PSPC

1. PSPC

2. Presenters & Agenda • Harris Inc. Overview: • Rick Polehonka – Sales Manager • Funding Strategies & Sources: • Lee Connor – Grant Funding Manager • Payment Terms & Financing Solutions: • Ed Clemente – Finance Manager Bids & Proposals • PNC Finance Overview: • Russ Munson – PNC Finance

3. Company overview International communications and information technology company headquartered in Melbourne, Florida serving government and commercial markets Publicly listed on NYSE (ticker: HRS) Approximately $6 billion annual revenue More than 16,000 employees located in 50 countries around the world Significant intellectual property and technology portfolio Workforce includes nearly 7,000 engineers and scientists Leader in design, deployment and operation of highly-reliable, secure communications systems and information networks for voice, data, imaging and video

4. Diverse served markets

5. RF Communications Tactical Communications Public Safety & Professional Communications International U.S. Department of Defense • Tactical radio products and integrated systems • JTRS-approved; delivering the JTRS promise today • Leading the transformation from narrowband to wideband networking • Tactical ISRproducts and applications • Communications Security products • Full range of Land Mobile Radio products • Integrated IP-based communications systems • Advanced 4G/LTE broadband communications systems

6. Financing Solutions for yourInvestment in a Public Safety NetworkMay 2011 Lee Connor – Grant Funding Program ManagerEd Clemente – Finance Manager Bids & Proposals

7. Agenda • Grant Funding Update • Funding Strategies • Harris Corporation Grant Funding Support • Payment Terms /Financing Solutions • Milestone Payments • Leasing • Public Private Partnerships (PPPs) • Next Steps – Discussion/Questions

8. Funding Update

9. Topics • 2011 SAFECOM: Guidance on Emergency Communication Grants • Grant Funding Update

10. SAFECOMhttp://www.safecomprogram.gov/SAFECOM/grant/default.htmSAFECOMhttp://www.safecomprogram.gov/SAFECOM/grant/default.htm • The purpose of the FY 2011 SAFECOM Guidance is to provide guidance to grantees on: • Emergency communications activities that can be funded through Federal grants • Technical standards that facilitate interoperability • Recommendations for planning, coordinating, and implementing emergency communications projects

11. SAFECOM: http://www.safecomprogram.gov/SAFECOM/grant/default.htm

12. 2011 SAFECOM Guidance • Narrowband Mandate • “In the FY 2011 SAFECOM Guidance, grantees are encouraged to allocate grant funds to plan and implement activities that will ensure compliance with the Federal Communications Commission (FCC) narrowband mandate by the January 1, 2013, deadline.” (pg 4)

13. 2011 SAFECOM Guidance • Consider Regional, Multi-Jurisdictional, Multi-Disciplinary Projects • Improve emergency communications across jurisdictions (e.g., across States, counties) • Enables communication across jurisdictions, between disciplines, and among all levels of government • Expands coverage to unserved or underserved areas within or beyond a region • Links disparate systems • Connects local systems and responders to regional or statewide systems “Regional projects (intra-State and/or inter-State projects that include more than one jurisdiction) should promote wide area interoperability and not create new barriers between responders inside and outside of the region. For example, grant funding should not advance a “proprietary-based project” when an equivalent “open standards” solution exists”

14. 2011 SAFECOM Guidance • Consider Broadband and Emerging Technologies • Grantees should consider investments in broadband planning and technologies* in order to continue to move their jurisdiction toward greater interoperability nationwide *The FCC has advised grantees to ensure that investments in wireless broadband networks are compliant with 3 GPP-Release 8 of theLong-Term Evolution (LTE) standard, and have required grantees to provide information on how the investment will achieve interoperability with other public safety networks, including a statement on whether the interface is compliant with 3 GPP-Release 8 of the LTE standard.

15. 2011 SAFECOM Guidance • Eligible Activities: • Planning • Training • Exercises • Equipment • Conversion to Narrowband Equipment • Replacing non-narrowband compliant equipment • Acquiring/upgrading additional tower sites needed to comply with narrowband conversion • Reprogramming existing equipment to comply with narrowband conversion Authorized Equipment List (AEL): https://www.rkb.us/mel.cfm?subtypeid=549

16. SAFECOM Summary • Acknowledges Narrowbanding Deadline • Encouraging funding agencies to “allocate grant funds” to narrowbanding projects • Focus on regional interoperability projects • Standard based & emerging technology solutions

17. FY11 Grant Funding Update

18. FY 2011 Grant Update • Budgets delayed – grants delayed • Overall decrease in DHS & DOJ grants • DHS grant consolidation • Earmarks removed

19. Grants forCommunications Equipment • Dept of Homeland Security (DHS) • Homeland Security Grant Program • -- State Homeland Security Program (SHSP) • -- Urban Area Security Initiative (USAI) • -- Operation Stonegarden Grants (OPSG) • -- Metropolitan Medical Response System (MMRS) • -- Citizen Corp Program (CCP) • Infrastructure Protection Program • -- Transit Security Grant Program (TSGP) • -- Port Security Grant Program (PSGP) • -- Intercity Bus Security Grant Program (IBSGP) • -- Buffer Zone Protection Program (BZPP) • -- Freight Rail Security Grant Program (FRSGP) • Preparedness Grants • -- Interoperability Emergency Communications Grant Program (IECGP) • -- Emergency Management Performance Grants (EMPG) • -- Emergency Operations Center Grant Program (EOCGP) • -- Regional Catastrophic Preparedness Grant Program  (RCPGP) • -- REAL ID Systems Integration and Data Verification Grant Program • -- Assistance to Firefighters Program (AFG) • Health & Human Services (HHS) • Hospital Preparedness Program • Pandemic Influenza Preparedness and Response • Rural Health Care Outreach Program • Small Rural Hospital Improvement Program • Dept of Justice (DOJ) • Community Oriented Policing Services (COPS) • -- Secure Our Schools • -- Tribal Resources Grant Program • -- Law Enforcement Technology • -- COPS Meth • Byrne Memorial Grant Program (JAG) • -- Discretionary • -- Competitive • -- Formula • Dept of Agriculture (USDA) • Broadband Grants and Loan Programs • Distance Learning /Telemedicine Grants DOE DOT FAA FTA TSA ED BIA DOI

20. Awards made annually 36 month period of performance Awarded to the State: SAA 80% Passed through to locals Grant guidance changes year to year Allowable expenditures: Planning Overtime for Orange alert Equipment Training, Exercise M&A Major Communications GrantsFY2011 President’s Budget http://www.fema.gov/government/grant/hsgp/index.shtm

21. Funded yearly 2- 3 yr period of performance Funds flow to fiduciary agents, specific entities Matching requirements PSGP & TSGP received $300M ARRA funds Allowable expenditures: Planning Equipment Training Exercise M&A Major Communications Grants FY2011 President’s Budget http://www.fema.gov/government/grant/index.shtm

22. AFG: Regional Communications Project: EOC FY10: $47M directed funding/ $10M competitive FY11: $15M competitive only! Consolidation of grant programs – IECGP, Driver License, RCPGP… Major Communications GrantsFY2011 President’s Budget • April 2011: • “Charlotte, NC accepted $2.1M • & approved a MOU with the • City of Gastonia related to the • regional communications grant” http://www.fema.gov/firegrants/index.shtm http://www.fema.gov/government/grant/eoc/index.shtm

23. Major Communications Grants FY2011 President’s Budget COPS SOS Now OPEN! Deadlines: May 25th & June 8th JAG Programs COPS Programs http://www.ojp.usdoj.gov/BJA/grant/jag.html http://www.cops.usdoj.gov/Default.asp?Item=46

24. HHS & ED Grants • Focus on the four phases of emergency management: • Prevention-Mitigation, Preparedness, Response, and Recovery • Interoperability communications is a priority • Focus on Health IT projects PHEP Now OPEN! Deadline: June 17th http://www.cdc.gov/phpr/coopagreement.htm#phep_ca

25. FTA Overview 1 of 11 administrations within U.S. DOT HQ in DC & 10 Regional Offices Authorized thru SAFETEA-LU (Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users of 2005) $10B combined formula & discretionary grants Project Types: Buses Subways Light rail, commuter rail Streetcars, monorail Passenger ferry boats Inclined railways, people movers Federal Transit Administration (FTA) http://www.fta.dot.gov/funding/grants_financing_263.html

26. Funding YOUR LMR system

27. Funding your LMR System • Developing sound funding sources for a Land Mobile Radio (LMR) system can be daunting. When approaching how to fund your LMR system, it’s most effective when it encompasses the entire life cycle of LMR. • There are three main phases: • Planning & Development • Procurement & Installation • Operations & Maintenance • Each phase has a different funding profile or requirement.

28. LMR: Fiscal Requirements Fiscal Requirements 8 – 10 years Service of Life Existing System Fiscal Requirements Planning & Design Procurement & Installation Operations & Maintenance System Life Cycle Source: Booz-Allen & Hamilton: Funding Strategies For Public Radio Communications (Oct 1998)

29. Funding Sources Source: Booz-Allen & Hamilton: Funding Strategies For Public Radio Communications (Oct 1998)

30. Funding Strategies • PROS: • No tax increases • Funds can co directly to Public Safety Communications • Excluded from budget review • Cons: • There are intense competition for funds • They are not evenly distributed • May not provide adequate revenue • Planning and Design Phase • Existing financial resources (CapEx/OpEx accounts) • Asset forfeiture • Watonga, OK and purchase of portable radios • Feb 2011: The city approved the expenditure of $3,848 from the Drug Seizure Account to purchase portable radios for the Police Department.

31. Funding Strategies • Installation and Procurement Phase • The Federal government can leverage • Annual appropriations • Federal exercise tax • Spectrum lease fees • The State & Local governments can • Issue bonds • Impose right-of-way fees • Utility tax/ surcharge fees April 22, 2011: Lapeer County, MI “The county approved the issuance of Capital Improvement Bonds in an amount not to exceed $14,475,000 for the purpose of outdated analog radio equipment for Police, Fire and EMS with updated digital radio equipment and other equipment necessary for the 911 Central Dispatch System to effectively provide and ensure 24x7 public safety communications service for citizens”

32. Funding Strategies • Operations and Maintenance Phase • Federal, State and Local governments can • Use existing financial resources • Tower Leasing • Impact Fees • User Fees Although cities nationwide are implementing nonresident emergency services fees, at least 10 states have outlawed them. States forbidding the fee include: Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Missouri, Oklahoma, Pennsylvania and Tennessee

33. Funding Strategies • Grant Pros • Flexibility to create programs • Advances policy goals • Encourages coordination • Grant Cons • Highly competitive with no guarantee of award • Have administrative reporting requirements • May require matching funds • May have political hurtles • Federal/State Grants

34. Funding Strategies • When deploying a LMR systems focus on a multi-jurisdictional approach. • WHY? • Allows leveraging economies of scale to reduce the cost to each participant. • Shared systems are developed as planned implementations • Management & control similar to other multi-agency or regional govt services • Costs can be equal share or prorated by relative population size, tax base, geographic area or number of users • Implementation financing based on proportional population or a percentage of system infrastructure dedicated to each agency • Operational & Maintenance financing based on number of users, numbers of pieces of equipment, or actual system usage (airtime) • Federal grants require a multi-jurisdictional, multi-agency approach

35. Funding Strategies Conclusion • It’s important to ensure fiscal requirements and sources for the life cycle of the system. • No matter what combination of funding sources, each agency must develop funding strategies that provide sufficient revenue to support each life cycle stage. • Key stakeholders – senior level government officials, budget directors, political representatives, and the public – need to be involved – especially when the funding strategy is developed. • The ability to secure funding to finance projects of this magnitude is one of the greatest challenges facing Public Safety agencies

36. Traditional Sources of Financing • Grant Funding • Bond issuance • Extended Payment Terms during implementation • Line up payment terms with Funding Stream • Time Phased Implementation aligned with Funding • Lease program (including tax exempt) • Public Private Partnerships

37. Payment Terms & Financing Solutions • Hurdles you may be facing: • Partial Funding • Budgetary Restraints • Bonding Thresholds • Aligning your Project Needs with available Funding

38. Examples of Payment Flow

39. Leasing Example

40. Credit - Response Times • Credit decisions are based on • Type of borrower • Credit Rating • Transaction size • Financial structure • Existing exposure with the same customer • The credit process starts with complete information • Project scope • Financial information

41. Public Private Partnership ( PPP) Venture ( LMR System) which is funded and operated through a partnership of State and Private Company(ies). Private Sector Consortium forms a Special Purpose Company to build and maintain the asset. A Building Contractor , Maintenance Company and Financial Firm. Pros: Cons: Available for Large Projects >$100M Extensive Terms and Conditions Long Term Relationship – 20 yrs • Technical Risk Lies with Technical Experts • Capital Risk Lies with the Financial Experts • Service Risk Lies with the Service Experts • Long Term Relationship – 20 yrs

42. Project Financing Structure (PPP example) Customer Consortium Partners/ single company Project Company Banks Equity Senior Secured Debt Debt Service Dividend Assets Build Operations 15 Yr Operations & Maintenance 3 Yr Build-out Sub-Contractors Sub-Contractors

43. Summary • We at the Harris Corporation are willing to discuss Project Financing to meet your needs. There are financing sources and payment methods that we are able to discuss that may be available to meet your needs. • Grant Funding Support is available • Should you wish further information regarding the Project Financing Options, Please feel free to contact us.

44. Contact Information • Contact your Harris team to learn more: • Your Local Harris representative: www.harris.com • Bank Financing/Leasing: Ed Clemente (eclement@harris.com) • Grant Funding Program Office: Lee Connor (lee.connor@harris.com)

45. Presented by: Russ Munson, Vice President Technology Finance Division May 19, 2011

46. PNC Financial Services Group • Headquartered in Pittsburgh, PA, with assets of $ 280 Billion PNC Financial Services is the 5th largest commercial bank in the United States • PNC enjoys the strongest Tier 1 capitalization of any peer bank • Moody's, Standard & Poors and Fitch rates PNC at A3 or A+ • PNC’s municipal leasing and public finance groups are leaders in financing for city, state and county governments and non-profit agencies

47. PNC Financial Services Group • Headquartered in Pittsburgh, PA, with assets of $ 280 Billion PNC Financial Services is the 5th largest commercial bank in the United States • PNC enjoys the strongest Tier 1 capitalization of any peer bank • Moody's, Standard & Poors and Fitch rates PNC at A3 or A+ • PNC’s municipal leasing and public finance groups are leaders in financing for city, state and county governments and non-profit agencies

48. PNCEF – Russ Munson • Vice President, PNCEF Equipment Finance, since 2005 • Located at West Region office • 19671 Beach Blvd, 3rd Floor • Huntington Beach, CA 92648 • 800 607 9830 ( Office ) • 714 267 7603 ( Mobile ) • Russ.munson@pnc.com • 30+ year career: equipment finance & vendor financing programs

49. Why PNC Equipment Finance? • Strong balance sheet - deep pockets - low cost of funds • Will fund $ 1.2 Billion in equipment financing for municipalities in 2011 • Flexible & customized deal structuring, with ability to respond quickly • HARRIS program relationship since 2006

50. Municipal Finance Nuts & Bolts • Terms from 12 months to 15 years • Payments can be structured: Monthly, Quarterly, Semi-Annually or Annually • Commercial and municipal rates for transactions are matched “rate-to-risk” and based on current cost of funds, transaction size, term, credit quality and other factors: • Tax-exempt rates for investment grade credits currently range from 1.5% to 3.9% • Tax-exempt rates for non-investment grade credits currently range from 2% to 5% • A municipal lease-purchase creates a series of annual appropriations (12 months at a time )