 years

6

Overview of Working Capital Tax AnalysisTax-exempt bonds are permitted to be issued to fund working capital requirements in the general or other funds.

Tax-exempt bonds can be issued for working capital purposes, subject to two special restrictions– Proof of deficit State must determine its “available amounts” under the tax code, including any funds available to pay

operating expenses without legislative or judicial action required State is permitted to maintain a reasonable working capital reserve of up to 5% of expenditures without

counting it as available funds for the deficit test– Replacement proceeds Tax code provides a safe harbor for working capital bonds with a final maturity of two years or less Bonds with a final maturity beyond two years are considered “long-term working capital” financings, raising

concerns from the IRS which seeks to limit the time bonds are outstanding to no longer than “reasonably necessary”

Private letter ruling interprets this to mean if bonds are outstanding longer than two years, any future surpluses over the permitted 5% working capital reserve are characterized as “replacement proceeds,” and State would be required to 1) restrict the yield on the excess funds to the yield on the bonds or 2) use the excess proceeds to redeem bonds

Identifying the fund is important – if it is determined that operating payments are General Fund related rather than related to a special fund, the State may have a portion of future General Fund surpluses yield restricted

State would not need proof of a deficit if it can be determined that the use of proceeds are for Qualified Grants

State should seek specific and detailed legal advice if it decides to pursue a working capital financing

$4.7

19.4

7.9

7

3. Debt Refinancings

General Obligation Refunding Opportunity

Preliminary – Subject to Change.

Series Name Maturity Refunded

Par Amt.PV

Savings$PV

Savings%Escrow

Efficiency2010A 11/15/2022 $2,465 $155 6.3% 86%2011A 9/1/2028 20,415 1,115 5.5% 51%2009A 5/1/2028 14,150 701 5.0% 52%2011A 9/1/2029 21,460 1,018 4.7% 46%2010A 11/15/2021 4,870 220 4.5% 100%2009A 5/1/2029 14,860 656 4.4% 47%2013A 5/15/2026 1,025 44 4.3% 62%2012A 8/1/2025 21,565 921 4.3% 61%2011A 9/1/2030 22,560 954 4.2% 42%2011A 9/1/2026 18,470 654 3.5% 48%2012A 8/1/2026 22,115 668 3.0% 45%2012A 8/1/2024 21,050 632 3.0% 63%2014A 2/1/2026 25,150 514 2.0% 47%2013C 7/15/2025 14,040 266 1.9% 43%2012A 8/1/2023 20,565 351 1.7% 73%2012A 8/1/2027 22,690 369 1.6% 26%2013A 5/15/2025 100 2 1.6% 51%2010A 11/15/2020 8,220 108 1.3% 100%2013A 5/15/2024 100 1 1.2% 83%2014A 2/1/2025 10,540 91 0.9% 41%2014A 2/1/2027 26,155 169 0.6% 16%2013C 7/15/2024 13,440 83 0.6% 29%2013C 7/15/2026 14,665 89 0.6% 15%

The State currently has approximately $185 million of GO bonds producing at least 3% present value individual savings– Over $85 million exceed 50% Escrow Efficiency

Citi notes the State is currently pursuing this opportunity in hopes of providing long-term debt service savings as interest rates have trended below those seen in the last GO Refunding transaction

Year MMD- 2014C Sale(Nov. 13, 2014)

MMD - Today(January 26, 2015) Difference

1 0.14% 0.14% 0.00%2 0.38% 0.42% 0.04%3 0.62% 0.62% 0.00%4 0.88% 0.81% -0.07%5 1.15% 1.00% -0.15%6 1.46% 1.22% -0.24%7 1.74% 1.40% -0.34%8 1.94% 1.57% -0.37%9 2.07% 1.71% -0.36%

10 2.17% 1.81% -0.36%11 2.28% 1.91% -0.37%12 2.38% 2.01% -0.37%13 2.45% 2.10% -0.35%14 2.50% 2.17% -0.33%15 2.55% 2.22% -0.33%16 2.60% 2.27% -0.33%17 2.65% 2.32% -0.33%18 2.70% 2.36% -0.34%19 2.75% 2.40% -0.35%20 2.80% 2.44% -0.36%21 2.85% 2.46% -0.39%22 2.89% 2.48% -0.41%23 2.92% 2.50% -0.42%24 2.95% 2.52% -0.43%25 2.98% 2.54% -0.44%26 3.01% 2.55% -0.46%27 3.03% 2.56% -0.47%28 3.05% 2.57% -0.48%29 3.06% 2.58% -0.48%30 3.07% 2.59% -0.48%

($ in 000’s).

8

Debt Optimization for Budget Relief

The State’s General Obligation debt structure is generally front-loaded and enjoys a relatively short average life– The current municipal market yield curve is steep with ‘AAA’ MMD yields remaining below 3% through 2035– Current market continues to show solid retail demand in the first 10 years of the yield curve for high quality paper

These market dynamics present a unique opportunity for the State to refinance near-term debt obligations at very low rates to provide for cash flow relief in FY2016, while only marginally increasing the prior bonds’ average lives

General Obligation Bonds Maturing by Fiscal Year

$229 million in outstanding principal amortizes in FY2016

$148 million in outstanding principal amortizes in FY2017

National Precedents

Commonwealth of Massachusetts, 2010 and 1991

State of Wisconsin, numerous years

New Jersey, numerous years

New York, numerous years

Hawaii, 2010

State of Louisiana General Obligation BondsOutstanding Debt Service1

With nearly $230 million in principal amortizing during FY2016, the State has the opportunity to strategically re-optimize a portion of these existing bonds for budget relief

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Principal Interest

1. Aggregate Debt Service profile includes G.O. Bonds Series 2006-B, 2013-C and Taxable Series 2012-D

9

FY2016 Optimization: Debt Profile ImpactRefunding nearly $85.16 million of the State’s tax-exempt, advance refundable bonds in FY2016 creates $84.78 million in cash flow benefit, while the average life of the State’s GO debt portfolio is lengthened by only two months

Summary Statistics:

• Average Life: 8.30 Years

• FY2016 Debt Service: $265,894,256

• FY2016 Budget Relief: $84,788,550

Summary Statistics:

• Average Life: 8.16 Years

• FY2016 Debt Service: $350,682,806

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

$84.789 million in FY2016 cash flow relief

Existing Debt Service

Restructuring Debt Service

FY2016 Cash Flow Relief

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Current State of LA G.O. Debt Service

1. Preliminary/Subject to Change. Delivery Date as of March 1, 20152. Assumes Series 2006-B Bonds are advance refundable; subject to bond counsel review. Assumes the Series 2010-A are partially advance refundable (13%); subject to bond counsel review. Assumes Series

2013-C Bonds are advance refundable; subject to bond counsel review. Restructuring does not include the Series 2005-A Bonds (2015 maturity) which are refundable on a current basis as early as May 2015.3. Aggregate Debt Service profile includes G.O. Bonds Series 2006-B, 2013-C and Taxable Series 2012-D10

FY 2016: Restructuring for Near-Term Budget Relief Targeting the State’s GO tax-exempt and advance refundable FY 2016 maturities can provide the State provide significant cash flow savings over the next year

Projected Restructuring Results

Summary of Refunding ResultsPar Amount of Refunding Bonds $71.790 M

Par Amount of Refunded Bonds $85.160 M

Amortization of Refunded Bonds (FY): 2021-2026

FY 2016 Budgetary Relief $84.789 M

Average Life of Refunding Bonds 7.860 years

Average Life of Refunded Bonds 0.721 years

Current MADs, FY2016 -FY2035 $350,683 M

MADs after Restructuring $307.794 M

All-In TIC 1.73%

Total Cash Flow Savings / (Cost): ($10.981) M

PV of Cash Flow Savings / (Cost) ($1,312) M

Negative Arbitrage $0.953 M

Pro-Forma Cash Flow ResultsFiscal Year

Current Debt Service

Restructured Debt Service

Debt Service Savings

2016 $350,683 $265,894 $84,789 2017 $261,486 $265,075 ($3,590)2018 $286,251 $289,841 ($3,590)2019 $299,051 $302,640 ($3,590)2020 $304,205 $307,794 ($3,590)2021 $286,453 $302,216 ($15,762)2022 $272,293 $287,276 ($14,982)2023 $256,503 $270,615 ($14,112)2024 $241,212 $254,487 ($13,275)2025 $233,030 $245,855 ($12,825)2026 $207,141 $218,539 ($11,398)

2027-2035 $928,894 $928,894 $0

Refunding $85.16 million of tax-exempt, advance refundable bondsusing tax-exempt proceeds in FY2016 creates $84.8 million in cashflow relief

While the State could generate significantly more near-term relief,Citi’s base case analyses targets a lesser amount so as not to over-burden the GO debt profile in future years

The State could use its future Series 2015-A Refunding savings tooffset negative savings produced by a potential restructuring of theState’s General Obligation debt

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Existing Debt Service

Restructuring Debt Service

FY2016 Cash Flow Relief

1. Preliminary/Subject to Change. Delivery Date as of March 1, 20152. Assumes Series 2006-B Bonds are advance refundable; subject to bond counsel review. Assumes the Series 2010-A are partially advance refundable (13%); subject to bond counsel review. Assumes Series

2013-C Bonds are advance refundable; subject to bond counsel review. Restructuring does not include the Series 2005-A Bonds (2015 maturity) which are refundable on a current basis as early as May 2015.3. Aggregate Debt Service profile includes G.O. Bonds Series 2006-B, 2013-C and Taxable Series 2012-D11

4. Tobacco Securitization Market Update

Tobacco Securitization Market – $60.1 billion

The market for non-recourse tobacco bonds has been volatile, with times when non-recourse tobacco securitizations were not possible

In recent years secondary market trading has been bifurcated with more conservatively structured transactions trading at significantly lower yields than higher leveraged “turbo” structures

The most recent non-recourse tobacco securitization issuance has been for refundings with the largest non-recourse transactions completed by the State of Louisiana and the State of Washington in 2013

Secondary Market Trading Data since January 2013

Tobacco Transactions over the Past Three Years

Source: J.J. Kenny Drake. Secondary market data as of January 28, 2015. For illustration purposes only.

Since the beginning of the financial crisis, secondary market trading in tobacco bonds has been characterized by a bifurcation based on structure and leverage. More recently, the issuance of refunding bonds has dominated the tobacco bond market.

Sale Date Par ($MM) Issuer Series Issue Description Purpose

03/08/12 92.81 Alabama 21st Century Authority Series 2012 A Tobacco Settlement Revenue Bonds Refunding

03/29/12 38.38 Suffolk Tobacco Asset Sec Corp Series 2012 A&B Tobacco Settlement Ass-Bck Bonds New Money

02/28/13 169.65 South Dakota Ed Enhance Fund Corp Series 2013 A&B Tobacco Settlement Rev Bonds Refunding

04/02/13 375.11 Golden State Tobacco Sec Corp Series 2013 A Enhanced Tobacco Settlement Bonds Refunding

07/02/13 659.75 LA Tobacco Settlement Fin Corp Series 2013 A Tobacco Asset-Backed Ref Bonds Refunding

10/02/13 334.70 Washington Tobacco Settlement Auth Series 2013 Tobacco Settlement Rev Ref Bonds Refunding

12/05/13 1,225.75 NY Tobacco Settlement Fin Corp Series 2013 A&B Asset-Backed Revenue Bonds Refunding

09/09/14 44.30 Niagara Tobacco Asset Sec Corp Series 2014 Tobacco Settlement Bonds Refunding

10/22/14 95.86 California Co Tobacco Sec Agency (Kern) Series 2014 Tobacco Settle Asset Backed Bonds Refunding

10/29/14 34.77 Chautauqua Tobacco Asset Sec Corp Series 2014 Tobacco Settlement Bonds Refunding

Note: Transactions highlighted in blue are appropriation supported

6.58%7.16%

2.76%

Buckeye 2047

Golden 2047

Railsplitter 2028

30-Year MMD 2.57%

Louisiana 2035

3.55%

12

Completed Tobacco Securitizations138 completed financings to date (approximately $60.1 billion aggregate par amount).

Financings Completed

Minnesota11/11

$787mm

2

Iowa10/01 $644mm

11/05 $831mm (ref)78% Illinois

Indiana

Missouri

Arkansas 59/01 $60mm6/06 $36mm

Mississippi2 Alabama 4 Georgia

North CarolinaTennessee

Kentucky

Virginia5/05 $428mm

4/07 $1,149mm50%

Ohio10/07$5.5b100%

Michigan5/06 $490mm New York

Washington

Oregon

Nevada

Utah

California 11/03 $3.0b9/03 $2.6b

7/05 $3.1b (ref)3/07 $4.4b (ref)

100% of State TSRs

Idaho

Montana

Wyoming

Arizona

Colorado

New Mexico

Texas2

Oklahoma

Kansas

Nebraska

South Dakota8/02 $278mm

100%

North Dakota 63/00 $32mm

3/05 $22 mm (ref)5/05 $62 mm

Wisconsin5/02$1.6b100%

Pennsylvania

MD

Florida2

West Virginia

AL: 9/00 $50mm

12/01 $103mm

S. Carolina

WA:10/02 $518mm

29.2%

Puerto Rico:10/00 $397mm 50%10/02 $1.1b 100%8/05 $108mm 100%

1. California allocated 50% of its TSRs to the State; the counties and certain cities receive the remaining 50% 2. State is not a party to the MSA 3. New York allocated 48.824% of its Initial and Annual Payment s to the counties of the State of New York and the City of New York. State

receives the remaining 51.176% and 100% of Strategic Payments4. Alabama has pledged an annual $13 -.16mm TSRs out of total annual projected TSRs of $82 - 143mm (projections for 2003- 2020)5. Arkansas has pledged the first $5mm of its TSR receipts annually, projected final payment in 20466. 45% of TSRs allocated towards payment of Bonds and other water development needs

Alaska

New York: 6/03 $2.3b 11/03 $2.4b 03/08 $441mm

100% of State TSRs

South Carolina$934mm 100%10/00 $116mm 40%

8/01 $126mm 40%8/06 $411mm 80% (ref)

Guam:6/01 $25mm

100%

Virgin Islands: 11/01 $22mm4/06 $7mm

100%

Louisiana10/01

$1.2b 60%

7/07 $911mm100%

8/07 $522mm

12/07 $37mm 4/08 $196mm 100%

6/08 $202mm

4/08:$300mm 100%3/01:

12/10 $1.5bn100%

Residual Financings (Includes states and transactions highlighted in blue)

California Counties/Cities Date

Size ($ mm)

Tulare County 12/99 $ 45Sacramento County 8/01 199San Diego County 12/01 466Stanislaus County 3/02 67Sonoma County 4/02 67Merced County 3/02 31Kern County 5/02 105Placer County 6/02 42Marin County 6/02 34CSAC Pool (2002) 7/02 197Fresno County 7/02 93Alameda County 10/02 220Merced County 10/05 39Sonoma County 10/05 83Sacramento County 12/05 255Alameda County 2/06 68Los Angeles County 2/06 320Stanislaus County 3/06 42Fresno County 4/06 39CSAC Pool (2006) 4/06 62San Diego County 5/06 584Placer County 5/06 59San Diego City 6/06 105Santa Clara County 1/07 102Marin County 6/07 50Riverside County 8/07 294

31 Total CA Deals $16,864

MA3

CT

DE

NYC 11/99 $709Nassau 11/99 $294Westchester 12/99 $103Monroe 7/00 $163Chautauqua 9/00 $30Erie 9/00 $246Niagara 10/00 $47New York Counties I11/00 $227Ulster 1/01 $28New York Counties II7/01 $215Rockland 12/01 $48Rensselaer 12/01 $35NYC 7/02 $500New York Counties III12/03 $80Westchester (ref) 6/05 $216New York Counties IV7/05 $415Erie (ref) 8/05 $318Rockland (ref) 10/05 $25New York Counties V11/05 $199Erie 12/05 $18Monroe 1/06 $15NYC 2/06 $1,300Suffolk 8/08 $233

RI: 6/02 $685mm6/07 $197mm

100%

DC: 3/01 $521mm8/06 $248 mm

100%

3/12 $92mm

Suffolk 3/12 $38

7/13 $659mm

2/13 $169mm

4/13 $375mm (ref)

10/13 $334.7mm

7/11 $959mm 12/13 $1.2b

31 TOTAL NYS DEALS $12,731

Niagara 9/14 $44Chautauqua 10/14 $35

Kern County 10/14 96

NJ:8/02 $1.8 b2/03 $1.7 b

1/07 $3.6 b (ref)100% of State

TSRs

13

40

45

50

55

60

65

70

Jan-13 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Dec-14

AU

M ($

Bill

ions

)Tax-exempt High Yield Fund AssetsHigh yield tax-exempt bond funds experienced net outflows of over $9.9 billion in 2013. The sector has mostly recovered during 2014 with inflows totaling $8.4 billion.

High Yield Tax-exempt Bond Fund Assets

High Yield Tax-exempt Bond Weekly Fund Flows and 30-Year MMD

High yield fund assets lost approximately 20% in value last summer

(due to both changes in fund flows and changes in mark-to-market)

Significant recovery in 2014

2

2.5

3

3.5

4

4.5

5

5.5

6

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

Feb-08 Oct-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14

MM

D Yield (%

)M

unic

ipal

Bon

d Fu

nd F

lows

($ b

illion

s)

Fund Flows 30 Year MMD

Source: AMG fund flows as of January 21, 2015.

14

640.

00

441.

69

435.

95

429.

36

417.

86

404.

07

404.

44

390.

25

391.

26

371.

83

357.

74

325.

23

304.

55

296.

13

290.

31

276.

21

265.

16

1981 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Domestic Cigarette ShipmentsAccording to the most recent IHS Global Insight forecast, domestic shipment declines are expected to trend toward a long-run average of approximately 3%.

The IHS Global Inc. (“IHS”) base case cigarette consumption report for October 2014 estimates a decline in domestic cigarette consumption of 2.9% for sales year 2014 compared to sales year 2013

The MSA OPMs which represent approximately 85% of the domestic cigarette market have reported industry-wide domestic shipment declines of between 3.5% and 4.0% for the first nine months of 2014 compared to the same time frame for 2013

* Based on PM USA 3Q 10-Q estimate of industry-wide shipmentsSource: NAAG and Alcohol and Tobacco Tax and Trade Bureau (RYO calculated at 0.0325 ounces per cigarette) http://www.ttb.gov/statistics/14tobstats.shtml; IHS Global Inc. 2014 Projections

1981 (domestic peak) – 2014 CAGR: -2.63%

1999 (post-MSA) – 2014 CAGR: -3.34%

-9.09%

-6.36%-2.76%

-1.97%-4.86%

-4.00%

*

15

Factors Influencing Cigarette ConsumptionIHS has considered the following set of variables relevant to building a model of cigarette demand.

Smoking Bans

Changes in Disposable Income

Increases in Taxes

Health Warnings

Indoor and outdoor smoking bans have spread rapidly throughout the country

Studies have found disposable income is directly linked to consumption resulting in a decrease of smoking during periods of economic downturn

Increases in federal and state excise taxes have decreased consumption

Long-term price elasticity of consumption is -0.33 (e.g. 1% increase in real cigarette prices reduces cigarette consumption by 0.33%)

The increasing availability and variety of smokeless tobacco products

Mandatory warnings on packaging have affected the public’s view of smoking

Smokers in the 12-17 age group has steadily declined (with exception of a peak in the 1990s) since the early 1970s

Youth Consumption

Price Elasticity

ElectronicCigarettes

16

FDA Regulation and Menthol On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) was signed by President Obama

granting the Food and Drug Administration (“FDA”) broad authority over the manufacture, sale, marketing and packaging of tobacco products. The legislation among other powers provides for the following:

– Establishes a Tobacco Products Scientific Advisory Committee (“TPSAC”) to, among other things, evaluate the issues surrounding the use of menthol as a flavoring or ingredient in cigarettes within one year of the committee’s establishment

– Grants the FDA the regulatory authority to consider and impose broad additional restrictions through a rule making process, including a ban on the use of menthol in cigarettes

– Requires larger and more severe health warnings on cigarette packs and cartons

– Bans the use of descriptors on tobacco products, such as “low tar” and “light” (effective in 2010)

– Requires pre-market approval by the FDA for claims made with respect to reduced risk or reduced exposure products

– Allows the FDA to require the reduction of nicotine or any other compound in cigarettes

– Allows the FDA to place more severe restrictions on the advertising, marketing and sales of cigarettes including preempting state cigarette advertising laws

– Permits inconsistent state regulation of cigarette advertising and eliminates the existing federal preemption of such regulation

In particular, the legislation permits the FDA to ban menthol upon a finding that such a prohibition would be appropriate for the public health. According to Lorillard, mentholated cigarettes are reported to comprise 31% of the U.S. domestic market

On March 18, 2011 the TPSAC presented its report and recommendations on menthol. TPSAC's overall recommendation to the FDA was that "[r]emoval of menthol cigarettes from the marketplace would benefit public health in the United States." On July21, 2011, the TPSAC considered revisions to its report, and the voting members unanimously approved submission of the final report to the FDA with no change in the recommendations

On July 23, 2013, the FDA made available for public comment, the Preliminary Scientific Evaluation and also provided an Advanced Notice of Proposed Rulemaking for public comment for 60 days

On July 21, 2014, a federal judge ruled in favor of Lorillard and Reynolds American’s challenge of the 2011 TPSAC report, finding three of the panel’s members had conflicts of interests. The US District Court ordered the FDA reconstitute the committee and barred the use of the panel’s findings

A ban or material restriction on the use of menthol or the negative impact of any of the foregoing possible FDA actions could reduce consumption of cigarettes in the U.S.

17

E-Cigarettes and Traditional Cigarette ConsumptionCigarette manufacturers have developed alternative tobacco products, most notably electronic cigarettes, which do not currently result in payments under the MSA and could impact demand for traditional cigarettes.

Numerous cigarette manufacturers are developing and marketing electronic cigarettes or “e-cigarettes”. E-cigarettes contain nicotine derived from tobacco plants and are battery powered devices that vaporize liquid nicotine, which is then inhaled. Thereare currently more than 250 e-cigarette brands on the market

E-cigarettes are not currently treated as "cigarettes" under the MSA

The parent companies of all three OPMs have launched e-cigarette brands and are aggressively pursuing the e-cigarette market by expanding distribution as well as product and technology acquisition. Reynolds American and Philip Morris (“PM”) also market “heat not burn” cigarettes that are “cigarettes” under the MSA

Sales of e-cigarettes in 2012 were estimated to be $300 million, double the amount during the prior two years, and are projectedto reach more than $2 billion in 2014. Certain reports predict that e-cigarettes could outpace traditional cigarette sales before 2050 with some reports predicting e-cigarettes overtaking traditional cigarettes in the next decade

In October 2013, Altria (PM USA’s parent) sent a letter to the FDA Commissioner supporting the regulation of all currently unregulated tobacco products including e-cigarettes

On February 12th, Democratic leaders sent a letter to select Attorneys General (“AGs”) urging them to classify e-cigarettes as cigarettes under the MSA definition. The AGs cannot unilaterally add e-cigarettes to the definition of cigarettes under the MSA.Such an addition would likely be a negotiation with the Participating Manufacturers and subject to different conversion methodology

On April 24, 2014, the FDA released proposed rules that would extend its regulatory authority to e-cigarettes and certain other tobacco products under the Family Smoking Prevention and Tobacco Control Act. The proposed rules would require, among other things, that e-cigarette manufacturers register with the FDA, report ingredients, only make direct and implied claims after FDA confirms, implement age restrictions to prevent sales to minors and include health warnings. The proposed rules do notrestrict flavored products, online sales or advertising. The proposed regulation is subject to a 75-day public comment period

In December 2014, the University of Michigan Monitoring the Future study released its report which indicates that in 2014 more teens used e-cigarettes than traditional, tobacco cigarettes or any other tobacco product. This represents the first time a U.S. study has shown that teen use of e-cigarettes surpasses use of tobacco cigarettes

18

5. Oil & Gas Royalty Securitization (GOMESA)

Executive Summary

The State has the essential pieces in place to take advantage of what is estimated to be a robust future revenue stream

Citi recommends the State, through the CPRA and CPRFC, develop the full menu of financing alternatives by investing in the development of a credible revenue forecast by a third party expert

Given the long history of production in the Gulf, Citi anticipates the future revenue stream past 2016 will prove forecastable

Bringing forward this future revenue stream today would serve to facilitate essential coastal projects while also mitigating inflation risk associated with projects of this nature

Recent events have made some otherwise unlikely events reality, therefore the issuance of any asset-backed securitization bonds will need to take into account such risks

Up-front moneys could potentially be utilized for projects that otherwise may have received State capital outlay moneys

Citi would welcome the opportunity to work with the State, the CPRA and its partners to implement this process and develop the credit structure through the Louisiana Coastal Protection & Restoration Financing Corporation

The Gulf of Mexico Security Act of 2006 provides sizeable future revenue sharing opportunities for Gulf Producing States, including Louisiana

19

CPRA Master Plan - Projected FundingThe CPRA’s most recent Annual Spending Plan envisions roughly $1.7 billion in Program Revenues and Expenditures through FY 2017 from a variety of sources

Projected CPRA Three-Year Revenues (FY 2015 - FY 2017)

Revenue Sources FY 2015 FY 2016 FY 2017Program Total

(FY2015 - FY2017)CPR Trust Fund Annual Revenue 33,131,175$ 33,100,000$ 33,100,000$ 99,331,175$ CPR Trust Fund Carried Forward 15,320,000 - - 15,320,000 GOMESA 80,775 80,775 TBD 161,550 DOTD Interagency Transfer 4,000,000 4,000,000 4,000,000 12,000,000 CIAP 78,616,250 30,755,349 16,691,884 126,063,483 Surplus '07, '08, '09 291,732,872 53,178,060 120,000 345,030,932 Community Development Block Grants 13,520,558 3,565,520 - 17,086,078 NRDA Early Restoration 78,555,920 115,368,331 34,497,051 228,421,302 NFWF 113,161,715 81,953,872 115,094,000 310,209,587 Other Oil Spill Related Revenues 43,115,935 38,221,005 118,030,070 199,367,010 FEMA Reimbursement 5,264,655 - - 5,264,655 Project Generated - Adaptive Management 18,719,241 17,754,220 20,071,584 56,545,045 Project Billing 18,500,000 18,500,000 18,500,000 55,500,000 Capital Outlay Request - 73,277,135 73,277,135 146,554,270 Other 11,760,924 336,102 81,719 12,178,745 Total Projected Revenue 725,480,020$ 470,090,369$ 433,463,443$ 1,629,033,832$ Source: w w w .cpra.gov. Annual Spending Plan; Section 1: Executive Summary

To date, funding of the CPRA Master Plan has included funds from a variety of sources, buoyed by funds related to the BP Oil Spill, the Coastal Impact Assistance Program and revenues related to on land oil and gas production

By bringing forward future GOMESA OCS Royalty Revenues, the State could benefit from the ability to quickly fund additional projects while mitigating future risks

20

Gulf of Mexico Energy Security Act of 2006

The Act created revenue sharing provisions for the four Gulf oil and gas producing States of Alabama, Louisiana, Mississippi and Texas, and their coastal political subdivisions (CPS’s)

Provided revenues generated by new leases in defined areas of the Gulf are to be distributed between:

– Federal government– Land and Water Conservation Fund (LWCF)– Gulf Producing States, including Louisiana

Qualified OCS Revenues– Rentals– Royalties– Bonus Bids

OCS Revenues received by the Gulf Producing States must be used for coastal conservation, restoration and hurricane protection

OCS Revenue Application

Federal Treasury50.0%

Gulf States37.5%

LWCF12.5%

MA

Minnesota

Iowa

Illinois Indiana

Missouri

Arkansas

Louisiana

Mississippi Alabama Georgia

S. Carolina

North CarolinaTennessee

KentuckyVirginia

Ohio

MichiganNew York

VT

NH

CT NJ

DC )

Washington

Oregon

Nevada

Utah

California

Idaho

Montana

Wyoming

Arizona

Colorado

New Mexico

Texas

Oklahoma

Kansas

Nebraska

South Dakota

North Dakota

Wisconsin

Maine

Pennsylvania

MD

Florida

RI

Puerto RicoAlaska

Hawaii

DE

West Virginia

Allocated a % of OCS Royalties

MA

Minnesota

Iowa

Illinois Indiana

Missouri

Arkansas

Louisiana

Mississippi Alabama Georgia

S. Carolina

North CarolinaTennessee

KentuckyVirginia

Ohio

MichiganNew York

VT

NH

CT NJ

DC )

Washington

Oregon

Nevada

Utah

California

Idaho

Montana

Wyoming

Arizona

Colorado

New Mexico

Texas

Oklahoma

Kansas

Nebraska

South Dakota

North Dakota

Wisconsin

Maine

Pennsylvania

MD

Florida

RI

Puerto RicoAlaska

Hawaii

DE

West Virginia

Allocated a % of OCS Royalties

The Gulf of Mexico Security Act of 2006 (GOMESA) significantly enhances OCS oil and gas leasing activities and revenue sharing in the Gulf of Mexico

21

Gulf of Mexico Energy Security Act of 2006 Qualified Revenues between through 2016 include those

lease revenues for leases entered into after the enactment of the 2006 Act that are within:

– 181 Area – Eastern Planning Area– 181 South Area

Qualified Revenues on or after October 1, 2016 include those lease revenues for leases entered into after the enactment of the 2006 Act that are within:

– 181 Area– 181 South Area– 2002-2007 Planning Area

Allocation of revenues - inversely proportional to the respective distances between the point on the coastline of each Gulf Producing State that is closest to the geographic center of the applicable leased tract

– Minimum allocation to each state of 10%– $500 Million per year cap on leases in the 2002-2007

Planning Area, through 2055– No cap on Qualified Revenues in 181 Areas

While MMS provided rules in 2008 related to the revenue sharing program through 2016, no guidance was provided for revenues generated between 2017 and 2055

– Governors from each Gulf Producing State, including Governor Jindal, requested further guidance in May 2009

– A subsequent Phase II rule was proposed on March 31, 2014, and has yet to be deemed final

22

Gulf of Mexico Energy Security Act of 2006

OCS Royalty Revenues

Gulf Producing States75.0%

LWCF25.0%

U.S. Treasury50.0%

Special Treasury Acct.50.0%

State Protection & Conservation Projects

80.0%

Coastal PoliticalSubdivisions

20.0%

26% 47% 14% 13%

23

Louisiana SB 53

The State’s Enabling Legislation includes strong provisions for realizing the maximum benefits of securitizing the proposed revenue stream

– Created a Single Purpose Corporation for purposes of securitizing OCS rents and royalty revenues

– Authorized the State to sell all or a portion of its royalty revenues to the Corporation and authorized the Corporation to purchase said revenues

– Authorized the Corporation to issue asset-backed bonds secured solely by these revenues for purposes of paying the purchase price on those revenues

– Granted the State the residual interest on revenues not pledged to securitization

– Deemed the sale of these revenues a “true sale” and absolute transfer to the Corporation

– Provided other bondholder protections typical in securitization transactions

Signed by Governor Blanco July 6, 2007, SB 53 created the “Louisiana Coastal Protection and Restoration Financing Corporation” to securitize revenues for coastal purposes

Residual Payments

Louisiana

Investors

PurchasePrice for % of

Revenue Rights

Sale of Rights toFuture Revenues

Securities Proceeds Securities

Louisiana Coastal

Protection & Restoration FC

24

Securitization - Overview

Securitization is the structuring of a stream of cash flows into a liquid security for sale to investors

Securitization offers the benefits of: – Non-recourse financing (no pledge of State credit)– Isolation of security– Upfront proceeds to the State – Reduced State exposure to oil & gas royalty risks

With securitization, the bondholders bear the downside risk of revenues coming in lower than forecasted with the State keeping the upside revenues in excess of debt service

Securitization constitutes and is treated as a “true sale” and absolute transfer of the State’s right to receive its royalty revenues

– Oil & Gas revenue rights sold to a La CPRFC– Securities issued by the entity are backed solely by

these revenues and any other pledged assets– Counsel will issue an opinion that securities are non-

recourse to the State– No State liability in the event revenues are not sufficient

to pay debt service

Residual Payments

Investors

PurchasePrice for % of

Revenue Rights

Sale of Rights toFuture Revenues

Securities Proceeds Securities

Louisiana Coastal

Protection & Restoration FC

Louisiana

Investors

25

Rationale for Securitization

Immediate Funds

• Capital projects and State programs

• Endowment Fund for priority programs

• Working capital

Diversification / Risk Transfer

• Insurance policy against non-payment or reduced revenues

• Diversify State’s assets by reducing exposure to one particular industry

• Transfer production risk

• Transfer litigation risk

• Transfer interruption / moratorium risk

• Non-recourse to the State• Rating agencies do not count

securitization bonds on states’ credits

Public Policy

• Provide show of commitment to rebuilding the State’s wetlands

• Eliminate uncertainty and unpredictability of revenue stream

• Limit visible dependence on oil & gas industry

26

GOMESA Securitization CapacityWhile revenue estimates differ, there exists significant potential for securitizing all or a portion of the estimated revenues to the State as needed over time

ONRR has estimated that royalty revenues to the Gulf Producing States and their CPS’s will exceed the $375 million cap beginning in 2017

If revenues exceed the cap, Louisiana’s share (estimated at 47%) would likely amount to over $175 million annually

Citi would recommend the State borrow only for those projects it can reasonably and prudently complete under the CPRA’s Master Plan

The ultimate capacity of the program will depend largely on

(1) the results of a Feasibility Study,

(2) market conditions at pricing,

(3) the timing of the phased in financing program and

(4) the ultimate percentage of the pledged revenues the State feels comfortable securitizing

Certain legislative and structural enhancements could further maximize capacity

State/CPS Est. % Est. $Louisiana 47% 176,250,000 Alabama 13% 48,750,000 Mississippi 14% 52,500,000 Texas 26% 97,500,000

State 80% 141,000,000 CPS 20% 35,250,000

GOMESA Phase II Revenue Estimates

Louisiana Phase II Revenue Breakdown

Revenues available for State and CPRA Master Plan total $141 million annually based on application of the annual cap

There may be potential to combine these revenues with those applicable to the CPS’s, or create a separate funding program available to those Parish’s

27

Key Structuring Elements

Any CPRFC Securitization would likely incorporate:– Fixed rate structure locking in cost of borrowing– Debt Service Reserve Fund– Acceptable coverage requirements– Structuring flexibility for accelerated redemption

Illustrative Capacity Analysis

Capacity for the Program is determined by the percentage of revenues utilized for securitization– Coverage requirements and percentage of

pledged revenues largely drives capacity– The same coverage requirements also largely

drive the rating process, along with other elements

Citi anticipates that coverage between 1.25x and 2.00x, in conjunction with required reserves, will be necessary to achieve investment grade ratings

Depending on the percentage of future revenues to be securitized, Citi estimates the capacity of the program in Louisiana could be substantial

GOMESA Securitization Capacity for Louisiana

Summary of Financing ResultsCoverage 1.25x 1.50x 2.00xPar Amount $1,733,985,000 $1,444,970,000 $1,083,720,000Project Fund $1,860,222,578 $1,550,166,099 $1,162,616,235DSRF $112,800,000 $93,999,750 $70,499,750Average Life 19.03 19.03 19.03TIC 3.91% 3.91% 3.91%Avg. Annual DS $112,797,573 $93,997,217 $70,497,658Assumes rates as of 01/28/15, fully funded DSRF at lesser of three pronged test, all-in issuance costs of 1%. Preliminary and subject to change, for illustrative purposes only.

Louisiana revenue share based on estimate provided by the Office of Natural Resources Revenue.

0

20

40

60

80

100

120

140

160

2017 2020 2023 2026 2029 2032 2035 2038 2041 2044

Deb

t Ser

vice

($ m

illio

ns)

1.50x Coverage Scenario

Principal Interest LA Revenue Share

28

6. Transportation Financing

Citi’s Senior Managed Surface Transportation Clients

Alabama Highway Dept

Port Authority of Allegheny County

TBTA

Michigan DOT

Dallas Area Rapid Transit

Tri-Met of Oregon

City of Laredo, Int’l Toll Bridge System

Pennsylvania Turnpike Commission

Las Vegas Monorail

P.R. Highway and Transportation Authority

Chicago Transit Auth

Buffalo Fort EriePeace Bridge Auth

State of Wisconsin

Clark Co, NV

San Diego County Transportation

Santa Clara County Transportation

San Bernardino County Transportation

Foothills Eastern TCA

San Mateo County Transit Dt

Riverside County Transportation

Ohio Turnpike

29

Case Study: State of Louisiana, Gasoline and Fuels TaxIn January 2015, the State of Louisiana issued $625 million of refunding bonds to realize debt service savings, totaling $70 million on a present value basis through 2041

• Citi swiftly prepared the 2015 Series A and B Gasoline and Fuels Tax Revenue andRefunding Bonds (“2015 Bonds”) to price on January 22, 2015, within six (6) weeks ofbeing hired, to take advantage of historically low interest rates and generate substantialdebt service savings for the State

• The finance team was able to affirm the Gasoline and Fuels Tax program’s strong FirstLien ratings of Aa1/AA and Second Lien ratings of Aa2/AA from Moody’s and S&P,respectively

• Citi worked closely with the State and its financial advisor to develop a refundingscreening methodology that allowed the State to select to refund those candidates thatproduced present value savings above certain threshold levels, leaving certain othermaturities unrefunded where present value savings could be substantially higher in thefuture

• In the three (3) weeks leading up to pricing, the combination of increased municipalsupply, continued weak U.S. economic news, and the European Central Bank’s plans forQuantitative Easing caused the municipal market to experience significant volatility

• As a result, Citi refreshed its refunding screen daily with updated borrowing and reinvestment rates to keep the Stateapprised of how interest rate changes impacted the economics of the refunding

• Citi’s focused marketing strategy included pre-marketing to targeted buyers of the 2015 Bonds, a pre-recorded internetroadshow that was viewed by 22 potential investors, and 10 one-on-one calls with potential institutional investors toeducate them on the strengths of the Gasoline and Fuels Tax credit and refunding structure

• The final pricing structure resulted in $649 million of bonds refunded and reduced total debt service by more than $109million ($70 million on a present value basis or 10.78% of bonds refunded)

30

Transportation Financing and Funding Tools Available States are undertaking a comprehensive review of a wide variety of transportation funding sources, across both the public and private spectrum.

Federal State Local Private

Highway Trust Fund

GARVEE / GANs– Direct / Indirect

Section 129 Loans

TIFIA– Direct Loan, Line of Credit,

Loan Guarantee Highway Trust Fund

State Infrastructure Bank– Loans, Guarantees, Interest

Rate Buydowns

Private Activity Bonds– MAP-21 Alternative Funding

34 states issue highway revenue bonds

Dedicated Highway Trust Fund (Leveraged and Pay-Go)

– Motor Fuel / Sales Tax– Sales Tax on Motor Vehicles– Use Tax on Motor Vehicles– Licensing Fees

Tolls and Toll Credits

Obtain Design/Build Contract

Grants/Capital Contributions

Provide Shadow Tolls

Back-up Appropriations for Toll Roads, Highways

– O&M, CapEx, DSRF Guarantee

Right of Way

Tolls

Capital Investment

Special Tax Districts

Transportation Corporations

Local Option Taxes

Sales Taxes

Toll Concession– Debt– Equity

Leverage Availability Payments, including Shadow Tolls

Provide Design/Build Contract– Subordinate loan/up-front

equity as consideration for contract

31

Future Federal Highway Transportation Funding is Uncertain

No revenue/tax increases and rising construction costs have depleted States capacity to fund new construction and ongoing maintenance of existing transportation infrastructure

There has not been an increase in the federal motor fuel excise tax since 1994– The 18.4 cpg federal gas tax and 24.8 federal diesel tax– Revenue split roughly 80% for Highways / 20% for Transit

Significant loss in buying power of Federal Gas Tax revenues– Since 2003, highway construction costs have increased by nearly 200% while revenue receipts have

stagnated

To maintain current spending levels, the U.S. Treasury has “bailed out” the Federal Highway Trust Fund multiple times totaling $54 billion over the last six fiscal years

The current House majority has publically committed to eliminating any future U.S. General Fund transfers without offsetting spending reductions

Without additional U.S. General Fund transfers or other revenue injections, the Federal Highway Trust Fund continues to be insolvent

With seemingly little political support to raise the Federal Gas Tax and more fuel efficient vehicles on the road resulting in minimal growth in both federal and state gas tax collection, new revenue streams must

be identified to fund transportation.

With Congress focused on reducing the Federal budget deficit and significantly reduce discretionary spending, transportation funding faces significant near-term challenges

32

Short-Term Funding of the Highway Trust FundOn August 8, 2014, President Obama signed a $10.8 billion measure called the Highway and Transportation Funding Act of 2014 to fund the Highway Trust Fund through May 31, 2015.

Key Elements of the Bill

The Act continues existing federal highway programs authorized under MAP-21 as well as existing programs that are funded by the Highway Trust Fund, which include the highway safety, transit and motor carrier safety programs

The spending authority of the Highway Trust Fund will be reauthorized to fund all existing programs through May 31, 2015 on a pro rata basis based on 2014 levels

Based on TIFIA’s budget of $1 billion in 2014, the prorated appropriation for the TIFIA program would be approximately $665.8 million

The funding of the legislation will come from the following transfers and budgetary offsets Transfer from the General Fund of the US Treasury - $9.8 billion Transfer from the Leaking Underground Storage Tank Trust Fund -

$1 billion Change in the Internal Revenue Code to allow single-employer

defined benefit pension plans to use higher interest rates when calculating their future liabilities and a one-year extension of the US Treasury’s capability to collect certain custom user fees

Source: http://www.mondaq.com/unitedstates/x/333536/Project+Finance+PPP+PFI/Federal+Surface+Transportation+Reauthorization+A+Temporary+Detour

33

State Highway Revenue Bond Programs Overview

27 states, plus Puerto Rico, have unsupported Highway Revenue Bond (“HRB”) programs with four states (Louisiana, Michigan, Pennsylvania and Wisconsin) having two separate programs

26 of the 32 programs leverage state motor fuel taxes

– Louisiana, Rhode Island, Vermont and Wisconsin are the only states that issue HRBs backed only by state motor fuel taxes

– In addition to motor fuel taxes, many states pledge a combination of:

Vehicle registration fees

Drivers License fees

Miscellaneous taxes and other fees

In addition to the 32 revenue programs, 10 states pledge their full faith and credit towards repayment of transportation bonds

Highway Revenue Bond programs are widely used by states to accelerate transportation funding and better connect user fees to public benefits

KEY:Highway Revenue BondsState Appropriations BondsMultiple Programs – Appropriation and Highway Revenue BondsMultiple Programs – GO and Highway Revenue BondsGO Bonds Paid by Transportation Revenues

34

Comparison of State Motor Fuel TaxesProvided below is a comparison of state motor fuel tax rates from January 2014 to January 2015

January 2014 January 2015 Difference January 2014 January 2015 DifferenceGasoline Diesel Gasoline Diesel Gasoline Diesel Gasoline Diesel Gasoline Diesel Gasoline Diesel

Alabama 20.95 21.92 20.87 21.85 (0.08) (0.07) Montana 27.75 28.50 27.75 28.50 - -Alaska 12.40 12.70 11.30 11.80 (1.10) (0.90) Nebraska 27.30 26.70 26.50 25.98 (0.80) (0.72)Arizona 19.00 27.00 19.00 27.00 - - Nevada 33.15 28.56 33.15 28.56 - -Arkansas 21.80 22.80 21.80 22.80 - - New Hampshire 19.63 19.63 23.83 23.83 4.20 4.20 California 52.47 51.06 45.39 40.60 (7.08) (10.46) New Jersey 14.50 17.50 14.50 17.50 - -Colorado 22.00 20.50 22.00 20.50 - - New Mexico 18.88 22.88 18.88 22.88 - -Connecticut 49.30 54.90 43.22 54.50 (6.08) (0.40) New York 49.57 49.57 45.09 46.28 (4.48) (3.29)Delaware 23.00 22.00 23.00 22.00 - - North Carolina 36.75 36.75 37.75 37.75 1.00 1.00 District of Columbia 23.50 23.50 23.50 23.50 - - North Dakota 23.00 23.00 23.00 23.00 - -Florida 36.03 32.37 36.42 33.67 0.39 1.30 Ohio 28.00 28.00 28.00 28.00 - -Georgia 28.45 31.97 26.53 30.10 (1.92) (1.87) Oklahoma 17.00 14.00 17.00 14.00 - -Hawaii 49.11 52.47 45.00 42.38 (4.11) (10.09) Oregon 31.07 30.34 31.07 30.34 - -Idaho 25.00 25.00 25.00 25.00 - - Pennsylvania 41.80 52.10 50.50 64.20 8.70 12.10 Illinois 39.10 44.10 30.72 39.49 (8.38) (4.61) Rhode Island 33.00 33.00 33.00 33.00 - -Indiana 38.69 39.81 29.85 44.26 (8.84) 4.45 South Carolina 16.75 16.75 16.75 16.75 - -Iowa 22.00 23.50 22.00 23.50 - - South Dakota 22.00 24.00 22.00 24.00 - -Kansas 25.00 27.00 24.03 26.03 (0.97) (0.97) Tennessee 21.40 18.40 21.40 18.40 - -Kentucky 38.80 27.80 27.60 24.60 (11.20) (3.20) Texas 20.00 20.00 20.00 20.00 - -Louisiana 20.00 20.00 20.00 20.00 - - Utah 24.50 24.50 24.50 24.50 - -Maine 30.01 31.21 30.01 31.21 - - Vermont 31.97 31.00 31.97 32.00 - 1.00 Maryland 27.00 27.75 30.30 31.05 3.30 3.30 Virginia 17.28 26.06 22.38 26.08 5.10 0.02 Massachusetts 26.50 26.50 26.54 26.54 0.04 0.04 Washington 37.50 37.50 37.50 37.50 - -Michigan 39.10 38.47 30.26 33.98 (8.84) (4.49) West Virginia 35.70 35.70 34.60 34.60 (1.10) (1.10)Minnesota 28.60 28.60 28.60 28.60 - - Wisconsin 32.90 32.90 32.90 32.90 - -Mississippi 18.78 18.40 18.78 18.40 - - Wyoming 24.00 24.00 24.00 24.00 - -Missouri 17.30 17.30 17.30 17.30 - - Average 28.22 28.82 27.39 28.53 (0.83) (0.29)

Source: American Petroleum InstituteTotal State Taxes include Sales Tax ComponentComponent of State Taxes indexed to wholesale price of gasoline Gasoline tax is linked to inflationVoters have repealed automatic indexing of the state's gasoline tax

35

Gasoline Price vs. Louisiana Gas and Motor Fuels Tax RevenuesSince 1991 U.S. and Gulf Coast gasoline prices have increased by 5.6 and 5.9%, respectively, while Louisiana’s gas and fuels tax revenues have increased by 1.7%, on average

0

100

200

300

400

500

600

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Tota

l Gas

olin

e an

d M

otor

Fue

ls T

axes

($ m

illio

n)

Gas

olin

e Pr

ice

($/g

allo

n)

Fiscal Year

U.S. Regular Conventional Retail Gasoline Price Gulf Coast Regular Conventional Retail Gasoline Price Total Louisiana Gasoline and Motor Fuels Taxes

Sources: U.S. Energy Information Administration; Louisiana Gas and Fuels Tax Revenue Refunding Bonds Series 2015 A and B Official Statement

U.S. Gasoline Price

Gulf Coast Gasoline Price

Louisiana Gasoline and

Motor Fuels TaxesAverage YoY Growth 5.56% 5.93% 1.69%Minimum YoY Growth -19.05% -19.34% -5.35%Maximum YoY Growth 32.31% 33.53% 11.19%

36

Diversity and stability of the pledged revenue stream– State’s economy– Qualitative and quantitative characteristics of the pledged revenues

Legal and practical restrictions to additional debt issuance– Additional bonds test should ensure that coverage will not be diluted to threshold level

Coverage of debt service– Vulnerability to declines in revenue– Historic coverage sufficient to meet dips

Governmental support– Importance of highways and roads in overall spectrum of infrastructure needs

Program management

Quality of planning, construction management, maintenance and inspection

Fuel efficiency / hybrid vehicles

Rating Agency Criteria for Transportation Revenue Bonds

37

Revenues for Financing Transportation Improvements

Type of Revenue Adequacy Stability Point of Taxation Potential for Evasion Equity Ease of Implementation

Gasoline and Diesel Taxes

Inflation erodes the value of fixed rate per

gallon fuel taxes; increasing fuel

efficiency reduces the revenue per mile of

travel

Periodic revisions in response to inflation;

changes in fuel efficiency will decrease

stability

Gasoline taxes can be collected fairly high up the distribution chain, on refiners or major

distributors; diesel fuel taxes are collected

from distributors and users

Evasion rate of diesel fuel (10%) taxes exceeds that of gasoline taxes

Does not achieve equity by vehicle class

and must be augmented by other

fees

Easy to implement compared with major

changes in the revenue structures of

the state

Vehicle Registration Fees

Could be set at any level, limited only by political feasibility;

rates should be graduated for the

various vehicle classes

Could provide a very stable revenue base, as well as one that

grew with the vehicle fleet; responsive to inflation if based on

value

Collected from all vehicle owners

Evasion relatively modest

Might not be equitable among vehicle classes depending on how it is

implemented; not sensitive to amount of

use of the vehicle

Present registration fees could easily be

adjusted, but it may be difficult to tie closely to benefits or objectives

of the program

Taxes on New Vehicles and Parts

Sales Tax

Tax at either the manufacturer's price or at the retail price could

yield substantial revenue

Highly responsive to inflation; will fluctuate

substantially in response to economic

cycles

Levied at the retail level or manufacturers'

level; would directly apply to buyers of new

vehicles

Evasion at manufacturer's level should be a relative

minor issue; however, at the retail level could

present a major problem

Tax could be set at different levels for vehicle classes to

reflect cost responsibility

Relatively easy to implement at the

manufacturers' level; however at the retail level, it may entail

some problems due to the large number of

selling entities

Taxes on Alternative Fuels (Ethanol,

Methanol, Blends, Liquefied Petroleum

Gas, Compressed Natural Gas (CNG),

and Electric Batteries)

Tax rates could be set to yield revenue

equivalent to gasoline and diesel taxes

Periodic revisions in response to inflation;

changes in fuel efficiency will decrease

stability

Similar to that for gasoline or diesel fuels- as far up the

distribution chain as feasible

Evasion is a serious problem for all

alternative fuels, particularly electricity

and CNG; rates similar to those of diesel fuel

taxes

Can be indexed by vehicle class to

achieve greater equity among vehicle classes than fuel taxes alone; vehicle sales taxes will

be less equitable by vehicle class than fuel

taxes

Taxes on fuels delivered through

stations may be easy to implement; other,

such as CNG or electricity, may be

difficult

38

Revenues for Financing Transportation Improvements (Cont’d)

Type of Revenue Adequacy Stability Point of Taxation Potential for Evasion Equity Ease of Implementation

Damage Fees and Weight-Distance

Taxes

Rates could be set at any level; could be based on registered

weight and distance or axle weights

Likely to be highly stable; relatively easy to adjust because not many taxpayers are

involved; unless indexed not responsive

to inflation

Will be incident upon trucks, at the level of the vehicle or fleet owner or operator

Evasion is highly dependent on

enforcement activities

Highly equitable source of revenue; in addition, pavement

fees may contribute to more productive use of

pavement resources

Neither are likely to be easy to implement

politically

Emission Fees

Rates could be chosen along a broad

continuum, and fees could yield very high

revenues at the higher rates

Not responsive to inflation; emissions

have been declining as a result of continued

tightening of standards

Collected from all vehicle owners

Dependent on the geographic breadth

of application, and on level of the highest

fees

Emission fees would be higher for those

owning higher-emitting (older) vehicles, likely

to include lower income groups

disproportionately

Currently no state emission fees in place;

would require centralized inspection

and testing of emissions at least

annually

Vehicle Miles of Travel (VMT) Fees

Could yield almost any desired level of

revenue; should be based on the relative cost responsibility of

vehicle classes

Not responsive to inflation, so they may need to be indexed or adjusted periodically in response to changes in revenue requirements

Collected from the individual vehicle or

fleet owner and would be incident upon

vehicle use

Evasion is a major concern because VMT

fee is paid on an individual basis and

more complex record-keeping is required

Highly equitable VMT fees could be set

among vehicle classes; could be graduated on

the basis of cost responsibility, vehicle

size and weight, equivalent single-axis

loads, value, emissions, or other

characteristics

No VMT currently applying to all vehicles; states would need to

expand existing registration procedures

39

7. Lottery & Gaming Revenue Bonds

Lottery Revenue Bond Programs – OverviewCiti believes the State has Lottery monetization alternatives that could be pursued to raise proceeds for a variety of programs while complying with any U.S. federal law constraints that may be applicable.

Some states have leveraged their lottery programs by issuing lottery revenue bonds– Lottery revenue bonds are secured by future lottery revenues – Most lottery revenue bond transactions have used traditional dedicated revenue structures that provide

strong debt service coverage with excess revenues continuing to be pledged for ongoing state programs

Citi has acted as Senior Managing Underwriter on four different Lottery Revenue Bond Programs on a total of 26 separate transactions

The States listed below have issued Bonds secured by lottery or gaming revenues:– West Virginia (Education/Economic Development)– Florida (Education)– Oregon (Capital Projects/Local Grants)– Oklahoma (Higher Education)– Arizona (Budget Relief)

Citi believes a revenue bond approach similar to those utilized in West Virginia, Florida and Oregon, could bring significant upfront value to the State– If desired, General Fund relief could be achieved through budget re-programming techniques

40

State Lottery Revenue Bond Credits - Overview

(1) Sources: S&P report dated August 18, 2011 and Official Statement dated August 31, 2011. (2) Sources: S&P report dated March 23, 2012 and Official Statement dated April 10, 2012. (3) Sources: Citi’s understanding of the credit, based on official statements. SLF = State Lottery Fund Program, including traditional games and a portion of Racetrack Video Lottery revenues.

Florida (1) Oregon (2) West Virginia SLF (3)

State GO Ratings AAA / Aa1 / AAA AA+ / Aa1 / AA+ AA+ / Aa1 / AA State Lottery Ratings A+ / A1 / AAA Aa2 / AAA A1 / AAA / A+

Debt Service Coverage 3.59x 4x 5x Additional Bonds Test 3x 4x 2x

Use of Proceeds Education Capital Proj. / Local Grants Education / Econ. Dev.

Revenues Pledged First lien on revenues deposited in “Educational

Enhancement Trust Fund,” which totals 38% of gross lottery revenues by statute

First lien on all lottery revenues, net of revenues required for prizes, lottery operating expenses and certain other programs

First $18 million of the State Lottery Fund (“SLF”)

to the senior bonds; Second $10 million of the SLF to the subordinate bonds and $5 million to

further subordinate bonds

DSRF Requirement Max. Annual Debt Service Max. Annual Debt Service Max. Annual Debt Service

Ann. Lottery Rev. Pledged

$1.18 billion $567.9 million $177.4 million

Addt’l Lottery Revs Pledged?

Yes No No

Term of Debt 20 years 20 years 30 years

Other Security Features Non-impairment clause $2.5 bil bonding

authorization 20-year max. maturity Other similar gaming

revenues pledged first to these bonds

Moral obligation of the state to replenish the DSRF

Covenant to continue to operate lottery while bonds are outstanding

Debt service statutorily limited to amount of pledged revenues

41

Louisiana Lottery Overview

The Lottery is required by statute to transfer 35.5% of its revenue to the State Treasury– A constitutional amendment in 2004 further provided that

Lottery proceeds would be dedicated to the Minimum Foundation Program, which funds public education in Louisiana

– Total Lottery sales have totaled over $7.0 billion since its inception in 1991

– $2.8 billion has been transferred to the State over time

The Lottery’s structure, which is set up like a quasi-public corporation owned by the state, is unique

The Lottery is run as a private business

The Lottery has expanded its game selection over the years

In FY 2014, the Lottery recorded sales of $450 million– Of this amount, more than $161 million was returned to the

State– 13th consecutive year over $100 million transferred to the State

The Louisiana Lottery Corporation faces competition Statewide– Video Poker– Riverboat Casinos– Indian Casinos

Established in 1990 for purposes of generating revenues without additional taxes, the Louisiana Lottery provides supplemental funding for public education in Louisiana.

Where the Money Goes

Price Winners53%

State Treasury35%

Lottery Retailers6%

Lottery Operations

6%

42

8. PPP Solutions

Why Public Private Partnerships (P3)? Generally, governments look to P3s to capitalize on the private sectors’ expertise, capacity for innovation and bottom line orientation while also looking to transfer risk and responsibilities and enhance financial resources

Why P3s? Transfer risk and responsibilities associated with:

– Setting rates and charges for services under market pricing regime– Providing and managing service delivery– Managing project development, construction, operations, financing

and/or life-cycle delivery Value monetization

– Freeing trapped equity to re-cycle and fund new infrastructure– Relieve financial stress and deleverage

Expand financial resource and sources of capital

What’s the role of the governmental partner? Design/Bid/Build: Total government control and responsibility DBOFR: Outsource development and operating risk Long Term Concession: Government entities grants rights and

privileges while retaining oversight responsibilities and remedies True Sale: No on-going role for governmental entity

How do governments benefit financially from P3s? Upfront payment that may extinguish current debt and future liabilities On-going payments from base lease payments and/or share in net

operating or residual revenues [Note: Can share revenues as lessor or as participating partner]

Val

ue C

reat

ion

Valu

e D

estru

ctio

n

Value Creation while Avoiding Value Destruction in PPPs

OpEx Savings

PriceRegime

CapExSavings

Taxes

Cost of Capital

Negative Arbitrage

Design/ Build/Operate/ Finance/Rebuild

Design/Bid/Build Procurement

Private Contract Fee Services (QMA)

Private Concession (Revenue Risk)

Most Public Control & Risk/Lower Cost of Capital Most Private Control & Risk/Higher Cost of Capital Privatization via True Sale

Private (Design/Build)

NAIM

New American Infrastructure Model (“NAIM”) aims to capture the value creation aspects of P3s while avoiding

the value destruction and governance concerns

43

Extracting EfficiencyP3s allow for reallocation of key risks.

Possible Goals Challenges

Construction Efficiency Transfer of construction risks, including cost,

schedule and/or performance Compliance with state laws Labor unions

Operating Efficiency

Reduce operating expenses and/or improve service through:

– Technology– Transfer of operating cost and

performance risk to private sector

Federal Qualified Management Agreement requirements for private operation of State debt financed assets

Labor unions

Revenue Efficiency

Enhance revenues through: – Technology– Improved collections– Increased rates– Implementing forward looking rate

schedules– Taking rate setting schedule out of

political arenas

Public/political opposition

Upfront Proceeds

Undertake transaction to generate upfront funds

Sale of certain assets requires defeasance of existing state debt

State law limitations on asset disposition

44

P3 Projects Financing Leverages State Funds

Public Financing ($millions) PPP Project Financing ($millions)State/Local* TIFIA** PABs Bank Sr. Debt Equity Total Closing

91 Express Lanes, CA (TR) 0 0 0 100 30 130 7/93Dulles Greenway, VA 0 0 0 298 80 378 9/93So. Bay Express, CA (TR) 0 140 0 400 160 700 5/03I-495 Express, VA (TR) 409 589 589 0 350 1,973 7/08SH 130 seg. 5+6, TX (TR) 0 430 0 686 210 1,326 3/08I-595, FL (AP) 0 603 0 781 208 1,592 2/09Port of Miami Tunnel, FL (AP) 100 341 0 342 80 860 10/09No. Tarrant Express, TX (TR 573 650 400 0 426 2,049 12/09LBJ Expressway, TX (TR) 490 850 615 0 672 2,627 6/11Denver Eagle Rail, CO (TR) 1,312! 280 396 0 54 2,042 8/10Jordan Bridge, VA (TR) 0 0 0 0 120 120 1/12Midtown Tunnel, VA (TR) 731 422 675 0 272 2,100 4/12Presidio Parkway, CA (AP) 0 60+90^ 0 167 45 362 6/12I-95 HOT Lanes, VA (TR) 83 300 253 0 280 916 12/12East End Bridge, IN (AP) 392 0 677 0 82 1,151 3/13No. Tarrant Exp. 3A/B, TX (TR) 0 531 274 0 430 1,235 9/13Goethals Bridge, NY (TR) 456 474 457 0 113 1,500 11/13US 36 Managed Lanes, CO (TR) 76 60 20 0 41 208 2/14I-69 Managed Lanes, IN (AP) 80 0 244 0 40.4 370 7/14I-4 Managed Lanes, FL (AP) 861 949 0 486 104 2,300 2/14Total $5,563 $6,769 $4,600 $3,260 $3,797 $23,989

Source: Public Works Financing (9/14)

(TR) Toll revenue risk financing(AP) Availability payment financing

*excludes public development costs**excludes capitalized interest! Federal grant (FTA FFGA), sales tax revenue, revenue bond proceeds^$60m 30yr loan +$90m 3yr loan

45

Key Barriers to P3s in the U.S.Need a New American Infrastructure Model (“NAIM”) that addresses obstacles unique to the U.S. and provides strong incentives for: (1) public pensions to invest in U.S. infrastructure, and (2) preserves the favorable financing terms and lowest cost of capital provided by the tax-exempt debt market.

Cost of Capital - U.S. Municipal Securities Market, nearly $4 Trillion in size, is extraordinarily diverse in terms of asset class, deal size and financing structures largely bolstered by the tax-exempt nature of most of the debt Large and broad pool of capital available Attractive interest rates – generally tax-exempt from Federal and in most

case state and local taxes Average rating of “A”, where a demonstrated ability to repay debt is

required Fixed rate, long tenured bonds (up to 40 years but not longer than average

useful life of assets) with attractive call features (10-yr par call) Ability to issue zero coupon debt to better match growing revenue streamsGovernance and Social Concerns Infrastructure concessions are still new in the U.S. and have a mixed track

record, and some of the distressed situations only add to the confusion Labor resistance, xenophobic fears and parochialism are P3s obstacles “Cost recovery” principals drive the pricing of infrastructure today where

“market pricing” regimes are needed to transform government enterprise and generate new and recycled capital for infrastructure

Public

Pension

Funds (“PPF)

Privatization & P3

Opposition

Infrastructure

Gap

Structural

Deficits

Recognize PPF’s as

Public Sector

Comparators

PPF

Mutual

Fund

PPF: Cautious,

Process-Oriented &

Market TestedApproaches

Tax

Revolt

Muni Bonds

World’s

Best Infra Market

Monetize

Trophy Assets

PPF COOP

IFM

Australian Super Fund

NewModel

New P2P

Distressed Situations

Federal Assets

In-lieu-of Payment

Rent-A-Platform

MacquarieJPM InfraMS InfraGS Infra

Challenges Sources Obstacles Catalyst Platforms

Private Capital

IntraFundsStrategics

Taft HartleySWF’s

Distressed Bondholders

Market Concerns - Distressed situations can widen credit spreads, which can be compounded by fear of tapering Difficult political climate with U.S. governments at all levels facing large unfunded obligations and high debt burdens Like the GM & Chrysler workouts, new model needs to provide tools for restructuring infrastructure enterprises and the currency to negotiate with creditors,

labor, and pensionsPublic Pension Fund (“PPFs”) Concerns Need long life, stable return assets like infrastructure Want to guard themselves from the politically motivated investments and look for investment partners to provide value added management solutions Fiduciary responsibility expects professional managers with “skin in the game” Currently, any equity ownership triggers negative financial consequences due to IRS Rules which would force (i) a taxable refinancing of all outstanding

debt, (ii) the need for costly debt defeasance, and (iii) the requirement that all future borrowings be done on a taxable basis – in effect penalizing PPF investment

46

NAIM’s Value Proposition and Role of Equity InvestorsNAIM Strategy

Develop a transformational infrastructure model that combines stakeholder friendly PPF equity with traditional municipal financing and engages highly qualified infrastructure managers with “skin in the game”

Public Pension Funds

PPFs have an estimated $150B of equity capital available for infrastructureAssuming tax change, PPFs are ideally suited to overcome the key obstacles to P3s in America significantly increasing cost of capital governance concerns (loss of public stewardship, xenophobia, labor

issues, etc.)Typically, PPFs are not equipped to act as lead financial sponsors and participate by investing in infrastructure funds and/or co-investing

Private Partners

Private infrastructure funds like Oaktree, Macquarie, and IFM, and strategic investors like AECOM, Clark and Walsh bring experience, expertise, scale and financial resources to infrastructure investing NAIM is most tax efficient without private partners but private

participation is expected to be the norm for the near future Private partners, as asset managers and investors, will select the

infrastructure investments, develop the business strategy and oversee the portfolio

Other Equity Investors

Taft-Hartley Plans, private and non-U.S. pension plans, sovereign wealth funds, and endowments are also investors in infrastructure.

Investment Focus

Primary focus will be on core infrastructure with strong cash flow and lower risk, greenfield opportunities with strong financial support and distressed situations where serving as “white knight”

NAIM Structure and Capital Stack

If NAIM is advanced via regulation, funds could be structured as a group of separately managed accounts, or if new legislation is pursued, a commingled fund regime could be constructed. Under NAIM, PPFs are the lead investors, Taxable and T.E. debt proportional to equity ownership (PPF vs.

Private) As instrumentalities, PPFs can serve to ease the burden of government Ultimate beneficiaries from tax exempt financing are governmental

sponsors and users of infrastructure assets and not NAIM investors

Stable returns supporting significant value & monetization Strong growth potential (top line / bottom line) High returns compared to similar risk profiles (10%+ ROE) Long life / long maturity matching with long liabilities Less vulnerable to competition, high barriers to entry Inflation hedge with inelastic demand

Low correlation to other asset classes Provides a reliable pipeline where P3 assets are scarce

Fund Investment Characteristics

Potential NAIM PartnersPPFs, Infrastructure Funds & Advisors

47

Appendix A - State Rating Landscape

MA Aa1/AA+/AA+

MinnesotaAa1/

AA+/AA+

Iowa(Aaa)/(AAA)/(AAA)

IllinoisA3/A-/A-

Indiana(Aaa)/(AAA)/(AAA)Missouri

Aaa/AAA/AAA

ArkansasAa1/AA/NR

LouisianaAa2/AA/AA

AlabamaAa1/

AA/AA+

GeorgiaAaa/

AAA/AAA

South CarolinaAaa/AA+/AAA

North CarolinaAaa/AAA/AAA

TennesseeAaa/AA+/AAA

Kentucky(Aa2)/(AA-)/NR Virginia

Aaa/AAA/AAA

OhioAa1/

AA+/AA+

MichiganAa2/

AA-/AA

New YorkAa1/

AA+/AA+

VermontAaa/AA+/AAA

NH Aa1/AA/AA+

CT Aa3/AA/AA/AANJ A1/A/A

WashingtonAa1/AA+/AA+

OregonAa1/AA+/AA+

NevadaAa2/AA/AA+ Utah

Aaa/AAA/AAA

CaliforniaAa3/A+/A

Idaho(Aa1)/(AA+)/(AA+)

MontanaAa1/AA/AA+

WyomingNR/(AAA)/NR

Arizona(Aa3)/(AA-)/NR

Colorado(Aa1)/(AA)/NR

New MexicoAaa/AA+/NR

TexasAaa/AAA/AAA

OklahomaAa2/(AA+)/AA+

Kansas(Aa2)/(AA)/NR

NebraskaAa2*/(AAA)/NR

South DakotaAa2*/(AA+)/(AA+)

North Dakota(Aa1)/(AAA)/NR

WisconsinAa2/AA/AA

MaineAa2/

AA/AA

PennsylvaniaAa3/AA-/AA-

MD Aaa/AAA/AAA

FloridaAa1/AAA/AAA

RI Aa2/AA/AA

Puerto RicoB2/BB/BB-

AlaskaAaa/AAA

/AAA

HawaiiAa2/AA/AA

DE Aaa/AAA/AAA

West VirginiaAa1/AA/AA+

Aaa/AAA

Aa/AAOne Less than Aa3/AA-

Order of Ratings: Moody’s/S&P/Fitch/Kroll as of November 20, 2014.*Lease revenue and/or Certificate of Participation (“COP”) ratingNR: General Obligation Debt is Not Rated( ) Indicates issuer credit rating which is equivalent to a General Obligation rating

MississippiAa2/AA/AA+

DC Aa2/AA-/AA-

One Aaa/AAA

State General Obligation Ratings

GuamNR/BB-/NR

This image cannot currently be displayed.

48

Ratings in parentheses are issuer credit ratings or implied General Obligation ratings.Note: Shading indicate changes since June 1, 2013. Green shaded box indicates upward rating action, Red shaded box indicates downward rating action.* No general obligation rating.(1) Lease revenue and/or Certificate of Participation (“COP”) rating.(2) Kroll Bond Rating Agency also assigns ratings to Connecticut (AA/stable) and Wisconsin (AA/stable).

State General Obligation Ratings and OutlooksState StateAlabama Aa1 Stable AA Stable AA+ Stable Montana Aa1 Stable AA Stable AA+ StableAlaska Aaa Stable AAA Stable AAA Stable Nebraska Aa2(1) Stable (AAA) Stable * N/AArizona (Aa3) Positive (AA-) Positive * N/A Nevada Aa2 Stable AA Stable AA+ StableArkansas Aa1 Stable AA Stable * N/A New Hampshire Aa1 Stable AA Negative AA+ StableCalifornia Aa3 Stable A+ Stable A Stable New Jersey A1 Negative A Stable A NegativeColorado (Aa1) Stable (AA) Stable * N/A New Mexico Aaa Stable AA+ Stable * N/AConnecticut(2) Aa3 Stable AA Stable AA Negative New York Aa1 Stable AA+ Stable AA+ StableDelaware Aaa Stable AAA Stable AAA Stable North Carolina Aaa Stable AAA Stable AAA StableDC Aa2 Stable AA- Stable AA- Stable North Dakota (Aa1) Stable (AAA) Stable * N/AFlorida Aa1 Stable AAA Stable AAA Stable Ohio Aa1 Stable AA+ Stable AA+ StableGeorgia Aaa Stable AAA Stable AAA Stable Oklahoma Aa2 Stable (AA+) Stable AA+ StableGuam * N/A BB- Stable * N/A Oregon Aa1 Stable AA+ Stable AA+ StableHawaii Aa2 Stable AA Stable AA Stable Pennsylvania Aa3 Stable AA- Stable AA- StableIdaho (Aa1) Stable (AA+) Stable (AA+) Stable Puerto Rico B2 Negative BB Negative BB- NegativeIllinois A3 Negative A- Negative A- Negative Rhode Island Aa2 Negative AA Stable AA StableIndiana (Aaa) Stable (AAA) Stable (AAA) Stable South Carolina Aaa Stable AA+ Stable AAA StableIowa (Aaa) Stable (AAA) Stable (AAA) Stable South Dakota Aa2(1) Stable (AA+) Positive (AA+) StableKansas (Aa2) Stable (AA) Negative * N/A Tennessee Aaa Stable AA+ Stable AAA StableKentucky (Aa2) Stable (AA-) Negative * N/A Texas Aaa Stable (AAA) Stable AAA StableLouisiana Aa2 Stable AA Stable AA Stable Utah Aaa Stable AAA Stable AAA StableMaine Aa2 Stable AA Stable AA Stable Vermont Aaa Stable AA+ Positive AAA StableMaryland Aaa Stable AAA Stable AAA Stable Virginia Aaa Stable AAA Stable AAA StableMassachusetts Aa1 Stable AA+ Stable AA+ Stable Washington Aa1 Stable AA+ Stable AA+ StableMichigan Aa2 Positive AA- Stable AA Stable West Virginia Aa1 Stable AA Stable AA+ StableMinnesota Aa1 Stable AA+ Stable AA+ Stable Wisconsin(2) Aa2 Positive AA Stable AA StableMississippi Aa2 Stable AA Stable AA+ Negative Wyoming * N/A (AAA) Stable * N/AMissouri Aaa Stable AAA Stable AAA Stable

FitchMoody's S&P Fitch Moody's S&P

Sources: Moody’s Investors Service, Standard & Poor’s, Fitch Ratings, Kroll Bond Rating Agency; As of November 20, 2014.

49

U.S. State Debt and UAAL Per CapitaMany states and municipalities are confounded by difficult choices, e.g., reduced benefits, boost taxes or cut service to increase contributions, improve investment performance, sell pension bonds or monetize assets to bolster funding levels and improve debtburden statistics

Source: “US State Pension Funding: Strong Investment Returns Could Lift Funded Ratios, But Longer Term Challenges Remain,” S&P Research released 6/24/2014

0

5

10

15

20

25

0

2

4

6

8

10

12

14

Ala

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