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interest only loans. The proposed transaction will include principal and interest payments with
full repayment of principal in 30 years.

The attached resolution approves the POS and confirms the Agency’s financial policies.
The POS is the Agency’s disclosure document and it is important that Management and the
Board of Directors carefully review this document prior to approval. The POS discloses material
information on the offering of the refunding revenue bonds and this information is used by
potential investors to evaluate the credit quality of and potential risks associated with the
Agency’s bonds. The POS includes information on the Agency’s finances and how the bonds
would be repaid, as well as general information on the financial and economic characteristics of
the Agency and its service area, the Agency’s water supply situation, the Agency’s long-term
capital improvement program and litigation. If any Director has questions or comments about
any of the information contained in the POS, or with respect to information that would be
material and should be included in the POS, please contact the Assistant General Manager
before or after the meeting. The Valencia Water Company Board of Directors approved its
portion of the POS on December 28, 2018.
The JPA Board must also approve a resolution approving the POS and authorizing the sale of
revenue refunding bonds. The bonds will be sold on January 16, 2018 with the closing and
refunding of the existing loans on January 31, 2018.

Interfund Loan – 2018A Revenue Refunding Bonds

The attached resolution establishes an Interfund Loan between the Valencia Water Division
(VWD) and the wholesale system for the payment of the annual debt service associated with the
2018A Revenue Refunding Bonds. A draft payment schedule is attached based on market
conditions of the week of December 18, 2017. The exact payment schedule will be the actual
debt service based on the sale of the bonds. All payments will be funded by the VWD.
Projected VWD revenues are sufficient to pay the debt service, the amount of which is projected
to be equivalent to the amounts currently being paid on the existing loans.

Interfund Loan – Reimbursement of the Acquisition Costs of the Stock of the Valencia
Water Company

The attached resolution establishes an Interfund Loan between the Valencia Water Division
(VWD) and the wholesale system to reimburse the Agency for the purchase of the stock of the
Valencia Water Company. The Agency purchased the stock in 2012 at a price of $58.6 million.
The Agency used a combination of 2006A and 2011A bond proceeds for this purchase. The
Agency’s financial advisor calculates the combined cost of the bond issues at 4.5 percent, and
prepared the Interfund Loan payment schedule (attached to the resolution) based on that rate of
return. The payments will be credited to one percent property tax revenues (60%) and Facility
Capacity Fees (40%), and will be used to fund capital improvement projects and debt service
associated with capital improvement projects.

Projected VWD revenues are sufficient to pay the Interfund Loan payments. In general, the
payments will be funded from funds that were previously used to pay taxes and franchise fees,
consistent with SB 634’s provisions on indebtedness.

FINANCIAL CONSIDERATIONS

All costs associated with these transactions will be assigned to and fully funded by the Valencia
Water Division.

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