Interview for Underwriting Services June 11, 2014

1. Chimacum School District Interview for Underwriting Services June 11, 2014 Maura Lentini Vice President, Analyst (206) 903-8687 mlentini@dadco.com Jon Gores Managing Director (206) 389-4043 jgores@dadco.com

3. D.A. Davidson by the Numbers 118 + 78 + 1,370 + 37 + 68 + 175 = 1 “Not everything that can be counted, counts. And not everything that counts can be counted.” --Albert Einstein

4. D.A. Davidson by the Numbers 118 78 1,370 37 68 175 1 Combined years of Washington State school finance experience D.A. Davidson celebrates its 78th anniversary in 2014 D.A. Davidson employees in 86 locations Years of uninterrupted service to school districts Institutional sales professionals Firm’s capital base exceeds $175,000,000 D.A. Davidson’s position as the leading underwriter of Washington school district bond issues

5. 4 Underwriting Rankings – Washington State Number 1 underwriter of Washington school district bonds for the seventh straight year Washington Schools 2007-2013 Totals NegotiatedSenior Manager D.A. Davidson & Co. Seattle-Northwest Piper Jaffray Martin Nelson 190 88 31 7 Source: Thomson Municipal Market Data.

6. School District Experience Washington State June 2013 - Present

7. Why is D.A. Davidson Number 1? • People & Experience • Bond Distribution • Capital & Employee ownership • References • Most importantly, we provide sleep insurance...

8. Financial and Quantitative AnalysisSuzanne EideVice President13 Yrs Experience UnderwritingMark Froio, CFAVice President27 Yrs Experience BankerJon GoresManaging Director28 Yrs Experience MarketingJoe BradySr. Vice President/Managing Director28 Yrs Experience Municipal CreditMaura LentiniVice President14 Yrs Experience DisclosureKelsey ThomasAssoc. Vice President 7 Yrs Experience MarketingRick TurnageSr. Vice President/Sales Manager20 Yrs Experience Research SupportMary KimAdministrative Assistant 1 Yr Experience Education Finance Team Assigned to Chimacum School District Backup BankerDavid TrageserManaging Director 28 Yrs Experience Backup BankerJim NelsonSr. Vice President27 Yrs Experience

9. Bond Distribution – Marketing Advantage • We operate 4 regional trading desks staffed with 68 institutional sales people. In addition, we operate 86 branch offices with 582 registered sales professionals. • D.A. Davidson is the only regional firm equipped to market bonds to both market segments: institutional and retail. • Our unique distribution system will ensure the broadest distribution of the District’s bonds, ensuring the lowest possible borrowing cost. Source: D.A. Davidson Fixed Income Capital Markets

10. Capital 2012 - Present Davidson can demonstrate our willingness to put our capital to work to ensure successful pricings for our clients in volatile market conditions.

11. Bond Rating • Moody’s last reviewed the District’s credit in 2007, assigned an A3 • The rating was adjusted to A1 in 2010 with Moody’s change to its Global Scale • A1 is the third most common rating (shared by 29 districts) among the 121 Washington school districts that have a Moody’s rating.

12. Credit Strengths Moody’s cited these strengths: • Absolute size and diversity of tax base • New residential development due to influx of retirees • Consistent maintenance of fund balances above the Board target of 5% • Low debt burden • Above-average wealth indicators • Strong voter support

13. Credit Pressures Moody’s cited these credit pressure sources: • Declining enrollment • Limited local economy/dependence on timber and tourism We believe Moody’s would note these credit pressure sources today: • Drop in AV over the past 5 years • Low fund balances compared to the peer group in Washington and nationally

14. Credit Comparisons

15. Rating Considerations • We believe the District would be rated A1 by Moody’s or an equivalent A+ by Standard & Poor’s • If the District were planning to increase fund balances above 15%, S&P might be more inclined to upgrade in the future. • Allow us to be your advocates

16. What Districts are saying about Davidson Jon Gores and his team worked closely with us through the bond rating process. We successfully maintained our bond rating despite a declining fund balance. Jon & Maura’s work on developing a rating strategy, rating presentation, preparing us for the call and facilitating and moderating the call were invaluable. Our bond rating call went exceedingly well due to the preparation and planning of D.A. Davidson. We were able to maintain our rating and develop a strategy to improve our rating. I have worked with Jon Gores on a number of bond issues and have found him and his team to be a great asset in developing a strategy and navigating the challenges of the bond rating process. • --Ryan Stokes • Dir. of Business, Snoqualmie Valley SD • --Wayne Leonard • Assistant Superintendent, Mead SD • --Mike Newman • Deputy Superintendent, Auburn SD

17. 2015 Bond Election

18. Level Debt: Results in level annual payments for the life of the bonds. Level Tax Rate: Attempts to result in a level annual tax rate over the life for the bonds* Stepped Level Tax Rate: Allows for the issuance of future bonds * Based on assessed value projections.

19. Bond Tax Rate Planning

20. Tax Impact Analysis

21. 50 Property Taxes 101 Increases in Home Values Will Not Increase School District Tax Collections • Changes in home values don’t change the amount of taxes authorized. • Local school taxes can only be increased by a vote of the people. • Changing property values will change tax rates, but not tax collections. • Tax collection impact

22. 51 Property Taxes 101 $1,000 Levy $250 $250 $250 $250 $100,000 $100,000 $100,000 $100,000

23. 52 Property Taxes 101 $1,000 Levy $250 $250 $250 $250 $200,000 $200,000 $200,000 $200,000

24. 53 Property Taxes 101 $1,000 Levy $250 $250 $250 $250 $90,000 $90,000 $90,000 $90,000

25. 54 Property Taxes 101 $1,000 Levy $187.50 $250 $250 $312.50 $250,000 $200,000 $200,000 $150,000

26. 55 Property Taxes 101 $1,000 Levy $200 $200 $200 $200 $200 $100,000 $100,000 $100,000 $100,000 $100,000 *Spokane County Assessor

27. 56 Increases in Property Values Will Not Increase School District Tax Collections • Changes in property values don’t change the amount of taxes authorized • Local school taxes can only be increased by a vote of the people • Changing property values will change tax rates, but not tax collections Year Home Value Tax Rate Tax Bill XYZ School District Home Value 2013 $100,000 $5.00/$1,000 $500 Assume a 20% increase in Assessed Value for XYZ School District #1: 20% increase 2014 $120,000 $4.17/$1,000 $500 #2: 10% increase 2014 $110,000 $4.17/$1,000 $459 #3: 30% increase 2014 $130,000 $4.17/$1,000 $542

28. 56 Decreases in Property Values Will Not Decrease School District Tax Collections • Changes in property values don’t change the amount of taxes authorized • Local school taxes can only be increased by a vote of the people • Changing property values will change tax rates, but not tax collections Year Home Value Tax Rate Tax Bill XYZ School District Home Value 2013 $100,000 $5.00/$1,000 $500 Assume a 10% increase in Assessed Value for XYZ School District #1: 10% decrease 2014 $90,000 $5.55/$1,000 $500 #2: 5% decrease 2014 $95,000 $5.55/$1,000 $528 #3: 20% decrease 2014 $80,000 $5.55/$1,000 $444

29. Property Taxes 101 Summary • If your property value increases at a lower rate than the average increase for the school district, the amount of taxes you pay will decrease. • If your property value increases at a higher rate than the average increase for the school district, the amount of taxes you pay will increase.

30. What Districts Are saying about Davidson Mr. Gores continues to provide on-going support and bond information. He is exceedingly knowledgeable and has the ability to explain bond, tax and financing information in simple terms. He has distinguished himself by consistently providing exceptionally well researched and well documented information and guidance. Three areas that I appreciate most about working with Jon and his team are their incredible preparation, quick, yet thorough, responses to questions, as well as the short and long range planning they developed for new and updated schools through the capital levy and bond. • --Angela Watts • Asst. Superintendent, West Valley SD • --Mike Newman • Deputy Superintendent, Auburn SD

31. Fee Proposal • Davidson is compensated entirely from the underwriting spread. The District would make no payments to Davidson, nor enter into any financial obligation prior to the completion of the bond sale. • The underwriting spread has three main components: • 1) Management fee—salaries, personnel costs • 2) Expenses—overhead costs, i.e., travel, telephone, printing, etc. • Takedown—sales commission paid to sales people to market the bonds

32. Why is Davidson the best fit for Chimacum School District? • We’ve worked with 20 out of 33 of the school districts with 1,000-1,999 FTE • We’ve worked on 14 out of 15 school districts receiving initial bond ratings of A3/A- or better • We’ve worked with 4 out of 6 school districts that received bond rating upgrades • We’ve successfully closed 100% of our transactions on time

33. D.A. Davidson’s Vision & Mission Vision: Continue to be the leader in school finance in Washington StateMission: To allocate all available human, intellectual and financial resources to each and every transaction and client, thereby ensuring the lowest cost of capital while providing exceptional service. Going the extra mile and doing whatever it takes to go above and beyond our clients’ expectations. Thank You

34. Services Pre-Election • Provide bond/levy planning • Develop long range financing plan • Attend community meetings and facility meetings • Election Finance Workshops • Brief County Assessor and Treasurer • Provide Voter Profile

35. Services Post-Election - Issue • Develop District Bond Sale Schedule and Distribution List • Provide input for Delegation and State Guarantee Resolution • Draft State Guarantee application • Prepare Preliminary and Final Official Statements • Review and comment on all necessary documents • Prepare credit evaluation and rating presentation • Organize local sales effort with local firms • Price and market bonds and report to the Board • Notify County Assessor, Treasurer and ESD of final pricing results and debt service requirements • Disclosure compliance update

36. Services Post Sale – Ongoing • Annual debt service fund cash flow • Continuing disclosure assistance • M&O levy tax rate projections • Arbitrage rebate assistance • Refunding monitoring • Evaluate alternative financings (LGO borrowing for energy grants, etc.) • Budget revision assistance & notes to financial statement • Briefings on legislation that may potentially impact bonds and elections • Annual Board updates • Guest lecturer for High School

37. References

38. Neither this material nor any of its contents may be disclosed, sold, or redistributed, electronically or otherwise, without prior written consent of Davidson Companies. The information presented herein is based on public information we believe to be reliable, prevailing market conditions, as well as our views at this point in time. We make no representation or warranty with respect to the accuracy or completeness of this material. Past performance is not necessarily indicative of future results. Davidson Companies does not assume any liability for any loss which may result from the reliance by any person upon such material. We make no representations regarding the legal, tax, regulatory, or accounting implications of entering into a Transaction. Required Disclosure Pursuant to MSRB Rule G-23: An underwriter’s primary role will be to purchase as principal, or arrange for the placement of the securities in a commercial arm’s length transaction with the issuer, and may have financial and other interests that differ from those of the issuer. In its capacity as underwriter and not as financial advisor, an underwriter may provide incidental financial advisory services at the issuer’s request, including advice regarding the structure, timing, terms and other similar matters concerning the issuance. However, an underwriter does not assume any financial advisory or fiduciary responsibilities with respect to the issuer.