LOWER PAXTON TOWNSHIP AUTHORITY Dauphin County, Pennsylvania

1. LOWER PAXTON TOWNSHIP AUTHORITYDauphin County, Pennsylvania INTEREST RATE & FINANCING UPDATE October 16, 2018 Jay Wenger John Hewlett Managing Director Director (717) 568-8341 (610) 584-5639 jwenger@susgrp.com jhewlett@susgrp.com

2. Interest Rate History (Since 1990)

3. Interest Rate History (Past 5 Years)

4. Interest Rate Outlook • The Fed has three main goals: 1. Maximum sustainable employment 2. Stable prices 3. Moderate long-term interest rates • In December 2015, with unemployment down to 6% and inflation at 0.7%, the Fed increased its key interest rate, the Federal Funds Rate, for the first time since June 2006. The rate had remained at effectively zero since December 2008 until the 0.25% increase in December 2015. • The Fed has subsequently raised the Fed Funds Rate seven (7) additional times (once in 2016, three times in 2017, and three times in 2018) to its current level of 2.25%. • The unemployment rate is currently 4.1% and core inflation has steadily increased to 2.3%. As a result, many economists believe the Fed will continue raising rates gradually. • The Fed could potentially raise the Fed Funds Rate once more in 2018. • The Fed expects three additional rate hikes in 2019.

5. Current Aggregate Debt Service – LPT Authority

6. Current Projected Drawdown and Funding Schedules * Based on expenditure schedules provided by GHD.

7. SUMMARY - Projected Aggregate Debt Service (Includes Existing & Future Debt)

8. Scenario 1: Current Program All PENNVEST Financings – 20-year LEVEL Debt Service

9. Scenario 1: Current Program All Fixed Rate Bonds - 30-year LEVEL Debt Service

10. Scenario 1: Current Program All Fixed Rate Bonds - 30-year WRAP Debt Service

11. Scenario 2: CAP Hyd. Overload All PENNVEST Financings – 20-year LEVEL Debt Service

12. Scenario 2: CAP Hyd. Overload All Fixed Rate Bonds - 30-year LEVEL Debt Service

13. Scenario 2: CAP Hyd. Overload All Fixed Rate Bonds - 30-year WRAP Debt Service

14. Scenario 3: Delay PC Storage All PENNVEST Financings – 20-year LEVEL Debt Service

15. Scenario 3: Delay PC Storage All Fixed Rate Bonds - 30-year LEVEL Debt Service

16. Scenario 3: Delay PC Storage All Fixed Rate Bonds - 30-year WRAP Debt Service

17. Scenario 3: Delay PC Storage All PENNVEST Financings – 20-year LEVEL Debt Service

18. Scenario 3: Delay PC Storage All Fixed Rate Bonds - 30-year LEVEL Debt Service

19. Scenario 3: Delay PC Storage All Fixed Rate Bonds - 30-year WRAP Debt Service

20. PENNVEST Financing Considerations • Below Market Interest Rates • According to the PENNVEST website, the current interest rates on a 20-year financing are 1.512% (years 1 to 5) and 2.063% (years 6 to 20). • Level annual debt service payment = ~$600,000 on $10 million over 20 years. • Annual savings vs. traditional bond issue = ~$110,000 (~$1,945,000 total over 20 years). • Disbursements Made as Needed • Avoid negative carry associated with bond reinvestment. • See example on following page – net interest cost of bond issue during drawdown period = $457,956. • Lower Issuance Costs than Traditional Bonds ADVANTAGES DISADVANTAGES • Less Structuring Flexibility • Debt service would be 20-year level. The debt can not be wrapped and can not extend beyond 20 years. • The Authority’s long-term cash flow and rate projections assume 30-year level financings. • To continue to meet its rate covenant of 110% debt service coverage, the Authority will need to begin utilizing wraparound debt service. • Loan Application Process is Lengthy and Time-Consuming • Risk of Non-Approval After Spending Time and Money to Apply • PENNVEST Consent Required for Future Issuance

21. PENNVEST vs. Traditional Bond Issue – Hypothetical $10 Million Financing20-Year Level Debt Service