Housing Authority of the City of Seattle

PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 15, 2016 NEW ISSUE RATING: S&P: “AA” BOOK-ENTRY ONLY (See “RATING”) In the opinion of Bond Counsel, under existing federal law and assuming compliance with applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issue date of the Bonds, (i) interest on the Bonds (except any Bond for any period during which it is held by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code) is excluded from gross income for federal income tax purposes, and (ii) interest on the Bonds is not treated as an item of tax preference for purposes of the federal alternative minimum tax applicable to individuals and corporations and is not included in adjusted current earnings of corporations for purposes of the federal alternative minimum tax. However, interest on the Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. Receipt of interest on the Bonds may have other federal tax consequences for certain taxpayers. See “TAX MATTERS.” HOUSING AUTHORITY OF THE CITY OF SEATTLE $6,860,000* $15,380,000* REVENUE BONDS, SERIES 2016A REVENUE BONDS, SERIES 2016B (NEWHOLLY PHASE I PROJECT) (NEWHOLLY PHASE I PROJECT) Dated: Date of Initial Delivery Due: October 1 or April 1, as shown on inside cover The Housing Authority of the City of Seattle (the “Authority”) is issuing its Revenue Bonds, Series 2016A (NewHolly Phase I Project) (the “2016A Bonds”) in the aggregate principal amount of $6,860,000*, and its Revenue Bonds, Series 2016B (NewHolly Phase I Project) (the “2016B Bonds” and, together with the 2016A Bonds, the “Bonds”) in the aggregate principal amount of $15,380,000*, pursuant to a Trust Indenture (the “Indenture”) to be dated the Date of Issue, by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”), as fully registered bonds which initially will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as initial securities depository for the Bonds. Purchases of interests in the Bonds will be made in book-entry form only in denominations of $5,000 and integral multiples thereof within a maturity of each series. Purchasers will not receive certificates representing their interest in the Bonds purchased, except as described herein. Interest on the Bonds is payable semiannually on April 1 and October 1 of each year, commencing April 1, 2017, until maturity or prior redemption, whichever occurs first. As long as the Bonds are registered in the name of DTC or its nominee, principal of, premium, if any, and interest on the Bonds will be paid by the Trustee to DTC, which will remit such principal, premium, if any, and interest to its

not be sold, nor may offers to buy be accepted, prior to the time the Official Statement is participants for subsequent disbursement to the purchasers of interests in the Bonds. See Appendix D – “DTC’S BOOK-ENTRY ONLY SYSTEM.” The Bonds are subject to acceleration of maturity and optional, mandatory and extraordinary mandatory redemption prior to maturity at the redemption prices and under the circumstances described herein. See “THE BONDS – Redemption of the Bonds” and APPENDIX A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF INDENTURE.” The Authority will use the proceeds of the Bonds to make a loan to NewHolly Phase I LLLP (the “Borrower”), a Washington limited liability limited urisdiction. urisdiction. j partnership of which the Authority is the sole general partner, pursuant to a Loan Agreement to be dated the Date of Issue (the “Loan Agreement”) for the purpose of providing funds with which to: (1) finance a portion of the cost of acquiring and rehabilitating a 305-unit affordable rental housing such y project, known as NewHolly Phase I in the City of Seattle, Washington; (2) fund a debt service reserve for the 2016A Bonds; and (3) pay certain costs of issuing the Bonds. See “PLAN OF FINANCE.” The Borrower will make payments under the Loan Agreement (“Loan Payments”) from certain revenues and receipts available from the Project. Payment of the principal of and interest on the Bonds is secured by (1) Loan Payments, (2) a leasehold deed of trust granting the Trustee a security interest in the Borrower’s interest in the Project, and (3) a pledge of the Authority’s General Revenues. The 2016A Bonds are also secured by the Debt Service Reserve Account. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.” THE BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY. THE BONDS DO NOT CONSTITUTE A DEBT OF THE CITY OF SEATTLE, THE STATE OF WASHINGTON OR ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE CITY OF SEATTLE, THE STATE OF WASHINGTON NOR ANY POLITICAL SUBDIVISION THEREOF, EXCEPT THE AUTHORITY, BUT ONLY FROM THE SOURCES SET FORTH IN THE INDENTURE, SHALL BE LIABLE FOR PAYMENT OF THE BONDS. THE AUTHORITY HAS NO TAXING POWER. This cover page contains only a brief description of the Bonds. It is not intended to be a summary of material information with respect to the Bonds. ualification under the securities laws of an of laws securities ualificationthe under

q Investors must read the entire Official Statement to obtain information necessary to make an informed investment decision regarding the Bonds. There are risks associated with purchase of the Bonds. For a discussion of certain of these risks, see “CERTAIN BONDOWNERS’ RISKS.” The Bonds are offered when, as and if issued by the Authority and received by the Underwriters, subject to prior sale, and to the approval of validity and certain other legal matters by Foster Pepper PLLC, Seattle, Washington, Bond Counsel. In connection with the issuance and sale of the Bonds, istration or istration g certain legal matters will be passed on for the Authority by Foster Pepper PLLC, special counsel to the Authority in its capacity as issuer of the Bonds and general partner of the Borrower. It is expected that the Bonds will be available for delivery in New York, New York through the facilities of DTC, or to the Trustee on behalf of DTC by Fast Automated Securities Transfer (FAST), on or about October 6, 2016. rior to rior re

* Preliminary, subject to change.

This Preliminary Official Statement and the information contained herein are subject to completion and amendment. The Bonds may delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor unlawful sale be or would solicitation offer, shall there be any sale of the Bonds, in any jurisdiction in which such

MATURITY SCHEDULE*

HOUSING AUTHORITY OF THE CITY OF SEATTLE $6,860,000*

REVENUE BONDS, SERIES 2016A (NewHolly Phase I Project)

Maturity Date Principal Interest CUSIP (October 1) * Amounts* Rates Prices Yields Numbers† 2017 $155,000 2018 160,000 2019 160,000 2020 165,000 2021 165,000 2022 170,000 2023 170,000 2024 175,000 2025 180,000 2026 180,000

$995,000* ____% Term Bond due October 1, 2031* Price ____% Yield ____% CUSIP No. ____†

$1,170,000* ____% Term Bond due October 1, 2036* Price ____% Yield ____% CUSIP No. ____†

$1,375,000* ____% Term Bond due October 1, 2041* Price ____% Yield ____% CUSIP No. ____†

$1,640,000* ____% Term Bond due October 1, 2046* Price ____% Yield ____% CUSIP No. ____†

HOUSING AUTHORITY OF THE CITY OF SEATTLE $15,380,000*

REVENUE BONDS, SERIES 2016B (NewHolly Phase I Project)

Maturity Date Principal Interest CUSIP (April 1) * Amount* Rate Price Yield Number† 2019 $15,380,000

* Preliminary, subject to change.

† Copyright, American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor’s. The CUSIP numbers listed above are being provided solely for the convenience of bondholders and the Authority makes no representation with respect to such numbers or undertakes any responsibility for their accuracy. The CUSIP numbers are subject to being changed after the issuance of the Bonds.

Each party listed below has provided the information under the caption or captions following its name. Each party is responsible only for the information provided under the captions following its name, unless otherwise stated.

DTC Appendix D – “DTC’s BOOK-ENTRY-ONLY SYSTEM”

Trustee “THE TRUSTEE”

Underwriters “UNDERWRITING” and the fourth paragraph below All other information set forth herein has been obtained from the Authority and other sources identified herein that are believed to be reliable, but such other information is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Authority or the Underwriters. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the other parties listed above since the date of this Official Statement. No broker, dealer, salesperson or other person has been authorized by the Authority or the Underwriters to give any information or to make any representations with respect to the Bonds other than as contained in this Official Statement and, if given or made, such information or representations must not be relied upon as having been authorized by Authority or the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any offer, solicitation or sale of the Bonds, by any person in any jurisdiction in which such offer, solicitation or sale is not authorized or in which the person making such offer, solicitation or sale is not qualified to do so or to any person to whom it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and it is not to be construed as a representation by, the Underwriters. Certain statements contained in this Official Statement do not reflect historical facts, but rather are forecasts and “forward- looking statements.” No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, the words “estimate,” “forecast,” “project,” “anticipate,” “expect,” “intend,” “believe” and other similar expressions are intended to identify forward-looking statements. The forward-looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. All estimates, projections, forecasts, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. The Authority specifically disclaims any obligation to update any forward- looking statements to reflect occurrences or unanticipated events or circumstances after the date of this Official Statement, except as otherwise expressly provided in “Continuing Disclosure – Undertaking to Provide Continuing Disclosure.” The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Information on web site addresses set forth in this Official Statement is not incorporated into this Official Statement and cannot be relied upon to be accurate as of the date of this Official Statement, nor can any such information be relied upon in making investment decisions regarding the Bonds. The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety. The offering of the Bonds is made only by means of this entire Official Statement. In connection with the offering of the Bonds, the Underwriters may overallot or effect transactions that stabilize or maintain the market price of the Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Bonds have not been registered under the Securities Act of 1933, as amended, and the Indenture has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Bonds in accordance with applicable provisions of the laws in any states in which Bonds have been registered or qualified and the exemption from registration or qualification in other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense.

HOUSING AUTHORITY OF THE CITY OF SEATTLE

Board of Commissioners

Chair ...... Deborah Canavan Thiele Vice Chair ...... Emily Abbey Commissioner ...... Ahmed Abdi Commissioner ...... Dr. Paula Houston Commissioner ...... David Moseley Commissioner ...... Zachary Pullin Commissioner ...... Jermaine Smiley

Authority Management

Executive Director ...... Andrew Lofton Deputy Executive Director ...... Anne Fiske Zuniga General Counsel ...... James Fearn Chief Financial Officer ...... Shelly Yapp Director of Communications ...... Kerry Coughlin Director of Development ...... Stephanie Van Dyke Director of Housing Operations ...... Rod Brandon Director of Housing Choice Voucher Program ...... Cynthia West Director of Housing Finance and Asset Management ...... Ann-Marie Lindboe Director of Human Resources ...... Marc Nilsen Director of Intergovernmental Relations ...... Lisa Wolters Director of Policy and Strategic Initiatives ...... Andria Lazaga

TRUSTEE

U.S. BANK NATIONAL ASSOCIATION Seattle, Washington

BOND COUNSEL

FOSTER PEPPER PLLC Seattle, Washington

UNDERWRITERS

KEYBANC CAPITAL MARKETS INC. Seattle, Washington

WEDBUSH SECURITIES INC. Scottsdale, Arizona

TABLE OF CONTENTS Page Page Early Redemption ...... 30 INTRODUCTION ...... 1 Competing Facilities ...... 30 THE BONDS ...... 1 Project Feasibility ...... 30 General ...... 1 Secondary Market and Prices ...... 30 Redemption of the Bonds ...... 2 Effects on Exemption of Interest From Federal Optional Redemption ...... 2 Income Taxes ...... 30 Mandatory Redemption ...... 2 Federal Housing Programs ...... 31 Extraordinary Mandatory Redemption ...... 3 Municipal Bankruptcies ...... 31 Notice of Redemption ...... 3 Environmental Matters ...... 32 Cancellation of Redemption ...... 4 TAX MATTERS ...... 32 Effect of Redemption ...... 4 Acceleration ...... 4 ABSENCE OF MATERIAL LITIGATION ...... 33 Open Market Purchases ...... 5 Registration, Transfer and Exchange of the APPROVAL OF LEGALITY ...... 33 Bonds ...... 5 CONTINUING DISCLOSURE ...... 33 Book-Entry Only System ...... 6 Undertaking to Provide Continuing Disclosure ...... 33 Past Compliance with Continuing Disclosure SECURITY AND SOURCES OF PAYMENT FOR THE Undertakings ...... 34 BONDS ...... 6 General ...... 6 RATING ...... 34 Limited Obligations ...... 6 Trust Estate ...... 7 UNDERWRITING ...... 34 Loan Agreement ...... 7 AUTHORITY AUDITS ...... 34 General Revenue Pledge ...... 7 Debt Service Reserve Account ...... 8 CONFLICTS ...... 35 Other Funds and Accounts ...... 9 Deed of Trust ...... 9 OTHER MATTERS ...... 35

PLAN OF FINANCE ...... 9 EXECUTION ...... 35

ESTIMATED SOURCES AND USES OF BOND APPENDIX A DEFINITIONS OF CERTAIN TERMS; PROCEEDS ...... 11 SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS DEBT SERVICE SCHEDULE ...... 12 APPENDIX B AUTHORITY’S COMPREHENSIVE ANNUAL THE AUTHORITY ...... 13 FINANCIAL REPORT FOR THE FISCAL General ...... 13 YEAR ENDED DECEMBER 31, 2015 Board Members and Senior Staff ...... 13 APPENDIX C FORM OF BOND COUNSEL OPINION Financial Management ...... 16 APPENDIX D DTC’S BOOK-ENTRY ONLY SYSTEM Programs ...... 17 APPENDIX E FORM OF BORROWER’S CONTINUING Pensions ...... 18 DISCLOSURE AGREEMENT

THE TRUSTEE ...... 20

THE BORROWER AND THE PROJECT ...... 20 The Borrower ...... 20 The Project ...... 20 Lease ...... 21 Use Restrictions and Project Rents ...... 22 Project Management ...... 23 Project Operating Pro Forma ...... 24 Other Project Debt ...... 26 Master Authority Loan ...... 26 Commerce Loan ...... 26 City Loans ...... 27

CERTAIN BONDOWNERS’ RISKS ...... 27 General ...... 27 Special Obligations ...... 27 Revenue Forecasts ...... 28 Casualty Loss or Condemnation ...... 28 Tax Credit Equity ...... 28 Use Restrictions ...... 28 General Revenue Pledge ...... 29 Possible Limitations on Remedies and Enforcement of Security Interests ...... 29 Limitations on Forecasting ...... 30 -i-

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OFFICIAL STATEMENT

RELATING TO

HOUSING AUTHORITY OF THE CITY OF SEATTLE

$6,860,000* $15,380,000* REVENUE BONDS, SERIES 2016A REVENUE BONDS, SERIES 2016B (NEWHOLLY PHASE I PROJECT) (NEWHOLLY PHASE I PROJECT)

INTRODUCTION

This Official Statement, including the cover page and appendices hereto, is being distributed by the Housing Authority of the City of Seattle (the “Authority”), a public body corporate and politic duly organized and existing under the laws of the State of Washington, to provide information in connection with the issuance and sale by the Authority of its Revenue Bonds, Series 2016A (NewHolly Phase I Project) (the “2016A Bonds”) and Revenue Bonds, Series 2016B (NewHolly Phase I Project) (the “2016B Bonds” and, together with the 2016A Bonds, the “Bonds”).

The Bonds will be issued pursuant to the laws of the State of Washington, Resolution No. 5109 of the Authority, adopted by the Board of Commissioners of the Authority on August 15, 2016, authorizing the issuance and sale of the Bonds (the “Resolution”), and a Trust Indenture (the “Indenture”) to be entered into by the Authority and U.S. Bank National Association, as trustee, paying agent and registrar (referred to herein as the “Trustee”).

The Authority will lend the proceeds of the Bonds to NewHolly Phase I LLLP (the “Borrower”), a Washington limited liability limited partnership of which the Authority is the sole general partner, pursuant to a Loan Agreement (the “Loan Agreement”) between the Authority and the Borrower, to provide part of the funds with which to: (1) finance of a portion of the cost of acquiring and rehabilitating the 305-unit affordable rental housing project, known as NewHolly Phase I, in the City of Seattle, Washington (the “Project”); (2) fund a debt service reserve for the 2016A Bonds; and (3) pay costs of issuing the Bonds. See “PLAN OF FINANCE.”

The Borrower will make payments under the Loan Agreement (“Loan Payments”) from certain revenues and receipts available from the Project. Payment of the principal of and interest on the Bonds is secured by (1) Loan Payments, (2) a leasehold deed of trust granting the Trustee a security interest in the Borrower’s leasehold interest in the Project, and (3) a pledge of the Authority’s General Revenues. The 2016A Bonds are also secured by the Debt Service Reserve Account. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.”

The summaries and descriptions of and references to statutes, the Resolution, the Indenture, the Loan Agreement, the Deed of Trust and other agreements that are included in this Official Statement do not purport to be comprehensive or definitive and such summaries, descriptions, and references are qualified by reference to each such statute, document, or instrument. Copies of the agreements are available upon request from the Trustee, U.S. Bank National Association, 1420 5th Avenue, 7th Floor, Seattle, Washington 98101. Capitalized terms used herein, if not specifically defined herein have the same meanings as in the Indenture. See Appendix A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS.”

THE BONDS

General

The Bonds will be dated their date of issue, will bear interest at the rates set forth on the inside front cover of this Official Statement, computed on the basis of a 360-day year consisting of twelve 30-day months, payable on April 1, 2017 and semiannually thereafter on April 1 and October 1 (each, an “Interest Payment Date”) of each year to their maturity or earlier redemption or acceleration, will be subject to redemption as described below, and will mature on the dates and in the amounts set forth on the inside cover page hereof. So long as the Bonds are registered in the name of The Depository Trust Company, New York, New York (“DTC”), or any nominee thereof, all payments of

* Preliminary, subject to change.

the principal or redemption price of or interest on the Bonds will be made to DTC or its nominee. For information as to the payment of the principal or redemption price of or interest on the Bonds prior to the discontinuance of the book-entry system for the Bonds, see “THE BONDS – Book-Entry Only System” and Appendix D – “DTC’S BOOK- ENTRY ONLY SYSTEM.”

Redemption of the Bonds

Optional Redemption

* The 2016A Bonds maturing on or before October 1, 2026 are not subject to optional redemption prior to maturity. The 2016A Bonds maturing on or after October 1, 2031*, are subject to optional redemption on any date on or after October 1, 2026*, at the option and written direction of the Authority (if from General Revenues) or the Borrower, in whole or in part, with maturities selected by the Authority, at a price of par plus accrued interest to the date of redemption.

The Series 2016B Bonds are subject to redemption on any date on or after April 1, 2018*, at the option and written direction of the Authority (if from General Revenues) or the Borrower, in whole or in part, at a price of par plus accrued interest to the date of redemption.

Mandatory Redemption

The 2016A Bonds maturing in the years 2031*, 2036*, 2041* and 2046*are subject to mandatory redemption at par plus accrued interest to the date of redemption on October 1 in years and amounts as follows:

2016A Bonds Maturing on October 1, 2031*

Mandatory Par Redemption Date* Amount* 2027 $185,000 2028 195,000 2029 200,000 2030 205,000 2031† 210,000

ಳMaturity.

2016A Bonds Maturing on October 1, 2036*

Mandatory Par Redemption Date* Amount* 2032 $220,000 2033 225,000 2034 235,000 2035 240,000 2036† 250,000

ಳMaturity.

* Preliminary, subject to change.

2016A Bonds Maturing on October 1, 2041*

Mandatory Par Redemption Date* Amount* 2037 $255,000 2038 265,000 2039 275,000 2040 285,000 2041† 295,000

ಳMaturity.

2016A Bonds Maturing on October 1, 2046*

Mandatory Par Redemption Date* Amount* 2042 $305,000 2043 315,000 2044 330,000 2045 340,000 2046† 350,000

ಳMaturity.

If 2016A Bonds maturing in the years 2031*, 2036*, 2041* or 2046* have been purchased in the open market or optionally redeemed other than as set forth in the mandatory redemption schedules above, the principal amount of such 2016A Bonds previously purchased or optionally redeemed is to be credited against such scheduled mandatory redemptions in inverse chronological order. If 2016A Bonds maturing in the years 2031*, 2036*, 2041* or 2046* have been defeased or redeemed pursuant to an extraordinary redemption, the principal amount of such 2016A Bonds so defeased or redeemed will be credited against the scheduled redemptions set forth above for that maturity on a pro rata basis within such maturity.

Extraordinary Mandatory Redemption

The Bonds are subject to extraordinary mandatory redemption prior to maturity at a redemption price equal to the principal amount to be redeemed plus accrued interest thereon to the date of redemption and without premium: (a) as a whole or in part within maturities selected by the Borrower in consultation with Bond Counsel, on the first date for which timely notice of redemption may be given, upon the destruction, damage or condemnation of all or a portion of the Project and the decision of the Borrower not to repair or replace the Project, as described in the Loan Agreement, with the Insurance Proceeds or a Condemnation Award (and, if necessary, other money legally available therefor) and (b) as a whole or in part within maturities selected by the Authority, on the first date for which timely notice of redemption can be given upon receipt by the Trustee of an opinion of Bond Counsel to the effect that such redemption is required to prevent a Determination of Taxability.

Notice of Redemption

So long as the Bonds are registered in the name of DTC or any nominee thereof, redemption notices are required to be given to DTC as provided in the Letter of Representations. Notice to beneficial owners of the Bonds is the responsibility of DTC and its participants. See “THE BONDS – Book-Entry Only System.”

The Trustee, or the Bond Registrar on behalf of the Trustee, must give notice of redemption by first class mail, postage prepaid, mailed not less than 20 nor more than 60 days prior to the redemption date to each Owner of Bonds to be redeemed at the address of such Owner appearing in the Bond Register, and also to the Rating Agency, if any, at its office in New York, New York (or its successor), and to such other Persons as the Authority specifies to the Trustee in writing. The failure of the Trustee to mail notice of redemption to Persons other than the Owners of Bonds to be redeemed will not affect the sufficiency of the proceedings for redemption. Notwithstanding the foregoing, notice of extraordinary mandatory redemption of Bond to prevent a Determination of Taxability must be

given by the Trustee, or by the Bond Registrar on behalf of the Trustee, within five Business Days of receipt by the Trustee of the opinion of Bond Counsel to the effect that such redemption is so required, and the redemption date must be not more than 10 days after the notice of such redemption is mailed by the Trustee or the Bond Registrar.

All notices of redemption are to state: (a) the redemption date, (b) the redemption price, (c) the name and Series of the Bonds to be redeemed, the principal amount of Bonds to be redeemed, and if less than all Outstanding Bonds of a Series are to be redeemed, the CUSIP numbers or other identification (and in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (d) that on the redemption date the redemption price of each such Bond will become due and payable to the extent of such funds on deposit with the Trustee for that purpose, and that interest on the principal amount of each such Bond to be redeemed will cease to accrue on and after such date, (e) the place or places where such Bonds must be surrendered for payment of the redemption price thereof, and (f) such additional information as the Trustee or the Bond Registrar deems appropriate.

Neither failure of an Owner to receive a redemption notice, nor any defect in any notice, will affect the sufficiency of the proceedings for redemption.

Cancellation of Redemption

Any notice of optional redemption may be rescinded by written notice to the Trustee by the Authority (if the redemption price was to be derived from General Revenues) or the Borrower prior to the date specified for redemption. The Trustee is to give notice of such rescission as soon thereafter as practicable in the same manner, and to the same persons, as notice of such redemption was given.

Further, with respect to optional redemptions only, if the Bond Registrar does not have funds in its possession on the redemption date sufficient to pay the redemption price (including interest accruing to the redemption date) of all of the Bonds to be optionally redeemed for any reason (including, but not limited to, failure to issue any refunding obligations intended for such purpose on or prior to the redemption date), then the purported optional redemption and such notice of redemption may be rescinded and will be void, and the Bond Registrar (if any entity other than the Trustee) is to so notify the Trustee. Such event will not constitute an Event of Default under the Indenture.

Effect of Redemption

Notice of redemption having been given as required by the Indenture and described above, the principal amount of the Bonds to be redeemed will become due and payable on the redemption date at the redemption price specified, and on and after such date (unless the Trustee does not have funds available for payment of the redemption price) such principal amount of the Bonds will cease to bear interest. Upon surrender of any such Bond for redemption in accordance with the notice, such Bond will be paid at the redemption price thereof to the extent that money is on deposit with the Bond Registrar for that purpose.

If any Bond called for redemption is not paid on the redemption date upon proper surrender of the Bond for redemption, the redemption price and, to the extent lawful, interest thereon will, until paid, bear interest from the redemption date at the rate borne by the Bond immediately before the redemption date.

Acceleration

If an Event of Default occurs due to a default in the due and punctual payment of the principal of, premium, if any, or interest on any Bond when and as the same shall become due and payable, whether on any Interest Payment Date, at maturity, by proceedings for redemption (except as otherwise described in “THE BONDS – Redemption of the Bonds”), by acceleration, or otherwise, then during the continuance of such Event of Default, the Trustee will be entitled, upon written notice to the Authority and the Borrower, or the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding will be entitled, upon written notice to the Authority, the Borrower and the Trustee, to direct the Trustee to declare the principal of all of the Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable.

The Trustee is to give or cause to be given notice of any Declaration of Acceleration to the respective Owners of the Bonds at their addresses appearing on the Bond Registrar. Notice of such Declaration of Acceleration having been

given, interest will cease to accrue on the Bonds from an after the date established for payment of the Bonds pursuant to the Declaration of Acceleration if and to the extent that money to make such payment is on hand with the Trustee in any of the Funds on that date.

Open Market Purchases

The Authority or the Borrower may at any time purchase Bonds in the open market. The Authority or the Borrower, as applicable, is to notify the Trustee in writing of any such purchase and, if the Bonds are in certificated form, immediately deliver such Bonds to the Bond Registrar for cancellation, together with a certificate specifying the date(s) of purchase. If the Bonds are not in certificated form, any such purchase will be deemed to be a redemption of such Bonds upon written notice to the Trustee of such purchase, whether or not such Bonds are otherwise subject to redemption at the time of purchase.

Registration, Transfer and Exchange of the Bonds

The Indenture provides that the Authority is to cause the Bond Registrar to keep books for the registration and transfer of the Bonds. The Bonds will initially be registered in the name of “Cede & Co.,” as nominee of DTC. The Bonds so registered will be held in fully immobilized form by or on behalf of DTC as depository. For so long as the Bonds are held in fully immobilized form, DTC or its successor depository will be deemed to be the registered owner for all purposes of the Indenture and all references to registered owner, bondowners and the like will mean DTC or its nominees and will not mean the owners or beneficial owners of any interests in the Bonds. So long as the Bonds are held in fully immobilized form, registered ownership of the Bonds, or any portions thereof, may not be transferred except: (i) to any successor of DTC or its nominee, if that successor is qualified under applicable laws to provide the services proposed to be provided by it; (ii) to any substitute depository appointed by the Authority or such substitute depository’s successor; or (iii) to any person as provided in the Indenture if the Bonds are no longer held in immobilized form. So long as the Bonds are registered in the name of DTC, or any nominee thereof, the beneficial ownership of the Bonds may only be transferred in accordance with DTC’s Book-Entry Only System. See Appendix D – “DTC’S BOOK-ENTRY ONLY SYSTEM.”

Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or a determination by the Authority that it no longer wishes to continue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the Authority may appoint a substitute depository. Any such substitute depository must be qualified under any applicable laws to provide the services proposed to be provided by it.

In the event that (i) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (ii) the Authority determines that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any Person as provided in the Indenture, and the Bonds no longer will be held in fully immobilized form.

Any Bond in certificated form to be exchanged may be surrendered at an office of the Bond Registrar designated by the Bond Registrar for that purpose. Any Bond in certificated form presented for transfer is to be accompanied by a written instrument or instruments of transfer, in form and with guaranty of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by its attorney duly authorized in writing. Upon surrender for transfer of any Bonds in certificated form at an office of the Bond Registrar designated by the Bond Registrar for that purpose, the Bond Registrar will authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same Series and interest rate and maturity and for the aggregate principal amount the Owner is entitled to receive. No transfer of any Bond will be binding upon the Bond Registrar, the Authority or the Trustee unless made at such office of the Bond Registrar and shown on the Bond Register. The costs of printing any new Bonds and any services rendered or expenses incurred by the Bond Registrar or the Authority in connection with any exchange or transfer of Bonds will be paid by the Borrower in accordance with the Loan Agreement, except that as a condition to a transfer of a particular Bond, the Bond Registrar may require payment by the Bondowner of a sum sufficient to cover any tax, fee or other governmental charge that the Bond Registrar is required to pay in relation thereto. The Bond Registrar will not be required to exchange or transfer any Bond or portion thereof that has been selected for redemption and also shall not be required to transfer or exchange any Bond or portion thereof during the period in which the Bond Registrar is selecting Bonds for redemption or during the 15 days preceding any Interest Payment Date or redemption date.

Book-Entry Only System

So long as the Bonds or any portion thereof are registered in the name of DTC or any nominee thereof (e.g., Cede & Co.), all payments of the principal of and interest on the Bonds will be made in the manner set forth in the Letter of Representations. While the Bonds are registered in the name of Cede & Co. as nominee of DTC, neither the Authority, the Trustee nor the Bond Registrar will have any responsibility or obligation to any direct or indirect participant in DTC, any Person claiming a beneficial ownership interest in the Bonds under or through DTC or any such participant, or any other Person not shown on the Bond Register as being an Owner, with respect to (i) the accuracy of any records maintained by DTC or any such participant; (ii) the payment by DTC or any such participant of any amount in respect of the principal or redemption price of or interest on the Bonds; (iii) the delivery to any participant or to any other Person, other than the Owners as shown on the Bond Register, of any notice with respect to the Bonds, including any notice of redemption; (iv) the selection by DTC or any such participant of any Person to receive payment in the event of a partial redemption of the Bonds; or (v) any consent given or other action taken by DTC as Owner. See Appendix D – “DTC’S BOOK-ENTRY ONLY SYSTEM.”

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

General

The principal of and interest on the Bonds are expected to be paid primarily from loan payments (the “Loan Payments”) made by the Borrower to the Authority under the Loan Agreement. The Borrower expects to make the Loan Payments solely from revenues of the Project, except for proceeds from capital contributions from the Borrower’s Limited Partner that are expected to be used to pay principal of the 2016B Bonds when due. Payment of the principal of and interest on the Bonds is secured by (1) Loan Payments, (2) a leasehold deed of trust granting the Trustee a security interest in the Borrower’s leasehold interest in the Project, and (3) a pledge of the Authority’s General Revenues. The 2016A Bonds are also secured by money and/or investments on deposit in the Debt Service Reserve Account.

The pledge of the General Revenues of the Authority to the payment of the Bonds is subject to the right of the Authority to issue, without limitation, other obligations to be paid from the General Revenues on a parity of lien with the Bonds and to pledge any portion of the General Revenues to the payment of other obligations, those payments to have a priority over the payments to be made on the Bonds with respect to that portion of the General Revenues so pledged. Nothing in the Indenture prohibits the Authority from issuing indebtedness that is payable solely from revenues, proceeds and earnings which are not Loan Payments or Bond proceeds, and are not payable, in whole or in part, from money in any of the Funds.

Except as contemplated under the Indenture, the Authority will not create or suffer to be created any lien upon the Trust Estate or any part thereof other than the liens created or contemplated by the Indenture and by the Loan Agreement and the Deed of Trust. The Authority has also agreed in the Indenture that it will issue no other obligations, other than bonds to refund the Bonds or a portion thereof, the payment of which is secured by money or amounts derived from Loan Payments. See Appendix A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Authority Covenants.”

Limited Obligations

THE BONDS ARE NOT A DEBT OF THE CITY OF SEATTLE, WASHINGTON, THE STATE OF WASHINGTON OR ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE CITY OF SEATTLE, WASHINGTON, THE STATE OF WASHINGTON NOR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT THE AUTHORITY FROM THE SOURCES DESCRIBED IN THE INDENTURE) SHALL BE LIABLE FOR PAYMENT OF THE BONDS NOR IN ANY EVENT SHALL THE PRINCIPAL OF, PREMIUM, IF ANY, ON OR INTEREST ON THE BONDS BE PAYABLE OUT OF ANY FUNDS OR ASSETS OTHER THAN THOSE PLEDGED TO THAT PURPOSE BY THE AUTHORITY IN THE INDENTURE AND IN THE RESOLUTION. THE AUTHORITY DOES NOT HAVE TAXING POWER. WHILE THE AUTHORITY HAS PLEDGED ITS GENERAL REVENUES TO SECURE PAYMENT OF THE BONDS, THERE CAN BE NO ASSURANCE THAT FUNDS WILL BE AVAILABLE TO THE AUTHORITY FOR THAT PURPOSE, OR IF AVAILABLE, IN A TIMELY MANNER.

Trust Estate

As provided in the Indenture, the Authority has granted to the Trustee a security interest in property described under this heading to secure the Bonds (the “Trust Estate”). The Trust Estate has been granted to the Trustee in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect, and the performance and observance by the Authority of all the covenants in the Indenture and in the Bonds. The Trust Estate consists of the following:

(a) All rights, title and interest of the Authority in the Loan Agreement (with certain reservations and exceptions noted in the Loan Agreement), including, but not limited to, the lien against and security interest in the Project, and the present and continuing right thereunder (i) to make claim for, collect or cause to be collected, and receive or cause to be received, all sums payable or receivable thereunder, (ii) to bring actions and proceedings thereunder or for the enforcement thereof, and (iii) to do the things which the Authority is or may become entitled to do under the Loan Agreement;

(b) The lien on the Borrower’s leasehold interest in the Project conveyed by the Deed of Trust;

(d) All Funds and accounts established under the Indenture and all Investment Earnings thereon and money, securities and obligations therein (subject to disbursements from any such Fund or account upon the conditions set forth in the Indenture);

(e) All money and securities from time to time held by the Trustee under the terms of the Indenture (except money and securities in the Rebate Fund) and any and all other real or personal property of every name and nature conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the Indenture by the Authority or anyone on its behalf, or with its written consent, to the Trustee, but excluding money collected for the indemnification of the Authority or the Trustee; and

(f) To the extent not covered above, all proceeds of the foregoing.

The Trust Estate has been pledged for the equal and proportionate benefit, security and protection (subject to the terms of the Indenture) of all Owners of the Bonds, without privilege, priority or distinction as to the lien or otherwise of any Bond over any other Bond, except as expressly provided therein. Notwithstanding the foregoing, the Debt Service Reserve Account shall be used solely to pay debt service on the 2016A Bonds.

Loan Agreement

The principal of and interest on the Bonds are expected to be paid primarily from Loan Payments to be made by the Borrower to the Authority under the Loan Agreement. See Appendix A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT.” The Borrower expects to make Loan Payments solely from revenues of the Project, except for proceeds from capital contributions from the Borrower’s Limited Partner that are expected to be used to pay principal of the 2016B Bonds when due. See “THE BORROWER AND THE PROJECT.” The Authority has assigned its rights to receive such Loan Payments and all remaining rights and interest in the Loan Agreement (other than certain indemnification rights and other rights specifically reserved in the Indenture and the Loan Agreement) to the Trustee, as security for payment of the principal of and interest on the Bonds. See “CERTAIN BONDHOLDERS’ RISKS – Possible Limitations on Remedies and Enforcement of Security Interests.”

General Revenue Pledge

The General Revenues of the Authority are pledged to the payment of the Bonds. “General Revenues” means all revenues of the Authority (other than Loan Payments) from any source, but only to the extent that those revenues are available to pay debt service on the Bonds and are not on the date of issuance of the Bonds or thereafter pledged or restricted, by law, regulation, contract, covenant, resolution, deed of trust or otherwise (including restrictions relating to funds made available to the Authority under the U.S. Housing Act of 1937), solely to another particular

purpose. The pledge of the General Revenues of the Authority to the payment of the Bonds is subject to the right of the Authority to issue, without limitation, other obligations to be paid from the General Revenues on a parity of lien with the Bonds and to pledge any portion of the General Revenues to the payment of other obligations, those payments to have a priority over the payments to be made on the Bonds with respect to that portion of the General Revenues so pledged. See “CERTAIN BONDHOLDERS’ RISKS – General Revenue Pledge” and “– Possible Limitations on Remedies and Enforcement of Security Interests.”

Although the amount of annual General Revenues is not included in the Authority’s Comprehensive Annual Financial Report for the Fiscal Year ended December 31, 2015, included in Appendix B hereto, it is the Authority’s practice to calculate General Revenues for each Fiscal Year. The following table sets forth the Authority’s annual General Revenues for Fiscal Years 2011 through 2015.

General Revenues for Fiscal Years 2011-2015 2011 2012 2013 2014 2015 $103,610,066 $104,497,138 $115,259,272 $130,332,505 $141,904,639

The Authority has previously issued multiple series of bonds and notes to which it has pledged its General Revenues. As of December 31, 2015, the amount of such obligations outstanding and secured in whole or in part by a pledge of General Revenues, was approximately $184,707,193, which includes financings for properties owned by the Authority and for projects owned by tax credit entities managed by the Authority. Of the $184,707,193 outstanding principal amount of Authority obligations to which General Revenues were pledged as of December 31, 2015, $5,784,412 is payable primarily from General Revenues. The remaining $178,922,781 is payable from multiple sources, and the Authority expects that such obligations will be paid from sources other than General Revenues, such as project revenues and/or capital contributions of tax credit equity investors. Some of the outstanding obligations to which General Revenues have been pledged are draw down obligations which may be drawn upon in amounts in excess of that outstanding as of December 31, 2015. In 2015, aggregate annual debt service for all obligations payable, in whole or in part, from General Revenues, represented approximately 14% of the Authority’s total General Revenues. Other than payments on obligations payable primarily from General Revenues, General Revenues were not used to pay debt service on any of the Authority’s obligations in 2015. The Authority expects to issue approximately $49,000,000 of other debt secured, in whole or in part, by a pledge of General Revenues within the next 12 months.

Debt Service Reserve Account

Under the provisions of the Indenture, the Trustee will create a debt service reserve account (the “Debt Service Reserve Account”) as security for the 2016A Bonds. Pursuant to the Indenture, the Trustee is required to deposit into the Debt Service Reserve Account (a) $180,148.13* derived from 2016A Bond proceeds upon the initial sale of the 2016A Bonds (the “Debt Service Reserve Requirement”) and (b) all other money required to be transferred to or deposited in the Debt Service Reserve Account pursuant to the Indenture or the Loan Agreement. Pursuant to the Loan Agreement, if at any time the Trustee withdraws money from the Debt Service Reserve Account to pay debt service on the 2016A Bonds (except with respect to the payment of the final installment(s) of principal of and interest on the 2016A Bonds), the Borrower is required to immediately deliver to the Trustee an amount sufficient to replenish the Debt Service Reserve Account to the Debt Service Reserve Requirement. Upon the optional or extraordinary mandatory redemption, open market purchase or defeasance of a portion of the 2016A Bonds, the Debt Service Reserve Requirement is to be reduced to an amount equal to 50% of the maximum annual debt service on the 2016A Bonds Outstanding immediately after such redemption, purchase or defeasance.

The money and investments in the Debt Service Reserve Account are irrevocably pledged and are to be used by the Trustee, to the extent required, in the following order of priority:

(A) for transfer to the Series 2016A Principal and Interest Account on each redemption or Interest Payment Date with respect to the 2016A Bonds, to the extent that the amount in the Series 2016A

* Preliminary, subject to change.

Principal and Interest Account on that date is insufficient to pay the principal of, premium, if any, on and/or interest on the 2016A Bonds coming due on that date;

(B) for transfer to the Rebate Fund, if any, to the extent the Authority determines pursuant to the Indenture that a Rebate Amount must be deposited in the Rebate Fund; and

(C) for transfer to the Series 2016A Principal and Interest Account or to the trust account described in the Indenture to pay or defease the last installment(s) of principal of and/or interest on the 2016A Bonds.

The Debt Service Reserve Account is to be valued the last Business Day of each March and September, beginning in March, 2017, and also on the date that a portion of the 2016A Bonds is defeased, purchased in the open market or redeemed. If on any valuation date the amount in the Debt Service Reserve Account exceeds the Debt Service Reserve Requirement, the Trustee is to transfer any excess to the Rebate Fund, if any, to the extent the Authority determines pursuant to the Indenture that a Rebate Amount must be deposited in the Rebate Fund, and then to the Series 2016A Principal and Interest Account.

The Debt Service Reserve Account does not secure payment of principal of or interest on the 2016B Bonds.

Other Funds and Accounts

In addition to the Debt Service Reserve Account, all money, along with Investment Earnings thereon, on deposit in any of the Funds and accounts created under the Indenture are pledged to secure performance of the Authority’s obligations under the Indenture. See Appendix A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Establishment of Funds and Accounts.”

Deed of Trust

On the date of issuance of the Bonds, the Borrower will lease the Project and the real property on which it is located (the “Property”) from the Authority for a term of approximately 99 years. To secure the payment of the principal of and premium, if any, and interest on the Bonds and performance of the other covenants and agreements of the Borrower in the Loan Agreement, the Borrower has granted to the Trustee, by way of the Deed of Trust, a first monetary lien on the Borrower’s leasehold interest in the Property, along with the equipment, furniture, fixtures and other articles of property therein. The Deed of Trust limits the Borrower’s ability to encumber, sell, convey or otherwise transfer its leasehold interest in the property subject thereto. See Appendix A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE DEED OF TRUST.” At any time, the value of the property encumbered by the Deed of Trust could be less than the principal amount of obligations secured thereby. A mortgagee policy of title insurance, subject to certain exceptions, will insure the Trustee’s mortgage lien interest in the Borrower’s leasehold interest in the Property encumbered by the Deed of Trust. The security for owners of the Bonds represented by the Deed of Trust may be subject to certain limitations and restrictions. See “CERTAIN BONDHOLDERS’ RISKS – Possible Limitations on Remedies and Enforcement of Security Interests.”

PLAN OF FINANCE

On the Date of Issue, the Authority and the Borrower will enter into a Lease, transferring ownership of the improvements constituting the Project to the Borrower for federal tax purposes. A portion of the capitalized rent under the Lease Agreement in the anticipated amount of $13,018,768* is expected to be financed by a loan from the Authority. Renovation of the Project is expected to cost approximately $20,910,687 and will be paid for with proceeds of the Bonds and with other sources as shown in the following table.

* Preliminary, subject to change.

The Authority will lend the proceeds of the Bonds to the Borrower under the Loan Agreement, to be applied, together with other available funds, to (1) finance a portion of the cost of acquiring and rehabilitating the Project; (2) fund a debt service reserve for the 2016A Bonds; and (3) pay costs of issuing the Bonds.

After the rehabilitation of the Project, the Authority expects that the Borrower will receive capital contributions from U.S. Bancorp Community Development Corporation, which is the investor Limited Partner of the Borrower, in the amount of approximately $18,046,820. A portion of this amount is expected to be used to repay or redeem the outstanding principal of the 2016B Bonds.

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The total permanent project costs for the Project are estimated by the Borrower to be approximately $46,071,771, not including accrued interest on the Bonds to be paid from Project revenues. The estimated sources and uses of funds for the Project are set forth below:

Source of Funds 2016A Bond Proceeds $6,860,000* Limited Partner Capital Contributions 18,046,820 Acquisition Loan 13,018,768* Assumption of City General Fund Loan 946,183 Assumption of Commerce Loan 1,700,000 First and Second Rehabilitation Loans 5,500,000 Total Sources of Funds $46,071,771

Uses of Funds Project Acquisition $19,250,000 Renovation 20,910,687 Financing Cost and Fees 544,012 Capitalized Interest on Bonds 219,772* Reserves 3,647,300 Developer Fee 1,500,000 Total Uses of Funds $46,071,771

*Preliminary, subject to change.

ESTIMATED SOURCES AND USES OF BOND PROCEEDS

Sources of Funds: Principal Amount of Bonds $______Original Issue Premium Other Borrower Funds Total Sources of Funds $______

Uses of Funds: Deposit to Debt Service Reserve Account $______Underwriters’ Discount Other Costs of Issuance(1) Deposit to Project Account ______Total Uses of Funds $______(1) Includes legal, printing, rating agency, trustee and other miscellaneous costs of issuance.

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DEBT SERVICE SCHEDULE

The following table sets forth an estimate of the debt service payments for the Bonds based on a year ending _____ l.

2016A Bonds 2016B Bonds(1) Year Ending Total Debt Principal Interest Principal Interest Service(1)

Totals(2) $______$______$______(1) Principal of the 2016B Bonds is expected to be paid from capital contributions from Borrower’s Limited Partner. (2) Totals may not add due to rounding. Source: KeyBanc Capital Markets Inc.

THE AUTHORITY

General

The Authority was created in 1939 by the Seattle City Council under chapter 35.82 of the Revised Code of Washington. The Authority is a public body corporate and politic created specifically to provide low-income housing and related services. The majority of the Authority’s revenue comes from rental income and from the U.S. Department of Housing and Urban Development (“HUD”). The Authority has entered into a Cooperation Agreement with the City of Seattle (the “City”) pursuant to which the City provides support services (police, fire, etc.) for the Authority’s developments.

The Mayor of the City appoints the seven-member non-paid Board of Commissioners of the Authority (the “Board”) for staggered four-year terms. The Board is responsible for setting policies for the Authority and for hiring the Executive Director, who administers the Authority’s programs and supervises its staff.

The Authority provides affordable housing for more than 29,500 people in more than 17,000 rental units throughout the City. The Authority owns more than 8,150 of these units. The others are privately owned or owned by non-profit organizations, and residents receive Federal rent subsidies through programs administered by the Authority. All households have initial incomes upon initial occupancy less than 80% of the median income in the Seattle-Bellevue- Everett Metropolitan Division (consisting of King and Snohomish Counties, Washington), adjusted for household size. Households generally pay a specified percentage of their income for rent and utilities, typically 30%.

Board Members and Senior Staff

Deborah Canavan Thiele, Chair. Commissioner Thiele is a Senior Program Manager for a national organization that works to improve opportunities for the homeless and other vulnerable families through supportive housing. She has held previous positions in multi-family lending at the Seattle Office of Housing, and in homeless housing initiatives at the King County Housing Authority. Commissioner Thiele holds a degree in communications and professional writing. She is an experienced public speaker and trainer for multiple government and nonprofit organizations. Commissioner Thiele’s term will expire March 20, 2017.

Emily Abbey, Vice Chair. Commissioner Abbey has been a resident of the Authority since 2003 and has served on the Authority’s Joint Policy Advisory Committee as co-chair for four years. She has worked for the federal government, a government contractor, private industry and a social services agency in roles including editor/writer and administration of employee development programs and energy program grants. She holds an M.A. degree in applied behavioral sciences, which emphasized skill training in organizational development, communication and conflict management skills, leading meetings and managing projects. Commissioner Abbey’s term will expire March 20, 2019.

Ahmed Abdi, Commissioner. Commissioner Abdi is a resident of the Authority and an Outreach Manager at Fair Work Center where he is responsible for organizing and conducting workshops for community partner organizations around King County. Commissioner Abdi also helps coordinate the Fair Work Collaborative, a coalition of ten organizations committed to collaboratively educating works on labor standards. Mr. Abid previously held positions with SEIU 775, Pastoralist Girls Initiative, Working Washington, African Diaspora of Washington, Somali American Public Advocacy Committee, Crest Services and Jewish Vocational Services. He volunteers at East African Community Services and serves on the Board of African Diaspora of Washington. Commissioner Abdi’s term will expire October 1, 2018.

Dr. Paula Houston, Commissioner. Commissioner Houston is the CEO of Sound Generations in Seattle. She was previously Executive Director for the Meredith Mathews East Madison YMCA. Commissioner Houston is a member of Seattle Rotary #4, where she has held an officer position, sits on the board of the Alzheimer’s Association and is a member of the Seattle Art Museum’s Education and Community Engagement Committee. She has also been a member of numerous other nonprofit boards and served two terms on the Seattle Women’s Commission. Commission Houston has a B.S. degree from Syracuse University, and a Master’s degree in Health Administration from the University of Washington and earned her Doctorate in Educational Leadership from Seattle University in 2014. Commissioner Houston’s term will expire March 20, 2020.

David Moseley, Commissioner. Commissioner Moseley is semi-retired. Most recently he was the Assistant Secretary to the Washington State Department of Transportation Ferries Division where he was responsible for the management of all aspects of the largest ferry system in the United States. Previously he was the Vice President of Institute for Community Change. Commissioner Moseley currently serves on numerous nonprofit boards and committees including Pioneer Human Services and the Housing Affordability and Livability Advisory Committee. He has a B.A. in Political Science from Willamette University, a Masters of Divinity from Golden Gate Theological Seminary, and a Certificate from Harvard University, John F. Kennedy School of Government. Commissioner Moseley’s term will expire March 19, 2019.

Zachary Pullin, Commissioner. Commissioner Pullin is a communications project lead at a large healthcare union. He has also worked as a communications coordinator for a nonprofit organization, the director of online community for a social justice website, a logistics coordinator for an 18-city social justice bus tour, and an organizational development volunteer for the United States Peace Corps. He serves on the boards of the Gender Justice League, Victory Campaign, and 43rd District Democrats of Washington, and is president of the Capitol Hill Community Council. He is a graduate of Western Washington University. Commissioner Pullin’s term will expire December 1, 2018.

Jermaine Smiley, Commissioner. Commissioner Smiley is executive director of a non-profit organization committed to developing affordable workforce housing, and is an organizer at Laborers’ Local 242. He is a former member of the Authority’s Section 3 advisory committee, and currently serves on the board of Puget Sound Sage, a community group that serves the interests of low-income people, people of color, immigrants and refugees in the Puget Sound region. Commissioner Smiley’s term will expire December 1, 2018.

Senior staff members are as follows:

Andrew Lofton, Executive Director. Mr. Lofton was appointed Executive Director of the Authority on September 1, 2012, and leads strategic planning and the day-to-day operations of the organization. Prior to his promotion to Executive Director, he held the position of Deputy Executive Director–Finance and Administration for more than eight years. As Deputy Executive Director, Mr. Lofton oversaw the Authority’s Human Resources, Information Technology, Finance and Budget, and Housing Choice Voucher functions, including the development and management of the agency’s annual budget. He has also worked closely with representatives of the U.S. Department of Housing and Urban Development regarding the oversight of the Authority’s Moving to Work agreement, regulatory reform, and funding issues. During Mr. Lofton’s nearly 40 years of public service, his many leadership positions have included Chief of Departmental Operations for City of Seattle Mayor Greg Nickels; Deputy Superintendent for Customer Service with Seattle City Light; Deputy Chief of Staff for City of Seattle Mayor Norm Rice; and Budget Director for the City of Seattle. He also served as Deputy Director for the Washington State Department of Community, Trade, and Economic Development (now the Washington State Department of Commerce). Mr. Lofton received his Baccalaureate from the University of Puget Sound and did his graduate work in Urban Planning at the University of Washington.

Anne Fiske Zuniga, Deputy Executive Director. Ms. Zuniga was appointed Deputy Executive Director of the Authority in May 2013, after joining the Authority as Senior Development Program Manager in March 2010. Previously, she worked as the first Deputy Director of the City of Seattle Department of Transportation, a department of over 800 employees, for nine years. Ms. Zuniga has also worked for the City of Seattle as a budget analyst and as manager of the City of Seattle Department of Neighborhoods, where she created the City’s Neighborhood Implementation Program. She has served on the board of directors of the Seattle Institute of Early Childhood Development. Ms. Zuniga earned a B.A. degree from Wellesley College in 1985 and received an MPA from the University of Washington – Evans School in 1992.

Shelly Yapp, Chief Financial Officer. Ms. Yapp joined the Authority in June 2007, bringing over 25 years of public sector management, financial and policy experience to the Authority. Most recently, she has held the position of Redevelopment Director and Executive Advisor for the Seattle Center. During her tenure there, she was responsible for capital financing of the Seattle Center’s projects, managed over $600 million in private investment and development at the Seattle Center and successfully completed the redevelopment of McCaw Hall. Ms. Yapp has also served as Executive Director of the Pike Place Market Preservation & Development Authority, as Deputy Mayor to City of Seattle Mayor Charles Royer, and as the Budget Director for King County, Washington. As King County Budget Director, she was responsible for the development and management of the County’s $500 million Operating

and Capital budget, and was on the Executive Finance Committee directing investment policies and practices for over 50 County funds. She has a B.A. in Economics from the University of Washington, where she graduated cum laude, was elected to Phi Beta Kappa and has since served as a member of the Board of Regents.

Kerry Coughlin, Director of Communications. Ms. Coughlin became Director of Communications of the Authority in January 2015. She serves on the Authority’s Executive Cabinet, providing counsel and oversight to ensure effective communication with the Board, residents and clients, elected officials, partner agencies, media, the public, employees and other stakeholders. Most recently Ms. Coughlin served as a director with the international Marine Stewardship Council, an organization devoted to environmental, food security and economic sustainability of the global seafood industry, as well as a consultant with the Daniel J. Evans Graduate School of Public Affairs at the University of Washington. She has held top communications leadership positions with former Washington State Governor Chris Gregoire, The Seattle Times Company and the YWCA of Seattle, King and Snohomish Counties. Prior to her career in management and corporate communications, Ms. Coughlin worked as a journalist.

Stephanie Van Dyke, Director of Development. Ms. Van Dyke joined the Authority in 2005 and is responsible for overseeing the Development Department activities, including HOPE VI redevelopment projects and Choice Neighborhood (CNI) redevelopments, which currently includes the redevelopment of the Yesler Terrace community. She is responsible for the oversight of major development programs and supervision of program management staff. Prior to joining the Authority, Ms. Van Dyke worked as a Senior Project Manager at The City of Seattle, where she was responsible for redevelopment projects at the Seattle Center, including the $110 million dollar McCaw Hall project. Ms. Van Dyke has an M.A. degree in Public Administration from the University of Washington and a B.A. degree from Harvard University.

Rod Brandon, Director of Housing Operations. Mr. Brandon was appointed Director of Housing Operations in January 2010. Mr. Brandon has held increasingly responsible leadership positions in the public sector for the past 25 years, most recently serving as director of sustainability services for King County Executive Ron Sims, where he implemented strategies for smart growth management, including the acquisition of more than 160,000 acres of threatened land into King County ownership. Mr. Brandon earned a B.A. degree in business administration from the University of Montana, Missoula, and also attended the John F. Kennedy School of Government, where he completed its summer program for senior executives in state and local government.

Cynthia West, Director of Housing Choice Voucher Program. Ms. West joined the Authority in January 2015. Previously, she was the Chief Financial Officer for Seattle-King County Public Health for nearly five years. In addition, Ms. West has served as a Health and Human Services Supervisor in the King County Office of Management and Budget, a Contract Monitor in The City of Seattle Human Services Department, a Criminal Justice Strategic Advisor in The City of Seattle Office of Policy and Management, and a high school social studies teacher. Ms. West holds a master’s degree in Public Administration from the University of Washington.

Ann-Marie Lindboe, Director of Housing Finance and Asset Management. Ms. Lindboe has been with the Authority for 12 years as the Housing Finance Manager. In May 2006 that position was combined with the Asset Manager position and elevated to a director level. Ms. Lindboe has over 30 years of housing finance and development experience having worked previously for the Alaska Housing Finance Corporation and the Housing Authority of the City of Tacoma. Ms. Lindboe has a B.B.A. degree in Business Administration and an M.P.A. degree in Public Administration from the University of Alaska Anchorage.

Lisa Wolters, Director of Intergovernmental Relations. Ms. Wolters was appointed the Authority’s Director of Intergovernmental Relations in 2015. Previously, she served as the Authority’s Director for the Housing Choice Voucher (Section 8) programs at the Porchlight Center for nine years, developing and implementing the Porchlight Center’s strategic plans, budgets, and operational procedures, and was responsible for federal, state and local policy issues and community building. Prior to joining the Authority in 2005, she was King County Director for U.S. Senator Maria Cantwell. Ms. Wolters has over ten years of management experience in the public and private sectors, including positions with the State of Washington, YWCA and TRAC Associates. She holds a B.A. degree in Political Science from Clemson University.

Andria Lazaga, Director of Policy and Strategic Initiatives. Ms. Lazaga was appointed the first director of the Authority’s newly formed Office of Policy and Strategic Initiatives in January 2015, having previously spent more than 15 years at the Authority in asset management and leading human services efforts in the Authority’s

redevelopment communities. Prior to joining the Authority, she worked in youth development and on policy and budget issues for local school districts. Ms. Lazaga holds an MPA degree from the University of Washington.

James Fearn, General Counsel. Mr. Fearn is the General Counsel at the Authority. He is an attorney with extensive experience in the areas of land use, zoning, environmental, real estate and municipal law. He also has been substantially involved in low income housing development issues. Prior to coming to the Authority, Mr. Fearn worked in the Land Use Division of the Seattle City Attorney’s Office, in private practice, and for the Department of Housing and Urban Development. Mr. Fearn has represented public and private organizations in connection with land development issues. He is a graduate of the University of Chicago Law School.

Marc Nilsen, Human Resources Director. Mr. Nilsen joined the Authority in November 1984 and has over 30 years in the Human Resources field, with special emphasis on employment, recruitment, labor relations, classification/compensation, and human resource information systems. He has B.A. degrees in Political Science and in International Studies from the Jackson School at the University of Washington in Seattle, Washington. He obtained his Professional Certification in Human Resources from the University of Washington, and is credentialed as a Senior Professional in Human Resources (SPHR) with the Human Resources Certification Institute, and as a Senior Certified Professional with the Society for Human Resource Management (SHRM). Prior to joining the Authority, Mr. Nilsen worked with the federal General Services Administration in Seattle.

Financial Management

The Authority is a Washington public body, corporate and politic, that is exempt from Federal income tax and from all state and local property taxes. The Authority owns, manages or administers approximately 8,150 housing units. The Authority’s accounts are organized on the basis of funds, each of which is considered a separate accounting entity and has a separate set of self-balancing accounts comprised of its assets, liabilities, net assets, revenues and expenses. The financial statements of the Authority are reported using the economic resources measurement focus and the accrual basis of accounting in conformity with Generally Accepted Accounting Principles (GAAP) as applied to government units. Annual appropriated budgets are adopted and all annual appropriations lapse at the Authority’s year-end. The Authority’s total assets as of December 31, 2015 were approximately $685 million.

The Authority, recognized by HUD as a high-performing, large housing authority, was selected to participate in HUD’s Moving to Work (“MTW”) Demonstration Program effective January 13, 1999. Under MTW, the Authority is exempt from many HUD regulations and reporting requirements, and is allowed significant flexibility to combine its HUD funding for reallocation among the Authority’s administrative, capital and development activities. The MTW contract also gives the Authority the ability to redesign HUD housing programs to meet the market conditions and resident needs in the City. In December 2015, Congress passed the Consolidated Appropriations Act of 2016, which directed HUD to extend the Authority’s MTW contract through December 30, 2028, maintaining the same terms and conditions as the existing MTW contract.

Pending HUD’s revisions of its Public Housing Assessment System or designation of an alternate tool, the Authority retains its high performer designation. Prior to its participation in the MTW Demonstration Program, the Authority was evaluated by HUD under its Public Housing Management Assessment Program (“PHMAP”). The PHMAP program evaluates housing authorities on eight indicators, including financial management, modernization, vacancy rates, uncollected rents, resident services and security. Under this program, the Authority was designated a “High Performer” for six straight years and received a perfect score of 100% two years in a row. HUD has confirmed the Authority’s designation as a “High Performer” each year since the Authority was selected to participate in MTW.

The Authority’s most recent audit is for the fiscal year ending December 31, 2015, and comprises a Comprehensive Annual Financial Report (“CAFR”) and a Single Audit report. The audit was performed by the independent accounting firm of KPMG, LLP. Both reports were issued by KPMG, LLP in May 2016. The audit for the year ended December 31, 2015, reported no findings of significant deficiencies, and there were no significant deficiencies reported by KPMG, LLP in connection with its audit of the Authority’s CAFR for the fiscal year ending December 31, 2015. The Authority’s CAFR for the fiscal year ended December 31, 2014, was awarded the Authority’s eighteenth consecutive Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of U.S. and Canada. As a political subdivision of the State of Washington, the Authority is also subject to accountability audits conducted by the Office of the State Auditor. Reports of the Authority’s audit examinations are published annually and are available to the public.

HUD Settlement. The Authority reached an agreement with HUD in August 2013 that resulted in an increase to the Authority’s annual Public Housing Operating funding of approximately $6.5 million. This addition to the Authority’s funding base represented a correction to the Authority’s funding formula and will continue from year to year in the future, subject to the overall Public Housing Operating Subsidy federal appropriation levels and funding proration. These funds are subject to the Authority’s MTW single fund authority and become part of the General Revenues of the Authority.

Programs

Public Housing Program. The Authority’s Public Housing Program operates under HUD’s Annual Contributions Contract (ACC) SF-151 and consists of the operations of low-rent public housing properties totaling 6,040 units, which includes 1,030 units of senior housing. The purpose of the program is to provide decent and affordable housing to low-income families at reduced rents. The properties are owned, maintained, and managed by the Authority. The properties are acquired, developed, and modernized under HUD’s Capital Funds Program and through HUD HOPE VI Urban Revitalization grants. Financing for the properties is obtained through bond issues and grants. Funding for the management and operation of the program is provided by federal annual contributions and operating subsidies and tenant rentals (determined as a percentage of family income, adjusted for family composition). 177 of the units in the Project will be public housing units.

Section 8 Programs. The Authority administers three Section 8 programs:

Section 8 Housing Choice Voucher Program. This program provides rental housing assistance subsidies in support of 10,359 housing units. The purpose of the program is to provide decent and affordable housing to low-income families and elderly and handicapped persons where rental assistance is provided by HUD. The associated units are maintained and managed by private landlords, private non-profit housing agencies and the Authority.

Section 8 New Construction and Substantial Rehabilitation Program. The purpose of this program is to construct or purchase and rehabilitate rental housing units to provide decent and affordable housing to low- income, elderly and handicapped individuals where rental assistance is provided by HUD. Funding of the program is provided by federal housing assistance contributions and tenant rentals. The Authority owns two housing developments financed under this program, totaling 130 units.

Section 8 Moderate Rehabilitation Program. This program operates under HUD’s ACC S-0068K and consists of the operations of 759 privately owned family housing units. The purpose of the program is to rehabilitate substandard rental housing units and provide decent and affordable housing to low-income families where rental assistance is provided by HUD. The associated developments are maintained and managed by private landlords. Funding of the program is provided by federal housing assistance contributions.

Seattle Senior Housing Program (“SSHP”). In 1981, City voters approved a $48.1 million elderly housing bond issue. The Authority entered into an agreement with the City to develop, manage and operate a total of 994 completed units. The purpose of this program is to provide low rent housing for the elderly, handicapped and disabled. In 2011, the Authority received approval from HUD and from the City to include 894 of the SSHP units in the Public Housing Program. This change took effect January 1, 2012. The Authority currently operates a total of 1,030 units under the SSHP.

Locally Developed Housing. The Authority has issued bonds and secured local funds from the City and the State of Washington (the “State”) to develop and manage 826 units of large family, elderly and special needs housing. The most recent acquisition was the Baldwin Apartments.

Tax-Exempt Conduit Bonds. Since 1985, the Authority has issued tax-exempt bonds to finance loans to non-profit corporations, partnerships and public corporations in connection with 56 properties. The loans totaled approximately $367 million and assisted in the development of over 4,000 units of affordable housing for residents of Seattle.

Low Income Housing Tax Credits. The Authority is the general partner in 17 limited partnerships formed to take advantage of the federal Low Income Housing Tax Credit program. These 17 partnerships own and manage 3,449

units of low-income housing. The Authority’s current limited partners in these partnerships include Enterprise Community Investments, Boston Capital, Boston Financial, Wells Fargo Affordable Housing Community Development Corporation, Union Bank and U.S. Bancorp Community Development Corporation.

Pensions

Substantially all of the Authority’s full-time and qualifying part-time employees are enrolled in the State Public Employees Retirement System (“PERS”). PERS Plans 1 and 2 are defined benefit plans and PERS Plan 3 is both a defined benefit plan (employer share) and defined contribution plan (employee share). These plans are administered by the State. Contributions by both employees and employers are based on gross wages. Those PERS participants who joined the system by September 30, 1977 are Plan 1 members. PERS participants who joined on or after October 1, 1977, are Plan 2 members, unless they exercise an option to transfer to Plan 3. PERS participants joining on or after September 1, 2002, have the irrevocable option of choosing membership in PERS Plan 2 or PERS Plan 3.

State law requires systematic actuarial based funding to finance the retirement plans. Actuarial calculations to determine employer and employee contributions are prepared by the Office of the State Actuary (“OSA”), a nonpartisan legislative agency charged with advising the Legislature and Governor on pension benefits and funding policy. To calculate employer and employee contribution rates necessary to pre-fund the plans’ benefits, OSA uses actuarial cost and asset valuation methods selected by the Legislature as well as economic and demographic assumptions. The Legislature adopted the following economic assumptions for contribution rates beginning July 1, 2015: (1) 7.8% rate of investment return; (2) general salary increases of 3.75%; (3) 3.0% rate of Consumer Price Index increase; and (4) 0.95% growth in membership. The long-term investment return assumption is used as the discount rate for determining the liabilities for a plan. As of March 31, 2016, the 10-year (2005-2015) annualized return on the investment of the retirement funds was 6.12%.

Plan Funding; Contribution Rates and Amounts. All State-administered retirement plans are funded by a combination of funding sources: (1) contributions from the State for certain plans; (2) contributions from employers (including the State as employer and the Authority and other governmental employers); (3) contributions from employees; and (4) investment returns. Retirement funds are invested by the Washington State Investment Board, a 15-member board created by the Legislature in 1981.

The Authority contributed $2,860,091 to PERS for plan year 2015 (July, 2014-June, 2015) and contributed $2,750,920 to PERS for plan year 2014 (July, 2013-June, 2014) for all of the Authority’s employees that are covered under PERS, representing 8.72% and 8.87% of covered payroll, respectively. See Appendix B – “AUTHORITY’S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 – Notes to Basic Financial Statements – Note (9)” for a description of the PERS pension plan.

Under State statute, contribution rates are adopted by the Pension Funding Council (“PFC”) in even-numbered years for the next ensuing State biennium. The rate-setting process begins with an actuarial valuation by the OSA, which makes non-binding recommendations to the Select Committee on Pension Policy, which then recommends contribution rates to the PFC. No later than the end of July in even-numbered years, the PFC adopts contribution rates, which are subject to revision by the Legislature. The following table outlines the current contribution rates of employers and employees under PERS effective as of July 1, 2015.

Contribution Rates for the 2015-17 Biennium Expressed as a Percentage of Covered Payroll

Employer(1) Employee PERS Plan 1 11.18% 6.00% PERS Plan 2 11.18 6.12 PERS Plan 3 11.18 Variable(2) ______(1) Includes a 0.18% DRS administration expense fee. Rates reflected are as of year-end 2015 and were effective for PERS plan year 2016, beginning July, 2015. (2) Rates vary from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member. Source: Department of Retirement Systems.

Plan Funding Status and Unfunded Actuarial Liability. While the Authority’s prior contributions represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the PERS Plans 2 and 3 will increase in the coming years. The OSA website (which is not incorporated into this Official Statement by reference) includes information regarding the values, funding levels and investments of these retirement plans.

Historically, OSA used the Projected Unit Credit (“PUC”) cost method and the Actuarial Value of Assets (“AVA”) to report a plan’s funded status. PUC was one of several acceptable measures of a plan’s funded status under current GASB rules. The PUC cost method projects future benefits under the plan, using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The Actuarial Value of Assets (“AVA”) is calculated using a methodology which smoothes the effect of short-term volatility in the Market Value of Assets (“MVA”) by deferring a portion of annual investment gains or losses over a period of up to eight years.

In September 2015, OSA adopted the Entry Age Normal (“EAN”) cost method to estimate accrued pension liabilities for the purposes of reporting funded status. The EAN method represents each plan member’s benefits as a constant share of payroll throughout the member’s career. This liability estimate incorporates the statutorily set discount rate and fully reflects the demographic assumptions revised in the June 30, 2013 valuation, which included projected improvements in mortality rates.

During the years 2001 through 2010 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1, a closed plan with a large proportion of the retirees. The State Actuary’s actuarial valuation for PERS Plan 1 as of June 30, 2013 showed a 63% funded ratio (unfunded liability of $4.831 billion) while PERS Plans 2 and 3 had valuation assets that exceed their accrued liability by $537 million (a 102% funded ratio). The State Actuary’s actuarial valuation for PERS Plan 1 as of June 30, 2014, showed a 61% funded ratio (unfunded liability of $4.965 billion) while PERS Plans 2 and 3 had valuation assets that exceed their accrued liability by $214 million (a 101% funded ratio). The decrease in the funded status and increase in the unfunded accrued actuarial liability primarily reflect changed demographic assumptions, including projected improvements in mortality rates, and the statutory requirement that the assumed rate of return be reduced to 7.8% from 7.9%.

The State Actuary’s actuarial valuation, using the EAN cost method, for PERS Plan 1 and PERS Plans 2 and 3 as of June 30, 2015, showed a 58% funded ratio (unfunded liability of $5.239 billion) and a 88% funded ratio (unfunded liability of $3.715 billion), respectively. Using the EAN cost method, the State Actuary’s actuarial valuation for PERS Plan 1 and PERS Plans 2 and 3 as of June 30, 2014, showed a 61% and 90% funded ratio, respectively.

PERS Plans 2 and 3 are accounted for in the same pension trust fund and may legally be used to pay the defined benefits of any PERS Plan 2 or 3 members. Assets for one plan may not be used to fund benefits for another plan: however, all employers in PERS are required to make contributions at a rate (percentage of payroll) determined by the OSA every two years for the sole purpose of amortizing the PERS Plan 1 unfunded actuarial accrued liability within a rolling 10-year period. The Legislature established certain maximum contribution rates that began in 2009 and continued until 2015 and certain minimum contribution rates that became effective in 2015 and remain in effect until the actuarial value of assets in PERS Plan 1 equals 100% of the actuarial accrued liability of PERS Plan 1. These rates are subject to change by future legislation enacted by the State Legislature to address future changes in actuarial and economic assumptions and investment performance. In 2011, the Legislature ended the future automatic annual increase, which is a fixed dollar amount multiplied by the member’s total years of service, for most retirees in the PERS Plan 1 plan, which is forecast to reduce the unfunded accrued actuarial liability in PERS Plan 1. The State Supreme Court recently upheld the constitutionality of this legislation.

New GASB 67/68 Reporting Rules. The Government Accounting Standard Board (“GASB”) has adopted new pension accounting standards that require employers, including the Authority, to report their pension liabilities on a generally accepted accounting principles (“GAAP”) basis rather than a funding basis. Beginning with its 2015 financial statements, the Authority will report its proportionate share of the net plan asset or liability for each pension plan in which Authority employees participate. The liability is based on the actuarial present value of projected benefit payments to periods of employee service, a discount rate that considers the availability of plan assets and recognition of projected investment earnings. DRS has determined each participating employers’

proportionate share of the plan liability and the Office of the State Actuary (“OSA”) has determined each plan’s accounting valuation. The GASB rules impact accounting for pensions and not the funding status of the plans calculated by OSA or pension contribution rates that are set based on statutory assumptions.

DRS has calculated the collective net pension liability for the various retirement plans based on the new GASB reporting requirements as well as the Authority’s share of such liability. Net pension liability equals the total pension liability (a measure of the total cost of future pension benefit payments already earned, stated in current dollars) minus the value of the assets in the pension trust that can be used to make benefit payments. Contributions from plan members and employers are assumed to continue to be made at contractually required rates, the assumed long-term rate of investment return is 7.50%, the assumed economic inflation is 3.0%, and the assumed salary inflation is 3.7%. The following table shows the Authority’s share of the net pension liability for the plans it participates in for the State fiscal year ended June 30, 2015 based on its share of contributions for the year.

Authority’s Share of Pension Liabilities/(Assets) For Year Ended June 30, 2015 Net Authority’s Share of Liability/(Assets) Authority’s Percent Net Liability/(Assets) PERS 1 $5,230,930,000 0.279123%(1) $14,600,729 PERS 2/3 $3,573,057,000 0.354073% $12,651,234

(1) Includes 0.274138% of UAAL. Source: DRS CAFR for Fiscal Year Ended June 30, 2015 The information in this section has been obtained from the Authority’s financial statements and information on the State Actuary’s and State Department of Retirement System’s websites.

THE TRUSTEE

The Authority has appointed U.S. Bank National Association as Trustee. The Trustee is to carry out such duties as are assigned to it under the Indenture, which provides that the Trustee is undertaking no duties except in accordance with the terms of the Indenture. Except for the contents of this paragraph, the Trustee has not reviewed or participated in the preparation of the Official Statement and assumes no responsibility for the nature, contents, accuracy or completeness of the information set forth in the Official Statement.

THE BORROWER AND THE PROJECT

The Borrower

NewHolly Phase I LLLP is a Washington limited liability limited partnership with its principal offices located at 190 Queen Anne Ave North, Seattle, Washington. The Authority is the sole general partner of the Borrower. The sole purpose of the Borrower is to own and operate the Project.

The Project

Description. Proceeds of the Bonds will be lent by the Authority to the Borrower to be used to finance a portion of the cost of acquiring and rehabilitating a 305-unit affordable rental housing project, known as NewHolly Phase I, to provide residential housing for persons or families of lower income (the “Project”).

The Project was built beginning in 1997 using the Authority’s initial HOPE VI Grant. It is located north of S. Othello St., west of 32nd Ave. S., south of S. Morgan St., and east of 28th Ave. S, in the Rainier Valley neighborhood. The Project consists of 305 units of housing in 141 buildings located on an approximately 30-acre site, with just under 400,000 square feet of gross building area Most of the existing buildings are two-story townhomes. Tenant parking is either beside townhomes, in individual garage units, or on city streets. The Project contains 177 public housing units and 128 non-public housing units and currently houses approximately 1,200 people from of low income. The Project’s vicinity includes Van Asselt Park and Community Center, a Neighborhood House campus, a Seattle City Library branch, and a South Seattle College branch campus. The Project includes open spaces, common areas and a community garden.

The unit-mix and current average monthly net rents for public housing units in the Project are set forth in the table below: Average Average No. of Unit Size Total Sq. Current Public Housing Unit Type Units (Sq. Ft.) Footage Net Rent One bedroom 5 746 3,731 $311 Two bedroom 48 1,058 50,798 361 Three bedroom 94 1,273 119,678 411 Four bedroom 25 1,512 37,796 461 Five bedroom 5 1,729 8,645 511 Total 177 220,648 The unit-mix and current average monthly net rents for non-public housing units in the Project are set forth in the table below: Avg. Unit Average No. of Size Total Sq. Current Net Non-Public Housing Unit Type Units (Sq. Ft.) Footage Rent One bedroom 5 781 3,908 $953 Two bedroom 55 1,066 58,646 1,130 Three bedroom 47 1,250 58,652 1,297 Four bedroom 11 1,430 15,727 1,445 Five bedroom 8 1,730 13,846 1,587 Common Area Units (three bedroom) 2 1,285 2,570 400 Total 128 153,349

Lease

On the Date of Issue, the Borrower and the Authority will enter into a Lease Agreement to be dated as of October 1, 2016 and effective the Date of Issue (the “Lease”), under which the Authority will lease the Project to the Borrower for a term to expire on December 31, 2115. The Lease requires the Borrower to use the Project solely for the purpose of providing housing for persons whose incomes, upon initial occupancy, are not greater than 60% of the area median gross income. The Lease requires the Borrower to pay annual ground rent to the Authority in the amount of $12. As consideration for the Borrower’s acquisition of the leasehold interest in improvements, the Lease requires the Borrower to pay capitalized rent in the amount of $19,250,000. Of this amount, (a) $3,585,049* will be paid in cash at closing (which is expected to be derived from proceeds of the sale of the Bonds), (b) $1,700,000 will be deemed paid upon the Borrower’s assumption of the Authority’s obligations under the Commerce Loan (described below), (c) $946,183 will be deemed to be paid upon the Borrower’s assumption of the Authority’s obligations under the City General Fund Loan (described below), and (d) the remaining balance of $13,018,768* will be deemed paid by delivery of a promissory note in connection with the Acquisition Loan as described below. Under certain circumstances, the Authority may terminate the Lease. See Appendix A – “DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE LEASE.”

* Preliminary, subject to change.

Use Restrictions and Project Rents

Of the 305 units that comprise the Project, 177 units, or 58 percent, will be reserved for those with incomes below 30 percent of area median income at initial occupancy, and 126 units, or 41 percent, will be reserved for those households with incomes below 60 percent of area median income. The remaining two units will become common area units and be occupied by on-site property management staff.

Public Housing. The 177 units reserved for those with incomes below 30 percent of area median income at initial occupancy are designated as public housing authority or “PHA” units for this extremely low-income population. Pursuant to an Amended Declaration of Trust (which will be amended on or about the Date of Issue), encumbering the fee interest in the Property granted by the Authority in favor of HUD and a Regulatory and Operating Agreement between the Authority and the Project’s prior owner, which will be assumed by the Borrower and amended on or about the Date of Issue (the “Regulatory and Operating Agreement”), the 177 public housing units are required to be operated in accordance with the Revised Consolidated Annual Contributions Contract between HUD and the Authority, as amended from time to time including, specifically, as amended by a Mixed-Finance Amendment to Consolidated Annual Contributions Contract between HUD and the Authority, which will be amended on or about the Date of Issue (collectively, the “ACC”).

The PHA designation is important as it allows the unit and the household to qualify for receipt of an operating subsidy from the Authority. The Regulatory and Operating Agreement provides, in part, that during each fiscal year the Authority may pay to the Borrower an operating subsidy equal to the estimated allowed expenses for the PHA units less estimated income from the PHA units (30 percent of income minus utility allowance) for such period. Allowed expenses include all ordinary and necessary expenses of operations of the Project (exclusive of debt service requirements of any lender and exclusive of utility expenses which are the direct responsibility of the tenant), management fees, legal and accounting expenses, and reserves for replacements. Allowed expenses are adjusted annually for inflation, changes in federal law, and the age and physical structure of the units. The Authority does not expect to use public housing operating subsidy to support the public housing in the Project for the next 15 years because rental income from non-public housing is expected to be sufficient to support Project operations and pay debt service on the Bonds.

The Authority’s overall financial well-being, as well as that of the Project, is partially dependent upon federal financing. The willingness of the U.S. Government to support subsidized housing has varied since the adoption of the Housing Act of 1937. Congress can, and in some cases has, adversely affected housing authority revenues in numerous ways, including decreasing the operating subsidy for public housing units. HUD regularly audits local housing authorities and can compel the repayment to the United States of funds that HUD has found to have been misspent. Such required reimbursements can be withheld from continued operating subsidies, thus depriving the Authority of resources. See “CERTAIN BONDHOLDERS’ RISKS — Federal Housing Programs.”

Regulatory Agreement. The Regulatory Agreement between the Authority and the Borrower (the “Regulatory Agreement”) relating to the various loans from the Authority to the Borrower requires that certain units in the Project be occupied by low or moderate income residents and contains other agreements relating to the Project. Under the Regulatory Agreement, the Borrower has agreed that at all times during the regulatory period (as described in the Regulatory Agreement), it will, among other things: (a) maintain at least 50 percent of the interior space in the Project or at least 50 percent of the dwelling units in the Project, whichever produces the larger number of dwelling units, for occupancy by Qualified Tenants (defined as individuals and families whose gross income does not exceed 60 percent of area median gross income, adjusted for family size); (b) maintain at least 40 percent of the apartment units in the Project for occupancy by Tax Qualified Tenants (defined as individuals and families whose gross income does not exceed 60 percent of area median gross income, adjusted for family size); (c) reserve units for Tax Qualified Tenants that have substantially the same basic equipment and amenities (not including luxury amenities) as other units in the Project; and (d) reserve units for Tax Qualified Tenants that are not geographically segregated and that are of substantially the same size as other units in the Project, unless otherwise required to comply with a local housing assistance program.

Federal Low Income Housing Tax Credits. The Borrower has received a “42(m)(1)” letter from the Washington State Housing Finance Commission (the “Commission”) concerning the financial feasibility of the Project and the availability of 4% Low Income Housing Tax Credits (“LIHTC”) issued under Section 42 of the Code. To qualify for LIHTC, the Authority and the Borrower will enter into a Regulatory Agreement (Extended Use Agreement) that will

be recorded against the property (the “Extended Use Agreement”). Under the Extended Use Agreement, the Borrower will agree to rent 303 residential units in the Project to individuals or households earning 60 percent or less of median gross income for the area in which the Project is located (adjusted for household size, as determined by HUD). The Borrower will also covenant to restrict monthly rents on the residential units in the Project to 1/12 of 30 percent of the applicable percentage of median gross income for the area in which the Project is located, adjusted for an imputed household size.

City of Seattle Regulatory Agreement. In connection with this financing, an Amended and Restated Regulatory Agreement among the Authority, the Borrower and The City of Seattle will be recorded against the Project (the “City Regulatory Agreement”). The City Regulatory Agreement will, among other things obligate the Authority and the Borrower, to rent 177 residential units in the Project at the time of initial occupancy to individuals or households earning 30 percent or less of median gross income for the area in which the Project is located (adjusted for household size, as determined by HUD). The Borrower is also obligated to restrict monthly rents and utility allowance on the 177 residential units to 1/12 of 30 percent of 30 percent of median gross income for the area in which the Project is located, adjusted for an imputed household size. The City Regulatory Agreement is to remain in effect until February 25, 2038, and thereafter for any period during which loans made by the City for the Project may be outstanding. The City Regulatory Agreement provides that the City may petition a court for the appointment of a receiver to assume full management, control and possession of the Project and to exercise all rights under applicable law (but not including the power to sell or dispose of the Property). However, pursuant to the Priority Agreement, the City agrees that it will not exercise such remedy so long as the Bonds remain outstanding.

State Department of Commerce Covenant Agreement. In connection with the assumption of the Commerce Loan, the Borrower will enter into a First Amended and Restated Low Income Housing Covenant Agreement with Commerce (the “Commerce Covenant Agreement”) that will obligate the Borrower, among other things, to rent 177 residential units in the Project at the time of initial occupancy to individuals or households earning 30 percent or less of median gross income for the area in which the Project is located (adjusted for household size, as determined by HUD) and 126 residential units in the Project to individuals or households earning 60 percent or less of median gross income for the area. Pursuant to the Commerce Covenant Agreement, rents charged to tenants may not exceed 30% of the monthly income of the target population, unless a different percentage is required for federal rental assistance. The Commerce Covenant Agreement will expire on December 31, 2040.

Declaration of Trust. In 1998, the Authority entered into an Amended Declaration of Trust (the “1998 Declaration”) pertaining to Holly Park Phase I (now, the Project) with HUD. In connection with this financing, the Authority and HUD will enter into an Amendment to Declaration of Trust amending the 1998 Declaration (as so amended, the “Declaration of Trust”). The Declaration of Trust requires, among other things, that, during its term, the Authority and the Borrower remain seized of title to the 177 public housing units and refrain from transferring, conveying, assigning, leasing, mortgaging, pledging, or otherwise encumbering or permitting any transfer of such public housing units except as permitted thereby. The Declaration of Trust will remain an encumbrance upon the property, in accordance with its terms, until 2048.

Project Management

The Borrower will enter into a management agreement with the Authority (the “Management Agreement”), pursuant to which the Authority will undertake oversight of the day-to-day operations of the Project. The Project’s day-to-day finances will be managed pursuant to the Management Agreement, including the annual budget, capital improvements, and financial reporting. In the Management Agreement, the Authority will agree to perform duties and responsibilities in compliance with public housing requirements, the Lease and applicable regulatory agreements.

Project Operating Pro Forma

The table below sets forth the Project’s actual revenues and expenses for 2013 through 2015, budgeted numbers for 2016, and projections for 2017, 2018 and 2019. Renovation of the Project is expected to be completed in April, 2018, making 2019 the first full fiscal year completion of renovation of the Project. The See “CERTAIN BONDHOLDERS’ RISKS — Limitations on Forecasting.”

Actual Budgeted Projected 2013 2014 2015 2016 2017 2018 2019 Revenues Rental Income(1) $2,478,560 $2,598,318 $2,688,809 $2,631,244 $2,683,869 $2,737,546 $2,792,297 Other Tenant Income 87,325 59,863 84,041 88,227 58,288 57,054 58,195 Total Revenues $2,565,885 $2,658,181 $2,772,850 $2,719,471 $2,742,157 $2,794,600 2,850,492

Expenses(2) 1,942,525 2,023,774 1,951,607 1,940,634 1,935,720 1,993,792 2,053,605

Replacement Reserve(2) $ 138,400 $ 142,552 $ 146,829 $ 151,234 $ 152,500 $ 157,075 161,787

Net Operating Income $ 484,960 $ 491,855 $ 674,414 $ 627,603 $ 653,937 $ 643,733 635,100

Debt Service: Prior Debt Service(3) $ 386,425 $ 388,088 $ 389,175 $ 288,623 – –– 2016A Bond Debt Service*(4) – ––43,281 $ 291,978 $ 291,845 $358,573 2016B Bond Debt Service*(5) – – – 41,184 130,573 102,665 – Total Bond Debt Service $386,426 $388,088 $389,175 $373,088 $422,551 $394,510 $358,573 Requirements*

Net Cash Flow After Bond Debt Service $ 98,534 $ 103,767 $ 285,239 $ 254,515 $ 231,386 $ 249,223 $ 276,527

* Preliminary, subject to change. (1) Assumes 2% rent inflation and 5% residential vacancy rate in the years 2016 through 2019. Years 2013, 2014 and 2015 include Housing Assistance Payments associated with Tenant Based Vouchers residing in certain units previously financed with low-income housing tax credits. Although the Regulatory and Operating Agreement allows the Authority to provide public housing operating subsidy (“Section 9 Operating Subsidy”) to support public housing units, Section 9 Operating Subsidy was not used to support the public housing units in years 2013-2015, nor does the Authority anticipate using Section 9 Operating Subsidy to support the public housing units in the upcoming 15- year period. The amount of Section 9 Operating Subsidy is restricted to the difference between the operating expenses associated with the public housing units and the tenant-paid rent from the public housing units. (2) Assumes 3.0% inflation for expenses and reserves in the years 2017 and 2018. (3) Includes debt defeased on or around the Date of Issue. (4) Excludes that portion of interest expected to be paid from Bond proceeds. (5) Preliminary, subject to change. Excludes that portion of interest expected to be paid from Bond proceeds and principal on the 2016B Bonds, which is expected to be paid from capital contributions from the Limited Partner. Assumes that 2016B Bonds will be optionally redeemed on October 1, 2018. Note: Actual revenue and expense information set forth above is for fiscal years ended December 31, 2013, 2014 and 2015. The information regarding budgeted and projected revenues and expenses is for fiscal years ending December 31, 2016, 2017, 2018 and 2019. Source: The Authority

Occupancy Rates. The monthly occupancy rates for the Project for September, 2014 through August, 2016 are set forth below: Occupancy Occupancy Occupancy Month Rate Month Rate Month Rate September 2014 99.3% May 2015 100.0% January 2016 98.36% October 2014 99.7% June 2015 100.0% February 2016 99.02% November 2014 99.7% July 2015 99.3% March 2016 98.03% December 2014 99.7% August 2015 98.7% April 2016 99.02% January 2015 99.7% September 2015 97.7% May 2016 98.69% February 2015 100.0% October 2015 98.7% June 2016 97.70% March 2015 100.0% November 2015 98.7% July 2016 98.03% April 2015 100.0% December 2015 99.0% August 2016 97.38% Source: The Authority.

Acquisition of Renovation of the Project/Capital Needs

Renovation of the Project is expected to cost approximately $20,910,687 and will be paid for in part with proceeds of the Bonds, Limited Partner capital contributions, and other sources. See “PLAN OF FINANCE.” In the past year, the Authority discovered exterior construction defects that resulted in water intrusion and premature damage to the Project’s buildings. The renovation will include removing and reinstalling all roofing, siding, windows, trim, gutters and decks. Water and other damage to the structures will also be corrected at this time. Any damage to unit interiors will be addressed on a unit-by-unit basis. Residents will occupy their units during construction and no tenant relocation is anticipated. The renovation work is expected to be completed in April, 2018. The Authority has projected other capital needs of the Project for 15 years and believes those needs can be met from Project revenues and reserves. The Borrower expects, but is not required by the documents pertaining to the Bonds, to fund a reserve for replacement fund for the Project at a rate of not less than $500 per unit per year.

On April 18, 2016, an accidental fire caused the total loss of one unit within a duplex at the Project. The other unit in the duplex will require some siding replacement, soffit and deck repair, limited interior drywall patching/paint and some carpet replacement/cleaning. Another neighboring unit will require replacement of the siding, building wrap and windows on one side. The cost of this work, estimated to be $300,000, is included in the costs of rehabilitation of the Project.

Project Appraisal

The Authority obtained an appraisal for the Project dated July 1, 2016. The appraiser determined the “as is market value” for the Project as of June 9, 2016 to be $19,250,000. The appraiser applied a capitalization rate of 6.0% in the “income approach” valuation. The appraisal took into consideration that 177 units are public housing and provided no added value to the Project, as they operate at a loss without public housing operating subsidy. In addition, the appraisal assumes the Project’s current set-aside restrictions of 56 units at 50% area median income, 56 units at 60% area median income and 16 market rate units. The Authority believes that the Project would appraise at a greater value after the completion of the Project.

Project Environmental Review

The Authority obtained a Phase I environmental assessment with respect to the Project dated March 18, 2016 (the “Phase I Assessment”). The Phase I Assessment reported no significant risks of environmental impact to the Project site from then-current or historical uses. The potential for environmental impact to the Project site from off- site sources was reported to be low. No additional environmental assessments were recommended at the time of the Phase I Assessment.

Market Study

The Project is located in the greater Rainier Valley neighborhood of Seattle. A market study by Kidder Mathews LLC dated February 3, 2016 (the “Market Study”) reported that, in the past 10 years, the area market’s

vacancy rate had a high of 8.7% in March 2006 and a low of 0.8% in September 2012. The Market Study reported a 1.4% estimated area market vacancy as of September 2015, a 2.6% area market five-year average vacancy rate and a 3.1% 10-year average vacancy rate. In the Market Study, the available supply of affordable housing was compared to estimated demand at similar income levels. The Market Study concluded that, based on existing data, there is a net shortage of affordable housing within the area market. The Project is an existing project and a majority of the Project’s units are income-restricted and do not constitute additional supply of affordable housing in the area market.

Other Project Debt

Master Authority Loan

On the Date of Issue the Borrower will grant the Authority a leasehold deed of trust encumbering the Borrower’s interest in the Project (the “Master Loan Deed of Trust”) to secure (1) a loan in the original principal amount of $13,018,768* (the “Acquisition Loan”) to finance a portion of the capitalized rent under the Lease; (2) a loan in the original principal amount of not to exceed $3,000,000 (the “First Rehabilitation Loan”) to finance a portion of the costs of rehabilitating the Project; and (3) a loan in the original principal amount of not to exceed $2,500,000 (the “Second Rehabilitation Loan” and, collectively with the Acquisition Loan and the First Rehabilitation Loan, the “Master Loan”) to finance a portion of the costs of rehabilitating the Project, all made pursuant to a Master Loan Agreement between the Authority and the Borrower to be dated as of October 1, 2016 (the “Master Loan Agreement”). In the event of unanticipated cost overruns associated with rehabilitation of the Project, the Authority may make additional loans to the Borrower, or increase the amount of the Master Loan.

The Acquisition Loan will be fully disbursed (or will be deemed to have been fully disbursed) at the time the initial rent is due under the Lease. See “THE BORROWER AND THE PROJECT — The Lease.” The Acquisition Loan will bear interest at a rate of 2.18% per annum, compounded annually, subject to adjustment upon an event of default. The Borrower may request advances on the First Rehabilitation Loan in an aggregate amount not to exceed $3,000,000. The First Rehabilitation Loan will bear interest at a rate of 1.00% per annum, compounded annually, subject to adjustment upon an event of default. The Borrower may request advances on the Second Rehabilitation Loan in an aggregate amount not to exceed $2,500,000. The Second Rehabilitation Loan will bear interest at a rate of 1.00% per annum, compounded annually, subject to adjustment upon an event of default. The Acquisition Loan, First Rehabilitation Loan and Second Rehabilitation Loan are each scheduled to mature on October 1, 2066, and are each payable from Project cash flow available after payment of operating expenses and debt service on the Bonds and from Capital Proceeds (as defined in the Partnership Agreement). Pursuant to the Priority Agreement, the Authority will agree that the Master Loan Deed of Trust is subordinate to the Deed of Trust.

Commerce Loan

In 1998, the Authority and the Washington State Department of Commerce (formerly known as the Washington State Department of Community, Trade and Economic Development) (“Commerce”) entered into that certain Holly Park Phase I Housing Finance Unit Contract No. 98-493-425 (the “Commerce Contract”), executed by Grantor on February 20, 1998, pursuant to which Commerce lent $1,700,000 to the Authority, which loan (the “Commerce Loan”) was originally secured by a leasehold deed of trust encumbering the Project. Pursuant to an Assignment, Assumption and Consent Agreement, by and among the Authority, the Borrower and Commerce, the Borrower will assume all of the Authority’s obligations under the Commerce Contract and the promissory note and covenant agreement pertaining to the Commerce Loan. The Commerce Loan does not accrue interest, and is due on the earlier of (a) December 31, 2040, or (b) the date the leasehold interest of the Borrower in the Project is sold, refinanced or not used as required by Commerce. The Commerce Loan will be secured by a Leasehold Deed of Trust encumbering the Project made by the Borrower and the Authority for the benefit of Commerce (the “Commerce Deed of Trust”). Pursuant to the Priority Agreement, Commerce will agree that the Commerce Deed of Trust is subordinate to the Deed of Trust.

* Preliminary, subject to change.

City Loans

In 1998, the Authority obtained a loan from The City of Seattle (the “City”) in the principal amount of $801,570 (the “City General Fund Loan”) pursuant to a Loan Agreement dated February 23, 1998, which was amended in 2010 (as amended, the “City General Fund Loan Agreement”). The Borrower will assume the obligations of the Borrower under the City General Fund Loan Agreement (including the obligation to pay accrued and unpaid interest) in connection with its acquisition of a leasehold interest in the Project. The City General Fund Loan will be secured by a Leasehold Deed of Trust, Assignment of Rents, Security Agreement, and Fixture Filing encumbering the Project made by the Borrower for the benefit of the City (the “City General Fund Deed of Trust”). The City General Fund Loan bears interest at a rate of 1.0% per annum, subject to adjustment upon an event of default, and is scheduled to mature in February 23, 2038, subject to extension for up to seven five-year periods, or to earlier maturity upon transfer of the property. Pursuant to the Priority Agreement, the City will agree that the City General Fund Deed of Trust is subordinate to the Deed of Trust.

The City and the Authority are parties to an second Loan Agreement dated February 23, 1998, which was amended in 2010, pursuant to which the City made a loan to the Authority in the principal amount of $413,000 to finance certain infrastructure improvements (the “City Urban Renewal Loan”). The Partnership is not obligated to pay debt service on the City Urban Renewal Loan, but the City Urban Renewal Loan is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (Urban Renewal Closeout Subaccount) encumbering the Authority’s fee interest in the Project (the “City Urban Renewal Deed of Trust”). Pursuant to the Priority Agreement, the City will agree that the City Urban Renewal Deed of Trust is subordinate to the Deed of Trust.

The City and the Authority are also parties to a third Loan Agreement dated February 23, 1998, which was amended in 2010, pursuant to which the City made a loan to the Authority in the principal amount of $1,202,685 to finance certain public street serving the Project (the “City Capital Facilities Projects Loan”). The Partnership is not obligated to pay debt service on the City Capital Facilities Projects Loan, but the City Capital Facilities Projects Loan is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (City Capital Facilities Projects Loan) encumbering the Authority’s fee interest in the Project (the “City Capital Facilities Projects Loan Deed of Trust”). Pursuant to the Priority Agreement, the City will agree that the City Capital Facilities Projects Loan Deed of Trust is subordinate to the Deed of Trust.

CERTAIN BONDOWNERS’ RISKS

The purchase of the Bonds involves certain investment risks that are discussed throughout this Official Statement. Accordingly, each prospective purchaser of the Bonds should make an independent evaluation of all of the information presented in this Official Statement in order to make an informed investment decision. Certain of these risks are described below. The discussion of risk factors is not meant to be definitive or exhaustive.

General

Prospective purchasers of the Bonds should consider carefully all possible factors that may affect both the operation of and the revenues from the Project and the Authority’s General Revenues, and consequently create the possibility that payment on the Bonds will not be made or that interest on the Bonds might be taxable from their date of issuance. The Bonds may not be a suitable investment for all prospective purchasers. Prospective purchasers should consult their investment advisors before making any decisions as to the purchase of the Bonds.

Special Obligations

ASSURANCE THAT FUNDS WILL BE AVAILABLE TO THE AUTHORITY FOR THAT PURPOSE, OR IF AVAILABLE, IN A TIMELY MANNER.

Revenue Forecasts

The Authority expects that the Bonds will be repaid from Loan Payments received under the Loan Agreement. The ability of the Authority to pay the principal of and interest on the Bonds depends in substantial part upon receipt of Loan Payments. The Borrower, in turn, expects to obtain the funds needed to make Loan Payments from Project Revenues, except for capital contributions from Borrower’s Limited Partner that are expected to be used to pay principal of the 2016B Bonds when due.

A primary source of repayment for the Bonds is the net operating income available from the Project. Although the Authority expects net operating income, together with capital contributions from the Borrower’s Limited Partner, to be adequate to make Loan Payments and hence payment on the Bonds, a number of factors could cause that not to be the case. Forecasted net operating income is based upon certain assumptions regarding current and future rent levels and occupancy levels. Although the Authority believes that the assumptions made are prudent and reasonable, various conditions, including but not limited to, rental rates lower than expected, vacancy rates higher than projected, a contraction in business growth, a downturn in the overall economy of the area, inadequate property management, expenses higher than projected or a significant number of new competing multifamily units built in the area of the Project could cause actual rent and occupancy levels to be less favorable than current Authority forecasts. As a result, future Project Revenues may vary from these forecasts, and could vary materially.

Casualty Loss or Condemnation

The insurance coverage for damage to or destruction of the Project may not adequately reimburse the income loss or total cost of reconstruction in the event of a casualty. Also, a particular loss may be excluded from coverage. Condemnation of the Project or a portion thereof may result in the remaining income being inadequate to make debt service payments on the Bonds. The net proceeds derived from a total condemnation may be insufficient to fund an extraordinary redemption of the Bonds. In such event, the Authority anticipates that it would use other available funds, including its General Revenues, to make up any shortfall.

Tax Credit Equity

Upon substantial completion of the Project, the Authority expects that the Borrower will receive capital contributions from U.S. Bancorp Community Development Corporation, which is the Limited Partner of the Borrower, in the amount of approximately $18,046,820. A portion of these capital contributions is expected to be used by the Borrower to make Loan Payments to be used pay the outstanding principal of the 2016B Bonds. The commitment of the Limited Partner make its capital contributions is subject to a number of preconditions and requirements. Although the Borrower expects to timely satisfy these requirements and preconditions, no guaranty can be made to that effect. The Trustee has no right, on behalf of Owners or beneficial owners of the Bonds, to enforce the rights to receive capital contribution payments under the Partnership Agreement. No analysis of the Limited Partner’s creditworthiness or ability to make its capital contributions under the Partnership Agreement has been performed by the Authority or the Borrower. Any failure by the Borrower to receive the full amount of the Limited Partner’s capital contributions on the anticipated schedule would have a significant impact on the Borrower’s ability to make Loan Payments, and therefore the Authority’s ability to make debt service payments on the Bonds, in particular the 2016B Bonds.

Use Restrictions

As described “THE BORROWER AND THE PROJECT – Use Restrictions and Project Rents”, the Project is subject to a number of use restrictions, that limit the ability of the Borrower to raise rents, if necessary or desirable to improve financial performance of the Project, and further restrict eligibility of potential tenants to certain income levels, which could make it more difficult to maintain high occupancy rates at the Project. These use restrictions could, in the future, negatively affect the ability of the Borrower to make Loan Payments. In addition, certain use restrictions would continue to apply to the Project, in accordance with their terms, after foreclosure of the Deed of Trust, limiting the value and the future operation of the Project.

General Revenue Pledge

The Authority has pledged its General Revenues as additional security for the Bonds. Prospective purchasers of the Bonds should assume that the Bonds will be paid solely from Loan Payments and funds held by the Trustee. If Loan Payments are insufficient to meet debt service on the Bonds, there is no assurance that General Revenues of the Authority will be available or sufficient for that purpose. The pledge of General Revenues of the Authority to the payment of the Bonds is subject to the right of the Authority to issue, without limitation, other obligations to be paid from the General Revenues on parity of lien with the Bonds and to pledge any portion of the General Revenues to the payment of other obligations, those payments to have priority over the payments to be made on the Bonds with respect to that portion of the General Revenues so pledged. The Authority has previously issued multiple series of bonds and notes to which it has pledged its General Revenues and expects to continue to do so in the future. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – General Revenue Pledge.”

Many factors could affect the availability of General Revenues to pay debt service on the Bonds. The Authority’s overall financial wellbeing is partially dependent upon federal financing. See “CERTAIN BONDHOLDERS’ RISKS – Federal Housing Programs.” See also “THE AUTHORITY – Pensions – Plan Funding Status and Unfunded Actuarial Liability” for a discussion of funding levels relating to retirement plans, which could affect future availability of General Revenues to pay debt service on the Bonds.

Possible Limitations on Remedies and Enforcement of Security Interests

While the Bonds are secured pursuant to the Indenture, the Deed of Trust and the Loan Agreement, and are payable primarily from the Loan Payments to be made by the Borrower under the Loan Agreement, the practical realization of such security interests (which are perfected only to the extent they may be perfected by recording with the appropriate authorities, filing pursuant to the Washington Uniform Commercial Code and/or by the Trustee’s possession of certain money and investments) upon any default will depend upon the exercise of various remedies specified by the Indenture, the Deed of Trust and the Loan Agreement. These and other remedies are in many respects dependent upon judicial actions, which are often subject to discretion and delay. Under existing constitutional, statutory and judicial law, the remedies specified by the Indenture, the Deed of Trust, the Loan Agreement or other related documents may not be readily available or may be limited by bankruptcy or by other similar laws affecting creditors’ rights. In addition, in the event of a foreclosure, there can be no assurance that amounts realized from the foreclosure of the Project would be sufficient to pay the debt service on the Bonds.

It is not possible to perfect a security interest in certain types of revenues of the Bond (e.g. cash, gifts, donations) prior to the actual possession of the cash relating to such items by the Trustee.

In addition, the enforceability of the security interests created under the Indenture and the Resolution in the Authority’s General Revenues may be subject to subordination or prior claims in certain instances, in addition to bankruptcy. The Authority and the Trustee are not entering into any depository agreement or other contractual arrangement whereby the Trustee will have any claim of possession with respect to the General Revenues of the Authority prior to the actual deposit of amounts derived from such General Revenues with the Trustee.

The Deed of Trust encumbers the Borrower’s leasehold interest in the Project. Although the Lease provides certain rights to Leasehold Mortgagees, were the Lease to be terminated, or found invalid or unenforceable, the Trustee would no longer have a security interest under the Deed of Trust.

The legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by state and federal laws, ruling and decisions affecting remedies by bankruptcy, insolvency, organization or other laws of general application affecting the enforcement of creditors’ rights, and, with respect to the Authority, by limitations potentially imposed on the basis of public policy.

Potential purchasers of Bonds should consult legal counsel or otherwise familiarize themselves with the relevant Washington laws.

Limitations on Forecasting

The Authority has prepared the forecasted financial information set forth in this Official Statement. The prospective financial information was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information but, in the view of the Authority, was prepared on a reasonable basis, reflects the best currently available estimates and judgments and presents, to the best of the Authority’s knowledge and belief, the expected course of action and the expected future financial performance of the Project. However, this information is not fact and should not be relied upon as necessarily indicative of future results. Readers of this Official Statement are cautioned not to place undue reliance on the forecasted financial information. Neither the State Auditor nor any independent accountant has compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor has the State Auditor or any independent accountant expressed any opinion or any form of assurance on such information or its achievability, or assumed any responsibility for or association with the prospective financial information.

Early Redemption

Purchasers of Bonds, including those who purchase Bonds at a price in excess of their principal amount or who hold such a Bond trading at a price in excess of par, should consider the fact that the Bonds are subject to redemption at a redemption price equal to their principal amount plus accrued interest in the event such Bonds are redeemed prior to maturity. See “THE BONDS – Redemption of the Bonds.”

Competing Facilities

The Authority, persons who may be affiliated with the Authority and others may own, finance, develop, construct and operate other facilities in the area of the Project that could compete with the Project. Any competing facilities, if so constructed, could adversely affect occupancy and revenues of the Project.

Project Feasibility

No independent financial feasibility study has been made of the Project. See “THE BORROWER AND THE PROJECT.”

Secondary Market and Prices

It has been the practice of the Underwriters to maintain a secondary market in municipal securities they sell, and the Underwriters currently intend to engage in secondary market trading of the Bonds, subject to applicable securities laws. The Underwriters, however, are not obligated to engage in secondary trading or to repurchase any of the Bonds at the request of the owners thereof. Because of general market conditions or because of adverse history or economic prospects connected with a particular issue or issuer, secondary marketing activity in connection with a particular issue may be suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. THERE CAN BE NO GUARANTEE THAT THERE WILL BE A SECONDARY MARKET FOR THE BONDS, OR IF A SECONDARY MARKET EXISTS, THAT THE BONDS CAN BE SOLD FOR ANY PARTICULAR PRICE.

Effects on Exemption of Interest From Federal Income Taxes

The exemption of interest on the Bonds from federal income taxes is dependent upon continuing compliance by the Authority and the Borrower with the requirements of the Code. If there is a failure to comply, interest on the Bonds could become includable for federal income tax purposes in the gross incomes of the owners thereof, which inclusion in gross income could be retroactive to the date of issuance of the Bonds. See “TAX MATTERS – Continuing Requirements”.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or to be subject to state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions

may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation.

Although the Bonds may be redeemed if necessary to prevent a Determination of Taxability, no loss of the exclusion of the interest on the Bonds from gross income for federal income tax purposes constitutes a default under the Indenture, and extraordinary mandatory redemption or acceleration upon any such loss of tax-exempt status is not required under the Indenture. Consequently, the Trustee may not have remedies available to it to mitigate the adverse economic effects to the Owners of the Bonds resulting from the interest on the Bonds becoming subject to federal income taxation. If interest on the Bonds becomes so includable in the owners’ gross incomes, the effect will be to reduce the yield on an owner’s Bonds as a result of the federal and, in certain cases, state and local, income tax liability incurred in connection with the receipt of interest on the Bonds. There is no provision for any adjustment to the interest rate borne by the Bonds in the event of any such loss of tax exempt status, nor is any provision made for the payment of any penalties or premium in such event. Such loss of tax exempt status can be expected to have a material adverse effect on the market price of the Bonds. Potential purchasers of the Bonds should note that there are no provisions for an early redemption of, or interest rate adjustment for, Bonds upon the occurrence of a Determination of Taxability.

Federal Housing Programs

Congress can and in some cases has adversely affected housing authority revenues in numerous ways including without limitation failing to create additional programs administered by housing authorities and permitting existing programs to expire; decreasing the operating subsidy for public housing units; decreasing the administrative fee for the administration of the Section 8 Certificate and Voucher Programs; and directing federal resources through other channels.

Activities of local housing authorities are closely monitored and regulated by HUD. Regulation can take the form of limitations in spending or compulsory spending in areas that could adversely affect the General Revenues of the Authority available to the owners of the Bonds. HUD is required to review housing authorities’ budgets to the extent of federal involvement. HUD regularly audits local housing authorities and can compel the repayment to the United States of funds that HUD has found to have been misspent. Such required reimbursements can be withheld from continued operating subsidies, thus depriving the Authority of resources.

Various proposals have been discussed that would significantly change the structure and programs of HUD. At this time it is not possible to determine what, if any, proposals may become law and what effect such proposals may have on the ability of the Authority to make debt service payments on the Bonds.

Municipal Bankruptcies

A municipality such as the Authority must be specifically authorized under state law in order to seek relief under Chapter 9 of the U.S. Bankruptcy Code (the “Bankruptcy Code”). Chapter 39.64 RCW, entitled the “Taxing District Relief Act,” permits any “taxing district” (defined to include any municipality or other political subdivision of any state) to voluntarily petition for relief under the Bankruptcy Code. While the Authority does not have taxing authority, it is a political subdivision of the state of Washington and falls within the definition of “taxing district” for purposes of chapter 39.64 RCW. Involuntary bankruptcy proceedings against municipal entities are not permitted under Chapter 9 of the Bankruptcy Code. In addition, under RCW 39.64.060 no plan of readjustment is effective for the purpose of binding a taxing district unless such taxing district files with the bankruptcy court a certified copy of a resolution adopted by its board or commission consenting to the plan of readjustment. The federal bankruptcy courts have broad discretionary powers under the Bankruptcy Code.

The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified by reference to bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and other similar laws affecting the rights of creditors generally, and by general principles of equity.

Environmental Matters

Under the federal Comprehensive Environmental Response, Compensation and Liability Act and under comparable State law, a secured party that takes a deed in lieu of foreclosure, purchases a mortgaged property at a foreclosure sale or operates a mortgaged property may become liable in certain circumstances for the cost of remedial action (“Remedial Action Costs”) if hazardous waste or hazardous substances have been released or disposed of on the property. Such Remedial Action Costs could subject all or a portion of the Project to a lien and reduce or eliminate the amounts otherwise available to pay the owners of the Bonds if such Remedial Action Costs were incurred.

TAX MATTERS

Exclusion from Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming compliance by the Authority and the Borrower with applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issue date of the Bonds, (i) interest on the Bonds (except any Bond for any period during which it is held by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code) is excluded from gross income for federal income tax purposes, and (ii) interest on the Bonds is not treated as an item of tax preference for purposes of the federal alternative minimum tax applicable to individuals and corporations and is not included in adjusted current earnings of corporations for purposes of the federal alternative minimum tax.

Continuing Requirements. The Authority and the Borrower are required to comply with certain requirements of the Code after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances, and the requirement to comply with arbitrage rebate requirements to the extent applicable to the Bonds. The Authority and the Borrower have covenanted in the Indenture, the Loan Agreement, and the Regulatory Agreement to comply with those requirements, but if the Authority or the Borrower fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. Bond Counsel has not undertaken and does not undertake to monitor the Authority’s or the Borrower’s compliance with such requirements.

Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess net passive investment income, including interest on the Bonds, received by an S corporation (a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of its taxable year may be subject to federal income taxation at the highest rate applicable to corporations, if more than 25% of the gross receipts of such S corporation is passive investment income.

Foreign Branch Profits Tax. Interest on the Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the Bonds are owned by, and effectively connected with a trade or business of, a United States branch of a foreign corporation.

Possible Consequences of Tax Compliance Audit. The Internal Revenue Service (the “IRS”) has established a general audit program to determine whether issuers of tax-exempt obligations, such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS would commence an audit of the Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the Bonds could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of its ultimate outcome.

Bonds Not “Qualified Tax-Exempt Obligations” for Financial Institutions. Section 265 of the Code provides that 100% of any interest expense incurred by banks and other financial institutions for interest allocable to tax-exempt private activity bonds, such as the Bonds, acquired after August 7, 1986, will be disallowed as a tax deduction.

Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of the Code, interest on the Bonds received by property and casualty insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15% of tax-exempt interest received during the taxable year.

Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires Owners of the Bonds who are also recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the Bonds into account in determining gross income.

Other Possible Federal Tax Consequences. Receipt of interest on the Bonds may have other federal tax consequences as to which prospective purchasers of the Bonds may wish to consult their own tax advisors.

Potential Future Federal Tax Law Changes. From time to time, there are legislative proposals in Congress which, if enacted, could require changes in the description of federal tax matters relating to the Bonds or adversely affect the market value of the Bonds. It cannot be predicted whether future legislation may be proposed or enacted that would affect the federal tax treatment of interest received on the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors regarding any proposed or pending legislation that would change the federal tax treatment of interest on the Bonds.

ABSENCE OF MATERIAL LITIGATION

There is no controversy of any nature now pending against the Authority or the Borrower, to the knowledge of the Authority’s officers, threatened which seeks to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or the application of the proceeds of the Bonds as contemplated by the Indenture, or in any way contesting or affecting the validity of the Bonds, any proceedings of the Authority or the Borrower taken with respect to the issuance or sale thereof, the pledge or application of any money or security provided for the payment of the Bonds, the existence or powers of the Authority or the Borrower or the title of any officers of the Authority to their respective positions.

APPROVAL OF LEGALITY

Legal matters incident to the authorization, issuance and sale of the Bonds by the Authority are subject to the approving legal opinion of Foster Pepper PLLC, Seattle, Washington, Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached as Appendix C. The opinion of Bond Counsel is given based on factual representations made to Bond Counsel, and under existing law, as of the date of initial delivery of the Bonds, and Bond Counsel assumes no obligation to revise or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention, or any changes in law that may thereafter occur. The opinion of Bond Counsel is an expression of its professional judgment on the matters expressly addressed in its opinion and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Payment of the fees of Bond Counsel to the transaction is contingent upon the issuance and delivery of the Bonds as described herein.

CONTINUING DISCLOSURE

Undertaking to Provide Continuing Disclosure

To meet the requirements of paragraph (b)(5) of United States Securities and Exchange Commission (“SEC”) Rule 15c2-12 (the “Rule 15c2-12”), as applicable to a participating underwriter for the Bonds, each obligated person will undertake (each, an “Undertaking”) for the benefit of holders of the Bonds to provide, or cause to be provided, to the Municipal Securities Rulemaking Board (“MSRB”), certain annual financial information and notices of certain events. The Authority’s Undertaking will be contained within the Indenture. See Appendix A – “Certain Definitions and Summary of Certain Provisions of Principal Documents – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Undertaking to Provide Annual Financial Information” for a summary of applicable provisions of the Indenture. A form of the Borrower’s Undertaking is set forth in Appendix E.

Past Compliance with Continuing Disclosure Undertakings

The Authority previously entered into undertakings under the Rule with respect to certain of its bonds. In the past five years, the Authority failed to (1) timely submit event notices with respect to rating changes on its Capital Fund Program Revenue Bonds, 2005 (High Rise Rehabilitation Program – Phase I), Capital Fund Program Revenue Bonds, 2006 (High Rise Rehabilitation Program – Phase II), Capital Fund Program Revenue Bonds, 2007 (High Rise Rehabilitation Program – Phase III), and Multifamily Housing Revenue Bonds, 2003 (GNMA Collateralized Mortgage Loan – Wisteria Court Project); (2) timely file audited annual financial statements for the fiscal year ended December 31, 2014 (materials were provided two days later than required by certain undertakings); (3) connect its audited annual financial statements for the fiscal year ended December 31, 2013, with the CUSIPs for the Authority’s Pooled Housing Revenue and Refunding Revenue Bonds, 2014; (4) provide notice of an assignment and assumption agreement entered into in connection with the Authority’s Revenue Bonds, 1997 (NewHolly Project) (the “1997 NewHolly Bonds”); (5) provide all operating data required by the undertaking entered into in connection with the 1997 NewHolly Bonds for the fiscal years ended December 31, 2010, 2011 and 2012; (6) provide all operating data required by the undertaking entered into in connection with the Authority’s Housing Revenue Bonds, 2002 (Replacement Housing Projects) for the fiscal year ended December 31, 2011; (7) provide a statement of unexpended capital fund allocations as required by the undertakings entered into in connection with the Authority’s Capital Fund Program Revenue Bonds, 2005 (High Rise Rehabilitation Program – Phase I), Capital Fund Program Revenue Bonds, 2006 (High Rise Rehabilitation – Phase II) and Capital Fund Program Revenue Bonds, 2007 (High Rise Rehabilitation Program – Phase III) for the fiscal year ended December 31, 2011; (8) provide a statement of coverage ratio for all projects as required by the undertaking for the Authority’s Taxable Refunding Revenue Bonds, 2015 (Gamelin House and Genesee Projects) for the fiscal year ended December 31, 2015; and (9) and provide notices of certain of the herein-described failures to comply. As of the date of this Official Statement, the Issuer has arranged for supplementary filings to provide information previously omitted from its filings with respect to those issues that will remain outstanding after the date of issuance of the Bonds. The Authority has taken steps intended to improve future compliance with its continuing disclosure undertakings, including recent participation by certain staff in relevant training and implementation of revised disclosure policies and procedures.

RATING

Standard & Poor’s Ratings Services (the “Rating Agency”) has assigned a rating of “AA” to the Bonds. Such rating reflects only the view of the Rating Agency and an explanation of the significance of such rating mentioned above may only be obtained from the Rating Agency. There is no assurance that the rating mentioned above will continue for any given period of time or that such rating will not be suspended, revised downward or withdrawn entirely, if in the judgment of the Rating Agency circumstances so warrant. The Authority and the Underwriters have undertaken no responsibility to oppose any such proposed revision or withdrawal. Any suspension, downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds.

UNDERWRITING

The Bonds are being purchased by KeyBanc Capital Markets Inc., on its own behalf and as representative of Wedbush Securities Inc. (together, the “Underwriters”), pursuant to a bond purchase contract entered into by and between the Authority and the Underwriters. The Bonds are being purchased at a price equal to $______(representing the aggregate principal amount of the Bonds, plus/minus a [net] original issue premium/discount of $______less an underwriter’s discount of $______). The bond purchase contract provides that the Underwriters will purchase all of the Bonds, if any are purchased. The obligation of the Underwriters to accept delivery of the Bonds is subject to various conditions contained in the bond purchase contract.

The Underwriters intend to offer the Bonds to the public at the offering prices set forth on the inside front cover page of this Official Statement, which offering prices may subsequently change without any requirement of prior notice.

AUTHORITY AUDITS

KPMG, LLP, the Authority’s independent auditor, currently audits the Authority’s financial statements. The Authority’s audited financial statements for the year ended December 31, 2015, are included in Appendix B.

KPMG, LLP has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. KPMG, LLP also had not performed any procedures relating to this Official Statement.

Additionally, the State Auditor is required to conduct an Accountability Audit of housing authorities in the State, including the Authority. The examination must include, among other things, the financial condition and resources of an authority, whether the laws and constitution of the State are being complied with, and the methods and accuracy of the accounts and reports of such an authority. Reports of the auditor’s examinations are required to be filed in the office of the State Auditor and in the auditing department of such an authority. The Authority’s most recent Audit Accountability Report can be obtained from the Authority.

CONFLICTS

Some or all of the fees of the Underwriters, Trustee and Bond Counsel are contingent upon the sale of the Bonds. Furthermore, from time to time Bond Counsel may serve as counsel to the Underwriters with respect to transactions other than the issuance of bonds of the Authority. None of the Commissioners or other officers of the Authority have interests in the issuance of the Bonds that are prohibited by applicable law.

OTHER MATTERS

All quotations from, and summaries and explanations of, the Indenture and the other documents referred to herein do not purport to be complete, and reference is made to those documents for full and complete statements of their provisions. Copies of such documents are available from the Trustee at the address set forth on page 1 of this Official Statement. The appendices attached hereto are a part of this Official Statement. All statements in this Official Statement involving matters of opinion, estimates or projections whether or not expressly so stated, are intended as such and not as representations of fact.

EXECUTION

This Official Statement has been issued by the Authority. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or holders of any of the Bonds.

HOUSING AUTHORITY OF THE CITY OF SEATTLE

By Andrew J. Lofton, Executive Director

(This Page Intentionally Left Blank)

APPENDIX A

DEFINITIONS OF CERTAIN TERMS; SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS

The following statements are brief summaries of certain provisions of the principal documents executed in connection with the issuance of the Bonds that have not been described elsewhere in this Official Statement. The summary does not purport to be complete and reference is made to the actual documents available from the Trustee for a full and complete statement of the provisions thereof.

CERTAIN DEFINITIONS

Unless the context otherwise requires, capitalized terms used in the following summaries of the principal documents and elsewhere in this Official Statement have the meanings set forth below, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined.

“Accountant” means any firm of independent certified public accountants selected by the Authority, or by the Borrower and approved by the Authority.

“Act” means Chapter 35.82 of the Revised Code of Washington, as amended.

“Authority” means the Housing Authority of the City of Seattle, a public body corporate and politic of the State of Washington.

“Authorized Denomination” means $5,000 or any integral multiple thereof within a single maturity.

“Authorized Investments” means any investments that are lawful for housing authorities in the State.

“Authorized Representative” means, (a) with respect to the Trustee, any Responsible Officer thereof; (b) with respect to the Authority, the Chair of its Board of Commissioners, its Executive Director, any Deputy Executive Director, or any other person(s) designated by resolution of the Board of Commissioners as the authorized representative of the Authority; and (c) with respect to the Borrower, (i) so long as the Authority is the sole general partner of the Borrower, the Chair of the Authority’s Board of Commissioners, the Authority’s Executive Director, any Deputy Executive Director of the Authority, or any other person(s) designated by resolution of the Authority’s Board of Commissioners as an authorized representative of the Authority, and (ii) if the Authority is not the sole general partner of the Borrower, the person or persons designated by the general partner of the Borrower in writing to the Trustee as the authorized representative of the Borrower.

“Bond” or “Bonds” means one or more of 2016A Bonds or 2016B Bonds.

“Bond Counsel” means the firm of Foster Pepper PLLC, of Seattle, Washington, or any other firm of nationally recognized bond counsel, and designated by the Authority as its bond counsel for the Bonds.

“Bond Fund” means the fund of that name established pursuant to the Indenture.

“Bond Register” means the books for registration of the Bonds kept for the Authority by the Bond Registrar as provided in the Indenture.

“Bond Registrar” means the paying agent and bond registrar for the Bonds, initially the Trustee.

“Bond Year” means, unless a different period has been selected by the Authority prior to the fifth anniversary of the Date of Issue, as to the first Bond Year, the period from the Date of Issue to October 1, 2017, and, thereafter, the annual period ending on October 1 of each year.

“Bondowner” means the Owner of any Bond.

“Borrower” means NewHolly Phase I LLLP, a Washington limited liability limited partnership of which the Authority is the sole general partner.

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“Business Day” means any day, other than a Saturday or a Sunday, on which banking institutions are open in the State of Washington and in the state(s) in which the Corporate Trust Office of the Trustee and the office of the Bond Registrar designated from time to time by the Bond Registrar for the transfer or exchange of Bonds are located.

“City” means The City of Seattle, Washington.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax statute or code. Any reference to a provision of the Code shall include the applicable regulations of the Department of the Treasury promulgated or proposed with respect to such provision.

“Computation Period” means each period for which the Rebate Amount is determined.

“Condemnation Award” means the total condemnation proceeds actually paid by the condemnor as a result of the condemnation of all or any part of the property subject to the Deed of Trust, less the actual costs and expenses, including attorneys’ fees, incurred by the Authority, the Borrower and/or the Trustee in obtaining such award.

“Continuing Disclosure Agreement” means the Continuing Disclosure Agreement between the Borrower and the dissemination agent named therein, initially U.S. Bank National Association, relating to the Bonds, as such agreement may be supplemented or amended.

“Corporate Trust Office” means the office of the Trustee located at (i) for purposes of presentation of Bonds for payment or transfer St. Paul, Minnesota, or (ii) for all other purposes Seattle, Washington, or such other office(s) as the Trustee may designate from time to time.

“Costs of Issuance” means all expenses of issuing the Bonds or the Indenture, including but not limited to legal, fiscal and printing expenses, the initial fees of the Trustee (including any fees and expenses of counsel to the Trustee) under the Indenture, or the initial fee of any bank or other agency for collection or administration of the Bonds, advertising expenses, any underwriter’s discount on the Bonds, financial advisor fees and expenses and any and all other similar out-of-pocket expenses incurred for the purpose of issuing the Bonds.

“Costs of Issuance Fund” means the fund of that name established pursuant to the Indenture.

“Date of Issue” means the date the Bonds are issued and delivered to the initial purchaser thereof.

“Debt Service Reserve Account” means the account of that name in the Bond Fund.

“Debt Service Reserve Requirement” means $180,148.13*. Notwithstanding the foregoing, upon the optional or extraordinary mandatory redemption, open market purchase, or defeasance of a portion of the Series 2016A Bonds, the Debt Service Reserve Requirement shall be reduced to an amount equal to 50% of the maximum annual debt service on the Series 2016A Bonds Outstanding immediately after such redemption, purchase or defeasance.

“Declaration of Acceleration” means a declaration given in accordance with the provisions of the Indenture that all principal of and interest on the Bonds are due and payable immediately.

“Deed of Trust” means the Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing under which the Borrower is to be grantor the Trustee is to be beneficiary, as such deed of trust may be amended from time to time in accordance with the Indenture.

“Determination of Taxability” means the receipt by the Trustee of (1) a copy of written notice from the Commissioner or any District Director of the Internal Revenue Service or a determination by any court of competent jurisdiction, or (2) an opinion of Bond Counsel, in either case to the effect that interest on the Bonds is not excludable for regular federal income tax purposes under Section 103(a) of the Code from gross income of any Owners of the Bonds (other than an Owner who is a substantial user of the Project or a related person as defined in the Code).

* Preliminary, subject to change.

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“DTC” means The Depository Trust Company.

“Event of Default” means any of the events specified in the Indenture as summarized under the heading “THE INDENTURE – Events of Default and Remedies of Bondowners – Events of Default”.

“Fiscal Year” means the fiscal year of the Authority, initially the 12-month period ending on December 31 of each year.

“Funds” means the Funds created and established pursuant to the Indenture, including, but not limited to, the Bond Fund, the Costs of Issuance Fund and the Project Fund, but excluding the Rebate Fund.

“General Revenues” means all revenues of the Authority (other than Loan Payments) from any source, but only to the extent that those revenues are available to pay debt service on the Bonds and are not now or hereafter pledged or restricted, by law, regulation, contract, covenant, resolution, deed of trust or otherwise (including restrictions relating to funds made available to the Authority under the U.S. Housing Act of 1937), solely to another particular purpose.

“Government Obligations” means (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America, including instruments evidencing an ownership interest in securities described in this clause (1); and (2) obligations, debentures, notes or other evidences of indebtedness issued or guaranteed by any of the following: Federal Home Loan Bank System, Export-Import Bank of the United States, Federal Financing Bank, Federal Land Banks, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association or Federal Housing Administration.

“Hazardous Substances Agreement” means the Hazardous Substances Warranty/Indemnity Agreement relating to the Project executed by the Borrower in favor of the Trustee.

“Indenture” means the Trust Indenture pertaining to the Bonds, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture.

“Insurance Proceeds” means the total proceeds of casualty insurance actually paid or payable in respect of insurance on the Project, less the actual costs and expenses, including attorneys’ fees, incurred by the Borrower, the Authority and/or the Trustee in collecting such proceeds.

“Interest Payment Date” means the first day of each April 1 and October 1 after the Date of Issue, commencing April 1, 2017. In the case of payment of defaulted interest, “Interest Payment Date” also means the date of such payment established pursuant to the Indenture for payment of principal or interest not punctually paid.

“Investment Earnings” means all net earnings derived from the investment of money held in any of the Funds.

“Lease” means the Lease Agreement between the Authority and the Borrower providing for the lease of the Project and the Property by the Authority to the Borrower, as it may be amended or supplemented.

“Letter of Representations” means the Blanket Issuer Letter of Representations dated July 10, 1995, between the Authority and DTC.

“Limited Partner” means the entity designated by the Borrower as its limited partner, initially U.S. Bancorp Community Development Corporation, a Minnesota corporation.

“Loan” means the loan by the Authority to the Borrower of the proceeds of the Bonds.

“Loan Agreement” means the Loan Agreement dated the Date of Issue, by and between the Authority and the Borrower, relating to the loan of the Bond proceeds to the Borrower and repayment of the Loan by the Borrower, including any supplements or amendments thereto made in conformity therewith and with the Indenture.

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“Loan Documents” means the Loan Agreement, the Regulatory Agreement, the Deed of Trust, any related UCC Financing Statements and any other documents relating to the Loan executed by the Borrower, as contemplated by the Resolution.

“Loan Payments” means the payments of principal of and premium if any, and interest on the Loan pursuant to the Loan Agreement and allocable to payment of principal of and interest on the Bonds.

“MSRB” means the Municipal Securities Rulemaking Board.

“Operation and Maintenance Costs” means all necessary costs of operating and maintaining the Project, including but not limited to administrative and general expenses, costs of insurance (including reasonable contributions for self-insurance reserves, if any), consulting and technical services and repairs and replacements (to the extent not properly classifiable as capital costs) and reasonable reserves therefor, but excluding depreciation (or reserves therefor), amortization of intangibles or other bookkeeping entries of a similar nature and debt service on the Bonds and any other obligations of the Borrower relating to the Project.

“Outstanding”, when used as of any particular time with reference to Bonds, means all Bonds theretofore, or thereupon being, authenticated and delivered by the Bond Registrar under the Indenture except (1) Bonds theretofore canceled by the Bond Registrar or surrendered to the Bond Registrar for cancellation; (2) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with the Indenture, and (3) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Bond Registrar pursuant to the Indenture.

“Owner”, whenever used herein with respect to a Bond, means the Person in whose name such Bond is registered on the Bond Register.

“Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership of the Borrower, as such agreement may be supplemented or amended.

“Person” means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.

“Priority Agreement” means the Priority and Subordination Agreement, by and among the Borrower, the Trustee, the Washington State Department of Commerce, The City of Seattle, the Authority, the Washington State Housing Finance Commission and the United States Department of Housing and Urban Development.

“Project” means, depending on the context (1) the acquisition and rehabilitation of the 305-unit affordable rental housing project, known as NewHolly Phase I, located in Seattle, Washington, or (2) NewHolly Phase I.

“Project Fund” means the fund of that name established pursuant to the Indenture.

“Project Revenues” means (1) all amounts due to or received by the Authority or by the Trustee for the account of the Authority pursuant or with respect to the Projects, including without limitation all rental revenue, subsidy payments, lease payments, payments on contractors’ bonds, Insurance Proceeds and Condemnation Awards, but excluding refundable security deposits, and (2) all Investment Earnings.

“Rating Agency” means the nationally recognized rating agency or agencies, if any, at the time rating the Bonds at the request of the Authority.

“Rebate Amount” means an amount equal to the sum of (1) the excess of (a) the aggregate amount earned from the Date of Issue on all nonpurpose investments in which gross proceeds of the Bonds are invested (not including income attributable to the excess amount described in this clause (1)) over (b) the amount that would have been earned if the yield on such nonpurpose investments (not including income attributable to the excess amount described in this clause (1)) had been equal to the yield on the Bonds, plus (2) all income attributable to the excess amount described in clause (1) whether or not that income exceeds the yield on the Bonds (i.e., whether or not that income was earned at a yield higher than the yield on the Bonds), all as determined in accordance with Section 148 of the Code.

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“Rebate Fund” means the fund of that name, the creation of which is provided for in the Indenture.

“Record Date” means the 15th day of the month preceding each Interest Payment Date occurs.

“Regulatory Agreement” means the Regulatory Agreement between the Authority and the Borrower dated the Date of Issue, relating to the use of the Project by the Borrower.

“Resolution” means Resolution No. 5109 adopted by the Authority on August 15, 2016, authorizing the issuance of the Bonds, as such resolution may be amended or supplemented.

“Responsible Officer” means, when used with respect to the Trustee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer or any other officer of the Trustee within the Corporate Trust Office (or any successor corporate trust office) customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject and having direct responsibility for the administration of the Indenture.

“Series” means any Series of Bonds issued pursuant to the Indenture.

“Series 2016A Principal and Interest Account” means the account of that name in the Bond Fund.

“Series 2016B Principal and Interest Account” means the account of that name in the Bond Fund.

“Special Record Date” means the date established by the Trustee pursuant to the Indenture as a record date for the payment of defaulted principal of or interest on the Bonds.

“State” means the State of Washington.

“Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized thereunder.

“Trust Estate” means the trust estate pledged by the Authority and described under “SOURCES OF PAYMENT AND SECURITY FOR THE BONDS – Trust Estate” in the forepart of this Official Statement.

“Trustee” means U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America and having a corporate trust office in Seattle, Washington, or its successor, as trustee under the Indenture.

“2016A Bonds” means one or more of the $6,860,000* Housing Authority of the City of Seattle Revenue Bonds, Series 2016A (NewHolly Phase I Project), or any replacement thereof authorized by, and at any time outstanding pursuant to, the Indenture.

“2016B Bonds” means one or more of the $15,380,000* Housing Authority of the City of Seattle Revenue Bonds, Series 2016B (NewHolly Phase I Project), or any replacement thereof authorized by, and at any time outstanding pursuant to, the Indenture.

“UCC” means the State’s Uniform Commercial Code.

* Preliminary, subject to change.

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SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

General

The Indenture sets forth the terms of the Bonds, the nature and extent of the security, the various rights of the Owners, the rights, duties and immunities of the Trustee and the rights and obligations of the Authority. Certain provisions of the Indenture are summarized below. Other provisions are described in this Official Statement under the captions “THE BONDS” and “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.”

Establishment of Funds and Accounts

The Indenture provides for the creation of a Bond Fund (and within the Bond Fund, a Series 2016A Principal and Interest Account, a Series 2016B Principal and Interest Account and a Debt Service Reserve Account), a Project Fund, a Costs of Issuance Fund, and, if necessary, a Rebate Fund, all of which are to be held by the Trustee.

Series 2016A Principal and Interest Account within the Bond Fund. The Indenture requires that the Trustee deposit in or transfer to the Series 2016A Principal and Interest Account, to the extent funds are available for such purpose: (a) all Loan Payments received from the Borrower for the payment of principal of or premium, if any, or interest on the 2016A Bonds; (b) all amounts required by the Indenture to be transferred to the Series 2016A Principal and Interest Account from the Debt Service Reserve Account; (c) all amounts required to be transferred to the Series 2016A Principal and Interest Account from the Project Fund; (d) all amounts required to be transferred to the Series 2016A Principal and Interest Account from the Costs of Issuance Fund; (e) the net earnings on investments of money in the Series 2016A Principal and Interest Account and the Debt Service Reserve Account (except as otherwise provided in the Indenture); and (f) all other money required to be transferred to or deposited in the Series 2016A Principal and Interest Account pursuant to any provision of the Indenture and the proceeds of any investment thereof.

The money and investments in the Series 2016A Principal and Interest Account are irrevocably pledged and shall be used by the Trustee, from time to time, to the extent required, in the following order of priority: (a) for the payment of the principal of and/or interest on 2016A Bonds coming due on the next Interest Payment Date or mandatory or extraordinary mandatory redemption date; (b) for the payment of the redemption price of 2016A Bonds called for optional redemption; (c) for transfer to the Rebate Fund, if any, to the extent the Authority determines pursuant to the Indenture that a Rebate Amount must be deposited in the Rebate Fund; and (d) for transfer to the Authority on the Business Day following each Interest Payment Date of all funds which the Trustee has determined, as of such Business Day, to be in excess of those necessary for the purposes described in paragraphs (a) through (c) above.

The Trustee is to deliver to the Bond Registrar on each redemption date or Interest Payment Date money from the Series 2016A Principal and Interest Account, to the extent available therein, in an amount sufficient to pay the principal of and premium, if any, and interest on all 2016A Bonds coming due on that date.

Series 2016B Principal and Interest Account within the Bond Fund. The Indenture requires that the Trustee deposit in or transfer to the Series 2016B Principal and Interest Account, to the extent funds are available for such purpose: (a) all Loan Payments received from the Borrower for the payment of principal of or premium, if any, or interest on the 2016B Bonds; (b) all amounts required to be transferred to the Series 2016B Principal and Interest Account from the Project Fund; (c) all amounts required to be transferred to the Series 2016B Principal and Interest Account from the Costs of Issuance Fund; the net earnings on investments of money in the Series 2016B Principal and Interest Account and the Debt Service Reserve Account (except as otherwise provided in the Indenture); and (d) all other money required to be transferred to or deposited in the Series 2016B Principal and Interest Account pursuant to any provision of the Indenture and the proceeds of any investment thereof.

The money and investments in the Series 2016B Principal and Interest Account are irrevocably pledged and shall be used by the Trustee, from time to time, to the extent required, in the following order of priority: (a) for the payment of the principal of and/or interest on 2016B Bonds coming due on the next Interest Payment Date or mandatory or extraordinary mandatory redemption date; (b) for the payment of the redemption price of 2016B Bonds called for optional redemption; (c) for transfer to the Rebate Fund, if any, to the extent the Authority determines pursuant to the Indenture that a Rebate Amount must be deposited in the Rebate Fund; and (d) for transfer to the Authority on

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the Business Day following each Interest Payment Date of all funds which the Trustee has determined, as of such Business Day, to be in excess of those necessary for the purposes described in paragraphs (a) through (c) above.

The Trustee is to deliver to the Bond Registrar on each redemption date or Interest Payment Date money from the Series 2016B Principal and Interest Account, to the extent available therein, in an amount sufficient to pay the principal of and premium, if any, and interest on all 2016B Bonds coming due on that date.

Debt Service Reserve Account within the Bond Fund. Upon receipt thereof, the Trustee shall deposit into the Debt Service Reserve Account: (a) all amounts derived from Bond proceeds or from the Borrower required to be deposited therein and (b) all other money required to be transferred to or deposited in the Debt Service Reserve Account pursuant to any provision of the Indenture or the Loan Agreement.

The money and investments in the Debt Service Reserve Account are irrevocably pledged and shall be used by the Trustee, from time to time, to the extent required, in the following order of priority: (a) for transfer to the Series 2016A Principal and Interest Account on each redemption or Interest Payment Date with respect to the 2016A Bonds, to the extent that the amount in the Series 2016A Principal and Interest Account on that date is insufficient to pay the principal of, premium, if any, on and/or interest on the 2016A Bonds coming due on that date; (b) for transfer to the Rebate Fund, if any, to the extent the Authority determines pursuant to the Indenture that a Rebate Amount must be deposited in the Rebate Fund; and (c) for transfer to the Series 2016A Principal and Interest Account or to the trust account described in the Indenture and summarized under the heading “The Indenture – Discharge of Obligations to Bondowners – Defeasance of Bonds” to pay or defease the last installment(s) of principal of and/or interest on the 2016A Bonds.

The Debt Service Reserve Account shall be valued on the last Business Day of each February and August, beginning in February, 2017, and also on any date a portion of the 2016A Bonds is defeased, purchased in the open market or redeemed pursuant to the optional or extraordinary mandatory redemption provisions of the Indenture. If on any valuation date the amount in the Debt Service Reserve Account exceeds the Debt Service Reserve Requirement, the Trustee shall transfer any excess to the Rebate Fund, if any, to the extent the Authority determines that a Rebate Amount must be deposited in the Rebate Fund, and if no determination of the Authority has been provided to the Trustee, then to the Series 2016A Principal and Interest Account.

Investment of Money in Bond Fund. Pending application of money in the Bond Fund, such money shall be invested and reinvested by the Trustee in Authorized Investments. All net earnings on money and investments in the accounts in the Bond Fund shall be deposited in such account, except that all net earnings on money and investments in the Debt Service Reserve Account shall remain in that account if and to the extent necessary to cause the balance therein to equal the Debt Service Reserve Requirement, and unless and to the extent the Authority determines that a Rebate Amount must be deposited in the Rebate Fund.

Project Fund. The Trustee shall deposit in or transfer to the Project Fund: (a) upon receipt thereof, the amounts derived from Bond proceeds required to be deposited therein pursuant to the Indenture; (b) upon receipt thereof, such amounts as are received by the Trustee from the Borrower, the Authority or any other source (other than proceeds of the Bonds) for purposes of paying costs of completing the Project; and (c) all earnings on funds in the Project Fund. The money and investments in the Project Fund will be held in trust by the Trustee and applied in accordance with and subject to the provisions of the Indenture and, pending such application, will be held for the further security of the Owners of the Bonds until applied as provided in the Indenture.

Upon giving a notice of a Declaration of Acceleration, the Trustee is required to transfer all funds in the Project Fund to the Series 2016A Principal and Interest Account of the Bond Fund and the Series 2016B Principal and Interest Account of the Bond Fund, until the amount on deposit in those accounts plus, with respect to the Series 2016A Principal and Interest Account, the amount in the Debt Service Reserve Account, equals the amount necessary to pay the principal of and interest on the Bonds coming due by reason of such acceleration (provided that if such amounts are not sufficient to pay the principal of and interest on the Bonds coming due, amounts in the Project Fund shall be divided between the Series 2016A Principal and Interest Account and Series 2016B Principal and Interest Account pro rata, based on the Outstanding principal amount of each Series). The Authority has no obligation under the Indenture or under the Act to deposit any money in the Project Fund (other than the proceeds of the Bonds as provided in the Indenture) nor to apply any money to payment of the costs of completing the Project except the money in the Project Fund.

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Payments from Project Fund. Costs of the Project, including interest on the Bonds prior to completion of construction, shall be paid by the Trustee from the Project Fund, but only to the extent of the balance therein, within five Business Days following receipt by the Trustee of a written request for payment from an Authorized Representative of the Borrower. Notwithstanding the foregoing, the Trustee shall pay costs of the Project as set forth with the closing memorandum for the Bonds without the need for a requisition. All payments made from the Project Fund pursuant to a written request for payment from an Authorized Representative of the Borrower will be presumed to be made properly and the Trustee will not be required to see to the application of any payments made from the Project Fund or to inquire into the purposes for which withdrawals are being made from the Project Fund.

Establishment of Completion and Application of Balance in Project Fund. The deemed completion date of the Project will be the earliest of (a) the date when the Trustee has received a certificate of an Authorized Representative of the Borrower to the effect that all costs of completing the Project have been paid in full, (b) the date on which no money remains in the Project Fund, or (c) the third anniversary of the Date of Issue, as such date may be extended upon receipt of an opinion of Bond Counsel to the effect that such extension will not result in a Determination of Taxability. Within five Business Days of the deemed completion date of the Project, the Trustee will transfer any money and investments remaining in the applicable account in the Project Fund (other than any money determined to be a Rebate Amount) to the Bond Fund to be used to make the payment of principal of or interest on Bonds due on the next Interest Payment Date.

Investment of Money in Project Fund. Pending application of money in the Project Fund, such money shall be invested and reinvested by the Trustee as directed by the Authority in accordance with the Indenture. All Investment Earnings on money in the Project Fund shall be deposited in the Project Fund, subject to the provisions of the Indenture.

Costs of Issuance Fund. The Trustee shall deposit in or transfer to the Project Fund: (a) upon receipt thereof, the amounts derived from Bond proceeds required to be deposited therein pursuant to the Indenture; (b) upon receipt thereof, such amounts as are received by the Trustee from the Borrower, the Authority or any other source (other than proceeds of the Bonds) for purposes of paying Costs of Issuance; and (c) all earnings on funds in the Costs of Issuance Fund. The money and investments in the Costs of Issuance Fund will be held in trust by the Trustee and applied in accordance with and subject to the provisions of the Indenture and, pending such application, will be held for the further security of the Owners of the Bonds until applied as provided in the Indenture.

Upon giving a notice of a Declaration of Acceleration, the Trustee is required to transfer all funds in the Costs of Issuance Fund to the Series 2016A Principal and Interest Account of the Bond Fund and the Series 2016B Principal and Interest Account of the Bond Fund, until the amount on deposit in those accounts plus, with respect to the Series 2016A Principal and Interest Account, the amount in the Debt Service Reserve Account, equals the amount necessary to pay the principal of and interest on the Bonds coming due by reason of such acceleration (provided that if such amounts are not sufficient to pay the principal of and interest on the Bonds coming due, amounts in the Costs of Issuance Fund shall be divided between the Series 2016A Principal and Interest Account and Series 2016B Principal and Interest Account pro rata, based on the Outstanding principal amount of each Series). The Authority has no obligation under the Indenture or under the Act to deposit any money in the Costs of Issuance Fund (other than the proceeds of the Bonds as provided in the Indenture) nor to apply any money to payment of the Costs of Issuance except the money in the Costs of Issuance Fund.

Payments from Costs of Issuance Fund. Costs of Issuance shall be paid by the Trustee from the Costs of Issuance Fund, within five Business Days following receipt by the Trustee of a written request for payment from an Authorized Representative of the Borrower. Notwithstanding the foregoing, the Trustee shall pay Costs of Issuance as set forth with the closing memorandum for the Bonds without the need for a requisition. All payments made from the Costs of Issuance Fund pursuant to a written request for payment from an Authorized Representative of the Borrower will be presumed to be made properly and the Trustee will not be required to see to the application of any payments made from the Costs of Issuance Fund or to inquire into the purposes for which withdrawals are being made from the Costs of Issuance Fund.

Application of Balance in Costs of Issuance Fund. Within five Business Days of the earlier to occur of (a) the date when the Trustee has received a certificate of an Authorized Representative of the Borrower to the effect that all Costs of Issuance have been paid in full, (b) the date on which no money remains in the Costs of Issuance Fund, the Trustee will transfer any money and investments remaining in the applicable account in the Costs of Issuance Fund

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(other than any money determined to be a Rebate Amount) to the Bond Fund to be used to make the payment of principal of or interest on Bonds due on the next Interest Payment Date.

Investment of Money in Costs of Issuance Fund. Pending application of money in the Costs of Issuance Fund, such money shall be invested and reinvested by the Trustee as directed by the Authority in accordance with the Indenture. All Investment Earnings on money in the accounts of the Costs of Issuance Fund shall be deposited in the Costs of Issuance Fund, subject to the provisions of the Indenture.

Investment of Funds; Rebate Fund

Investment of Funds. Except as otherwise provided in the Indenture, money on deposit in the Project Fund, the Costs of Issuance Fund or the Bond Fund, if invested, shall be invested and reinvested by the Trustee in Authorized Investments, as directed in writing by an Authorized Representative of the Borrower at least two Business Days in advance of the investment, which direction shall certify that such investment is an Authorized Investment; but in the event of the failure of the Authority to provide timely written directions as to such investment or reinvestment, the Trustee shall invest or reinvest any or all money held by it in the Project Fund, the Costs of Issuance Fund or the Bond Fund in Authorized Investments through an automated sweep investment vehicle as directed by an Authorized Representative of the Borrower. The Trustee shall have no obligation to invest and reinvest any cash held in the Project Fund, the Costs of Issuance Fund, the Rebate Fund and the Bond Fund in the absence of timely and specific written direction from the Borrower or the Authority. The Trustee shall have no liability in respect of losses incurred as result of the liquidation of any investment prior to its stated maturity or the failure of the Borrower or the Authority to provide timely written direction. The Trustee may deem such investments as Authorized Investments without independent investigation thereof.

Money in the Series 2016A Principal and Interest Account and the Series 2016B Principal and Interest Account shall be invested only in Authorized Investments, as directed by the Borrower, maturing no later than the date money in such account is needed to make the payments authorized to be made therefrom. Money in the Debt Service Reserve Account shall be invested in Authorized Investments, as directed by the Borrower. Pending application of the money in the Rebate Fund as required pursuant to the Indenture, such money shall be invested and reinvested, without regard to yield, in such Government Obligations maturing on or before the date the money invested therein is required to be paid to the United States as an Authorized Representative of the Authority shall direct in writing at least two Business Days prior to the date of investment. However, if no such investment is available or if no such direction is given, the Trustee shall invest such money in the sweep investment vehicle identified by an Authorized Representative of the Authority.

For the purpose of valuing Authorized Investments held in any Fund or Account, the Trustee shall value all investments at market. In determining market value of Authorized Investments, the Trustee may use and rely conclusively and without liability upon any generally recognized pricing information service (including brokers and dealers in securities) available to it and any pricing service available within the accounting systems used by the Trustee for record-keeping purposes of the funds and accounts held by the Trustee under this Indenture.

Allocation of Income and Losses. The interest and income received with respect to the investments in any Fund or account held by the Trustee under the Indenture, and any profit or loss resulting from the sale of any such investments, shall be deposited and credited upon receipt, or charged, as follows: (a) all interest, income and profit received from the investment of money in the Rebate Fund shall be deposited and credited, upon receipt, to the Rebate Fund; (b) all earnings received from the investment of money in any Fund or account that has been determined to be a Rebate Amount for any Computation Period, as determined in accordance with the Indenture, shall be deposited in and credited to the Rebate Fund (to the extent such money has not been previously disbursed to any Person pursuant to the terms of the Indenture); and (c) all loss resulting from the sale of any investments in any specified Fund or account shall be charged to such Fund or such account, and all earnings received from the investment of money in any Fund or account shall be credited as described in the Indenture and summarized above under the heading “THE INDENTURE – Establishment of Funds and Accounts.”

Rebate Fund. The Trustee is authorized to establish a separate special fund designated as the “Rebate Fund” if at any time there is determined, pursuant to the Indenture, to be a Rebate Amount, which fund shall be segregated from all other funds and accounts held by the Trustee. If such a fund is established, the Trustee shall maintain the Rebate Fund until the expiration of 60 days after the retirement of the last outstanding Bond. (2) Within 30 days after the

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end of each Computation Period, the Authority shall determine or cause to be determined, by an Accountant or other qualified Person selected by the Authority, in accordance with Section 148 of the Code and applicable Treasury Regulations promulgated under Section 148(f) of the Code and written instructions of Bond Counsel delivered to the Trustee, the Borrower and the Authority from time to time, the Rebate Amount attributable to each account and/or fund and to the fees, if any, of the Authority under the Loan Agreement for each Computation Period (initially, a five-year period ending on the last day of each fifth Bond Year) on such determination date or dates as may be permitted by Section 148 of the Code and written instructions of Bond Counsel delivered to the Authority, the Borrower and the Trustee, and shall notify the Trustee in writing of any Rebate Amount so determined within 45 days after the end of the Computation Period. The Trustee, the Authority and the Borrower may rely conclusively upon the opinions, calculations, determinations, directions and advice of such Accountant or other Person, copies of all of which opinions, calculations, determinations, directions and advice shall be given to the Trustee by the Authority. If a Rebate Amount is determined to exist, the Trustee shall notify the Authority and the Borrower of the amount in the Rebate Fund available to pay the Rebate Amount, and the Borrower shall deliver an amount equal to any deficiency in the Rebate Fund to the Trustee, with instructions to deposit that amount in the Rebate Fund for any Computation Period the amount of money and investments held in the Rebate Fund exceeds the Rebate Amount for that Computation Period, the Trustee shall deposit such excess to the Series 2016A Principal and Interest Account and the Series 2016B Principal and Interest Account (pro rata, based on the Outstanding principal amount of each Series). The Borrower has covenanted in the Loan Agreement to deliver all Rebate Amounts to the Trustee within 10 days of a request from the Trustee for such amounts. The Trustee shall not be responsible for calculating Rebate Amounts or for the adequacy or correctness of any rebate report. The Trustee shall deposit in and credit to the Rebate Fund all amounts described under the subheading “Allocation of Income and Losses” above, as determined in accordance with the Indenture, and all earnings received from the investment of those amounts.

The Trustee shall make the following payments from the money and investments in the Rebate Fund to the United States Treasury when and as indicated below (or on such other payment date or dates as may be permitted by Section 148 of the Code and specified in written instructions of Bond Counsel delivered to the Trustee), and shall file with the Internal Revenue Service such forms and/or reports as the Authority provides to the Trustee for such purpose: (a) not later than the 60th day following the end of each fifth Bond Year, an amount equal to 90% of the Rebate Amount for the Computation Period ending immediately prior to the date of payment; and (b) not earlier than the date of payment of the last outstanding Bond, nor later than the 60th day thereafter, the amount, if any, which, when added to amounts previously paid to the United States as Rebate Amounts, will equal 100% of the Rebate Amount with respect to the Bonds.

Authority Covenants

The Authority has covenanted:

In General. That it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Indenture, in any and every Bond executed, authenticated and delivered under the Indenture and in all proceedings of its Board of Commissioners pertaining thereto.

Extensions of Payment of Bonds. That it will not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of the interest thereon without the consent of the Owners of all Outstanding Bonds.

Lien of Indenture. That it will not create or suffer to be created any lien upon the Trust Estate or any part thereof other than the liens created or contemplated hereby and by the Loan Agreement and the Deed of Trust. The Authority agrees that it issue no obligations, other than refunding bonds, the payment of which is secured by money or amounts derived from Loan Payments.

Tax-Exempt Status of Bonds. That it will not to use or permit the use of any of the proceeds of the Bonds in such manner, and not to take or omit to take any other action in such manner, as will impair the exclusion of interest on the Bonds from gross income for federal income tax purposes, and that it will comply with applicable arbitrage rebate requirements under Section 148 of the Code, and to provide to the Trustee written as to the investment of funds held by the Trustee.

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Concerning the Loan Agreement. That it shall do or cause to be done all things to be performed on its part under the Loan Agreement so that the obligations of the Borrower thereunder shall not be impaired or excused.

Undertaking to Provide Annual Financial Information

To meet the conditions of paragraph (d)(2) of United States Securities and Exchange Commission (“SEC”) Rule 15c2-12 (the “Rule”), as applicable to a participating underwriter for the Bonds, the Authority has agreed to undertake (the “Undertaking”) for the benefit of holders of the Bonds to provide or cause to be provided, either directly or through the Dissemination Agent, as its designated dissemination agent, to the MSRB, in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB::

(a) annual financial information and operating data of the type included in the final official statement for the Bonds (“annual financial information”); and

(b) timely notice of a failure by the Authority to provide required annual financial information on or before the required date.

Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the Authority undertakes to provide:

(a) Shall consist of: (A) annual financial statements for the Authority prepared in accordance with applicable generally accepted accounting principles promulgated by the Government Accounting Standards Board (“GASB”), as modified to reflect HUD guidelines and principles, as such principles may be modified from time to time by GASB or HUD, and (B) a statement of the amount of the Authority’s General Revenues for the applicable Fiscal Year;

(b) If the Authority’s audited financial statements are not available by the time the annual financial information is required to be provided, if and when audited financial statements are otherwise prepared and available to the Authority, they will be provided;

(c) Shall be provided to the MSRB, not later than the last day of the ninth month after the end of each Fiscal Year of the Authority (currently, a fiscal year ending December 31), as such Fiscal Year may be changed as required or permitted by State law, commencing with the Authority’s Fiscal Year ending December 31, 2016; and

(d) May be provided in a single or multiple documents, and may be incorporated by reference to other documents that have been filed with the MSRB.

Authority Listed Events. The Authority shall give, or cause to be given, notice of the occurrence of any of the following events (each, an “Authority Listed Event”) with respect to the Bonds to the MSRB in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB, in a timely manner but not in excess of 10 Business Days after the occurrence of the Listed Event:

(a) Modifications to rights of holders, if material;

(b) Rating changes;

(d) Consummation of a merger, consolidation, or acquisition involving the Authority or the sale of all or substantially all of the assets of the Authority (other than in the ordinary course of business), the entry into a definitive agreement to undertake such action or the termination of a definitive agreement relating to any such actions, other than pursuant to the terms of such agreement, if material.

Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency or the MSRB, under the circumstances and in the manner permitted by the Rule.

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The Authority will give (or cause the dissemination agent to give) notice to the MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided.

Beneficiaries. The Undertaking evidenced by the Indenture will inure to the benefit of the Authority and any holder of Bonds, and shall not inure to the benefit of or create any rights in any other Person.

Termination of Undertaking. The Authority’s obligations under the Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. In addition, the Authority’s obligations under the Undertaking will terminate if those provisions of the Rule that require the Authority to comply with the Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the Authority, and the Authority provides timely notice of such termination to the MSRB.

Remedy for Failure to Comply with Undertaking. As soon as practicable after the Authority learns of any failure to comply with the Undertaking, the Authority will proceed with due diligence to cause such noncompliance to be corrected. No failure by the Authority or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shall be to take such actions as that holder deems necessary and appropriate, including seeking a writ of mandate or order of specific performance from an appropriate court, to compel the Authority or other obligated person to comply with the Undertaking.

Designation of Official Responsible to Administer Undertaking. The Executive Director of the Authority or his or her designee is authorized and directed in his or her discretion to take such further actions as may be necessary, appropriate or convenient to carry out the Undertaking of the Authority in respect of the Bonds set forth in the Indenture and in accordance with the Rule, including, without limitation, the following actions:

(a) Preparing and filing with the Dissemination Agent the annual financial information undertaken to be provided;

(b) Determining whether any person other than the Authority is an “obligated person” within the meaning of the Rule with respect to the Bonds, and obtaining from such person an undertaking to provide any annual financial information and notice of material events for that person in accordance with the Rule;

(c) Selecting, engaging and compensating designated agents and consultants, including but not limited to financial advisors and legal counsel, to assist and advise the Authority in carrying out the Undertaking; and

(d) Effecting any necessary amendment of the Undertaking.

Concerning the Dissemination Agent. Upon written direction of the Authority given to U.S. Bank National Association, U.S. Bank National Association, not in its capacity as Trustee, but solely in its capacity as dissemination agent (“Dissemination Agent”), agrees to act to act as dissemination agent. Either the Authority or the Dissemination Agent may elect to terminate the Dissemination Agent’s responsibilities as Dissemination Agent, in either case upon prior written notice to the other party. The Authority shall pay compensation to the Dissemination Agent for its services, as agreed by the Authority and Dissemination Agent from time to time, and the reasonable out-of-pocket expenses, which fees and expenses shall be in addition to and separate from its fees of the Trustee.

Trustee to Forward Information. The Trustee shall provide notice to the Authority of any of the events listed in “Authority Listed Events” described above of which the officer of the Trustee responsible for administering the Indenture has actual notice (including notice from the Authority) or knowledge and, upon a written determination by the Authority given to the Dissemination Agent, the Dissemination Agent shall provide notice of such event to the MSRB. In addition, the Dissemination Agent shall forward to the MSRB all information delivered to the Dissemination Agent by the Authority with instructions to forward that information to the MSRB pursuant to this section, it being understood that the Dissemination Agent has no responsibility for the content, format or timeliness of any such information.

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Notwithstanding the foregoing, the Trustee shall have no duty or obligation under the Undertaking to the Authority, any holder of Bonds or any other Person (including without limitation any underwriter of the Bonds) to monitor the Authority’s compliance with the Undertaking.

Events of Default and Remedies of Bondowners

Events of Default. The following events shall be Events of Default:

(1) default in the due and punctual payment of the principal of, premium, if any, or interest on any Bond when and as the same shall become due and payable, whether on any Interest Payment Date, at maturity as expressed therein, by proceedings for redemption (except as otherwise provided in the Indenture with respect to optional redemptions), acceleration, or otherwise; or

(2) default by the Authority in the observance of any of the other covenants, agreements or conditions on its part contained in the Indenture, the Resolution the Loan Agreement or the Bonds, if such default shall have continued beyond any applicable cure period and for a period of 60 days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority and the Borrower by the Trustee, or to the Authority, the Borrower and the Trustee by the Owners of not less than 25% in aggregate principal amount of the Bonds at the time Outstanding (or, if cure cannot be completed within such 60-day period through the exercise of diligence and the Authority commences the required cure within such 60-day period and continues the cure with diligence and the Authority reasonably anticipates that the default could be cured within 120 days, the Authority shall have 120 days following receipt of such notice to effect the cure).

Acceleration of Maturity. If any Event of Default described in paragraph (1) under the heading “THE INDENTURE – Events of Default and Remedies of Bondowners – Events of Default” shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee shall be entitled, upon written notice to the Authority and the Borrower, or the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding shall be entitled, upon notice in writing to the Authority, the Borrower and the Trustee, to direct the Trustee to declare the principal of all of the Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything contained in the Indenture or in the Bonds to the contrary notwithstanding.

The Trustee shall give or cause to be given notice of any such Declaration of Acceleration to the respective Owners of the Bonds at their addresses appearing on the Bond Register. Notice of such Declaration of Acceleration having been given as aforesaid, anything to the contrary contained in the Indenture or in the Bonds notwithstanding, interest shall cease to accrue on such Bonds from and after the date established for payment of the Bonds pursuant to the Declaration of Acceleration if and to the extent that money to make such payment is on hand with the Trustee in any of the Funds on that date.

Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, then and in every such case the Trustee in its discretion may (subject to the provisions described under the subheading “Trustee to Represent Bondowners” below), and upon the written direction of the Owners of not less than a majority in principal amount of the Bonds then Outstanding and receipt of indemnity against anticipated expenses and liability satisfactory to the Trustee in its sole discretion (which indemnity, subject to the provisions described in the last paragraph of this subsection and under the subheading “Trustee to Represent Bondowners” below, is a condition precedent to its duties under the Indenture) shall, in its capacity as the Trustee of an express trust, pursue any one or more of the following remedies to the extent permitted by applicable law:

(1) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Owners and require the Authority or the Borrower to carry out any agreements with or for the benefit of the Bondowners and to perform its duties under the Act, the Resolution and the Indenture, provided that any such remedy may be taken only to the extent permitted under the applicable provisions the Act, the Resolution, the Loan Agreement or the Indenture, as the case may be;

(2) bring suit upon the Bonds;

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(3) foreclose the Deed of Trust or exercise any remedies thereunder; or

(4) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Bonds.

The Trustee shall be entitled as a matter of right to the appointment of a receiver or receivers for the property securing the obligations under the Indenture, and of the revenues, income and profits thereof, ex parte, and without notice, and the Authority consents to the appointment of such receiver upon the occurrence of an Event of Default. In the case of any receivership, insolvency, bankruptcy, reorganization, or other judicial proceedings affecting the Authority, the Trustee shall be entitled to file such proof of claims and other documents as may be necessary or advisable in order to have the claims of the Trustee and of the Owners allowed in such proceedings.

Upon instituting any such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the assets pledged under the Indenture, the Deed of Trust or the Loan Agreement pending resolution of such proceeding. The Trustee shall have the right to decline to follow any direction of Bondowners that in the sole discretion of the Trustee would be unjustly prejudicial to the Trustee or to Bondowners not parties to such direction or that is not in accordance with law or the provisions of the Indenture, and shall not be responsible for the propriety of or liable for the consequences of following such a direction given by the Owners of a majority in aggregate principal amount of the Bonds Outstanding. Notwithstanding anything to the contrary contained herein, the Trustee shall not be required to foreclose the Deed of Trust or bid on behalf of Bondowners at any foreclosure sale (a) if, in the Trustee’s sole discretion, such action would subject the Trustee to personal liability including, but not limited to, any liability arising directly or indirectly under any federal, state or local statute, rule or ordinance related to the protection of the environment or Hazardous Substances (as defined in the Loan Agreement), for the cost of investigation, removal and/or other remedial activity with respect to Hazardous Substances or (b) if the presence of any Hazardous Substance on the property subject to the Deed of Trust results in such property having no or nominal value. In particular, the Trustee is authorized to obtain a “Phase One” environmental report prior to taking any action under the Deed of Trust. It is acknowledged and agreed that the Trustee has no authority to manage, own or operate the Project, or any portion thereof, except as necessary to exercise remedies upon an Event of Default.

When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.

Application of Funds After Default. If an Event of Default shall occur and be continuing, all Loan Payments and other assets and funds then held or thereafter received by the Trustee under any of the provisions of the Indenture (subject to provisions of the Indenture with respect to discharge of the Indenture), the Loan Agreement or the Deed of Trust shall be applied by the Trustee as follows and in the following order:

(1) To the payment of any expenses necessary in the sole discretion of the Trustee to protect the interests of the Owners of the Bonds and reimbursement of the Trustee for any advances made by the Trustee for such purposes, and/or payment of reasonable fees, charges and expenses of the Trustee and the Authority (including reasonable fees and disbursements of their respective counsel, advisors and agents) incurred in and about the performance of their respective powers and duties under the Indenture, the Deed of Trust, the Loan Agreement or any other document executed in connection with any of the foregoing;

(2) If the Trustee appoints a receiver or exercises remedies under the Deed of Trust or the Loan Agreement, to prevent payment of Operation and Maintenance Costs;

(3) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Indenture, as follows:

(a) Unless the principal of all of the Bonds shall have become or have been declared due and payable,

First: To the payment to the Persons entitled thereto of all installments of interest then due on the Bonds in the order of the maturity of such installments and, if the amount available shall not be

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sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference, except that the Series 2016A Principal and Interest Account and the Debt Service Reserve Account shall be applied only to payments with respect to the 2016A Bonds, and the Series 2016B Principal and Interest Account shall be applied only to payments with respect to the 2016B Bonds; and

Second: To the payment to the Persons entitled thereto of the unpaid principal of any Bonds that shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds, and, if the amount available shall not be sufficient to pay in full all of the principal due on the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the Persons entitled thereto, without any discrimination or preference, except that the Series 2016A Principal and Interest Account and the Debt Service Reserve Account shall be applied only to payments with respect to the 2016A Bonds, and the Series 2016B Principal and Interest Account shall be applied only to payments with respect to the 2016B Bonds; or

(b) If the principal of all of the Bonds shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Bonds, with interest on the overdue principal at the rate borne by the Bonds, and, if the amount available shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference, except that the Series 2016A Principal and Interest Account and the Debt Service Reserve Account shall be applied only to payments with respect to the 2016A Bonds, and the Series 2016B Principal and Interest Account shall be applied only to payments with respect to the 2016B Bonds;

(3) To the Authority, to the extent specified by the Authority in a notice to the Trustee that amounts are owed to it under the terms of the Loan Agreement; and

(4) To the Borrower.

Trustee to Represent Bondowners. Pursuant to the Indenture, the Trustee is irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be deemed to have so appointed the Trustee) as trustee for and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture, the Loan Agreement and applicable provisions of any law. All rights of action under the Indenture, the Loan Agreement or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all Owners of Bonds, subject to the provisions of the Indenture. The foregoing notwithstanding, the Trustee shall not be entitled to vote in favor of any plan of reorganization or similar restructure plan in any bankruptcy or other insolvency proceeding, to the extent that such a vote by the Trustee would alter the Indenture, or the rights of the Owners of any outstanding Bonds, in any manner not permitted by the Indenture.

Bondowners’ Direction of Proceedings. No Owner of any Bonds shall have the right to institute any proceeding, judicial or otherwise, for the enforcement of the covenants contained in the Indenture, without the concurrence of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding. The Owners of not less than a majority in aggregate principal amount of the Bonds at any time Outstanding may, subject to the limitations of and upon compliance with the provisions of the Indenture summarized below under the heading “THE INDENTURE – Events of Default and Remedies of Bondholders – Limitation on Bondowners’ Right to Sue”, either at law or in equity, by suit, action, mandamus, application for appointment of a receiver or other proceeding, protect and enforce the rights of all Owners of Bonds, and may enforce the performance of all covenants and duties of the Authority and its officials as set forth in the Indenture, including but not limited to collection and proper segregation an application of all Loan Payments. Before the Owners may take any action under the Indenture, the

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Trustee may require that it be furnished an indemnity bond for the reimbursement of all of its expenses to which it may be put (including the reasonable expenses and disbursements of its in-house and outside counsel, independent appraisers, accountants, consultants, agents and other experts) and to protect it against all liability by reason of any action so taken by the Owners, except liability which is adjudicated to have resulted from the negligence or willful misconduct of the Trustee.

Limitation on Bondowners’ Right to Sue. No Owner of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, or take any other action described above under the heading “THE INDENTURE – Events of Default and Remedies of Bondholders – Bondowners’ Direction of Proceedings”, for the protection or enforcement of any right or remedy under the Indenture, the Loan Agreement or any applicable law with respect to such Bond, unless (1) the Owner shall have given to the Trustee written notice of the occurrence of an Event of Default; (2) the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in their names; (3) such Owner or Owners shall have tendered to the Trustee indemnity satisfactory to the Trustee in its sole discretion against the costs, expenses and liabilities to be incurred in compliance with such request (including the reasonable expenses and disbursements of its in-house and outside counsel, independent appraisers, accountants, consultants, agents and other experts); and (4) the Trustee shall have refused or failed to comply with such request for a period of 60 days after such written request shall have been received by, and such tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or failure are, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Indenture, the Loan Agreement or under law; it being understood and intended that no one or more Bondowners shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Bondowners, or to enforce any right under the Indenture or applicable law with respect to the Bonds, except in the manner provided in the Indenture, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner provided in the Indenture, and for the benefit and protection of all Owners of Outstanding Bonds, subject to the provisions of the Indenture.

Termination of Proceedings. In case any proceedings taken by the Trustee or any one or more Bondowners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, then in every such case the Authority, the Borrower, the Trustee and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights under the Indenture, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Borrower, the Trustee and the Owners shall continue as though no such proceedings had been taken. The Trustee shall restore the balance in each fund or account to its level prior to the occurrence of the Event of Default from and to the extent of money transferred from such fund or account as a result of the occurrence of such Event of Default and not disbursed in accordance with the Indenture.

Remedies Not Exclusive. Except with respect to the limitations on Owners’ rights to sue set forth in “THE INDENTURE – Events of Default and Remedies of Bondholders – Limitation on Bondowners’ Right to Sue”, no remedy conferred upon or reserved to the Trustee or the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or otherwise.

No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy given by the Indenture to the Trustee or to the Owners may be exercised from time to time and as often as may be deemed expedient.

Concerning the Trustee

Qualifications of Trustee. There shall at all times be a Trustee under the Indenture which shall be an association or a corporation organized and doing business under the laws of the United States or any state thereof, authorized under such laws to exercise corporate trust powers. Any successor Trustee shall have a combined capital and surplus of at least $50,000,000 (or shall be a wholly-owned subsidiary of an association or corporation that has such combined capital and surplus), and be subject to supervision or examination by federal or state authority, or shall have been

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appointed by a court of competent jurisdiction. If such association or corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority referred to above, the combined capital and surplus of such association or corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time any successor Trustee shall cease to be eligible in accordance with the provisions and another association or corporation is eligible, the Trustee shall resign immediately.

Resignation of Trustee. The Trustee may resign and be discharged from the trusts created by the Indenture by giving to the Authority and the Borrower at least 60 days’ advance written notice. Such resignation shall take effect on the day specified in such notice, but the Trustee shall not be discharged from the trusts created until a successor Trustee has been approved and appointed. Subsequent to such date, the Trustee shall have no further duties and obligations under the Indenture.

Removal of Trustee. The Trustee may be removed at any time, either with or without cause, by the Authority or at the written request of the Borrower, so long as there has been no Event of Default which then remains uncured and provided that all fees and expenses of the Trustee that are due and owing and that are not disputed shall first be paid. The Trustee may be removed at any time, either with or without cause, by the Owners of a majority in aggregate principal amount of Outstanding Bonds, provided that all fees and expenses of the Trustee that are due and owing and that are not disputed shall first be paid. Any removal of the Trustee shall be effected by delivery to the Trustee and the Authority (if applicable), and the Borrower of a written instrument to that effect. Such removal shall take effect on the day specified in such notice, but the Trustee shall not be discharged from the trusts created by the Indenture until a successor Trustee has been approved and appointed. Subsequent to such date, the Trustee shall have no further duties and obligations under the Indenture.

Appointment of Successor Trustee. In case at any time the Trustee shall resign, be removed or otherwise become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or if a public supervisory office shall take charge or control of the Trustee or of its property or affairs, a vacancy shall forthwith and automatically be created in the office of such Trustee under the Indenture, and the Authority shall, after consultation with the Borrower, promptly appoint a successor. Any such appointment shall be made by a written instrument executed by an Authorized Representative of the Authority, with a copy to the Borrower. The Authority shall direct the successor Trustee to mail notice by first class mail, postage prepaid, at least once within 30 days of such appointment, to the Owners of all Outstanding Bonds at their addresses on the Bond Register.

If, in a proper case, no appointment of a successor Trustee shall be made within 90 days after the receipt by the Authority and the Borrower of the Trustee’s notice of resignation or of removal of the Trustee, any Owner or the retiring Trustee, may apply to any court of competent jurisdiction to appoint a successor Trustee. The court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee.

Merger of Trustee. Any Person into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, automatically shall be and become successor trustee under the Indenture and shall be vested with all of the title to the Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties to the Indenture, anything in the Indenture to the contrary notwithstanding, but only if such resulting entity is entitled under state or federal law to exercise corporate trust powers.

Appointment of a Co-Trustee. It is the intent of the Authority and the Trustee that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in case of litigation under the Indenture and, in particular, in case of the enforcement of any remedies on default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies granted herein to the Trustee or hold title to the properties in trust, as granted in the Indenture, or take any other action that may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint, with the consent of the Authority, an additional individual or institution as a separate trustee or co-

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trustee. In the event that the Trustee appoints an additional individual or institution as a separate trustee or co- trustee, in the event of the incapacity or lack of authority of the Trustee, by reason of any present or future law of any jurisdiction, to exercise any of the rights, powers, trusts and remedies granted to the Trustee herein or to hold title to the Trust Estate or to take any other action that may be necessary or desirable in connection therewith, each and every remedy, power, right, obligation, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by the Indenture to be imposed upon, exercised by or vested in or conveyed to the Trustee with respect thereto shall be imposed upon, exercisable by and vest in such separate trustee or co-trustee, but only to the extent necessary to enable such separate trustee or co-trustee to exercise such powers, rights, trusts and remedies, and every covenant and obligation necessary to the exercise thereof by such separate trustee or co-trustee shall run to and be enforceable by either of them. Such separate trustee or co-trustee shall deliver an instrument in writing acknowledging and accepting its appointment under the Indenture to the Authority and the Trustee. Should any instrument in writing from the Authority be required by the separate trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority. If the Authority shall fail to deliver the same with 15 days of such request, the Trustee is appointed attorney-in-fact for the Authority to execute, acknowledge and deliver such instruments in the Authority’s name and stead. In case any separate trustee or co-trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co- trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee.

Discharge of Obligations to Bondowners

Defeasance of Bonds. In the event that, in accordance with a refunding or defeasance plan, the Authority shall issue refunding bonds or if the Authority or the Borrower shall have money available from any other lawful source to pay the principal of and interest on the Bonds or such portion thereof included in the refunding or defeasance plan as the same become due and payable and to refund or defease such then Outstanding Bonds and to pay the costs of refunding or defeasance, and the Authority or the Borrower shall have set aside irrevocably in a special fund for and pledged to such payment, refunding or defeasance, cash and/or Government Obligations described in paragraph (1) of the definition of Government Obligations that are not subject to redemption prior to maturity sufficient in amount, together with known earned income from the investments thereof, to make such payments and to accomplish the refunding or defeasance as scheduled (the “trust account”), and shall make irrevocable provisions for redemption of such Bonds, if applicable, then in that case all right and interest of the Owners of the Bonds to be so retired, refunded or defeased (collectively, the “defeased Bonds”) in the covenants of the Indenture, in the Trust Estate, and in the funds and accounts obligated to the payment of such defeased Bonds, other than the right to receive the funds so set aside and pledged, thereupon shall cease and become void, except that such Owners shall have the right to receive payment of the principal of and premium, if any, and interest on the defeased Bonds from the trust account and, in the event the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and premium, if any, and interest on the defeased Bonds from the Trust Estate (but only if the Indenture has not been discharged) without any priority of lien or charge against the Trust Estate or those covenants with respect thereto except to be paid therefrom (except that such rights as exist with respect to payment, exchange and transfer of such Bonds under the pertinent provisions of the Indenture shall continue in full force and effect). The Authority shall include in the refunding or defeasance plan such provisions as the Authority deems necessary for the random selection of any defeased Bonds that constitute less than all of a particular maturity of the Bonds, for notice of the defeasance to be given to the Owners of the defeased Bonds and to such other Persons as the Authority shall determine, for any required replacement of Bond certificates for defeased Bonds, and for new CUSIP numbers to be assigned to all or a portion of the defeased Bonds if less than all of the Bonds of a particular maturity are to be defeased. After the establishing and full funding of such trust account, the defeased Bonds shall be deemed to be discharged and the Authority or the Borrower then may cause any money in any other fund or account established for the payment or redemption of the defeased Bonds to be applied to such lawful purposes as they shall determine, subject only to the rights of the Owners of any other Bonds then Outstanding, the rights of the Authority under the Loan Agreement and the rights of the Trustee under the Indenture. If the Bonds are registered in the name of DTC or its nominee, notice of any defeasance of Bonds shall be given to DTC in the manner prescribed in the Letter of Representations for notices of redemption of Bonds.

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The Authority or the Borrower, if applicable, shall notify the Trustee of the defeasance of any Bonds. The Trustee may rely on any notice provided to it by the Authority or the Borrower pursuant to the Indenture. However, the Trustee may in its discretion request that the Authority or the Borrower provide to the Trustee (a) an opinion of Bond Counsel stating that the defeased Bonds are no longer deemed Outstanding under the Indenture and (b) if Government Obligations form any part of the trust account, written verification by an Accountant of the conformity of the trust account with the provisions of the Indenture.

Discharge of Indenture. The obligations of the Trustee under the Indenture shall remain in effect with respect to all Bonds until the principal of and premium, if any, and interest on all Bonds shall have been paid in full or discharged, notwithstanding that the lien of the Indenture may have been discharged with respect to some of the Bonds. Any money held by the Trustee after payment or discharge of principal of and interest on all of the Bonds and all amounts due to the Trustee under the Indenture shall be free from the trust hereof and, except for any money in the Rebate Fund, shall promptly thereafter be transferred to the Borrower, and the Trustee shall be released and discharged with respect thereto. None of the Trustee, the Authority nor the Bond Registrar shall be responsible for accounting for, or paying to, any Bondowner any return on or benefit from money held for the payment of unredeemed Bonds or outstanding checks, and no calculation of the same shall affect or result in any offset against fees and expenses due to the Trustee or the Bond Registrar under the Indenture.

Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or at the date fixed for redemption thereof or otherwise, if funds sufficient to pay the principal and interest accrued thereon to such date shall have been made available to the Bond Registrar for the benefit of the Owner thereof, the Bond Registrar shall hold such principal and interest accrued thereon to such date, without liability to the Owner for further interest thereon, for the benefit of the Owner of such Bond, for a period of one year from the date such Bond shall have become due, either at maturity or upon earlier redemption or otherwise, and thereafter the Bond Registrar shall remit such funds to the Authority unless otherwise required by the Uniform Unclaimed Property Act, RCW 63.29, as amended, or its successor. In the event the Uniform Unclaimed Property Act, as amended, or its successor, should require by law other action to be taken by the Bond Registrar, then the Bond Registrar shall comply with such law and the Indenture shall be deemed amended. After remittance as provided herein, the Bond Registrar’s liability for payment to the Owner of such Bond shall forthwith cease, terminate and be completely discharged and thereafter the Owner shall be restricted exclusively to his or her rights of recovery provided under the Uniform Unclaimed Property Act. All money held under this section will be held uninvested.

Amendment of Indenture

The Indenture shall not be supplemented or amended in any respect subsequent to the initial issuance of the Bonds, except as provided in and in accordance with and subject to the provisions of the Indenture.

Amendments to Indenture Without Consent of Owners. The Authority and the Trustee may from time to time without the consent of or notice to the Owners of the Bonds, enter into Supplemental Indentures for the following purposes:

(a) to cure any formal defect, omission, inconsistency or ambiguity in the Indenture in a manner not materially adverse to the Owner of any Bond;

(b) to impose upon the Trustee (with its consent) for the benefit of the Owners of the Bonds any additional rights, remedies, powers, authority, security, liabilities or duties that may lawfully be granted, conferred or imposed and that are not contrary to or inconsistent with the Indenture or the rights of the Trustee thereunder as theretofore in effect;

(c) to add to the covenants and agreements of, and limitations and restrictions upon, the Authority in the Indenture other covenants, agreements, limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with the Indenture as theretofore in effect;

(d) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge created or to be created by, the Indenture of any other money, securities or funds;

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(e) to comply with any future federal law, regulation or interpretation to prevent the occurrence of an event that in the opinion of Bond Counsel would lead to a Determination of Taxability;

(f) to authorize different denominations of the Bonds and to make correlative amendments and modifications to the Indenture regarding exchangeability of Bonds of different Authorized Denominations, redemptions of portions of Bonds of particular Authorized Denominations and similar amendments and modifications of a technical nature;

(g) to make such changes as are required to provide for the conversion of the Bonds to certificated form;

(h) to make such changes as are required by the Rating Agency to obtain or maintain a rating or ratings for the Bonds;

(i) to make such changes as are elsewhere expressly permitted by the Indenture, including but not limited to amendments to the continuing disclosure undertaking of the Authority; and

(j) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Owners of the Bonds to be Outstanding after the effective date of the change and which does not involve a change described below under the heading “THE INDENTURE – Amendment of Indenture – Amendments to Indenture Requiring Consent of All Owners”.

Before the Authority and the Trustee shall adopt any such Supplemental Indenture or simultaneously with such adoption, there shall be or have been delivered to the Authority and the Trustee an opinion of Bond Counsel, stating that such Supplemental Indenture is authorized or permitted by the Indenture and will, upon the execution and delivery thereof, be valid and binding upon the Authority in accordance with its terms and will not cause the interest on the Bonds to be included in gross income of the Owners for federal income tax purposes.

Amendments to Indenture Requiring Consent of All Owners. Unless approved in writing by the Owners of all Bonds then Outstanding, or as expressly provided in the Indenture, nothing in the Indenture shall permit, or be construed as permitting:

(a) a change in the times, amounts or currency of payment of the principal of or interest on any outstanding Bond, or a reduction in the principal amount or redemption price of any outstanding Bond or (except for amendment under described under subparagraph (f) above) a change in the method of redemption or redemption price of any outstanding Bond, or

(b) a preference or priority of any Bond over any other Bond, except as expressly contemplated in the Indenture, or

(c) a reduction in the aggregate principal amount of Bonds, the consent of the Owners of which is required for any such Supplemental Indenture, or

(d) the creation of any lien or pledge of the Trust Estate (other than pledges of the Authority’s General Revenues) ranking prior to or on a parity with the lien of the Bonds, or

(e) the modification of any of the provisions of the Indenture regarding Supplemental Indentures.

Procedures for Consent. If the Bonds are registered in the name of DTC or its nominee, then for purposes of obtaining the consent of the Owners of the Bonds the Trustee shall establish a record date for determining the identity of beneficial owners thereof in accordance with the Letter of Representations, and notice to DTC of such record date shall be given to the address specified in the Letter of Representations.

If at any time the Authority and the Trustee shall desire to enter into any Supplemental Indenture for any of the purposes described under the headings “THE INDENTURE – Amendment of Indenture – Amendments to Indenture Requiring Consent of All Owners” and “THE INDENTURE – Amendment of Indenture – Amendments to Indenture Requiring Consent of Majority Owners”, the Trustee shall cause notice (in the form provided by the Authority) of the proposed Supplemental Indenture to be given by first class mail, postage prepaid, to all Owners of the then

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Outstanding Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture, shall request the consent of each Bondowner and shall state that a copy of the proposed Supplemental Indenture is on file at the office of the Trustee for inspection by all Owners of outstanding Bonds. Within four weeks after the date of the mailing of such notice, the Authority and the Trustee may enter into such Supplemental Indenture substantially in the form described in such notice, but only if there shall have first been or is simultaneously delivered to the Trustee (i) the required consents, in writing, of the Owners of at least a majority of the aggregate principal amount of the Bonds Outstanding, and (ii) an opinion of Bond Counsel, stating that such Supplemental Indenture is authorized or permitted by the Indenture and, upon the execution and delivery thereof, will be valid and binding upon the Authority in accordance with its terms and will not cause interest on the Bonds to be includable in gross income of the Owners for federal income tax purposes.

If the Owners of not less than the percentage of Bonds required by the Indenture shall have consented to and approved the execution and delivery thereof as provided herein, no Owner of any Bond shall have any right to object to the adoption of such Supplemental Indenture, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Authority or the Trustee from entering into the same or from taking any action pursuant to the provisions thereof. Any written consent to a permitted amendment may be embodied in and evidenced by one or any number of concurrent written instruments of substantially similar tenor signed by Bondowners in person or by an agent duly appointed in writing, and such consent shall become effective when such instrument or instruments are delivered to the Authority or the Trustee.

Proof of the execution of any such consent or of a writing appointing any such agent shall be sufficient for any purpose and shall be conclusive in favor of the Authority if made in the following manner: the fact and date of the execution by any Person of any such consent or appointment may be proved by the affidavit of any witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the Person signing such consent or appointment acknowledged to him the execution thereof. The fact and date of execution of such consent or appointment may also be proved in any other manner which the Authority may deem sufficient; but the Authority may nevertheless, in its discretion, require further proof in cases where it deems further proof desirable. Any consent by the Owner of any Bond shall bind any future Owner of the same Bond with respect to any Supplemental Indenture executed by the Authority pursuant to such consent.

Amendments to Loan Agreement, Regulatory Agreement, or Deed of Trust Without Consent of Bondowners

The Authority, the Trustee and the Borrower, as applicable, may consent to and execute such supplements or amendments to the Loan Agreement, the Regulatory Agreement, and/or the Deed of Trust as may or shall by them be deemed necessary or desirable and as they all shall approve, from time to time and at any time, without the consent of any Owner, for any one or more of the following purposes:

(a) To add covenants and agreements to the Loan Agreement, the Regulatory Agreement, or the Deed of Trust for the protection of Owners of Bonds; and/or

(b) To cure any ambiguity or correct any defect or inconsistent provision in the Loan Agreement, the Regulatory Agreement or the Deed of Trust; and/or

(d) To preserve the exclusion of the interest on the Bonds from gross income for federal income tax purposes and preserve the right of the Authority to continue to issue bonds, debts or other obligations of any nature the interest income on which is likewise excluded from gross income for federal income tax purposes; and/or

(e) To make any other change which, in the judgment of the Trustee, is not materially adverse to the Trustee or the Owners of Outstanding Bonds.

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Modification of Loan Agreement, Regulatory Agreement, or Deed of Trust with Consent of Majority of Bondowners

Except for the supplements and amendments necessary or desirable to accomplish the purposes described under “Amendments to Loan Agreement, Regulatory Agreement, or Deed of Trust Without Consent of Bondowners”, none of the Authority, the Trustee or the Borrower shall consent to any other supplement or amendment to the Loan Agreement, the Regulatory Agreement or the Deed of Trust after the execution thereof without the approval of all of them and the prior written consent of the Owners of not less than a majority in aggregate principal amount of Outstanding Bonds. If the Owners of not less than a majority in aggregate principal amount of Outstanding Bonds shall have consented to and approved the execution thereof as provided in the Indenture, no Owner shall have any right to object to any of the terms and provisions contained therein, or in the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee, the Borrower or the Authority from executing the same or from taking any action pursuant to the provisions thereof.

Modification of Loan Agreement, Regulatory Agreement, or Deed of Trust with Consent of All Bondowners

Without the approval of the Authority, the Trustee, the Borrower and the Owners of all the Outstanding Bonds, no supplement or amendment to the Loan Agreement, the Regulatory Agreement and/or the Deed of Trust shall change the terms of redemption or maturity of the principal of any Bonds or of any installment of interest on any Bonds; shall deprive any Owner of any Outstanding Bond of the lien or right created by the Indenture; shall give priority to any Bond over any other Bond (except as expressly contemplated herein); or shall amend the provisions of the Indenture summarized under this heading.

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT

Loan; Payments

Under the Loan Agreement, the Authority agrees to make the Loan to the Borrower in an amount equal to the aggregate principal amount of the Bonds and the Borrower agrees to repay the Loan in the amounts and at the times necessary to pay amounts due on the Bonds.

The Borrower is required to repay the Loan, together with interest thereon, in Loan Payments, delivered to the Trustee in immediately available funds in amounts that shall be sufficient, together with other money, if any, in the Series 2016A Principal and Interest Account and Series 2016B Principal and Interest Account (including, without limitation, amounts transferred to the Series 2016A Principal and Interest Account and/or the Series 2016B Principal and Interest Account from the Project Fund to pay capitalized interest on the applicable series of Bonds), to pay in full all of the principal of and premium, if any, and interest on the Bonds on the Business Day immediately before the date on which the same shall come due, whether at maturity, earlier redemption or acceleration pursuant to the Indenture. If at any time the Trustee withdraws money from the Debt Service Reserve Account to pay debt service on the 2016A Bonds (except with respect to the payment of the final installment(s) of principal of and interest on the Bonds), the Borrower shall immediately deliver to the Trustee an amount sufficient to replenish the Debt Service Reserve Account to the Debt Service Reserve Requirement. Any amounts so delivered to the Trustee by the Borrower shall be credited against the Loan Payments. In addition, all payments of interest Bonds made from money transferred from the Project Account to the Series 2016A Principal and Interest Account or the Series 2016B Principal and Interest Account to pay capitalized interest on the Bonds and the final installment(s) of principal and interest on the Bonds made from money in the Debt Service Reserve Account pursuant to the Indenture shall be credited against amounts due under the Loan Agreement.

Prepayment

The Borrower, at its option, may pay the remaining balance of the Loan or any part thereof in advance at the times and prices and after notice to the Authority and the Trustee and with subsequent notice to the Bondowners in the manner and at time times provided for redemption of the Bonds in the Indenture, the Bonds and the Loan Documents.

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Payments Required Upon Acceleration

In the event of acceleration of payment of the principal of and interest on any of the Bonds, the Borrower shall pay to the Trustee an amount sufficient, together with other money held by the Trustee under the Indenture (but not including money in the Rebate Fund), to pay the entire principal of and accrued interest on the Bonds so accelerated to the date of payment.

Nature of Borrower’s Obligations; Limitation of Liability

Notwithstanding anything in the Loan Agreement to the contrary, (i) the obligations of the Borrower to make the Loan Payments and to perform and observe the other obligations on its part contained therein and in the other Loan Documents shall be absolute and unconditional, and shall not be subject to diminution by setoff, counterclaim, abatement or otherwise, (ii) the Borrower’s obligations to make payments and to perform any other covenants or indemnities or meet any conditions under the Loan Agreement and under the other Loan Documents shall be secured solely by the property pledged thereunder; and (iii) except to the extent of the Authority’s pledge of its General Revenues to the payment of the Bonds in its capacity as issuer of the Bonds, no recourse shall be had against any assets of the Borrower not so pledged, or against any of the partners, officers, directors or employees of the Borrower in their capacities as such, nor shall any recourse be had against any affiliate of the Borrower, or against any partner, officer, director, commissioner or employee of any such affiliate, except as otherwise set forth in the Loan Documents.

Insurance; Damage, Destruction and Condemnation

Insurance. During the term of the Loan Agreement, the Borrower will maintain at its sole cost and expense liability insurance, business interruption insurance and insurance against loss and/or damage to the Project and all equipment therein under a policy or policies covering such risks as are ordinarily insured against by like organizations engaged in like activities of comparable size and liability exposure. All required insurance shall be carried by insurers that are financially responsible and capable of fulfilling the requirements of such policies. All policies evidencing insurance shall be in the usual form and shall name the Borrower as the insured party or loss payee and shall also name the Authority and the Trustee as insured parties and loss payees. Annually on or before December 31, the Borrower shall provide to the Authority and the Trustee copies of certificates from an insurance agent or consultant indicating that the required insurance has been maintained. All insurance shall be carried by insurers that are financially responsible and capable of fulfilling the requirements of such policies.

Damage, Destruction, Condemnation or Insured Loss of Title. The Borrower shall be obligated to continue to make the Loan Payments even if the Project or the property therein is destroyed or damaged (in whole or in part) by fire or other casualty, or if title to, or the temporary use of, the Project or the property therein or any part thereof shall be condemned by any governmental body or any Person acting under governmental authority, unless the Borrower shall have theretofore caused all of the principal of and premium, if any, and interest on the Bonds to have been paid or prepaid in full in accordance with their terms. Upon the occurrence of any such event, the Borrower may direct the Trustee to call Bonds for mandatory redemption pursuant to the Indenture.

If Insurance Proceeds or a Condemnation Award is paid, the Borrower shall forthwith notify the Authority and the Trustee of such fact and of the amount of Insurance Proceeds or Condemnation Award received by the Borrower, and shall deliver such Insurance Proceeds or Condemnation Award to the Trustee for deposit in an account created for that purpose under the Indenture. Money in the amount of such Condemnation Award or Insurance Proceeds shall be held by the Trustee in trust for the purposes set forth in the following paragraphs.

If the Borrower determines to restore the Project (such determination to be made within 120 days after receipt by the Trustee of such Condemnation Award or Insurance Proceeds), such Condemnation Award or Insurance Proceeds shall be used exclusively for such purpose, and the Borrower shall so certify to the Authority and the Trustee. The Trustee shall disburse such funds to pay the costs of the reconstruction or rehabilitation of the Project in accordance with the procedures established for disbursement of amounts in the Project Fund pursuant to the Indenture. In such event, the date for the completion of the Project as set forth in the Indenture shall be adjusted to reflect a reasonable date for completion of such restoration or rehabilitation as determined by the Borrower and the Authority, but in no

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event later than three years from the date of receipt by the Borrower of the Condemnation Award or Insurance Proceeds.

If the Borrower determines not to restore the Project (the Borrower shall make such determination if, in the opinion of the Borrower, repair could not be completed within three years or the restoration and repair of the Project would not be economically practical or desirable), the Borrower shall so certify to the Authority and the Trustee, and the Trustee shall transfer such Condemnation Award or Insurance Proceeds to the Series 2016A Principal and Interest Account and the Series 2016B Principal and Interest Account in the Bond Fund under the Indenture to be applied to the payment or mandatory redemption of the Bonds in accordance with the provisions of the Indenture.

Application of Project Revenues

Project Revenues shall be applied solely for the purposes and is the order set forth below.

(a) to pay Project Operation and Maintenance Costs;

(b) to make deposits to the Series 2016A Principal and Interest Account and the Series 2016B Principal and Interest Account as required by the Indenture and the Loan Agreement;

(d) to repay other debt or other obligations of the Borrower with respect to the Project; and

(e) for application in accordance with to the Partnership Agreement.

Certain Other Covenants of the Borrower

Maintenance of Existence. The Borrower covenants and agrees to maintain its existence as a limited liability limited partnership duly qualified to do business in the State.

Sale, Transfer or Assignment of Assets. The Borrower agrees in the Loan Agreement that it will not voluntarily sell, assign or transfer all or substantially all of its interest in the Project except that the Borrower may sell, assign or transfer all or substantially all of interest in the Project (a) in accordance with the Loan Documents and with the consent of the Authority and prior written notice to the Trustee, (b) to the Authority, or (c) in connection with the removal of the Authority as general partner of the Borrower. For purposes of these provisions, a change of the general partner of the Borrower, or the admission of a new general partner, shall be deemed to be a transfer of the Borrower’s interest in the Project, but a transfer of the interest of a limited partner shall not be deemed to be a transfer of the Borrower’s interest in the Project. Any sale, transfer or other disposition of the Project in violation of the Loan Agreement provisions summarized under this heading shall be ineffective to relieve the Borrower of its obligations under the Loan Agreement.

Maintenance of Facilities; Management Contract. The Borrower covenants and agrees in the Loan Agreement to carry on and conduct its business in an efficient manner at all times; and to maintain, preserve and keep substantially all of the Project in reasonable repair, working order and condition, reasonable wear and tear excepted. The Borrower further covenants and agrees that it shall at all times during the Regulatory Period contract for the services of a qualified property manager for the Project (which may be the Authority) and that if the Authority is no longer the sole general partner of the Borrower, it will obtain the written consent of the Authority, which consent shall not be unreasonably withheld, to the appointment of such property manager. Further, the Borrower agrees that if the property manager fails to meet the performance criteria established by the Authority, the Authority shall have the right, but not the obligation, to appoint a new property manager (which may be the Authority, unless the Authority has been removed as general partner of the Borrower for cause) for the Project.

Use of Facilities. The Borrower agrees in the Loan Agreement that the Project is to be owned, managed and operated as a “housing project” under the Act and as a “qualified residential rental property” as that term is used in

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Section 142(d) of the Code at all times during the term of the Loan Agreement and throughout the Regulatory Period, and that the Borrower shall own and operate the portions of the Project financed with proceeds of the Bonds as a housing project containing Dwelling Units and Functionally Related and Subordinate Facilities to such Dwelling Units in compliance with the provisions of the Act, Section 142(d) of the Code and related Treasury Regulations.

Tax-Exempt Status of the Bonds. The Borrower covenants and agrees in the Loan Agreement (1) to provide such certificates, opinions of Bond Counsel and other evidence as may be necessary or requested by the Authority to establish the exclusion of interest on the Bonds from gross income under Section 103 of the Code and the absence of arbitrage expectation under Section 148 and related sections of the Code; (2) acting alone or with the Trustee or the Authority, to file such information and statements with the Internal Revenue Service as may be required to establish or preserve such exemption or as may be required by Section 103 or related sections of the Code; (3) to comply with arbitrage rebate requirements imposed with respect to the Bonds, including the requirement to calculate and pay to the United States, at the sole expense of the Borrower, all arbitrage rebate amounts in the manner and at the times required by Section 148 of the Code; and (4) if required to prevent a loss of the exclusion from gross income for federal income tax purposes of interest on the Bonds because of any failure to meet applicable arbitrage rebate requirements under Section 148 of the Code, to pay on behalf of the Authority the penalty and interest thereon as provided in Section 148(f)(7)(C) of the Code. The Borrower further covenants and agrees that it will not (a) take any action, (b) fail to take any action or (c) make any use of the Project or the proceeds of the Bonds, which would cause the interest on the Bonds to be or become includable in the gross income of the owner thereof (other than substantial users of the Project) for federal income tax purposes. Without limiting the generality of the foregoing, the Borrower further covenants and agrees that it will take such action or actions, including, without limitation, consenting and agreeing to amendments to the Loan Agreement or any of the other documents as may be necessary, in the opinion of Bond Counsel, so that the Borrower and all subsequent owners of the Project comply fully and continuously with the Code, as applicable to the Bonds from time to time, and all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service pertaining to qualified residential rental property (as defined in the Code), including, without limitation, the Treasury Regulations.

Borrower’s Performance Under Indenture. Pursuant to the Loan Agreement, the Borrower agrees that it shall, for the benefit of the Bondowners and the Trustee, do and perform all acts and things that are to be done or performed by it, either directly on its own behalf or on behalf of the Authority, under the terms of the Indenture.

Events of Default; Remedies

Events of Default. Any one or more of the following events shall constitute an “Event of Default” under the Loan Agreement:

(a) A default in the due and punctual payment of the principal of, interest on or other amounts due with respect to the Loan when and as the same shall become due and payable; provided however, that any payment made by means of a draw upon the Debt Service Reserve Account established pursuant to the Indenture shall be deemed a payment made when due, provided further, however, that the failure of the Borrower to replenish the Debt Service Reserve Account shall constitute a default in the due and punctual payment of amounts due with respect to the Loan;

(b) The failure by the Borrower to perform any other covenant, agreement or obligation of the Borrower under the Loan Agreement or the Regulatory Agreement, if not cured within 30 days after written notice thereof is given to the Borrower by the Authority, or if such cure cannot be completed within such 30-day period through the exercise of diligence, the failure by the Borrower to commence the required cure within such 30-day period and thereafter to continue the cure with diligence and to complete the cure within 90 days following the Authority’s notice of default;

(c) The occurrence and continuation of any “Event of Default” under the Deed of Trust which is not cured within any applicable cure or grace period;

(d) The termination of the Lease; or

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(e) The filing by the Borrower of a petition in voluntary bankruptcy or for an arrangement or reorganization pursuant to the Federal bankruptcy statutes, or any similar law, state or federal, whether now or hereafter existing (herein referred to as a “Bankruptcy Proceeding”); or the filing by the Borrower of any answer admitting insolvency or inability to pay its debts; or the failure by the Borrower to obtain the dismissal of any involuntary Bankruptcy Proceeding within 45 days after it is filed; or the adjudication of the Borrower as a bankrupt or insolvent entity in any Bankruptcy Proceeding or the failure of the Borrower to obtain the dismissal of the appointment of any trustee or receiver appointed for or the dismissal of any proceeding in which any court has taken jurisdiction of any of its property in any proceeding for the purpose of, reorganization, arrangement, dissolution, or liquidation unless such trust or receiver is discharged, or such jurisdiction is relinquished or vacated, within 45 days of appointment or commencement; or making by the Borrower of an assignment for the benefit of its creditors or consent to an appointment of a receiver or trustee of any of its property.

Any breach or default by the Borrower under the Loan Agreement or the Deed of Trust which is cured by the action of the Limited Partner, caused to be cured by an action of the Limited Partner, or the cure of which is commenced within a 30-day period by action of the Limited Partner and thereafter the cure is continued with diligence to completion within the 90 day period following the Authority’s notice of default shall be deemed cured for the benefit of the Borrower, and the Authority and the Trustee shall treat such cure as a cure of the Borrower’s breach or default under other Loan Documents, as appropriate.

Remedies on Default. Upon the occurrence of an Event of Default any one or more of the following steps may be taken:

(a) The Authority, by written notice to the Borrower and the Trustee, may declare the entire principal balance of the Loan (if not then due and payable) to be due and payable immediately, and upon any such declaration the principal of the Loan shall become and be immediately due and payable, together with all interest accrued thereon to the date of such acceleration, anything in the Loan Agreement to the contrary notwithstanding. However, if at any time after the acceleration of the Loan shall have been so declared and before any judgment or decree for the payment of the money due shall have been obtained or entered, all arrears of principal and interest, if any, upon the Loan, and the expenses of the Authority and the Trustee shall be paid by the Borrower, and every other default in the observance or performance of any covenant, condition or agreement contained in the Loan Agreement shall be made good or be secured to the satisfaction of the Authority and the Trustee, or provision shall be made therefor in a manner satisfactory to the Authority and the Trustee, then and in every such case, the Authority, by written notice to the Borrower and the Trustee, may waive such Event of Default and may rescind and annul such declaration and its consequences; but no such waiver, rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right incident thereto; provided, however, that it is understood and agreed that a mandatory redemption of the Bonds shall constitute an acceleration of the Loan without further action by the Authority;

(b) The Authority shall be entitled by law or in equity to compel specific performance by the Borrower of its obligations under the Loan Agreement or the Regulatory Agreement, it being recognized that the beneficiaries of the Borrower’s obligations thereunder cannot be adequately compensated by monetary damages in the event of the Borrower’s default;

(c) The Authority, upon reasonable advance notice, may have access to and inspect, examine and make copies of the books and records and any and all accounts, data and income tax and other tax returns of the Borrower;

(d) The Authority may appoint a project manager or managers (which may be the Authority, unless the Authority has been removed as general partner of the Borrower for cause) for the Project;

(e) The Authority may, without being required to give any notice except as provided in the Loan Agreement, pursue all remedies of a secured creditor under applicable laws of the State;

(f) The Authority may proceed to protect and enforce its rights in equity or at law, either in mandamus or for the specific performance of any covenant or agreement contained in the Loan Agreement, or for the enforcement of any other appropriate legal or equitable remedy, as the Authority may deem most effectual to protect and enforce any of its rights or interests under the Loan Agreement;

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(g) The Authority may seek the appointment of a receiver of the rents, issues and profits arising from or related to the Project, with such powers as the court making such appointment shall confer, including such powers as may be necessary or usual in such cases for the protection, possession, control, management and operation of the Project in accordance with the provisions of the Indenture, the Lease, the Regulatory Agreement and the Deed of Trust;

(h) The Trustee may, but shall not be required to, foreclose the Deed of Trust and otherwise enforce its rights as beneficiary thereunder; and/or

(i) The Authority may institute and prosecute any proceeding at law or in equity to abate, prevent or enjoin any violation or attempted violation of any of the provisions of the Loan Agreement, or to recover monetary damages caused by such violation or attempted violation.

SUMMARY OF CERTAIN PROVISIONS OF THE DEED OF TRUST

To secure its obligations under the Loan Agreement, the Borrower will enter into a Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing (the “Deed of Trust”). The initial deed of trust trustee will be First American Title Insurance Company, and the beneficiary of the Deed of Trust (the “Beneficiary”) is U.S. Bank National Association, as Trustee under the Indenture.

Obligations Secured

The Deed of Trust secures the following:

(1) Payment of the principal of and premium, if any, and interest on the Loan to the Borrower of the proceeds of the Bonds made pursuant to the Loan Agreement;

(2) The performance of the other covenants and agreements of the Borrower contained in the Loan Agreement;

(3) Payment of all sums advanced to protect the security of the Deed of Trust, together with interest thereon;

(4) Performance of all of the Borrower’s other obligations under the Financing Documents.

As used in the Deed of Trust, the term “Financing Documents” means the Deed of Trust, the Loan Agreement, the Indenture, the Regulatory Agreement, any UCC Financing Statements executed in connection therewith, and any other instrument or document (other than the Hazardous Substances Agreement) securing the obligations secured by the Deed of Trust or otherwise executed in connection therewith, together with all modifications, extensions, renewals and replacements thereof.

Property Encumbered by the Deed of Trust

Pursuant to the Deed of Trust, the Borrower grants, transfers, conveys and assigns to the deed of trust trustee, in trust, with power of sale, all of the Borrower’s present and future estate, rights, title, claim, interest and demand, either in law or in equity, now existing or hereafter acquired, of, in and to the following property (the “Property”):

(a) The Borrower’s leasehold estate in the real property and all rights to the alleys, streets and roads adjoining or abutting the real property described on Exhibit “A” to the Deed of Trust (the “Realty”), together with and including all right, title and interest of the Borrower therein, and which leasehold estate is created by the Lease;

(b) The Borrower’s leasehold estate in all buildings, improvements and tenements now or hereafter located on the Realty;

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(c) The Borrower’s leasehold estate in all fixtures and articles of property now or hereafter attached to, or used or adapted for use in the ownership, development, operation or maintenance of the buildings, improvements, and Realty (whether such items be owned absolutely or subject to any title retaining or security instrument, or be otherwise used or possessed, but excluding leased property located on the Realty), including without limitation all heating, cooling, air conditioning, ventilating, refrigerating, plumbing, generating, power, lighting, laundry, maintenance, incinerating, lifting, cleaning, fire prevention and extinguishing, security and access control, cooking, gas, electric and communication fixtures, equipment and apparatus, all engines, motors, conduits, pipes, pumps, tanks, ducts, compressors, boilers, water heaters and furnaces, all ranges, stoves, disposals, refrigerators and other appliances, all escalators and elevators, baths, sinks, all cabinets, partitions, mantels, built in mirrors, window shades, blinds, screens, awnings, storm doors, windows and sashes, all carpeting, underpadding, floor covering, paneling and draperies, all furnishings of public spaces, halls and lobbies, and all shrubbery and plants; all of which items shall be deemed part of the real property and not severable wholly or in part without material injury to the freehold;

(d) All assessments, all access, air and development rights, all minerals and oil, gas and other hydrocarbon substances, all royalties, all water, water rights and water stock, and all other rights, hereditaments, privileges, permits, licenses, franchises and appurtenances now or hereafter belonging or in any way appertaining to the Realty;

(e) All of the Borrower’s rights, title and interests in the rents, revenues, issues, profits and income of the Property, and all rights, title and interests of the Borrower in and to all present and future leases and other agreements for the occupancy or use of all or any part of the Realty, and all right, title and interest of the Borrower thereunder, including without limitation all cash or security deposits, advance rentals and deposits or payments of similar nature; SUBJECT, HOWEVER, to the assignment of rents and other property to the Beneficiary contained in the Deed of Trust;

(f) All of the Borrower’s rights, title and interests in all intangible personal property used or useful in connection with the ownership, development, operation or maintenance of the buildings, improvements and Realty, including without limitation all permits, licenses and franchises with respect to the Property, the exclusive right to use of any trade names, all contract rights (including, but not limited to, architectural, engineering and management agreements), all accounts receivable, leases and rental agreements, escrow accounts, insurance policies, deposits (including but not limited to tenant deposits), instruments, documents of title, general intangibles and business records pertaining to the buildings, improvements and Realty excluding only cash on hand and in bank accounts;

(g) All of the Borrower’s rights, title and interests in materials, supplies and other goods, collectively referred to as “materials” now owned or hereafter acquired, wherever located, whether in the possession of the Borrower or any warehouseman or bailee, or any other person, purchased for use in the construction or furnishing of improvements on the Realty, but excluding leased property located on the Realty, together with any documents covering such materials, all contract rights and general intangibles relating to such materials and proceeds of such materials, documents, contract rights and general intangibles;

(h) All other rights and privileges of every kind included within the Property, and all present and future contracts and policies of insurance which insure the Property or any part thereof, real or personal (whether or not Beneficiary is a loss payee thereof); and

(i) All products and proceeds of the foregoing property.

Events of Default

The occurrence of any one or more of the following shall constitute an event of default under the Deed of Trust:

(a) Failure by the Borrower to make any payment when due under any of the other Financing Documents, if not cured within any applicable grace period set forth in such documents, or under the Deed of Trust, if not cured within 30 days after written notice thereof given to the Borrower by Beneficiary.

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(b) Failure by the Borrower to perform any other covenant, agreement or obligation under any of the Financing Documents, if not cured after notice and within any applicable cure period set forth in such documents (or if such cure cannot be completed within such period though the exercise of diligence, the failure by the Borrower to commence the required cure within such period and thereafter to continue the cure with diligence and to complete the cure within 120 days following the Trustee’s notice of default).

Remedies

Acceleration Upon Default; Additional Remedies. In the event of any uncured default under the Deed of Trust, Beneficiary may, at its option and without notice to or demand upon the Borrower but subject to the terms of the Indenture, exercise any one or more of the following actions:

(a) Declare any or all indebtedness secured by the Deed of Trust to be due and payable immediately;

(b) Bring a court action to enforce the provisions of the Deed of Trust or any of the indebtedness or obligations secured by the Deed of Trust;

(d) Cause any or all of the Property to be sold under the power of sale granted by the Deed of Trust in any manner permitted by applicable law;

(e) Elect to exercise its rights with respect to the Leases and the Rents;

(f) Exercise any or all of the other rights and remedies provided for in the Deed of Trust in the event of default thereunder; or

(g) Exercise any other right or remedy available under law or in equity.

Exercise of Power of Sale. For any sale under the power of sale granted by the Deed of Trust, Beneficiary or deed of trust trustee shall record and give all notices required by law and then, upon the expiration of such time as is required by law, deed of trust trustee may sell the Property upon any terms and conditions specified by Beneficiary and permitted by applicable law. Deed of trust trustee may postpone any sale by public announcement at the time and place noticed for the sale. If the Property includes several lots or parcels, Beneficiary in its discretion may designate their order of sale or may elect to sell all of them as an entirety. The Property, real, personal and mixed, may be sold in one parcel. To the extent any of the Property sold by the deed of trust trustee is personal property, then deed of trust trustee shall be acting as the agent of Beneficiary in selling such Property. Any person permitted by law to do so may purchase at any sale. Upon any sale, deed of trust trustee will execute and deliver to the purchaser or purchasers a deed or deeds conveying the Property sold, but without any covenant or warranty, express or implied, and the recitals in the deed of trust trustee deed showing that the sale was conducted in compliance with all the requirements of law shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value.

Application of Sale Proceeds. The proceeds of any sale under the Deed of Trust will be applied in the following manner:

FIRST: Payment of the costs and expenses of the sale, including without limitation deed of trust trustee’s fees, legal fees and disbursements, title charges and transfer taxes, and payment of all expenses, liabilities and advances of Trustee, together with interest on all advances made by deed of trust trustee from the date of disbursement at the rate specified in the Deed of Trust

SECOND: Payment of all sums expended by Beneficiary under the terms of the Deed of Trust and not yet repaid, together with interest on such sums from date of disbursement at the rate specified in the Deed of Trust.

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THIRD: Payment of all other indebtedness secured by the Deed of Trust in any order that Beneficiary chooses, subject to the terms of any applicable subordination agreements.

FOURTH: The remainder, if any, to the person or persons legally entitled to it.

Limited Partner’s Right to Cure. Notwithstanding anything to the contrary contained in the Deed of Trust, Beneficiary shall not exercise any of its remedies without having given notice of the Event of Default to the Limited Partner. The Limited Partner shall have the same cure period after the giving of a notice as provided to the Borrower. If the Limited Partner elects to cure the default (and nothing in the Deed of Trust binds the Limited Partner to do so), Beneficiary agrees to accept such performance as though the same had been done or performed by the Borrower.

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SUMMARY OF CERTAIN PROVISIONS OF THE LEASE

Pursuant to a Lease Agreement to be dated as of October 1, 2016 (the “Lease”), between the Authority, as Grantor, and the Borrower, as Grantee, the Authority will lease to the Borrower and the Borrower will lease from the Authority the property comprising the Project (the “Property”). The term of the Lease will commence on the Date of Issue and will end on December 31, 2115. The Authority will at all times own title to the Property, and will be the owner of the Property for State law purposes. However, the parties to the Lease intend that the Borrower alone will be entitled to all of the federal tax attributes of ownership of the Property, including, without limitation, the right to claim depreciation or cost recover deductions and the right to claim the low-income housing tax credit described in Section 42 of the Code. Capitalized terms not otherwise defined under this heading shall have the terms ascribed thereto in the Lease.

Payments Under the Lease

In addition to the rent payments described in this Official Statement under the heading “The Borrower and the Project – Lease”, under the Lease the Borrower is required to pay all reasonable expenses incurred by the Authority in enforcing provisions of the Lease. And, if the Authority ceases to be the sole general partner of the Borrower (other than as a result of the Authority’s voluntary withdrawal), the Borrower is required to pay to the Authority a monitoring fee equal to the actual documented cost to the Authority of monitoring the Borrower’s compliance with use restrictions under the Lease. Such fee is not required to be paid while the Loan pertaining to the Bonds remains outstanding.

Repairs and Maintenance

Under the Lease the Borrower is solely responsible for repairs and replacements necessary to maintain the Property and shall have the right to make necessary alterations and repairs. The Borrower agrees to keep the Property (including, without limitation, the structural and interior and exterior portions, roofing and covering material, foundations, exterior walls, plumbing, electrical systems, heating and ventilation systems, sidewalks, parking areas and landscaping) in good and safe condition, in compliance with all applicable laws, codes and regulations, and in good order and repair, ordinary wear and tear and damage by fire, casualty or condemnation.

Services

Under the Lease the Borrower agrees to make arrangements for the provision to the Property of all utilities and to directly pay for all utilities supplied to the Property, unless such utilities are billed to residents of the dwelling units in the Property.

Conditions, Covenants and Restrictions

The Borrower agrees operate the Property in compliance with all applicable conditions, covenants and restrictions relating to the Property, and to pay any assessments required by any documents containing such conditions, covenants or restrictions, whether now existing or created during the term of the Lease.

Taxes

The Borrower and the Authority anticipate that the Property is and will remain exempt from all state, local and/or other real estate taxes and assessments (but not fees and charges, including for example surface water management fees assessed by King County, Washington, all of which are to be paid by the Borrower). Notwithstanding the foregoing, the Borrower agrees to pay all real estate taxes and assessments levied or assessed directly against the Property. The Borrower may at its sole cost and expense, and in its own name, dispute and contest any taxes or assessments charged against the Property. The Authority agrees to cooperate with the Borrower in any reasonable effort necessary to have the Property retain an exemption or reduction from real estate or property taxes on the basis of its intended use and ownership of the Property.

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Indemnification

During the term of the Lease, the Borrower agrees, subject to limitations imposed by law, to indemnify and defend the Authority and its commissioners, officers, employees and agents for and hold Grantor and its commissioners, officers, employees and agents harmless from all claims, actions, causes of action, judgments, liabilities, expenses, costs and reasonable attorneys’ fees and all limitations, restraints, penalties or obligations pertaining to the Authority or its commissioners, officers, employees or agents arising or alleged to arise out of any act, omissions, or neglect in connection with the Borrower’s (including the Borrower’s employees, agents, officers, licensees, invitees or other occupants of the Property) use or occupancy of the Property covered by the Lease, except in all cases where such is a result solely of the negligence or willful misconduct of the Authority or its commissioners, officers, employees or agents.

During the term of the Lease, the Authority agrees, subject to the limitations imposed by law, to indemnify and defend and hold harmless the Borrower and its partners, employees and agents from all claims, actions, causes of action, judgments, liabilities, expenses, costs and reasonable attorneys’ fees and from all limitations, restraints, penalties or obligations pertaining to the Borrower or its partners, employees or agents arising out of or alleged to arise out of any act, omissions or neglect in connection with the Authority’s (including the Authority’s commissioners, employees, agents, officers, licensees, or invitees) ownership of the premises covered by the Lease or obligations thereunder, including any such claims, actions, causes of action, judgments, liabilities, expenses, costs and reasonable attorneys’ fees arising from any environmental condition existing prior to the date of the Lease, except where such is a result of the negligence or willful misconduct of the Borrower or its partners (other than the Authority), agents or employees.

Insurance; Damage, Destruction and Condemnation

During the term of the Lease, the Borrower agrees to maintain at its sole cost and expense liability insurance, business interruption insurance and insurance against loss and/or damage to the Property and all equipment therein under a policy or policies covering such risks as are ordinarily insured against by like organizations engaged in like activities of comparable size and liability exposure, including but not limited to claims arising from violations or alleged violations of fair housing laws.

Although the Lease contains provisions regarding the use of Insurance and Condemnation Proceeds, all Insurance Proceeds and Condemnation Proceeds shall be subject to any Leasehold Mortgagee’s right to receive and apply the same as set forth in the applicable Leasehold Mortgagee documents.

Leasehold Mortgage Provisions

Leasehold Mortgages Authorized. The Lease provides Borrower may mortgage or otherwise encumber the Borrower’s leasehold estate under one or more mortgages, deeds of trust, security agreements or collateral assignments, securing a loan or loans to the Borrower, and/or assumed by the Borrower, and encumbering the Borrower’s estate created thereunder (“Leasehold Mortgage”) and regulatory, use and other security agreements in connection therewith, all of which constitute permitted encumbrances under the Lease.

Notice to Grantor. If the Borrower shall mortgage the Borrower’s leasehold estate, the holder of such Leasehold Mortgage shall provide Grantor with written notice of such Leasehold Mortgage together with a true copy of such Leasehold Mortgage and the name and address of the mortgagee.

Consent of Leasehold Mortgagee Required. No cancellation, surrender, or modification of the Lease Agreement will be effective as to any Leasehold Mortgage unless consented to in writing by such Leasehold Mortgagee.

Default Notice. The Authority, upon providing the Borrower any notice of (i) an Event of Default under the Lease, (ii) termination of the Lease, or (iii) failure of the Borrower to exercise any renewal option or purchase option prior to the expiration date thereof, shall, at the same time provide a copy of such notice to any Leasehold Mortgagee, to the Limited Partner and, so long as the Applicable Public Housing Requirements are in effect, to HUD. After such notice has been given to a Leasehold Mortgagee, such Leasehold Mortgagee shall have the same period, after the

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giving of such notice upon it, for remedying any Event of Default or causing the same to be remedied, as is given Grantee after the giving of such notice to Grantee, plus in each instance, the additional periods of time specified in the Lease to remedy, commence remedying, or cause to be remedied the Events of Default specified in any such notice. The Authority shall accept such performance by or at the instigation of such Leasehold Mortgagee as if the same had been done by the Borrower. The Borrower authorizes each Leasehold Mortgagee to make any such action at such Leasehold Mortgagee’s option and authorizes entry upon the Property by the Leasehold Mortgagee for such purpose.

Notice to Leasehold Mortgagees. The Authority shall have no right to terminate the Lease unless, following the expiration of the period of time given to the Borrower to cure such default, the Authority shall notify any Leasehold Mortgagee of Grantor’s intent to so terminate at least 30 days in advance of the proposed effective date of such termination if the nature of such default is the failure to pay a sum of money, and at least 60 days in advance of the proposed effective date of such termination if such default is not the failure to pay a sum of money.

Procedure on Default.

If the Borrower shall elect to terminate the Lease by reason of any default of Grantee, the specified date for the termination of the Lease, as fixed by Grantor in its Termination Notice shall be extended for a period of six months, provided that such Leasehold Mortgagee shall, during such six-month period:

(1) Pay or cause to be paid the rent, additional rent and other monetary obligations of the Borrower under the Lease as the same become due, and continue its good faith efforts to perform all of Grantee’s other obligations under the Lease, excepting (A) obligations of Grantee to satisfy or otherwise discharge any lien, charge, or encumbrance against the Borrower’s interest in the Lease junior in priority to the lien of the mortgage held by such Leasehold Mortgagee and (B) past non-monetary obligations then in default and not reasonably susceptible of being cured by such Leasehold Mortgagee; and

(2) If not enjoined or stayed, take steps to acquire or sell the Borrower’s interest in the Lease by foreclosure of the Leasehold Mortgage or other appropriate means and prosecute the same to completion with reasonable diligence.

If at the end of such six-month period such Leasehold Mortgagee complying with the procedures described above, the Lease shall not then terminate; and the time for completion by such Leasehold Mortgagee of proceedings pursuant to (2) above shall continue so long as such Leasehold Mortgagee is enjoined or stayed and thereafter for so long as such Leasehold Mortgagee proceeds to complete steps to acquire or sell Borrower’s interest in the Lease by foreclosure of the Leasehold Mortgage or by other appropriate means with reasonable diligence and continuity.

If a Leasehold Mortgagee is complying with the procedures described above, and if the Borrower has failed to discharge any lien, charge or encumbrance against Grantee’s interest in the Lease which is junior in priority to the lien of the Leasehold Mortgage held by such Leasehold Mortgagee and which the Borrower is obligated to satisfy and discharge by reason of the terms of the Lease, then upon the acquisition of the Borrower’s estate therein by such Leasehold Mortgagee or its designee or any other purchaser at a foreclosure sale or otherwise the Lease shall continue in full force and effect as if the Borrower had not defaulted under the Lease.

Use Covenants

Under the Lease, the Borrower agrees that the Property is to be owned, managed and operated pursuant to the Housing Authorities Act at all times during the term of the Lease, Section 42 of the Code so long as the Extended Use Agreement is in effect and Section 142(d) of the Code at all times during the Regulatory Period. To that end, during such period, the Borrower represents, covenants and agrees in the Lease as follows:

a) that the Property will be used for the purpose of providing low income housing under the Housing Authorities Act and as “qualified residential rental property” as that term is used in Section 142(d) of the Code, and Grantee shall operate the Property as a housing project containing dwelling units and facilities that are functionally related and subordinate to such dwelling units in compliance with the provisions of the

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Housing Authorities Act, and, during the Regulatory Period, Section 142(d) of the Code and related Treasury Regulations; b) that throughout the Regulatory Period, Dwelling Units, together with facilities Functionally Related and Subordinate to those Dwelling Units, used by Qualified Tenants on a long-term basis shall occupy at least 50% of the interior space in the Improvements or shall constitute at least 50% of the Dwelling Units, whichever produces the larger number of Dwelling Units used by Qualified Tenants; c) that each Dwelling Unit shall contain complete and separate facilities for living, sleeping, eating, cooking and sanitation for a single person or family; d) that not more than 20% of the interior space in any building constituting part of the Improvements that exceeds four stories in height shall be commercial space, and there shall be no commercial space in any building without the written consent of Grantor; e) that none of the Dwelling Units shall at any time be used on a transient basis; that none of the Dwelling Units shall be leased or rented for a period of less than six months; and that neither the Improvements nor any portion thereof shall be used as a hotel, motel, dormitory, fraternity house, sorority house, room house, hospital, sanitarium, nursing home or trailer park, or court, or by a cooperative housing corporation (as defined in Section 216(b)(1) of the Code); f) that once available for occupancy, each Dwelling Unit (other than the manager’s unit(s), if any) shall at all times be occupied by or available for residency on a continuous basis to qualified members of the general public (except as otherwise allowed under applicable fair housing laws) in compliance with applicable Treasury Regulations, the laws of the State and the Lease; g) that the Improvements will include similarly constructed Dwelling Units, together with Functionally Related and Subordinate facilities, financed pursuant to a “common plan”, which Improvements shall be owned by the same “person” (as such terms are used in the Treasury Regulations) for federal tax purposes; h) that, if at any time Grantee is unable to rent or lease the Dwelling Units designated in accordance with Section 20(b) for use by Qualified Tenants to such tenants, it will hold the unrented Dwelling Units so designated vacant until Qualified Tenants are found to occupy those Dwelling Units, and that it will offer the unrented Dwelling Units so designated for occupancy by Qualified Tenants; i) that it will comply with the provisions of all regulatory agreements applicable to the Property (including, without limitation, the Permitted Encumbrances) through the periods specified therein; j) that it will obtain at the time each Dwelling Unit is rented to a Qualified Tenant and annually thereafter and maintain on file certifications or verifications of income. Such certifications and verifications of income shall be in such form and manner as may be acceptable to Grantor, as dictated by the rules applicable to Grantor’s administration of public housing programs or housing voucher programs (to the extent applicable to the Property) and, during the “extended use period” (as defined in Code Section 42(h)(6)(D)) with respect to the Property, by the Low-Income Housing Tax Credit Program. Copies of such documentation shall be submitted to Grantor upon request. An annual rent roll and financial statement for the Property shall be submitted to Grantor upon request; k) that it will obtain and maintain on file, with respect to each Qualified Tenant residing in the Property, the original documentation required in paragraph (j) above; l) that it will permit any duly authorized representative of Grantor to inspect, during regular business hours and upon reasonable notice, the books and records of Grantee pertaining to the incomes of the Qualified Tenants who are residing or have resided in the Property; m) that it will, beginning on the last day of the “compliance period” (as defined in Code Section 42(i)(1)) with respect to the Property, and at all times thereafter during the term of the Lease, maintain 100% of the Dwelling Units for occupancy by individuals and families whose annual income is not greater than 60% of area median gross income (such calculation shall be adjusted for family size and shall be performed in a manner consistent with determinations made pursuant to the United States Housing Act of 1937, as amended, and its implementing regulations); and n) that, beginning on the last day of the “compliance period” (as defined in Code Section 42(i)(1)) with respect to the Property, and at all times thereafter during the term of the Lease, each Dwelling Unit will be “rent restricted” (within the meaning of Code Section 42(g)(2), as the same exists on the date of the Lease) determined with reference to the income limitation set forth in Section 20(m) above.

For the purposes of the Lease, subject to the requirements of the Low-Income Housing Tax Credit Program, a Dwelling Unit occupied by an individual or family who at the commencement of that occupancy is a Qualified Tenant shall be treated as occupied by a Qualified Tenant during such individual’s or family’s tenancy in such unit

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regardless of the future income levels of such individual or family; moreover, a unit shall be treated as occupied by a Qualified Tenant until occupied by another occupant, at which time the character of the unit shall be redetermined. Income limits on continued occupancy shall be governed by the rules of Grantor’s administration of public housing programs or housing voucher programs (to the extent applicable to the Property), by the restrictions of the Low- Income Housing Tax Credit Program.

Defaults; Remedies.

Defaults. Each of the following will constitute an Event of Default under the Lease:

(a) Failure by the Borrower to make any required rent or any other payment as and when due, if the failure continues for a period of 10 days after written notice from the Authority.

(b) Failure by the Borrower to comply with any of the covenants or provisions of the Lease, other than those described in (a) above, if the failure continues for a period of 60 days after written notice from the Authority. If the nature of the Borrower’s default reasonably requires more than 60 days for its cure, the Borrower will not be in default if it commences to cure within the 60 day period and thereafter diligently pursues its completion.

(c) The Borrower’s making any general assignment or arrangement for the benefit of creditors; the filing by or against the Borrower of a petition to have it adjudged as bankrupt or a petition for reorganization or arrangement under any bankruptcy law (unless any petition filed against the Borrower is dismissed or stayed within 60 days); the appointment of a trustee or receiver to take possession of substantially all of the Borrower’s assets at the Property or its interest in the Lease, if possession is not restored to the Borrower within 60 days; or the attachment, execution or other judicial seizure of substantially all of Grantee’s assets at the Property or its interest in the Property, if that seizure is not discharged within 60 days.

Notwithstanding the foregoing, the Authority shall not terminate the Lease, consider a default to be an Event of Default or exercise any other remedy under the Lease if at the time of the default the Authority, or any affiliate of the Authority, is the general partner of the Authority and such default is not caused, directly or indirectly, by any material act or omission of the Limited Partner under the Partnership Agreement (including, without limitation, the failure of the Limited Partner to make capital contributions to the Borrower as and when required by the terms and conditions of the Partnership Agreement), or if such default is caused, directly or indirectly, by any act or omission of the Authority, or any affiliate of the Authority, in its capacity as general partner of the Authority or developer of the Property.

Remedies. Upon the occurrence of an Event of Default, the Authority may at any time thereafter without notice or demand (subject to the conditions of the Extended Use Agreement) do any or all of the following:

(a) Upon 90 days’ written notice to the Borrower and the Limited Partner, terminate Grantee’s right to possession of the Property and the Lease. The Authority may then re-enter and take possession of and remove all persons or property, and the Borrower shall immediately surrender possession of the Property to the Authority. The Authority may recover from the Borrower all damages incurred by the Authority resulting from the Event of Default, including but not limited to reasonable attorney’s fees and costs.

(b) Maintain the Borrower’s right to possession, and continue the Lease in force whether or not the Borrower has abandoned the Property. The Authority shall be entitled to enforce all of its rights and remedies under the Lease, including the right to recover rent as it becomes due.

(d) No remedy conferred upon or reserved to the Authority by the Lease is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Lease or now or hereafter existing at law or in equity or by statute, and the Authority shall be free to pursue, at the same time, each and every remedy, at law or in equity, which it may have under the Lease, or otherwise.

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In the event the Authority exercises its remedies pursuant to (a) or (c) above and terminates the Lease, the Borrower may, within 90 days following such termination reinstitute the Lease for the balance of the term, by paying to the Authority an amount equal to the actual damages incurred by the Authority as a result of such breach and payment of any actual costs or expenses incurred by the Authority, including reasonable attorneys’ fees and disbursements, as a result of such reinstatement of the Lease.

The Authority’s rights to exercise remedies under the Lease are subject to notice and cure rights of the Limited Partner and, to the Authority’s agreement that, for so long as the Authority is the Borrower’s general partner, Authority will not exercise any remedy during the tax credit “compliance period”. In addition, the rights and remedies of the Authority in are subject to the rights and remedies of Leasehold Mortgagees, as described above.

Default by Authority. The Authority is not in default unless it fails to perform obligations required of it within a reasonable time, and not later than 60 days after delivery of written notice by the Borrower to the Authority specifying the Authority’s failures to perform its obligations. If the Authority’s obligation reasonably requires more than 60 days for performance or cure, the Authority is not in default if it commences performance or cure within the 60-day period and thereafter diligently pursues its completion. In the event of default by the Authority, the Borrower may pursue all remedies available to it at law or in equity.

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APPENDIX B

AUTHORITY’S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015

(This Page Intentionally Left Blank)

The Housing Authority of the City of Seattle, Washington

Comprehensive Annual Financial Report

For the year ended December 31, 2015

THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON

Comprehensive Annual Financial Report

For the year ended December 31, 2015

Issued by Department of Finance & Administrative Services Shelly Yapp, Chief Financial Officer

THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Table of Contents

Exhibit Page(s) SECTION I – INTRODUCTORY SECTION (UNAUDITED): Transmittal Letter i–xvii Principal Officials xviii Organization Chart xix Government Finance Officers Association of the United States and Canada (GFOA) xx December 31, 2014 Certificate

SECTION II – FINANCIAL SECTION: Independent Auditors’ Report 1–3 Management’s Discussion and Analysis (Unaudited) 4–15 Basic Financial Statements: A-1 Statement of Net Position 16–17 A-2 Statement of Revenues, Expenses, and Changes in Net Position 18 A-3 Statement of Cash Flows 19 Notes to Basic Financial Statements 20–83

Required Supplementary Information 84

Supplementary Information (Unaudited) Cost Certificates: WA19URD001I108 85 WA19C001501-10 86 WA19URD001I199 87 WA19URD001I100 88

Table SECTION III – STATISTICAL SECTION (UNAUDITED): Financial Trends: 1 Net Position by Component – Primary Government 90 2 Changes in Net Position – Primary Government 91 Revenue Capacity: 3 Operating Revenues by Source – Primary Government 92 4 Nonoperating Revenues by Source – Primary Government 93 Debt Capacity: 5 Schedule of General Revenue Bond Coverage 94–95 6 Ratio of Debt to Capital Assets – Primary Government 96 Demographics and Economic Statistics: 7 Tenant Demographics – Population Statistics 97–98 8 Regional Demographics – Population Statistics 99 9 Principal Industries 100 Operating Information: 10 Number of Units by Program, Households Served and Waiting List Data 101 11 Property Characteristics and Dwelling Unit Composition 102–104 12 Regular Staff Headcount by Department 105

THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON

Introductory Section (Unaudited)

Section I

May18,2016 MembersoftheBoardofCommissioners TheHousingAuthorityoftheCityofSeattle,Washington:

Introduction WearepleasedtopresentTheHousingAuthorityoftheCityofSeattle,Washington’s(referredto hereafteras“theSeattleHousingAuthority”,“theAuthority”or“SHA”)ComprehensiveAnnual FinancialReport(CAFR)fortheyearendedDecember31,2015.Thisreportwaspreparedbythe Authority’sFinancestaff,andtheAuthority’s2015financialstatementsincludedinthisCAFRwere auditedbythenationalpublicaccountingfirmofKPMGLLP,withassistancefromtheSeattlepublic accountingfirmofFrancis&CompanyPLLC.Theindependentauditor’sreportofKPMGLLPis presentedonpages1through3herein.WeinvitethepublictoreviewSHA’s2015CAFRat http://www.seattlehousing.org/news/financial/.

ThedatapresentedinthisreportaretheresponsibilityofthemanagementoftheAuthority.Tothe bestofourknowledgeandbelief,thedataaspresentedareaccurateinallmaterialrespects;are presentedinamannerdesignedtofairlystatethefinancialpositionandresultsofoperationsofthe Authority;includeallnecessarydisclosurestoenablethereadertogainathoroughunderstandingof theAuthority’sfinancialaffairs;andarebasedonasystemofinternalcontrolsthroughpoliciesand proceduresdesignedtominimize,prevent,ordetectriskstotheintegrityofthedataandcorrect weaknesseswherediscovered.TheeffectivenessofSHA’sinternalcontrolsistestedinthecourseof independentfinancial,compliance,andperformanceaudits.The2015FinancialStatementsalsoreflect SHA’simplementationofGASB68andincorporatesintherestated2014and2015financialstatements theAuthority’sproportionateshareoftheWashingtonStatePublicEmployees’RetirementSystemnet pensionliabilities.

ForanoverviewoftheAuthority’s2015financialconditions,pleasereview“Management’sDiscussion andAnalysis”foundinSectionII:FINANCIALSECTION,intandemwiththistransmittalletter.

ProfileofSeattleHousingAuthority IndependentPublicJurisdiction:TheAuthorityisanindependentmunicipalentitycreatedbytheCity ofSeattle(City)in1939pursuanttostatelawandtheNationalHousingActof1937.Althoughit maintainsclosetieswiththeCityinseveralrespects,theAuthorityisnotacomponentunitoftheCity, asdefinedbythepronouncementsoftheGovernmentalAccountingStandardsBoard.TheCityisnot financiallyaccountablefortheoperationsoftheAuthority,hasnoresponsibilitytofunditsdeficitsor receiveitssurpluses,andhasnotguaranteedtheAuthority’sdebt.TheAuthorityisthelargesthousing authorityinthePacificNorthwestandthe24thlargestintheUnitedStates. TransmittalLetter 2015ComprehensiveAnnualFinancialReport MovingtoWorkHousingAuthority:TheAuthorityisoneof39housingauthorities,ofapproximately 3,300inthecountry,designatedasa“MovingtoWork”(MTW)housingauthority.AnMTWagencyis onethatispartofademonstrationcreatedinthe1996Congressionalappropriationforthe DepartmentofHousingandUrbanDevelopment(HUD).MTWagencieshavethreestatutory objectives: ReducecostandachievegreatercostseffectivenessinFederalexpenditures; Giveincentivestofamilieswithchildrenwheretheheadofhouseholdisworking,isseeking work,orispreparingforworkbyparticipatinginjobtraining,educational,orjobreferral programs,toobtainemploymentandbecomeeconomicallyselfsufficient;and, Increasehousingchoicesforlowincomefamilies. AsanMTWagency,SeattleHousingAuthorityhasflexibilitythroughitsAnnualMTWPlantodevelop operatingpoliciesandproceduresthatdifferfromthoseprescribedinregulationsimplementing Sections8and9oftheHousingActof1937.TheAuthorityisalsoauthorizedtocombinepublic housingoperatingandcapitalfundsandhousingchoicevoucherfundsintoaMTWBlockGrantandto allocatethissinglefundtobestmeetlocallowincomehousingneeds.MTWagenciesarerequiredby statutetoservesubstantiallythesamenumberofhouseholdsastheMTWagencywouldhaveserved haditnotcombineditsfederalfundsasprovidedunderthedemonstration.

GoverningBodyandStrategicGuidance:ThegoverningbodyoftheAuthorityisitsBoardof Commissioners.TheBoardiscomprisedofsevenmembersappointedbytheMayorandconfirmedby theCityCouncil;membersservefouryeartermsandmaybereappointed.TheBoardappointsan ExecutiveDirectortoadministertheaffairsoftheAuthority.Theprogramsandactionsofthe AuthorityareguidedbySHA’s20162020StrategicPlan.ThePlanwasadoptedbytheBoardinMarch 2016,followingnearlyeighteenmonthsofplanningandaparticipationprocessinvolvingresidents, voucherparticipants,employees,partnergovernmentandnonprofitagencies,civicleadersand interestedcitizens.Theunderpinningsforthe20162020StrategicPlanaretheAuthority’sMission andValuesstatements:

OurMission OurmissionistoenhancetheSeattlecommunitybycreatingandsustainingdecent,safeand affordablelivingenvironmentsthatfosterstabilityandincreaseselfsufficiencyforpeoplewith lowincome. OurValues Asstewardsofthepublictrust,wepursueourmissionandresponsibilitiesinaspiritofservice, teamwork,andrespect.Weembracethevaluesofexcellence,collaboration,innovation,and appreciation.

SeattleHousingAuthority’s20162020StrategicPlanlaysoutthreestrategicdirectionsthatframethe Authority’skeyobjectivesovertheperiod:

ExpandHousingOpportunities. SHAservesmorepeoplebycultivatingadditionalresourcesandemployingstrategieswhichhavethe biggestimpactinincreasingSeattle’saffordablehousingchoices. ii

TransmittalLetter 2015ComprehensiveAnnualFinancialReport Createmoreaffordablehousing.Prioritizestrategiesandleverageresourcestoenableincreased rentalassistanceandhousingunitsformorepeopleinneedofaffordablehousing.

Advanceaffordablehousingpolicy.Championpublicpoliciesthatwillincreasetheviability, availability,andaccessibilityofaffordablehousingforpeoplewithlowincomes.

Diversifyhousingchoice.Expandavailablehousingchoices,demonstratealternativehousing models,andpreserveandincreaseaccesstoneighborhoodsthroughoutSeattlethatwould otherwisebeoutofreachforpeoplewithlowincomes. PromoteQualityCommunities. SHAinvestsinsafe,qualityhousingandconnectsparticipantstocommunities,resources,and servicesthataredesignedtomeettheirneeds.

Preserveandpromotehighqualityhousing.Providesafe,accessible,sustainable,andattractive livingenvironmentsthatcontributetothequalityofSeattleneighborhoodsthroughpreservation andredevelopmentofSHA’shousingstock.

Connectpeopletoopportunity.Investincommunitiesthroughpartnershipssothat neighborhoodswhereparticipantslivesupportaccesstoopportunitiessuchasgoodjobs,parks, transit,arts,highperformingschools,andhealthyliving.

Strengthencommunityandservice.Facilitateeffectiveandsupportiverelationshipsand respectfulinteractionsamongparticipants,staff,partnerorganizations,andneighborssothat peoplefeelvalued,proud,andconnectedtothecommunitytheylivein. ImproveQualityofLife. SHApartnerstousehousingasaplatformtoimprovequalityoflifebyenhancinghealth,supporting educationandskilldevelopment,andotherservicestohelppeoplereachtheirfullpotential. Enhancesenioranddisabledliving.Connectsenioranddisabledparticipantstotheservicesthey needandfacilitateaccesstootherhousingchoicesalongacontinuumofcareasappropriate.

Economicallyempowerpeople.Assistparticipantsinbenefitingfromeducationandemployment toincreasetheireconomicsecurity,skills,income,assets,andfinancialwellbeing.

Supportyouthachievement.Promoteaccesstohighqualitylearningopportunitiesforyoung children,youth,andyoungadultsthatincreaseeducationalperformance,collegeandcareer readiness,andencouragelifelongwellbeing. The20162020StrategicPlanalsorecognizessevenOrganizationalCornerstonesreflectingSHA’s valuesinaction.ThesequalitieshelpformthefoundationofhowSHAadvancesitsmissionand pursuesstrategicdirections.SHA’scultureisdrivenbyacommitmenttoexcellencethatcontinually strengthensthesecornerstones:

iii

TransmittalLetter 2015ComprehensiveAnnualFinancialReport RespectfulandEngagingServiceandRelationships SHAiscommittedtoprovidingconsistentlyhighqualityserviceandrespectfulinteractions.SHA honorsandassistsparticipantsandcommunitiesthroughserviceandengagementthatrecognize theiruniqueneedsandstrengths.

FinancialStabilityandOperationalEfficiency SHAmanagesitsresourcestomaximizetheimpactandcosteffectivenessofitsoperationsaswell asthevalueandlongevityofitsassets.SHAfocusesonstrengtheningitsfinancialcondition, streamliningservicedelivery,andbeinggoodstewardsofthepublictrusttobestservepeople nowandintothefuture.

Partnership&CoordinatedAction SHAengagesinpartnershipsandleveragesresourcestoextendservicesbeyondcorehousing programs.SHAalignspartners,programs,andservicedeliverytoaccelerateprogressonstrategic directions.

EnvironmentalStewardship SHAincorporatesenvironmentalstewardshipintodailypracticesandlongtermdecisionmakingto allowformorecosteffectiveinvestments,inventiveapproachestocomplexsustainability challenges,healthierworkingandlivingenvironmentsforstaffandparticipants,andbroader impactwithinthecommunity.

StaffExcellence SHAiscommittedtorecruiting,retaining,anddevelopingpeoplewhoseskillsanddedicationallow themtoconsistentlyperformatthetopoftheirfield.SHAtrainsandinvestsinawellequipped workforcetosupporttheAuthority’sdaytodayoperationinpursuitofitsmission.

RaceandSocialJustice SHAiscommittedtodeliveringservicesinaculturallycompetentway,freeofracismand prejudice,tominimizetheimpactsofpovertyandtoadvanceandsupportsocialjustice.SHA strivestoeliminateindividual,institutional,andsystemicracisminitspoliciesandpractices.

Innovation SHAactivelypursuescreative,innovative,andimpactfulsolutionstoexpandorganizational capacity,improveservice,andmeetparticipantandcommunityneeds.SHAcontinuallyuseshigh qualityinformationandeffectiveanalysistoplanandevaluateitsactions. HousingProfile:TheAuthorityisthedeveloperandthegeneralpartnerandmanagementagentfor17 ComponentUnits,theownersofwhichareLowIncomeHousingTaxCreditlimitedpartnershipsor limitedliabilitylimitedpartnerships.

TheAuthorityownsandmanagesormanagesnearly8,000unitsofhousingandadministersjustover 10,000rentalvouchers,providingrentalhousingorrentalassistancetonearly29,000lowincome peopleintheCityofSeattle.

TheAuthorityoperateslowincomehousinginfourlargefamilycommunities–NewHolly,Rainier Vista,HighPoint,andYeslerTerrace;intwentyeighthighrisebuildings,andinsingle,duplex,triplex, andsmallapartmentbuildingsacrossthecity.TheAuthorityalsoadministerstheHousingChoice iv

TransmittalLetter 2015ComprehensiveAnnualFinancialReport Voucherprogramsthatprovidetenantbasedorprojectbasedvouchersthatserveasrent supplementsforqualifiedlowincometenants.

TheAuthorityworksinpartnershipwithlocalagenciestoprovidecommunity,social,andhealth servicestosomelowincomeresidentsandvoucherparticipants.Theseservicesincluderecreation,job trainingandreferral,elderservices,instructioninEnglishasasecondlanguage,healthanddental clinics,andvariouseducationalandtutoringprograms.

Inthemid1990s,theAuthoritybeganalongtermprogramtoredevelopitshousingstockto transformthefamilycommunitiestonewmixedincomeneighborhoods,whileassuringthatalllow incomeresidentsoftheseneighborhoodsreceiverelocationassistance.Replacementhousing,either onoroffsitehasalsobeenbuiltoracquiredinordertomaintainorincreaseSeattle’sinventoryoflow incomehousing.TheAuthority’sredevelopmentactivitiescontinuetodayandintothefuture. Presently,theAuthorityisengagedintheredevelopmentofthelastofits1940erafamilyhousing communities–YeslerTerrace(seeMajorInitiativesbelow).

BudgetProcessandMonitoring:TheannualbudgetfortheAuthorityispreparedbytheExecutive DirectorwithsignificantinvolvementoftheAuthority’stopexecutivestaffandthesupportand analysisoftheAuthority’sBudgetstaff.Atthefrontendofthebudgetprocess,theCabinetwiththe ExecutiveDirectoragreeonthefinancialforecastonwhichthebudgetwillbepreparedandestablish thekeyareasoffocusforthecomingyearfromtheStrategicPlan.Attheendofthebudgetprocess, theExecutiveDirector,withtheadviceoftheCabinet,determinesthefinalactionstobalancethe proposedbudget.

TheBoardofCommissionersadoptstheannualbudgetfortheAuthorityaftertheExecutiveDirector haspresentedboththeAnnualMTWPlanandtheAuthority’sProposedBudgetforpublicreviewand comment.TheMTWPlanandtheProposedBudgetareprimarytoolsforimplementingtheStrategic Plan.Theannualproposedbudgetincludesfourcomponents–theOperating,HAPs(Housing AssistancePayments),Capital,andDevelopmentbudgets.MTWfederalfundscomprise7075percent ofthecombinedOperating,HAPs,andCapitalrevenues.Theoperatingandcapitalbudgetsare developedfromthecommunityorprogramlevelupintheAuthority’sprojectbasedbudgeting process.ThedevelopmentprogramsoftheAuthority,torebuildandrehabilitatethefamily communities,seniorprogrambuildings,andhighrisepublichousingbuildings,andbuildnew affordablehousingaresupportedthroughmixedfinancings,includinglowincomehousingtaxcredit partnerships,bondandmortgagefinancing,federalHOPEVIandChoiceNeighborhoodInitiativefunds, andfederal,stateandlocalgrants.

OnceadoptedbytheBoard,theannualbudgetsareimplementedandmonitoredbyalldepartments oftheAuthority,withsupportfromtheFinanceandAdministrationDepartmentandtheAsset ManagementDepartment.Monthlyreportsonbudgetversusactualperformancearereviewedbythe BudgetOfficeandtheDepartments.Quarterlybudgetandportfolioreviewsareconductedatthe managementandexecutivelevels,andbudgetrevisionsandactionstoaddressvariancesagainst budget,asneeded,aretakentoensureappropriatebudgetcontrol.

TransmittalLetter 2015ComprehensiveAnnualFinancialReport EconomicConditionsandFinancialOutlook

StateandLocalEconomy–ForecastHighlights(1): TheWashingtonandSeattleareaeconomiescontinuetogrowandinmostareashaveregainedthe lossesoccasionedbytheGreatRecession.Todate,recoveryofthelocalandstateeconomieshave outpacedthenation’s,butthereareclearsignsofdecelerationinWashington’sgrowthrate.The PugetSoundEconomicForecasterprovidesthisperspectiveontheStateandPugetSoundforecastsfor thefuture:

“Atthispoint,thereislittlereasonforalarm.Similartoourforecastsofthepasttwo years,wearepredictingthatthePugetSound economywilldecelerate,causingthe regionalandthenationalgrowthratestoconverge.Thisimpliesthat ifthenationavoidsa recessionoverthenextfew years—alikelyprospectgivenitsslowrateofrecovery,sowill theregion.” So,boththeregionalandthestateforecastsreflectcontinued,butslowergrowthovertheperiod 2016through2021inmostindicators.HereareseveralkeyindicatorsfromtheWashingtonState EconomicForecastCouncilontheconditionandprognosisfortheeconomy:

TheWashingtoneconomyisexpandingatasolidpace.Inrecent monthsWashington employmenthasgrownfasterthanexpected.In2015,employmentgrowthinthestatewas 2.8%,thehighestratesince2006.Theemploymentgrowthforecastisunchanged atanaverage rateof1.1%peryearthrough2019withstronger growthin2016offsetbyweakergrowthin 2017and2018.InthePugetSoundregion,aftergrowingat2.9%in2015,employmentgrowth isexpectedtoslowto1.8%in2016. Washingtoninitialclaimsforunemploymentinsurancehavefallen sharplyinearly2016, reachinganewpostrecessionlow.BasedonthefourweekaverageendingFebruary20,2016 of6,865,unemploymentclaimshavefallen59% sincethepeakinearly2009. TheStateunemploymentratein2015was6.0%andisexpectedstatewidetoimproveto5.3% in2016.InthePugetSoundregion,theunemploymentratereachedalowof4.1%inAugust 2015andclimbedto5.2%inDecember2015,principallyasaresultofreductionsin constructionemploymentasthehotmultifamilybuildingboomslowed. In2015,averageweeklyearningsgrowthwas4.6%comparedto2.5%ayearearlier.Private sectoraveragehourlyearningsinthetwelvemonths endinginDecember2015wereup4.1% overtheprevious twelvemonthperiod.Ayearagothecomparablerateofincreasewasonly 2.7%. Washington’s personalincomegrewata5.2%rateinthethirdquarter2015,matchingthe nationalaveragepersonalincomegrowthrate.TheStateforecastforpersonalincomegrowth

1 This economic outlook information is significantly informed by the “Puget Sound Economic Forecaster” produced by Conway Pedersen Economics, Inc. and by the “Washington Economic and Revenue Forecast” preparedbytheWashingtonStateEconomicandForecastCouncil.

TransmittalLetter 2015ComprehensiveAnnualFinancialReport in2016is4.2%.InthePugetSoundforecast,the2015growthrateof5.3%isexpectedin2016 toslowto4.3%. TheSeattleConsumerPriceIndex(CPI)hascontinuedtobebelow2.0%forthelastthree years,andwithlowenergypricesexpectedtocontinue,theforecastfor2016isthattheCPI willbe1.4%to1.7%andwillremainbelow2%in2017.

Inanutshell,wecanexpectfortheeconomytocontinueintheStateandPugetSoundregiontogrow, butnotattheratesofthelastcoupleofyears.Economistsgenerally,however,seethedownsiderisks fortheirforecastsasgreaterthantheupside.ThisispartlyduetothefactthattheU.S.economy’s growthperiodhasreached150months,thelongestsustainedexpansionfortheU.S.economy.They seemtotakesomecomfortinthefactthattherecoveryhasbeensogradual,buteventuallythey expectachangeintheeconomiccycleandtheyseebothinternationalanddomesticcircumstances thatcouldtriggeradownturn.

EconomicconditionsaffecttheAuthority’sperformanceinanumberofways: First,webenefitfromlowinflation,asourcostsofdoingbusinessdonotescalateasrapidlyas theymightotherwise. Second,asanorganizationwithasignificantrealestatedevelopmentportfolio,wearesubjectto thesamevolatilityofthehousingmarketasareprivatedevelopers.Wehaveexperiencedboth sidesofthatcoin–wehaveexperiencedinrecentyearsescalationofconstructioncostsinexcess ofinflationduetothehotconstructionmarketinmultifamilybuilding;and,wehavebenefited fromlandpriceappreciationinsellingpropertyfordevelopmentbytheprivatemarketinour mixedincomecommunities. Third,wecontinueinamarketwhereworkableresidentsfacenumerousbarrierstoemployment andadvancement.Formanyoftheseresidents,thereislittlerealitytothe“economicrecovery”, asithasnotyetincludedopportunitiesformanyofthem.Thatsaid,wehaveheardinthelast yearincreasingreportsofgreateremployment,especiallyinourfamilycommunities. Finally,themostseriousimpactofthelocaleconomyonlowincomerentersinthetighthousing marketisthattheyarepricedoutofthemarketwithrentsescalatingnearly17%from2014to 2016andvacancyratesaresolowthesupplyofaffordablehousingintheprivatemarket,even witharentalassistancevoucher,leadstoacurrent50%rateoffailuretoleaseamongourvoucher holders,evenaftersixmonthsofshoppingforahome.

FederalFunding–StatusandOutlook TheAuthorityreliesonfederalfundingforabout60percentofouroverallsourcesandapproximately 7075percentofitsoperatingandrentalassistancefunds.Consequently,federalbudgetdecisions playamoredirectroleinSHA’songoingeconomicconditionthandolocaleconomicconditions.

SincetheBudgetControlActof2011,thefederalbudgetaryfocushasbeenondeficitreduction throughreducingfederalbudgetappropriations,especiallyfordiscretionarydefenseandnondefense programs.And,withthe2012failureoftheCongressionalSuperCommitteetoreachabipartisan agreementonhowtoachieveasecond$1trillionsavingsovertenyearsinthefederalbudgettoadd tothe$1trillionenactedin2011,theautomatictriggerofsequestrationwentintoeffect.Initsinitial year,thismeanta5percentreductionontopofthebudgetcutspassedbyCongress.

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TransmittalLetter 2015ComprehensiveAnnualFinancialReport Attheendof2013,thetwohousesofCongressagreedontheBipartisanBudgetActof2013,which providedatwoyearreprievein2014and2015fromsequestrationandtherestorationofabout50 percentofthesequesteredcuts.TheagreementscontainedintheBipartisanBudgetActusheredinat leastashorttermsenseofstabilityinthefederalbudgetprocess.AsecondBipartisanBudgetActof 2015continuedtherespitefromsequestrationandweactuallysawincreasesinseveralpartsofthe DepartmentofHousingandUrbanDevelopment(HUD)budgetwiththe2016appropriation.

Sofarin2016,Congresshasbeenstalledonthe2017BudgetAppropriations,particularlyintheHouse, wheretheFreedomCaucushaspreventedavoteonaBudgetResolutionbasedontheiroppositionto theBudgetControlActof2015andthespendingceilingsitallowed.Theyproposemuchmoreserious cuts,particularlytothenondefensediscretionaryspending.ItappearsunlikelyCongresswillbeable todomorethanpassaContinuingResolutionbeforethefiscalyearbeginsOctober1,2016.Whilethe federalbudgetprospectsareuncertainandgenerallynegativefordiscretionarydomesticspending, includinghousing,politicsofbothPresidentialandCongressionalelectionswillultimatelydictatethe outcomeswemightexpectintheFederalBudgetdecisionsoverthenexttwoyears.

RenewaloftheMTWProgramContracts

Lastyearatthistime,wereportedabouttheuncertainfuturefortheMovingToWork(MTW) demonstrationprogramandthecontractsofthe39MTWPublicHousingAuthorities.Thevastbulkof uncertaintywasremovedinDecember2015withtheinclusionoflanguageintheAppropriationsAct directingHUDtorenewthecontractsthrough2028onthesametermsandconditionsoftheexisting contracts.TheappropriationslanguagealsoclarifiedthatMTWagenciescouldretainfourmonthsof operatingcostsasareservethatcouldnotbesweptwithoutCongressionalauthorization;thebillalso directedtheexpansionoftheMTWProgramby100publichousingagenciesoverthenextsevenyears.

WhiletherearestillprogramissuesremainingtobenegotiatedbetweenHUDandtheMTWagencies, thethreatofradicalchangetotheprogramhasbeenremovedandtheextensionofcontractsthrough 2028secured.

FinancialManagementandOversight

TheAuthority’smanagementisresponsibleforestablishingandmaintaininganinternalcontrol structuredesignedtoensurethattheAuthority’sassetsareprotectedfromloss,theftormisuse,and thatrepresentationoftheAuthority’sassetsanddeferredoutflows,liabilitiesanddeferredinflows, andnetpositionareaccuratelyreflectedontheAuthority’sfinancialstatements,inconformancewith U.S.generallyacceptedaccountingprinciples.Theinternalcontrolstructureisdesignedtoprovide reasonable,butnotabsolute,assurancethattheseobjectivesaremet.Theconceptofreasonable assurancerecognizesthatthecostsandbenefitsrequireestimatesandtheexerciseofjudgmentsby management.

Asarecipientoffederalandstatefinancialassistance,theAuthorityisalsoresponsibleforensuring thatanadequateinternalcontrolstructureisinplacetoensurecompliancewithapplicablelawsand regulationsrelatedtothoseprograms.Theinternalcontrolstructureissubjecttoperiodicevaluation bymanagementandthecompliancestaffoftheAuthority.

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TransmittalLetter 2015ComprehensiveAnnualFinancialReport SingleAudit IncompliancewiththeSingleAuditActAmendmentsof1996,testsaremadetodeterminethe adequacyoftheAuthority’sinternalcontrolstructure,includingthatportionrelatedtofederal financialassistanceprograms,aswellastodeterminewhethertheAuthorityhascompliedwith applicablelawsandregulations.TheAuthority’ssingleauditwascarriedoutbythenationalpublic accountingfirmofKPMGLLP.FortheaudityearendedDecember31,2015,KPMGLLPissuedno SingleAuditfindingsofsignificantdeficienciesandtherewerenosignificantdeficienciesreportedby KPMGLLPinconnectionwiththeirauditoftheAuthority’s2015FinancialStatements.

BudgetingControlandProgramAccountability TheobjectiveofbudgetarycontrolsmaintainedbytheAuthorityistoensureappropriatefinancial managementbyAuthoritydepartmentmanagersofactualexpendituresinrelationtotheapproved budget.TheFinanceandAdministrationDepartmentprovidesquarterlyreportstomanagersand executivestaffonthestatusofthebudgetandonanyactionsneededtoensurethattheAuthority operateswithintheadoptedbudget.Additionally,monthlyfinancialreportscomparingactual revenuesandexpensestobudgetareprovidedtoDepartmentandprogrammanagerstoassistthem withtimelyinformationformanagingtheirbudgetsfromtheindividualcommunityleveltotheoverall managementlevel.

Anintegralpartofbudgetcontrolistoreviewneedsforandimpactsofbudgetrevisionsfollowing adoptionoftheannualbudgetbytheBoard.Thesereviewsoccuratleastquarterlyandwhere adjustmentsarejustified,theadoptedbudgetisrevised.Therearealsoquarterlyreviewsofall HousingPortfoliosbytheAuthority’sAssetManagementCommittee.Duringthesesessionsbudget statusisreviewed;vacanciesandrentcollectionstrendsarenoted;unitturnovercostandlengthof timetoreturnavacatedunittoanewleasearereviewedagainststandardsandpastperformance, andgeneralconditionsofthepropertyandwelfareoftheresidentsarepresentedbyproperty managementstaff.Followupactionsresultingfromthesequarterlyportfolioreviewsareassignedto operatingdepartments,thebudgetoffice,ortheassetmanagementdepartment.

FinancialPolicyOversight TheAuthorityhastwoongoingCommittees–oneinternalandoneaBoardCommittee–thatprovide financialoversight.TheBoardCommitteeistheAuditCommitteeconsistingoftheChairoftheBoard, twootherBoardmembers,andtwooutsideindependentnonvotingmemberswithexpertisein financeandaccounting.AllmembersareappointedbytheBoardchairandservestaggeredtermsof threeyears.TheCommitteemeetstwotofourtimesayear,asneeded,toconductentrymeetings withtheindependentauditorandtheStateAuditorandtohearreportsandfindingsoftheAuditors. TheAuditCommitteereportsitsactivitiestothefullBoard,alongwithanyconclusionsor recommendationstheyhavetocontinuetostrengthentheAuthority’sfinancialmanagement. Internally,theAuthorityhasaFinancialPolicyOversightCommitteethatmeetsmonthlyandis comprisedoftheExecutiveDirector,theDeputyExecutiveDirector,theDirectorofHousing Operations,theDirectorofDevelopment,theDirectorofHousingFinanceandAssetManagement,the ChiefFinancialOfficer(wholeadstheCommittee),theController,andtheBudgetManager.

TheFinancialPolicyOversightCommitteeischargedwithoverseeingthefinancialconditionsand financialmanagementdecisionsoftheAuthorityandensuringthatcurrentorimpliedfinancial ix

TransmittalLetter 2015ComprehensiveAnnualFinancialReport commitments/conditionsreceivethefullscrutinyoftheAuthority’stopmanagersandexpertlinestaff. Thiscommitteehasenhancedagencywideconsiderationofanddecisionsoncreditanddebt management;developmentopportunities,projectselection,andfinancingplansandpolicies;criteria forsolicitingandselectinglimitedpartnersinlowincomehousingtaxcreditprojects;coordinationof timingonactions;planningandmonitoringofinterimfinancingrepaymentplans;managementofcash reserves;and,riskassessment.TheFinancialPolicyOversightCommitteealsoadministersthe Authority’spolicyonunrestrictedcashbalancesandunassignedcash(OperatingCashReserves),which wasadoptedbytheBoardofCommissionersinApril2011andrevisedinMay2013.

ComponentUnits:TheAuthorityhasseventeendiscretelypresentedcomponentunitsasof December31,2015.AstheAuthorityhasexpandeditsredevelopmentactivitiesusingmixedfinancing, componentunitshavebecomealargerandlargershareofourstrategyofprovidinglowincome housing.Attheendof2015,theAuthority’scomponentunitsrepresented50percentofallrental housingunitsoperateddirectlybytheAuthority. PrudentlyManagingAffordableHousingProperties StrongAssetManagement:TheAuthorityhascontinuedtotakeanactiveassetmanagement approachtomanagingitsproperties,treatingeachofthemasadistinctive“community”withthegoal ofefficientlyusingeachpropertytoitsfullestpotentialtowardmeetingourmission.Thismeansthe Authorityisactivelyreviewingitsexistingrealestateholdingstoensurethatallassetsaremanagedin acosteffectiveandefficientfashionandarecontributingtotheoverallmissionofcreatingand sustainingdecent,safe,andaffordablelivingenvironmentsforthelowincomepeopleofSeattle.As notedabove,theinternalAssetManagementCommitteewithmanagementrepresentativesfromall departmentsconductsquarterlyportfolioreviewswithpropertymanagersandbudgetandaccounting staff,andnotesissuesforfurtherdiscussionandreviewandcircumstancesrequiringcorrective measures.TheAuthority’sapproachisspelledoutinthe“LocalAssetManagementPlan”includedin theAuthority’sannualMTWPlan.

DiverseFundingandPartnerships:TheAuthoritywillcontinuetosupplementitstenantrental income,operatingrevenues,andHUDsubsidiesbyactivelycompetingforadditionalfederalfundsfor modernization,redevelopment,andresidentsupportactivities;byapplyingforlocalandstategrant opportunities;byexpandingpartnershipswithcommunityorganizationsandprivatefoundations,and bybuildingnewpartnershipswithschools,fromelementarythroughvocational/technicalcollegesto universities.TheAuthoritycontinuestocompetesuccessfullywhereverweseenewfundingor partnershipopportunities.

Wealsocontinuetoforgenewandstrengthenexistingpartnershipsaroundeducationalandjob trainingopportunitieswithfoundationsandschools.TheU.S.DepartmentofLaborthroughtheKing CountyWorkforceDevelopmentCouncilhasfundedatwoyearprogram–PathwaysOutofPoverty; thisgrantisdesignedtosupportlowincomepeopleingainingaccesstopreapprenticeship constructiontrainingandplacementintoconstructionjobs.Inaddition,weareusingthesegrantfunds tosupportparentengagementworkforYeslerparentssotheycanbettersupportandadvocatefor theirchildren’seducationalsuccess.WeareleveragingfundsfromHUD’sCNIYeslerTerracegrantfor partnershipswiththeschooldistrict,localsocialservicesandhealthcarenonprofits,highereducation institutions,andlocalandnationalfoundationsinprogramsofeducationalandeconomicopportunity

TransmittalLetter 2015ComprehensiveAnnualFinancialReport forlowincomeresidentsatYesler.Theseeffortswillbeevaluatedfortheireffectivenessasmodels thatmightbescaledupinSeattleandreplicatedelsewhere.

KeyPartnershipwithCityofSeattle:TheAuthorityworkscloselywiththeCityofSeattletoadvance theavailabilityoflowincomehousingintheCityandtoensureaccesstocriticalpublicservicesby thosecommunities.Wehaveworkedtogetheraspartnersinsuccessfullyfinancingthedevelopment ofourlowincomehousingtaxcreditproperties;incombiningCityhousinglevydollarswithHousing Authorityrentalassistancevouchersinordertoensurethatextremelylowincomepeoplehaveaccess toassistedhousing;we’vecooperatedinthedevelopment,rehabilitation,andoperationofthe SeattleSeniorHousingProgramforlowincomeseniors;and,we’veworkedwithboththeCityandthe Countyontheroutingandstationdesignsoflightrailandthestreetcarextensiontoensureserviceto SHA’sfamilycommunitiesinSoutheastSeattleand,mostrecently,withtheroutingofthestreetcar extensionthroughtheheartoftheYeslerTerraceTransformationPlanarea.Thestreetcarextension wasapublicinvestmentofmorethan$134millionandopenedin2014.

MajorandLongTermInitiative YeslerTerraceRedevelopmentInvestinginPeople,Neighborhood,andHousing YeslerTerraceisa30acresiteneardowntownSeattleinitiallydevelopedbySeattleHousingAuthority intheearly1940sasSeattle’sfirstpubliclysubsidizedhousing.Now,76yearslater,arevitalizedYesler Terraceisemergingasadynamic,vibrant,mixedincomecommunitythathonorstheneighborhood’s historyandculturalrichnesswhilecreatingsafe,healthyandsustainableaffordablehousing,new parksandopenspaces,increasedtransportationoptionsandenhancedeconomicopportunities. TheplanningforYeslerTerraceformallybeganin2006withthecreationoftheGuidingPrinciples, developedbytheYeslerTerraceCitizenReviewCommitteeandadoptedbytheSeattleHousing AuthorityBoardofCommissioners.TheGuidingPrinciplesestablishedthecorevaluesofsocialequity, oneforonereplacementhousing,environmentalstewardshipandsustainability,andeconomic opportunitythatstillguidetheredevelopmentprocesstoday. Overthelastfiveyears,theYeslerTerraceRedevelopmentprojectachievedseveralkeymilestonesto implementthevisionofanewYeslerTerracecommunity.TheUSDept.ofHousingandUrban Developmentgranted$30millionfromitsChoiceNeighborhoodsInitiativetotheSeattleHousing Authority.Thisfundingleveragesbothpublicandprivatesources,including$750,000receivedfrom theJPMorganChaseFoundationand$678,000fromtheKresgeFoundation.In2012theSeattleCity Councilunanimouslyadoptedanextensivelegislativepackagenecessarytoimplementthe redevelopmentofYeslerTerrace.TheCooperativeAgreement,oneimportantelementofthe legislativepackage,committedupto$10.92millionofCityfundingtothedevelopmentofaffordable housingandparks.Since2012,theCityhascommittedanadditional$7milliontosupportupgrade andexpansionofthesewersystematYesler,constructionofthe10thAvenueHillclimbthatconnects YeslerTerraceandLittleSaigon,thenewneighborhoodPark,andotherimportantneighborhood improvements. xi

TransmittalLetter 2015ComprehensiveAnnualFinancialReport Withcommitmentoffundingfortheredevelopmentandtheextensiveplanningcompleted,Seattle HousingAuthoritymovedforwardwithdesign,construction, andimplementationofkeyactivitiestodevelopanewYesler Terracethatishealthy,livable,affordable,viable,andgreenin allfacetsofdevelopment.Extensiveworkwascompletedin 2015toreachfuturehousingproductiontargets,meet educationandeconomicopportunitygoals,andprovidenew neighborhoodservicesandamenities.Highlightsofmajor accomplishmentsinclude: AnoverheadviewofKeberoCourt,103new CompletionofKeberoCourt,103newaffordable unitsofaffordablehousing. apartmentslocatedat1105EastFirStandwelcomingof67 familieswhoformerlylivedintheoriginalYeslerTerracehomesand36householdsnewtoYesler Terrace. Completionof120affordableandmarketrateapartmentsatAnthemon12thApartments(by SpectrumDevelopmentSolutions). Completionandassignmentof28 gardeningplotsatHoriuchiParkPPatch. Constructionprogresson: o 10thAveSHillclimb,Sewerbackbone, andstreetandutilityinfrastructure (finishedHillclimbopenedtoacclaim inApril2016); o 83newaffordableapartmentsat RavenTerrace(820YeslerWay)and leasedupbytheendofthe1stQ2016. o 111newaffordableapartmentsatHoa MaiGardens(22110thAveS) In2015,theconcretestairsandrampswerepouredforthe 10thAveSHillclimb. underconstructiontoopeninearly2017. Relocationprogress: o 51familieswereassistedinrelocating,whichcompletedPhase3ontime. o UponcompletionofKeberoCourt,the166householdswhohadmovedfromYeslerTerrace sincetheprojectbeganwereinvitedtousetheirRighttoReturnwithmovingassistance. o 12residentsreturnedtoYeslerTerraceafterpreviouslyrelocatingaway,withmovingexpenses paidbySHA. Thirteen(13)YeslerTerraceresidentsparticipatedintheESL/JobShadowingProgram, implementedinpartnershipwiththeCityofSeattle(includingOfficeofImmigrant&Refugee Affairs,Parks),SeattleCentralCollege,HarborviewandSwedishmedicalcenters. Completionofthe2015annualHealthNeedsAssessmentconductedbyNeighborcare.97%ofthe currentonsiteYeslerTerraceresidentsindicatedtheynowhavehealthinsurance,and92%said theyhaveaprimaryhealthcareprovider. YeslerTerracesitebasedTRACAssociatesmade52jobplacementsofYeslerTerraceresidents, withanaveragehourlywageof$12.32. xii

TransmittalLetter 2015ComprehensiveAnnualFinancialReport Approximately100YeslerTerracechildrenandyouthparticipatedinsummeracademicand enrichmentactivitiesledbyvariousorganizations. IncreasedattendanceratesforYeslerTerracechildreninallgradesatBaileyGatzert,except secondgrade.AllYeslerstudentcohortshavemadesteadyprogressinattendanceeachyearsince 2010. ThepercentofstudentsreadyinallsixKindergartenReadinessdomainsincreasedfrom20%to 50%. Twentyfive(25)YeslerTerracefamiliescompletedtheParentChildHomeProgram,implemented byNeighborhoodHouse. FundingtheYeslerTerraceRedevelopmentProject TheYeslerTerraceRedevelopmentProjecthassuccessfullyleveragedpublicandprivatefunding. Todate,fundshavebeencommittedfromthefollowingsourcestosupportthemanyfacetsof YeslerTerraceRedevelopment: 2011 HUDChoiceNeighborhoodsInitiative$10.27million HUDCommunityFacilitiesCapitalFund(CFCF)$3.1million 2012 HUDChoiceNeighborhoodsInitiative$19.73million JPMorganChaseFoundation$750,000 SeattleFoundation$25,000 BillandMelindaGatesFoundation$120,623 CityofSeattle,ParksandGreenSpacesLevy$3million CityofSeattle,CommunityDevelopmentBlockGrant$1,045,000 CityofSeattle,OtherCityHousingFunds$6,575,000 CityofSeattle,HomeWiseProgram–upto$300,000 2013 HUDPublicsafetyenhancementgrant$80,000 JPMorganChaseFoundation$60,000 GatesFoundation$30,000 LowIncomeHousingTaxCreditEquity$11,968,000 2014 LowIncomeHousingTaxCreditEquity$11,250,000 CityofSeattle,CommunityDevelopmentBlockGrant$500,000 CityofSeattle,OfficeofHousing–$1,300,000 CityofSeattle,DepartmentofTransportation–$500,000 CityofSeattle,PublicUtilities$3,000,000

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TransmittalLetter 2015ComprehensiveAnnualFinancialReport TheBoeingCompany$25,000 2015 LowIncomeHousingTaxCreditEquity$21,900,000 TheKresgeFoundation$678,000 YeslerTerraceNextSteps–2016andBeyond ThefundingleveragedtodatewillallowSeattleHousingAuthoritytomoveforwardwithdeveloping affordablehousingforavarietyofincomes,completethenecessaryinfrastructureworkandutility replacements,andprovideimportantamenitiesandservicestothecommunity.Communitymembers willhaveongoingopportunitiestoprovideinputastheplanningandimplementationprocess progressesontheredevelopmentandcontinuityofsupportiveservices.Theyear2016willbe significantinthatrelocatedresidentswillbewelcomedintothesecondnewbuildingatYeslerTerrace andimportantserviceswillcontinuetobeofferedtocommunitymembers.Theactivitiesplannedfor 2016include: Welcomingof83newhouseholdstoRavenTerrace. Openingofthe10thAveSHillclimb,astaircase,accessibleramp,andplazatoconnectYesler TerraceandtheLittleSaigonneighborhoods. ContinuingconstructionofHoaMaiGardens(111apartmentsand20communitygardening plots). StartofconstructionforVulcanRealEstate’sfirstaffordableandmarketratebuildingtobe locatedalongYeslerWayandBroadway. DesignandpermittingofRedCedar,thenextSHAaffordablehousingbuildingwith125units. Completionofsegmentsofthenewgreenstreetloop(EFirStand10thAveS). OfferingtenYeslerTerraceyouthanopportunitytointernforthesummeratourvarious contractorandpartnerofficestolearnmoreaboutredevelopmentandreceiveapaidstipend. Developmentofnewprogramstoengagethecommunityofallagesintemporaryand permanentartworktobecreatedfortheneighborhood. OpeningoftemporarycommunitygardensintheblockalongBorenAvenueandEYeslerWay. SelectionofpartnerstodevelopcommunityusesforthegreenspacenexttoInterstate5. Planforsummerprogrammingwitheducationalpartnerstoserveover100youth. ImplementationofthecontractwithTherapeuticHealthServicestoprovidesocial/emotional support,academic,andwraparoundservicesforYeslerTerracestudentsattendingGarfield HighSchool. ContinuationofjobplacementsatYeslerTerrace. ContinuationofworkwithemployerstohireYeslerTerraceresidentsattendingtheIndustrialSewing Class. NeighborcareHealthwillcontinuetoworkwithresidentsonhealthrelatedactivities.

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TransmittalLetter 2015ComprehensiveAnnualFinancialReport Yesler Terrace redevelopment will gain added momentum in 2016 as SHA’s replacement housing constructionwilladdRedCedartoHoaMaiasactiveconstructionin2016andVulcanwilladditsfirst marketrateandworkforcehousingbuildingtotheactiveconstructionmix.Thedreamoftheoriginal guidingprinciplesiscomingtorealitydaybyday.

AwardsandRecognition

During2015,theHousingAuthorityoftheCityofSeattleanditsresidentsreceivedorcontinued distinctionsandrecognitions,including: RainierVistaresidentboundforStanfordUniversityOriginallyfromKenya,MohamedAden,a GarfieldHighgraduate,hasearnedhiswaytoaspotatStanford,whereheplanstostudy humanities.Adentookonmanyvolunteerdutieswhileinhighschool,whichhebelieveshelped himstandoutamongcollegeapplicants.Heplanstoworkinthenonprofitworldorattendlaw schoolaftergraduation. ResidentswinTechnologyGrantsTheCityofSeattle2015TechnologyMatchingFundawarded grantstoresidentcomputerlabsintheHighRisesandSeattleSeniorHousingProgramsatDenny Terrace,JeffersonTerrace,StarCenteratCenterPark,WestwoodHeightsandBarton Place.ResidentsworkwithCommunityBuilderstopreparethesegrantapplicationsandawardees arerecognizedwithareceptionbytheMayorandCityCouncil.TheTechnologyMatchingFund seekstoimprovedigitalequitybyconnectingpopulationsthathavelimitedaccesstotechnology. HCVStaffMeritAwardOnJuly30,2015,SHAstaffacceptedaNationalAssociationofHousing andRedevelopmentOfficials(NAHRO)AwardofMeritinHousingandCommunityDevelopment fortheHCVResourceDevelopmentPlan.TheNAHROAgencyAwardsProgramwascreatedtogive nationalrecognitiontotheachievementandinnovationandtocreatearesourcebankof informationonsignificant,innovativeactivitiesperformedbyhousingagenciesacrossthecountry. FinancialExcellence/AwardSHAwasawardedfortheeighteenthyearinarow,aCertificateof AchievementforExcellenceinFinancialReportingbytheGovernmentFinanceOfficersAssociation (GFOA)oftheU.S.andCanadaforthefiscalyearendingDecember31,2014fortheSeattle HousingAuthorityComprehensiveAnnualFinancialReport.ACertificateofAchievementisvalid foraperiodofoneyearonly.Webelieveourcurrentreportcontinuestoconformtothe CertificateofAchievementprogramrequirements,andwearesubmittingittotheGFOAfortheir assessmentagainthisyear. CreditRatingRenewedSeattleHousingAuthority’sentitycreditratingof“AA”fromStandard andPoor’s(S&P)undertheirinternationalratingcriteriaforhousingauthorities/socialhousingin theU.S.andEuropewasagainconfirmedwithastableoutlookin2015.DoubleAisthehighest U.S.housingauthorityratingbyS&Panditisheldbyfivehousingauthorities,includingSHA. SHARemainsHUDHighPerformerSHAwasdesignatedahighperformingagencyin1993under HUD’sPublicHousingManagementAssessmentProgram(PHMAP).Asaresult,theAuthority becameoneofsixoriginalparticipantsundercontractwithHUDinitsMovingtoWork(MTW) DemonstrationProgram.SHAretainedthisdesignationin2015andwillsignanextensionofits MTWContractto2028inMay2016. ArtMasterPlanatYeslerReceivesKeySupportSHAhasreceiveda$678,000threeyeargrant fromTheKresgeFoundationtosupportanartmasterplanaspartoftheredevelopmentofYesler xv

TransmittalLetter 2015ComprehensiveAnnualFinancialReport Terrace.SHAwillusethefundingtoretainartiststoinfusethenew,mixedincomecommunity withmultipleworksofart,andtosupportcollaborativeartisticprojectsandprograms,working withcommunitymembersandteamsinvolvedwithdesignofstreets,pathways,parksandother publicspaces.ThegrantwillalsoenableSHAtoworkwithartisanslivingintheYeslerTerrace communitytoenhancetheirskillsandtranslatethemintoworksforpublicdisplayoravailablefor salelocally. Asapartofthethreeyeargrant,SHAwillpartnerwithSeattleUniversity(SU)ontwoprojects.An existingSUcoledprogramthattrainsyouthinfilmmakingwillbeenhancedtoincludeafocuson youthatYeslerTerracedocumentingthephysicalandsocialtransformationoftheirhistoric community.Inaddition,ateamoffacultyandstudentsfromSUwillevaluatetheoverallimpactof theartisticeffortsatYeslerTerrace,documentthem,andcreatewaystosharetheassessment withotherhousingauthoritiesandwithartsorganizations. GatesFoundationContinuesSupportforSHA:SeattlePublicSchoolsPartnershipIn2015,the BillandMelindaGatesFoundationawardedSHAagrantfor$300,000tocontinueworkwith SeattlePublicSchoolstodevelopandimplementamultiyearEducationInitiativefocusedon improvingtheeducationaloutcomesforSHAservedyouth.Thisinvestmentbuildsonthework alreadyhappeningintheYeslerTerraceneighborhoodandalsoexpandsthescopeacrossallofour housingportfolios. ChaseFoundationRenewsSupportforWorkforceOpportunitySystemsPilotSHAwasawarded $375,000aspartofthesecondyearofalargerinvestmentfromtheJPMorganChaseFoundation intheWorkforceOpportunitySystempilot.ThispilotisapartnershipamongSHA,theSeattleKing CountyWorkforceDevelopmentCouncil,theSeattleCollegeDistrict,SeattleJobsInitiativeandthe FinancialEmpowermentNetworktotestandscaleeffectivewaystopromoteandincreaseself sufficiencyamongSHA’sunemployedandunderemployedworkableresidents. HUDGrantSupportsSelfSufficiencyWorkHUDhasawardedSHAagrantof$410,500forour FamilySelfSufficiencyprogram.Underthisprogram,grantfundedcasemanagersworkwith publichousingandHousingChoicevouchertenantstodevelopandmeetselfsufficiencygoals whicharesupportedbyindividualsavingsaccountssubsidizedbySHA. Acknowledgments ThepreparationofthisreporthasbeenaccomplishedthroughthehardworkoftheFinance DepartmentaccountantsandthesupportofotherstaffmembersthroughouttheSeattleHousing Authority.AspecialthankstoJanetHayes,SeattleHousingAuthority’sController,whosetalents, dedication,andcommitmenttoaccurateandthoroughfinancialreportingandwhoseoversightof stronginternalcontrolsarelargelyresponsiblefornearlytwodecadesofAwardsofExcellencein FinancialReportingfromtheGovernmentFinanceOfficersAssociationandconsistentlyunmodified opinionsonSHA’sFinancialStatementsbyourindependentauditors.Wewishtothank,aswell,the managementandstaffofKPMGLLPandFrancis&CompanyPLLCwhoprovidedthenecessary professionalauditingservicesandtechnicalassistanceinconductingtheindependentauditofthe Authority.

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THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Principal Officials

Commissioners as of December 31, 2015

Name Term expires Nora Gibson, Chair* March 20, 2015 Deborah Canavan Thiele, Vice Chair March 20, 2017 Emily Abbey, Commissioner March 20,2019 Aser Ashkir, Commissioner* October 1, 2014 Kollin Min, Commissioner March 20, 2016 Zachary Pullin, Commissioner December 1, 2018 Jermaine Smiley, Commissioner December 1, 2018

*Although the terms expired for Nora Gibson and Aser Ashkir, they continue to serve until the Mayor of the City of Seattle appoints new commissioners in 2016.

Administrative Staff Andrew Lofton, Secretary-Treasurer/Executive Director

Shelly Yapp, Chief Financial Officer

Janet Hayes, Controller

xviii THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Organization Chart

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Government Finance Officers Association Certificate of Achievement for Excellence

in Financial Reporting Presented to The Housing Authority of the City of Seattle Washington

For its Comprehensive Annual Financial Report for the Fiscal Year Ended

December 31, 2014

Executive Director/CEO

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xxi

THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON

Financial Section

Section II

KPMG LLP Suite 2900 1918 Eighth Avenue Seattle, WA 98101

Independent Auditors’ Report

The Board of Commissioners The Housing Authority of the City of Seattle, Washington

Report on the Financial Statements We have audited the accompanying financial statements of the business type activities (primary government) and the aggregate discretely presented component units of The Housing Authority of the City of Seattle, Washington (the Authority) as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the aggregate discretely presented component units of the Authority, which represent 100% of the total assets, total liabilities, total net position, total revenues and total expenses of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinions on the basic financial statements, insofar as they relate to the amounts included for the discretely presented component units, is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

1 KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinion In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business type activities and the aggregate discretely presented component units of The Housing Authority of the City of Seattle, Washington, as of December 31, 2015 and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with U.S. generally accepted accounting principles.

Other Matters Required Supplementary Information

U.S.generally accepted accounting principles require that the management’s discussion and analysis on pages 4 through 15, and the required supplementary information related to the pension plans on page 84, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary and Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements. The cost certificates for projects WA19URD001I108, WA19C001501-10, WA19URD001I199, and WA19URD001I100, and the introductory and statistical Sections are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The cost certificates and introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Emphasis of Matter As discussed in note 1(c) to the financial statements, effective January 1, 2015, the Authority adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Financial Reporting for Pensions – an Amendment of GASB No. 27, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an Amendment of GASB Statement No. 68. This new accounting guidance requires governments providing defined benefit pensions to their employees to recognize their proportionate share of the pension plan’s net pension liability or net pension asset, as well as recognizing most changes in the net pension liability within pension expense. Our opinion is not modified with respect to this matter.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 18, 2016, on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.

Seattle, Washington May 18, 2016

THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Overview of the Financial Statements The Housing Authority of the City of Seattle, Washington (the Authority) is pleased to present its basic financial statements as of and for the year ended December 31, 2015, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). GAAP requires the inclusion of three basic financial statements: the statement of net position (balance sheet); the statement of revenues, expenses, and changes in net position; and the statement of cash flows. In addition, GAAP requires the inclusion of this management’s discussion and analysis (MD&A) section as required supplementary information.

The basic financial statements provide both long-term and short-term information about the Authority’s overall financial condition. The basic financial statements also include notes that provide additional information and more detailed data.

As provided for under GAAP, the Authority uses the accrual basis of accounting to prepare its basic financial statements. Under this basis of accounting, revenues are recognized in the period in which they are earned and expenses, including depreciation and amortization, are recognized in the period in which they are incurred. All assets and liabilities associated with the operation of the Authority are included in the statement of net position.

This section of the Authority’s annual financial report presents our discussion and analysis of the Authority’s financial performance during the year ended December 31, 2015, with comparative data for the year ended December 31, 2014. Please read this section in conjunction with the transmittal letter in the introductory section of this report and the Authority’s basic financial statements, which immediately follow this section.

Financial Highlights Assets and deferred outflows of resources of the Authority exceeded liabilities and deferred inflows of resources at December 31, 2015 by $480.9 million (net position), representing an increase of $33.0 million over 2014. Unrestricted net position of $243.7 million at the end of the year represents committed, assigned, and unassigned funds that may be used to meet the Authority’s ongoing obligations. Unrestricted cash and investments makes up $92.4 million of this net position, which reflects $47.8 million in longer term commitments adopted by the Board of Commissioners, $3.2 million in assigned funds designated by the Authority’s Financial Policy Oversight Committee, and $41.4 million in unassigned funds that make up the Authority’s Operating Reserves. By Board policy, the Operating Reserve is to be maintained at a minimum of one month and a maximum of six months of average monthly operating expenses plus 1/12th of principal debt service requirements. The Authority’s Operating Reserve at the end of 2015 represented approximately two months and 17 days (based on 20 business days in the month) of average monthly expenses and principal debt service. Total net position increased by $33.0 million, which is an increase of 16.6% over the 2014 increase in net position of $28.3 million. Operating revenues increased by $13.6 million, which was offset by an increase in operating expenses of $5.6 million and a reduction in capital contributions of $8.1 million compared to 2014. Also, nonoperating expenses decreased by $4.8 million compared to 2014.

4 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

The Authority’s current ratio that measures liquidity decreased during the year from 4.19 to 3.81. Current assets increased by $13.4 million as a result of higher cash and investments balances as well as increases in receivables from the Yesler Terrace development related component units. Current liabilities increased by $5.8 million. Although there were payoffs on short term borrowings of $1.5 million, accounts payable to vendors increased by approximately $4.0 million primarily due to Yesler Terrace related construction payables at year end. In addition, the current portion of long term debt increased by $2.1 million largely because of a bond refunding and subsequent payoff in January of 2016 for $2.5 million. Long-term notes receivable increased from $214.8 million to $220.7 million. The Authority has made loans to other low-income housing providers and to its component units that are redeveloping housing communities under the HOPE VI Redevelopment program and the Choice Neighborhoods Initiative. The largest change in long-term notes receivable from 2014 to 2015 resulted from the additions of loans made to limited partnerships for developments at Yesler Terrace and Leschi. The Authority’s total debt decreased from $117.3 million to $107.5 million during the current reporting period. The reduction stemmed primarily from payoffs of short-term borrowings and homeWorks phase I bonds. As a result, the percentage of total debt to net capital assets decreased from 39.2% at December 31, 2014 to 35.1% at December 31, 2015.

Financial Analysis Statement of Net Position The statement of net position presents the assets and deferred outflows of resources, liabilities and deferred inflows of resources, and net position of the Authority at the end of the fiscal year. The purpose of the statement of net position is to give the financial statement readers a snapshot of the fiscal condition of the Authority as of a certain point in time. It presents end-of-year data for assets, liabilities, and net position (assets minus liabilities). Also shown is the sum of total liabilities and net position, which equals total assets.

Total assets of the Authority at December 31, 2015 and 2014 amounted to $685.0 million and $658.9 million, respectively, an increase of approximately 4.0%. The significant components of current assets are short-term investments, receivables from component units, and restricted cash. The significant components of noncurrent assets are long-term investments, capital assets, receivables from component units, and notes receivable. Capital assets include land, land improvements, leasehold improvements, structures, construction in progress, and equipment. All capital assets except for land and construction in progress are shown net of accumulated depreciation. The principal changes in assets from December 31, 2014 to December 31, 2015 were increases in current assets, capital assets, and long-term notes receivable. Increases in cash and investments resulted from additional HUD funding.

Total liabilities of the Authority were $203.1 million and $203.0 million at December 31, 2015 and 2014, respectively, representing a slight increase. Current liabilities include accounts payable, accrued liabilities, unearned revenue, current portion of long-term debt, and short-term borrowings. Current liabilities have increased primarily due to the increases in vendor payables as noted above. Noncurrent liabilities are primarily

5 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

made up of the long-term portion of the notes and bonds payable. Noncurrent liabilities decreased by approximately $5.6 million primarily as a result of decreases in long-term borrowings.

Deferred outflows of resources in the amount of $3.2 million and deferred inflows of resources in the amount of $4.2 million were established in 2015 as a result of the adoption of Government Accounting Standards Board (GASB) Statement No. 68, Financial Reporting for Pensions – an amendment of GASB No. 27, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an Amendment of GASB Statement No. 68, which require governments participating in pension plans for their employees to record their share of net pension liabilities. The deferred outflows of resources primarily relate to contributions made by the Authority subsequent to the measurement date of the collective net pension liability, and the deferred inflows of resources primarily relate to the difference between projected and actual earnings on plan investments. Fiscal year 2015 financial results reflect application of the accounting changes required by Statement No. 68, which have also been been applied to fiscal year 2014 in order to make it comparable to the current year.

Net position represents the Authority’s equity, a portion of which is restricted for certain uses. Net position is divided into three major categories. The first category, net investment in capital assets, represents the Authority’s equity in land, structures, construction in progress, and equipment, net of related capital debt outstanding. The next net position category is restricted net position; this shows the amounts subject to external restriction, which is primarily amounts reserved to service debts until they mature. The last category is unrestricted net position; these funds are available to use for any lawful and prudent purpose of the Authority. Unrestricted net position increased by 11.8% during the year from $218.0 million to $243.7 million. This was primarily the result of increases in operating revenues and reductions in non-operating expenses.

6 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Condensed Statement of Net Position (In thousands) December 31 2015 2014 Assets: Current assets, net $ 109,827 96,409 Noncurrent investments and cash 15,857 16,949 Capital assets, net 306,246 299,241 Notes receivable, long-term, net 220,710 214,808 Other noncurrent receivables and other 32,310 31,520 Total assets 684,950 658,927

Deferred outflows of resources 3,228 1,434

Total assets and deferred outflows of resources 688,178 660,361

Liabilities: Current liabilities 28,764 22,999 Noncurrent liabilities 174,385 179,965 Total liabilities 203,149 202,964

Deferred inflows of resources 4,176 9,378

Net position: Net investment in capital assets 223,535 218,243 Restricted for debt service 13,578 11,669 Unrestricted 243,740 217,986 Total net position (as restated) 480,853 447,898 Total liabilities and net position 684,002 650,862

Total liabilities, net position and deferred inflows of resources $ 688,178 660,240

Statement of Revenues, Expenses, and Changes in Net Position The purpose of the statement of revenues, expenses, and changes in net position is to present the revenues earned by the Authority, both operating and nonoperating revenues, and the expenses incurred through operating and nonoperating expenditures, plus any other revenues, expenses, gains, and losses of the

7 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Authority. Generally, operating revenues are amounts received for providing housing to the Authority’s tenants as well as subsidies and grants received from the U.S. Department of Housing and Urban Development (HUD) that provide significant funding for the operations of the Authority’s housing programs. Operating expenses are those incurred to operate, maintain, and repair the housing units and to provide supportive services to the tenants of the Authority. Nonoperating revenues are revenues earned for which goods and services are not provided, for example, interest income. Capital contributions represent revenues earned from HUD for public housing capital repairs and rehabilitation, Hope VI redevelopment, and other capital activities.

The statement of revenues, expenses, and changes in net position, which follows this section, reflects the year ended December 31, 2015 compared to the year ended December 31, 2014. Overall, operating revenues increased by approximately 7.4% or $13.6 million from 2014 to 2015 and operating expenses increased by 3.3% or approximately $5.6 million for the year; net nonoperating expenses decreased by 76.8% or approximately $4.8 million; and capital contributions decreased approximately 38.0% or $8.1 million. Net position increased in 2015 by approximately $33.0 million. Explanations of principal reasons for these changes follow.

There were two primary reasons for favorable increases in operating revenues. The Authority had increases in subsidies for housing assistance payments in the Housing Choice Voucher program and other operating revenues increased from land sales at High Point redevelopment and from a contribution from Seattle Public Utilities for infrastructure work at Yesler Terrace redevelopment. Subsidies for the Move-To-Work (MTW) Housing Choice Voucher Program are part of the MTW Block Grant for the Authority, and as such cover Housing Assistance Payments (HAP’s), the greatest portion of this funding, as well as administrative costs of the Housing Choice Voucher Program and other single fund activities under the MTW demonstration program and the Authority’s MTW contract.

The most significant increases in operating expenses were related to housing assistance payments and to other operating expenses. There were smaller increases in housing operations and administration and tenant services. The Authority experienced slight decreases in utility and maintenance expenses as well as depreciation and amortization. Housing assistance payments increased due to higher utilization and higher voucher payment standards while other expenses increased as a result of increased soft costs related to the infrastructure construction at Yesler Terrace redevelopment.

Net nonoperating expenses decreased by approximately $4.8 million during the year. Interest expense was reduced compared to 2014 due to reductions in long term debt in 2015 and refundings of long term debt to lower interest rates during 2014 and 2015. In 2014 the Authority reported losses on limited partnerships of $2.3 million and losses from disposition of assets of $2.5 million that resulted in higher non operating losses for 2014 compared to 2015.

Capital contributions for the year ended December 31, 2015 were made up of $7.7 million from HUD capital grants and $5.5 million from the Choice Neighborhoods grant, which is one of the funding sources for Yesler Terrace redevelopment.

8 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Statement of Revenues, Expenses, and Changes in Net Position (In thousands) Year ended December 31 2015 2014 Operating revenues: Tenant rentals $ 22,837 22,786 Housing assistance payment subsidies 115,101 109,439 Operating subsidies and grants 29,246 28,898 Other 28,512 21,003 Total operating revenues 195,696 182,126 Operating expenses: Housing operations and administration 49,456 48,731 Tenant services 5,072 4,097 Utility services 6,046 6,335 Maintenance 18,481 18,696 Housing assistance payments 82,776 79,543 Other 3,345 1,398 Depreciation and amortization 9,315 10,077 Total operating expenses 174,491 168,877 Operating income 21,205 13,249 Nonoperating revenues (expenses): Interest expense (4,572) (5,082) Interest income 3,520 3,698 Change in fair value of investments (2) (41) Loss on investment in limited partnerships (1) (2,321) Loss on disposition of assets (404) (2,541) Net nonoperating expenses (1,459) (6,287) Change in net position before capital contributions 19,746 6,962 Capital contributions 13,209 21,307 Change in net position 32,955 28,269 Total net position, beginning of year (as restated) 447,898 419,629 Total net position, end of year $ 480,853 447,898

9 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Operating revenues are shown in detail in the chart below:

Operating Revenues – 2015 and 2014

140.0 115.1 120.0 109.4 100.0 80.0 60.0 40.0 29.2 28.9 28.5 22.8 22.8 21.0 20.0 0.0 Tenant Rentals Housing Assistance Operating Subsidies Other Payment Subsidies and Grants

2015 2014

Dollars (in millions)

10 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Operating expenses are shown in detail in the chart below:

Operating Expenses – 2015 and 2014

100 82.8 79.6 80

60 49.5 48.7

18.5 18.7 20 9.3 10.1 6.0 6.3 5.1 3.3 1.4 4.1 0 Depreciation Other Housing Maintenance Utility Tenant Services Housing and Assistance Services Operations and Amortization Payments Administration

2015 2014

Dollars (in millions)

11 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Capital Asset and Debt Administration The Authority increased capital assets, net, during the year ended December 31, 2015 by approximately $7.0 million.

The table below shows the Authority’s capital assets, net of accumulated depreciation and amortization, at December 31, 2015 and 2014 (in thousands):

2015 2014 Land $ 63,501 63,501 Land improvements 37,896 38,875 Structures 179,488 183,574 Leasehold improvements 266 356 Equipment 1,299 1,470 Construction in progress 23,796 11,465 Total capital assets, net $ 306,246 299,241

Construction in progress increased during the year as a result of redevelopment activities at Yesler Terrace including renovation of the steam plant, construction of the Baldwin Apartments, as well as infrastructure for the 1105 E. Fir site.

The following schedule shows the significant components of the construction in progress as of December 31, 2015 (in thousands):

2015 Modernization funds – Capital grants $ 2,028 Modernization funds – Choice neighborhood grant 3,546 Yesler Terrace Infrastructure 16,179 Other programs 2,043 Total construction in progress $ 23,796

Note 5 to the Authority’s basic financial statements provides additional detail regarding the changes in capital assets during the year ended December 31, 2015.

Total debt outstanding decreased from 2014 to 2015 by $9.7 million. The Authority decreased short-term borrowings by $1.5 million as a result of from payments on the taxable line of credit. Bonds payable decreased primarily due to the payoff of the bonds for High Rise Rehabilitation project, Phase I in the amount of $7.9 million. This was offset by a bond refunding for the Gamelin and Genesee buildings which resulted in an additional $3.3M of bonds payable.

12 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

The table below shows the Authority’s outstanding debt at December 31, 2015 and 2014 (in thousands):

2015 2014 Short-term borrowings $ 2,081 3,592 Notes payable 39,990 40,494 Bonds payable 65,437 73,170 Total debt outstanding $ 107,508 117,256

Notes 6 and 7 to the Authority’s basic financial statements provide additional detail regarding the debt changes during the year ended December 31, 2015.

The Authority maintained an entity credit rating from Standard & Poor’s Rating Services under their international rating criteria for housing authorities/social housing in the United States and Europe of ‘AA’ with a stable outlook.

Federal Funding Support to the Authority Federal appropriation levels for HUD programs, such as Section 8 Housing Choice Voucher Program and Section 9 Public Housing Operating Subsidies, and the various capital programs continue to have a major impact on the Authority’s budget. Federal housing dollars make up the largest source of operating revenue for the Authority and the principal source of funding for public housing capital. During 2015, the Authority earned $144.3 million in federal dollars for its operating programs and $13.2 million for its capital projects. In addition, federal financial support from HUD has been an important source of seed money and leverage funding for acquiring or developing a majority of the Authority’s $306.2 million of capital assets as of December 31, 2015.

The Authority has been engaged for more than 20 years in the redevelopment of the Authority’s family communities and 24 of the Authority’s 25 public housing high rises. The Authority has relied with great success on public and private mixed-financings to achieve the modernization of a substantial portion of its portfolio. The mixed-financings at these properties have used federal HOPE VI funds, Choice Neighborhoods Initiative grants, ARRA funds, Public Housing capital grant funds, and other competitive awards of federal capital funds to leverage tax credit partnership equity, grants from state and local government, equity contributions from the Authority, proceeds from sale of land, and issuances of bonds to finance the completion of these projects.

The federal government has been a principal source of funds for low-income housing operations, maintenance and capital since the enactment of the National Housing Act of 1937 (Act). While the level of federal support of public housing has ebbed and flowed with different administrations and Congresses over the decades, there is a history of federal financial support for low-income housing that dates from the Act.

The Authority has successfully weathered the challenges to date of federal budget reductions to non-defense discretionary funding resulting from the approximate $2 trillion in federal budget cuts to discretionary programs required over a ten year period under the Budget Control Act of 2011 and Sequestration. This has been done by investing in cost saving measures and changing our business practices to increase our efficiency

13 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

with limited impacts on tenants and participants services. This did not come without a price. The Authority reduced its full-time staffing by more than 100 positions, an 18% cut in staff from 2010 through 2013. There was no avoiding a service impact of this level of cuts – response times for service increased; some maintenance tasks moved from annual to biennial – like window washing; caseloads increased for property management and rental voucher staff; and for a period rental assistance vouchers were not being issued to people on the waitlist. However, the Authority has continued to serve more people each year and no low income people lost their housing with the Authority as a result of the federal cuts.

Congress enacted a reprieve from Sequestration for 2014 and 2015, and as a result the Authority has had two stable years of funding and we expect 2016 and 2017 to be only a modest change from 2015 funding, as a result of Congress renewing for two years the moderation of the sequestration budget ceilings. That said, over the long-term federal budget deficits can only grow as the baby-boomer generation ages and Congress and the President fail to address either new revenues or changes in mandatory spending programs. Local Housing Market Outlook The condition of the local housing market and economy affect the Authority in three different roles: as a developer of low income housing; as a landlord that operates and maintains our own low income housing communities; and, as a participant in the private rental housing market as the provider of rental assistance to tenants who qualify for housing vouchers they use to secure affordable housing in the private sector.

Beginning in 2014, the Authority has experienced both the upsides and downsides of the “hot” housing market in Seattle. We have had success in completing sales of most remaining properties in in our redeveloped communities of High Point and Rainier Vista. This will assure completion of the private sector side of the mixed income developments of housing and commercial properties in these communities. In the Yesler Terrace redevelopment, the Authority is experiencing, along with all other developers, construction cost increases that challenge our development assumptions and budgets. On the flip side, we are benefiting at Yesler Terrace from land appreciation in sale of blocks for private residential development.

Perhaps of most concern is that the low income households who qualify for rental assistance vouchers are finding the private rental stock in Seattle unaffordable to them and half of new voucher holders are failing to lease a unit after up to 180 days of looking. The private rental market has seen an increase of nearly 17% in rents from 2014 to 2016; at the same time, vacancy rates are at all-time lows, hovering between 2.0-2.5%, with larger bedroom sizes below 1.5%. The Authority will raise its voucher payment standard in May 2016 for the third time in 18 months – this time by 25% – in an effort to improve voucher holders buying power, but this won’t address the scarcity of vacancies. The Authority has also undertaken housing search assistance and counseling to address the affordability crisis and SHA will continue sustainable measures to support the success of voucher holders in securing housing.

14 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Management’s Discussion and Analysis (Unaudited) December 31, 2015

Request for Information This financial report is designed to provide a general overview of the Authority’s finances for all those interested. Questions concerning any of the information presented in this report or requests for additional information should be addressed to Janet Hayes, Controller, 190 Queen Anne Ave North, Seattle, WA 98109.

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BASIC FINANCIAL STATEMENTS

ExhibitA1 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON StatementofNetPosition December31,2015

Primary Component AssetsandDeferredOutflowsofResources government units Currentassets: Cashandcashequivalents $ 4,448,951 4,613,622 Restrictedcash 8,285,189 21,894,597 Investments 79,988,700 — Accountsreceivable: Tenantrentalsandservicecharges 409,496 519,544 Other 891,740 38,254 Duefrom: Othergovernments 3,140,980 — Primarygovernment — 204,140 Componentunits(netofallowanceof$1,542,581) 7,227,307 — Inventoryandprepaiditems 406,831 907,197 Restrictedinvestments 3,164,228 19,797 Unamortizedcharges 221,667 4,602,105 Notesreceivable 944,201 — Notesreceivablefromcomponentunits 40,000 — Assetsheldforsale 613,206 — Otherassets 44,353 — Totalcurrentassets 109,826,849 32,799,256 Noncurrentassets: Investments 7,987,629 — Cashrestrictedforlongtermpurpose 1,171,025 — Restrictedinvestments 6,698,983 576,623 Duefromcomponentunits(netofallowanceof$13,179,097) 19,902,999 — Assetsheldforsale 6,964,990 — Other 5,442,415 4,085,171 Capitalassets: Land 63,500,815 5,099,274 Landimprovements 43,812,813 21,490,242 Leaseholdimprovements 897,974 — Structures 391,219,505 402,714,038 Equipment 16,789,665 8,922,117 Constructioninprogress 23,795,946 31,874,642 Lessaccumulateddepreciationandamortization (233,770,733) (94,494,298) Capitalassets,net 306,245,985 375,606,015 Notesreceivable,lesscurrentportion(netofallowanceof$5,702,137) 13,201,009 — Notesreceivablefromcomponentunits,lesscurrentportion (netofallowanceof$4,013,439) 207,508,641 — Totalnoncurrentassets 575,123,676 380,267,809 Totalassets 684,950,525 413,067,065 Deferredoutflowsofresources 3,227,683 — Totalassetsanddeferredoutflowsofresources $ 688,178,208 413,067,065

16 (Continued) ExhibitA1 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON StatementofNetPosition December31,2015

Primary Component Liabilities,DeferredInflowsofResourcesandNetPosition government units Currentliabilities: Accountspayable: Vendorsandcontractors $ 8,916,651 6,576,951 Other 1,733,395 490,874 Accruedliabilities 4,077,574 5,192,458 Duetocomponentunits 204,140 — Duetoprimarygovernment — 8,769,888 Securitydeposits 1,394,402 1,263,383 Shorttermborrowings 2,080,982 — Shorttermborrowingsfromprimarygovernment — 40,000 Currentportionoflongtermdebt 5,623,934 14,192,025 Unearnedrevenue 4,732,738 8,623 Totalcurrentliabilities 28,763,816 36,534,202 Noncurrentliabilities: Duetoprimarygovernment — 33,082,096 Unearnedrevenue 42,400,125 — Longtermpayablesandliabilities 587,385 473,226 Longtermdebt,lesscurrentportion: Notespayabletoprimarygovernment — 211,522,080 Notespayable 39,446,270 49,603,271 Bondspayable 60,356,551 37,195,797 Accruedcompensatedabsences 2,809,230 — OPEBliability 1,534,000 — Netpensionliability 27,251,963 — Totalnoncurrentliabilities 174,385,524 331,876,470 Totalliabilities 203,149,340 368,410,672 Deferredinflowsofresources 4,175,760 — Totalliabilitiesanddeferredinflowsofresources 207,325,100 368,410,672

Netposition: Netinvestmentincapitalassets 223,534,799 63,052,842 Restrictedfordebtservice 13,578,114 21,207,837 Unrestricted(deficit) 243,740,195 (39,604,286) Totalnetposition(asrestated) 480,853,108 44,656,393

Totalliabilities,deferredinflowsofresourcesandnetposition $ 688,178,208 413,067,065

Seeaccompanyingnotestobasicfinancialstatements.

17 ExhibitA2 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON StatementofRevenues,Expenses,andChangesinNetPosition YearendedDecember31,2015

Primary Component government units Operatingrevenues: Tenantrentals $ 22,837,426 28,977,883 Housingassistancepaymentsubsidies 115,101,121 — Operatingsubsidiesandgrants 29,245,755 — Other 28,511,890 1,234,642 Totaloperatingrevenues 195,696,192 30,212,525 Operatingexpenses: Housingoperationsandadministration 49,455,950 8,475,910 Tenantservices 5,072,113 — Utilityservices 6,045,785 4,514,389 Maintenance 18,481,187 6,887,453 Housingassistancepayments 82,775,844 — Other 3,344,964 2,920,110 Depreciationandamortization 9,314,799 11,903,415 Totaloperatingexpenses 174,490,642 34,701,277 Operatingincome(loss) 21,205,550 (4,488,752) Nonoperatingrevenues(expenses): Interestexpense (4,572,533) (7,107,415) Interestincome 3,520,102 59,374 Changeinfairvalueofinvestments (1,704) 269,233 Lossoninvestmentinlimitedpartnerships (1,160) — Lossondispositionofassets (403,789) — Netnonoperatingexpenses (1,459,084) (6,778,808) Changeinnetpositionbeforecontributions 19,746,466 (11,267,560) Contributions: Capitalcontributions 13,208,823 — Partners’contributions — 7,314,074 Totalcontributions 13,208,823 7,314,074 Changeinnetposition 32,955,289 (3,953,486) Totalnetpositionatbeginningofyear(asrestated) 447,897,819 48,609,879 Totalnetpositionatendofyear $ 480,853,108 44,656,393

Seeaccompanyingnotestobasicfinancialstatements.

18 ExhibitA3 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON StatementofCashFlows YearendedDecember31,2015

Primary government Cashflowsfromoperatingactivities: Receiptsfromresidents $ 23,208,365 Receiptsfromothersources 27,896,205 Operatinggrantsandsubsidiesreceived 144,056,467 Advancestoaffiliates (6,261,407) Paymentstovendors (52,973,099) Housingassistancepayments (82,775,844) Paymentsforsalariesandbenefits (28,853,582) Netcashprovidedbyoperatingactivities 24,297,105 Cashflowsfromcapitalandrelatedfinancingactivities: Capitalcontributions 13,267,326 Acquisitionandconstructionofcapitalassets (13,996,541) Proceedsfromdispositionsofpropertyandequipment 1,127,150 Proceedsfromlongtermborrowings 3,320,000 Principalpaymentsonnotesandbondspayable (13,068,127) Interestpaid (4,480,375) Netcashusedincapitalandrelatedfinancingactivities (13,830,567) Cashflowsfrominvestingactivities: Investmentincomereceived 4,057,713 Maturityofinvestmentsecurities 46,644,750 Purchasesofinvestmentsecurities (56,324,209) Increaseinnetinvestmentofpartnerships 140,695 Collectionsonnotesreceivable 290,385 Advancesonnotesreceivable (6,415,449) Netcashusedininvestingactivities (11,606,115) Decreaseincashandcashequivalents (1,139,577) Cashandcashequivalentsatbeginningofyear 15,044,742 Cashandcashequivalentsatendofyear $ 13,905,165 Reconciliationofoperatingincometonetcashprovidedbyoperatingactivities: Operatingincome $ 21,205,550 Adjustmentstoreconcileoperatingincometonetcashprovidedbyoperatingactivities: Depreciationandamortization 9,314,799 Notesreceivableallowance Changesinoperatingassetsandliabilities: Accountsreceivableandotherassets (5,933,810) Inventoryandprepaiditems (24,747) Accountspayableandotherliabilities 1,864,981 Accruedcompensatedabsences (20) Unearnedrevenueandother (2,129,648) Totaladjustments 3,091,555 Netcashprovidedbyoperatingactivities $ 24,297,105

Seeaccompanyingnotestobasicfinancialstatements.

19 THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(1) Summary of Significant Accounting Policies (a) Organization and Program Descriptions The Housing Authority of the City of Seattle, Washington (the Authority) was created in 1939 as a municipal corporation that derives its powers from Washington State (State) Law RCW 35.82. The Authority was created for the acquisition, development, modernization, operation, and administration of public housing programs. The primary purpose of the Authority is to provide safe, decent, sanitary, and affordable housing to low-income and elderly families in Seattle, Washington, and to operate its housing programs in accordance with federal and State laws and regulations. The Authority’s programs are administered through the U.S. Department of Housing and Urban Development (HUD) under provisions of the U.S. Housing Act of 1937, as amended.

The Authority, recognized by HUD as a high-performing, large housing authority, was selected to participate in HUD’s Moving to Work (MTW) Demonstration Program effective January 13, 1999. The program allows the Authority an exemption from a multitude of HUD regulations and reporting requirements, and significant flexibility to combine its HUD funding for reallocation among the Authority’s administrative, capital, and development activities.

The Authority presents its activities as a single enterprise proprietary fund and its primary operations comprised a number of housing and grant programs as follows:

The Public Housing Program – operates under HUD’s Annual Contributions Contract (ACC) SF-151 and consists of the operations of low-rent public housing properties totaling 6,040 units, which includes 894 units of senior housing (see below). The purpose of the program is to provide decent and affordable housing to low-income families at reduced rents. The properties are owned, maintained, and managed by the Authority. The properties are acquired, developed, and modernized under HUD’s Capital Funds Program and through HUD Hope VI Urban Revitalization grants. Financing for the properties is obtained through bond issues and grants. Funding of the program is provided by federal annual contributions and operating subsidies and tenant rentals (determined as a percentage of family income, adjusted for family composition).

The Seattle Senior Housing Program (SSHP) – operates 1,029 units acquired and developed under a 1981 City of Seattle (City) bond issue. The purpose of this program is to provide low-rent housing for the elderly, handicapped, and disabled. Funding for the management and operation of these housing units is provided primarily from rental income with a small subsidy for the Public Housing operating funds. During 2011, the Authority received approval from HUD and from the City to include 894 of the SSHP units in the Public Housing program. This change took effect January 1, 2012.

The Section 8 Program – consists of several Section 8 housing programs including the Section 8 Housing Choice Voucher program, the Section 8 New Construction and

20 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Substantial Rehabilitation program, and the Moderate Rehabilitation program. The Housing Choice Voucher program provides rental housing assistance subsidies in support of 10,359 housing units. The purpose of the program is to provide decent and affordable housing to low-income families and elderly and handicapped individuals wherein rental assistance is provided by HUD. The associated units are maintained and managed by private landlords.

The purpose of the Section 8 New Construction and Substantial Rehabilitation program is to construct or purchase and rehabilitate rental housing units to provide decent and affordable housing to low-income, elderly, and handicapped individuals whereby rental assistance is provided by HUD. Funding of the program is provided by federal housing assistance contributions and tenant rentals. The Authority owns two housing developments totaling 130 units.

The Section 8 Moderate Rehabilitation program operates under HUD’s ACC S-0068K and consists of the operations of 759 privately owned family housing units. The purpose of the program is to rehabilitate substandard rental housing units and provide decent and affordable housing to low-income families whereby rental assistance is provided by HUD. The associated developments are maintained and managed by private landlords. Funding of the program is provided by federal housing assistance contributions.

Other Housing Programs – operates 932 units of low-income housing. These projects are financed primarily through bond issues and receive no external funding. On-site management for these units may be done by the Authority or contracted with other management companies. In addition, the Authority also has 739 nonpublic housing, tax credit units within the HOPE VI redeveloped communities.

The basic financial statements of the Authority have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Authority’s significant accounting policies are described below.

(b) Reporting Entity The governing body of the Authority is its Board of Commissioners (Board), comprising seven members appointed by the Mayor of the City. The Authority is not financially dependent on the City and is not considered a component unit of the City.

As defined by GAAP, the reporting entity consists of the primary government, as well as its component units, which are legally separate organizations for which the elected officials of the primary government are financially accountable. Financial accountability is defined as appointment of a voting majority of the component units’ board, and one of (a) the ability to impose will by the

21 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

primary government, or (b) the possibility that the component unit will provide a financial benefit to or impose a financial burden on the primary government, or if the component unit is fiscally dependent on and there is a potential for the component unit to provide specific financial benefits to, or impose specific financial burdens on, the primary government regardless of whether the component has (a) a separately elected governing board, (b) a governing board appointed by a higher level of government, or (c) a jointly appointed board.

Component units are reported as part of the reporting entity under either the blended or discrete method of presentation. The discrete method presents the financial statements of the component unit outside of the basic financial statement totals of the primary government.

The Authority is the 0.01% owner and the general partner in 17 real estate limited partnerships as of December 31, 2015. The limited partnership interests are held by third parties unrelated to the Authority. As the general partner, the Authority has certain rights and responsibilities, which enable it to impose its will on the limited partnerships. The Authority is financially accountable for the limited partnerships as they are fiscally dependent on the Authority according to the terms of the partnership agreements to provide operating subsidy for ongoing operations and some partnership debt obligations are backed by the Authority’s general revenues. Additionally, in some cases, the Authority is legally obligated to fund operating deficits and could be liable for tax payment upon exiting the partnerships. The Authority also has outstanding loans and net advances to the limited partnerships amounting to approximately $234.7 million at December 31, 2015. The limited partnerships do not serve the primary government exclusively, or almost exclusively, and, therefore, are shown as discretely presented component units.

The 17 component units are: Desdemona Limited Partnership (Desdemona), Escallonia Limited Partnership (Escallonia), High Point North Limited Partnership (High Point North), High Point South Limited Partnership (High Point South), Ritz Apartments Limited Partnership (Ritz Apartments), Alder Crest Limited Partnership (Alder Crest), High Rise Rehabilitation Phase I Limited Partnership (homeWorks I), Seattle High Rise Phase II Limited Partnership (homeWorks II), Seattle High Rise Phase III Limited Partnership (homeWorks III), Douglas Apartments Limited Partnership (South Shore Court), Tamarack Place Limited Partnership (Tamarack Place), Lake City Village Limited Liability Limited Partnership (Lake City Court), Rainier Vista Northeast Limited Liability Limited Partnership (Rainier Vista NE), Leschi House Limited Liability Limited Partnership (Leschi House), 1105 East Fir Limited Liability Limited Partnership (Kebero Court), 820 Yesler Way Limited Liability Limited Partnership (Raven Terrace) and 221 10th Ave S Limited Liability Limited Partnership (Hoa Mai Gardens).

Desdemona is a separate legal entity created on May 10, 2002 to undertake phase three of the redevelopment activities at the Holly Park community. Development activities are completed and Desdemona will continue to operate and manage the rental units. The Authority has leased the land for phase three of the Holly Park redevelopment project to the partnership for a nominal amount under a noncancelable 99-year operating lease. The Authority is the 0.01% general partner

22 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

of the partnership and is obligated to fund an operating deficit without limitation as to amount. As of December 31, 2015, Desdemona has no outstanding developer fees payable to the Authority.

Escallonia is a separate legal entity created on May 10, 2002 to undertake phase one of the redevelopment activities at the Rainier Vista community. Development activities are complete and Escallonia will continue to operate and manage the rental units. The Authority participates as the 0.01% managing general partner of the partnership. The Authority has leased the land for phase one of the Rainier Vista redevelopment project to the partnership for a nominal amount under a noncancelable 99-year operating lease. As of December 31, 2015, Escallonia owed the Authority for developer fees in the amount of $485,418.

High Point North is a separate legal entity created on October 31, 2003 to undertake phase one of the redevelopment activities at the High Point community. The Authority participates as the 0.01% managing general partner of the partnership. The Authority has leased the land for phase one of the High Point redevelopment project to the partnership for a nominal amount under a noncancelable 99-year operating lease. The Authority is obligated to fund operating or other cash shortfalls of the partnership. The amount the Authority is obligated to fund is unlimited prior to the project’s stabilization date, as defined in the limited partnership agreement, and is limited to $1,200,000 after the project’s stabilization date. The amount is further limited to $750,000 after 10 consecutive years of the partnership’s operating subsidy being fully funded. As of December 31, 2015, High Point North owed the Authority developer fees in the amount of $1,541,649.

High Point South is a separate legal entity created on July 12, 2007 to undertake phase two of the redevelopment activities at the High Point community. The Authority participates as the 0.01% managing general partner of the partnership. The Authority has leased the land for phase two of the High Point redevelopment project to the partnership for a nominal amount under a noncancelable 99-year operating lease. The Authority is obligated to fund operating or other cash shortfalls of the partnership. As of December 31, 2015, High Point South owed the Authority $2,193,544 for developer fees.

Ritz Apartments is a separate legal entity created on August 12, 2004 to undertake rehabilitation of the Ritz Apartments. During fiscal year 2005, the Ritz Apartments admitted a tax credit investor to the partnership as a 99.99% limited partner. The Authority participates as the 0.01% managing general partner of the partnership. The land and building are leased to the partnership under a 75-year financing lease. The partnership agreement does not specify the obligation of the general partner in regard to funding operating shortfalls. As of December 31, 2015, Ritz Apartments owed the Authority $170,515 for developer fees.

Alder Crest is a separate legal entity created on January 1, 2005 to undertake rehabilitation of the Alder Crest Apartments. Alder Crest admitted a tax credit investor to the partnership as a 99.99% limited partner. The Authority participates as the 0.01% managing general partner of the partnership and the Authority has leased the building to Alder Crest under a 75-year financing lease. The Authority is required to fund the operating deficit without limitation through operating 23 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

deficit loans. Upon dissolution and liquidation of the partnership, the general partner obligation to fund operating deficits through operating deficit loans shall continue in an additional amount not to exceed $109,615. As of December 31, 2015, the Alder Crest owed the Authority oversight developer fees amounting to $39,748.

homeWorks I is a separate legal entity created on July 26, 2005 to undertake phase one of a three-phase rehabilitation of 21 public housing high-rise buildings owned by the Authority. Each phase of the project will cover seven buildings, which are leased to the component unit for 99 years. The Authority participates as the 0.01% managing partner. The Authority is required to provide operating subsidies sufficient to cover the difference between tenant rental income and operating expenses as well as contributions to reserve accounts. As of December 31, 2015, homeWorks I has no outstanding developer fee payable to the Authority.

homeWorks II is a separate legal entity created on August 11, 2006 to undertake phase two of the three-phase rehabilitation of 21 public housing high-rise buildings owned by the Authority. Phase two also covers seven buildings, which are leased to the component unit for 99 years. The Authority participates as the 0.01% managing partner. The Authority is required to provide operating subsidies sufficient to cover the difference between tenant rental income and operating expenses as well as contributions to reserve accounts. As of December 31, 2015, homeWorks II has no outstanding developer fee payable to the Authority.

homeWorks III is a separate legal entity created on September 13, 2007 to undertake phase three of the three-phase rehabilitation of 21 public housing high-rise buildings owned by the Authority. Phase three also covers seven buildings, which are leased to the component unit for 99 years. The Authority participates as the 0.01% managing partner. The Authority is required to provide operating subsidies sufficient to cover the difference between tenant rental income and operating expenses as well as contributions to reserve accounts. As of December 31, 2015, homeWorks III has no outstanding developer fee payable to the Authority.

South Shore Court is a separate legal entity created on September 17, 2007 to undertake rehabilitation of the Douglas Apartments, owned by the Authority. South Shore Court admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The land and building are leased to the partnership under a 75-year financing lease. If an operating deficit exists, the Authority is obligated to loan funds to the partnership up to the amount of the deficit. As of December 31, 2015, the South Shore Court owed the Authority developer fees in the amount of $283,146.

Tamarack Place is a separate legal entity created on October 15, 2008 to undertake phase two of the redevelopment activities at the Rainier Vista community. During 2010, Tamarack Place admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The Authority has a 99-year lease for the land to the partnership for a nominal amount. If an operating deficit exists, the general partner is

24 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

obligated to loan the partnership up to $350,000. As of December 31, 2015, Tamarack Place owed the Authority developer fees in the amount of $145,711.

Lake City Court is a separate legal entity created on December 3, 2009 to undertake redevelopment activities at the site formerly occupied by Lake City Village, which was demolished in 2002 due to severe flooding damage to the housing units. During 2010, the Lake City Court admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The partnership has a 55-year capital lease for the land with the Authority for $2,750,000 of which $1,675,000 is payable as of December 31, 2015. If an operating deficit exists, the Authority is obligated to contribute funds to the partnership up to $515,000. As of December 31, 2015, Lake City Court has no developer fees owed to the Authority.

Rainier Vista NE is a separate legal entity created on January 29, 2010 to undertake phase three of the redevelopment activities at the Rainier Vista Community. During 2010, Rainier Vista NE admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The Authority has a 99-year lease for the land to the partnership for a nominal amount. The Authority is obligated to fund operating deficits up to $1,000,000 and to advance funds with no limitation to the partnership to cover deficits. As of December 31, 2015, Rainier Vista NE has no outstanding developer fees payable to the Authority.

Leschi House is a separate legal entity created on October 8, 2012 to undertake the redevelopment of Leschi House, a property in the Senior Housing portfolio. During 2015, Leschi House admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The Authority has a long-term lease for the land and building with the partnership in the amount of $3,110,000. If operating deficits exist, the Authority is required to loan funds to the partnership up to $298,498. As of December 31, 2015, the Leschi House owed the Authority developer fees in the amount of $810,000.

Kebero Court is a separate legal entity created on October 23, 2012 to undertake the first phase of the redevelopment of Yesler Terrace with the construction of a 103-unit apartment building. During 2014, Kebero Court admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The partnership has leased the land from the Authority for 99 years. The Authority has unlimited obligation to fund operating deficits through the stabilization date. After that date, operating the obligation will be limited to $384,000. As of December 31, 2015, Kebero Court owed the Authority developer fees in the amount of $1,275,000.

Raven Terrace is a separate legal entity created on October 23, 2012 to undertake the second phase of the redevelopment of Yesler Terrace with the construction of an 83-unit apartment project. During 2015, Raven Terrace admitted a tax credit investor to the partnership as a 99.98% limited partner and a 0.01% special limited partner. The Authority participates as the 0.01% managing general partner of the partnership. The partnership has leased the land from the Authority for 99 years for a nominal amount. If there are insufficient funds in the operating deficit 25 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

reserve, the Authority is obligated to provide noninterest-bearing loans to the partnership. As of December 31, 2015, Raven Terrace owed the Authority developer fees in the amount of $1,185,000.

Hoa Mai Gardens is a separate legal entity created on February 2, 2015 to continue with the redevelopment of Yesler Terrace with the construction of an 111-unit apartment building. During 2015, the Hoa Mai Gardens admitted a tax credit investor to the partnership as a 99.99% limited partner and the Authority participates as the 0.01% managing general partner. The partnership has leased the land from the Authority for 99 years. The Authority has unlimited obligation to fund operating deficits through the stabilization date. The partnership agreement does not specify the obligation of the general partner in regard to funding operating shortfalls after stabilization. As of December 31, 2015, no developer fees were owed to the Authority.

All 17 component units have a December 31 year-end. The component units’ financial statements are presented as of December 31, 2015 and may be obtained by contacting the Authority.

The Othello Street Limited Partnership (Othello) was a separate legal entity created on September 9, 1999 to undertake phase two of the redevelopment activities at the Holly Park community. On January 1, 2015 the limited partner (The Housing Outreach Fund VIII Limited Partnership) assigned its share in the partnership to the general partner (the Authority). The Authority paid $1 to the limited partner and assumed the debt of the partnership to complete the transaction. Prior to the merger, the Othello was reported as a discretely presented component unit of the Authority.

The transaction resulted in the following increases and decreases in the January 1, 2015 amounts reported for the primary government and component units:

Primary Component government units Current assets $ 888,874 (888,874) Write-off deferred charges — (305,085) Allowance for loss on interest receivable 247,485 — Capital assets, net 10,153,592 (10,153,592) Noncurrent assets 321,710 (321,710) Inter-entity receivables/payables (950,616) 950,616 Inter-entity notes receivables/payables (6,195,384) 6,195,384 Current liabilities (499,804) 499,804 Noncurrent liabilities (19,896) 19,896 Long term debt (3,915,000) 3,915,000 Investment in limited partnerships (120,478) — Net position $ (89,517) (88,561)

26 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(c) New Accounting Standards Adopted Effective January 1, 2015, the Authority adopted GASB Statement No. 68, Financial Reporting for Pensions – an amendment of GASB No. 27, and has retroactively restated its financial statements accordingly. This statement establishes accounting and financial reporting requirements for pension plans that are administered through trusts. Statement No. 68 requires governments participating in cost-sharing multiple-employer defined benefit plans to recognize a liability for its proportionate share of the net pension liability of the collective pension liability of all employers in the plan. A cost sharing employer is required to recognize pension expense and report deferred outflows and deferred inflows of resources related to pensions. The Authority also adopted GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68, which addresses an issue regarding application of the transition provisions of Statement No. 68.

In accordance with the new standards, the Authority restated its net position for December 31, 2014 as of January 1, 2015. The merger with Othello in note 1 (b) also impacted the restatement of net position as shown in the table below.

Net position as previously reported $ 477,363,920 Adoption of GASB Statement No. 68 and 71 (29,376,584) Combination of Othello Street Limited Partnership (89,517) Net position, as restated $ 447,897,819

(d) New Accounting Standards to be Adopted in Future Years GASB Statement No. 72, Fair Value Measurement and Application, defines fair value and describes how fair value should be measured, what assets and liabilities should be measured at fair value, and what information about fair value should be presented in the notes to the financial statements. The provisions of this Statement are effective for periods beginning after June 15, 2015.

GASB Statement No. 75, Accounting and Financial Reporting for Post Employment Benefits Other Than Pensions (OPEB), addresses accounting and financial reporting for OPEB that is provided to employees of state and local governmental employers. The provisions of this Statement are effective for periods beginning after June 15, 2017.

GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, will improve financial reporting and comparability of financial statement information among governments by providing clear guidance on how to apply financial reporting guidance. The requirements of this statement are effective for periods beginning after June 15, 2015 and should be applied retroactively.

27 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

GASB Statement No. 79, Certain External Investment Pools and Pool Participants, will establish specific criteria used to determine whether a qualifying external investment pool may elect to use an amortized cost exception to fair value measurement. The requirements of this statement are effective for periods beginning after December 15, 2015.

GASB Statement No. 82, Pension Issues, will address certain issues that have been raised regarding GASB Statements No. 67, No. 68, and No. 73. The requirements of this statement are effective for periods beginning after June 15, 2017.

The Authority’s management is currently evaluating these new standards to determine what impact they will have on the Authority.

(e) Basis of Accounting The financial statements of the Authority are reported using the economic resources measurement focus and the accrual basis of accounting, whereby all revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Depreciation and amortization of assets is recognized in the statement of revenues, expenses, and changes in net position. All assets and deferred outflows and liabilities and deferred inflows associated with the operation of the Authority are included in the statement of net position. The principal operating revenues of the Authority are rental revenues received from residents and subsidies received from HUD for qualified residents for housing assistance payments in the Section 8 program and for operations in the public housing program. Grants and similar items are recognized as operating revenue when all eligibility requirements have been met. Gains from sale of capital assets used in the core operations of the Authority are included in operating revenues – other. Operating expenses for the Authority include the costs of operating housing units, administrative expenses, depreciation, and loss from sale of capital assets. All other revenues and expenses not meeting the definition of operating revenues and expenses are reported as nonoperating revenues and expenses or as contributions of capital.

The Authority reports unearned revenue on its statement of net position. Unearned revenues arise when the cash has been received but the potential revenue has not been earned in the current period. Unearned revenues also arise when resources are received by the Authority before it has a legal claim to them, as grant monies are received prior to meeting all eligibility requirements and/or the occurrence of qualifying expenditures. In subsequent periods, when both the revenue recognition criteria are met or when the Authority has a legal claim to the resources, the liability for unearned revenue is removed from the statement of net position and revenue is recognized.

(f) Cash and Investments Cash and cash equivalents are comprised of cash on hand, demand deposits, and short-term investments with a term of less than one year. All of the Authority’s investments are reported at

28 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

fair value with the exception of the Local Government Investment Pool, which is carried at amortized cost. Fair value is determined based on quoted market prices for the investments.

The Authority is authorized by HUD and its Board to invest in time deposits, certificates of deposits, and obligations of the U.S. government or its agencies, and to enter into repurchase agreements. Repurchase agreements are secured by U.S. Treasury securities with a market value equal to or greater than the amount of the repurchase agreements. The Authority’s investment policies provide for the ability to sell investments prior to the investments’ contractual maturity.

(g) Accounts Receivable – Other Other accounts receivable represent various receivables including accrued interest on investments, accrued interest on notes receivable, receivables from other housing authorities for Section 8 portability payments, receivables from component units for developer fees, and receivables from other rental projects that the Authority manages but does not own. The Authority will record an allowance when collectability of the related receivable in uncertain.

(h) Inventories and Prepaid Items Inventories are stated at lower of cost or market value and consist of expendable materials and supplies. Inventory items are expensed using the moving weighted average. Office supplies and maintenance materials are expensed using the first-in, first-out method. Prepaid items are for payments made by the Authority for services or goods received in a subsequent fiscal year.

(i) Unamortized Charges Unamortized charges consist of bond discounts, which are amortized over the term of the related note or bond.

(j) Capital Assets and Depreciation Capital assets are stated at historical cost. Maintenance and repairs are charged to current period operating expenses while improvements are capitalized. Upon retirement or other disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the respective accounts and any gains or losses are included in operating revenues and expenses. All capital assets with a value greater than $1,000 and a useful life of over one year are capitalized. Assets acquired through contribution are recorded at the fair value on the date donated.

29 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Capital assets are generally depreciated using the straight-line method over estimated useful lives the following:

Land improvements 50 years Leasehold improvements 10 years Structures 40–75 years Equipment 3–10 years

(k) Accounts Payable – Other Other accounts payable include payables for escrow accounts related to construction activities and the Section 8 Family Self-Sufficiency program, as well as miscellaneous payables related to payroll costs.

(l) Compensated Absences Cabinet level employees and certain other executive level staff are covered under an executive leave policy. The policy provides this group of employees with 200 hours of annual leave per year to be used within that calendar year and may carry over a maximum of 40 hours to the next calendar year.

All other employees earn 100 hours each year, and after the first year, additional hours are added based on the number of years of service up to a maximum of 200 hours per year. Unused vacation is allowed to accumulate to a maximum of 240 or 360 hours, depending on the employees’ date of hire. Employees are paid for all accumulated vacation pay upon termination.

The Authority recognizes and compensates employees for nine traditional holidays. Holiday pay is recorded as an expense when incurred.

Employees earn sick leave at a rate of 96 hours per year. Sick leave is allowed to accumulate with no maximum. Employees are compensated for accumulated unused sick leave at the rate of 25% upon termination, permanent disability, or death.

Accruals are recorded at year-end for unused annual leave and unused sick leave, based on balances of hours at December 31 for each year-end. See note 7(a) for detailed schedule.

(m) Management Fees The Authority manages two residential rental properties for HUD. For the year ended December 31, 2015, the Bay View Tower project paid the Authority management fees of $53,045, which is equal to 5.0% of net rental revenues received. Market Terrace paid the Authority management fees of $13,284 based on a fee of $1,107 per month.

30 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(n) Payments in Lieu of Taxes Pursuant to an agreement with the City, the Authority may make payments in lieu of taxes (PILOT). PILOT may also be provided to other taxing districts in which property is owned. Upon mutual understanding with the City and other taxing districts, no PILOT was made in 2015 and no amounts are due and payable as of December 31, 2015.

(o) Unearned Revenue The Authority has unearned revenue resulting from operating lease payments received from eight of its discretely presented component units: Ritz Apartments, Alder Crest, South Shore Court, Lake City Court, homeWorks I, homeWorks II, homeWorks III, and Leschi House. The lease payments are recognized over the lease terms and unearned lease payments are shown as unearned revenue.

In addition, the Authority also has unearned revenue from prepaid tenant rents and commercial rents, earnest money collected for property sales, and grant funds that have been received but not yet earned.

(p) Income Taxes Income received or generated by the Authority is not subject to federal income tax, pursuant to Internal Revenue Code Section 115. The Authority is also exempt from state and local property taxes. Interest paid on obligations issued by the Authority is excludable from the gross income of the recipients, pursuant to Section 103(a) of the Internal Revenue Code of 1986, as amended. Contributions to the Authority are tax-deductible contributions, pursuant to Sections 170(b)(l)(A)(v) and 170 (c)(l) of the Internal Revenue Code of 1986, as amended.

(q) Pension Plans For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources, and pension expense, information about the fiduciary net position of the Washington state Public Employees’ Retirement System (PERS) cost-sharing multiple-employer defined benefit plans and additions to/deductions from PERS’s fiduciary net position have determined on the same bases as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

(r) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and deferred outflows and liabilities and deferred inflows, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates relate primarily to the determination of the allowance on notes receivable from component units.

31 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(2) Deposits and Investments (a) Deposits As of December 31, 2015, the Authority’s carrying amount of deposits (excluding petty cash and U.S. Post Office deposits) was $13,898,719 and the bank balance was $14,284,917. The bank deposits are held with financial institutions and are entirely insured or collateralized and are classified as cash and cash equivalents in the statement of net position. All deposits in excess of the FDIC insurance limit of $250,000 are covered by the Public Deposit Protection Commission of the State of Washington, which is a multiple financial institution collateral pool, established under Chapter 39.58 of the Revised Code of Washington. In addition to bank deposits, the Authority has $2,500 held at the U.S. Post Office and $3,946 in petty cash funds. All deposits are either insured or registered and held by the Authority or its agent in the Authority’s name.

(b) Investments The Authority’s investment policies require that all investments be made in accordance with the stated objectives of capital preservation, optimum liquidity, and return, while conforming to all applicable statutes and regulations. The Authority has established a maximum maturity of three years for operating reserves and a maximum maturity of five years for replacement reserves. Bond reserves may have maturities that match the bond maturity.

The Authority invests a portion of its funds with the Washington State Local Government Investment Pool (LGIP) managed by the State Treasurer’s office. The investments in this pool comprise repurchase agreements, government securities, and certificates of deposits. The LGIP operates in a manner consistent with the Security and Exchange Commission’s Rule 2a-7 of the Investment Company Act of 1940. As such, the LGIP uses amortized cost to report net position and share prices since that amount approximates fair value.

The Authority intends to adhere fully to its investment policy, which expressly prohibits the making of speculative or leveraged investments and requires that all investments be made prudently and with due care to ensure compliance with all statutes and regulations.

The Authority restricts its participation in money market mutual funds to those investing only in U.S. Treasury securities. However, the Authority’s indirect exposure to any risks arising from derivative instruments utilized by such funds and programs is unknown.

Custodial Risk Custodial risk for investments is the risk that in the event of failure of the counterparty to a transaction, the Authority will not be able to recover the value of the investments. As of December 31, 2015, all investments were insured or registered, and held by the Authority or its agent in the Authority’s name, or uninsured and unregistered, with securities held by the counterparty’s trust department or agent in the Authority’s name, or investment pools that are not

32 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

classified since the investments are not evidenced by securities that exist in physical or book entry form. Therefore, the investments are not exposed to custodial risk. The Authority's policy allows for safekeeping of securities either by the agent or a third party custodian as is the case for the Local Government Investment Pool.

Investments in U.S. Treasury-backed short-term money market funds are investments held by the trustee in the Authority’s name for bond issues.

Concentration of Credit Risk, Credit Risk, and Interest Rate Risk Concentration of credit risk is the risk of loss that may occur due to the amount of investments in a single issuer (not including investments issued or guaranteed by the U.S. government, investments in a mutual fund, or external investment pools). Although the Authority has a large percentage of its portfolio invested in the Local Government Investment Pool, this is not considered a risk due to the diversification within the pool.

Credit risk of investments is the risk that the issuer or other counterparty will not meet its obligations. This credit risk is measured by the credit quality rating of investments in debt securities, as described by a national statistical rating organization such as Standard and Poor’s (S&P). The Authority’s policy provides that investments in corporate bonds and other fixed-income securities must have a rating of A or better.

Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Authority’s policy is to select investments of varied maturities to mitigate this risk.

The following chart shows the Authority’s exposure to these risks:

S&P N/A or less More than credit rating than 1 year 1–5 years 10 years Total

Money market funds n/a $ 5,808,785 — — 5,808,785 U.S. agency securities AAA — 7,987,629 3,373,058 11,360,687 State investment pool n/a 80,670,068 — — 80,670,068

Total investments $ 86,478,853 7,987,629 3,373,058 97,839,540

Investments are presented in the following financial statement captions in the statement of net position as investments, current and noncurrent and restricted investments, current and noncurrent.

(c) Component Unit Deposits As of December 31, 2015, the component units’ carrying amount of deposits (excluding petty cash) was $26,508,175 and the bank balance was $26,588,054. The bank balances held with financial institutions are entirely insured or collateralized and are classified as cash and cash equivalents in

33 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

the statement of net position. All deposits in excess of the FDIC insurance limit of $250,000 are covered by the Public Deposit Protection Commission of the State of Washington, which is a multiple financial institution collateral pool, established under Chapter 39.58 of the Revised Code of Washington. In addition to bank deposits, the component units have $1,000 in petty cash funds.

(d) Component Unit Investments As of December 31, 2015, investments of $596,420 were held in trust and restricted for the development of the component units’ redevelopment projects, replacement reserves, and operating reserves.

Custodial Risk The investments of the component units are guaranteed investment contracts collateralized by U.S. government investment securities. As of December 31, 2015, all investments were insured or registered, and held by the component unit or its agent in the component unit’s name, or uninsured and unregistered, with securities held by the counterparty’s trust department or agent in the component unit’s name. Therefore, the investments are not exposed to custodial risk.

The component units of the Authority are subject to the same concentration of credit risk, credit risk, and interest rate risk as the Authority. The chart below shows the exposure to these risks:

S&P N/A or less More than credit rating than 1 year 10 years Total U.S. government money market funds n/a $ 19,797 — 19,797 Yield agreements n/a — 576,623 576,623 Total investments $ 19,797 576,623 596,420

(3) Restricted Cash and Investments (a) Security Deposits Upon moving into a project, tenants are required to pay a security deposit, which is refundable when the tenant vacates the apartment, provided the apartment’s physical condition is satisfactory. The Authority held security deposits for residential tenants as well as commercial tenants as of December 31, 2015 as shown in the schedule below:

Residential Commercial Total Total security deposits $ 1,214,562 179,840 1,394,402

34 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(b) Bond Trust Funds and Mortgage Reserves As of December 31, 2015, funds held for bond trust funds and mortgage reserves are shown below: Balance Investments for Gamelin/Genesee bonds are restricted for the payment of principal and interest. The investments consist of money market funds and bear no interest. $ 253,183 Cash is held for replacement reserves on the public housing units at New Holly Phase II. Interest is paid at approximately 0.15% as of December 31, 2015. 224,346 Cash is held for the payment of principal and interest for the bond refunding in 2013 for Montridge Arms, Westwood East, Spruce Street, Norman Street, MLK properties, Fir Street, Lam Bow, Main Street Apartments, and Yesler Court. The funds consist of money market funds and bear no interest. 847,909 Investments for the Longfellow Creek bonds are restricted for the payment of principal and interest. The investments consist of notes, mortgages, and contracts and bear no interest. 244,910 Cash is held for Tamarack commercial property for operating reserves as required by the loan agreement. The account bears interest at 0.20%. 30,245 Investments for the Wisteria Court bonds are restricted for the payment of principal and interest. The investments consist of GNMA securities and bear interest at approximately 5.15%. 3,373,058 Reserves are held in restricted cash accounts for the mortgage on Wedgwood Estates and bear interest at approximately 0.046%. 1,408,637 Reserves are held in restricted cash accounts for taxes and insurance for Wedgewood Estates and bear no interest. 113,285 Reserves are held in restricted cash accounts for the mortgage on Wisteria Court Apartments and bear interest at approximately 0.08%. 294,751 Reserves are held in restricted cash accounts for taxes and insurance for Wisteria Court Apartments and bear no interest. 38,742 Restricted cash is held for the Beacon operating reserves and replacement reserves. The funds consist of money market funds and bear interest at approximately 0.21%. 124,489 Reserves are held in restricted cash accounts for the capital replacement and operations of Villa Park and bear interest at approximately 0.20%. 101,002 Reserves are held in restricted cash accounts for the capital replacement and operations of Telemark, Mary Avenue, Montridge, Longfellow Creek, Main St Apts, Main Street Place, Yesler Court, and New Holly Phase I, bearing interest at approximately 0.20%. 1,038,665 Investments are held for the Holly Park Phase I bonds and are restricted for payment of principal and interest. The funds are invested mainly in highly liquid, short-term U.S. Treasury obligations. The interest rate was 0.01%. 277,288

35 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Reserves are held in restricted cash accounts for the Holly Park Phase I and Phase II operating reserve and tax credit replacement reserve and bear interest at approximately 0.20%. 2,374,591 Restricted cash is held for operating reserves and replacement reserves for Senior Housing projects Willis House, Reunion House, Nelson Manor, and Olmsted Manor and bear interest of approximately 0.20%. 139,054 Restricted cash is held for critical repairs at Wedgewood Estates related to the refinancing of the building. The account bears interest at 0.24%. 389,032 Restricted cash held for bond activity related to the Douglas Apartment bonds. The account bears no interest. 281,722 Reserves are held in cash accounts for Ravenna School replacement reserves and bear interest at approximately 0.15% 184,869 Restricted investments held for critical repairs at Replacement housing properties and Yesler Court related to the 2013 bond refunding. The funds bear no interest. 128,536 Money market funds are held for replacement reserves for properties supported by the 2014 bond refunding including Market Terrace, Mary Avenue, Bayview Tower, Lake City Commons, Villa Park, Telemark Apartments, Main Place II, Delridge Triplexes, 5983 Rainier Avenue, 924 MLK Way, and Baldwin Apartments. The funds bear no interest. 777,833 Restricted money market funds are held for the payment of principal and interest for properties of the 2015 bond refunding including Market Terrace, Mary Avenue, Bayview Tower, Lake City Commons, Villa Park, Telemark Apartments, Main Place II, Delridge Triplexes, 5983 Rainier Avenue, 924 MLK Way, and Baldwin Apartments. The funds bear no interest. 862,003 Investments are held for the Genesee/Gamelin 2015 bond refunding refunding for the payment of principal and interest. The funds 14,511 bear no interest. Investments are held for the Genesee/Gamelin bond payoff in January 2,484,544 2016. The funds bear no interest. Restricted cash and investments are held for Holly Park Phase II bonds for the payment of principal and interest. The accounts consist of money market funds and bear interest at approximately 0.0148%. 322,382 Restricted cash is held for Holly Park Phase II public housing expense reserve and operating deficit reserve. The funds bear interest at approximately 0.2%. 435,380 Total $ 16,764,967

36 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(c) Other Restricted Funds As of December 31, 2015, restricted cash amounts of $587,385 are held in trust for the Family Self-Sufficiency (FSS) program. Families in the Section 8 and Low Rent programs may sign up for the FSS program and any rent increase due to an increase in income may be deposited into an escrow account. The tenant may request reimbursement from the trust account for certain allowable expenditures.

Restricted cash amounts of $21,087 are held for retainage for construction projects.

HUD requires the Authority to maintain restricted investments equal to the required reserves for the Market Terrace project. HUD must approve any release or disbursement of reserve funds in advance. Restricted investments for required reserves of $83,147 were held as of December 31, 2015.

Restricted cash amounts of $81,033 are held in the Development fund for the Dream Big Scholarship fund, which provides scholarships for residents of the Authority’s communities.

Restricted cash amounts of $223,583 are held in an endowment trust for residents of High Point. The funds are to be used only for planning, providing, and evaluating community and support services for the primary benefit of the public housing residents of High Point housing development and former residents occupying other public housing in accordance with the plan approved by HUD. A portion of the interest may be spent each year and the High Point Endowment Trust will continue to exist in perpetuity. Upon approval from HUD on August 28, 2009, grant funds in the amount of $220,995 were deposited to the account. During the year, there were no withdrawals and the account increased in value by $447.

Restricted cash amounts of $163,821 are held in an endowment trust for residents of Lake City Court. The funds are to be used for purposes that are consistent with the objectives of providing youth enrichment activities, providing services for seniors and providing community building activities for the residents of Lake City Court. The intent is to spend only the interest earnings and leave the principal intact. Upon approval from HUD in September 2013, grant funds in the amount of $163,069 were deposited to the account. During the year, there were no withdrawals and the account increased in value by $327.

37 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(4) Notes Receivable (a) Other Than from Component Units December 31, Due within 2015 one year Due from Stone View Village I Limited Partnership and Stone View Village II Limited Partnership. The notes bear interest at rates ranging from 0.5% to the lowest applicable federal rate as determined under the Internal Revenue Code of 1986, and all interest and principal are due in March and April 2039. $ 1,373,835 — Due from Lutheran Alliance to Create Housing (LATCH) Roxbury Limited Partnership. The note bears no interest for the first 30 years. Interest accrues beginning February 1, 2030 at 2%, with annual payments of $73,388 until the note matures on January 31, 2050. 1,200,000 — Due from the Low Income Housing Institute (LIHI), a Washington nonprofit corporation, and the Lakeview Apartments Limited Partnership. The note bears interest at 3% annually and all interest and principal will be forgiven in December 2040, if the project is operated according to the loan regulatory agreement. 494,600 — Due from the Plymouth Housing Group (PHG), a Washington nonprofit corporation. The loan bears interest at 1% annually and all principal and interest are due January 2041. Provided the borrower complies with the loan regulatory agreement, all principal and interest will be forgiven January 2041. 856,912 — Notes due from the Mount Baker Housing Association for the Starlighter Apartments, which are secured by a deed of trust on the property. The note bears interest at an annual rate of 1%, which is deferred until October 31, 2040, at which time the loan will be forgiven if the project is operated in in accordance with the loan agreement. 270,000 —

38 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

December 31, Due within 2015 one year Due from the Retirement Housing Foundation. The note requires annual payments and is payable in full by December 2016. The interest rate is approximately 3.27%. $ 193,669 193,669 Due from Madison Housing Partners Phase I, LLC and Madison Housing Partners Phase II, LLC. The notes are for the Views at Madison Apartments I and Views at Madison II, respectively, and are secured by deeds of trust on the properties. Both notes bear interest at an annual rate of 1.0% and are payable December 31, 2042. 826,106 — Due from the Seattle Chinatown International District Public Development Authority (SCIDPDA). The note bears interest at a rate of 1% per annum and all interest and principal are due on the maturity date of December 31, 2043. 1,622,881 — Two notes due from the LIHI NW 85th, LLC, which are secured by a deed of trust on the property. One of the $500,000 notes bears interest at 1% per annum and is payable in full on December 31, 2042, provided the project is operated in accordance with Low Income Housing regulatory agreement and the terms of the loan agreement. The other note bears interest at 3% per annum. The balance of principal and accrued interest as of December 31, 2004 shall be amortized over a period of 20 years beginning on January 1, 2005. Payments of $2,942 will be required monthly until final maturity on December 31, 2025. 778,139 27,332 Due from the Andover Court Associates, LLC and secured by a deed of trust on the property. The note bears interest at 1% per annum and is payable in full on the maturity date of March 31, 2043, provided the project is operated in accordance with the Low Income Housing regulatory agreement and the terms of the loan agreement. 743,179 — Due from LIHI Meadowbrook Associates, LLC. The note bears interest at a rate of 1% per annum. The balance of principal and interest is due in full on the maturity date of December 31, 2052. 600,000 — Due from HRG for the purchase of Judkins Park Apartments. The note is secured by a deed of trust on the property and bears interest at 1%. Principal and interest are due on the maturity date of February 29, 2044. 400,340 —

39 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

December 31, Due within 2015 one year Due from the Archdiocesan Housing Authority and ML King Housing Limited Partnership. The note is secured by a deed of trust on the property and bears interest at 1%. Principal and interest are due on the maturity date of July 31, 2044. $ 266,013 — Due from Main Street Interim, LLC. The note is secured by a deed of trust, bears interest at 1% per annum, and matures December 1, 2054. 1,055,568 — Principal and interest are due on the maturity date. Due from Denny Park, LLC. The note is secured by a deed of trust on the property and bears interest at 1%. Principal and interest are due on the maturity date of September 3, 2044. 250,000 — Due from CHHIPS Pantages Apartments LLC. The note is secured by a deed of trust on the property and bears interest at 1%. Principal and interest are payable on the maturity date of August 16, 2044. 548,465 — Due from Stoneway Apartments, LLC. The note is secured by a deed of trust on the property and bears interest at 1% per annum. Principal and interest are payable on the maturity date of July 31, 2055. 1,499,999 — Due from CHHIPS for the construction of Broadway and Pine Apartments. The note is secured by a deed of trust and bears interest at 1%. Principal and interest are due on the maturity date of November 4, 2055. 548,465 — Due from Delridge Neighborhood Development, managing member of the West Seattle Resource Center, LLC. The note is secured by a deed of trust and bears interest at 1%. Principal and interest are payable on the maturity date of February 1, 2056. 325,000 — Due from Homestead Community Land Trust for four properties purchased from the Authority. The notes are secured by deeds of trust, assignments of rent, security agreement, and fixture filing and bear interest at 0.39%. Principal and interest are due when the property is sold to a qualified low-income borrower. Final maturity date was extended to June 30, 2016. 723,200 723,200 Due from Neighborhood House for land sold at Rainier Vista. The note bears no interest and matures August 31, 2054. 210,000 — Allowance for loss (641,161) — Total notes receivable, net $ 14,145,210 944,201

40 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

The Authority has gross notes receivable and an allowance of $5,060,976 for loans made to Neighborhood House, Boys and Girls Club, and Solid Ground that are excluded from the table above. The allowance fully covers the loans as a portion of the loan amounts is forgivable each year provided they comply with the terms of the loan agreements.

(b) Notes Receivable from Component Units December 31, Due within 2015 one year Two notes due from homeWorks I. One note for $12,000,000 bears interest at 4.82% per annum during rehabilitation and 2.75% per annum thereafter. The other note in the amount of $12,000,000 bears interest at 4.68% per annum during rehabilitation and 2.75% per annum thereafter. Both notes mature on January 1, 2046 with principal and interest payments due quarterly during rehabilitation and annually from available cash flows thereafter. As of December 31, 2015, the amount of interest payable to the Authority was $4,144,250. $ 24,000,000 — Two notes due from Escallonia. One note in the amount of $13,430,695 and one note in the amount of $9,916,399. Both notes bear interest at 1% per annum and mature in fiscal year 2058. Interest payments are due annually from available net cash flows. As of December 31, 2015, interest payable to the Authority was $2,159,950. 23,347,094 — Two notes due from High Point North in the amounts of $8,500,000 and $16,652,734. The notes bear compounding interest at 1% per annum and mature in in fiscal year 2054. Interest payments are due annually from available net cash flows. As of December 31, 2015, interest payable to the Authority was $3,029,150. 25,152,734 — Due from Ritz Apartments. The note bears interest at 1% per annum and matures December 31, 2054. Principal and interest payments are due annually from available cash flows. Interest payable to the Authority on December 31, 2015 was $46,972. 265,856 — Due from Alder Crest. The note bears interest at 5% per annum and matures March, 2057 with payments from available cash flows. Interest payable to the Authority on December 31, 2015 was $104,847. 220,000 —

41 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

December 31, Due within 2015 one year Due from Alder Crest for renovations. The note bears interest at 0.5% per annum, payable annually beginning January 1,2014. The loan shall not exceed $371,816 and matures January 31, 2029. No interest was due to the Authority on December 31, 2015. $ 121,816 — Two notes due from Desdemona. One note in the amount of $10,149,991 bears interest at 3% per annum and the other note in the amount of $2,739,144 bears interest at 1% per annum. Both notes require interest only payments from available net cash flows and both notes mature March 1, 2058. Interest due to the Authority as of December 31, 2015 was $4,115,628. 12,889,135 — Two notes due from High Point South in the amounts of $4,606,506 and $8,606,159. The notes bear interest at at 1% per annum and mature in 2062. Interest payments are due annually from available net cash flows. As of December 31, 2015, interest payable to the Authority was $836,802. 13,212,665 — Two notes due from homeWorks II in the amounts of $12,000,000 and $16,051,551. The notes bear bear interest at 4.88% and 4.60%, respectively, during rehabilitation and 3.5% thereafter. Both notes mature December 21, 2046. As of December 31,2015, interest payable to the Authority was $5,816,455. 28,051,551 — Two notes due from homeWorks III in the amounts of $9,200,000 and $11,750,000. The notes bear interest at 4.13% and 5.04%, respectively, during rehabilitation and 4.25%, thereafter. Both notes mature December 19, 2047. As of December 31, 2015, interest payable to the Authority was $4,198,289. 20,950,000 — Due from Tamarack Place. The note bears interest at 1% per annum and matures in 2049. Interest payments are due annually from available net cash flows. As of December 31, 2015, interest payable to the Authority was $650,000. 10,400,000 —

42 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance December 31, Due within 2015 one year Two notes due from Rainier Vista NE. One note in the amount of $10,700,000 and one note in the amount of $6,604,268. Both notes bear interest at 0.25% per annum and mature in 2060. Interest payments are due annually from available cash flows. As of December 31, 2015, interest payable to the Authority was $727,909. $ 16,604,268 — Due from Lake City Court. The amount of the note is up to $16,402,326. The note accrues interest at 0.8% per per annum and matures May 2065. As of December 31, 2015, interest payable to the Authority was $898,256. 16,358,505 — Due from South Shore Court. The note accrues interest at 4.80% per annum and matures June 2040. As of December 31, 2015, interest payable to the Authority was $7,240. 1,810,000 40,000 Two notes due from Kebero Court. The notes accrue interest at 3.0% per annum and mature April 1, 2065. As of December 31, 2015, interest payable to the Authority was $409,566. 8,668,981 — Due from Raven Terrace. The note accrues interest at 2.5% and matures in 2069. As of December 31, 2015 interest payable to the Authority was $137,952. 6,997,709 Due from Leschi House. The note accrues interest at 1.0% per annum and matures April 30, 2065. As of December 31,2015, interest payable to the Authority was $2,073. 624,478 — Due from Hoa Mai Gardens. The note accrues interest at 1.0% per annum and matures December 1, 2065. As of December 31,2015 interest payable to the Authority was $64. 212,288 — Allowance for loss (2,338,439) — Total notes from component units, net $ 207,548,641 40,000

The Authority has gross notes receivable and an allowance of $1,675,000 for a loan made to Lake City Village LLLP, which is excluded from the table above. The allowance fully covers the loan, which is payable to the Authority and dependent on uncertain cash flows. Interest payable to the Authority as of December 31, 2015 was $214,644.

43 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(5) Capital Assets The following is a summary of changes in capital assets of the Authority for the year ended December 31, 2015:

Balance Additions Dispositions Balance January 1, and and December 31, 2015 transfers-in transfers-out 2015 Capital assets, not being depreciated: Land $ 63,500,815 — — 63,500,815 Construction in progress 11,465,698 25,944,900 (13,614,652) 23,795,946 Total capital assets, not being depreciated 74,966,513 25,944,900 (13,614,652) 87,296,761 Depreciable capital assets: Land improvements 43,812,813 — — 43,812,813 Structures 401,057,970 4,032,252 (13,870,717) 391,219,505 Leasehold improvements 897,974 — — 897,974 Equipment 16,706,834 357,975 (275,144) 16,789,665 462,475,591 4,390,227 (14,145,861) 452,719,957 Less accumulated depreciation and amortization for: Land improvements (4,937,784) (978,860) — (5,916,644) Structures (217,483,420) (7,713,609) 13,465,866 (211,731,163) Leasehold improvements (542,059) (89,797) — (631,856) Equipment (15,238,025) (519,685) 266,640 (15,491,070) Total accumulated depreciation and amortization (238,201,288) (9,301,951) 13,732,506 (233,770,733) Total capital assets, being depreciated, net 224,274,303 (4,911,724) (413,355) 218,949,224 Total capital assets, net $ 299,240,816 21,033,176 (14,028,007) 306,245,985

Substantial restrictions are imposed by HUD, as well as by state and local governments, on the use and collateralization of the Authority’s capital assets.

Construction in Progress Capital improvements made on the Authority’s Low Rent housing stock are financed by grant funds provided by HUD under Capital Grants and the Choice Neighborhood Initiative Grants (CNI). The funds

44 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

provided through these programs are used to rehabilitate the housing stock, which extends the useful life of the buildings. Capital grants are awarded annually based on a comprehensive modernization plan submitted by the Authority. CNI grants are awarded based on a specific application request. The Authority’s construction in progress in the Low Rent program consists of the costs for modernization of public housing units. When modernization grants are completed, HUD issues a modernization cost certificate for each grant, at which time construction in progress for that grant is recorded in the building category. For the CNI redevelopment grants, some construction in progress amounts represent infrastructure costs, which will be ultimately transferred to and maintained by the City of Seattle. These transfers occur when the projects are complete.

Component Units The following is a summary of changes in the capital assets of the Authority’s component units for the year ended December 31, 2015:

Balance Additions Dispositions Balance January 1, and and December 31, 2015 transfers-in transfers-out 2015 Capital assets, not being depreciated: Land $ 5,099,274 — — 5,099,274 Construction in progress 45,295,597 30,244,161 (43,665,116) 31,874,642 Total capital assets not being depreciated 50,394,871 30,244,161 (43,665,116) 36,973,916 Depreciable capital assets: Land improvements 20,182,851 1,307,391 — 21,490,242 Structures 361,285,226 41,428,812 — 402,714,038 Equipment 8,158,964 780,850 (17,697) 8,922,117 389,627,041 43,517,053 (17,697) 433,126,397 Less accumulated depreciation for: Land improvements (8,996,151) (1,333,722) 2,423,485 (7,906,388) Structures (66,951,328) (9,890,902) (5,173,996) (82,016,226) Equipment (6,983,386) (338,809) 2,750,511 (4,571,684) Total accumulated depreciation (82,930,865) (11,563,433) — (94,494,298) Total capital assets, being depreciated, net 306,696,176 31,953,620 (17,697) 338,632,099 Total capital assets, net $ 357,091,047 62,197,781 (43,682,813) 375,606,015

45 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(6) Short-Term Borrowings The Authority maintains a $6 million line of credit, which provides the Authority with a ready means of short-term financing for general operations of the Authority. The line of credit bears interest at 65.0% of the bank’s prime rate plus 0.96%, or 3.24% at December 31, 2015, which is payable monthly. The line of credit matures August 2016. There were no amounts outstanding at December 31, 2015.

The Authority maintains a $15 million revolving real property line of credit in order to provide a ready means of financing real property acquisitions. The Authority entered an agreement with the bank effective June 22, 2010. Under the terms of the agreement, the line of credit is split into series A in the amount of $9.25 million and series B in the amount of $5.75 million. Series A bears interest at 65.01% of the bank’s prime rate plus 0.96% and is for a term of one year. The line may be extended annually by the Executive Director until June 22, 2016 with consent of the bank. The rate at December 31, 2015 was 3.24%. Series B has a three-year term and may be extended for an additional three-year term by the Executive Director until June 22, 2016 with consent of the bank. Series B bears interest at 65.01% of the bank’s prime rate plus 0.96%, or 3.24% as of December 31, 2015. As of December 31, 2015, no amounts were outstanding on either portion of the line of credit.

The Authority has also established a $7 million revolving taxable line of credit for the purpose of obtaining bridge financing for the Authority’s acquisition of commercial or other nontax-exempt properties over the next five to seven years. The line of credit bears interest at Key Bank’s prime rate minus 0.90%, or 2.6% as of December 31, 2015, which is payable monthly. The line matures on December 3, 2015, and is renewable annually through 2021. The total amount outstanding at December 31, 2015 was $2,080,982.

The following is a summary of changes in the Authority’s short-term borrowings for the year ended December 31, 2015:

Balance Balance January 1, December 31, 2015 Additions Retirements 2015 Taxable line of credit for purchase of 6058 35th Ave SW. During the year, the Authority paid off the balances for other properties in the development fund including 103 12th Ave S, and 113 & 117 12th Ave. $ 2,462,862 — 1,511,177 951,685 Taxable line of credit for purchase of Apartments at 6927 MLK Jr Way S. 1,129,297 — — 1,129,297 Total short-term borrowings $ 3,592,159 — 1,511,177 2,080,982

46 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(7) Long-Term Debt and Other Long-Term Obligations (a) Authority Debt and Accrued Compensated Absences The following is a summary of changes in the Authority’s long-term debt and accrued compensated absences for the year ended December 31, 2015:

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Loan payable to the City of Seattle for the Epstein Building remodel financed by HUD Community Development Block Grant funds. The loan will be fully forgiven on December 31, 2017 if the property is kept for low-income use. $ 200,000 — — 200,000 — Notes payable issued in 1998 to the City of Seattle’s General Fund, Urban Renewal, and Capital Facilities Fund for New Holly Phase I. Interest accrues at 1% simple interest per year and is forgiven at the rate of 5% per year beginning on the 21st year subject to compliance with certain covenants. Principal payments may be deferred if the property is kept for low- income housing. If the Authority remains in compliance with the debt covenants for 75 years, the unpaid principal balance will be forgiven. 2,417,263 — — 2,417,263 — Note payable to the City of Seattle’s Housing Development fund for New Holly Phase II. Interest accrues at 1% simple interest per year and is payable on or before September 11, 2040. 1,700,000 — — 1,700,000 —

47 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Notes payable issued in 2001 to the City of Seattle’s Cumulative Reserve Fund and HOME Program for New Holly Phase II. Interest accrues at 1% simple interest per year up to the 20th year and is forgiven at the rate of 5% per year beginning on the 21st year, subject to compliance with certain covenants. Principal and interest payments may be deferred if the property is kept for low-income use. If the Authority remains in compliance with the debt covenants for 75 years, the unpaid principal balance and accrued interest will be forgiven. $ 2,800,000 — — 2,800,000 — Note payable to the Washington State Office of Assistance Program. Payments of principal and interest are deferred for 30 years until December 31, 2032 with interest accruing at 1%. beginning on the 31st year, all unpaid principal and interest will be paid over 20 years with annual payments of $149,383. 2,000,000 — — 2,000,000 — Note payable to the State of Washington for the Villa Park project. Interest accrues at 1% per year compounded monthly, with 50 annual payments of $27,698. The note is secured by a deed of trust on the property. 775,274 — 19,945 755,329 20,145

48 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Note payable to the City for the Villa Park Apartments. Interest accrues at 1% simple interest per year for the first 20 years and is forgiven at the rate of 5% per year beginning on the 21st year, subject to compliance with certain covenants. Principal payments may be deferred if the property is kept for low-income housing. If the Authority remains in compliance with debt covenants for 75 years, the unpaid principal balance will be forgiven. The note is secured by a deed of trust on the property. $ 1,785,723 — — 1,785,723 — Mortgage loan for Wedgewood Estates payable to CBRE. Term is 35 years, with final maturity September 1, 2046. The interest rate is 4.10% with monthly payments of $75,102. The loan is guaranteed with FHA insurance. 15,967,318 — 229,922 15,737,396 260,861 Mortgage loan for Wisteria Court payable to Prudential. Term is 35 years, with final maturity August 1, 2038. The interest rate is 5.51%, with monthly payments of $21,114. The loan is guaranteed with FHA Insurance. 3,357,927 — 70,103 3,287,824 74,065

49 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Note payable to the City from 1992 for the Beacon House project. Interest accrues at 1% per year for the first 20 years and is forgiven at the rate of 5% per year beginning on the 21st year, subject to compliance with certain covenants. Principal payments may be deferred if the property is kept for low- income housing. If the Authority remains in compliance with the debt covenants for 75 years, the unpaid principal balance will be forgiven. $ 329,260 — — 329,260 — Note payable to State Office of Community Trade and Economic Development for New Holly Phase I. The note is secured by a lien on the property and matures December 31, 2040. 1,700,000 — — 1,700,000 — Loans payable to Seattle Office of Housing for the rehab of Willis House and Reunion House. Loans bear interest at 1%, which is payable at maturity, December 2059. 850,000 — — 850,000 — Loans payable to Seattle Office of Community Trade and Economic Development for rehab at Willis House and Reunion House. Forgivable on maturity date December 2049. 879,273 — — 879,273 — Loan payable to the City of Seattle for utility infrastructure at New Holly Rainier Visa and High Point. The loan matures July, 2019 and bears interest at 2.5%. 834,843 — 169,095 665,748 173,363

50 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Loans payable to Seattle Office of Housing for the rehab of Nelson Manor. The loan bears interest at 1%, which is payable at maturity, in August 2061. $ 478,065 — — 478,065 — Loan payable to Seattle Office of Housing for the rehab of Olmsted Manor. The loan is payable at maturity, August 2061. 477,974 — — 477,974 — Loan payable to Seattle Office of Housing for the rehab of Blakely Manor. The loan is payable at maturity November 18, 2061. Interest rate is 1%. 984,155 — — 984,155 — Loan payable to Seattle Office of Housing for the rehab of Bitter Lake Manor. The loan bears interest at 1% and is payable at maturity, January 25, 2062. 978,930 — — 978,930 — Loan to the State of WA for Beacon House payable at maturity, in March 2043. 114,212 — — 114,212 — Loan payable to WA State Community Reinvestment Assn for Tamarack Commercial property. Term is 15 years. Note bears interest at 6.5% and is due March 2027. 1,052,082 — 14,527 1,037,555 15,500 CDBG loan payable to City of Seattle for Yesler Terrace redevelopment. Principal and interest at 1% are due at maturity, December 1, 2064. 375,027 — — 375,027 — CDBG loan payable to City of Seattle for Yesler Terrace redevelopment. Principal and interest at 1% are due at maturity, December 1, 2065. for Yesler Terrace 436,470 — — 436,470 —

Total notes payable 40,493,796 — 503,592 39,990,204 543,934

51 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Bonds payable for the Wallingford property. The bonds were repaid during the year. $ 5,358 — 5,358 — — Bonds payable tax-exempt series A and taxable series B for the Gamelin and Genesee commercial condo units. The bonds were rerefunded in December 2015 when series B was paid off. Series A was paid off in January, 2016. 3,228,000 — 768,000 2,460,000 2,460,000 Bonds payable for Gamelin and Genesee commercial condo units. The bonds mature in 2035 and bear interest at 4.3%. The bonds are with revenues from the from the properties and by a pledge of the general the general revenues of the Authority. — 3,320,000 — 3,320,000 125,000 Bonds payable for the High Rise Rehabilitation project, Phase I. The bonds were repaid during the year. 7,860,000 — 7,860,000 — — Bonds payable for the High Rise Rehabilitation project, Phase II. The bonds mature November 1, 2026 and bear interest of 4.553%. The bonds are secured by a deed of trust. 11,416,551 — 675,000 10,741,551 705,000 Bonds payable for the High Rise Rehabilitation project, Phase III. The bonds mature November 1, 2027 and bear interest of 5.15%. The bonds are secured by a deed of trust. 9,380,000 — 405,000 8,975,000 425,000

52 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year Fixed rate bonds payable Longfellow Creek Apartments. Annual payments are $15,000 to $235,000 plus interest at rates of 1.90% to 5.35% with final due date of October 1, 2033. The bonds are secured by a pledge of the general revenue of the Authority and certain revenues and receipts available from the property. $ 2,910,000 — 95,000 2,815,000 100,000 Fixed rate bonds payable for Wisteria Court Apartments. Annual payments are $45,000 to $245,000 plus interest at rates of 1.2% to 5.3%, with final due date of October 20, 2038. The bond proceeds are invested in GNMA certificates to secure the bond repayment. 3,340,000 — 70,000 3,270,000 70,000 Variable rate bonds subject to remarketing for Wedgewood Estates mature August 2036. The interest rate is reset every Wednesday with remarketing agent and was 0.16% on December 31, 2014. The bonds are secured by a letter of credit with Key Bank. 1,175,000 — 450,000 725,000 450,000

53 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Variable rate bonds subject to remarketing for Douglas Apartments rehabilitation project and mature June 2040. The interest rate is reset every Wednesday with remarketing agent and was 0.17% on December 31, 2015. The bonds are secured by a letter of credit with Key Bank. $ 1,840,000 — 30,000 1,810,000 40,000 Fixed rate bonds for New Holly phase I acquired from Holly Park Limited partnership. Interest rates are 4.7–5.9% payable twice a year. The bonds mature January 1, 2030. 3,990,000 — 160,000 3,830,000 165,000 Fixed rate bonds for Replacement Housing Properties, Montridge Arms, Main Street Apts and Yesler Court. Bonds mature September 2043 and are secured by a deed of trust on the properties. 12,380,000 — 205,000 12,175,000 205,000 Fixed rate bonds for Market Terrace, Mary Avenue townhomes, Bayview Tower, Lake City Commons, Villa Park, Telemark Apartments, Main Place II, Delridge Triplexes, 5983 Rainier Ave, 924 MLK Way and Baldwin Apartments. Bonds mature December 1, 2044 and are secured by a deed of trust on the properties. properties. Rates range from 0.25 to 3.50%. 13,670,000 — 270,000 13,400,000 275,000

54 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, December 31, Due within 2015 Additions Retirements 2015 one year

Fixed rate bonds for New Holly phase II. The bonds mature January, 2032 and bear interest at 7.0%. The bonds are backed by a deed of trust on the property and by a pledge of the Authority's general revenue. $ 1,975,000 — 60,000 1,915,000 60,000

Total bonds payable 73,169,909 3,320,000 11,053,358 65,436,551 5,080,000

Accrued compensated absences 3,056,919 2,460,058 2,437,701 3,079,276 270,046

Total long-term obligations $ 116,720,624 5,780,058 13,994,651 108,506,031 5,893,980

For variable rate bonds, the Authority estimated interest payments based on the interest rates in effect at the end of the fiscal year and principal payments based on the maturity date on the bond indentures assuming the bonds will not be called before the maturity dates.

55 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

The following is a summary of debt service requirements of the Authority for long-term obligations as of December 31, 2015:

Total Bonds Notes Principal Interest 2016 $ 8,105,883 1,576,898 5,623,934 4,058,847 2017 5,458,494 1,776,903 3,294,630 3,940,767 2018 5,197,412 1,572,974 2,931,205 3,839,181 2019 5,209,489 1,499,179 3,004,295 3,704,373 2020 5,221,789 1,365,334 3,010,597 3,576,526 2021–2025 26,085,588 6,701,887 17,231,246 15,556,229 2026–2030 21,804,644 7,166,521 18,270,026 10,701,139 2031–2035 12,799,290 7,021,303 11,779,981 8,040,612 2036–2040 9,865,883 16,803,942 22,126,698 4,543,127 2041–2045 6,819,500 5,694,489 10,920,854 1,593,135 2046–2050 — 2,545,772 2,323,408 222,364 2051–2055 — 187,430 — 187,430 2056–2060 — 1,028,930 850,000 178,930 2061–2065 — 3,773,190 3,730,621 42,569 2066–2070 — 329,260 329,260 — Total requirements $ 106,567,972 59,044,012 105,426,755 60,185,229

There are several limitations and restrictions contained in the various debt instruments primarily requiring the Authority to maintain certain levels of low-income tenants. Authority management believes it is in compliance with all significant limitations and restrictions. As of December 31, 2015, all bond issues met debt coverage ratio requirements.

(b) Conduit Debt The Authority has issued special revenue bonds to provide financial assistance to not-for-profit agencies and private developers for the purpose of constructing low-income housing. The bonds are limited obligation bonds of the Authority and are payable solely from project revenue. These nonrecourse conduit bonds are secured by the property financed and are often collateralized by a letter of credit issued by a major bank. The Authority is not obligated in any manner, and accordingly, the bonds have not been recorded in the accompanying financial statements.

As of December 31, 2015, there were 43 series of these special revenue bonds outstanding. The aggregate principal amount payable for the series issued after September 30, 1996 was $342,201,950. The aggregate principal amount payable for the 4 series issued prior to October 1, 1996 could not be determined; their original issue amount totaled $25,310,000.

56 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(c) Component Unit Debt Desdemona has fixed rate bonds outstanding at December 31, 2015 of $6,605,000. The bonds were issued by the Authority on behalf of the component unit and are backed by an irrevocable letter of credit issued by Key Bank and secured by a deed of trust on Desdemona’s leasehold interest in the Holly Park redevelopment project. The bonds are further secured by a pledge of the Authority’s unobligated general revenue. At December 31, 2015, the interest rate on the bonds ranged from 6.0% to 6.25%, based on the maturity schedule in the First Supplemental Trust Indenture. The bonds mature on December 1, 2035.

As of December 31, 2015, Desdemona has other long-term debt totaling $16,955,806 secured by liens on the partnership’s property. Of this amount, $12,889,135 represents the general partner loans made by the Authority and is secured by liens on the partnership’s property. These loans accrue interest at the annual rate of 1% to 3%, and interest-only payments on the outstanding principal balances are due to the general partner from available net cash flows. As of December 31, 2015, no interest payments had been made to the Authority. Desdemona also has a loan from the State of Washington Department of Community, Trade, and Economic Development, Office of Community Development in the amount of $2,000,000. Payments of principal and interest were deferred for 10 years until December 1, 2015, with interest accruing at 1% per annum during the deferral period. Beginning December 1, 2015, all unpaid principal and accrued interest is being paid over 20 years, with annual payments of $22,104 for the first 10 years and $122,060 for the remaining 10 years and the final payment due on or before October 1, 2045. Desdemona also owes the City for a loan in the amount of $2,066,671. The loan accrues interest at 1% annually and matures on August 7, 2053. Payments of principal and interest are due from available net cash flows.

Escallonia has bonds outstanding at December 31, 2015 totaling $4,300,000. The bonds were issued by the Authority on behalf of the component unit and are backed by a deed of trust on the partnership’s leasehold interest in the Rainier Vista redevelopment project. The bonds are further secured by a pledge of the Authority’s unobligated general revenue. Interest is due monthly at a fixed rate of 3.98% under the interest rate swap agreement on the variable rate bonds. The bonds mature on December 1, 2036.

As of December 31, 2015, Escallonia has other long-term debt totaling $23,347,094 of general partner loans made by the Authority and secured by liens on the partnership’s property. These loans accrue noncompounding interest at the annual rate of 1% and mature in fiscal year 2058. Interest-only payments on the loans are due to the general partner from available net cash flows.

High Point North has fixed rate bonds outstanding at December 31, 2015 totaling $8,798,831. The bonds were issued by the Authority on behalf of the component unit and are backed by a deed of trust on High Point North’s leasehold interest in the High Point Phase I redevelopment project. The bonds are further secured by a pledge of the Authority’s unobligated general revenue. The bonds mature on June 1, 2036 and accrue interest at 5.295%.

57 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

As of December 31, 2015, High Point North has other long-term debt totaling $27,152,734. Of this amount, $25,152,734 represents the general partner loans made by the Authority and is secured by liens on the partnership’s property. These loans accrue compounding interest at the annual rate of 1% and mature in fiscal year 2054. Interest-only payments on the loans are due to the general partner from available net cash flows. As of December 31, 2015, no interest payments had been made to the Authority. The remaining $2,000,000 represents a loan from the State of Washington Housing Assistance Program. Payments of principal and interest are deferred for 12 years, with interest accruing at 1% a year during the deferral period. Beginning April 30, 2016, quarterly interest payments are due, and beginning April 30, 2021, quarterly payments of principal and interest are required until the final maturity date of January 31, 2046.

High Point South has bonds outstanding at December 31, 2015 totaling $14,965,000. The bonds were issued by the Authority on behalf of the component unit and are backed by a deed of trust on High Point South’s leasehold interest in the High Point Phase II redevelopment project. The bonds are further secured by a pledge of the Authority’s unobligated general revenue. Interest is due monthly at a fixed rate of 3.98% through an interest rate swap agreement, and at the variable rate of 65.01% of the one-month LIBOR rate plus 2.54%. The bonds mature on March 1, 2039.

As of December 31, 2015, High Point South has other long-term debt totaling $15,212,665. Of this amount, $13,212,665 represents the general partner loans made by the Authority and is secured by liens on the partnership’s property. These loans accrue noncompounding interest at the annual rate of 1% and mature in fiscal year 2062. Interest-only payments on the loans are due to the general partner from available net cash flows. As of December 31, 2015, no interest payments had been made to the Authority. The remaining $2,000,000 represents a loan from the State of Washington Housing Trust Fund. Payments of principal and interest are deferred for 12 years, with interest accruing at 1% a year during the deferral period. Beginning December 31, 2019, quarterly interest payments are due, and beginning December 31, 2029, quarterly payments of principal and interest are required until the final maturity date of September 30, 2059.

Ritz Apartments has total loans outstanding totaling $1,768,885 as of December 31, 2015. The construction loan of $943,029 bears interest at 5.496%, requires monthly principal and interest payments, and is due September 1, 2036.

As of December 31, 2015, Ritz Apartments has other long-term notes payable outstanding totaling $825,856. Of this amount, $560,000 represents a note to the City that bears simple interest at 1% annually. Payments are due annually beginning June 30, 2006 from available net cash flows and the note is payable in full by August 9, 2054. The remaining $265,856 is payable to the general partner and bears interest at 1% annually. Payments are due annually beginning March 30, 2006 from available net cash flows, with final maturity on December 31, 2054.

Alder Crest has outstanding long-term obligations in the amount of $2,458,234 as of December 31, 2015. Of this amount, $992,283 represents a loan payable to the City that bears interest at 1% per annum and matures March 31, 2057. Alder Crest also has a loan payable to the City in the amount 58 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

of $111,124. The loan bears interest at 1% per annum and matures March 31, 2057. The loan is secured by a third deed of trust on the property. Alder Crest has a loan payable to the State in the amount of $1,013,012. Of this amount, $463,012 requires quarterly payments. The entire amount bears no interest and is payable in full March 31, 2057. In addition, Alder Crest also has other borrowings outstanding in the amount of $341,815 from the Authority. One loan in the amount of $220,000 bears interest at 5% per annum and is secured by a fourth deed of trust on the property and matures March 31, 2057. The remaining $121,815 is a loan from the Authority for reimbursement of capital work needed on the stairways of the property. The loan amount shall not exceed $371,816, bears interest at 0.5% annually beginning January 1, 2014 and matures January 31, 2029.

homeWorks I has long-term obligations totaling $24,000,000 as of December 31, 2015. Of this amount, $12,000,000 represents a promissory note from the general partner made by the Authority and secured by a deed of trust encumbering the partnership’s interest in the project. During the rehabilitation phase of the project, interest-only payments are due quarterly beginning April 1, 2006, with interest accruing at a rate of 4.82%. After the rehabilitation stage, principal and interest shall be paid from available cash flows at an annual interest rate of 2.75%. The loan matures on January 1, 2046. homeWorks I has another loan from the general partner made by the Authority and secured by the land, buildings, and improvements in the amount of $12,000,000 as of December 31, 2015. During the rehabilitation phase of the project, interest only payments are due quarterly beginning April 1, 2006, with interest accruing at a rate of 4.68%. After the rehabilitation stage, principal and interest shall be paid from available cash flows at an annual interest rate of 2.75%. The loan matures on January 1, 2046.

homeWorks II has long-term obligations totaling $28,051,551 as of December 31, 2015. Of this amount, $12,000,000 represents a promissory note from the general partner made by the Authority and secured by a deed of trust encumbering the partnership’s interest in the project. During the rehabilitation phase of the project, interest-only payments are due quarterly beginning April 1, 2007, with interest accruing at a rate of 4.88%. After the rehabilitation stage, principal and interest shall be paid from available cash flows at an annual interest rate of 3.5%. The loan matures on December 21, 2046. homeWorks II has another loan from the general partner made by the Authority and secured by the land, buildings, and improvements in the amount of $16,051,551 as of December 31, 2015. During the rehabilitation phase of the project, interest-only payments are due quarterly beginning April 1, 2007, with interest accruing at a rate of 4.6%. After the rehabilitation stage, principal and interest shall be paid from available cash flows at an annual interest rate of 3.5%. The loan matures on December 21, 2046.

homeWorks III has long-term obligations totaling $20,950,000 as of December 31, 2015. Of this, $9,200,000 represents a promissory note from the general partner made by the Authority and secured by a deed of trust encumbering the partnership’s interest in the project. During the rehabilitation phase of the project, interest-only payments are due quarterly beginning April 1, 2008, with interest accruing at a rate of 4.13%. After the rehabilitation stage, principal and interest

59 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

shall be paid from available cash flows at an annual interest rate of 4.25%. The loan matures on December 19, 2047. homeWorks III has another loan from the general partner made by the Authority and secured by the land, buildings, and improvements in the amount of $11,750,000 as of December 31, 2015. During the rehabilitation phase of the project, interest-only payments are due quarterly beginning April 1, 2008, with interest accruing at a rate of 5.04%. After the rehabilitation stage, principal and interest shall be paid from available cash flows at an annual interest rate of 4.25%. The loan matures on December 19, 2047.

South Shore Court has outstanding long-term obligations in the amount of $7,960,000 as of December 31, 2015. Of this amount, $3,650,000 represents a loan payable to the City that bears interest at 2% per annum and matures June 30, 2060. Also, the partnership has a long-term note payable to the Authority in the amount of $1,810,000, which bears interest at 4.8% annually and matures June 1, 2040. South Shore Court has another note payable to the Department of Commerce with the face amount of $2,500,000. The note bears no interest and is payable on June 30, 2060.

As of December 31, 2015, Tamarack Place has outstanding long-term obligations in the amount of $11,344,693. Of this amount, $944,693 represents a fixed rate construction loan payable to Washington Community Reinvestment Association (WCRA) at an interest rate of 6.5%. In addition, the Tamarack Place has a loan payable to the Authority in the amount of $10,400,000. The loan bears interest at 1% per annum and is secured by a leasehold deed of trust on the project.

As of December 31, 2015, Lake City Court has outstanding long-term obligations in the amount of $18,033,505. Of this amount, $16,358,505 represents a note payable to the Authority, which bears interest at 0.8% per annum and is secured by a leasehold dead of trust on the project. Lake City Court also has a lease payable to the Authority in the amount $1,675,000, which is payable from available cash flows. The variable construction loan was paid during the year.

As of December 31, 2015, Rainier Vista NE has outstanding long-term obligations in the amount of $19,176,849. Rainier Vista NE has a fixed rate note payable to U.S. Bank in the amount of $2,572,581, which is secured by a deed of trust on the property and carries an interest rate of 4.8%. The remaining long-term obligation balance consists of two loans payable to the Authority. Loan one bears interest at 1.5% per annum and is secured by a leasehold deed of trust on the project. As of December 31, 2015, $10,000,000 was outstanding. Loan two bears interest at 1.5% per annum and is also secured by a leasehold deed of trust on the project. As of December 31, 2015, $6,604,268 was outstanding.

As of December 31, 2015, Kebero Court has outstanding long-term obligations in the amount of $25,370,416. Of this amount, $15,203,202 represents the amounts advanced on variable rate construction loan from Chase. In 2016, the loan will convert to a fixed rate permanent loan in the amount of $7,050,000 which matures November 8, 2034 and the remaining portion will be paid off. The maximum loan amount is $15,250,000. Kebero Court also has a loan payable to the City of Seattle in the amount of $1,814,325, which bears interest at 1.0% and matures in April, 2065. The 60 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

maximum loan amount is $1,855,000. The remaining $8,668,981 represents two notes from the Authority, which bear interest at 3.0% with principal and interest payable annually from the property’s cash flow and matures April 2065. The notes are secured by a leasehold deed of trust and the maximum amount is $8,783,627.

As of December 31, 2015, Leschi House has outstanding long-term obligations in the amount of $12,848,114. Of this amount, $8,400,000 represents variable rate bonds payable to Bank of America Public Capital Corp. As of December 31, 2015, the rate was 5.13% and matures on August 1, 2045. In addition, Leschi House has a loan payable to the State of Washington Department of Commerce in the amount of $2,499,999. The loan began accruing interest of 1% per annum beginning on May 1, 2015 and matures on April 30, 2065. Leschi House has an additional loan payable to the City of Seattle Office of Housing in the amount of $1,323,637. The loan accrues interest at a rate of 1% per annum and matures on April 30, 2065. Leschi House also has a loan payable to the Authority for $624,478 which bears interest at 1% per annum and matures on April 30, 2065.

As of December 31, 2015, Raven Terrace has outstanding long-term obligations in the amount of $22,675,415. Of this amount $1,141,631 represents a loan from the City of Seattle with a maximum amount of $1,300,000. The loan accrues interest at 1% annually and has a term of 51 years with no payments due until maturity. Raven Terrace also has a variable rate construction loan in the amount of $14,535,875, which matures February 2035. The remaining $6,997,709 represents two loans from the Authority that mature in May 2069 and bear interest of 2.5%.

As of December 31, 2015, Hoa Mai Gardens has outstanding long-term obligations in the amount of $262,289. Of this amount $50,001 represents the amounts advanced on variable rate, 32 month construction loan from Chase bank. The maximum loan amount is $25,300,000. After construction is completed, the construction loan will be converted to a fixed rate, permanent loan for up to $10,750,000 with a term of 17 years and amortization period of 35 years. Hoa Mai Gardens also has two notes from the Authority. The first note bears interest at 1% and a term of 50 years; matures in December 2065 and the maximum amount of the notes is $6,688,824. As of December 31, 2015 $212,288 was drawn from that note. The second note bears interest at 1% and carries a term of 50 years with a maximum loan amount of $10,750,000. The loan will be funded when the construction loan is closed.

61 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

The following is a summary of changes in long-term obligations for the component units:

Balance Balance January 1, Additions/ December 31, Due within 2015 transfers Retirements 2015 one year

Loans payable to primary government from Desdemona $ 12,889,135 — — 12,889,135 — Loan payable to Washington State Housing Trust fund from Desdemona 2,000,000 — — 2,000,000 — Loan payable to City of Seattle HOME fund from Desdemona 2,066,671 — — 2,066,671 — Loans payable to primary government from Escallonia 23,347,094 — — 23,347,094 — Loans payable to primary government from High Point North 25,152,734 — — 25,152,734 — Loan payable to Washington State Housing Trust fund from High Point North 2,000,000 — — 2,000,000 — Loans payable to primary government from High Point South 13,212,665 — — 13,212,665 — Loan payable to Washington State Housing Trust fund from High Point South 2,000,000 — — 2,000,000 — Loans payable to primary government from the Ritz Apartments 265,856 — — 265,856 — Loans payable to the City of Seattle from the Ritz Apartments 560,000 — — 560,000 — Loans payable to Washington Mutual from the Ritz Apartments 966,765 — 23,736 943,029 25,074 Loan payable to City of Seattle from Alder Crest 992,283 — — 992,283 — Loan payable to City of Seattle from Alder Crest 111,124 — — 111,124 — Loans payable to primary government from Alder Crest 341,815 — — 341,815 — Loan payable to Washington State Housing Trust fund from Alder Crest 1,024,236 — 11,224 1,013,012 11,224

62 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, Additions/ December 31, Due within 2015 transfers Retirements 2015 one year

Loans payable to primary government from homeWorks I $ 24,000,000 — — 24,000,000 — Loans payable to primary government from homeWorks II 28,051,551 — — 28,051,551 — Loans payable to primary government from homeWorks III 20,950,000 — — 20,950,000 — Loan payable to City of Seattle from South Shore Court 3,650,000 — — 3,650,000 — Loan payable to primary government from South Shore Court 1,840,000 — 30,000 1,810,000 40,000 Loan payable to the Department of Commerce from South Shore Court 2,500,000 — — 2,500,000 — Loans payable to primary government from Tamarack Place 10,400,000 — — 10,400,000 — Loan payable to WCRA from Tamarack Place 958,622 — 13,929 944,693 14,883 Loan payable to primary government from Rainier Vista NE 16,604,268 — — 16,604,268 — Loan payable to US Bank for construction of Rainier Vista NE 2,617,650 — 45,069 2,572,581 46,586 Lease payable to primary government from Lake City Court 16,358,505 — — 16,358,505 — Lease payable to primary government from Lake City Court 1,675,000 — — 1,675,000 — Loan payable to Office of Housing from Leschi House 1,969,813 530,186 — 2,499,999 — Loan payable to Washington State Housing Trust fund from Leschi House 1,323,637 — — 1,323,637 — Loan payable to primary government from Leschi House — 624,478 — 624,478 — Loan payable to Chase Bank from Kebero Court 11,209,794 3,993,408 — 15,203,202 8,221,224 Loan payable to primary from Kebero Court 6,894,580 1,774,401 — 8,668,981 —

63 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Balance Balance January 1, Additions/ December 31, Due within 2015 transfers Retirements 2015 one year

Loan payable to City of Seattle from Kebero Court $ 1,452,485 361,840 — 1,814,325 — Loan payable to primary government from Raven Terrace 3,404,626 3,593,083 — 6,997,709 — Loan payable to City of Seattle from Raven Terrace 1,141,831 — — 1,141,831 Loan payable to Chase Bank from Raven Terrace 1,167,699 13,368,176 — 14,535,875 — Loan payable to Chase Bank from Hoa Mai Gardens 50,001 — — 50,001 — Loan payable to primary government from Hoa Mai Gardens — 212,288 — 212,288 — Total notes payable 245,150,440 24,457,860 123,958 269,484,342 8,358,991

Bonds payable – Desdemona $ 6,775,000 — 170,000 6,605,000 180,000

Bonds payable – Escallonia 4,420,000 — 120,000 4,300,000 125,000

Bonds payable – High Point North 9,032,150 — 233,319 8,798,831 244,886 Bonds payable – High Point South 15,265,000 — 300,000 14,965,000 300,000 Bonds payable – Leschi House 7,132,981 1,267,019 — 8,400,000 5,023,148

Total bonds payable 42,625,131 1,267,019 823,319 43,068,831 5,873,034

Total long-term obligations $ 287,775,571 25,724,879 947,277 312,553,173 14,232,025

64 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Debt service requirements of long-term obligations of the component units as of December 31, 2015 are as follows:

Total Bonds Notes Principal Interest 2016 $ 7,450,114 14,085,442 14,232,025 7,303,531 2017 2,391,014 5,969,528 1,169,908 7,190,634 2018 2,450,580 5,895,040 1,273,458 7,072,162 2019 2,448,654 5,909,577 1,317,374 7,040,857 2020 2,450,034 5,945,617 1,376,484 7,019,167 2021–2025 12,668,927 30,350,560 8,609,642 34,409,845 2026–2030 13,135,106 32,674,898 13,053,109 32,756,895 2031–2035 13,629,232 45,404,201 28,455,852 30,577,581 2036–2040 8,165,983 30,054,636 10,823,188 27,397,431 2041–2045 1,134,026 52,848,550 28,621,463 25,361,113 2046–2050 — 75,193,451 60,308,464 14,884,987 2051–2055 — 39,974,813 28,820,135 11,154,678 2056–2060 — 67,713,254 59,129,963 8,583,291 2061–2065 — 60,561,289 55,362,108 5,199,181 2066–2070 — 39,708 — 39,708 Total requirements $ 65,923,670 472,620,564 312,553,173 225,991,061

(8) Unearned Revenue – Operating Leases The Authority leased the building and land of the Ritz Apartments to the Ritz Apartments partnership beginning in August 2004. The lease term is 75 years and the Authority has received all required payments. The lease includes a purchase option in which Ritz Apartments has the right to require the Authority to convey legal title to the property for a total purchase price equal to $1 plus the sum of the amount remaining to be paid or outstanding on the bonds any time after all lease payments have been made. Assets held for lease included the land of $194,480 and building and improvements with a cost of $1,395,225 and accumulated depreciation at December 31, 2015 of $424,294.

The Authority leased the building and land of the Alder Crest Apartments to the Alder Crest partnership beginning in December 2005. The lease matures December 31, 2080. The lease includes a purchase option in which Alder Crest has the right to require the Authority to convey legal title to the property for a total purchase price of $1 any time after December 31, 2104. The Authority has received all payments required under the terms of the lease. Assets held for lease-included land of $595,017 and building and improvements with a cost of $1,405,230 and accumulated depreciation at December 31, 2015 of $404,052.

65 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

homeWorks I has leased seven public housing buildings and the related land from the Authority for the purpose of rehabilitating and operating the properties. The initial lease amount was $11,434,751 and all payments have been received. The lease matures December 31, 2104. Assets held for lease included land of $982,235 and building and improvements with a cost of $17,052,143 and accumulated depreciation at December 31, 2015 of $16,802,580.

homeWorks II has leased seven public housing buildings and the related land from the Authority for the purpose of rehabilitating and operating the properties. The initial lease amount was $11,062,522 and all payments have been received. The lease matures December 31, 2105. Assets held for lease included land of $804,323 and building and improvements with a cost of $16,997,451 and accumulated depreciation at December 31, 2015 of $16,875,322.

homeWorks III has leased seven public housing buildings and the related land from the Authority for the purpose of rehabilitating and operating the properties. The initial lease amount was $10,510,573 and the last required payment was received during the year. The lease matures December 31, 2106. Assets held for lease included land of $1,088,828 and building and improvements with a cost of $18,442,567 and accumulated depreciation at December 31, 2015 of $339,038.

The Authority leased the building and land of the Douglas Apartments to South Shore Court beginning in December 2008. The lease matures December 31, 2083. The lease includes a purchase option in which South Shore Court has the right to require the Authority to convey legal title to the property for a total purchase price of $1 any time after December 31, 2058. The Authority has received all payments required under the terms of the lease. Assets held for lease included land of $813,062 and building and improvements with a cost of $2,856,708 and accumulated depreciation at December 31, 2015 of $636,547.

The Lake City Court has leased land and improvements from the Authority beginning May 2010 for the purpose of constructing an 86-unit affordable apartment building in northeast Seattle. The initial lease amount was $1,075,000, the remaining $1,675,000 is in the form of a note payable to the Authority no later than May 1, 2065, and payments are subject to available cash flow of the partnership. The lease matures December 31, 2109. Assets held for lease include land with a cost of $951,658.

The Authority has leased land to Kebero Court for the purpose of constructing a 103-unit affordable apartment building as part of the overall Yesler Terrace development. The initial lease amount was $365,615 based on the appraised land value and is shown as a capital contribution from the Authority. The lease matures December 31, 2112. Assets held for lease include land with a value of $8,505 as of December 31, 2015.

The Authority has leased land to Leschi House for the purpose of constructing a 35-unit addition to Leschi House. The initial lease amount was $3,110,000 based on the appraised land value and is shown as a capital contribution from the Authority. The lease matures December 31, 2112. Assets held for lease include land of $427,500 and building and improvements with a cost of $1,700,469 and accumulated depreciation of $713,139 as of December 31, 2015.

66 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Unearned lease payments are shown as unearned revenue on the statement of net position. The following schedule shows related unearned rental revenue as of December 31, 2015.

Original Unearned lease amount revenue Ritz Apartments $ 1,600,000 1,358,225 Alder Crest Apartments 1,935,000 1,677,000 homeWorks I 11,434,750 10,280,022 homeWorks II 12,171,533 11,061,397 homeWorks III 11,446,098 10,517,157 South Shore Court 3,650,000 3,309,330 Lake City Court 2,750,000 997,131 Leschi House 3,110,000 3,044,399 Kebero Court 365,615 357,622 Total $ 48,462,996 42,602,283

(9) Pension Plans Substantially all of the Authority’s full-time and qualifying part-time employees participate in the Washington State Public Employees Retirement System (PERS), a defined benefit, cost-sharing, multiple-employer public employee retirement system. PERS issues publicly available reports which can be obtained from the Washington State Department of Retirement Systems’ (DRS) website at www.drs.wa.gov or at 402 Legion Way, Olympia, WA 98504.

(a) Aggregated Balances The Authority’s aggregated balances of net pension liability, net pension assets and deferred inflows and outflows of resources as of December 31, 2015 are presented in the table below.

Net pension liability Deferred outflows Deferred inflows

PERS 1 $14,600,729 $ 814,650 $ 798,819

PERS 2/3 12,651,234 2,413,033 3,376,941

Total $27,251,963 $3,227,683 $4,175,760

(b) Plan Description The State legislature established PERS in 1947 under RCW Chapter 41.40. Membership in the system includes: elected officials; State employees; employees of the Supreme, Appeals, and Superior courts (other than judges); employees of legislative committees; college and university employees not in national higher education retirement programs; judges of district and municipal

67 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

courts; noncertificated employees of school districts; and employees of local government. Approximately 50% of PERS members are State employees. PERS contains separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component.

PERS is comprised of and reported as three separate plans for accounting purposes: Plan 1, Plan 2/3 and Plan 3. Plan 1 accounts for the defined benefits of Plan 1 members. Plan 2/3 accounts for the defined benefits of Plan 2 members and the defined benefit portion of the benefits for Plan 3 members. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of Plan 2/3 may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered to be a single plan for accounting purposes.

PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service. The AFC is the average of the member’s 24 highest-paid consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living adjustment (COLA), and a one-time duty-related death benefit if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977.

PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service for Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the member’s 60 highest-paid consecutive service months. Members are eligible for retirement with a full benefit at age 65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3 members who have at least 20 service credit and are 55 years of age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire under one of two provisions:

With a benefit that is reduced by three percent for each year before age 65; or

With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-to-work rules.

68 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

PERS 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of five percent for each year of retirement before age 65. This option is available only to those who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the Consumer Price Index), capped at three percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44.

PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of five percent and escalate to 15 percent with a choice of six options. Employers do not contribute to the defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan.

(c) Pension plan fiduciary net position The pension plans’ fiduciary net positions have been determined on the same basis used by the pension plans. DRS financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). The retirement plans are accounted for as pension trust funds using the flow of economic resources measurement focus and the accrual basis of accounting. Plan member contributions are recognized as revenues in the period in which the contributions are earned. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan.

The Washington State Investment Board (WSIB) has been authorized by statute (chapter 43.33A of the RCW) as having the investment responsibility for the pension funds. Investments are reported at fair value, and unrealized gains and losses are included as investment income in the Statement of Changes in Fiduciary Net Position presented in the DRS Comprehensive Annual Financial Report. Purchases and sales of investments are recorded on a trade-date basis.

Detailed information about the pension plan’s fiduciary net position is available in the separately issued DRS financial report.

69 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(d) Contributions Each biennium, the legislature establishes Plan 1 and Plan 3 employer contribution rates and Plan 2 employer and employee contribution rates. Employee contribution rates for Plan 1 are established by legislative statute and do not vary from year to year. Employer rates for Plan 1 are not necessarily adequate to fully fund the system. The employer and employee contribution rates for Plan 2 and for Plan 3 are developed by the Office of the State Actuary to fully fund the system. The methods used to determine the contribution requirements were established under State statute. All employers are required to contribute at the level established by the legislature and the Office of the State Actuary.

The actual contribution rates for the employers and employees were changed during the year. Effective July 1, 2015 employer rates were increased from 9.21% to 11.18% for all plans. Contributions rates for employees in plan 2 increased from 4.92% to 6.12% effective July 1, 2015.

The Authority’s employer and employee rates and required contributions for employees covered by PERS as of December 31, 2015 were:

PERS Plan 1 PERS Plan 2 PERS Plan 3 required required required Employer 11.18% 11.18% 11.18% Employee 6.00 6.12 varies 17.18% 17.30% 11.18%

PERS Plan 1 PERS Plan 2 PERS Plan 3 required required required Employer $ 22,792 2,700,164 628,861 Employee 13,397 1,462,144 428,631 $ 36,189 4,162,308 1,057,492

70 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(e) Actuarial Assumptions The total pension liability for each of the plans was determined using the most recent actuarial valuation completed in 2015 with a valuation date of June 30, 2014 and rolled forward to the measurement date of June 30, 2015. The following actuarial assumptions have been applied to all prior periods included in the measurement:

Inflation 3.0 percent total economic inflation, 3.75 percent salary inflation

Salary increases In addition to the base 3.75 percent salary inflation assumptions, salaries are also expected to grow by promotions and longevity

Investment rate of return 7.5 percent

Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Washington State Office of the State Actuary (OSA applied offsets to the base tale and recognized future improvements in the mortality by projecting the mortality rates using 100% Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime.

The actuarial assumptions used in the June 30, 2014 report were based on the results of OSA’s 2007-2012 Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2014 actuarial valuation report.

(f) Discount Rate The discount rate used to measure the total pension liability was 7.50 percent for all the plans. To determine that rate, an asset sufficiency test was completed to test whether each pension plan’s fiduciary net assets was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency tests for PERS included an assumed 7.70 percent long term discount rate to determining funding liabilities for calculating future contribution rate requirements.

Consistent with the long term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at the contractually required rates which includes the component of PERS 2/3 pertaining to the unfunded actuarial accrued liability for PERS 1, as provided for in chapter 41.45 of the RCW.

71 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability.

(g) Sensitivity of the Net Pension Liability to Changes in the Discount Rate The table below presents the Authority’s net pension liability calculated using the discount rate of 7.50 percent as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.50 percent) or one percentage point higher (8.50 percent) than the current rate.

Plan 1% decrease Current discount rate 1% increase

PERS 1 $ 17,776,426 14,600,729 11,869,921 PERS 2/3 36,992,853 12,651,234 (5,986,238)

Total $ 54,769,279 27,251,963 5,883,683

(h) Long-Term Expected Rate of Return The long-term expected rate of return on pension plan investments was determined by the WSIB using a building-block method in which the best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class Target Allocation Long-term Expected real rate of return

Fixed income 20.00% 1.70%

Tangible assets 5.00% 4.40%

Real estate 15.00% 5.80%

Global equity 37.00% 6.60%

Private equity 23.00% 9.60%

The inflation component used to create the table is 2.20 percent and represents WSIB’s most recent long-term estimate of broad economic inflation.

72 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(i) Proportionate Share Collective pension amounts are determined as of a measurement date which can be no earlier than an employer’s prior fiscal year. The measurement date for the pension liabilities recorded by the Authority as of December 31, 2015 was June 30, 2015. The Authority's contributions received and processed by DRS during the fiscal year ended June 30, 2015 have been used as the basis for determining the Authority’s proportionate share of the collective pension amounts reported by DRS in their June 30, 2015 Schedules of Employer and Nonemployer Allocations for PERS Plans 1, 2 and 3. The proportionate share for the year ended December 31, 2015 was 0.28 percent for Plan 1 and 0.35 percent for Plan 2/3.

(j) Proportionate share of Pension Expense and Deferrals The Authority’s proportionate share of pension expense for the year ended December 31, 2015 was $870,180 for PERS 1 and $1,499,230 for PERS 2/3 and is reported on the Statement of Revenues, Expenses and Changes in Net Position.

The Authority’s deferred outflows of resources and deferred inflows of resources pertaining to PERS as of December 31, 2015 are presented in the following table:

Deferred outflows of Deferred inflows of Plan Description resources resources PERS 1 Difference between projected and actual earnings on plan investments, net $ (798,819) PERS 1 Contributions subsequent to the measurement date of the collective net pension liability 814,650 Difference between projected and actual earnings on plan PERS 2/3 investments, net (3,377,279) Contributions subsequent to the measurement date of the collective PERS 2/3 net pension liability 1,047,820 Difference between expected and PERS 2/3 actual experience 1,344,829 PERS 2/3 Change in proportionate share 338 PERS 2/3 Change of assumptions 20,384 Total $ 3,227,683 (4,175,760)

73 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Deferred outflows of resources related to the Authority’s contributions subsequent to the measurement date of $1,862,470 will be recognized as a reduction of the net pension liability as of December 31, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows:

Year PERS 1 PERS 2/3 All Plans 2016 $ (309,595) (916,850) (1,226,445) 2017 (309,595) (916,850) (1,226,445) 2018 (309,595) (916,850) (1,226,445) 2019 129,966 738,822 868,788 2020 - - - Thereafter - - - Total $ (798,819) (2,011,728) (2,810,547)

(10) Deferred Compensation Plan The Authority, in conjunction with the State, offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan is managed by the Washington State Department of Retirement Systems. In June 1998, the State Deferred Compensation Program plan assets were placed into trust for the exclusive benefit of participants and their beneficiaries. Pursuant to GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, since the Authority is not the owner of these assets, the plan assets and liabilities are not reported as part of the Authority.

(11) Other Post Employment Benefits (OPEB) (a) Plan Description and Funding Policy The Authority participates in the City Health Care Blended Premium Subsidy, a cost-sharing multiple-employer postemployment healthcare plan administered by the City. Employees who retire from the Authority and spouses of employees who have passed away may continue medical coverage until age 65. Eligible retirees self-pay 100% of the premium based on blended rates, which were established by including the experience of retirees with the experience of active employees for underwriting purposes. The Authority employees are included with the City of Seattle for this plan. The Authority provides implicit subsidy of the postretirement health insurance costs and funds the subsidy on a pay-as-you-go basis. The postemployment benefit provisions are established and may be amended by City Ordinances.

(b) OPEB Obligation The actuarial valuation is updated biannually. The most recent actuarial valuation was as of January 1, 2014. The net OPEB obligation is recorded on the statement of net position as of December 31, 2015, which is calculated based on the excess of Annual Required Contribution over the actual contribution.

74 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(c) Funded Status and Funding Progress As of December 31, 2015, based on the actuarial valuation dates for each of the plans, the unfunded actuarial accrued liability (UAAL) was equal to the actuarial accrued liability (AAL) due to the Authority’s pay-as-you-go policy. Following is the funded status for the plans as of December 31, 2015:

Actuarial valuation date January 1, 2015 January 1, 2014 January 1, 2013 Actuarial value of assets (a) $ — — — Entry age normal AAL (b) 1,125,000 1,039,000 2,458,000 UAAL (b-a) $ 1,125,000 1,039,000 2,458,000 Funded ratio (a/b) Covered payroll $ 32,805,691 31,007,128 30,261,028 UAAL as a percentage of covered payroll ((b-a)/c) 3% 3% 8%

There were no required contributions for the Authority for the year ended December 31, 2015 of for either of the two prior years.

(d) Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits in force at the time of the valuation and the pattern of sharing of benefit costs between the employer and plan members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of any assets.

In the January 1, 2014 actuarial valuation, the entry age normal method was used and the actuarial assumptions included a discount rate of 3.48%. The medical inflation trend rates were adjusted to estimate the impact of the excise tax effective in 2018 on high value health plans. The values of benefits were assumed to increase 2.5% per year. The rate of increases for the City of Seattle traditional and preventative plans was 8% initially with an increase in 2017 to 16.0% due to the excise tax effect and all other years ranging from 7.5% to 5.10%. The medical inflation trend rate for the Group Health standard and deductible plans was 7.5% initially and then ranging from 7.0% to 5.2%. Unfunded actuarial accrued liability is being amortized as a level amount over past and future service. The remaining amortization period at January 1, 2014 was 30 years.

(12) Risk Management The Authority maintains insurance against most normal hazards. Property insurance coverage is at a limit of $100 million, with a deductible of $50,000. Earthquake insurance coverage is $1 million per occurrence, with a deductible of $100,000 per occurrence. The Authority participates in the Housing

75 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Authority Risk Retention Group (HARRG) in order to obtain stable and affordable general liability insurance coverage. General liability coverage provided is $15 million per year, with a deductible of $25,000 per occurrence. The Authority also maintains a number of other insurance policies necessary and appropriate in the normal course of business, including employee fidelity and directors and officers insurance. The amount of settlements has not exceeded insurance coverage for each year of the past three fiscal years.

The Authority’s economic risk as a participant in HARRG is limited to the Authority’s initial surplus contribution of $90,000 and the payment of annual premiums for its general liability insurance coverage. Although the underwriting experience of HARRG may result in increased annual premium charges and/or assessments against each participant’s surplus contribution account, the Authority’s exposure to any net loss allocation is restricted to its surplus contribution account balance. Based on the results of HARRG’s latest annual independent actuarial study performed in accordance with GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, the level of reserve maintained by HARRG has been determined to be adequate to cover estimated claim liabilities.

The Authority has elected to pay for its employment security coverage via quarterly reimbursements to the Washington State Department of Employment Security. This reimbursable method of payment is in lieu of unemployment taxes and the election is authorized for all political subdivisions under Washington State Law (RCW 50.44.060).

(13) Contingencies In connection with various federal and state grant programs, the Authority is obligated to administer related programs and spend the grant moneys in accordance with regulatory restrictions, and is subject to audit by the grantor agencies. In cases of noncompliance, the agencies involved may require the Authority to refund program moneys. The amount, if any, of expenses, which may be disallowed by the grantor, cannot be determined at this time although the Authority expects such amount, if any, to be immaterial.

As of December 31, 2015, the Authority and its component units have outstanding construction contracts and other commitments totaling approximately $45.7 million. These commitments are primarily related to the implementation of redevelopment activities and capital projects funded by federal, state, and local financial assistance, tax-exempt bonds, and tax credit equity contributions.

The Authority is also contingently liable in connection with claims and contracts arising in the normal course of its activities. Authority management is of the opinion that the outcome of such matters will not have a material effect on the accompanying financial statements.

76 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(14) General Revenue Pledge The Authority issues certain bonds and short-term borrowings that are backed by the general revenues of the Authority. The Authority also backs certain bonds issued by its discretely presented component units. For some borrowings, revenues from the properties are intended to be the primary source of repayment and the revenues of the Authority would be used only if those revenues are not sufficient to cover the required payments. Total pledged revenues as of December 31, 2015 are as follows:

Proportion of annual debt service pledged to Total future 2015 Year revenues general Term of Description of debt Purpose of Debt Issued pledged revenue commitment

Obligations of the Authority Project revenues are primary repayment source: Fixed Rate bonds Purchase of Longfellow Creek Apartments 2003 $ 4,441,100 0.18% 2033 Fixed Rate tax exempt Purchase of condominium units at bonds - Series A Gamelin and Genesee mixed use buildings (paid off January, 2016) 2005 2,482,202 0.10 2035 Fixed Rate taxable Refunding of bonds for Gamelin/Genesee mixed use buildings 2015 4,966,628 0.17 2035 Fixed Rate bonds Construction of housing units at NewHolly redevelopment, Phase I 1998 5,761,253 0.27 2030 Fixed Rate bonds 2013 Refunding for Montridge Arms, Main Street Apartments, 2002 Replacement Housing projects and Yesler Court properties 2013 24,521,213 0.60 2043 Fixed Rate bonds 2014 Refunding for Market Terrace, Mary Avenue Townhomes, Bayview Tower, Lake City Commons, Villa Park, Telemark Apartments, Main Place II, Delridge Triplexes, 5983 Rainier Ave, 924 MLK Way and Baldwin Apartments 2014 24,928,976 0.61 2044 Fixed Rate bonds Construction of housing units at New Holly redevelopment, Phase II 2000 3,270,375 0.14 2032

77 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Proportion of annual debt service pledged to Total future 2015 Year revenues general Term of Description of debt Purpose of Debt Issued pledged revenue commitment

General revenues are primary repayment source: Variable Rate bonds Purchase Wedgewood Estates Apartment complex 2001 $ 730,500 0.32% 2036 Variable Rate bonds Rehabilitation of Douglas Apartments (property of South Shore Court) 2009 2,972,870 0.06 2040 Taxable short term line of credit, $7 million Purchase commercial properties 2004 2,081,042 0.04 2021

Obligations of the Authority for component units: Project revenues are primary repayment source: Fixed Rate bonds for Construction of housing units at Rainier component unit Vista redevelopment, Phase I 2003 6,546,959 0.21 2036 Fixed Rate bonds for Construction of housing units at component unit NewHolly redevelopment, Phase III 2003 11,698,563 0.41 2035 Fixed Rate bonds for Construction of housing units at High component unit Point redevelopment, Phase I 2004 14,413,191 0.50 2036 Fixed Rate bonds for Construction of housing units at High component unit Point redevelopment, Phase II 2007 21,475,000 0.41 2039

Equity investment are the primary repayment source: Variable rate bonds Construction of housing units at Leschi for component unit House (2016 conversion to fixed rate) 2013 11,789,957 3.72 2045 Variable rate Construction of housing units at construction loan Kebero Court (2016 conversion to fixed rate) 2013 22,831,585 6.05 2016 Variable rate Construction of housing units at construction loan Raven Terrace (2016 conversion to fixed rate) 2014 19,745,778 0.19 2035 Variable rate Construction of housing units at Hoa Mai construction loan Gardens 2014 50,001 — 2050

78 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(15) Discretely Presented Component Units Condensed Financial Information The following tables reflect the condensed statements of net position and statements of revenues, expenses, and changes in net position for the discretely presented component units as of and for the year ended December 31, 2015:

Condensed statements of net position Tamarack Rainier High Point Desdemona Escallonia Place Vista NE North

Cash and cash equivalents $ 1,030,811 1,133,299 671,627 1,530,416 3,225,931 Current receivables from primary government 25,320 — — 14,625 8,546 Capital assets, net 29,380,860 26,883,662 12,322,335 20,533,165 44,154,740 Other assets 992,146 403,520 53,925 182,132 871,455

Total assets 31,429,137 28,420,481 13,047,887 22,260,338 48,260,672 Current payables due to primary government 579,255 463,194 2,949 147,467 557,224 Other current payables 868,570 363,235 125,740 149,382 806,121 Long-term payables to primary government 17,004,763 25,954,182 11,209,020 17,207,645 29,537,353 Bonds and other long-term liabilities 10,491,671 4,648,226 929,810 2,525,994 10,553,945

Total liabilities 28,944,259 31,428,837 12,267,519 20,030,488 41,454,643

Net investment in capital assets 5,820,054 (763,432) 977,642 1,356,317 8,203,176 Restricted net position 1,452,554 977,677 445,019 1,004,978 2,726,656 Unrestricted net position (4,787,730) (3,219,601) (642,293) (131,445) (4,123,803)

Total net position 2,484,878 (3,005,356) 780,368 2,229,850 6,806,029

Condensed statements of revenues, expenses and changes in net position Operating revenues 2,197,146 1,820,984 682,926 1,184,062 3,474,472 Depreciation/amortization (1,161,998) (1,126,171) (407,858) (840,277) (1,804,642) Other operating expenses (1,627,465) (1,226,040) (547,408) (763,315) (2,595,122)

Operating loss (592,317) (531,227) (272,340) (419,530) (925,292)

Nonoperating expense (759,984) (367,731) (164,900) (375,744) (767,143) Change in net position before partners’ contributions (1,352,301) (898,958) (437,240) (795,274) (1,692,435) Partners’ contributions 2,319,517 — — — — Beginning net position 1,517,662 (2,106,398) 1,217,608 3,025,124 8,498,464

Ending net position $ 2,484,878 (3,005,356) 780,368 2,229,850 6,806,029

79 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Condensed statements of net position

High Point Ritz South Shore South Apartments Alder Crest Court homeWorks I

Cash and cash equivalents $ 1,926,163 100,942 311,841 417,840 3,180,641 Current receivables from primary government 15,728 119,116 — 13,987 — Capital assets, net 48,459,775 1,935,898 5,282,729 8,998,769 25,292,234 Other assets 703,289 56,817 88,416 201,946 697,599

Total assets 51,104,955 2,212,773 5,682,986 9,632,542 29,170,474

Current payables due to primary government 428,689 7,131 176,543 47,240 455,628 Other current payables 4,013,854 219,014 198,182 565,631 460,451 Long-term payables to primary government 16,074,230 547,180 608,317 2,053,146 28,144,250 Bonds and other long-term liabilities 16,665,000 1,477,955 2,105,194 6,150,000 —

Total liabilities 37,181,773 2,251,280 3,088,236 8,816,017 29,060,329

Net investment in capital assets 18,282,110 167,013 2,824,495 1,038,769 1,292,234 Restricted net position 1,201,991 91,392 300,341 342,965 3,025,504 Unrestricted net position (5,560,919) (296,912) (530,086) (565,209) (4,207,593)

Total net position 13,923,182 (38,507) 2,594,750 816,525 110,145

Condensed statements of revenues, expenses and changes in net position

Operating revenues 3,133,667 232,510 250,030 343,467 4,909,814 Depreciation/amortization (1,649,112) (107,207) (242,575) (252,069) (849,541) Other operating expenses (1,882,046) (92,279) (264,672) (259,484) (4,104,454)

Operating loss (397,491) 33,024 (257,217) (168,086) (44,181)

Nonoperating expense (847,190) (60,607) (22,141) (153,560) (653,728)

Change in net position before partners’ contributions (1,244,681) (27,583) (279,358) (321,646) (697,909) Partners’ contributions — — — — — Beginning net position 15,167,863 (10,924) 2,874,108 1,138,171 808,054

Ending net position $ 13,923,182 (38,507) 2,594,750 816,525 110,145

80 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Condensed statements of net position Lake City Leschi Kebero homeWorks II homeWorks III Court House Court

Cash and cash equivalents $ 2,504,909 1,884,794 1,101,444 1,932,743 1,749,982 Current receivables from primary government — — — 6,818 — Capital assets, net 30,169,707 23,457,201 24,849,134 13,115,334 28,913,888 Other assets 671,860 657,120 183,587 3,395,482 1,216,511

Total assets 33,346,476 25,999,115 26,134,165 18,450,377 31,880,381

Current payables due to primary government 149,816 181,570 150,093 448,860 1,284,744 Other current payables 300,395 240,097 92,509 5,658,067 9,583,662 Long-term payables to primary government 33,868,005 25,148,288 18,814,514 988,970 9,456,299 Bonds and other long-term liabilities — — — 7,200,488 8,796,303

Total liabilities 34,318,216 25,569,955 19,057,116 14,296,385 29,121,008

Net investment in capital assets 2,118,156 2,507,201 6,815,629 267,220 3,227,380 Restricted net position 2,348,977 1,755,876 596,379 88,925 1,142,393 Unrestricted net position (5,438,873) (3,833,917) (334,959) 3,797,847 (1,610,400)

Total net position (971,740) 429,160 7,077,049 4,153,992 2,759,373

Condensed statements of revenues, expenses and changes in net position

Operating revenues 5,452,246 4,625,096 704,814 609,013 592,278 Depreciation/amortization (1,000,321) (762,868) (866,956) (422,505) (409,315) Other operating expenses (4,506,296) (3,670,711) (529,694) (344,236) (374,968)

Operating (loss) income (54,371) 191,517 (691,836) (157,728) (192,005)

Nonoperating (expense) revenue (976,513) (886,643) (231,606) (274,050) (237,812)

Change in net position before partners’ contributions (1,030,884) (695,126) (923,442) (431,778) (429,817) Partners’ contributions — — — 464,091 1,205,675 Beginning net position 59,144 1,124,286 8,000,491 4,121,679 1,983,515

Ending net position $ (971,740) 429,160 7,077,049 4,153,992 2,759,373

81 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

Condensed statements of net position Raven Hoa Mai Terrace Gardens Total Cash and cash equivalents $ 1,363,935 2,440,901 26,508,219 Current receivables from primary government — — 204,140 Capital assets, net 25,577,285 6,279,299 375,606,015 Other assets 369,886 — 10,748,691 Total assets 27,311,106 8,720,200 413,067,065 Current payables due to primary government 659,552 3,089,166 8,829,121 Other current payables 2,016,416 2,043,756 27,705,082 Long-term payables to primary government 7,775,662 212,352 244,604,176 Bonds and other long-term liabilities 15,677,706 50,001 87,272,293 Total liabilities 26,129,336 5,395,275 368,410,672 Net investment in capital assets 2,901,870 6,017,010 63,052,844 Restricted net position 1,265,409 2,440,801 21,207,837 Unrestricted net position (2,985,509) (5,132,886) (39,604,288) Total net position 1,181,770 3,324,925 44,656,393

Condensed statements of revenues, expenses and changes in net position Operating revenues — — 30,212,525 Depreciation/amortization — — (11,903,415) Other operating expenses (9,672) — (22,797,862) Operating income(loss) (9,672) — (4,488,752) Nonoperating revenue (expense) 410 134 (6,778,808) Change in net position before partners’ contributions (9,262) 134 (11,267,560) Partners’ contributions — 3,324,791 7,314,074 Beginning net position 1,191,032 — 48,609,879 Ending net position $ 1,181,770 3,324,925 44,656,393

82 (Continued) THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Notes to Basic Financial Statements December 31, 2015

(16) Lease Commitment During August 2011, the Authority executed a long-term operating lease for the central office. The lease began on April 1, 2012 and the following schedule shows the future minimum rentals under the lease: Year ending December 31: 2016 $ 1,404,295 2017 1,451,547 2018 1,467,297 2019 1,467,297 2020 1,467,297 Thereafter 3,301,418 Total $ 10,559,151

(17) Subsequent Events The Authority has evaluated the subsequent events from the balance sheet date through May 18, 2016, the date which the financial statements were issued, and determined there are no other items to disclose.

REQUIRED SUPPLEMENTARY INFORMATION PENSION PLANS

THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON SchedulesofRequiredSupplementalInformation ScheduleofProportionateShareoftheNetPensionLiability LastTenFiscalYears(Unaudited)(1)

2014 2015 PERS1 Proportionofthenetpensionliability 0.283227% 0.279123% Proportionateshareofthenetpensionliability $ 14,267,693 14,600,729 Coveredemployeepayroll $ 309,470 223,273 Proportionateshareofthenetpensionliabilityasapercentageof coveredemployeepayroll 4610.36% 6539.41% Planfiduciarynetpositionasapercentageofthetotalpensionliability 61.19% 59.10%

PERS2/3 Proportionofthenetpensionliability 0.354434% 0.354073% Proportionateshareofthenetpensionliability $ 7,164,391 12,651,234 Coveredemployeepayroll $ 30,697,958 32,579,187 Proportionateshareofthenetpensionliabilityasapercentageof coveredemployeepayroll 23.34% 38.83% Planfiduciarynetpositionasapercentageofthetotalpensionliability 93.29% 89.20%

ScheduleofPensionPlanContributions LastTenFiscalYears(Unaudited)(1)

PERS1 Contractuallyrequiredcontribution $ 1,253,651 1,282,842 Contributionsinrelationtothecontractuallyrequiredcontribution $ (1,253,651) (1,282,842) Contributiondeficiency(excess) $ — —

Coveredemployeepayroll $ 309,470 223,273 Contributionsasapercentageofcoveredemployeepayroll 405.10% 574.56%

PERS2/3 Contractuallyrequiredcontribution $ 1,497,269 1,577,229 Contributionsinrelationtothecontractuallyrequiredcontribution $ (1,497,269) (1,577,229) Contributiondeficiency(excess) $ — —

Coveredemployeepayroll $ 30,697,958 32,579,187 Contributionsasapercentageofcoveredemployeepayroll 4.88% 4.84%

NotestotheRequiredSupplementaryInformationfortheyearendedDecember31,2015. Changesinbenefitterms Therewerenochangesinthebenefittermsforpensionplans. Changesofassumptions Therewerenochangesintheassumptionsforpensionplans.

(1) GASB68wasadoptedin2015,prioryearsdatanotavailable

SUPPLEMENTARY INFORMATION COST CERTIFICATES (SEE INDEPENDENT AUDITORS’ REPORT)

(Unaudited)

Actual HOPE VI U.S. Department of HousIng OMB Approval No. 2577·0208 and Urban Development (exp. 9/30/2014) Cost Certificate Office of Public and Indian Housing

Public reporting burden for this collection of Information Is estimated to average 2 hours per response, Including the time for reviewing Instructions, searching existing data sources, gathering and malnlalnlng the data needed, and completing and reviewing the oollectlon of Information. This agency may not conduct or sponsor, and a person Is not required to respond to. a collection of Information unless that collecllon displays a valid OMB conlrol number. This collection of Informalion requires thaI each Grantee submit Information to enable HUD to Initiate the fiscal ctoseout process. The Information will be used by HUD to determine whether Ihe HOPE VI grant Is ready to be audited and closed out. The Information Is essential for audit verllloation and fiscal close oul. Responses to the collecllon are required by the HOPE VI Grant Agreement. The Information requesled does not lend Ilself to confidentiality.

Grantee Name HOPE VI Granl Number Housing Authority of the City of Seattle WA19URD0011108

The Grantee hereby certifies to the Department of Housing and Urban Development as follows: 1. That the Actual Program Cost of the HOPE VI Grant Is as shown below:

A. Original Funds Approved $ 10,486,839.00

B. Funds Disbursed $ 10,486,839.00

C. Funds Expended (Actual Program Cost) $ 10,486,839.00

D. Amount to be Recaptured (A-C) $ 0.00

E. Excess of Funds Disbursed (B-C) $ 0.00

2. That all work in connection with the HOPE VI Grant has been completed; 3. That the entire Actual Program Cost or liabilities therefor incurred by the Grantee have been fully paid;

4. That there are no undischarged mechanics', laborers', contractors', or materialmen's liens against such Program work on file In any public office where the same should be filed in order to be valid against such Program work; and 5. That the time in which such liens could be flied has expired.

I hereby certify that all the information stated herein, as well as any information provided in the accompaniment herewith, Is true and accurate. WarnIng: HUD will prosecute false claims and statemenls. Conviction may result In crimInal and/or civil penalties. (18 U.S.C. 1001, 1010, 1012;31 U.S.C. 3729, 3802)

Dale (mm/ddlyyyy)

<5 tt 10V 101..0/11

For HUD The Cost Certificate Is approved for audit (signature of approving official) Use Only

Wvdt-~ ; k~~=:----:---L-_tOt_'1_1s:o_n_.------L I°--!..~~~;~f_!;-;~~-- The audited costs ag ~C=ostsshown above Verified (signature) Dale (mm/dd/yyyy)

Approved (signature) Date (mm/dd/yyyy)

form HUD·530D1-A (08/2003) Previous adilions ara obsolete 85 !~._

U.S. Department of Housing OMB Approval No. 2577-0157 (exp. 12/31/2011) Actual Modernization and Urban Development Cost Certificate Office of Public and Indian Housing

Comprehensive Improvement Assistance Program (CIAP) Comprehensive Grant Program (CGP)

Public reporting burden for this collection of information is estimated to average 2 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Reports Management Officer, Paperwork Reduction Project(2577 -0044 and 0157), Office of Information Technology, U.S. Department of Housing and Urban Development, Washington, D.C. 20410-3600. This agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless that collection displays a valid OMB control number. Do not send this form to the above address. This collection of information requires that each Housing Authority (HA) submit information io enable HUD to initiate the fiscal closeout process. The information will be used by HUD to determine whether the modernization grant is ready to be audited and closed out. The information is essential for audit verification and fiscal close out. Responses to the collection are required by regulation. The information requested does not lend itself to confidentiality. HA Name: Modernization Project Number: CITY OF SEATTLE HOUSING AUTHORITY WA19C001501-10 The HR hereby certifies to the Department of Housing and Urban Cevelopment as follows:

1. That the total amount of Modernization Cost (herein called the "Actual Modernization CosY') of the Modernization Grant, is as shown below:

A. Original Funds Approved $ 3,109,271.00

B. Funds Disbursed $ 3,109,271.00

C. Funds Expended (Actual Modernization Cost) $ 3,109,271.00

D. Amount to be Recaptured (A—C) $ 0.00

E. Excess of Funds Disbursed (B-C) $ 0.00

2. That all modernization work in connection with the Modernization Grant has been completed; 3. That the entire Actual Modernization Cost or liabilities therefor incurred by the HA have been fully paid; 4. That there are no undischarged mechanics', laborers', contractors', or material-men's liens against such modernization work on file in any public office where the same should be filed in order to be valid against such modernization work; and

5. That the time in which such liens could be filed has expired.

hereby certify that all the information slated herein, as well as any information provided in the accompaniment herewith, is true and accurate. Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties.(18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802)

Signature of Executive Director &Date:

/ ~~~~~~~ X

For HUD Use Only The Cost Certificate is approved for audit: Approved r Au it (Director, Offi of Public Ho ing / ONAP Administrator) Date: - ~.

The audited costs agree with the costs shown above: Verified: (Designated HUD Official) Date:

X Approved: (Director, Office of Public Housing / ONAP Administrator) Date:

X form HUD-53001 (10/96) 86 ref Handbooks 7485.1 &.3 u.S. pepartment of Housing OMB Approval No. 2577.0208 (exp. Actual HOPE VI and Urban Qevelopment o1131r2o18) Cost Certificate Office of Public and Indian Housing

reporting burden for this collection of information fs estimated to average 2 hours per response, including the time for revlewing Insiructlons, Public This agency searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of Iniormetlon. valid OMB control number. may nit conductor sponsor, and a person fs no! required to respond to, a collecllon of Information unloss that collection displays a will be of requires Thal each Grantee submit Information to enable HUp io Initiate the ilscai closeout process. The information This collection Intormatlon verification and 11ece1 by HUD to determine whether the HOPE VI grant fs ready to be audited and closed out. The iniormatlon is essenfiel for audit used to conildentlelity. close out. Responses to the collection are required by the HOPE VI Grant Agreement. The information requested does not lend itself

Grantee Name HOPE VI Gf0f11 NurtlbBf Housing Authority of the City of Seattle WAI9URD0~11199

The Grantee hereby certifies to the Department of Housing and Urban Development as follows: 1. That the Actual Program Cost of the HOPE VI Grant is as shown below:

A. Original Funds Approved ~ $ 35,000,000.00

B. Funds Disbursed $ 35,000,000.00

C. Funds Expended (Actual Program Cost} $ 35,D00,000.00

D. Amount to be Recaptured (A—C) $ 0.00 0.00 E. Excess of Funds Disbursed (B-C) $

2. That all work in connection with the HOPE VI Grant has been completed; fully paid; 3. That the entire Actual Program Cost or Ifabilitles therefor Incurred by the Grantee have been Program work on file in any public 4. That there are no undischarg ed mechanics', laborers', contractors', or materialmen's liens against such office where the same should be filed In order to be valid against such Program work; and 5. That the time In which such Ilens could be filed has expired.

herewith, Is true and accurate. hereby certify Thai all the information stated herein, as well as any Information provided in the accompaniment U,S.C.1001,1010,1012; 31 U,S.C, 3729,3802) Warning: HUD will prosecute false claims and statements. Conviction may result In criminal and/or civil penallles.(18

Date (mm/ddlyyyy) Signature of Executive

is approved for audit (signature of approving official) For HUD The Cost tificate Date m/d yyyy) Use Only , ,, ~~ above..~______shown- wcoats tea,agree with the The audited costs Date (mm/dd/yyyy) Verified (signature)

Date (mm/dd/yyyy) Approved (signature)

form HUD-53001•A (0112016) Previous editions are obsolete

87 Actual HOPE VI u.s. Department of Housing OMB Approval No. 2577-0208 and Urban Development {exp 01I31I2018) Cos# Certificate Office of Public and Indian Housing

Public reporting burden for this collection of information is estimated to average 2 hours per response, including the time for reviewing Instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless that collection displays a valid OMB control number. This collection of information requires that each Grantee submit information to enable HUD to initiate the fiscal closeout process. The iniormetion will be used by HUD to determine whether the HOPE VI grant is ready to be audited and closed out. The information is essential for audit verification and fiscal close out. Responses to the collection are required by the HOPE VI Grant Agreement. Tha information requested does not lend itself to confidentiality.

Grantee Name HOPE VI Grant Numhe~ Housing Authority of the City of Seattle WAI9URD0011100

The Grantee hereby certifies to the Department of Housing and Urban Development as follows: 1. That the Actual Program Cost of the HOPE VI Grant is as shown below:

A. Original Funds Approved 35,000,000.00

B. Funds Disbursed 35,000,000.00

C. Funds Expended (Actual Program Cost) 35,000,000.00

D. Amount to be Recaptured (A—C) 0.00

E. Excess of Funds Disbursed (B-C) 0.00

2. That all work in connection with the HOPE VI Grant has been completed;

3. That the entire Actual Program Cost or liabilities therefor incurred by the Grantee have been fully paid;

4. That there are no undischarged mechanics', laborers', contractors', or materialmen's liens against such Program work on file in any public office where the same should be filed in order to be valid against such Program work; and 5. That the time in which such liens could be filed has expired.

hereby certify that all the information stated herein, as well as any Information provided In the accompaniment herewith, is true end accurate. Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties.(1B U.S.C.1001,1010,1012;31 U.S.C.3729, 3802)

Signature of Executiver A ~ ~ Date (mm/dd/yyyy)

For HUD The Cost Ce 'Icate is approved for audit (signature of approving official) Use Only ~ ~~~ '; ~a~e ~m dd/yyyy) shy/~~ The audited costs agree with the costs shown above Verified (signature) Date (mMdd/yyyy)

Approved (signature) Date (mmlddlyyyy)

Previous editions are obsolete form HUD-53001-A (01/2015)

THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON

StatisticalSection (Unaudited)

SectionIII

THE HOUSING AUTHORITY OF THE CITY OF SEATTLE, WASHINGTON Statistical Section

Statistical Section

This section provides additional information regarding the Authority in the following categories:

Financial Trends show how the Authority’s financial position has changed over Tables 1–2 time

Revenue Capacity the tables in this section show the Authority’s ability to Tables 3–4 generate revenue

Debt Capacity shows the Authority’s debt burden over time and provide Tables 5–6 information on the ability to issue debt

Demographics and the tables in this section portray the socioeconomic Table 7–9 Economic Statistics environment and provide information to allow comparisons over time and comparisons to other governments

Operating the purpose of these tables is to show the Authority’s Tables 10–12 Information operations and provide information to assess the government’s economic condition

89 Table1 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON FinancialTrends NetPositionbyComponent–PrimaryGovernment LastTenFiscalYears(Unaudited)

Net investment Restricted Fiscalyear incapital fordebt endedSeptember30(a) assets service Unrestricted Total 2006 $ 174,593,252 5,448,150 144,625,694 324,667,096 2007(a) 211,875,842 9,725,557 132,651,693 354,253,092 2008(a) 222,001,336 5,326,536 142,674,746 370,002,618 2009(a) 227,083,324 5,550,146 151,794,210 384,427,680 2010(a) 229,826,301 6,486,917 170,526,030 406,839,248 2011(a,b) 224,771,337 8,543,577 185,863,188 419,178,102 2012(a,b) 199,273,982 9,406,113 212,444,630 421,124,725 2013(a,c) 210,293,958 10,069,831 228,421,457 448,785,246 2014(a,d) 218,243,381 11,669,052 217,985,386 447,897,819 2015(a) 223,534,799 13,578,114 243,740,195 480,853,108

Notes: (a) Beginninginfiscalyear2007,theAuthority’sfiscalyearenddatechangedtoDecember31 fromSeptember30. (b) Netpositionfor2011and2012wererestatedasaresultoftheadoptionofGASB65. (c) Netpositionfor2013wasrestatedasaresultofthemergerwithRavennaSchoolLimited Partnership,acomponentunitoftheAuthority. (d) Netpositionfor2014wasrestatedasaresultofthemergerwithOthelloStreetLimited Partnership,acomponentunitoftheAuthorityandasaresultofGASB68.

90 Table2 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON FinancialTrends ChangesinNetPosition–PrimaryGovernment LastTenFiscalYears(Unaudited)

2006 2007(a) 2008(a) 2009(a) 2010(a) 2011(a,c) 2012(a,c,d) 2013(a,d) 2014 2015 Operatingrevenues: Tenantrentals $ 19,888,907 23,958,442 18,548,105 18,963,514 19,853,164 21,338,005 20,690,177 21,550,029 22,785,736 22,837,426 Housingassistancepaymentsubsidies 77,907,735 107,528,715 84,099,962 87,253,047 96,202,546 95,645,677 105,422,182 103,981,489 109,438,967 115,101,121 Operatingsubsidiesandgrants(b) 16,038,328 19,109,472 17,523,075 18,006,286 21,258,217 22,814,568 19,522,792 28,020,480 28,898,006 29,245,755 Other 21,232,065 35,381,503 22,594,560 19,212,557 19,480,446 21,762,895 18,081,083 18,619,880 21,002,883 28,511,890 Totaloperatingrevenues 135,067,035 185,978,132 142,765,702 143,435,404 156,794,373 161,561,145 163,716,234 172,171,878 182,125,592 195,696,192 Operatingexpenses: Housingoperationsandadministration 30,248,810 46,408,207 41,515,711 38,998,671 42,453,709 44,662,095 41,680,059 39,786,646 48,731,040 49,455,950 Tenantservices 2,750,585 3,171,644 1,307,592 1,644,363 3,729,452 3,937,994 3,602,554 3,542,648 4,096,481 5,072,113 Utilityservices 4,827,108 5,252,632 4,092,002 4,540,982 4,718,662 4,998,955 5,393,684 5,990,952 6,334,799 6,045,785 Maintenance 16,388,539 21,461,247 17,053,995 18,159,325 20,082,664 18,824,304 15,081,988 17,409,835 18,696,116 18,481,187 Housingassistancepayments 62,296,993 80,300,757 64,270,568 71,064,302 73,550,131 76,942,437 79,478,249 78,552,745 79,543,161 82,775,844 Other 6,031,825 2,585,630 2,767,976 2,115,315 4,209,600 1,318,772 2,021,796 30,221,452 1,398,022 3,344,964 Depreciationandamortization 11,929,183 15,155,490 10,299,572 9,281,594 10,059,962 10,676,293 10,258,105 10,232,876 10,077,223 9,314,799 Totaloperatingexpenses 134,473,043 174,335,607 141,307,416 145,804,552 158,804,180 161,360,850 157,516,435 185,737,154 168,876,842 174,490,642 Operatingincome(loss) 593,992 11,642,525 1,458,286 (2,369,148) (2,009,807) 200,295 6,199,799 (13,565,276) 13,248,750 21,205,550 Nonoperatingrevenues(expenses): Interestexpense (7,849,402) (10,755,826) (8,532,367) (7,956,814) (7,479,432) (6,887,452) (5,721,825) (5,500,338) (5,082,076) (4,572,533) Interestincome 5,625,496 7,637,844 6,547,470 5,337,931 5,257,848 1,536,648 1,397,221 461,197 3,698,302 3,520,102 Changeinfairvalueofinvestments (273,517) 140,142 (332,725) 430,908 44,842 68,742 (74,996) (94,819) (40,763) (1,704) Lossonnotesreceivable — — — — — (479,017) — — — — Lossoninvestmentinlimitedpartnerships — — (1,505,687) (1,480) (67,624) (1,321) (621,387) (70,809) (2,320,774) (1,160) Dispositionofassets (13,426,642) (6,673,827) (1,735,402) (4,472,397) (19,878,330) (16,774,091) (12,343,242) (11,826) (2,540,988) (403,789) Netnonoperatingexpenses (15,924,065) (9,651,667) (5,558,711) (6,661,852) (22,122,696) (22,536,491) (17,364,229) (5,216,595) (6,286,299) (1,459,084) Changeinnetpositionbefore contributions (15,330,073) 1,990,858 (4,100,425) (9,031,000) (24,132,503) (22,336,196) (11,164,430) (18,781,871) 6,962,451 19,746,466 Capitalcontributions 10,218,082 27,595,138 19,849,951 23,456,062 46,544,071 34,675,050 13,249,971 17,146,108 21,307,488 13,208,868 Increase(decrease)innetposition (5,111,991) 29,585,996 15,749,526 14,425,062 22,411,568 12,338,854 2,085,541 (1,635,763) 28,269,939 32,955,334 Netpositionatbeginningofyear 329,779,087 324,667,096 354,253,092 370,002,618 384,427,680 406,839,248 419,178,102 421,263,643 419,627,880 447,897,819 Netpositionatendofyear $ 324,667,096 354,253,092 370,002,618 384,427,680 406,839,248 419,178,102 421,263,643 419,627,880 447,897,819 480,853,153 Notes: (a) Fiscalyear2006representsayearenddateofSeptember30.Beginningin2007,thefiscalyearenddateis December31,andin2007,thestatementofrevenues,expenses,andchangesinnetpositionreflectsafifteenmonthperiod. — — (b) Beginningwithreportingyear2010,theAuthorityhasclassifiedOperatingsubsidiesandgrantsasoperatingrevenues.Prioryears havebeenrestatedonthisscheduletoreflectcomparativeresults. (c) Netpositionfor2011and2012wererestatedasaresultoftheadoptionofGASB65. (d) Netpositionfor2012and2013wasrestatedasaresultofthemergerofRavennaSchoolLLC,a componentunitoftheAuthority. (e) Netpositionfor2014wasrestatedasaresultoftheadoptionofGASB68andasaresultof themergerwithOthelloStreetLimitedPartnership,acomponentunitoftheAuthority.

91 Table3 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON RevenueCapacity OperatingRevenuesbySource–PrimaryGovernment LastTenFiscalYears(Unaudited)

Housingassistance Operating Tenantrentals paymentsubsidies subsidiesandgrants Other Total Percentage Percentage Percentage Percentage Year(a) Amount oftotal Amount oftotal Amount oftotal Amount oftotal Amount Total 2006 $ 19,888,907 14.7% $ 77,907,735 57.7% $ 16,038,328 11.9% $ 21,232,065 15.7% $ 135,067,035 100.0% 2007 23,958,442 12.9 107,528,715 57.8 19,109,472 10.3 35,381,503 19.0 185,978,132 100.0 2008 18,548,105 13.0 84,099,962 58.9 17,523,075 12.3 22,594,560 15.8 142,765,702 100.0 2009 18,963,514 13.2 87,253,047 60.9 18,006,286 12.6 19,212,557 13.3 143,435,404 100.0 2010 19,853,164 12.7 96,202,546 61.3 21,258,217 13.6 19,480,446 12.4 156,794,373 100.0 2011 21,338,005 13.2 95,645,677 59.2 22,814,568 14.1 21,762,895 13.5 161,561,145 100.0 2012 20,690,177 12.6 105,422,182 64.4 19,522,792 11.9 18,081,083 11.1 163,716,234 100.0 2013 21,287,096 12.4 103,981,489 60.5 28,020,480 16.3 18,618,710 10.8 171,907,775 100.0 2014 22,785,736 12.5 109,438,967 60.1 28,898,006 15.9 21,002,883 11.5 182,125,592 100.0 2015 22,837,426 11.7 115,101,121 58.8 29,245,755 14.9 28,511,890 14.6 195,696,192 100.0 Notes: (a) Fiscalyears2006and2007representayearenddateofSeptember30.Beginningin2007,thefiscalyearenddateis December31,andin2007,thestatementofrevenues,expenses,andchangesinnetpositionreflectsafifteenmonthperiod.

(b) Year2015wasrestatedduetothemergerwithOthelloStreetLimitedPartnership,acomponentunitoftheAuthority

92 Table4 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON RevenueCapacity NonoperatingRevenuesbySource–PrimaryGovernment LastTenFiscalYears(Unaudited)

Changeinfairvalue Interestincome ofinvestments Total Percentof Percentof Year(a) Amount total Amount total Amount Total 2006 $ 5,625,496 105.1 $ (273,517) (5.1) $ 5,351,979 100.0% 2007 7,637,844 98.2 140,142 1.8 7,777,986 100.0 2008 6,547,470 105.3 (332,725) (5.3) 6,214,745 100.0 2009 5,337,931 92.5 430,908 7.5 5,768,839 100.0 2010 5,257,848 99.2 44,842 0.8 5,302,690 100.0 2011 1,536,648 95.7 68,742 4.3 1,605,390 100.0 2012 1,397,221 105.7 (74,996) (5.7) 1,322,225 100.0 2013 444,930 127.1 (94,819) (27.1) 350,111 100.0 2014 3,698,302 101.1 (40,763) (1.1) 3,657,539 100.0 2015(b) 3,520,102 100.0 (1,704) — 3,518,398 100.0 Notes: (a) Fiscalyear2006representsayearenddateofSeptember30.Beginningin2007,the fiscalyearenddateisDecember31,andin2007,thestatementofrevenues,expenses,andchanges innetpositionreflectsafifteenmonthperiod. (b) Year2015wasrestatedduetothemergerwithOthelloStreetLimitedPartnership,acomponentunitoftheAuthority

93 Table5 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DebtCapacity ScheduleofGeneralRevenueBondCoverage LastTenFiscalYears(Unaudited)

Ratioof debtservice Debtservice Total General togeneral Fiscalyear Principal Interest debtservice expense(b) expenses Wakefield2000BondsforWallingford: 2006 34,840 22,636 57,476 18,115 3.2 2007(a) 47,093 33,620 80,713 15,327 5.3 2008 40,749 24,278 65,027 6,070 10.7 2009 43,711 20,971 64,682 710 91.1 2010 46,871 17,845 64,716 825 78.4 2011 50,259 14,456 64,715 — — 2012 53,893 10,823 64,716 — — 2013 57,789 6,927 64,716 — — 2014 61,966 2,750 64,716 — — 2015 5,353 31 5,384 — — 2013BondRefunding 2014 205,000 627,845 832,845 1,080,325 0.8 2015 205,000 642,406 847,406 1,135,804 0.7 2014BondRefunding 2014 185,000 400,569 585,569 1,781,030 0.3 2015 270,000 588,129 858,129 1,822,150 0.5 Wedgewood2001VariableRateBonds: 2006 150,000 105,939 255,939 943,339 0.3 2007(a) 187,500 151,700 339,200 922,274 0.4 2008 160,000 69,529 229,529 808,109 0.3 2009 165,000 40,280 205,280 812,350 0.3 2010 170,000 12,862 182,862 821,552 0.2 2011 — 13,320 13,320 860,218 — 2012 — 7,755 7,755 897,637 — 2013 765,000 4,511 769,511 935,755 0.8 2014 475,000 2,672 477,672 943,186 0.5 2015 450,000 1,456 451,456 966,690 0.5 NewHollyPhaseI 2010 120,000 268,700 388,700 673,784 0.6 2011 125,000 261,806 386,806 1,972,525 0.2 2012 135,000 254,331 389,331 1,531,083 0.3 2013 140,000 246,425 386,425 1,956,647 0.2 2014 150,000 238,088 388,088 2,166,103 0.2 2015 160,000 229,175 389,175 2,022,355 0.2 DouglasBonds 2010 3,750,000 21,565 3,771,565 24,010 157.1 2011 20,000 6,752 26,752 52,454 0.5 2012 30,000 5,760 35,760 44,543 0.8 2013 30,000 5,601 35,601 46,971 0.8 2014 30,000 3,827 33,827 42,993 0.8 2015 30,000 3,384 33,384 45,342 0.7

94 (Continued) Table5 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DebtCapacity ScheduleofGeneralRevenueBondCoverage LastTenFiscalYears(Unaudited)

Ratioof debtservice Debtservice Total General togeneral Fiscalyear Principal Interest debtservice expense(b) expenses LongfellowCreek2003Bonds: 2006 65,000 179,215 244,215 255,770 1.0 2007(a) 87,500 221,437 308,937 428,712 0.7 2008 70,000 175,085 245,085 282,268 0.9 2009 75,000 172,891 247,891 343,526 0.7 2010 75,000 170,379 245,379 335,457 0.7 2011 80,000 167,670 247,670 420,657 0.6 2012 80,000 165,450 245,450 445,630 0.6 2013 85,000 161,419 246,419 540,047 0.5 2014 90,000 158,805 248,805 432,176 0.6 2015 95,000 154,125 249,125 540,538 0.5 Gamelin/GeneseeBonds: 2007(a) 30,000 288,150 318,150 37,079 8.6 2008 17,000 229,901 246,901 58,525 4.2 2009 21,000 229,052 250,052 43,951 5.7 2010 62,000 228,955 290,955 17,837 16.3 2011 70,000 219,218 289,218 10,204 28.3 2012 78,000 218,792 296,792 8,307 35.7 2013 87,000 212,439 299,439 13,183 22.7 2014 97,000 199,683 296,683 52,833 5.6 2015 108,000 196,470 304,470 45,322 6.7 Gamelin/Genesee2015bondrefunding 2015 — — — 45,322 —

NewHollyPhaseII 2015 60,000 136,150 196,150 686,053 0.3

Notes: (a) Fiscalyears2006representsayearenddateofSeptember30.Beginningin2007,the fiscalyearenddateisDecember31,andin2007,thestatementofrevenues,expenses,andchanges innetassetsreflectsafifteenmonthperiod. (b) Generalexpenseincludesoperatingexpensesexceptfordepreciationandamortization. (c) Generalexpensefor2010representsapartialyearbeginningAugust27,2010.

95 Table6 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DebtCapacity RatioofDebttoCapitalAssets–PrimaryGovernment LastTenFiscalYears(Unaudited)

Ratioof Ratioof Fiscalyear totaldebt debtfor ended Bonds Notes Total Capital tocapital housingunits September30(a) payable payable debt assets,net assets tototaldebt(b) 2006 $ 85,476,724 33,750,623 119,227,347 304,561,566 39.15 33.50 2007 130,867,182 33,016,355 163,883,537 329,120,245 49.79 43.31 2008 123,459,433 32,485,160 155,944,593 337,110,417 46.26 44.43 2009 108,984,688 60,573,959 169,558,647 337,089,410 50.30 44.71 2010 98,950,816 62,277,978 161,228,794 343,138,706 46.99 51.45 2011 79,675,557 55,221,591 134,897,148 322,532,095 41.82 53.07 2012 77,128,664 49,564,954 126,693,618 291,056,484 43.53 54.07 2013 71,408,875 40,188,127 111,597,002 288,455,844 38.69 54.71 2014(c) 73,169,909 40,493,796 113,663,705 299,240,816 37.98 57.33 2015 65,436,551 39,990,204 105,426,755 306,245,985 34.43 67.10

Note:(a)TheAuthoritychangeditsfiscalyearenddatefromSeptember30toDecember31beginninginfiscalyear2007. (b)UnitcountexcludesSection8unitsnotownedbytheAuthorityandexcludesunitsownedbycomponentunitswhere therelateddebtisheldbythecomponentunit. (c)2014wasrestatedduetothemergerwithOthelloStreetLimitedPartnership,acomponentunitoftheAuthority

96 Table7 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DemographicsandEconomicStatistics TenantDemographics–PopulationStatistics LastTenFiscalYears(Unaudited)

Publichousingprogram Total Nonelderly Calendar number handicapped/ year(a) Adults Elderly Minors oftenants disabled 2005 4,944 1,657 2,755 9,356 1,953 2006 4,731 1,662 2,648 9,041 1,793 2007 4,598 1,727 2,587 8,912 1,709 2008 4,730 1,685 2,814 9,229 1,739 2009 4,897 1,767 3,230 9,894 1,782 2010 4,888 1,823 3,089 9,800 1,839 2011 5,029 1,909 3,180 10,118 1,807 2012 5,140 1,970 3,317 10,427 1,774 2013 4,953 2,008 3,148 10,109 1,691 2014 4,795 2,049 3,079 9,923 1,716 2015 4,582 2,073 3,003 9,658 1,655 Section8program(b) Total Nonelderly Calendar number handicapped/ year(a) Adults Elderly Minors oftenants disabled 2005 7,149 1,421 5,636 14,206 2,615 2006 7,209 1,857 5,102 14,168 2,727 2007 7,426 1,801 5,311 14,538 2,863 2008 7,616 1,970 5,258 14,844 3,044 2009 8,084 1,995 5,998 16,077 3,289 2010 8,371 2,059 5,937 16,367 3,451 2011 8,694 2,307 5,949 16,950 3,520 2012 8,654 2,477 5,938 17,069 3,510 2013 8,528 2,547 5,717 16,792 3,503 2014 8,295 2,638 5,733 16,666 3,419 2015 8,252 2,695 5,639 16,586 3,387

97 (Continued) Table7 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DemographicsandEconomicStatistics TenantDemographics–PopulationStatistics LastTenFiscalYears(Unaudited)

Seniorandlocalhousing programs(c) Total Nonelderly Calendar number handicapped/ year(a) Adults Elderly Minors oftenants disabled 2005 640 903 746 2,289 196 2006 661 904 278 1,843 192 2007 723 913 345 1,981 186 2008 711 906 310 1,927 170 2009 924 1,023 424 2,371 126 2010 926 1,001 424 2,351 117 2011 994 1,039 426 2,459 86 2012 1,023 1,042 434 2,499 110 2013(d) 1,040 1,058 499 2,597 93 2014(e) 994 1,074 474 2,542 102 2015 929 1,136 442 2,507 91 Agencywidetotals Total Nonelderly Calendar number handicapped/ year(a) Adults Elderly Minors oftenants disabled 2005 12,733 3,981 9,137 25,851 4,764 2006 12,601 4,423 8,028 25,052 4,712 2007 12,747 4,441 8,243 25,431 4,758 2008 13,057 4,561 8,382 26,000 4,953 2009 13,905 4,785 9,652 28,342 5,197 2010 14,185 4,883 9,450 28,518 5,407 2011 14,717 5,255 9,555 29,527 5,413 2012 14,817 5,489 9,689 29,995 5,394 2013 14,521 5,613 9,364 29,498 5,287 2014 14,084 5,761 9,286 29,131 5,237 2015 13,763 5,904 9,084 28,751 5,133 Notes: (a)2001dataispresentedonafiscalyearbasisratherthancalendaryear. (b)IncludesportinsandexcludesportoutsandparticipantslivingintheAuthority’sSeniorHousingprogram. (c)Effective2009,SeniorandLocalHousingProgramsincludestenantsfromprivatelymanagedproperties. (d)Excludes36householdswhoseageisunknown (e)Excludes37householdswhoseageisunknown

98 Table8 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DemographicsandEconomicStatistics RegionalDemographics–PopulationStatistics LastTenFiscalYears(Unaudited)

KingCounty Seattle Percapital Percapita averageannual KingCounty population incomeKing incomeKing Publicschool unemployment Year (a) (a) County(b) region(b) enrollment rate(c) 2006 1,835,300 578,700 52,655 48,522 45,634 4.2 2007 1,861,300 586,200 57,710 53,061 45,276 4.5 2008 1,884,200 592,800 58,141 53,999 45,572 5.7 2009 1,909,300 602,000 56,904 50,644 45,944 8.5 2010 1,931,249 608,660 54,927 51,370 47,008 8.4 2011 1,942,600 612,100 57,281 53,931 48,496 7.1 2012 1,957,000 616,500 61,911 52,267 49,525 6.1 2013 1,981,900 626,600 65,990 55,190 51,094 5.6 2014 2,017,250 640,500 68,877 N/A 52,819 4.2 2015 2,052,800 662,400 N/A N/A 53,844 4.5 Notes: (a)AsofApril1,source:WashingtonStateOfficeofFinancialManagement,2015Population TrendsforWashingtonStateestimatesonly. (b)Source:U.S.BureauofEconomicAnalysis,2013ismostcurrentavailable. (c)Preliminarysource:WashingtonStateEmploymentSecurityDepartment.

99 Table9 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON DemographicsandEconomicStatistics PrincipalIndustries LastTenFiscalYears(Unaudited)

2015 2014 2013 Numberof Percentageof Numberof Percentageof Numberof Percentageof Industry employees Employment Rank employees Employment Rank employees Employment Rank Retailtrade 133,800 10.19% 1 128,000 10.02% 1 120,200 9.75% 1 Professionalandtechnical 115,500 8.79 2 112,000 8.76 2 107,100 8.68 2 Localgovernment 95,200 7.25 3 92,400 7.23 3 90,400 7.33 3 Foodservicesanddrinkingplaces 92,400 7.03 4 88,300 6.91 4 84,100 6.82 4 Information 89,400 6.81 5 85,600 6.70 5 82,300 6.67 5 Manufacturingdurablegoods 82,600 6.29 6 83,000 6.49 6 82,100 6.66 6 Administrativeandwasteservices 70,300 5.35 7 67,400 5.27 7 66,100 5.36 7 Wholesaletrade 62,300 4.74 8 61,700 4.83 8 60,600 4.91 8 Stategovernment 59,000 4.49 9 57,200 4.48 9 56,800 4.61 9 Ambulatoryhealthcareservices 55,500 4.23 10 54,100 4.23 10 50,400 4.09 10 Transportationandwarehousing 48,600 3.70 11 46,200 3.62 11 43,500 3.53 12 Financeandinsurance 41,900 3.19 12 45,000 3.52 12 45,500 3.69 11 946,500 72.06% 920,900 72.06% 889,100 72.10% 2012 2011 2010 Numberof Percentageof Numberof Percentageof Numberof Percentageof Industry employees Employment Rank employees Employment Rank employees Employment Rank Retailtrade 113,600 9.62% 1 109,300 9.47% 1 105,900 9.33% 1 Professionalandtechnical 102,200 8.66 2 97,900 8.49 2 93,400 8.23 2 Localgovernment 89,100 7.55 3 88,800 7.70 3 89,300 7.87 3 Foodservicesanddrinkingplaces 79,600 6.74 6 76,400 6.62 6 74,400 6.56 6 Information 80,900 6.85 4 80,200 6.95 4 79,400 7.00 4 Manufacturingdurablegoods 80,000 6.78 5 77,100 6.68 5 75,200 6.63 5 Administrativeandwasteservices 64,000 5.42 7 63,000 5.46 7 61,000 5.37 7 Wholesaletrade 59,400 5.03 8 58,500 5.07 8 58,000 5.11 8 Stategovernment 55,500 4.70 9 55,000 4.77 9 55,800 4.92 9 Ambulatoryhealthcareservices 49,200 4.17 10 48,400 4.20 10 47,400 4.18 10 Transportationandwarehousing 42,700 3.62 12 43,400 3.76 12 42,400 3.74 12 Financeandinsurance 43,600 3.69 11 44,400 3.85 11 44,500 3.92 11 859,800 72.83% 842,400 73.02% 826,700 72.86% 2009 2008 2007 Numberof Percentageof Numberof Percentageof Numberof Percentageof Industry employees Employment Rank employees Employment Rank employees Employment Rank Retailtrade 106,000 9.19% 1 116,900 9.62% 1 119,800 9.86% 1 Professionalandtechnical 92,900 8.05 2 100,600 8.28 2 94,700 7.80 2 Localgovernment 89,300 7.74 3 89,500 7.37 3 87,300 7.19 3 Foodservicesanddrinkingplaces 74,000 6.42 6 77,700 6.39 6 77,100 6.35 5 Information 80,200 6.95 4 79,800 6.57 5 75,600 6.23 6 Manufacturingdurablegoods 79,000 6.85 5 83,700 6.89 4 86,900 7.16 4 Administrativeandwasteservices 61,100 5.30 7 72,500 5.97 7 73,900 6.09 7 Wholesaletrade 59,700 5.18 8 63,400 5.22 8 64,200 5.29 8 Stategovernment 55,800 4.84 9 57,100 4.70 9 55,300 4.55 9 Ambulatoryhealthcareservices 46,400 4.02 11 44,800 3.69 12 42,800 3.52 12 Transportationandwarehousing 43,500 3.77 12 46,600 3.83 11 48,700 4.01 11 Financeandinsurance 46,900 4.07 10 49,000 4.03 10 50,600 4.17 10 834,800 72.38% 881,600 72.56% 876,900 72.22% 2006 Numberof Percentageof Industry employees Employment Rank Retailtrade 120,900 10.06% 1 Professionalandtechnical 88,600 7.37 2 Localgovernment 86,000 7.15 4 Foodservicesanddrinkingplaces 75,900 6.31 5 Information 72,500 6.03 7 Manufacturingdurablegoods 87,200 7.25 3 Administrativeandwasteservices 75,000 6.24 6 Wholesaletrade 64,700 5.38 8 Stategovernment 55,400 4.61 9 Ambulatoryhealthcareservices 42,700 3.55 12 Transportationandwarehousing 47,900 3.98 11 Financeandinsurance 51,400 4.28 10 868,200 72.21% Source:WashingtonEmploymentSecurityDepartmentLaborMarketandEconomicAnalysis. DataprovidedforKingCounty,whichincludestheSeattleMetropolitanAreaandothersurroundingcommunities.

100 Table10 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON OperatingInformation NumberofUnitsbyProgram(d) LastTenFiscalYears(Unaudited)

Other HopeIV Public Senior housing nonpublic Fiscalyear housing Section8 housing programs units Total 2006 5,432 9,199 993 902 423 16,949 2007 5,250 9,202 993 1,008 423 16,876 2008 5,263 9,260 993 971 539 17,026 2009 5,261 9,425 993 910 629 17,218 2010 5,316 9,612 994 915 661 17,498 2011(d) 5,408 10,164 994 915 385 17,866 2012(d) 5,441 10,558 994 876 739 18,608 2013(d,e) 5,401 10,775 994 876 739 18,785 2014(f) 5,259 11,036 1,029 826 596 18,746 2015(g) 5,146 11,248 1,029 929 596 18,948

HouseholdsServedandWaitingListData LastTenFiscalYears(Unaudited) Total Total households householdson Fiscalyear served(b) waitinglists(c) 2006 11,869 12,284 2007 12,077 3,850 2008 12,359 6,879 2009 12,912 7,751 2010 13,220 8,179 2011 13,765 7,523 2012 13,769 7,586 2013 13,601 9,435 2014 13,532 8,569 2015 13,516 8,481

Notes: (a) 2010and2011publicHousingunitcountsarecorrected;projectbasedunitsownedbySHAwaserroneouslyincluded. (b) ExcludesModrehab,outgoingportablevouchers,nonpublichousingtaxcredits,andlocalprograms, butincludesincomingportablevouchers. (c) Reflectsuniquehouseholds.ExcludesHOPEVIcommunities. Foryear2013–HousingChoiceVoucherwaitinglistopenedandreflectsuniquehouseholds.IncludesHOPEVIcommunities (d) 894Seniorhousingunitswereaddedtopublichousingbutarerepresentedwithseniorandotherlocalhousingprograms. (e) 40unitsatYeslerTerracewasdemolishedin2013. (f) 142publichousingunitsdemolishedorsoldin2014.35seniorhousingunitsaddedatLeschiHouse. (g) 113publichousingunitsdemolishedorsoldin2015.103otheraffordableunitsaddedatKeberoCourt.

101 Table11 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON OperatingInformation PropertyCharacteristicsandDwellingUnitComposition December31,2015(Unaudited)

Publichousing Numberof Yearbuilt Nameofdevelopment Address units oracquired BallardHouse 2445NW57thStreet 79 1969 BartonPlace 9201RainierAvenueS. 91 1971 BeaconTower 1311S.Massachusetts 108 1971 BellTower 22151stAvenue 120 1970 CalMorCircle 6420CaliforniaAvenueSW 75 1968 CapitolPark 52514thAvenueE. 125 1970 CedarvaleHouse 110508thAvenueNE 118 1970 CedarvaleVillage 110508thAvenueNE 24 1971 CenterPark 212126thAvenueS. 137 1969 CenterWest 5333rdAvenueW. 91 1969 DennyTerrace 100MelroseAvenueE. 220 1968 GreenLakePlaza 505NE70thStreet 130 1969 HarvardCourt 610HarvardAvenueE. 81 1968 HighPoint 3000SWGrahamStreet 250 Various HollyCourt 3804S.Myrtle 97 1980 InternationalTerrace 2026thAvenueS. 100 1972 JacksonParkHouse 1439630thAvenueNE 71 1970 JacksonParkVillage 1439630thAvenueNE 41 1970 JeffersonTerrace 800JeffersonStreet 299 1967 LakeCityCourt 1253633rdAvenueNE 51 2011 LakeCityHouse 1254633rdAvenueNE 115 1971 Lictonwood 9009GreenwoodAvenueN. 81 1970 LongfellowCreek* 5915DelridgeWaySW 30 1993 NewHolly 705032ndAvenueS. 400 Various OliveRidge 170017thAvenue 105 1969 OlympicWest 110W.OlympicPlace 75 1970 Partnershipunits Various 50 Various QueenAnneHeights 1212QueenAnneAvenueN. 53 1970 RainierVista 2917SSnoqualmieSt 251 Various RossManor 1420WesternAvenue 100 1984 RoxhillCourtApartments* 994027thAveSW 13 1980 ScatteredSites Various 711 Various StewartManor 633934thAvenue 74 1968 TriCourt 720N.143rd 87 1971 UniversityHouse 470012thAvenueNE 101 1971 UniversityWest 45447thAvenueNE 113 1971 WestTownView 14072ndAvenueW 59 1977 WestwoodHeights 945527thAvenueSW 130 1978 WisteriaCourt* 754424thAveSW 20 1987 YeslerTerrace 903E.YeslerWay 270 1941 Totalunits–publichousing 5,146 *Nonpublichousingunitsarelistedunder“Otherhousingprogram”section.

102 (Continued) Table11 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON OperatingInformation PropertyCharacteristicsandDwellingUnitComposition December31,2015(Unaudited)

Section8 Numberof Yearbuilt Nameofdevelopment Address units oracquired HousingChoiceVouchers Various 10,359 — ModerateRehabilitation Various 759 — BayViewTower 26144thAve 100 1979 MarketTerrace 1115NWMarketSt. 30 1980 TotalnumberofSection8units 11,248 Seniorhousing Numberof Yearbuilt Nameofdevelopment Address units oracquired LeschiHouse 1011S.Weller 69 1988 RavennaSchoolApartments 6564RavennaAvenueNE 39 1979 SouthParkManor 520S.Cloverdale 27 1983 BitterLakeManor 620N.130th 72 1983 BlakeleyManor 2401NEBlakeley 70 1984 CarrollTerrace 6005thAvenueW. 26 1985 ColumbiaPlace 4628S.Holly 66 1983 FortLawtonPlace 3401W.GovernmentWay 24 1984 FremontPlace 4601PhinneyAvenueN. 31 1983 GideonMathewsGardens 32325thAvenueS. 45 1986 IslandView 3031CaliforniaAvenueSW 48 1984 MichaelsonManor 320W.Roy 57 1985 NelsonManor 220NW58th 32 1985 OlmstedManor 501NERavennaBlvd. 35 1986 PhinneyTerrace 6561PhinneyAvenueN. 51 1984 PinehurstCourt 1270215thAvenueNE 73 1984 PleasantValleyPlaza 380134thAvenueW. 41 1984 PrimeauPlace 30814thAvenueE. 53 1984 ReunionHouse 53010thAvenueE. 28 1984 SchwabacherHouse 1715NW59thStreet 44 1984 SunriseManor 1530NW57thStreet 32 1985 WildwoodGlen 4501SWWildwood 24 1983 WillisHouse 63415thAveNE 42 1983 Totalnumberofsenior housingunits 1,029

103 (Continued) Table11 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON OperatingInformation PropertyCharacteristicsandDwellingUnitComposition December31,2015(Unaudited)

Otherhousingprograms Numberof Yearbuilt Nameofdevelopment Address units oracquired 104thStTownhomes 528N104th 3 2001 127th&Greenwood 12701GreenwoodAveN 6 1983 5983RainierAveS 5983RainierAveS 12 2002 924MLKJrWayS 924MLKJrWayS 5 1998 AlderCrestApartments 652035thAveSW 36 1977 BaldwinApartments 1305EFirStreet 15 2014rehab BeaconHouse 154512thAveS 6 1993 Daybreak 15152ndAveN. 3 1978 DelridgeTriplexes 8136and8144DelridgeWaySW 6 1993 FirStreetTownhomes Various 7 Various KeberoCourt 1105EFirSt 103 2015 LakeCityCommons 1274530thAveNE 15 2002 LamBowApartments 6935DelridgeWaySW 51 1970 LongfellowCreekApartmentsb 5915DelridgeWaySW 54 1993 MainPlaceII 30822ndAveS 25 1993 MainStreetApartments 2035SMainSt 12 1993 MaryAvenueTownhomes 855084MaryAveNW 8 2001 MLKTownhomes Various 6 1996 MontridgeArmsApartments 900027thAveSW 33 1968 NormanStreetTownhomes Various 15 Various RavennaSprings/BryantApts Various 13 Various Referendum37 Various 2 Various RitzApartments 1302EYeslerWay 30 1908 RoxhillCourtApartmentsb 994027thAveSW 11 1980 SpruceStreetTownhomes Various 10 1997 SouthShoreCourt 4811SHenderson 44 1962 StoneAveTownhomes 8514StoneAveN 4 2001 TelemarkApartments 2850NW56thSt 24 1975 VillaParkTownhomes 911150thAvenueS. 43 1997 WedgewoodEstates 3716NE75th 203 1948 WestwoodHeightsEastApts 944027thAveSW 42 1997 WisteriaCourtb 754424thAveSW 76 1987 YeslerCourt 11423rdAve 9 1994 Totalotherhousingunits 932 HOPEVInonpublichousingunits: HighPoint 350 LakeCityVillage 35 NewHolly 220 RainierVista 134 TotalHOPEVINonpublichousing 739 Totalunits–Allnonpublic housingprograms(a) 19,094 Notes: (a)Includesoverlapofotherhousingprogramunitsandseniorhousingunitswhichalsohaveprojectbasedand programbasedHousingChoiceVouchers. (b)Publichousingunitsarelistedunderthepublichousingsection.

104 Table12 THEHOUSINGAUTHORITYOFTHECITYOFSEATTLE, WASHINGTON OperatingInformation RegularStaffHeadcountbyDepartment LastTenFiscalYears(Unaudited)

Development Financeand andasset Housing Admissions administrative Information Human Fiscalyear Executive management operations andSection8 services systems resources Total 2006 13 37 333 56 44 14 7 504 2007 15 36 352 51 43 17 8 522 2008 16 31 362 60 42 18 10 539 2009 14 33 362 59 41 19 10 538 2010 15 33 350 63 43 22 10 536 2011 12 32 367 54 43 19 10 537 2012 12 33 343 54 45 18 10 515 2013 13 29 308 57 40 16 9 472 2014 18 26 309 55 39 15 9 471 2015 26 50 332 61 47 18 11 545

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APPENDIX C

FORM OF BOND COUNSEL OPINION

October __, 2016

Housing Authority of the City of Seattle Seattle, Washington

Re: $______Revenue Bonds, Series 2016A (NewHolly Phase I Project) and $______Revenue Bonds, Series 2016B (NewHolly Phase I Project)

We have served as bond counsel to the Housing Authority of the City of Seattle (the “Authority”) in connection with the issuance of the above-referenced bonds (the “Bonds”) and in that capacity have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. As to matters of fact material to this opinion, we have relied upon representations contained in the certified proceedings and other certifications of public officials and officers of the Authority furnished to us, without undertaking to verify the same by independent investigation. The Bonds are issued pursuant to the Constitution and laws of the State of Washington and Resolution No. 5109 of the Authority (the “Bond Resolution”) and a Trust Indenture dated October __, 2016, by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”), for the purpose of making a loan to NewHolly Phase I LLLP (the “Partnership”) pursuant to a Loan Agreement (the “Loan Agreement”) dated October __, 2016, by and between the Authority and the Partnership, to provide a portion of the funds required to acquire and rehabilitate the 305-unit affordable rental housing project, known as NewHolly Phase I, in the City of Seattle, Washington (the “Project”), as provided in the Bond Resolution and the Indenture. The Authority has assigned to the Trustee the Authority’s rights under the Loan Agreement (with certain reservations and exceptions described therein). Principal of, premium, if any, and interest on the Bonds are payable solely from the sources identified in the Bond Resolution and the Indenture. The Bonds are not a debt of The City of Seattle, the State of Washington or any political subdivision thereof and neither The City of Seattle nor the State of Washington or any political subdivision thereof shall be liable thereon, except the Authority from the sources described in the Bond Resolution and the Indenture. The Authority does not have taxing power. Reference is made to the Bonds, the Bond Resolution and the Indenture for a full description of the covenants with and rights of the registered owners of the Bonds and for the definitions of capitalized terms used and not otherwise defined herein. We express no opinion herein concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used in connection with the Bonds.

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Under the Internal Revenue Code of 1986, as amended (the “Code”), the Authority and the Partnership are required to comply with certain requirements after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances and the arbitrage rebate requirement to the extent applicable to the Bonds. The Authority has covenanted in the Bond Resolution and the Indenture and the Partnership has covenanted in the Loan Agreement and the Regulatory Agreement to comply with those requirements, but if the Authority or the Partnership fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. We have not undertaken and do not undertake to monitor the Authority’s or the Partnership’s compliance with the Bond Resolution, the Indenture, the Loan Agreement or the Regulatory Agreement, including any requirements of the Code.

Based upon the foregoing, as of the date hereof, it is our opinion that under existing law: 1. The Authority is a duly organized and legally existing public body corporate and politic and a housing authority under the laws of the State of Washington. 2. The Bond Resolution has been duly adopted by the Authority in full compliance with the laws of the State of Washington. The Indenture and Loan Agreement have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, constitute valid and binding agreements of the Authority, enforceable against the Authority in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights and by the application of equitable principles and by the exercise of judicial discretion. 3. The Bonds have been issued in full compliance with the Constitution and laws of the State of Washington and the resolutions of the Authority relating thereto, and are the valid and legally binding obligations of the Authority enforceable in accordance with their terms, except only to the extent that enforcement may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights and by the application of equitable principles and the exercise of judicial discretion in appropriate cases.

4. Assuming compliance by the Authority and the Partnership after the date of issuance of the Bonds with applicable requirements of the Code, under existing federal law, amounts properly treated as interest on the Bonds are excluded from gross income for federal income tax purposes, provided, however, that such exclusion is not available with respect to interest on the Bonds for any period during which the Bonds are held by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax applicable to individuals or corporations and is not included in adjusted current earnings of corporations for purposes of the federal alternative minimum tax. Interest on the Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. We

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express no opinion regarding any other federal tax consequences of receipt of interest on the Bonds. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. We bring to your attention the fact that the foregoing opinions are expressions of our professional judgment on the matters expressly addressed and do not constitute guarantees of result. Respectfully submitted,

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APPENDIX D

DTC’S BOOK-ENTRY ONLY SYSTEM

The following information has been provided by DTC. The Authority makes no representation as to the accuracy or completeness thereof. Beneficial Owners should confirm the following with DTC or the Participants (as hereinafter defined). Neither the information on the website listed in 2. below, nor any links from that website, is part of this Official Statement, and such information cannot be relied upon to be accurate as of the date of this Official Statement, nor should any such information be relied upon to make investment decisions regarding the Bonds.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC.

2. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book- entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

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5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account.

10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

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APPENDIX E

FORM OF BORROWER’S CONTINUING DISCLOSURE AGREEMENT CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (this “Disclosure Agreement”) is executed and delivered by NewHolly Phase I LLLP (the “Borrower”) and U.S. Bank National Association, as dissemination agent (the “Dissemination Agent”), in connection with the issuance of $______Housing Authority of the City of Seattle Revenue Bonds, Series 2016A (NewHolly Phase I Project) and $______Housing Authority of the City of Seattle Revenue Bonds, Series 2016B (NewHolly Phase I Project) (together, the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture dated ______, 2016 (the “Indenture”), by and between the Housing Authority of the City of Seattle (the “Issuer”) and U.S. Bank National Association, as trustee (the “Trustee”). The proceeds of the Bonds are being used by the Issuer to make a loan to the Borrower pursuant to a Loan Agreement dated ______, 2016 (the “Loan Agreement”), by and between the Issuer and the Borrower. The Borrower and the Dissemination Agent covenant and agree as follows:

Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Borrower and the Dissemination Agent for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriters in complying with the Rule (each as defined below). The Borrower and the Dissemination Agent acknowledge that neither the Issuer (in such capacity) nor the Trustee (in its capacity as Trustee under the Indenture) has undertaken any responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, not has liability to any person, including any Owner or beneficial owner of Bonds, with respect to any such reports, notices or disclosures.

Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Disclosure Agreement, the following capitalized terms shall have the following meanings:

“Annual Financial Information” means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and as specified in Section 4(a) of this Disclosure Agreement.

“Annual Report” means any annual report provided by the Borrower pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Bankruptcy Event” means any of the following: the appointment of a receiver, fiscal agent or similar officer for an Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Obligated Person.

“Dissemination Agent” means U.S. Bank National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Borrower and which has filed with the Trustee a written acceptance of such designation in the form attached hereto as Exhibit C.

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“Fiscal Year” means the fiscal year of the Borrower, currently the twelve-month period ending on each December 31, as such fiscal year may be changed from time to time.

“Listed Event” means any of the events listed in Section 5(a) of this Disclosure Agreement.

“MSRB” means the Municipal Securities Rulemaking Board.

“Obligated Person” means an “obligated person” with respect to the Bonds, within the meaning of the Rule.

“Official Statement” means the Official Statement dated ______, 2016, relating to the Bonds.

“Participating Underwriters” means KeyBanc Capital Markets Inc., Wedbush Securities Inc., and their respective successors and assigns.

“Rule” means paragraph (b)(5) of Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“SEC” means the United States Securities and Exchange Commission.

Section 3. Provision of Annual Reports.

(a) The Borrower, as an Obligated Person shall or, by written direction shall cause the Dissemination Agent to, not later than the last day of the ninth month following the end of each Fiscal Year of the Borrower, commencing with the report for the Fiscal Year ending December 31, 2016, provide to the MSRB, an Annual Report consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than 15 Business Days prior to each such date, the Borrower shall provide the Annual Report to the Dissemination Agent, which shall include a certification by the Borrower that the Annual Report constitutes the Annual Report required to be furnished by the Borrower hereunder. The Dissemination Agent may conclusively rely upon such certification of the Borrower.

(b) If by five Business Days prior to any date specified in subsection (a) for providing the Annual Report to the MSRB, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Borrower to determine whether the Borrower is in compliance with subsection (a).

(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice to the MSRB, with copies to the Issuer and the Borrower, in substantially the form attached as Exhibit B.

(d) To the extent the Borrower has provided the Annual Report to the Dissemination Agent pursuant to subsection (a), the Dissemination Agent shall file a report with the Borrower and the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided.

(e) If the Borrower’s Fiscal Year changes, the Borrower shall give notice of such change in the same manner as for a Listed Event under Section 5.

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Section 4. Content of Annual Reports.

(a) Each Annual Report shall contain Annual Financial Information with respect to the Borrower as follows:

1. The annual financial statements of the Borrower, which shall be prepared in accordance with generally accepted accounting principles. If the Borrower’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements. The Borrower’s audited financial statements shall be filed in the same manner as the Annual Report when and if they become available; and

2. Additional information in substantially the form set forth in Exhibit A attached hereto, including the information described therein.

(b) Any or all of the items above may be set forth in one document or a set of documents. The items listed above may be included by specific reference to other documents available to the public on the internet web site of the MSRB or filed with the SEC.

Section 5. Reporting of Listed Events. Pursuant to the provisions of this Section 5, the Borrower shall give, or upon delivery of notice and direction to disseminate such notice from the Borrower to the Dissemination Agent, the Dissemination Agent shall give, notice of the occurrence of any of the following events (each, a “Listed Event”) with respect to the Bonds, such notice to be given in a timely manner not in excess of 10 Business Days after the occurrence of the Listed Event:

1. Principal and interest payment delinquencies; 2. Nonpayment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their enhancement facility or their failure to perform; 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices of determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; 7. Modifications to rights of Bondholders, if material; 8. Bond calls, if material, and tender offers; 9. Defeasances; 10. Release, substitution or sale of property securing repayment of the Bonds, if material; 11. Rating changes; 12. Bankruptcy Events, or similar events involving an Obligated Person; 13. Consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of an Obligated Person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such

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action or the termination of a definitive agreement relating to any such actions, other than pursuant to the terms of such agreement, if material; and 14. Appointment of a successor or additional trustee, or the change of name of a trustee, if material. Section 6. Format of Reports. All reports, notices or disclosures provided under this Disclosure Agreement shall be provided in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB. Unless and until otherwise designated by the MSRB or the SEC, any information or notices submitted to the MSRB in compliance with the Rule are to be submitted through the MSRB’s EMMA system, which as of the date hereof is located at emma.mrsb.org.

Section 7. Termination of Reporting Obligation. The Borrower’s and the Dissemination Agent’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Borrower shall give notice of such termination in the same manner as for a Listed Event under Section 5. If the Borrower’s obligations under the Loan Agreement are assumed in full by some other entity, such entity shall be responsible for compliance with this Disclosure Agreement in the same manner as if it were the Borrower and the original Borrower shall have no further responsibility hereunder.

Section 8. Dissemination Agent. The Borrower may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign at any time upon at least 30 days’ prior written notice to the Borrower and the Trustee.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Borrower and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Borrower, except that the Dissemination Agent shall not be obligated to agree to any amendment that modifies or increases its duties or obligations hereunder) and any provision of this Disclosure Agreement may be waived, if (i) the amendment or waiver is necessary to reflect a change in circumstances that arises from a change in legal requirements, a change in law, a change in the identity, nature or status of an obligated person, or a change in the type of activities or business conducted by the Borrower or other obligated person; (ii) the undertaking, as amended, or with applicable provisions waived, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretation of the Rule by the SEC and any such change in circumstances; and (iii) it is determined by a party unaffiliated with the Borrower or any other obligated person and acceptable to the Issuer, such as nationally recognized bond counsel or other counsel expert in federal securities laws, or pursuant to a favorable “no-action” letter issued by the SEC, that the amendment or waiver does not materially and adversely affect the interests of Owners or beneficial owners of Bonds. The Borrower will give notice to the MSRB of the substance (or provide a copy) of any amendment to this Disclosure Agreement and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the notice also will include a narrative explanation of the effect of that change on the type of information to be provided.

Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Borrower from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Borrower chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this E-4

Disclosure Agreement, the Borrower shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Borrower or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee shall, at the request of the Participating Underwriters or the Owners and beneficial owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding and upon receipt of indemnification from any cost, expense or liability, including without limitation fees and costs of its attorneys, satisfactory to the Trustee, or any Owner or beneficial owner of Bonds may, take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Borrower or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture or the Loan Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Borrower or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Borrower agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any claims, loss, expense and liabilities which they each may incur arising out of or in the exercise or performance of the Dissemination Agent’s powers and duties hereunder, including the costs and expenses (including reasonable attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or misconduct. The Borrower shall compensate the Dissemination Agent for the services provided hereunder in accordance with its schedule of fees, as amended from time to time, and shall reimburse the Dissemination Agent for all reasonable expenses, reasonable legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Borrower, the Owners and beneficial owners of the Bonds or any other party. The obligations of the Borrower under this section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 13. Notices. All notices, certificates or other communications shall be sufficiently given and shall be deemed given on the business day on which the same have been personally delivered (either by messenger, courier service or telecopy or other electronic means capable of producing a written notice) or on the second business day following the date on which the same has been deposited with the U.S. Postal Service when sent by certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Issuer: Housing Authority of the City of Seattle 190 Queen Anne Avenue North Seattle, Washington 98109-1028 Attn: Executive Director

If to the Borrower: New Holly Phase I LLLP Housing Authority of the City of Seattle 190 Queen Anne Avenue North Seattle, Washington 98109-1028 Attn: Executive Director

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with a copy to: U.S. Bancorp Community Development Corporation 1307 Washington Avenue, Suite 300 Mail Code: SL MO RMCD St. Louis, MO 63103 Attention: Director of LIHTC Asset Management

If to the Dissemination Agent: U.S. Bank National Association 1420 Fifth Avenue, 7th Floor Seattle, Washington 98101 Attn: Global Corporate Trust Services

If to the Trustee: U.S. Bank National Association 1420 Fifth Avenue, 7th Floor Seattle, Washington 98101 Attn: Global Corporate Trust Services

Section 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Borrower, the Dissemination Agent, the Trustee, the Participating Underwriters and the Owners and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Section 15. Governing Law. This Disclosure Agreement shall be governed by the internal laws of the State of Washington applicable to contracts performed wholly therein and without reference to its conflict of laws principles.

Section 16. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Date: ______, 2016

NEWHOLLY PHASE I LLLP, a Washington limited liability limited partnership

By HOUSING AUTHORITY OF THE CITY OF SEATTLE, its general partner

U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent

By: Authorized Representative

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EXHIBIT A

FORM OF CONTINUING DISCLOSURE ANNUAL REPORT

Name of Issuer: Housing Authority of the City of Seattle

Name of Bond Issue: Housing Authority of the City of Seattle Revenue Bonds, Series 2016A (NewHolly Phase I Project) and Housing Authority of the City of Seattle Revenue Bonds, Series 2016B (NewHolly Phase I Project) (together, the “Bonds”)

Name of Borrower: NewHolly Phase I LLLP (the “Borrower”)

Date of Issuance: ______, 2016

Report for Period Ending ______

1. Annual Financial Statements of the Borrower. Enclosed herewith are the [un]audited Financial Statements of the Borrower for the Fiscal Year ended ______. [If not available when the Annual Report is filed, Annual Financial Statements are to be filed when/if available.]

2. Project Revenues and Expenses. Set forth below are actual revenues and expenses for the Project for the Fiscal Year ended ______in substantially the form set forth in the Official Statement with respect to the Bonds dated ______, 2016 (the “Official Statement”) under the caption “THE BORROWER AND THE PROJECT – The Project – Project Operating Pro Forma”. 20__ Revenues Rental Income Other Tenant Income Total Revenues

Expenses

Replacement Reserve

Net Operating Income

Debt Service on: 2016ABonds 2016B Bonds Total Bond Debt Service Requirements

Net Cash Flow After Bond Debt Service

Total Debt Service Requirements

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3. Project Occupancy Rates. Set forth below are the monthly occupancy rates for the Project for the Fiscal Year ended ______in substantially the form set forth in the Official Statement under the caption “THE BORROWER AND THE PROJECT – The Project – Occupancy Rates”.

Occupancy Occupancy Month Rate Month Rate

4. Optional Narrative Explanation. [Please provide a narrative explanation discussing the Borrower’s financial performance if necessary to avoid misunderstanding in judging the financial and operating condition of the Borrower.]

Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Continuing Disclosure Agreement dated as of ______, 2016 (the “Continuing Disclosure Agreement”), between the Borrower and U.S. Bank National Association. The Borrower hereby certifies that the financial and operating information contained herein and attached hereto is the Annual Report required by the Continuing Disclosure Agreement.

NEWHOLLY PHASE I LLLP, a Washington limited liability limited partnership

By HOUSING AUTHORITY OF THE CITY OF SEATTLE, its general partner

[Note to Borrower when preparing Annual Report. When preparing Annual Report, but not as part of Annual Report, please also review Section 5 of the Continuing Disclosure Agreement, and confirm that no listed event required to be disclosed thereunder has occurred. If necessary, please provide notice of any event required to be disclosed pursuant to Section 5 of the Continuing Disclosure Agreement that has occurred since the date of the last report for which notice has not previously been provided in accordance therewith.]

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EXHIBIT B NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Housing Authority of the City of Seattle

Name of Borrower: NewHolly Phase I LLLP (the “Borrower”)

Date of Issuance: ______, 2016

NOTICE IS HEREBY GIVEN that the Borrower has not provided an Annual Report with respect to the above-referenced Bonds as required by the Continuing Disclosure Agreement, dated ______, between the Borrower and U.S. Bank National Association, as dissemination agent. [The Borrower anticipates that the Annual Report will be filed by ______, 20__.]

Dated: ______, 20__.

U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent, on behalf of the Borrower

By: Authorized Officer cc: Borrower Issuer

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EXHIBIT C ACCEPTANCE OF DUTIES AS DISSEMINATION AGENT

The undersigned, duly authorized officer of [Name of Successor Dissemination Agent] (the “Dissemination Agent”) hereby accepts the duties and obligations imposed upon the undersigned Dissemination Agent under the Continuing Disclosure Agreement, dated ______, 2016, between NewHolly Phase I LLLP and U.S. Bank National Association, as initial Dissemination Agent and relating to the Housing Authority of the City of Seattle Revenue Bonds, Series 2016A (NewHolly Phase I Project) and Housing Authority of the City of Seattle Revenue Bonds, Series 2016B (NewHolly Phase I Project).

The principal corporate trust office of the Dissemination Agent is ______.

Dated: .

[NAME OF SUCCESSOR DISSEMINATION AGENT], as successor Dissemination Agent

By: Authorized Officer

cc: NewHolly Phase I LLLP U.S. Bank National Association

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HOUSING AUTHORITY OF THE CITY OF SEATTLE • Revenue Bonds, Series 2016A and Series 2016B (NewHolly Phase I Project)