Buffalo and Fort Erie Public Bridge Authority Toll Bridge System Revenue Bonds Series 2017 T Notice

PRELIMINARY OFFICIAL STATEMENT DATED MAY 31, 2017

NEW ISSUE – Book Entry Only Standard & Poor’s: “A+” (see “Rating” herein)

In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, ll there be rulings and court decisions and assuming, among other matters, the accuracy of certain representations and compliance with

isdiction. certain covenants, interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. In the further opinion of Bond Counsel, interest on the Series 2017 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel is also of the opinion that interest on the Series 2017 Bonds is exempt from personal income taxes imposed by the State of New York and any political subdivision thereof, including The City of New York. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2017 Bonds. See “TAX MATTERS” herein. $72,580,000* Buffalo and Fort Erie Public Bridge Authority Toll Bridge System Revenue Bonds Series 2017 t notice. The Authority will make available its final Official Dated: Date of Delivery Due: January 1, as shown on the inside cover

n offer to sell or the solicitation of an offer to buy, nor sha The Series 2017 Bonds of the Buffalo and Fort Erie Public Bridge Authority (the “Authority”) will be issued pursuant to the Authority’s Toll Bridge System Revenue Bond Resolution adopted by the Authority on July 26, 1995, as amended and restated on April 25, 2014, and as supplemented by the Fifth Supplemental Resolution adopted on May 18, 2017 (as so amended, restated and supplemented, the “Resolution”), and are secured as to the payment of principal, premium, if any, and interest thereon by a pledge of the Pledged Revenues and certain funds and accounts established under the Resolution, subject to the application thereof for the purposes and on the terms and conditions provided in the Resolution. Pledged Revenues are principally toll revenues derived from the Authority’s operation of the Peace Bridge, a major international border crossing linking Buffalo, New York with Fort Erie, Ontario across the Niagara River. The Series 2017 are being issued on parity with the Authority’s outstanding $22,260,000 aggregate principal amount of Series 2014 Bonds.

fficial Statement constitute a Interest on the Series 2017 Bonds is payable on each January 1 and July 1, commencing January 1, 2018. Principal and premium, if any, and interest on the Series 2017 Bonds will be payable through U.S. Bank National Association, as Trustee

would be unlawful prior to registration or qualification underthe securities law of such jur and Paying Agent. The Series 2017 Bonds will be issued in book-entry form only as registered bonds without coupons in denominations of $5,000 and in integral multiples thereof and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Series 2017 Bonds. Purchasers of Series 2017 Bonds will not receive certificates representing their ownership interests in Series 2017 Bonds. For so long as Cede & Co. is the registered owner of the Series 2017 Bonds, principal and interest payments are payable to Cede & Co., as nominee for DTC, and the responsibility of remitting such payments to the Beneficial Owners is solely the responsibility of DTC and the DTC Participants. See “DESCRIPTION OF THE SERIES 2017 BONDS — Book-Entry Only System” herein. ed herein are subject to change, completion or amendment withou

mstances shall this Preliminary O The Series 2017 Bonds are being issued to (i) provide funds to pay a portion of the costs of the Project (as defined herein), (ii) make a deposit to the Debt Service Reserve Account, and (iii) pay certain Costs of Issuance of the Series 2017 such offer, solicitationor sale Bonds. The Series 2017 Bonds are special revenue obligations of the Authority. The Series 2017 Bonds do not constitute a debt of the United States of America, the State of New York, the Government of Canada or the Province of Ontario and none of the foregoing governmental entities is liable thereon, nor are the Series 2017 Bonds payable out of any funds other than those of the Authority pledged for the payment of the Series 2017 Bonds under the Resolution. The Authority has no taxing power. The Series 2017 Bonds are subject to optional and mandatory redemption prior to maturity as more fully described herein. The Series 2017 Bonds are offered, when, as and if issued by the Authority and delivered to the Underwriter, and are subject to the approval of legality by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority. Certain legal matters will be passed upon by Hodgson Russ, LLP, United States Counsel to the Authority, Gowling Lafleur Henderson LLP, Canadian Counsel to the Authority, and by Harris Beach PLLC, Counsel to the Underwriter. Capital Markets Advisors, LLC and Frasca & Associates, LLC are acting as co-financial advisors to the Authority. It is expected that the Series 2017 Bonds will be available for delivery to The Depository Trust Company, New York, New York, on or about June 22, 2017. Morgan Stanley

June __ 2017 Statement Statement with respect to the Series 2017 Bonds. Under no circu which in jurisdiction any Bondsin 2017 Series the of sale any This Preliminary Official Statement and the information contain ______* Preliminary, subject to change.

Buffalo and Fort Erie Public Bridge Authority Toll Bridge System Revenue Bonds Series 2017

MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS AND CUSIPS

Due Principal Price or January 1* Amount* Interest Rate Yield CUSIP(†) 2026 $2,300,000 % % 2027 2,355,000 2028 2,415,000 2029 2,475,000 2030 2,540,000 2031 2,610,000 2032 2,685,000 2033 2,765,000 2034 2,850,000 2035 2,935,000 2036 3,025,000 2037 3,120,000

$17,795,000* ____% Term Bond due January 1, 2042*, Yield: _____% CUSIP Number† ______$22,710,000* ____% Term Bond due January 1, 2047*, Yield: _____% CUSIP Number† ______

______* Preliminary, subject to change. † CUSIP© is a registered trademark of the American Bankers Association. The CUSIP numbers listed above have been assigned by an independent company not affiliated with the Authority and are being provided solely for the convenience of holders of the Series 2017 Bonds. None of the State of New York, the Government of Canada nor the Authority makes any representation with respect to such numbers nor undertakes any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity of the Series 2017 Bonds is subject to being changed after the issuance of the Series 2017 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to such maturity.

PEACE BRIDGE LOCATION MAP

Peace Bridge

BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

PEACE BRIDGE PLAZA BUFFALO, NEW YORK 14213

BOARD

CANADA UNITED STATES

Timothy Clutterbuck ...... Chairman William (Sam) B. Hoyt, III ..... Vice Chairman

Debra Zimmerman ...... Member Charles L. Gurney ...... Member Isabel Meharry ...... Member Anthony M. Masiello...... Member

Patrick Robson ...... Member Michael J. Russo ...... Member

Lew Holloway† ...... Member Kenneth Manning...... Member

SENIOR STAFF

General Manager ...... Ron Rienas Chief Financial Officer ...... Karen Costa

Chief Operating Officer ...... Thomas Boyle

AUTHORITY CONSULTANTS

Bond Counsel ...... Orrick, Herrington & Sutcliffe LLP

Co-Financial Advisors ...... Capital Markets Advisors, LLC and Frasca & Associates, LLC

Independent Accountants ...... Lumsden & McCormick, LLP

Traffic Consultants ...... Jacobs Civil Consultants, Inc.

______† Term commences June 3, 2017.

No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2017 Bonds by any person in any jurisdiction in which it is unlawful for the person to make such offer, solicitation or sale. The information set forth herein has been provided by the Authority and by other sources which are believed to be reliable by the Authority, but it is not guaranteed as to its accuracy or completeness. The information herein is 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 since the date hereof. This Official Statement is submitted in connection with the sale of the securities referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Certain statements contained in this Official Statement that are not historical facts are forward looking statements, which are based on the Authority’s beliefs, as well as assumptions made by, and information currently available to, its staff and officers. Because the statements are based on assumptions about future events and economic performance, many of which are beyond the control of the Authority, and are not statements of fact, actual results may differ materially from those projected. The words “anticipate”, “assume”, “estimate”, “expect”, “objective”, “projection”, “forecast”, “goal”, “budget”, or similar words are intended to identify forward looking statements. These forward-looking statements speak only as of the date they were prepared. The Authority disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Authority’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The words or phrases “to date”, “now”, “currently”, and the like are intended to mean as of the date of the Official Statement. IN CONNECTION WITH THE OFFERING OF THE SERIES 2017 BONDS, THE UNDERWRITER MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS Page Page

INTRODUCTION ...... 1 THE PROJECT ...... 2 Interest Expense ...... 25 Project Engineering and Construction Agreements ...... 2 Unaudited Interim Financial Performance for the SOURCES OF PAYMENT AND SECURITY FOR Four Months Ended April 30, 2017 ...... 25 THE SERIES 2017 BONDS ...... 3 2017-21 FORECASTED REVENUE, EXPENSES Pledge Under the Bond Resolution ...... 3 AND OPERATING RESULTS...... 26 Flow of Funds ...... 3 THE CAPITAL PLAN ...... 28 Debt Service Reserve Account ...... 6 Capital Plan ...... 28 Additional Bonds, Refunding Bonds and Other Indebtedness ...... 6 THE AUTHORITY ...... 30 Capital Improvement Fund ...... 7 History ...... 30 Tolls Covenant and Toll Setting Authority ...... 7 Powers ...... 30 Limitations with Respect to Events of Default and Remedies ...... 8 Members and Officers ...... 30 DESCRIPTION OF THE SERIES 2017 BONDS ...... 8 Senior Staff ...... 31 General ...... 8 Operating Budget Process ...... 32 Redemption ...... 9 Bridge Inspection Program ...... 32 Book-Entry Only System ...... 10 Insurance ...... 33 SOURCES AND USES OF FUNDS ...... 12 Employee Relations ...... 33 DEBT SERVICE REQUIREMENTS ...... 13 Retirement Plans ...... 33 Other Postemployment Benefits ...... 34 THE TOLL BRIDGE SYSTEM ...... 13 Investments ...... 35 Introduction ...... 13 RISK FACTORS ...... 36 The Bridge...... 14 Toll Rates ...... 15 LITIGATION ...... 37 Traffic Composition and Regional Traffic Market Share ...... 17 TAX MATTERS ...... 37 Duty-Free, Brokerage, Customs, Immigration UNDERWRITING...... 39 and Plaza Facilities ...... 17 RATING ...... 39 HISTORICAL REVENUE AND EXPENSES ...... 18 LEGALITY OF INVESTMENT ...... 39 Traffic and Pledged Revenues ...... 18 APPROVAL OF LEGAL PROCEEDINGS ...... 39 Unpledged Revenues ...... 20 CONSULTANT’S AND ACCOUNTANT’S REPORTS ...... 39 Multi-Currency Operations ...... 21 FINANCIAL ADVISORS ...... 40 Operating Results ...... 21 CONTINUING DISCLOSURE ...... 40 Operating and Capital Reserves...... 22 MISCELLANEOUS ...... 41 Voluntary Board Financial Operating Policy ...... 23 APPENDIX A – Audited Financial Statements of the Authority MANAGEMENT’S DISCUSSION AND ANALYSIS for the Years ended December 31, 2016 and 2015 A-1 OF RESULTS OF OPERATIONS ...... 23 APPENDIX B – Unaudited Financial Information of the Toll Revenues ...... 23 Buffalo and Fort Erie Public Bridge Authority for Rental Income ...... 23 the four months ended April 30, 2017 and 2016 B-1 Other Non-Toll Revenues ...... 24 APPENDIX C – Peace Bridge Comprehensive Traffic Toll Collection & Traffic Control / Maintenance of Bridge and Facilities / Administration...... 24 and Revenue Study C-1 Contribution to Pension Plans ...... 24 APPENDIX D – Summary Of Certain Provisions of the Resolution D-1 Other Postemployment Benefits ...... 24 APPENDIX E – Form of Continuing Disclosure Agreement E-1 Property Taxes and Equalization Payments ...... 24 APPENDIX F – Form of Approving Opinion of Bond Counsel F-1 Payments to New York State ...... 25

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BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Official Statement

Relating to

$72,580,000* Toll Bridge System Revenue Bonds Series 2017

June __, 2017

INTRODUCTION

The purpose of this Official Statement, including the cover and appendices, is to set forth information with respect to the offering of Toll Bridge System Revenue Bonds, Series 2017 (the “Series 2017 Bonds”), of the Buffalo and Fort Erie Public Bridge Authority (the “Authority”) and the operations of the Authority and its principal facility, the Peace Bridge, a major international border crossing linking Buffalo, New York with Fort Erie, Ontario across the Niagara River (the “Peace Bridge”). The Series 2017 Bonds are authorized by Chapter 824 of the Laws of New York of 1933, as amended (the “New York Act”), and by an Act of the Seventeenth Parliament of Canada, 24-25 George V, c.63, assented to March 28, 1934, as amended (the “Canadian Act”). The New York Act was duly consented to by the Congress of the United States. The New York Act and the Canadian Act, together, are referred to herein as the “Act”. The Series 2017 Bonds are authorized to be issued under and pursuant to the Authority’s Toll Bridge System Revenue Bond Resolution adopted by the Authority on July 26, 1995, as amended and restated on April 25, 2014 (as so amended and restated, the “Bond Resolution”), and the Fifth Supplemental Toll Bridge System Revenue Bond Resolution Authorizing Toll Bridge System Revenue Bonds, Series 2017 adopted by the Authority on May 18, 2017 (the “Supplemental Resolution”; the Bond Resolution, as supplemented by the Supplemental Resolution, is collectively referred to as the “Resolution”). U.S. Bank National Association is Trustee and Paying Agent under the Resolution.

The Series 2017 Bonds are secured as to the payment of principal, premium, if any, and interest thereon by a pledge of the Pledged Revenues and certain funds and accounts established under the Bond Resolution, subject to the application thereof for the purposes and on the terms and conditions provided in the Bond Resolution. See “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS” and APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Pledge of Pledged Revenues, Funds and Other Moneys”.

The Series 2017 Bonds do not constitute a debt of the United States of America, the State of New York, the Government of Canada or the Province of Ontario and none of the foregoing governmental entities is liable thereon nor are the Series 2017 Bonds payable out of any funds other than those of the Authority pledged for the payment of the Series 2017 Bonds under the Resolution. The Authority has no taxing power.

The Series 2017 Bonds will be issued on a parity with the Authority’s Toll Bridge System Revenue Refunding Bonds, Series 2014 (the “Series 2014 Bonds”). If the Authority issues Additional Bonds and/or Refunding Bonds under the Bond Resolution in the future, such Additional Bonds and/or Refunding Bonds are expected to be issued on a parity with the Series 2014 Bonds and the Series 2017 Bonds. See “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS”. The Authority is required to satisfy the requirements of the Bond Resolution for the issuance of Additional Bonds and/or Refunding Bonds. See APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Additional Bonds” and “ — Refunding Bonds” and “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS — Additional Bonds, Refunding Bonds and Other Indebtedness”. The Authority is also authorized under the Bond Resolution to issue subordinate indebtedness which is not subject to the Additional Bonds tests contained in the

______* Preliminary, subject to change.

Bond Resolution. Upon issuance of the Series 2017 Bonds, the Series 2014 Bonds and the Series 2017 Bonds will be the only outstanding Bonds of the Authority.

Capitalized terms used herein have the meaning ascribed to them herein or in the Bond Resolution. See APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Definitions”. All dollar amounts cited in this Official Statement are in United States dollars unless otherwise indicated.

THE PROJECT

As more fully described below, substantially all of the proceeds of the Series 2017 Bonds are expected to be used to (i) pay or reimburse the Authority for the costs of re-decking and rehabilitating the Peace Bridge (the “Project”), (ii) make a deposit to the Debt Service Reserve Account, and (iii) pay certain Costs of Issuance of the Series 2017 Bonds. Series 2017 Bond proceeds may also be used to pay the cost of Peace Bridge coatings and enhancements to the United States plaza of the Peace Bridge that is devoted to inspection capacity.

In 1995, the Authority, its Consulting Engineer and other engineering consultants identified the re-decking of the existing three-lane span and expansion of Peace Bridge capacity as a long-term need, the scope and financing of which was beyond the Authority’s ten year Capital Plan then in effect. In October 2012, the Authority’s Board of Directors approved the commencement of engineering work related to the re-decking of the Peace Bridge. Over the next three years, the Authority continued to refine the scope and details of the Project to include steel rehabilitation of the substructure under the deck surface.

In October 2015, the Authority’s Board of Directors approved a $184.5 million Five Year Capital Plan (the “Capital Plan”) that included the redecking/rehabilitation of the Peace Bridge. The Project utilizes a cast-in-place reinforced deck methodology and will require a full-time single bridge lane closure during off-peak traffic periods (mid-October through mid-May) for a three year period ending in May 2019. Work on the first traffic lane (the northern-most lane) was started in October 2016 and completed in May 2017 when the lane was reopened to traffic. Each traffic lane represents approximately one-third of the Project and the first lane was completed on time and within budget. In addition, no unknown or unforeseen conditions relative to the Peace Bridge were noted and the Authority expects this to be the case with respect to the remaining two traffic lanes that make up the redecking project on the Peace Bridge.

The Project involves complete replacement of the original bridge deck and select structural steel items, as well as the modification of the existing sidewalks and gantry system. Upon completion of the Project, the Peace Bridge will essentially be a new bridge with an estimated useful life of 75 years.

Additional Project Phases. In recognition of the fact that the coatings on the bridge are nearing the end of their useful life, the Capital Plan also includes a bridge coatings (i.e., painting) program. This portion of the Capital Plan is currently in the scope development phase and is slated to begin once the Project is completed. The Authority will also be assessing various alternatives for enhancing U.S. federal inspection processing capacity, including the full implementation of commercial inspection in Canada and/or the reconfiguration and potential expansion of the U.S. plaza. For a complete description of the Capital Plan, see “CAPITAL PLAN” herein.

Project Engineering and Construction Agreements

In 2012, the Authority retained the services of Parsons Transportation Group of New York, Inc., an engineering firm, with respect to the engineering of all of the components of the Capital Plan for the Peace Bridge, including the Project. In 2016, the Authority retained the services of LiRo Engineers, Inc., an engineering inspection firm, with respect to the inspection of construction of the Project. Finally, in 2016, the Authority retained American Bridge Canada Company to serve as the general contractor for the Project and entered into a construction contract containing, among other provisions, a fixed price of $80,533,420 for the Project and a substantial completion date of June 28, 2019.

SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS

Pledge Under the Bond Resolution Under the Bond Resolution, there is pledged and assigned as security for the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms and the provisions of the Bond Resolution, (i) the proceeds of sale of the Bonds pending application thereof in accordance with the provisions of the Bond Resolution, (ii) Pledged Revenues, and (iii) all Funds and Accounts established by the Bond Resolution including the investments, if any, thereof other than the Unpledged Revenues Account, the Unpledged Operating Account, the Unpledged Government Payments Account, the Unpledged Capital Improvement Account, the Unpledged System General Account, the Note Repayment Fund and, with respect to any Bonds not secured by the Debt Service Reserve Account, the Debt Service Reserve Account. See “Flow of Funds” and “Debt Service Reserve Account” below, and APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Pledge of Pledged Revenues, Funds and Other Moneys” and “— Establishment of Funds and Accounts”. The pledge created by the Bond Resolution is subject to the provisions of the Bond Resolution permitting the application of the Pledged Revenues, the proceeds of the sale of the Bonds and the Funds and Accounts established under the Bond Resolution for the purposes and upon the terms and conditions set forth in the Bond Resolution. The Bond Resolution also provides that monthly Operating Expenses, including reserves, of the Toll Bridge System will be funded first from Unpledged Revenues and then from Pledged Revenues prior to the provision for accrued Debt Service on Bonds from Pledged Revenues. The Bond Resolution also provides that the pledge and lien created by the Bond Resolution shall be superior in all respects to any pledge or lien now or hereafter created for Junior Lien Indebtedness or Subordinated Indebtedness.

“Net Pledged Revenues” means the Pledged Revenues remaining after taking into account Operating Expenses not paid for through the use of Unpledged Revenues available therefor. For purposes of the Bond Resolution relating to the issuance of Additional Bonds, Net Pledged Revenues shall be deemed not to include the proceeds of any business interruption insurance relating to the loss or non-receipt of Tolls.

“Pledged Revenues” means (i) all Tolls, (ii) investment income from any moneys or securities held in the Pledged Revenues Account, Bond Fund, Pledged Capital Improvement Account and the Pledged System General Account, (iii) recurring federal and State of New York grants in the nature of operating subsidies specifically earmarked for application to payment of Operating Expenses, and (iv) any leasehold payments, revenues, fees, rents, charges and other income and receipts derived by or for the account of the Authority, and interest received on such moneys, but only if the Authority has obtained a written opinion of nationally recognized bond counsel acceptable to the Trustee that such inclusion will not impair the exclusion from gross income for United States federal income tax purposes of interest on any of the Bonds, or subordinate obligations of the Authority, under the Code. (Currently, no opinions described in clause (iv) of the preceding sentence have been rendered and, accordingly, all revenues described in such clause (iv) constitute Unpledged Revenues.) The term “Pledged Revenues” excludes federal, State, Canadian and provincial grants and appropriations (except as provided in clause (iii) above), loan proceeds, gifts or donations of any kind, transfers, if any, to the Authority, proceeds from the sale of surplus property and receipts not related to the Authority’s performance of its obligations under the Resolution or to the operation of the Toll Bridge System.

“Unpledged Revenues” means (i) all leasehold payments, revenues, fees, rents, charges and other income and receipts derived by or for the account of the Authority other than Pledged Revenues and moneys held in escrow in connection with the defeasance of Refunded Bonds, and (ii) interest received on any moneys or securities held in the Unpledged Revenues Account, the Unpledged Operating Account, the Unpledged Government Payments Account, the Unpledged Capital Improvement Account and the Unpledged System General Account.

Flow of Funds Pursuant to the Bond Resolution, the Authority is required to pay into the Pledged Revenues Account all Pledged Revenues on a daily basis, if practicable, but in no event more than three Business Days after receipt. The Bond Resolution likewise requires the Authority to pay into the Unpledged Revenues Account all Unpledged Revenues. On or before the twenty-fifth day of each month, the Authority is required to transfer from the Unpledged Revenues Account to the Unpledged Operating Account the amount necessary to cause the amounts on deposit in the Unpledged and Pledged Operating Accounts of the Operating Fund to equal the amount estimated by the Authority to be sufficient to fund Operating Expenses for the remainder of such Fiscal Year or such longer

period of time selected by the Authority in its sole discretion. On or before such twenty-fifth day, after such transfer to the Unpledged Operating Account, the Authority, in its sole discretion, may withdraw any remaining balance from the Unpledged Revenues Account and transfer such amounts to the Unpledged Government Payments Account, the Unpledged Capital Improvement Account and the Unpledged System General Account. After the application of moneys in the Unpledged Revenues Account, the Authority will transfer from the Pledged Revenues Account to the Pledged Operating Account of the Operating Fund the amount necessary to cause the amount on deposit therein, together with the amounts in the Unpledged Operating Account, to equal the amount estimated by the Authority to be sufficient to fund Operating Expenses for the next 30 days. The Authority will then transfer from the Pledged Revenues Account to the Pledged Operating Reserve Account of the Operating Fund, the amount, if any, necessary to bring the balance in the Pledged Operating Reserve Account to the amount required to be deposited therein in order to satisfy the Operating Reserve Requirement. The Authority shall then transfer any amounts remaining in the Pledged Revenues Account, after such deposits to the Operating Fund, as follows:

(1) To the Trustee for deposit in the Interest Account the amount necessary to bring the balance in the Interest Account to the interest accrued on the Bonds through the end of the calendar month;

(2) To the Trustee for deposit in the Principal Account the amount necessary to bring the balance in the Principal Account to the principal accrued (in accordance with the definition of Debt Service) on the Bonds through the end of the calendar month;

(3) To the Trustee for deposit in the Bond Retirement Account, an amount necessary to bring the balance in the Bond Retirement Account to the principal accrued on the Term Bond(s) for the next pending Sinking Fund Installment through the end of the calendar month;

(4) To the Trustee for deposit in the Debt Service Reserve Account an amount sufficient to meet the Debt Service Reserve Requirement (or the amount of the monthly deposit where the Debt Service Reserve Requirement is being funded by not more than sixty monthly deposits, as authorized by the Bond Resolution or any Supplemental Resolution);

(5) To the Trustee for deposit in the Junior Lien Indebtedness Fund, such deposits as may be required to pay debt service on or maintain reserves with respect to Junior Lien Indebtedness under a Supplemental Resolution or other resolution, indenture or agreement for Junior Lien Indebtedness;

(6) After the application of moneys in the Unpledged Revenues Account, to the Pledged Government Payments Account of the Government Payment Fund, the amount necessary to cause the deposits to such Fund during such month to equal 1/12 of all payments required to be paid pursuant to the New York Act, to the State of New York or the Government of Canada or the designee of either in such Fiscal Year;

(7) After the application of moneys in the Unpledged Revenues Account, to the Pledged Capital Improvement Account of the Capital Improvement Fund, an amount sufficient, together with all previous deposits to such Fund during such Fiscal Year, to equal the portion of the Annual Capital Improvement Fund Deposit for such Fiscal Year due through the end of such month; and

(8) To the Pledged System General Account of the System General Fund, the balance of such amounts in the Pledged Revenues Account after meeting all of the required deposits to Funds and Accounts described above.

Buffalo and Fort Erie Public Bridge Authority - Flow of Funds Diagram

Debt Service Reserve Account The Bond Resolution provides that the Authority may determine pursuant to any Supplemental Resolution authorizing a series of Bonds whether or not that Series of Bonds will be secured by the Debt Service Reserve Account. The Series 2014 Bonds are currently secured by the Debt Service Reserve Account and pursuant to the Fifth Supplemental Resolution, upon issuance, the Series 2017 Bonds will also be secured by the Debt Service Reserve Account. The Debt Service Reserve Requirement is the lower of (i) the Maximum Annual Debt Service Requirement for all Outstanding Bonds intended to be secured by the Debt Service Reserve Account and (ii) the maximum amount that will not adversely affect the tax-exempt status of any Bonds intended by the Authority to be tax-exempt. On the date of issuance of the Series 2017 Bonds, the aggregate Debt Service Reserve Requirement for the Series 2014 Bonds and the Series 2017 Bonds shall be $______. To the extent that amounts in the Bond Fund are insufficient to pay debt service, when due, on the Series 2014 Bonds, the Series 2017 Bonds and any other bonds hereafter issued by the Authority and intended to be secured by the Debt Service Reserve Account, deficiencies will be made up from amounts in the Debt Service Reserve Account. The Bond Resolution also provides that a Debt Service Reserve Credit Facility may be deposited or substituted for deposit in the Debt Service Reserve Account to satisfy all or any part of the Debt Service Reserve Requirement. See APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Bond Fund”.

Additional Bonds, Refunding Bonds and Other Indebtedness The Bond Resolution permits the issuance of Bonds, Junior Lien Indebtedness and Subordinated Indebtedness. The Bond Resolution defines “Bonds” to include bonds issued under the Bond Resolution (which on the date of delivery of the Series 2017 Bonds shall consist of the Series 2014 Bonds and the Series 2017 Bonds), and any Additional Bonds, Refunding Bonds and Parity Commercial Paper Notes but does not include Bond Anticipation Notes, Junior Lien Indebtedness or Subordinated Lien Indebtedness.

Subject to the limitations described below (i) Additional Bonds may be issued to pay for Costs of Construction of the Toll Bridge System, including any Capital Improvements or System Expansion Projects and to refund any Bonds, Junior Lien Indebtedness or any Subordinated Indebtedness and (ii) Refunding Bonds may be issued to refund any Outstanding Bonds. For a more complete description of the provisions of the Bond Resolution governing the issuance of Additional Bonds and Refunding Bonds than the discussion that follows, see APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Additional Bonds” and “— Refunding Bonds”.

Additional Bonds for Costs of Construction. In addition to certain other requirements, in the case of Additional Bonds issued to provide for the Costs of Construction of the Toll Bridge System, including any Capital Improvements or System Expansion Projects other than described under “Additional Bonds to Complete a System Expansion Project” below or to refund all or any portion of any Outstanding Bonds or Parity Commercial Paper Notes, (a) the Net Pledged Revenues (subject to certain adjustments as provided by the Bond Resolution) for any consecutive twelve (12) month period out of the eighteen (18) months immediately preceding the month in which such Bonds are to be issued were equal to not less than one hundred twenty-five percent (125%) of the Maximum Annual Debt Service Requirement on the Bonds Outstanding, including the Series of Bonds then being issued for the then current Fiscal Year and all future Fiscal Years; or in the alternative, and (b) the estimated Net Pledged Revenues for the current and each Fiscal Year after the date such certificate is delivered are at least one hundred twenty-five percent (125%) of the Maximum Annual Debt Service Requirement on the Bonds Outstanding (including the Series of Bonds then being issued). Such estimation may include increases, and shall include any decreases, in future Net Pledged Revenues due to increases or decreases in the schedule of Tolls adopted by the Authority for the current Fiscal Year and any future Fiscal Year during which such changes will be in effect as certified by the Traffic Consultant.

Additional Bonds to Complete a System Expansion Project. A Series of Bonds may be issued without satisfying the Additional Bonds test of the Bond Resolution, to complete a System Expansion Project for which a prior Series of Bonds was issued satisfying the Additional Bonds test of the Bond Resolution, provided that the net proceeds of such new Series of Bonds will not exceed 10% of the original estimated costs of such System Expansion Project at the time of issuance of such prior Series of Bonds and a Consulting Engineer certifies that such net proceeds, together with any other available (and not contingent) funds, will be sufficient to complete such System Expansion Project.

Refunding Bonds. The Authority may issue Refunding Bonds pursuant to the Bond Resolution for the purpose of refunding (including by purchase) (a) at any time, all of the Bonds then Outstanding or (b) any portion of Bonds then Outstanding upon the Authority’s delivery of a certificate stating that for the then current and each future Fiscal Year, the Annual Gross Debt Service for the Refunding Bonds will be no more than one hundred and ten per cent (110%) of the Annual Gross Debt Service that would have existed for that Fiscal Year with respect to the portion of the Bonds being refunded.

Bonds to Refund Junior Lien Indebtedness or Subordinated Indebtedness. Bonds may be issued for the purpose of refunding Junior Lien Indebtedness or Subordinated Indebtedness only if the requirements summarized above under the subheading “Additional Bonds for Costs of Construction” are met.

Other Indebtedness. The Bond Resolution permits the issuance of Junior Lien Indebtedness and Subordinated Indebtedness under the Bond Resolution or another indenture. See APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Junior Lien Indebtedness and Subordinated Indebtedness” and “— System General Fund”. The Authority may covenant with the holders of Junior Lien Indebtedness or Subordinated Indebtedness to add to the conditions and restrictions under which Additional Bonds may be issued. The holders of Junior Lien Indebtedness or Subordinated Indebtedness may not accelerate the principal owed upon a default unless all Outstanding Bonds shall have been declared immediately due and payable in accordance with the Bond Resolution. The proceeds of Junior Lien Indebtedness or Subordinated Indebtedness may be used to finance any lawful corporate purpose of the Authority.

Capital Improvement Fund Pursuant to the Bond Resolution, the Authority is required to make monthly deposits into the Capital Improvement Fund in amounts sufficient together with all previous deposits to such Fund during that Fiscal Year, to equal the portion of the Annual Capital Improvement Fund Deposit due through the end of that month. The Annual Capital Improvement Fund Requirement is set annually by the Authority based on the Consulting Engineer’s estimated cost of Capital Improvements for the fiscal year.

Subject to the provisions of the Bond Resolution, money held in the Capital Improvement Fund can be disbursed for the purpose of paying the cost of major or extraordinary renewal, replacement, resurfacing or reconstruction of the Toll Bridge System.

Tolls Covenant and Toll Setting Authority Toll Covenant. Pursuant to the Bond Resolution, the Authority has covenanted at all times to charge and collect such tolls, fees and charges for the use of the Toll Bridge System as are required in order that, in each Fiscal Year, Net Pledged Revenues will be sufficient to pay an amount for such Fiscal Year at least equal to the greater of: (1) 125% of the Annual Debt Service Requirement in such Fiscal Year; and (2) 100% of the sum, in such Fiscal Year, of the Annual Debt Service Requirement, any deficiency in the amount required to be on deposit in the Debt Service Reserve Account, any required deposits into the Junior Lien Indebtedness Fund, Government Payments Fund or, in connection with Subordinated Indebtedness, in the System General Fund, and the Annual Capital Improvement Fund Deposit.

If on or before the fifteenth day of the tenth month of each Fiscal Year, the Tolls collected may not be sufficient to provide the amounts described in the preceding paragraph, the Authority is required (i) to cause the Traffic Consultant to make a study for the purpose of recommending a schedule of Tolls for transit over the Toll Bridge System which, in the opinion of the Traffic Consultant, will cause sufficient Net Pledged Revenues to be received in the following Fiscal Year to provide funds equal to the amounts specified in the preceding paragraph for such following Fiscal Year and will cause additional Net Pledged Revenues to be received in such following and later Fiscal Years sufficient to restore the amount of any deficiency at the earliest practicable time, (ii) as promptly as practicable and in any case no later than the fifteenth day of the fourth month of such Fiscal Year, establish and place in effect a schedule of Tolls as recommended by the Traffic Consultant and (iii) notify the Trustee of such Toll Schedule. The Traffic Consultant is required to take into account all adjustments of Tolls necessary to reflect currency fluctuations between U.S. and Canadian dollars in such Fiscal Year in its Toll Schedule recommendation. As an alternative to any schedule of Tolls developed and recommended by the Traffic Consultant, a different schedule of Tolls developed by the Authority, which will provide sufficient Net Pledged Revenues in the appropriate Fiscal Year to comply with the revenue covenant described above and which will provide additional Net Pledged

Revenues in such Fiscal Year to eliminate any deficiency at the earliest practicable time, may be implemented if the Traffic Consultant certifies that said alternative schedule of Tolls is sufficient. See APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Tolls and Charges”. For a discussion of the impact of the Authority Board’s financial operating policy on the Toll Covenant, see “HISTORICAL REVENUE AND EXPENSES – Voluntary Board Financial Operating Policy” herein.

Ability to Set Tolls. The Act provides that the Authority, subject to the authority vested in the Secretary of Transportation of the United States and the appropriate Canadian authority, has the power and is required to fix the rate of tolls for the use of the bridge and related facilities and that the toll charges for pedestrian and vehicular traffic shall be discretionary and adjusted from time to time, but at a rate consistent with any contract with the holders of the Authority’s bonds, and shall be maintained at such rates as, in the judgment of the Authority, is necessary, allowing a reasonable margin of safety, to provide for the payment of interest on and retirement of any bonds or other obligations, operating expenses, maintenance and insurance, repairs, replacements and proper working funds and any other amounts required to be paid under the provisions of the Act. The Act further provides that if at any time it appears to the Authority that the gross receipts of any fiscal year are or may be insufficient to make the payments required to be made under the provisions of the Act, the Authority shall take appropriate measures to adjust toll rates upward to the extent required.

The Authority’s original legislation in the United States and Canada permitted the Government of Canada and the Federal Government of the United States to intervene in the setting of toll rates. In February 2007, the Parliament of Canada enacted legislation, known as the “International Bridges and Tunnels Act” (the “IBTA”), that clarifies the right of the Government of Canada to intervene with respect to the setting of toll rates by the Authority (although the Government of Canada has not heretofore exercised this right). The IBTA authorizes the Minister of Transport, with the approval of the Governor in Council, to intervene in the setting of tolls if the Minister is of the opinion that “a change in the tolls, fees or other charge for the use of an international bridge or tunnel is resulting in adverse effects on the flow of traffic”. Before imposing any order, the Minister is required to consult with the owner or operator of the international bridge. The IBTA provides that alteration or construction of an international bridge may only be carried out if an application is first made to the Minister of Transport and approval of the Governor in Council is obtained. Under the IBTA, the Authority was not required to obtain the approval of the Governor in Council to undertake the Project because it constitutes “maintenance and repair” as opposed to an “alteration” of the Peace Bridge. The IBTA also contains provisions authorizing the Canadian Government to make regulations respecting the operation and use of international bridges generally and provisions relating to matters of security and safety which historically have been the province of the governments of Canada and the United States, respectively. The Authority believes that unilateral imposition of substantive change concerning matters of operation, use, safety, security or alteration of the Peace Bridge by either host country, without the other host country’s consent, is unlikely. The Authority has not experienced any material change in the oversight relationship that existed between Transport Canada and the Authority prior to the enactment of the IBTA.

Limitations with Respect to Events of Default and Remedies The Bond Resolution, in accordance with the Act, limits the ability of the Trustee to accelerate the payment of the Bonds. For a more complete description of the Events of Default under the Bond Resolution, remedies available upon the occurrence of such events and limitations on the enforcement of such remedies, see APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Events of Default”, “— Application of Revenues in an Event of Default” and “— Limitation of Remedies; Venue”.

DESCRIPTION OF THE SERIES 2017 BONDS

General Interest on the Series 2017 Bonds is payable on each January 1 and July 1, commencing January 1, 2018. Principal and premium, if any, and interest on the Series 2017 Bonds will be payable through U.S. Bank National Association, as Trustee and Paying Agent under the Resolution.

The Series 2017 Bonds will be issued in book-entry form only as registered bonds without coupons in denominations of $5,000 and in integral multiples thereof and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities

depository for the Series 2017 Bonds. Purchasers of Series 2017 Bonds will not receive certificates representing their ownership interests in Series 2017 Bonds. For so long as DTC is the securities depository for the Series 2017 Bonds, it will be the sole registered owner of all of the Series 2017 Bonds, and transfers of ownership interests in the Series 2017 Bonds will occur through the DTC Book-Entry-Only System. For so long as Cede & Co. is the registered owner of the Series 2017 Bonds, all principal and interest payments will be made to DTC by wire transfer of immediately available funds, and the responsibility of remitting such payments to the Beneficial Owners is solely the responsibility of DTC and the DTC Participants. See “DESCRIPTION OF THE SERIES 2017 BONDS — Book-Entry Only System” herein.

Trustee and Paying Agent. U.S. Bank National Association is Trustee and Paying Agent with respect to the Series 2017 Bonds.

Redemption Optional Redemption. The Series 2017 Bonds are subject to redemption prior to maturity at the option of the Authority from any moneys available therefor on and after January 1, 20__, in whole or in part at any time, in such manner as determined by the Authority, at a redemption price of 100% of the principal amount thereof, plus accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The Series 2017 Bonds maturing on January 1, 20__ and January 1, 20__ are subject to mandatory redemption prior to maturity from Sinking Fund Installments in part, by lot, in such manner as the Trustee may reasonably determine, at a redemption price of 100% of the principal amount thereof, plus accrued interest to the redemption date, on January 1 in each of the years and in the respective principal amounts as follows:

Series 2017 Bonds Maturing January 1, 20__ Year Principal Amount $

†

† Stated maturity.

Series 2017 Bonds Maturing January 1, 20__ Year Principal Amount $

†

† Stated maturity.

Credit Toward Mandatory Sinking Fund Redemption. Credit toward mandatory Sinking Fund Installment requirements may be made as follows, and if made, will thereafter reduce the amount of Series 2017 Bonds otherwise subject to mandatory Sinking Fund Installments on the date credit is taken:

• If the Authority directs the Trustee to purchase Series 2017 Bonds subject to Sinking Fund Installments with money in the Bond Fund (at a price not greater than 100% of the principal amount thereof plus accrued interest to the date of purchase), then a credit of 100% of the principal amount of such Series 2017 Bonds purchased will be made against the next Sinking Fund Installment of such Series 2017 Bonds due.

• If the Authority purchases or redeems Series 2017 Bonds subject to Sinking Fund Installments with other available moneys, then the principal amount of those Series 2017 Bonds will be credited against future Sinking Fund Installments of such Series 2017 Bonds in any order, and in any annual amount, that the Authority may direct.

Selection of Series 2017 Bonds to be Redeemed. In the event of redemption of less than all of the Series 2017 Bonds, the Authority will select the maturities of the Series 2017 Bonds to be redeemed. In the event of redemption of less than all of the Outstanding Series 2017 Bonds of a maturity, the Series 2017 Bonds to be redeemed shall be selected by the Authority in its discretion and if not by the Authority, then by lot by the Trustee, using such method of selection as it shall deem proper in its discretion.

Notice of Redemption. Notice of redemption shall be provided not more than sixty (60) days nor less than thirty (30) days prior to the redemption date, by electronic means and registered mail, to the registered owners of Series 2017 Bonds to be redeemed at their addresses shown on the books of registry. So long as the Series 2017 Bonds are in book entry only form, notice of redemption shall be given to Beneficial Owners of Series 2017 Bonds to be redeemed in accordance with the operational arrangements then in effect at DTC (or its successor or alternate depository), and neither the Authority nor the Trustee shall be obligated or responsible to confirm that any notice of redemption is, in fact, provided to Beneficial Owners. No assurance can be given by the Authority or the Trustee that DTC and DTC Participants will promptly transmit notices of redemption to Beneficial Owners. The Authority may condition optional redemption on the receipt of moneys on or before the date fixed for such redemption or any other event. Any notice of optional redemption may be rescinded by written notice given to the Trustee by the Authority no later than five (5) Business Days prior to the date specified for redemption. In such event, the Trustee shall give notice of such rescission, as soon thereafter as practicable, by electronic means and registered mail, to the registered owners of Series 2017 Bonds to be redeemed.

Book-Entry Only System The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2017 Bonds. The Series 2017 Bonds will be issued as fully-registered bonds 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 Series 2017 Bond certificate will be issued for each stated maturity of the Series 2017 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE SERIES 2017 BONDS, AS PARTNERSHIP NOMINEE FOR DTC, REFERENCES HEREIN TO BONDHOLDERS OR OWNERS OF THE SERIES 2017 BONDS (OTHER THAN UNDER THE CAPTIONS “TAX MATTERS” AND “CONTINUING DISCLOSURE”) SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE SERIES 2017 BONDS.

DTC 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”). 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 and dtc.org.

Purchases of Series 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2017 Bond (“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 Series 2017 Bonds 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 Series 2017 Bonds, except in the event that use of the book-entry system for the Series 2017 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2017 Bonds 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 Series 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee does not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2017 Bonds 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.

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 Series 2017 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Series 2017 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Series 2017 Bonds may wish to ascertain that the nominee holding the Series 2017 Bonds 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 the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2017 Bonds within a stated maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such Series 2017 Bonds to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2017 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority 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 Series 2017 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Series 2017 Bonds 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 the Authority or Paying Agent on the 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, the Paying Agent or the Authority, 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 the Authority or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2017 Bonds at any time by giving reasonable notice to the Authority or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Series 2017 Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2017 Bonds will be printed and delivered to DTC.

NEITHER THE AUTHORITY NOR THE UNDERWRITER (IN SUCH CAPACITY) WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (i) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY PARTICIPANT OR INDIRECT PARTICIPANT; (ii) THE PAYMENT BY DTC OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON, THE SERIES 2017 BONDS; (iii) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO SERIES 2017 BOND HOLDERS; (iv) ANY CONSENT GIVEN BY DTC OR OTHER ACTION TAKEN BY DTC AS A SERIES 2017 BONDHOLDER; OR (v) THE SELECTION BY DTC OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2017 BONDS.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from DTC or other sources that the Authority believes to be reliable, but neither the Authority nor the Underwriter take any responsibility for the accuracy thereof.

SOURCES AND USES OF FUNDS

The proceeds received from the sale of the Series 2017 Bonds, together with other available funds, are expected to be applied as follows:

Sources of Funds Proceeds of Series 2017 Bonds ...... $ Authority Equity Total Sources of Funds ...... $

Uses of Funds Deposit to Construction Fund ...... $ Deposit to Debt Service Reserve Account for the Series 2017 Bonds Costs of Issuance ...... Underwriter’s Discount ...... Total Uses of Funds ...... $

DEBT SERVICE REQUIREMENTS

Bond Year Ending Series 2017 Bonds Series 2014 Bonds Aggregate Debt December 31 Principal Interest Total Debt Service(1) Service(1) 2017 - $ $ $3,408,600 $ 2018 $ 3,412,600 2019 3,425,000 2020 3,437,500 2021 3,443,000 2022 3,451,500 2023 3,462,500 2024 3,475,500 2025 – 2026 – 2027 – 2028 – 2029 – 2030 – 2031 – 2032 – 2033 – 2034 – 2035 – 2036 – 2037 – 2038 – 2039 – 2040 – 2041 – 2042 – 2043 – 2044 – 2045 – 2046 – 2047 – TOTAL $ $ $ $27,516,200 $

(1) Totals may not add due to rounding.

THE TOLL BRIDGE SYSTEM

Introduction The Toll Bridge System currently consists of the Peace Bridge, its respective plazas on the United States and Canadian sides of the Peace Bridge and the related international trade and commerce facilities operated under contract by Canadian and United States government authorities and various commercial brokers on the property of the Authority. Additional bridge facilities can, under the limitations set forth in the Resolution, be constructed at the site of the Peace Bridge and become part of the Toll Bridge System. See “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS — Additional Bonds, Refunding Bonds and Other Indebtedness — Additional Bonds for Projects”.

Only the Pledged Revenues of the Authority (i.e., currently primarily toll revenues derived from the operation of the Peace Bridge) are pledged as security for the Bondholders under the Resolution. Unpledged Revenues (i.e., revenues derived from the other contractual and lease activities) are available and will be applied as

received to the payment of all Operating Expenses of the Authority, thereby reducing the amount of Pledged Revenues required for Operating Expenses. See “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS — Pledge Under the Bond Resolution”.

The Bridge The Peace Bridge is located near the center of downtown Buffalo, New York and Fort Erie, Ontario, where it crosses the Niagara River. The Peace Bridge is one of four vehicular toll crossings over the Niagara River in the Buffalo-Niagara region. The Lewiston-Queenston, Whirlpool Rapids and Rainbow Bridges, owned and operated by the Niagara Falls Bridge Commission (the “NFBC”), an unaffiliated bi-national entity, are three additional crossings all located more than 20 highway miles north of the Peace Bridge. Of the four bridges, the Peace Bridge and Lewiston-Queenston Bridge carry a greater percentage of vehicles with nonlocal destinations because of their connections to major arterials. Consequently, virtually all commercial traffic is over the Peace Bridge and the Lewiston-Queenston Bridge (with no commercial traffic permitted on the Whirlpool Bridge and commercial traffic officially discouraged on the Rainbow Bridge). In 2016, annual bus and truck traffic on the Peace Bridge comprised an estimated 61% of total commercial traffic on all four crossings. The Peace Bridge is one of the essential transportation and economic corridors between the United States and Canada.

Upon its completion on June 1, 1927, the Peace Bridge represented a monument to commemorate the century of peace which had existed between Canada and the United States since the War of 1812. The appearance and structure of the Peace Bridge has changed little since its dedication on August 17, 1927.

The Peace Bridge measures 3,580 feet in length from abutment to abutment. The roadway is 36 feet wide from curb to curb with two six-foot pedestrian sidewalks on either side of the bridge. The superstructure of the Peace Bridge consists of riveted steel with reinforced concrete deck slabs and a latex modified concrete wearing surface. The Peace Bridge was originally designed to support two lanes of 20-ton trucks and two tracks for 40-ton trolleys. Although the supporting structural steel is in place to support the trolley tracks, the tracks were never installed. Today, the Peace Bridge has been modified to a three-lane bridge with twelve foot wide lanes, able to accommodate heavy duty commercial loads. The center lane of this three-lane bridge is reversible, allowing for two-lane operation in one direction during peak hours. The main approaches to the Peace Bridge on the United States side are the New York State Thruway (I-190), a four-lane arterial, and Porter Avenue in Buffalo, New York. On the Canadian side, the principal approach highways are the Queen Elizabeth Way (“QEW”), a four-lane controlled-access highway, Highway 3, a regional four lane highway and the Niagara Parkway.

As more fully described above under the caption “THE PROJECT”, the Authority is currently undertaking a complete redecking and rehabilitation of the Peace Bridge. Upon completion of the Project, the configuration of the Peace Bridge will be predominantly the same as pre-construction, with three 12 foot wide traffic lanes, overhead gantries, and a gantry control system allowing directional change of the center lane. Additional Peace Bridge improvements include the addition of a 650 foot long fourth lane that was completed as part of the Canadian Bridge Approach Widening Project in 2016. This additional lane allows for more efficient commercial vehicle and NEXUS traffic segregation and egress from the Peace Bridge into Canada. Also as a result of the Project, pedestrian and bicycle access along the length of the Peace Bridge will change from two 6 foot-wide sidewalks, to one 8 foot-wide pathway on the South side of the Peace Bridge and one 4 foot-wide service corridor on the North side. The dedicated pedestrian/bicycle pathway will also feature an observation platform on the Peace Bridge at the United States and Canadian border.

Under the Resolution, the Authority has covenanted to cause the Consulting Engineer to conduct an annual inspection and to prepare a written report of such inspection and the condition of the Peace Bridge and the Authority causes the Peace Bridge to be inspected annually. In addition, a visual inspection is performed after any significant seismic activity, flood or impact event. Clark Patterson Lee, an independent diversified engineering firm headquartered in Rochester, New York, performed the 2015 and 2016 inspections and will perform the 2017-2020 annual inspections. The 2016 annual inspection found the overall structural condition of the Peace Bridge to be “generally satisfactory” to “good”. The primary structural steel members and concrete substructures are generally functioning as intended in the original design. The overall load carrying capacity of the Peace Bridge is adequate for the current legal loads and its load carrying capacity has not been significantly reduced by deterioration or other conditions reported during the 2016 inspection. For a more detailed discussion of the bridge inspection program of the Authority and recent results of such inspections, see “THE AUTHORITY — Bridge Inspection Program”.

Toll Rates The Authority’s Board of Directors adopts resolutions setting and adjusting tolls on the Peace Bridge, subject to applicable public notification procedures. The Board has independent rate setting authority and no additional governmental approvals are required to adjust tolls. However, tolls are subject to the standard that such tolls be “just and reasonable” pursuant to applicable provisions of United States and Canadian law and under the IBTA that they do not have an adverse effect on the flow of traffic. Pursuant to such resolutions, tolls are fixed at levels required to maintain revenues sufficient to satisfy the requirements of the New York Act and the toll covenant contained in the Bond Resolution. Tolls are collected one-way only on crossing from the United States into Canada. See “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS — Toll Covenant and Toll Setting Authority herein”.

Motorists and commercial vehicles crossing the Peace Bridge have the convenience of paying tolls electronically using a transponder attached to their vehicle and “read” by in-lane toll equipment. The Peace Bridge accepts E-ZPass, which can be used on toll facilities in 16 states from Maine to Illinois and south to North Carolina. The option to use E-ZPass in any of the toll lanes results in a reduction of toll collection processing time, less congestion during heavy traffic periods and less uncertainty as vehicles approach the toll plaza. As an incentive, the Authority has offered a discounted toll rate for E-ZPass users, although effective January 1, 2018, the discount for autos using E-ZPass will be eliminated. Users also have the option of paying in U.S. or Canadian currency. Approximately 81% of current Peace Bridge commercial traffic is enrolled in the E-ZPass system while an estimated 38% of passenger vehicles crossing the border at the Peace Bridge utilize E-ZPass.

Current toll rates (effective as of April 15, 2017) E-ZPass Cash Cash (U.S.$) (U.S.$) (CAD$) Autos $2.70 $3.00 $4.00 Autos + Trailer $5.40 $6.00 $8.00 Commercial: 2 Axles $5.40 $6.00 $8.00 3 Axles $9.00 $10.00 $13.00 4 Axles $16.20 $18.00 $24.00 5 Axles $25.20 $28.00 $37.00 6 Axles $36.00 $40.00 $53.00 7+Axles $47.70 $53.00 $70.00 Buses $11.70 $13.00 $17.00 Pedestrians and Bicycles Free ______Special loads arriving between 12 AM – 12 PM - $100 U.S. or $135 CAD Special loads arriving between 12 PM – 12 AM - $200 U.S. or $265 CAD

Prior to 2002, the Authority calculated the toll for commercial carriers by weight and charged the toll in both directions. With the switch to E-ZPass in 2002, the Authority changed the methodology for more efficient processing by counting the number of axles on each truck to calculate toll payments as trucks pass through the toll booths. In addition tolls are now collected in one direction only. The adoption of the Authority’s axle-based toll structure was intended to be revenue neutral to the Authority (as compared with the prior weight-based toll structure) while achieving greater fairness for commercial traffic and minimizing customer impact. The following tables illustrate the change in methodology and the history of toll adjustments as needed.

Historical Toll Rates 1996-2001* Cars Buses Trucks Cash Cash Token Token Cash Cash Charge Charge Year US$1,4 CAD$1,4 US$1,3,4 CAD$1,3,4 US$1,5 CAD$1,5 US$2,5 CAD$2,5 US$2,5 CAD$2,5 1996 $1.50 $2.00 $1.00 $1.28 $6.50 $8.00 $0.30 $0.375 $0.30 $0.30 1997 $2.00 $2.50 $1.32 $1.72 $6.50 $8.00 $0.30 $0.375 $0.30 $0.30 1998/1999 $2.00 $2.50 $1.32 $1.72 $7.50 $9.00 $0.35 $0.44 $0.35 $0.35 2000/2001 $2.25 $2.75 $1.52 $1.92 $10.00 $11.50 $0.41 $0.51 $0.41 $0.51 ______1. One-way toll Westbound. 2. Two-way toll, per U.S. gross ton. 3. Tokens sold in rolls of 25. 4. Car tolls increased on June 1, 1997. 5. Bus and Truck tolls increased on January 1, 1998. * Beginning in 2002, the Authority instituted an axle-based methodology for toll rate setting for trucks (set forth in the table below) that was not comparable to the methodology described in this table.

Historical and Scheduled Toll Rates 2002-2018 Effective 1/20/2002 Effective 4/1/2007 Effective 7/1/2007 Effective 1/18/2018 E-ZPass Cash Cash E-ZPass Cash Cash E-ZPass Cash Cash E-ZPass Cash Cash (US$) US$ CAD$ (US$) US$ CAD$ (US$) US$ CAD$ (US$) US$ CAD$* Passenger Vehicles: Auto $1.75 $2.50 $3.50 $2.70 $3.00 $3.50 ------$3.75 $3.75 $5.00 Auto + Trailer $3.50 $5.00 $7.00 $5.40 $6.00 $7.00 ------$7.50 $7.50 $10.00 Commercial Vehicles: 2-axle truck $4.50 $5.00 $7.00 ------$5.40 $6.00 $7.00 ------3-axle truck $7.20 $8.00 $12.00 ------$9.00 $10.00 $12.00 ------4-axle truck $13.50 $15.00 $22.00 ------$16.20 $18.00 $22.00 ------5-axle truck $19.80 $22.00 $33.00 ------$25.20 $28.00 $33.00 ------6-axle truck $28.80 $32.00 $48.00 ------$36.00 $40.00 $48.00 ------7-axle truck $37.80 $42.00 $63.00 ------$47.70 $53.00 $63.00 ------Bus $9.45 $10.50 $15.50 ------$11.70 $13.00 $15.50 ------______Also effective July 1, 2007, new fees were implemented for any special loads that required any bridge lanes to be closed or traffic patterns to be altered on the bridge. The new fees were: Special Loads arriving between 12 AM-12 PM $100 U.S. $120 CAD Special Loads arriving between 12 PM-12 AM $200 U.S. $240 CAD * Assumes an exchange rate of 1.33 USD to CAD for illustration purposes.

Due to the strengthening of the Canadian dollar in 2007, the Board adopted a toll equity currency policy on November 16, 2007, governing the semi-annual adjustment of Canadian cash toll rates (rounded to the nearest $0.25) based upon the U.S. cash toll rates and market exchange rates should there be a disparity between the U.S. and Canadian currencies. This policy was revised on October 14, 2008 to implement a policy of rounding auto tolls to the nearest $0.25 and commercial tolls to the nearest $1.00 for any toll rate adjustments. On December 19, 2008, the Board again revised the policy to change the semi-annual adjustment to a quarterly adjustment, at a minimum.

Effective January 1, 2018, the cash toll for autos is scheduled to increase from $3.00 USD to $3.75 USD. Coinciding with the cash toll increase on January 1, 2018, the discount for autos using E-ZPass will be eliminated making the E-ZPass toll rate the same as the USD cash toll rate. The cash toll for autos with a trailer will also increase from $6.00 USD to $7.50 USD. This increase in auto toll rates was approved by the Authority’s Board of Directors at the annual budget meeting on October 7, 2016. As noted in the chart above, the last time auto toll rates were increased was in 2007. Due to the low toll elasticity experienced and comparable rates at other local crossings, the Authority believes that this toll increase will have little to no impact on auto traffic utilizing the Peace Bridge. See APPENDIX C — “COMPREHENSIVE TRAFFIC AND REVENUE STUDY”.

Traffic Composition and Regional Traffic Market Share Passenger auto traffic accounted for 77.0% of Peace Bridge traffic and 27.6% of toll revenues during the most recent calendar year (2016), while truck traffic accounted for 22.7% of traffic, but 71.6% of toll revenues during the same period. Bus traffic has been a minor component of the traffic mix on the Peace Bridge, comprising 0.2% of traffic in 2016 and merely 0.6% of toll revenues. See “MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS — Toll Revenues”.

During the period 2012 – 2016, total traffic (trucks, autos and buses) in the Buffalo-Niagara Region has declined approximately 19%. While regional traffic has declined overall during the past 5 years, the Peace Bridge has increased its share of regional traffic. Historical regional traffic and market share is set forth below:

Buffalo-Niagara Regional Traffic Volume 2012 2013 2014 2015 2016 Total Buffalo-Niagara Region Traffic 14,098,732 13,626,931 12,843,694 11,697,511 11,449,980

Total Peace Bridge Traffic 6,012,374 5,898,372 5,590,743 5,384,811 5,305,937

Total NFBC Traffic 8,086,358 7,728,559 7,252,951 6,312,700 6,144,043

Peace Bridge % of Buffalo-Niagara Region Traffic 42.6% 43.3% 43.5% 46.0% 46.3%

NFBC % of Buffalo-Niagara Region Traffic 57.4% 56.7% 56.5% 54.0% 53.7% ______Source: Public Borders Operators Association (PBOA).

Since 2012, the total regional truck market share of the Peace Bridge compared to bridges owned and operated by the NFBC has decreased slightly while the total regional auto market share has increased slightly. Regional vehicle market share for autos has historically been influenced by the fluctuation in the U.S./Canada exchange rate (with the Canadian dollar weakening during this period) because the Peace Bridge tends to serve a greater proportion of Americans than the NFBC bridges. Historical vehicle market share is set forth below:

Trucks Autos Peace Bridge NFBC bridges Peace Bridge NFBC bridges 2012 65% 35% 39% 61% 2013 65% 35% 40% 60% 2014 63% 37% 40% 60% 2015 63% 37% 43% 57% 2016 62% 38% 43% 57% ______Source: Public Borders Operators Association (PBOA).

Duty-Free, Brokerage, Customs, Immigration and Plaza Facilities On each side of the Peace Bridge, the Authority has entered into operating leases with duty-free enterprises. In 2016, the Authority recognized approximately $4,900,000 in rental income from these duty-free enterprises. This amount included approximately $1,100,000 of contingent rental payments representing a percentage of sales by lessees. Such income constitutes Unpledged Revenues under the Resolution.

The Canadian duty-free facility commenced operations on November 1, 1998. The facility is owned by the Authority and leased to a private operator and is North America’s largest duty free store with 22,000 square feet of retail space and parking for 200 cars and 24 trucks. See “HISTORICAL REVENUES AND EXPENSES — Unpledged Revenues” for further discussion on the Canadian duty-free lease.

The U.S. duty-free store opened in October 2005 and was constructed by the duty-free operator at a cost of $2.8 million. The duty-free operator paid the entire cost of the store. It contains approximately 5,000 square feet of retail space and parking for 40 cars and 4 trucks.

The Authority’s lease agreements expire on October 31, 2031 and December 31, 2020, with the Canadian and U.S. duty free operators, respectively. The Authority also leases real property to Public Works and Government Services Canada, for use by Canada Border Services Agency (“CBSA”), under the terms and conditions of a lease expiring on April 30, 2022.

As part of the super highway communications network, the Authority has conduit leases, generally with five year terms, with eight firms for telecommunication conduits across the Peace Bridge.

At the Peace Bridge plaza facilities in the United States, eighteen booths adjacent to the administration building provide inspection locations for the United States Customs and Border Protection (“CBP”) operations. Eleven of the eighteen booths are used primarily for inspection of passenger vehicles, all of which are equipped with radio frequency identification (“RFID”) equipment, designed to meet the requirements of the Western Hemisphere Travel Initiative. All lanes are equipped with “NEXUS”, a program that allows passengers with immigration pre- clearance to pass through inspection with minimal delay. Specifically, one of the 11 passenger lanes is used as a dedicated NEXUS lane regularly with up to two additional lanes functioning as additional dedicated NEXUS lane(s) during peak commuter periods, a “Ready Lane” (which CBP implemented in August 2011 to expedite the inspection process for travelers carrying RFID enhanced documentation), or as a regular inspection lane at CBP’s discretion. The remaining seven booths are used primarily for commercial vehicles; however, five of these booths are bi-level and may be used for passenger vehicle inspection. As part of a rental agreement with the United States General Services Administration, the Authority receives rent for these inspection and administrative facilities under the terms and conditions of a lease expiring in June 2019. In addition, as part of the Authority’s current Capital Plan, the Authority is in the process of obtaining CBP approval to add a hi-lo (auto and commercial) inspection booth in the U.S. plaza. Upon receiving the necessary approvals, the Authority currently expects construction to be completed by the end of 2017.

There are a total of twenty canopied inspection booths on the Canadian side of the Peace Bridge, used for inspection of vehicles traveling westbound into Canada. Fifteen of these booths, used for inspection of passenger vehicles, are equipped with the “Integrated Primary Inspection Lane System”, sometimes referred to as I-PILS. Three of the passenger inspection lanes are equipped with NEXUS. Five inspection booths are primarily used for commercial vehicles; however, one of these booths is bi-level and may be used for passenger vehicle inspection. In May 2014, CBSA implemented eGate, or the NEXUS electronic gate at the Peace Bridge. eGate allows CBSA to extend NEXUS hours of service thereby allowing it to operate 24 hours a day 7 days a week. The Peace Bridge is the only high volume port of entry to have the eGate system.

HISTORICAL REVENUE AND EXPENSES

Traffic and Pledged Revenues Since its opening, the Peace Bridge has served all classes of traffic, including automobiles, trucks, and buses. Truck traffic, however, has provided the Authority with its largest and most stable source of toll revenues. During the period 2012-16, truck traffic averaged 22% of total bridge traffic, and approximately 71% of toll revenues. The Peace Bridge’s direct connection to major regional long distance commercial routes, the New York State Thruway system and the Queen Elizabeth Way highway in Ontario, positions the Peace Bridge in a favorable logistical location and is the reason that the Peace Bridge handles nearly 62% of the annual commercial traffic flow across the four Niagara River toll crossings in the Buffalo-Niagara region. In addition, the Buffalo-Niagara region itself, with approximately one million people living within an 11-mile radius of the Peace Bridge, generates considerable commercial activity. See APPENDIX C – “COMPREHENSIVE TRAFFIC AND REVENUE STUDY”. Overall, regional commercial traffic for the period 2012-16 remained relatively constant increasing 0.6%

over the past 5 years. The Peace Bridge’s regional market share for commercial vehicles has decreased slightly. Historical commercial volume for the Buffalo-Niagara region during 2012-16 is set forth below:

Buffalo-Niagara Regional Commercial Volume 2012 2013 2014 2015 2016 Total Buffalo-Niagara Region Commercial Traffic 1,954,662 1,925,550 1,971,179 1,953,059 1,966,031

Total Peace Bridge Commercial Traffic 1,265,351 1,244,738 1,250,405 1,228,876 1,212,268

Total NFBC Commercial Traffic 689,311 680,812 720,774 724,183 753,763

Peace Bridge % of Buffalo-Niagara Region Traffic 64.7% 64.6% 63.4% 62.9% 61.7%

NFBC % of Buffalo-Niagara Region Traffic 35.3% 35.4% 36.6% 37.1% 38.3%

______Source: Public Borders Operators Association (PBOA).

Historical truck traffic volume for both directions at the Peace Bridge for 2012-16 is set forth below:

Truck Traffic Volume (in millions) Year Volume % Change 2012 1.265 +1.0% 2013 1.245 -1.6% 2014 1.250 +0.5% 2015 1.229 -1.7% 2016 1.212 -1.4%

Passenger cars have historically represented over 77% of Peace Bridge traffic, while buses have historically comprised less than one percent. Regional passenger traffic has been in decline since the tragic events of September 11, 2001, and the new documentation requirements imposed by the Western Hemisphere Travel Initiative (“WHTI”) in 2009, which increased security at the border. During the period 2012-16, passenger traffic declined by 21% in the Niagara Region. While overall regional passenger traffic declined, the Peace Bridge’s regional market share for passenger vehicles has increased slightly over the period 2012-16, primarily due to the fluctuation of the Canadian dollar as the Peace Bridge tends to serve a greater proportion of Americans than the NFBC crossings. See APPENDIX C – “COMPREHENSIVE TRAFFIC AND REVENUE STUDY”. Historical passenger car volume for the Buffalo-Niagara region during 2012-16 is set forth below:

Buffalo-Niagara Regional Passenger Volume 2012 2013 2014 2015 2016 Total Buffalo-Niagara Region Passenger Traffic 12,144,070 11,701,381 10,872,515 9,744,452 9,483,949

Total Peace Bridge Passenger Traffic 4,747,023 4,653,634 4,340,338 4,155,935 4,093,669

Total NFBC Passenger Traffic 7,397,047 7,047,747 6,532,177 5,588,517 5,390,280

Peace Bridge % of Buffalo-Niagara Region Traffic 39.1% 39.8% 39.9% 42.6% 43.2%

NFBC % of Buffalo-Niagara Region Traffic 60.9% 60.2% 60.1% 57.4% 56.8%

______Source: Public Borders Operators Association (PBOA).

Historical passenger car volume for both directions at the Peace Bridge for 2012-16 is set forth below:

Passenger Car Volume (in millions) Year Volume % Change 2012 4.747 -0.5% 2013 4.654 2.0% 2014 4.340 -6.7% 2015 4.156 -4.2% 2016 4.094 -1.5%

Unpledged Revenues The Authority receives non-toll revenues from its operation of the Toll Bridge System primarily in the form of rental payments derived from property and services provided on both sides of the Peace Bridge. Among the Authority’s rental agreements are certain leases with operators of duty-free facilities on each side of the Peace Bridge, as well as leases with governmental agencies and commercial brokerage operators. These revenues have been an important source of income for the Authority, representing 26-32% of the Authority’s annual operating revenues during the period 2012-16.

The Authority has agreements with private operators of duty-free shopping facilities for the provision of such services on both sides of the bridge. These providers are Ammex Tax and Duty Free Shops, Inc. (“Ammex”) on the U.S. side, and Peace Bridge Duty Free (“PBDF”) in Canada. Both of these facilities provide a variety of goods to shoppers free of international tariffs and otherwise applicable sales taxes. The Authority incurs only incidental expenses as a result of these rentals.

The area sales taxes saved by shoppers at the Ammex facility in Buffalo, New York currently equals 8¾%. Subject to certain government imposed restrictions, shoppers are also able to purchase liquor and tobacco products tax and duty free. The contract with Ammex for operation of its duty-free shop in Buffalo expires in December 2020. The Authority’s agreement with Ammex provides for an annual rental payment to the Authority based upon a percentage of gross sales (escalating percentages based on actual annual gross sales). Payment is made monthly in the form of annual base rent ($503,000 USD for the year 2016), and contingent rent earned during the prior month.

Customers of the PBDF store on the Canadian side of the Peace Bridge similarly purchase goods free of all area taxes, and, subject to certain government imposed restrictions, excise duties. The Authority’s contract with the PBDF was renewed November 1, 2016 and expires on October 31, 2031, with one five year renewal. The Authority receives a minimum monthly rent payment, plus an additional rental payment based upon a percentage of gross sales (escalating percentages based on actual annual gross sales). Payment is made monthly in the form of annual base rent ($1,736,000 USD for the year 2016), and contingent rent earned during the month. Over the remaining lease term, the annual minimum rent would be approximately $3,000,000 USD, assuming the average exchange rate for 2016.

The Authority currently provides facilities and services in connection with the operation of Canadian and United States immigration and customs facilities on the Peace Bridge. The customs facilities are staffed by their respective governments, but are maintained by Authority staff. The Authority receives an annual payment from the U.S. government in return for the operating and administrative expenses it incurs to maintain the U.S. customs facilities. Canadian regulations require all international bridge operators to provide and fund inspection facilities, including the on-going maintenance of such facilities, at the expense of the bridge operator. Accordingly, the Authority does not currently receive reimbursement from the Canadian government for the operation of these facilities.

The Authority leases real property space under cancelable operating leases to approximately sixteen brokerage and small package firms on both sides of the border. The leases not only provide significant rental income, but also enhance the operational efficiency by providing brokerage services for commercial carriers on site. The Authority also leases real property to Public Works and Government Services Canada, for use by CBSA for administrative rather than border operation purposes, under the terms and conditions of a lease expiring on April 30,

2022. The Authority incurs some expenses as a result of these rentals, including utilities, for which it is reimbursed as a part of the lease contracts.

Multi-Currency Operations As a bi-national toll bridge operator, the Authority earns revenues and incurs operating and capital expenses in both U.S. and Canadian dollars. The Authority has maintained a practice of depositing U.S. dollar denominated toll and other revenues into a U.S. dollar denominated bank account, while similarly depositing all Canadian dollar based revenues into a Canadian dollar denominated bank account. These accounts are drawn upon for all expenses to be paid in their respective currencies, with deposits exchanged on an as-needed basis to pay expenses of the other currency.

The following is a table of historical exchange rates for the Canadian dollar during the period of the historical revenues and expenses provided below.

Historical Average Exchange Rates Year CAD$ per US$ 2012 1.00 2013 1.03 2014 1.10 2015 1.28 2016 1.33 ______Source: Bank of Canada

Debt service for the Series 2017 Bonds will be paid in U.S. dollars. The majority of toll receipts are made through the E-ZPass electronic toll system, which requires payment in U.S. dollars, thus substantially mitigating the risk associated with fluctuations between the value of Canadian and U.S. dollars. In 2016, approximately 82% of the Authority’s revenues that would have constituted Pledged Revenues and Unpledged Revenues under the Resolution were received in U.S. dollars and 18% of such revenues were received in Canadian dollars. Of the Authority’s operating expenses, approximately 60% were paid in U.S. dollars and 40% were paid in Canadian dollars during the same time period. In 2016, the net of Pledged and Unpledged Revenues and Operating Expenses earned and incurred in Canadian dollars approximated $1,644,000.

The Authority anticipates that it may be necessary to convert some portion of its Net Pledged Revenues received in U.S. dollars to Canadian dollars in order to pay expenses associated with Canadian contractors for ongoing capital improvements on the Peace Bridge and/or the Canadian plaza. The amount of U.S. dollars to be converted to Canadian dollars for such purpose will vary and is dependent upon factors which are beyond the Authority’s control including, among other things, the ratio of Canadian to U.S. dollars collected by the Authority, currency exchange rates, and the ratio of capital and operating expenses paid in each currency. The Authority adjusts Canadian toll rates quarterly based upon U.S. cash toll rates and market exchange rates.

Operating Results Set forth in the following table are selected revenue and expense items derived from the Authority’s financial statements for its five most recent fiscal years. The table excludes non-cash revenues and expenses such as depreciation and amortization, currency remeasurement and losses on asset valuation. Also excluded are capital contributions from grants, as these revenue sources are restricted for planning, design or construction of capital asset expenditures. Although the capital contribution grants are not available to fund principal or interest on the Bonds, the grants provide reimbursement for a portion of the expenditures included within the Authority’s capital plan.

As a bi-national toll bridge operator, the Authority earns revenue and incurs expenses in both U.S. and Canadian dollars. All Canadian revenue and expenses are converted, for financial statement reporting purposes, to U.S. dollars at the average rate of exchange for the year. Weakening of the Canadian dollar against the U.S. dollar, such as occurred during 2015-16, results in a decrease in the remeasured value of both the revenue earned and the expenses incurred in Canadian dollars.

The following information should be read in conjunction with the financial statements, including those for the Authority’s fiscal years ended December 31, 2016 and 2015 which are included in Appendix A to this Official Statement. Historical Revenues and Expenses, excluding non-cash items and capital contribution grants Year Ended December 31 (U.S.$ in thousands) 2012 2013 2014 2015 2016

Revenues Toll Revenues $22,491 $22,390 $22,177 $21,441 $21,321 Rental Income1 10,644 10,399 8,889 7,425 7,601 Other Non-Toll Revenue1 636 403 415 449 767 Total Revenues $33,771 $33,192 $31,481 $29,315 $29,689 Expenses Toll collection and traffic control $ 3,656 $3,491 $ 3,411 $3,087 $ 3,043 Maintenance of bridge and facilities 4,996 6,154 5,075 5,899 5,106 Administration 2,849 2,731 2,750 3,034 2,472 Pension 1,363 1,390 487 224 758 Other postemployment benefits 1,768 1,791 1,681 1,656 1,682 Property taxes and equalization payments 887 956 969 915 951 Payments to New York State 200 200 200 200 200 Bond Financing Closing Costs 0 0 424 0 0 Interest Expense 1,393 1,309 1,053 775 708 Total Expenses2 $17,112 $18,022 $16,050 $15,790 $14,920 Net Revenues3 $16,659 $15,170 $15,431 $13,525 $14,769 Net Revenues Available for Debt Service $18,252 $16,679 $17,108 $14,500 $15,677 Debt Service Coverage on Series 2014 Bonds 5.05x 4.60x 4.89x 4.26x 4.60x ______(1) These categories of Unpledged Revenues will not be pledged as security for the Bonds under the Resolution, but will be applied to pay Operating Expenses. (2) Any variances in the 2015 and 2016 expense amounts in the table above and in the 2017-21 FORECASTED REVENUES, EXPENSES AND OPERATING RESULTS table on page 26 are attributable to the fact that (i) Total Expenses are categorized in functional categories above and are categorized by natural categories in the table on page 26, and (ii) Interest Expense and Payments to New York State are included in Total Expenses in the table above, but are excluded from Total Expenses in the table on page 26. (3) Excludes non-cash revenues and expenses such as depreciation and amortization, currency remeasurement, and losses on asset valuation. Also excluded are capital contributions from grants, as these revenue sources are restricted for planning, design or construction of capital asset expenditures. Source: The Authority.

See “2017-21 FORECASTED REVENUES, EXPENSES AND OPERATING RESULTS” herein for forecasted combined debt service coverage on the Series 2014 Bonds and the Series 2017 Bonds.

Operating and Capital Reserves Operating reserves are required by the Act to be maintained by the Authority in order to pay current year net operating liabilities plus a reserve equal to one-sixth of the Authority’s prior year operating expenses, excluding depreciation. As of the close of the Authority’s five most recent years, operating reserves were as follows:

Operating Reserves 12/31/2012 $3,990,000 12/31/2013 3,883,000 12/31/2014 4,589,000 12/31/2015 3,955,000 12/31/2016 3,312,000

Capital reserves, consisting of funds in excess of those required by the Bond Resolution, have been designated for capital improvements. Capital reserves have increased substantially as a result of favorable operating results. As the Authority self-funds its Capital Plan each year on a pay-as-you-go basis, the capital reserves decrease as projects are completed (i.e., U.S. Customs Warehouse and Canadian Approach Widening). The Authority anticipates continuing its practice of funding its Capital Improvement Program with capital reserves. See “THE CAPITAL PLAN” herein.

The Authority’s capital reserves for each of the most recent five years are set forth below:

Capital Reserves 12/31/2012 $ 92,249,000 12/31/2013 101,845,000 12/31/2014 99,133,000 12/31/2015 95,605,000 12/31/2016 88,814,000

Voluntary Board Financial Operating Policy In October 2003, the Authority’s Board of Directors adopted a voluntary financial operating policy designed to ensure the preparation of operating and capital budgets that provide adequate liquidity to absorb unanticipated revenue shortfalls, unforeseen expenditures, and capital project overruns, thereby protecting the interests of bondholders and others. Under the most recently approved version of this financial operating policy, the Authority’s staff has been directed to prepare operating budgets that reflect net revenues equal to at least 175% of current debt service in order to provide adequate flexibility to meet the Authority’s contractual bond resolution requirement that Net Pledged Revenues in each fiscal year be at least equal to 125% of the Annual Debt Service Requirement for such fiscal year. In addition, the financial operating policy calls for operating budgets to be prepared that include the maintenance of a $20 million USD capital improvement reserve fund at all times. Overall responsibility for oversight and adherence to this Board financial policy rests with the Chief Financial Officer of the Authority or his or her designee.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS Toll Revenues Commercial crossings decreased by 4.2% from 2012 to 2016 and auto toll crossings decreased 13.8% for the same period with the highest decrease in volume occurring from 2013 to 2014 (6.7% decrease), resulting in a decrease in toll revenue of approximately 5% for 2012 through 2016. Toll rates, other than adjustments made to Canadian cash rates to recognize the changes in exchange rates, remained unchanged during the years 2012-16.

Rental Income Rental income from the U.S. Ammex facility, which is based upon the sales levels of the facility operator, averaged 41% of the Authority’s rental income during the past five years. Rental income has decreased substantially since 2012 due mainly to the weakening of the Canadian dollar, which significantly reduced the savings differential for Canadians purchasing products in the United States. Declining traffic volumes also contributed to the decline in the revenue. Rental income from the PBDF facility, which was based upon the sales levels of the facility operator, averaged 28% of the Authority’s rental income during the past five years. Revenue declined during the period 2012-16 due mainly to the reduction in traffic volumes. While the U.S. dollar is strengthening against the Canadian dollar, the uptick in U.S. travelers coming into Canada is not as pronounced as the volume of Canadian travelers that come in to the United States when the Canadian dollar strengthens against the U.S. dollar. In the summer of 2016, the Authority conducted an RFP for an operator of the Canadian duty free store. The current operator was awarded the concession and a new fifteen year lease with one five year renewal was entered in to effective November 1, 2016. The new lease includes an annual minimum rental payment and additional rent based on an escalating percentage of sales. The new lease agreement substantially increases the Authority’s rental revenue from the PBDF and includes capital improvements at the store which will be paid for by the duty free operator.

Set forth below is the Authority’s rental income from duty-free leases for each of the last five years.

Duty-Free Operations - Historical Rental Income (U.S. $000’s) Year Ammex PBDF 2012 $4,581 $2,958 2013 4,623 2,677 2014 3,863 2,390 2015 3,007 2,106 2016 2,649 2,228

See “HISTORICAL REVENUE AND EXPENSES – Unpledged Revenues” herein for additional information regarding the new Canadian duty free lease.

Other Non-Toll Revenues Other non-toll revenues, consisting primarily of investment income, were negatively impacted by declines in short-term investment rates during 2013-15. As short-term interest rates have risen, starting in 2016, investment income has also increased significantly as compared to the 2012-15 period.

Toll Collection & Traffic Control / Maintenance of Bridge and Facilities / Administration Included within these expense categories are wages and benefits, and purchased services and supplies. The Authority has improved workforce flexibility, including the increased ability to utilize temporary staff to complement full-time staff during peak periods, allowing for the reduction of staff through normal attrition. Full- time staffing levels have decreased by 18% since 2012 allowing the Authority to absorb moderate wage increases, as well as increases in pension costs, OPEB costs and health insurance premiums. Maintenance of bridge and facilities includes an impairment loss in 2013 of $1.2 million associated with costs incurred to purchase a mortgage note in support of a property purchase for potential plaza expansion. The Authority is no longer pursuing the purchase of this site.

Contribution to Pension Plans Pension contributions have fluctuated due to changes in the market value of investments and the long-term interest rates used to value pension liabilities. In addition, effective January 1, 2015 the Authority adopted GASB Statement No. 68 – Accounting and Financial Reporting for Pensions (“GASB 68”) and GASB Statement No. 71- Pension Transition for Contributions Made Subsequent to the Measurement Date (“GASB 71”). See “THE AUTHORITY — Retirement Plans”. Both the U.S. and Canadian defined benefit pension plans were in an over funded status at 108% and 111%, respectively, as of the last valuation date on December 31, 2015.

Other Postemployment Benefits (“OPEB”) The Authority recognizes the cost, based upon an actuarial analysis, of postemployment benefits during the periods when employees render the services that will ultimately entitle them to benefits. The Authority continues to fund other postemployment benefits using the pay-as-you-go method. The Authority’s Board of Directors approved the establishment of a qualified OPEB trust with an initial funding level of $10 million to provide for the future funding of OPEB benefits in anticipation of implementing GASB Statement No. 75 - Accounting and Financial Reporting for Post-Employment Benefits Other Than Pensions (“GASB 75”) which is effective for fiscal years beginning after June 15, 2017. See “THE AUTHORITY — Other Postemployment Benefits”.

Property Taxes and Equalization Payments The Act provides that the Authority’s real property in Canada and the Authority itself are subject to assessment and taxation. While the New York Act exempts Authority property maintained in the United States from taxation, the New York Act requires the Authority to pay New York State, or its designee, an amount equal to the municipal property taxation paid by it in Canada. The fluctuations in expense throughout the years 2012-16 are generally attributable to changes in the assessed value of the Authority’s Canadian properties. The increase noted in 2013 was attributable to a change in the assessment methodology used to value international bridges and tunnels in

Ontario. Further increases in the assessment were phased in during 2014-16. In addition, payments made to New York State or its designee are based upon an equivalent amount to that paid in Canada. Consequently, this equivalent payment increased with the strengthening of the Canadian dollar which occurred during the period 2012- 13.

Payments to New York State The New York Act provides that the Authority must make an annual payment of $200,000 to the State of New York or its designee. The current designee is the Niagara Frontier Transportation Authority.

Interest Expense The decrease in interest expense is primarily attributable to a reduction in the Series 2014 Bonds outstanding.

Unaudited Interim Financial Performance for the Four Months Ended April 30, 2017 As noted in Appendix B hereto, unaudited operating income for the four months ended April 30, 2017 is approximately $970,000, or 53%, higher than operating income for the first four months of 2016.

Current year operating revenues have increased by $275,000, primarily as a result of a $540,000, or 28%, increase in rental income from duty free concessions, primarily related to the new Canadian duty free lease. The increase in rental income was offset by a decrease in toll revenue of $189,000, or 3%, primarily as a result of a decrease in commercial vehicle volume compared to the same period last year.

Operating expenses for the four months ended April 30, 2017 decreased $695,000, or 10%, as compared to operating expenses incurred for the same period in 2016, due to decreases in expenses associated with snow removal and utilities as a result of the milder winter, reductions in wages and benefits and reductions in legal and consulting expenses which were incurred in 2016 in conjunction with the Canadian duty free concession RFP process.

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2017-21 FORECASTED REVENUE, EXPENSES AND OPERATING RESULTS

The following table sets forth the Authority’s forecast of revenues, expenses, and debt service coverage for calendar years 2017-21. Such forecast is based on expectations, estimates and data that the Authority believes are reasonable as of the date hereof but it may be prove to be incorrect or not reflective of actual results. Accordingly the information in the following table should not be regarded as a representation of fact or a guarantee of results. The forecast of revenues, expenses, and debt service coverage is subject to a variety of risks and uncertainties that could cause actual results to differ materially and adversely from those projected below. Actual results, displaying expenses in natural (i.e., salaries and wages, utilities, etc.) rather than functional (i.e., toll collection, maintenance, etc.) classifications, are included for 2015 and 2016 for comparative purposes. $ In thousands Actual Forecasted 2015 2016 2017 2018 2019 2020 2021 Revenues: Toll Revenues1 $21,441 $21,321 $20,750 $22,150 $21,930 $22,080 $22,000 Other Revenue2 7,874 8,368 8,892 9,161 9,117 9,162 9,300 Total Revenues 29,315 29,689 29,642 31,311 31,047 31,242 31,300 Expenses: Salaries & Wages3 4,534 4,633 4,817 4,938 5,061 5,188 5,318 Employee Benefits4 1,418 1,459 1,590 1,630 1,726 1,774 1,823 Pension Expense5 224 758 1,048 1,129 1,171 1,228 1,026 OPEB6 1,656 1,682 1,814 1,868 1,924 1,982 2,041 Total Wages and Benefits 7,832 8,533 9,269 9,565 9,882 10,172 10,208

Repairs and Maintenance7 1,680 1,304 1,814 1,604 1,569 1,632 1,697 Utilities8 898 955 992 1,022 1,053 1,084 1,117 Property taxes and equalization payments9 916 951 997 1,047 1,099 1,154 1,212 Government grants10 1,146 ------Other11 2,343 2,269 2,190 2,234 2,278 2,324 2,371 Total Expenses† 14,815 14,012 15,262 15,472 15,881 16,336 16,605

Net Revenues Available for Debt Service $14,500 $15,677 $14,380 $15,839 $15,166 $14,876 $14,695

Debt Service - Series 2014 Bonds Principal (due Jan. 1 of subsequent year) 2,130 2,220 2,320 2,440 2,550 2,690 2,830 Interest 1,262 1,177 1,089 973 875 748 613 Total Debt Service - Series 2014 Bonds $ 3,392 $ 3,397 $ 3,409 $ 3,413 $ 3,425 $ 3,438 $ 3,443 Debt Service Coverage - Series 2014 Bonds12 4.26x 4.60x 4.22x 4.64x 4.43x 4.33x 4.27x Debt Service – Series 2017 Bonds Principal (due Jan. 1 of subsequent year) ------Interest13 1,806 3,421 3,421 3,421 3,421 Total Debt Service - Series 2014 Bonds and Series 2017 Bonds $5,215 $6,834 $6,846 $6,859 $6,864 Debt Service Coverage - Series 2014 Bonds and Series 2017 Bonds12 2.76x 2.32x 2.22x 2.17x 2.14x ______Source: The Authority Footnotes to 2017-21 Forecasted Revenues, Expenses and Operating Results 1. Assumes traffic volumes and revenues as noted within the Comprehensive Traffic and Revenue Study. See Appendix C. Note that for purposes of this forecast, only the auto toll increase effective January 1, 2018 was considered, no other toll increases were assumed which would be subject to future Board actions. 2. Assumes current duty free leases will be renewed at current levels. 3. Assumes 2.5% annual growth after 2017.

Footnotes to 2017-21 Forecasted Revenues, Expenses and Operating Results (Cont.) 4. Assumes employee benefits equal to 33% of salaries and wages, with a slight increase in 2019 to accommodate potential impacts of providing healthcare for an additional class of employees. Employee benefit expenses have been between 30-32% of salaries and wages for 2012-16. 5. GASB 68 implemented in 2015. Assumes actual rate of return equals actuarial rate of return for years 2017 – 2021 and includes amortization of existing deferred outflows and deferred inflows related to pensions. See Note 7 of the Authority’s December 31, 2016 audited financial statements, attached as Appendix A. 6. Assumes current healthcare benefit levels and actuarial determined assumptions as noted within Note 8 of the Authority’s December 31, 2016 audited financial statements, attached as Appendix A. Also included is the continued amortization of the unfunded actuarial liability. The impact of GASB 75 is unknown and not included in the 2017-21 forecast. 7. Includes periodic and recurring maintenance expenses. 2020 includes a mandated pier scour assessment, which occurs every five years. 8. Assumes 3% annual growth and incremental cost increases. 9. Assumes 5% annual growth. 10. Represents a non-recurring cost incurred to support installation of radial portal monitors (“RPMs”) for use by U.S. Customs and Border Patrol. Includes purchased services and supplies, such as insurance, electronic toll collection fees, etc. Assumes 2% annual growth. 11. Includes other purchased services and supplies and gain or loss on asset disposal; assumes a 2% annual cost increase. 12. Net Revenues Available for Debt Service / Total Debt Service. 13. Projected debt service associated with $75 million aggregate principal amount of bonds amortized over 30 years at an assumed all in true interest cost of 3.91% for the Series 2017 Bonds. † Any variances in the 2015 and 2016 expense amounts in the table above and in the Historical Revenues and Expenses table on page 22 are attributable to the fact that (i) Total Expenses are categorized in natural categories above and are categorized by functional categories in the table on page 22, and (ii) Interest Expense and Payments to New York State are excluded from Total Expenses in the table above, but are included in Total Expenses in the table on page 22.

Forecasted Toll Revenues

The Comprehensive Traffic and Revenue Study (the “T&R Study”) included herein as Appendix C to this Official Statement was prepared by Jacobs Civil Consultants, Inc. in connection with the issuance of the Series 2017 Bonds. The T&R Study should be read in its entirety for an understanding of the forecasts and the underlying assumptions. The T&R Study includes an examination of the historical traffic and toll revenue data, economic indicators, demographic trends and other key factors that have affected bridge usage.

The following chart depicts the transaction growth forecasts for 2017 to 2047 per the T&R Study.

Annual Transactions Eastbound (Non-Tolled) Westbound (Tolled) Grand Total Year Auto + Truck Total Auto Truck Bus Total Bus 2017 -4.0% -4.0% -4.0% -2.7% -2.6% -3.8% -2.7% -3.3% 2018 -1.3% -1.1% -1.3% -2.1% -1.1% -2.0% -1.8% -1.6% 2019 -1.1% -0.9% -1.1% -1.1% -0.9% -1.5% -1.1% -1.1% 2020 -1.7% 2.3% 1.8% 0.4% 0.9% 0.3% 0.5% 1.2% 2021 -0.6% -0.2% -0.5% -0.6% -0.3% -0.5% -0.5% -0.5% 2022 -0.3% 0.0% -0.2% -0.3% 0.0% 0.0% -0.2% -0.2% 2023 -0.1% 0.0% 0.0% -0.2% 0.0% 0.0% -0.1% -0.1% 2024-47 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Note: Shaded years are relative to bridge redecking/rehabilitation project. ______Source: Jacobs Civil Consultants, Inc.

The traffic and associated revenue forecasts included within the T&R Study were used by the Authority to develop revenue and debt service coverage forecasts.

The T&R Study relies on the experience and expertise of Jacobs Civil Consultants, Inc. as Traffic Engineers. As noted in the report any forecast is subject to uncertainties. Therefore, there are likely to be differences between forecast and actual results, and those differences may be material. The T&R Study should be read in its entirety for a complete understanding of its contents, including limits and disclaimers.

Certain Factors Affecting Authority Expenses

Approximately 70% of the Authority’s workforce is covered by two collective bargaining agreements, one of which expires on December 31, 2018, and one which expires on December 31, 2019. There can be no assurance that future changes to the collective bargaining agreements will correspond to the forecasted wage and benefit expenses. In addition, the Affordable Care Act or any other future U.S. health care related legislation may result in additional changes in the cost of health care provided to U.S. employees and retirees, which may exceed the amounts included within the forecast. Sustained declines in the market value of pension assets or the long-term interest rates used to value pension liabilities may result in pension expenses beyond those forecasted. See “THE AUTHORITY – Employee Relations”.

Other Factors Affecting Authority Net Revenues Available for Debt Service

Other factors, as noted within the “RISK FACTORS” section of this Official Statement, may negatively impact the forecasted net revenues available for debt service.

THE CAPITAL PLAN Capital Plan The Authority’s Capital Plan, which is updated annually, was last revised in 2016 to accommodate updated cost estimates and timing for previously approved projects, as well as new staff recommendations. The Capital Plan, which is summarized below, includes modifications to the existing Peace Bridge and to the U.S. federal inspection plaza to improve the operational efficiency of the crossing and to ensure its longevity. U.S. $ in millions Description Current Status 2016 2017 2018 2019 2020 Total U.S. Commercial Warehouse Addition and Renovation Substantially Complete 2.3 0.6 - - - 2.9 Canadian Approach Widening Complete 6.0 - - - - 6.0 Bridge Redecking and Rehabilitation* Under Construction 10.3 35.8 33.5 19.4 - 99.0 U.S. Wilson Building Renovations Detailed Design .40 3.4 - - - 3.8 Enhancement of U.S. Subject to legislative inspection capacity approval 1.5 9.6 9.0 27.4 - 47.5 Bridge Painting Program Scope Development - - - 1.0 12.0 13.0 Other Minor projects/equipment 5.5 4.3 2.5 - - 12.3 Total $26.0 $53.7 $45.0 $47.8 $12.0 $184.5 ______* Approximately $75 million of the projected total cost of the Peace Bridge redecking and rehabilitation is to be funded with proceeds of the Series 2017 Bonds. Projected Capital Plan Funding Sources U.S. $ in millions

2016 2017 2018 2019 2020 Total Net Revenues After Debt Service $11.3 $10.0 $ 9.9 $10.8 $10.8 $ 52.8 Capital Reserves 14.7 7.9 6.2 26.7 1.2 56.7 Series 2017 Bonds* - 35.8 28.9 10.3 - 75.0 Total $26.0 $53.7 $45.0 $47.8 $12.0 $184.5 ______* Proceeds of the Series 2017 Bonds are expected to be used to fund a majority of the cost of the Peace Bridge redecking and rehabilitation.

The first phase of the plan consisted of widening the bridge approach on the U.S. side (completed in 2014), expanding and renovating a commercial customs warehouse (completed in 2016), and widening of the northern most Canadian approach lane (completed in 2016).

The U.S. commercial warehouse renovation project consisted of the construction of a new two-story addition and a complete renovation of existing space. The intent was to allow construction of this addition while maintaining the operational functionality of the existing facility. The commercial warehouse contains offices and program space for the U.S. Food and Drug Administration, U.S. Customs and Border Protection, and U.S. Department of Agriculture, as well as offices for private brokerage firms. Construction began in April 2014 and was substantially completed in April 2016. Open punch list items and other minor wrap-up are all that remain to be completed.

Competed in 2016, the Canadian Approach Widening added a truck lane off of the bridge on the Canadian approach (northern) side facilitating the queuing of commercial vehicles for primary inspection, while improving access to primary inspection booths for passenger vehicles. This project was also designed to alleviate traffic queuing on the connecting interstate system in the U.S. and will continue to help alleviate congestion during the redecking/rehabilitation project which will necessitate bridge lane closures. This project’s original timeline was moved up to ensure completion prior to commencement of the bridge re-decking/rehabilitation project.

The second phase of the plan consists of redecking and rehabilitating the Peace Bridge “under traffic,” which will use a cast-in-place reinforced deck methodology. This will involve a complete replacement of the original bridge deck and select structural steel items, as well as the modification of the existing sidewalks and gantry system. The Capital Plan also includes the addition of a fourth lane to the Canadian approach to the Peace Bridge and a widening of the U.S.-side approach to the Peace Bridge designed to help alleviate plaza congestion. Upon completion of the redecking/rehabilitation project, the Peace Bridge will essentially be a new bridge with an estimated useful life of 75 years.

To accommodate the work being done “under traffic”, a full-time bridge lane closure during off-peak traffic periods (mid-October through mid-May) will be required for a three year period ending in May 2019 while the redecking of the traffic lane occurs. The first traffic lane (the northern-most lane) was started in October 2016 and completed in May 2017 when the lane was reopened to traffic. Each traffic lane represents approximately one- third of the project and the first lane was completed on time and within budget. In addition, no unknown or unforeseen conditions relative to the Peace Bridge were noted and the Authority expects this to be the case with respect to the remaining two traffic lanes that make up the redecking project on the Peace Bridge.

Renovations to the U.S. Wilson Building included in the Capital Plan are mainly required immediate upgrades such as a new HVAC system and required electrical upgrades. Additional renovations are in the idea phase as this building’s future plans will need to be considered along with the enhancement of U.S. inspection capacity project. In addition, the Authority will be assessing various alternatives for enhancing U.S. federal inspection processing capacity, including the full implementation of commercial inspection in Canada and/or the reconfiguration and potential expansion of the U.S. plaza.

The Capital Plan also includes other capital expenditures include minor projects and purchases which are necessary to sustain and facilitate current toll collection and traffic control processes and to provide adequate vehicles, equipment, and computer systems to maintain operations. The portions of the Capital Plan not being financed with the proceeds of the Series 2017 Bonds include discrete elements that may be deferred at the discretion of the Authority’s Board of Directors.

THE AUTHORITY History Beginning in 1851, there were numerous attempts to construct a bridge over the Niagara River between the City of Buffalo, New York and Fort Erie, Ontario. In 1922 and 1923, respectively, the State of New York and the Government of Canada each incorporated a company under the name Buffalo and Fort Erie Public Bridge Company. By agreement dated June 13, 1925, the United States and Canada consolidated the two companies into a single international company known as The Buffalo and Fort Erie Public Bridge Company. This company was formed to evaluate the feasibility and practicality of a bridge spanning the Niagara River. Later, this company financed and built the Peace Bridge and managed its operations for several years prior to its sale to the Authority.

The Peace Bridge was completed and officially opened to traffic in June 1927. Its name came from the commemoration of more than 100 years of peace between the United States and Canada. The New York Act, which became law in 1933, created the Authority. Under the Act, the Authority is the successor in interest to the original international company.

Powers The Authority is generally authorized under the Act to establish and collect such tolls and charges as may be convenient or necessary to produce at all times sufficient revenues to meet its expenses of maintenance and operation, to pay, as the same shall become due, the principal of and interest on debt of the Authority, including the Bonds and to fulfill the terms of any agreement made with the holders of the Bonds until such Bonds and the interest thereon are fully paid and discharged. With respect to certain Authority powers, the Canadian Act does not contain comparable provisions to the New York Act but the Canadian Act does not prohibit any activities of the Authority that are authorized under the New York Act. Under the Resolution, tolls shall remain in effect until all of the Bonds have been retired. See “SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2017 BONDS – Tolls Covenant and Toll Setting Authority”.

Under the Act, the powers of the Authority include, among others, the power to maintain, reconstruct and operate the Peace Bridge so long as its corporate existence shall continue; and, in addition, to construct and maintain facilities for the public not inconsistent with the appropriate use of the Peace Bridge, to contract for such construction, and to lease the right to construct and use such facilities on such terms and for such considerations as it determines.

Title to the property and assets of the Authority is vested in the Authority until July 1, 2020 or until all of the bonds issued by the Authority have been paid in full or otherwise discharged, whichever is later (currently January 1, 2025 and upon the issuance of the Series 2017 Bonds, January 1, 20__). Thereafter, the powers, jurisdiction and duties of the Authority cease and the property and assets acquired and held by the Authority within the State of New York and within Canada shall be under the jurisdiction of the State of New York and Her Majesty in right of Canada, respectively.

Since 1923, the Authority and its predecessor, the Buffalo and Fort Erie Public Bridge Company, have held pursuant to Canadian law an exclusive franchise under Canadian law to construct and operate a bridge across the Niagara River. The law provides that “no other bridge for a like purpose shall be constructed or located at any point nearer than six miles from the location of the bridge of [the Authority], except with the consent of [the Authority] or of the Governor in Council”. By letter to the Authority dated November 30, 2004, Transport Canada confirmed the Authority’s exclusive six-mile franchise. The Authority believes that its exclusive franchise is a property right that is subject to judicial protection.

Pursuant to the Act, the Authority has the power to acquire, hold and dispose of real and personal property for its corporate purposes. The Authority does not have eminent domain rights in the United States or expropriation rights in Canada. The Authority has no taxing power and its obligations are not a debt of the State of New York or the government of Canada.

Members and Officers The Act provides that the Authority shall consist of a Board of ten members, five of whom shall be citizens of the United States and residents of the State of New York and five of whom shall be Canadian citizens resident in

Canada. Two members are appointed by the Governor of the State, with the advice and consent of the Senate of the State, to serve two-year terms. The three remaining New York members shall be the chairman of the Niagara Frontier Transportation Authority (“NFTA”), the Commissioner of Transportation and the Attorney General of the State. The five Canadian members are appointed by the Governor in Council (Government of Canada) to hold office at pleasure. These appointments are currently made for specified terms. The United States members of the Authority receive no salary, while Canadian members receive compensation in the amount of $150 per meeting up to an annual maximum of $10,000. All members are reimbursed for their necessary expenses incurred in connection with their duties. The Chairman and Vice-Chairman of the Board are each elected annually and both offices alternate annually between the United States and Canadian members. The members of the Authority may appoint other officers. The present members of the Board and the expiration dates of their terms of office are as follows:

Canada United States

Name Expiration of Term Name Expiration of Term William (Sam) B. Hoyt, III Timothy Clutterbuck February 22, 2021 (NYSDOT Commissioner designee) ex officio Debra Zimmerman June 2, 2020 Charles L. Gurney (NFTA designee) ex officio Isabel Meharry February 22, 2021 Anthony M. Masiello December 31, 2013* Patrick Robson March 5, 2020 Michael J. Russo (Atty. Gen. designee) ex officio Lew Holloway** February 15, 2021 Kenneth Manning December 31, 2017 ______* Term continues until New York State Governor appoints a new member. ** Term commences on June 3, 2017.

A majority of the members of the Board constitute a quorum for the transaction of any business or the exercise of any power or function of the Authority.

The present officers of the Authority are:

Name Office Timothy Clutterbuck Chairman William (Sam) B. Hoyt, III Vice Chairman Ron Rienas Secretary/Treasurer and General Manager Senior Staff The day-to-day management of the Authority is primarily the responsibility of the following senior staff members:

Secretary/Treasurer and General Manager. Ron Rienas was appointed Secretary/Treasurer and General Manager of the Authority in 2003. As the General Manager and Secretary/Treasurer of the Authority, Mr. Rienas serves as the chief advisor to the Board of Directors, assisting in the development and implementation of the strategic plan and Board policies. Mr. Rienas is also responsible for directing the Finance, Human Resources, Operations, and Toll/Traffic Departments, and all capital construction projects.

Before joining the Authority, Mr. Rienas spent twelve years as the Director of Planning & Property Safety with the Town of Fort Erie where he oversaw the planning and building departments. Prior to his tenure with the Town of Fort Erie, Mr. Rienas was employed with the Ministry of Municipal Affairs, Ontario, and with an urban and rural planning consulting firm in the Niagara Region.

Mr. Rienas holds an honors bachelor’s degree from the University of Waterloo in urban and regional planning with an environmental studies major and management studies minor.

Chief Financial Officer. Karen L. Costa became Chief Financial Officer in 2015. Ms. Costa has primary managerial responsibility for financial and administrative functions including financial and regulatory reporting,

treasury management, budget development and monitoring, human resource planning, recruitment, and salary/benefit administration.

Ms. Costa has over 20 year’s experience in traditional and non-traditional accounting and leadership roles. She has held various financial and leadership positions in public accounting, energy services companies (“ESCOs”), manufacturing, and healthcare where she oversaw the implementation of integrated financial systems, financial and tax reporting, revenue management and financial analysis and planning.

Ms. Costa received a Bachelor of Science Degree from Canisius College and graduated Cum Laude. She is a Certified Public Accountant in the State of New York and is a member of the New York State Society of Certified Public Accountants, and the American Institute of Certified Public Accountants.

Chief Operating Officer. Thomas A. Boyle became Chief Operating Officer in 2015. Mr. Boyle has primary managerial responsibility for operations functions including maintenance, capital projects, labor relations, and toll/traffic processes and external stakeholder relations including U.S. Department of Homeland Security Customs and Border Protection and Canadian Border Services Agency.

Mr. Boyle was instrumental in the planning, development and execution of the current Capital Plan including infrastructure expansion, renovation and bridge rehabilitation. Mr. Boyle has nearly 20 years of progressive experience in strategic planning and implementation of international corporate operations as well as the financial business modeling, planning, development and management of major capital investment programs. Prior to joining the Authority, Mr. Boyle held various positions with Parsons Corporation and most recently served and the Managing Director/Country Manager for Parsons Corporations operations in Turkey. Mr. Boyle earned his Bachelor of Science in Civil Engineering, a Master of Science in Structural Engineering and a Master of Business Administration from the State University of New York College at Buffalo and continues ongoing professional training in management and professional leadership.

Operating Budget Process The Authority adopts an annual operating budget and a capital budget prior to the start of each fiscal year. The budget process is initiated by a meeting of senior staff, which establishes budget strategies including levels of services, maintenance requirements, on-going capital project commitments and other issues for the upcoming year. The budget strategies are further guided by Board approved policies governing the overall financial requirements associated with the annual operating and capital plan. Each department then prepares its preliminary budget requests based upon the budget strategies and level of service. These requests are then reviewed by senior staff in concert with overall corporate goals and strategies. The budget is then submitted for review and formal adoption by the Board at a meeting of the Authority. During the fiscal year, the Authority has budget control procedures in place and the Board receives monthly operating and capital budget monitoring reports, comparing actual revenues and expenditures against budget. The monitoring reports also serve as a means of highlighting changes in net revenues, cash flows and expenditures which may require changes to the operating and capital plans.

Bridge Inspection Program The Authority’s inspection program for the Peace Bridge exceeds current minimum Federal and State standards. The inspection process strives for strict adherence to both the qualification and training of inspectors, and inspection methodologies as prescribed by the New York State Department of Transportation (“NYSDOT”). The Peace Bridge is inspected annually which is more frequently than the biannual requirements of the State’s Uniform Code of Bridge Inspection (the “Bridge Code”). In addition to the Bridge Code requirement, the Authority also performs visual inspections after any significant event that occurs in the area such as seismic event or flooding.

As part of the annual bridge inspection, all primary and secondary structural elements are given a hands-on inspection. The Authority’s bridge maintenance engineers review each inspection report to determine maintenance and rehabilitation needs. A maintenance and rehabilitation program is developed each year and implemented through in-house staff or through a contracts program, depending upon the extent of work required to be performed.

Substructure elements are also inspected. The NYSDOT Diving Inspection Technical requirements specify that diving inspections be performed on bridge substructures where the water depth exceeds six feet, at a frequency of five years. Scour investigations usually include hands-on underwater investigations, but due to the inherently

swift current and difficult access around the Peace Bridge river piers, these methods have not been performed to date. Rather, underwater scour investigation requirements have been fulfilled by conducting side scan sonar surveys of the pier/river bottom interface. The most recent underwater scour investigation was performed in 2015, and an updated scour inspection is planned for 2020. Based on past experience, knowledge of the construction of the Peace Bridge, and knowledge of the foundation conditions, there has been no concern to date from structural engineers or bridge inspectors as to the condition of the piers below the surface of the water.

Based on the results of the 2016 inspection of the Peace Bridge, the overall structural condition of the Peace Bridge is “generally satisfactory” to “good”. The United States Department of Transportation (“USDOT”) /Federal Highway Administration (“FHWA”) National Bridge Sufficiency Rating for the Peace Bridge is 55 points out of a possible 55 points for the category of Structural Adequacy and Safety. As a result of the most recent inspection, no Red Structural Flags (immediate repair required) were issued and two Yellow Structural Flags (significant structural problems that do not require immediate repair) were issued and have been subsequently corrected as part of the current Peace Bridge rehabilitation program.

Insurance The Authority has an insurance policy covering business interruption on the Peace Bridge in the amount of $40 million with a deductible of eight days toll revenues. The Authority also has a builders risk insurance policy covering the replacement value of the Peace Bridge and ancillary property in the amount of $200 million USD and $77 million CAD with a maximum $250,000 deductible. This policy is in effect until September 1, 2019 (the scheduled completion date for the Project). Upon completion of the bridge redecking/rehabilitation project, the Authority will seek to return coverage through a traditional property policy. General liability claims against the Authority are covered by general liability and umbrella insurance policies in the amount of $85 million CAD. In addition, the Authority maintains boiler and machinery, buildings and contents (including rental income insurance), automobile, crime, fidelity, and directors’ and officers’ insurance policies. All policies of insurance contain particular exceptions regarding coverage thereunder and reference should be made to such policies for an explanation of the coverage contained therein.

Although the Authority has procured property, general liability and excess liability coverage through February 28, 2018 (and, as noted above, builders risk insurance coverage through September 1, 2019), the Authority is unable to predict whether the cost of coverage and/or the amount of policy deductibles may increase in future years. Under its general liability policy, the Authority has limited coverage for losses arising from certain acts of terrorism, with the terms of such coverage being governed by the Terrorism Risk Insurance Act of 2002 (“TRIA”), U.S. legislation that is currently scheduled to expire on December 31, 2020. Under the Authority’s property and excess liability policies, TRIA coverage is provided in the general liability and first excess liability policy up to $25 million USD, however, losses resulting from acts of terrorism are excluded from coverage under the Authority’s additional property and additional excess liability policies. In the event that TRIA is not extended by Congress, the Authority would evaluate its options for replacement insurance coverage for certain acts of terrorism but it might not find suitable, cost effective replacement coverage. The Authority does not have insurance coverage to replace the Peace Bridge in the event of a catastrophic terrorist attack.

Employee Relations As of April 1, 2017, the Authority had 58 full-time employees, 14 part-time employees and numerous temporary employees. 22 full-time and 8 part-time U.S. Maintenance, Toll Collection and Janitorial Employees are represented by the Teamsters Local Union No. 449 affiliated with the International Brotherhood of Teamsters. The contract for the U.S. employees expires on December 31, 2018. The 15 full-time and 5 part-time Canadian Maintenance, Traffic and Janitorial staff are represented by Teamsters Local No. 879, also affiliated with the International Brotherhood of Teamsters. The contract for the Canadian employees will expire on December 31, 2019.

Retirement Plans The Authority has two self-funded defined benefit retirement plans covering the majority of all full-time employees in the United States and Canada. The plans have been closed to new members since January 1, 2009. The Authority has actuarial valuations performed no less frequently than every other year. Effective January 1, 2015, the Authority adopted GASB 68 and GASB 71. These statements address the accounting and financial

reporting for pensions provided to Authority employees. The statements also require various note disclosures and required supplementary information.

GASB 68 requires the liability of employers and non-employer contributing entities to employees for defined benefit pensions (net pension liability) to be measured as the portion of the present value of projected benefit payments to be provided through the pension plan to current active and inactive employees that is attributed to those employees’ past periods of service (total pension liability), less the amount of the pension plan’s fiduciary net position.

The pension expense and deferred outflows of resources and deferred inflows of resources related to pensions that are required to be recognized by an employer primarily result from changes in the components of the net pension liability—that is, changes in the total pension liability and in the pension plan’s fiduciary net position. GASB 68 requires that most changes in the net pension liability be included in pension expense in the period of the change. For example, changes in the total pension liability resulting from current-period service cost, interest on the total pension liability, and changes of benefit terms are required to be included in pension expense immediately. Projected earnings on the pension plan’s investments also are required to be included in the determination of pension expense immediately. The effects of certain other changes in the net pension liability are required to be included in pension expense over the current and future periods. The effects on the total pension liability of (1) changes of economic and demographic assumptions or of other inputs and (2) differences between expected and actual experience are required to be included in pension expense in a systematic and rational manner over a closed period equal to the average of the expected remaining service lives of all employees that are provided with benefits through the pension plan (active employees and inactive employees), beginning with the current period. The effect on the net pension liability of differences between the projected earnings on pension plan investments and actual experience with regard to those earnings is required to be included in pension expense in a systematic and rational manner over a closed period of five years, beginning with the current period. Changes in the net pension liability not included in pension expense are required to be reported as deferred outflows of resources or deferred inflows of resources related to pensions.

Employer contributions subsequent to the measurement date of the net pension liability are required to be reported as deferred outflows of resources.

The most recent valuations were prepared as of January 1, 2015 and were rolled forward to December 31, 2016 at which time the Authority recorded a net pension asset of $3,374,000. The Authority pays the full cost of all benefits provided and its policy is to fund the annual actuarially required contribution or the current year service cost (whichever is greater) for the U.S. plan and the annual actuarially required contribution under the (Canada) Federal Pension Benefits Standards Act for the Canadian plan. Both the U.S. and Canadian defined benefit pension plans were in an over funded status at 108% and 111% respectively as of the last valuation date which was December 31, 2015.

The defined-benefit retirement plans are closed to new entrants. The Authority’s Board directed that an Asset Liability Study be conducted on these plans to evaluate strategies to align the investments of the plans with the plan liabilities. The Authority’s Board approved the implementation of the de-risking strategies as presented by the Authority’s consultant at the April 28, 2017 board meeting. The Authority has established two defined contribution plans which separately cover U.S. and Canadian employees. Since 2008, these plans have been offered to all new employees in place of the defined benefit pension plans. The defined contribution plans require the Authority to contribute 6% of each qualified employee’s covered salary. Contributions to the defined contribution plans totaled $87,000 in 2016.

See APPENDIX B — “FINANCIAL STATEMENTS OF THE AUTHORITY — Note 7-Pension Plans”.

Other Postemployment Benefits The Authority maintains two single-employer defined benefit postemployment healthcare plans (the “Plans”), one covering certain Canadian employees and one plan covering certain U.S. employees. The Plans provide benefits in the form of insurance premium payments for coverage of eligible retires, spouses and dependents. Plan provisions and Authority and member contribution rates are determined through negotiations

between the Authority and its employees or the collective bargaining units that represent its employees. The Plans have been closed to new members since January 1, 2009.

Eligibility is based on the date of hire, attainment of retirement age, and years of service. The Authority pays 100% of the health, dental and life insurance premiums for employees meeting the following criteria:

Canadian Plan

Full-time employees hired prior to September 19, 2003 (union) or November 21, 2003 (non-union), upon attainment of age 50 with 2 years of service

Full-time employees hired after September 19, 2003 but prior to July 27, 2007 (union) or after November 21, 2003 but prior to December 31, 2008 (non-union), upon attainment of age 50 with 10 years of service

U.S. Plan

Full-time employees hired prior to July 18, 2003 (union) or November 21, 2003 (non-union), upon attainment of age 50 with 2 years of service

Full-time employees hired after July 18, 2003 but prior to September 29, 2006 (union) or after November 21, 2003 but prior to December 31, 2008 (non-union), upon attainment of age 50 with 10 years of service

The Authority adopted GASB Statement No. 45 – Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions as of January 1, 2008. This statement requires governmental entities, including the Authority, to recognize the cost of postemployment benefits during the periods when employees render the services that will ultimately entitle them to the benefits, rather than continuing to use the pay- as-you-go method (recognize the cost as the retiree premiums and retirements are paid). As of January 1, 2016, the total actuarial accrued liability for future other postemployment benefits was $24,300,000, all of which is currently unfunded.

The Authority’s Board of Directors approved as part of the 2017 budget the establishment of a qualified OPEB trust with an initial funding level of $10,000,000. The Authority has engaged its actuary to perform a full valuation of the OPEB liabilities as of December 31, 2016, with the expectation of implementing GASB 75 and complying with the requirements of this new accounting standard which has a required implementation date for all fiscal years beginning after June 15, 2017. The Authority anticipates the trust to be established during late 2017 or early 2018. Until the establishment of the trust, the Authority will continue to fund these benefits on the pay-as-you- go basis.

See APPENDIX B — “FINANCIAL STATEMENTS OF THE AUTHORITY — Note 8-Other Postemployment Benefits”.

Investments The Bond Resolution enumerates various eligible investments for Authority funds. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Definitions – “Investment Securities”, “— Government Obligations”, “— United States Government Obligations”, “— Canadian Government Obligations”, and “SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION — Investment of Funds”.

It has historically been the Authority’s practice to invest substantial portions of its available moneys in interest-bearing short-term investments with commercial banks in both Canada and in New York, denominated in Canadian dollars and United States dollars, respectively. Under the Bond Resolution, the Trustee will invest all funds held in the Bond Fund in United States Government Obligations. The Authority expects to continue to hold the other funds which it controls, including the Operating Fund in a prudent combination of interest-bearing Investment Securities with Canadian and New York commercial banks. The Authority believes its practices are fiscally responsible.

RISK FACTORS

Factors Impacting Traffic and Toll Revenue

Certain factors may, from time to time, impact the volume of traffic crossing the Peace Bridge. For a discussion of risks or factors impacting traffic volume and toll revenue, see the Comprehensive Traffic and Revenue Study prepared by Jacobs Civil Consultants, Inc. included herein as Appendix C to this Official Statement.

Volatility of Commercial Traffic

Approximately 72% of the Authority’s toll revenue is generated from commercial vehicle traffic. While cross-border commercial traffic is subject to change based upon factors beyond the Authority’s control, including international trade agreements and tariffs, price differentials caused by changes in currency exchange rates, and economic cycles, commercial traffic is less impacted by socio-economic factors than it is by specific events. The impact of some historical specific events contributed to a substantial increase in commercial traffic following the enactment of the Free Trade Agreement in 1989 and the North American Free Trade Agreement in 1994. Commercial volume increased from 847,000 crossings in 1989 to its peak of 1,480,000 in 1999. The recent economic recessions in the U.S. and Canada saw commercial traffic volume decline 13% during 2009, recovering by 9% in 2010. Since 2010, the commercial traffic has remained relatively stable with a 0.7% overall decline.

International Events

International events such as the September 11, 2001 terrorist attacks and the 2003 outbreak of Severe Acute Respiratory Syndrome significantly impacted the passenger vehicle volume on the Peace Bridge and other international border crossings. In addition, as a result of a recommendation made by the 9/11 Commission and a requirement within the U.S. Intelligence Reform and Terrorism Prevention Act of 2004, U.S. Customs and Border Protection implemented the Western Hemisphere Travel Initiative (WHTI). This initiative, which became effective June 1, 2009, requires all American and foreign travelers returning to the U.S. to possess a passport, enhanced driver’s license, or other approved document denoting identity and citizenship. Travelers who do not possess an approved form of documentation are restricted from entering the United States via any international crossing. Future border security policies enacted by the federal government of Canada or the United States may positively or negatively impact the requirements to enter either country or the ease of crossing an international border.

Significant Changes in U.S. Customs and Border Protection and/or Canada Border Services Agency Staffing Levels

Travel times at all international crossings are often a function of inspection staffing levels; thus, significant changes in U.S. Customs and Border Protection and/or Canada Border Services Agency staffing levels may positively or negatively impact travel times for vehicles crossing the Peace Bridge and other international bridges. Increases in travel times may reduce discretionary travel, which may negatively impact toll revenue and duty-free rental income. The Authority is not aware of any significant planned decreases in U.S. Customs and Border Protection or Canada Border Services Agency staffing levels.

Catastrophic Terrorist Attack

Losses resulting from acts of terrorism have been excluded from the coverage of the Authority’s property and excess liability policies. The Authority does have limited coverage under its general liability policy for losses arising from certain acts of terrorism; however, the terms of such coverage are governed by the Terrorism Risk Insurance Act of 2002 (“TRIA”), which is currently scheduled to expire on December 31, 2020. In the event that TRIA is not extended by Congress, the Authority would evaluate its options for replacement insurance coverage for certain acts of terrorism but it might not find suitable, cost effective replacement coverage. The Authority does not have insurance coverage to replace the Peace Bridge in the event of a catastrophic terrorist attack.

Natural and Catastrophic Events that Could Damage the Peace Bridge

A natural disaster (earthquake, landslide), severe weather (tornados, floods, hurricanes, extreme wind and storm), or any other event (explosion, ship strike) that damages the Peace Bridge could reduce projected toll revenues or significantly increase the expense of maintaining or restoring the Peace Bridge. These risks are generally covered by Authority insurance policies for property damage and business interruption and, in the extreme, assistance from the U.S. Federal Emergency Management Agency (“FEMA”). If any of the foregoing

events occur, to the extent not fully covered by insurance or federal disaster assistance, the Authority’s ability to repay the Series 2017 Bonds could be adversely affected.

Expected Pay-As-You-Go Financing Basis for the Authority’s Capital Plan

With most of the redecking project being financed with the proceeds of the Series 2017 Bonds, the remaining portion of the Capital Plan (including the balance of the cost of the redecking project), totaling approximately $110 million, is expected to be funded on a “pay-as-you-go” basis. While the Authority does not currently anticipate issuing any Additional Bonds for the remaining portion of the Capital Plan, there can be no assurance that the Authority’s Board of Directors might not determine to change the Capital Plan and the method of paying for the costs thereof, which could result in the issuance of Additional Bonds at some time in the future.

LITIGATION

There is no litigation pending or, to the knowledge of the Authority, threatened in any court, questioning the creation, organization or existence of the Authority, the title to office of the members or officers of the Authority, the validity of any provision of the Series 2017 Bonds or the Resolution, or any proceedings of the Authority taken with respect to the issuance and sale of the Series 2017 Bonds, or seeking to restrain or enjoin the issuance of the Series 2017 Bonds.

The Authority is a party from time to time to various legal proceedings including negligence suits arising in the normal course of the Authority’s operations, all of which will, in the opinion of the Authority, be disposed of within the amounts which the Authority has reserved or has available therefore, or, as applicable, within the amounts of insurance coverage provided therefore and without any material adverse effect on the financial position of the Authority. TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Series 2017 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel is also of the opinion that interest on the Series 2017 Bonds is exempt from personal income taxes imposed by the State of New York and any political subdivision thereof (including The City of New York). A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix F hereto.

To the extent the issue price of any maturity of the Series 2017 Bonds is less than the amount to be paid at maturity of such Series 2017 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2017 Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2017 Bonds which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Series 2017 Bonds is the first price at which a substantial amount of such maturity of the Series 2017 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2017 Bonds accrues daily over the term to maturity of such Series 2017 Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series 2017 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2017 Bonds. Beneficial Owners of the Series 2017 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2017 Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Series 2017 Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2017 Bonds is sold to the public.

Series 2017 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated

as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2017 Bonds. The Authority has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2017 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2017 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2017 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Series 2017 Bonds may adversely affect the value of, or the tax status of interest on, the Series 2017 Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Bond Counsel is of the opinion that interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes and is exempt from personal income taxes imposed by the State of New York and any political subdivision thereof (including The City of New York), the ownership or disposition of, or the accrual or receipt of interest on, the Series 2017 Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2017 Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from 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 or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Series 2017 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Authority has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Series 2017 Bonds ends with the issuance of the Series 2017 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority or the Beneficial Owners regarding the tax-exempt status of the Series 2017 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Authority and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2017 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2017 Bonds, and may cause the Authority or the Beneficial Owners to incur significant expense.

UNDERWRITING

Morgan Stanley & Co. LLC, as the Underwriter of the Series 2017 Bonds, has agreed, subject to certain conditions, to purchase from the Authority the Series 2017 Bonds at an aggregate purchase price of $______, reflecting a [net] original issue premium/discount of $______and an Underwriters’ discount of $______. Such Series 2017 Bonds may be offered and sold to certain dealers (including dealers depositing such Series 2017 Bonds into investment trusts) at prices lower than such public offering prices and prices may be changed, from time to time, by the Underwriter. The Underwriter’s obligations are subject to certain conditions precedent, and it will be obligated to purchase all such Series 2017 Bonds if any Series 2017 Bonds are purchased.

Morgan Stanley & Co. LLC, the underwriter of the Series 2017 Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Series 2017 Bonds.

RATING

S&P Global Ratings has assigned a rating of “A+” (stable) to the Series 2017 Bonds. Such rating reflects only the views of the organization furnishing the same and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the same.

Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Series 2017 Bonds.

LEGALITY OF INVESTMENT

Pursuant to the New York Act, the Series 2017 Bonds are securities in which all public officers and bodies of the State of New York and all municipalities and municipal subdivisions may properly and legally invest funds in their control or accept as security for deposits and all insurance companies and associations, all savings banks and savings institutions, including savings and loan associations, administrators, guardians, executors, trustees and other fiduciaries of the State may properly and legally invest funds in their control.

APPROVAL OF LEGAL PROCEEDINGS

The approving legal opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority, will be provided on the date of delivery of the Series 2017 Bonds. The form of opinion of Bond Counsel is attached hereto as Appendix F. Certain legal matters will be passed upon for the Authority by Gowling Lafleur Henderson LLP, Canadian Counsel to the Authority, and Hodgson Russ, LLP, United States Counsel to the Authority, and for the Underwriter by its counsel Harris Beach PLLC.

CONSULTANT’S AND ACCOUNTANT’S REPORTS

The Authority has engaged Jacobs Civil Consultants, Inc., New York, New York (“Jacobs”), to produce a historical and projected traffic and revenue study relating to the Peace Bridge and the impact of the redecking and rehabilitation of the Peace Bridge. This study is included herein as Appendix C to this Official Statement in reliance upon the authority of such firm as experts. Jacobs has advised the Authority that they have reviewed the summaries contained in this Official Statement of the information, estimates and projections contained in the Traffic Engineer’s Report and that, in their opinion, the statements made herein are correct and fairly present in summary form the information contained in such Traffic Engineer’s Report, and that all material assumptions or qualifications with respect to such statements are reflected therein.

The financial statements of the Authority for the fiscal years ended December 31, 2016 and 2015 included in Appendix A of this Official Statement have been audited by Lumsden & McCormick, LLP, independent certified public accountants, as stated in their report appearing in Appendix A.

FINANCIAL ADVISORS

The Authority has retained Capital Markets Advisors, LLC, Orchard Park, New York and Frasca & Associates, LLC, New York, New York, as Co-Financial Advisors in connection with the issuance of the Series 2017 Bonds. The Co-Financial Advisors have assisted in the preparation of this Official Statement and in other matters relating to the offering and issuance of the Series 2017 Bonds by the Authority. Capital Markets Advisors, LLC and Frasca & Associates, LLC, in their capacity as Co-Financial Advisors, do not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Series 2017 Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies.

The Co-Financial Advisors have provided the following sentence for inclusion in this Official Statement. The Co-Financial Advisors have each reviewed the information in this Official Statement in accordance with, and as part of its responsibilities to the Authority and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Co-Financial Advisors do not guarantee the accuracy or completeness of such information.

CONTINUING DISCLOSURE

In connection with the issuance of the Series 2017 Bonds and to assist the underwriters to comply with the provisions of paragraph (b)(5) of Rule 15c2-12 promulgated by the Securities and Exchange Commission (“Rule 15c2-12”), the Authority will undertake in a written agreement for the benefit of the holders of the Series 2017 Bonds (the “Continuing Disclosure Agreement”) to provide, continuing disclosure of certain financial and operating data concerning the Authority of the type included in this Official Statement (collectively referred to herein as the “Annual Information”). The Authority will electronically file the Annual Information with the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access (“EMMA”) system on an annual basis on or before 120 days after the end of each fiscal year, commencing with the fiscal year ending December 31, 2017. Pursuant to the Continuing Disclosure Agreement, the Authority has also agreed to electronically file with the MSRB its annual financial statements prepared in accordance with GAAP, and audited by an independent firm of certified public accountants in accordance with generally accepted auditing standards, if and when such statements are available. In addition, the Authority has undertaken, for the benefit of the holders of the Series 2017 Bonds, to electronically file with the MSRB, in a timely manner not in excess of ten business days after the occurrence of any of the fourteen events described in the Continuing Disclosure Agreement, notice of any such events. An executed copy of the Continuing Disclosure Agreement is attached hereto as Appendix E.

The sole and exclusive remedy for breach or default under the Continuing Disclosure Agreement is an action to compel specific performance of the undertakings of the Authority, and no person, including a holder of the Series 2017 Bonds, may recover monetary damages thereunder under any circumstances. A breach or default under the Continuing Disclosure Agreement shall not constitute an Event of Default under the Resolution. The Continuing Disclosure Agreement is intended to set forth a general description of the type of financial information and operating data that will be provided; the descriptions are not intended to state more than general categories of financial information and operating data; and where an undertaking calls for information that no longer can be generated because the operations to which it is related have been materially changed or discontinued, a statement to that effect will be provided. As a result, the parties to the Continuing Disclosure Agreement do not anticipate that it often will be necessary to amend the information undertakings. The Continuing Disclosure Agreement may be amended, including under certain circumstances without the consent of Series 2017 Bondholders, as provided therein. In addition, if all or any part of Rule 15c2-12 ceases to be in effect for any reason, then the information required to be provided under the Continuing Disclosure Agreement, insofar as the provision of Rule 15c2-12 no longer in effect required the provision of such information, shall no longer be required to be provided.

The Authority has not, in the previous five years, failed to comply in all material respects with any previous continuing disclosure undertakings pursuant to Rule 15c2-12.

MISCELLANEOUS

The references herein to the Canadian Act, the New York Act, and the Resolution are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and reference is made to the Canadian Act, the New York Act and the Resolution for full and complete statements of such provisions. Copies of the Canadian Act, the New York Act, and the Resolution are on file at the offices of the Authority and Trustee.

The agreements of the Authority with the holders of the Series 2017 Bonds are fully set forth in the Resolution. Neither any advertisement of the Series 2017 Bonds nor this Official Statement is to be construed as a contract with purchasers of the Series 2017 Bonds.

The Underwriters have not provided any information contained in this Official Statement except for the information contained under the caption “UNDERWRITING” and certain financial and statistical information relating to the Series 2017 Bonds.

Any statements in this Official Statement involving matters of opinion, forecasts or estimates, whether or not expressly stated, are intended merely as expressions of opinion, forecasts or estimates and not as representations of fact.

The delivery of this Official Statement by an Authorized Officer of the Authority has been duly authorized by the Authority.

BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

By: /s/ General Manager, Treasurer and Secretary

By: /s/ Assistant Treasurer and Chief Financial Officer

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APPENDIX A

AUDITED FINANCIAL STATEMENTS OF THE AUTHORITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

FINANCIAL STATEMENTS

December 31, 2016 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Table of Contents

December 31, 2016

Independent Auditors’ Report

Management’s Discussion and Analysis

Financial Statements

Balance Sheet Statement of Revenues, Expenses, and Changes in Net Position Statement of Cash Flows

Notes to Financial Statements

Required Supplementary Information (Unaudited)

Schedule of Funding Progress Postemployment Benefit Plans Schedules of Changes in the Authority’s Net Pension Asset and Related Ratios – Canadian Plan Schedules of Changes in the Authority’s Net Pension Asset and Related Ratios – U.S. Plan Schedule of Canadian Plan Contributions Schedule of U.S. Plan Contributions INDEPENDENT AUDITORS’ REPORT

The Board of Directors Buffalo and Fort Erie Public Bridge Authority

We have audited the accompanying financial statements of Buffalo and Fort Erie Public Bridge Authority (the Authority), a business-type activity, as of and for the years ended December 31, 2016 and 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 accounting principles generally accepted in the United States of America; 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 an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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.

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

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of December 31, 2016 and 2015, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that management’s discussion and analysis and other required supplementary information, as listed in the table of contents, be presented to supplement the financial statements. Such information, although not a part of the basic financial statements, is required by the Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the 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 financial statements, and other knowledge we obtained during our audit of the 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.

February 24, 2017

Buffalo and Fort Erie Public Bridge Authority Management’s Discussion and Analysis

December 31, 2016, 2015, and 2014 (Unaudited)

The management of the Buffalo and Fort Erie Public Bridge Authority (hereinafter referred to as the Authority) offers the following overview and analysis of the Authority’s financial activities as of and for the years ended December 31, 2016 and 2015, which should be read in conjunction with the Authority’s financial statements and notes to the financial statements.

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the Authority’s financial statements. It begins by presenting and explaining the financial statements. These statements have been prepared according to accounting principles generally accepted in the United States of America (GAAP). Revenues and expenses are recorded using the accrual basis of accounting, meaning that they are recorded and recognized by the Authority as earned/incurred, regardless of when cash is received or paid.

Effective January 1, 2015, the Authority adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68) and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. These statements require the Authority to include in its statement of net position its net pension asset, deferred outflows and deferred inflows of resources for the pension provided to Authority employees and administered by the Authority. The cumulative effect of this change was an increase in net position at January 1, 2015 totaling $3,903,000.

The balance sheets present information on all of the Authority’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Increases or decreases in net position serve as a relative indicator as to whether the Authority’s financial position is strengthening or weakening over time.

The statements of revenues, expenses, and changes in net position show the results of the Authority’s operations during the year and reflect both operating and non-operating activities. Changes in net position reflect the operational impact of the current year’s activities on the financial position of the Authority.

The statements of cash flows provide an analysis of the sources and uses of cash. The cash flow statements show net cash provided or used in operating, capital and related financing, and investing activities.

The notes to the financial statements include additional information which provides a further understanding of the financial statements.

FINANCIAL STATEMENT ANALYSIS

Comparative Balance Sheets as of December 31:

U.S. $, in thousands

2016 2015 2014 Assets Current assets $ 90,901 $ 96,930 $ 101,972 Restricted assets 9,625 10,229 11,055 Net pension asset 3,374 5,430 - Capital assets, net 156,282 139,457 128,680 Total assets 260,182 252,046 241,707

Deferred outflows of resources Defeasance loss 477 582 695 Deferred outflows of resources from pensions 2,806 800 - Total deferred outflows 3,283 1,382 695 Total assets and deferred outflows of resources$ 263,465 $ 253,428 $ 242,402

Liabilities and net position Current liabilities $ 11,782 $ 9,264 $ 9,259 Noncurrent liabilities 34,516 36,257 38,397 Total liabilities 46,298 45,521 47,656

Deferred inflows of resources Deferred inflows of resources from pensions 561 722 -

Net position Net investment in capital assets 122,929 105,869 92,710 Restricted 9,425 10,029 10,855 Unrestricted 84,252 91,287 91,181 Total net position 216,606 207,185 194,746 Total liabilities, deferred inflows and net position $ 263,465 $ 253,428 $ 242,402

As noted earlier, net position serves as an indicator of the Authority’s overall financial strength. The Authority’s net position increased by approximately $9,421,000 during 2016 and $12,439,000 during 2015. As required by the Authority’s bond indenture, the restricted portion of net position is reserved for debt service, governmental payments, and operating reserves. Restricted amounts fluctuate based upon required debt service and operating reserve requirements. Substantially all unrestricted net position has been designated by the Board of Directors for acquisition or construction of capital projects and/or major repairs and replacements.

Deferred outflows of resources from pensions increased $2,006,000 primarily because actual net investment earnings were less than expected returns. Accounting standards require amortization of the difference between actual and expected investment earnings over a five year period.

Statements of Revenues, Expenses, and Changes in Net Position for the years ended December 31:

U.S. $, in thousands

2016 2015 2014 Operating revenues Toll revenues $ 21,321 $ 21,441 $ 22,177 Other revenues 7,913 7,643 9,126 Total operating revenues 29,234 29,084 31,303

Operating expenses Toll collection and traffic control 3,043 3,087 3,411 Maintenance of bridge, buildings, plazas & equip. 5,106 5,899 5,075 Administration 2,472 3,034 2,750 Pension 758 224 487 Other postemployment benefits 1,682 1,656 1,681 Other expenses 1,151 1,115 1,169 Depreciation 5,374 4,899 4,980 Total operating expenses 19,586 19,914 19,553 Operating income 9,648 9,170 11,750

Non-operating revenues (expenses) Interest income 419 188 178 Interest expense (708) (774) (1,053) Currency remeasurement 26 (90) (64) Bond issuance costs - - (424) Other 36 42 - Total non-operating net expense (227) (634) (1,363)

Change in net position 9,421 8,536 10,387 Net position, beginning of year 207,185 194,746 184,359 Restatement - GASB 68 - 3,903 - Net position, end of year $ 216,606 $ 207,185 $ 194,746

As a bi-national toll bridge operator, the Authority earns revenue and incurs expenses in both U.S. and Canadian dollars. All Canadian revenue and expenses are converted to U.S. dollars at the average rate of exchange for the year. Fluctuations in the exchange rate during the year resulted in an improvement in the currency remeasurement to U.S. dollars in 2016. The weakening of the Canadian dollar relative to the U.S. dollar since 2013 negatively impacted the currency remeasurement for 2015 and 2014.

Toll revenues decreased slightly during 2016 due to a 1.3% and 1.2% decline in passenger and commercial crossings and a 4% and 2% decline in passenger and commercial crossings, respectively, in 2015. Toll revenue during 2014 also decreased due to a 7% decline in passenger crossings; commercial crossings were consistent with 2013. Toll rates have remained unchanged for all years presented. Other revenues, consisting primarily of rental income, were impacted by an increase in rental income from Canadian duty-free operators during 2016 as well as an increase in rental income attributable to U.S. Government agencies.

iii

Operating expenses for 2016 decreased by $328,000 or 1.6% (increase of $361,000 or 1.8% in 2015 and a decrease of $2,498,000 or 11.3% in 2014). The decrease in 2016 was primarily the result of maintenance expenses of $1,100,000 for radiation portal monitors on the U.S. plaza and $376,000 related to bridge deck and plaza paving repairs which occurred in 2015. Additional decreases in operating expenses are attributable to a decrease in legal expenses in 2016. Decreases were partially offset by increases in salaries and benefits of $702,000 (mainly attributable to pension expenses) and an increase in depreciation of $475,000.

Total non-operating net expense decreased $407,000 in 2016 due to the increase in investment income on restricted assets of $249,000, as well as a reduction in interest expense of $66,000. Interest expense continues to decrease due to reductions in the outstanding principal balances and a decrease in the effective interest rate paid on the bonds. Currency remeasurement was positively impacted by the performance of the Canadian dollar during 2016 compared to 2015.

Total non-operating net expense decreased $729,000 in 2015 due to non-recurring costs associated with the issuance of the Series 2014 Bonds in 2014. These expenses were partially offset by a reduction in interest expense of $279,000, due to a reduction in outstanding principal and a decrease in the effective interest rate paid on the bonds. Currency remeasurement was negatively impacted by the continued weakening of the Canadian dollar during 2015.

CAPITAL ASSETS AND LONG TERM DEBT

The Authority’s total investment in capital assets as of December 31, 2016 approximated $156,282,000, representing 60% of the Authority’s total assets. Capital assets consist of land, the Peace Bridge, buildings and plaza improvements, equipment, and construction-in-progress. Capital asset additions totaled $22,800,000 in 2016 and $15,680,000 in 2015, as the Authority continued projects to renovate the U.S. commercial warehouse and widen the Canadian bridge approach. As described below, in 2016 the Authority also began construction on the Peace Bridge rehabilitation project.

In August 2005, the Authority issued $44,120,000 in Series 2005 Toll Bridge System Revenue Refunding Bonds, bearing interest at 3% through July 1, 2007. On July 1, 2007, the bonds were remarketed at an interest rate of 4% through July 1, 2010. On July 1, 2010, the bonds were again remarketed at an interest rate of 2.625% until July 1, 2014, at which time the bonds were refunded.

In June 2014, the Authority issued $28,840,000 in fixed rate Toll Bridge System Revenue Refunding Bonds at a premium of $4,262,000, to currently refund $33,500,000 of outstanding Series 2005 bonds, with interest rates ranging from 4% to 5%, and a true interest cost of 2.22%. The Series 2014 bond proceeds of $33,102,000 plus $3,710,000 in Series 2005 bond reserve monies were used to refund the Series 2005 bonds under a mandatory tender and establish the Series 2014 debt reserves.

Standard & Poor’s Rating Services and Fitch Ratings have assigned ratings of “A+” and “A” respectively, to the Series 2014 Bonds.

FACTS THAT WILL IMPACT FINANCIAL POSITION

In October 2016, the Authority began the construction project to “re-deck” and rehabilitate the Peace Bridge. This project will continue for a period of three (3) years with an anticipated total cost of approximately $100,000,000. Replacement of the concrete bridge deck will be conducted during the off-peak travel season (October 15th – May 1st). During construction, the bridge will be reduced at times to 2 lanes. Following each off-peak season, the bridge will be returned to a condition that will facilitate 3 lanes of travel. While lane restrictions will be in place during active construction time, the Authority believesit has in place other mechanisms to minimize any impact on traffic volumes at the bridge which will minimize the impact on toll revenues.

In conjunction with the Authority’s five year capital plan that was approved by the Board in October 2016, the Board also approved a new money bond issuance to support the five year capital plan. The Authority is anticipating the bond issuance to occur during 2017. The Board also approved the allocation of up to $10,000,000 of unrestricted net position for the establishment and funding of an independent trust for the purpose of providing the benefits associated with the Authority’s defined benefit postemployment healthcare plans (OPEB). The establishment of the trust is also in anticipation of the implementation of GASB 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions.

CONTACT FOR AUTHORITY’S FINANCIAL MANAGEMENT

This report is designed to provide a general overview of the finances of the Authority for interested parties. Questions concerning any information within this report or requests for additional information should be addressed to Karen L. Costa, Finance Manager, 100 Queen Street, Fort Erie, ON L2A 3S6.

v BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Balance Sheets (in thousands)

December 31, 2016 2015

Assets Current assets: Cash $ 523 $ 697 Accounts receivable, net 1,177 936 Prepaid expenses and other assets 850 332 Investments 88,351 94,965 90,901 96,930 Noncurrent assets: Restricted assets: Cash 3,413 4,078 Investments 6,212 6,151 9,625 10,229 Net pension asset 3,374 5,430 Capital assets, net (Note 5) 156,282 139,457 169,281 155,116 Total assets 260,182 252,046

Deferred outflows of resources Defeasance loss 477 582 Deferred outflows of resources from pensions 2,806 800 3,283 1,382 Total assets and deferred outflows of resources $ 263,465 $ 253,428

Liabilities Current liabilities: Current portion of bonds payable $ 2,220 $ 2,130 Accounts payable and accrued liabilities 7,662 5,275 Accrued compensation and benefits 779 739 Other current liabilities 1,121 1,120 11,782 9,264 Noncurrent liabilities: Bonds payable 25,008 27,803 Other postemployment benefits 9,508 8,454 34,516 36,257 Total liabilities 46,298 45,521

Deferred inflows of resources Deferred inflows of resources from pensions 561 722

Net Position Net investment in capital assets 122,929 105,869 Restricted 9,425 10,029 Unrestricted 84,252 91,287 Total net position 216,606 207,185 Total liabilities, deferred inflows of resources, and net position $ 263,465 $ 253,428

See accompanying notes. 3 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Statements of Revenues, Expenses, and Changes in Net Position (in thousands)

For the years ended December 31, 2016 2015

Operating revenues: Commercial tolls $ 15,426 $ 15,522 Passenger tolls 5,895 5,919 Rentals 7,601 7,425 Other 312 218 Total operating revenues 29,234 29,084

Operating expenses: Toll collection and traffic control 3,043 3,087 Maintenance of bridge, buildings, plazas and equipment 5,106 5,899 Administration 2,472 3,034 Pension 758 224 Other postemployment benefits 1,682 1,656 Canadian property taxes and U.S. equalization payments 951 915 Payments to New York State 200 200 Depreciation 5,374 4,899 Total operating expenses 19,586 19,914 Operating income 9,648 9,170

Non-operating revenues (expenses): Interest income 419 188 Interest expense (708) (774) Currency remeasurement 26 (90) Other 36 42 Total non-operating net expense (227) (634)

Change in net position 9,421 8,536

Net position - beginning of year 207,185 198,649

Net position - end of year $ 216,606 $ 207,185

See accompanying notes. 4 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Statements of Cash Flows (in thousands)

For the years ended December 31, 2016 2015

Operating activities: Toll revenue $ 21,065 $ 21,386 Payments to suppliers (5,685) (7,097) Payments for wages and employee benefits (7,578) (7,040) Other revenues 7,860 8,030 Net operating activities 15,662 15,279

Capital and related financing activities: Acquisition and construction of capital assets (20,393) (15,254) Interest paid on debt (1,220) (1,353) Principal payment on debt (2,130) (2,230) Proceeds from asset disposal and other 46 55 Net capital and related financing activities (23,697) (18,782)

Investing activities: Decrease in investments 6,553 4,253 Interest income 419 188 Net investing activities 6,972 4,441

Effect of exchange rate changes 224 (1,046)

Change in cash (839) (108)

Cash - beginning 4,775 4,883

Cash - ending 3,936 $ 4,775

Reconciliation of operating income to net cash provided from operating activities: Operating income 9,648 $ 9,170 Adjustments to reconcile operating income to net cash provided from operating activities: Depreciation 5,374 4,899 Net pension activity (55) (188) (Gain) loss on disposal 537 (10) Accrued compensation and other postemployment benefits 1,009 792 Changes in assets and liabilities: Accounts receivable (236) 388 Prepaid expenses and other assets (516) 46 Accounts payable and accrued liabilities (99) 182 $ 15,662 $ 15,279

See accompanying notes. 5 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Notes to Financial Statements

1. Summary of Significant Accounting Policies:

Reporting Entity

Buffalo and Fort Erie Public Bridge Authority (the Authority) was established through a legislative act as a public benefit corporation to own and operate an international toll bridge connecting the United States and Canada. The enabling Act, under which the Authority was created, provides that on July 1, 2020, or when all bonds issued by the Authority have been discharged (current final maturity date is January 1, 2025), whichever shall be later, the powers, jurisdiction and duties of the Board shall cease and the property and assets acquired and held by the Authority within the State of New York and within Canada shall be under jurisdiction of the State of New York and Her Majesty The Queen in Right of Canada, respectively.

Basis of Presentation

The financial statements of the Authority are 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.

Measurement Focus

The Authority reports as a special purpose government engaged in business-type activities, as defined by GASB Statement No. 34. Business-type activities are those that are financed in whole or in part by fees charged to external parties for goods or services. The Authority’s financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been satisfied.

The Authority’s policy for defining operating activities in the statements of revenues, expenses, and changes in net position are those that generally result from exchange transactions such as payments received for services and payments made to purchase those goods or services. Certain other transactions are reported as non-operating activities and include investment income, interest paid on capital debt, and the net effect of currency remeasurement.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash

At various times, cash in financial institutions may exceed insured limits and subject the Authority to concentrations of credit risk.

6 Investments

Investments consist of money market funds, short-term commercial paper, and U.S. mortgage and government agency obligations and are stated at fair value on a recurring basis as determined by quoted prices in active markets.

Restricted Assets

The Authority established the following accounts in order to comply with bond resolution requirements:

Bond – trustee accounts established to receive amounts necessary to meet current principal and interest payments and to maintain a sufficient balance in a debt service reserve fund.

Government payments – holds amounts necessary to fund payments to the State of New York as required under current legislation.

Operating expense reserve – holds amounts necessary to pay current year operating expenses as defined, plus an operating reserve equal to one-sixth of the operating expenses of the Authority for the preceding year.

Capital Assets

Capital assets are reported at historical cost. For assets being depreciated, expense is calculated over estimated useful lives using the straight-line method. Maintenance and repairs are expensed as incurred; significant improvements are capitalized.

Capitalization thresholds for determining which asset purchases are added to capital accounts and the estimated useful lives of capital assets are:

Capitalization Estimated policy useful life

Bridge infrastructure $ 5,000 10-150 years Buildings and plazas $ 5,000 10-40 years Equipment - general $ 1,000 3-10 years Equipment - toll system $ 1,000 7 years

Currency Translation

Due to its bi-national operations, the Authority accounts for transactions in either United States dollars (USD) or Canadian dollars (CAD). The Authority translates all Canadian asset and liability accounts at the year end exchange rate, except for property and equipment, which is translated at historical rates in effect in the year of acquisition. The statement of revenues, expenses, and changes in net position is converted at the average rate of exchange for the year. Translation gains and losses are included as a component of non- operating revenues (expenses) as a currency remeasurement.

Compensated Absences

The Authority provides for vacation, sick, and compensatory time that is attributable to services already rendered and vested. The liabilities are recorded based on employees' rates of pay as of the end of the year, and include all payroll-related liabilities.

7 Pensions For purposes of measuring the net pension asset, deferred outflows and deferred inflows of resources, pension expense, and information about and changes in the fiduciary net position of the Authority’s defined benefit pension plans (Note 7) have been determined on the same basis as reported by the plans. For this purpose, benefit payments in the plans are recognized when due and payable in accordance with the benefit terms and investments are reported at fair value. Net Position ! Net investment in capital assets – consists of net capital assets reduced by outstanding balances of any related debt obligations attributable to the acquisition, construction, or improvement of the assets. ! Restricted – consists of restricted assets, reduced by liabilities and deferred inflows of resources related to those assets, subject to externally imposed restrictions by creditors (such as through debt covenants), federal or state laws, or enabling legislation. ! Unrestricted – the net amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the definition of the above restrictions and are available for general use of the Authority. The Authority has adopted a policy of using restricted funds, when available, prior to unrestricted funds. 2. Deposits and Investments: The Authority's policy is to obtain collateral from U.S. financial institutions for its cash deposits. Cash deposits maintained in banks within the United States are covered by U.S. Federal Deposit Insurance and by collateral held by a custodial bank in the Authority's name based upon the average daily funds available as determined by the bank. Canada Deposit Insurance covers cash deposits maintained at banks within Canada. Custodial credit risk is the risk that in the event of a bank failure, the Authority's deposits may not be returned to it. At December 31, 2016, $1,142,000 of the Authority's bank deposits were exposed to custodial credit risk. The Authority's exposure to foreign currency risk derives from its deposits in Canadian denominated deposits totaling $1,546,000 (USD). The Authority manages its investments pursuant to the bond resolution, which defines the nature and maturity of allowable investments. In general, the Authority invests conservatively in short-term U.S. and Canadian government agency securities and certificates of deposit. 3. Accounts Receivable, net: (in thousands) 2016 2015 Accounts receivable for rental and tolls $ 1,178 $ 937 Less allowance for doubtful accounts 1 1 $ 1,177 $ 936 4. Investments: (in thousands) 2016 2015 Unrestricted: U.S. Treasury notes $ 59,977 $ 77,193 Federal Home Loan Mortgage Corporation notes 9,982 699 Federal Home Bank notes - 7,005 Federal National Mortgage Association notes 10,018 3,005 Money market funds 8,374 7,063 $ 88,351 $ 94,965 Restricted: U.S. Treasury notes $ 6,212 $ 6,151

8 5. Capital Assets: January 1, Reclassifications December 31, (in thousands) 2016 Additions and Disposals 2016 Non-depreciable capital assets: Land $ 25,243 $ - $ - $ 25,243 Construction-in-progress 6,835 22,162 (12,540) 16,457 Total non-depreciable assets 32,078 22,162 (12,540) 41,700

Depreciable capital assets: Bridge 63,762 - 9,115 72,877 Buildings and plazas 115,455 - 1,390 116,845 Equipment - general 4,907 620 (202) 5,325 Equipment - toll system 4,521 18 (16) 4,523 Total depreciable assets 188,645 638 10,287 199,570

Less accumulated depreciation: Bridge (33,929) (1,721) (8) (35,658) Buildings and plazas (39,467) (3,200) 1,298 (41,369) Equipment - general (3,547) (398) 346 (3,599) Equipment - toll system (4,323) (55) 16 (4,362) Total accumulated depreciation (81,266) (5,374) 1,652 (84,988) Total depreciable assets, net 107,379 (4,736) 11,939 114,582 $ 139,457 $ 17,426 $ (601) $ 156,282

January 1, Reclassifications December 31, (in thousands) 2015 Additions and Disposals 2015 Non-depreciable capital assets: Land $ 25,245 $ - $ (2) $ 25,243 Construction-in-progress 13,065 15,022 (21,252) 6,835 Total non-depreciable assets 38,310 15,022 (21,254) 32,078

Depreciable capital assets: Bridge 63,451 311 - 63,762 Buildings and plazas 94,754 58 20,643 115,455 Equipment - general 4,329 271 307 4,907 Equipment - toll system 4,533 18 (30) 4,521 Total depreciable assets 167,067 658 20,920 188,645

Less accumulated depreciation: Bridge (32,203) (1,726) - (33,929) Buildings and plazas (36,932) (2,773) 238 (39,467) Equipment - general (3,252) (345) 50 (3,547) Equipment - toll system (4,310) (55) 42 (4,323) Total accumulated depreciation (76,697) (4,899) 330 (81,266) Total depreciable assets, net 90,370 (4,241) 21,250 107,379

$ 128,680 $ 10,781 $ (4) $ 139,457

9 Net investment in capital assets as of December 31, 2016 and 2015 consists of the following (in thousands):

2016 2015 Capital assets, net of accumulated depreciation $ 156,282 $ 139,457 Bonds and related premiums (27,228) (29,933) Capital asset purchases included in accounts payable (6,013) (3,606) Accrued interest (589) (631) Defeasance loss 477 582 $ 122,929 $ 105,869

6. Bond Indebtedness:

January 1, December 31, Due Within (in thousands) 2016 Increases Decreases 2016 One Year Serial bonds $ 26,610 $ - $ (2,130) $ 24,480 $ 2,220 Unamortized premium 2014 refunding 3,323 - (575) 2,748 -

$ 29,933 $ - $ (2,705) $ 27,228 $ 2,220

January 1, December 31, Due Within (in thousands) 2015 Increases Decreases 2015 One Year Serial bonds $ 28,840 $ - $ (2,230) $ 26,610 $ 2,130 Unamortized premium 2014 refunding 3,924 - (601) 3,323 -

$ 32,764 $ - $ (2,831) $ 29,933 $ 2,130

In August 2005, the Authority issued $44,120,000 in variable rate Toll Bridge System Revenue Refunding Bonds to currently refund $43,915,000 of outstanding 1995 Series bonds with interest rates ranging from 5.125% to 6.0%. The net proceeds of $43,639,000 (after payment of $481,000 for underwriting fees and other issuance costs) plus $4,789,000 in Series 1995 bond reserve monies were used to refund the original bonds and establish the series 2005 debt reserves.

The refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $2,242,000. This difference, reported in the accompanying balance sheets as a deferred outflow, is being charged to operations through the year 2024 using the effective interest method. The net difference is $477,000 and $582,000 at December 31, 2016 and 2015.

The Series 2005 bonds, which were special revenue obligations of the Authority, were issued as variable rate obligations. They bore an initial term rate interest of 3% through July 1, 2007. On July 1, 2007, the bonds were remarketed at an interest rate of 4% until July 1, 2010. On July 1, 2010, the bonds were again remarketed at an interest rate of 2.625% until July 1, 2014, when the bonds were subject to mandatory tender without a bondholder right to retain.

In June 2014, the Authority issued $28,840,000 in fixed rate Toll Bridge System Revenue Refunding Bonds at a premium of $4,262,000, with interest rates ranging from 4% to 5%, to currently refund $33,500,000 of outstanding Series 2005 bonds. The Series 2014 bond proceeds, including premium, of $33,102,000 plus $3,710,000 in Series 2005 bond reserve monies were used to refund the Series 2005 bonds under mandatory tender and establish the Series 2014 debt reserves.

10 Debt service requirements are as follows (in thousands):

Years ending December 31, Principal Interest 2017 $ 2,220 $ 1,089 2018 2,320 973 2019 2,440 875 2020 2,550 748 2021 2,690 613 2022-2025 12,260 961 $ 24,480 $ 5,259

7. Pension Plans:

Defined Benefit Plans

The Authority maintains two non-contributory, single-employer defined benefit pension plans: Pension Plan for Employees of Buffalo and Fort Erie Public Bridge Authority in the United States (U.S. Plan) and Pension Plan for Employees of Buffalo and Fort Erie Public Bridge Authority in Canada (Canadian Plan), collectively, the Defined Benefit Plans. The Defined Benefit Plans cover full and part-time employees hired before September 29, 2006 (union) and January 1, 2009 (non-union) in the United States, and before July 27, 2007 (union) and January 1, 2009 (non-union) in Canada. The Board of Directors has the responsibility to establish and amend benefit provisions. Audited financial statements of the Defined Benefit Plans are not required and have not been prepared.

Benefits: The Defined Benefit Plans provide retirement, death benefits, and if applicable, certain annual cost of living adjustments to members and beneficiaries. Cost of living adjustments are effective when the most recent actuarial valuation reports reveal a surplus which is greater than twice the annual service cost. The cost of living adjustment, on a percentage basis, is equal to 50% of the change in consumer price indices based on the average change over the 12 month period ending on September 30th of the calendar year prior to the effective date of the adjustment. The cost of living adjustments are included in the Authority’s annual pension cost only in the applicable years.

Employees Covered by Benefit Terms: At December 31, 2016, the following employees were covered by the Defined Benefit Plans:

Canadian Plan U.S. Plan Inactive employees or beneficiaries currently receiving benefits 45 44 Inactive employees entitled to but not yet receiving benefits - 2 Active employees 17 32 62 78

Employees Covered by Benefit Terms: At December 31, 2015, the following employees were covered by the Defined Benefit Plans:

Canadian Plan U.S. Plan Inactive employees or beneficiaries currently receiving benefits 41 44 Inactive employees entitled to but not yet receiving benefits - 2 Active employees 22 32 63 78

11 Contributions: The Authority pays the full cost of all benefits provided under the Defined Benefit Plans. As a federally regulated pension plan, the Canadian plan is funded based upon an actuarial valuation and funding standards established by the Pension Benefits Standard Act. The Authority’s policy with respect to the U.S. plan is to fund the greater of the annual required contribution or the current year service cost, as actuarially determined. Actuarial valuations are prepared no less frequently than every other year. For the years ended December 31, 2016 and 2015, the Authority’s contribution rate to the Canadian Plan was 37.0% and 44.2% of covered payroll. The contribution rate to the U.S. Plan was 10.2% and 12.7% of covered payroll.

Defined Contribution Plans

The Authority has also established two non-contributory defined contribution money purchase plans which separately cover U.S. and Canadian employees hired subsequent to the eligibility dates of the Defined Benefit Plans described above.

The defined contribution plans require the Authority to contribute 6.0% of each qualified employee's covered salary annually. Contributions to the defined contribution plans totaled $87,000 and $53,000 in 2016 and 2015, respectively. The Authority makes all required contributions when due.

Net Pension Asset

The net pension asset was measured as of December 31, 2015 based on an actuarial valuation as of January 1, 2015. The December 31, 2016 end of year measurement used in this report reflects an actuarial roll forward of the January 1, 2015 valuation. There have been no changes in benefits or other plan provisions from the beginning of the year to the end of the year.

Actuarial Assumptions: Based on the size of the plans, it was not deemed appropriate to perform an experience study. The total pension liability in the January 1, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Canadian U.S. Plan Plan

Inflation 2.25% 2.75% Salary increases 2.75% 2.75% Investment rate of return 5%, compounded annually, 6%, compounded annually, net of all expenses net of all expenses

Mortality CPM2014 Mortality Table with RP-2000 Blended Mortality Table generational mortality improvements fully generational with Scale BB projected using Scale B - no assumed improvements - no assumed preretirement deaths preretirement deaths

Discount rate 5.00% 6.00%

COLA increases 1.01% COLA assumed .83% COLA assumed

12 The long-term expected rates of return on plan assets were determined using best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment and inflation) developed for each major asset class. These ranges are combined to produce the long-term expected rates 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 geometric real rates of return for each major asset class are summarized as follows:

Long-Term Expected Target Real Rate of Asset Class Allocation Return

Canadian Plan Canadian equities 30% 6.0% Foreign equities 20% 6.0% Fixed income 50% 0.2% Cash equivalents - 0.1% 100%

U.S. Plan Domestic equities 40% 8.4% International equities 10% 7.0% Fixed income 47% 1.3% Cash 3% 0.8% 100%

Discount rate: The projection of cash flows used to determine the respective discount rates assumed that the Authority’s contributions will continue to follow the current funding policy. Based on this assumption, the Authority’s fiduciary net position was projected to be sufficient to make all projected future benefit payments of the Defined Benefit Plans’ current members. A municipal bond rate of 3.20% was used in the development of the blended GASB discount rate after that point for the Defined Benefit Plans. The 3.20% rate is based on the S&P Municipal Bond 20 Year High Grade Rate Index as of December 31, 2015. Based on the long-term rate of return of 5.0% (Canadian Plan) and 6.0% (U.S. Plan) and the municipal bond rate of 3.20%, the blended GASB discount rate would be 5.0% (Canadian Plan) and 6.0% (U.S. Plan).

13 Changes in the Net Pension Asset

Canadian Plan Total Pension Plan Fiduciary Net Pension (in thousands) Liability Net Position Asset Balances at 12/31/14 $ (11,391) $ 11,788 $ 397 Changes for the year: Service cost (190) - (190) Interest (565) - (565) Employer contributions - 647 647 Net investment income - 1,432 1,432 Benefit payments 565 (565) - Administrative expense - (19) (19) Net changes (190) 1,495 1,305 Balances at 12/31/15 $ (11,581) $ 13,283 $ 1,702 Effect of foreign currency exchange rate changes (431) 495 64 Changes for the year: Service cost (207) - (207) Interest (593) - (593) Employer contributions - 554 554 Net investment income - 175 175 Benefit payments 673 (673) - Administrative expense - (41) (41) Net changes (127) 15 (112) Balances at 12/31/16 $ (12,139) $ 13,793 $ 1,654

U.S. Plan Total Pension Plan Fiduciary Net Pension (in thousands) Liability Net Position Asset Balances at 12/31/14 $ (21,073) $ 24,547 $ 3,474 Changes for the year: Service cost (267) - (267) Interest (1,252) - (1,252) Employer contributions - 300 300 Net investment income - 1,515 1,515 Benefit payments 936 (936) - Administrative expense - (42) (42) Net changes (583) 837 254 Balances at 12/31/15 $ (21,656) $ 25,384 $ 3,728 Changes for the year: Service cost (283) - (283) Interest (1,269) - (1,269) Employer contributions - 266 266 Net investment income (loss) - (657) (657) Benefit payments 1,610 (1,610) - Administrative expense - (65) (65) Net changes 58 (2,066) (2,008) Balances at 12/31/16 $ (21,598) $ 23,318 $ 1,720

14 The following presents the Authority’s net pension asset for the plans calculated using the discount rate of 5.0% (Canadian Plan) and 6.0% (U.S. Plan) and the impact of using a discount rate that is 1.0% higher or lower than the current rate as of December 31, 2016.

At Current (in thousands) 1.0% Decrease Discount Rate 1.0% Increase

Authority’s Canadian Plan net pension asset $ 194 $ 1,654 $ 2,876

Authority’s U.S. Plan net pension asset $ 863 $ 1,720 $ 3,891 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the years ended December 31, 2016 and 2015, the Authority recognized pension expense of $85,000 and $16,000, respectively, for the Canadian Plan and $550,000 and $96,000, respectively, for the U.S. Plan. At December 31, 2016 and 2015, the Authority reported deferred outflows and deferred inflows of resources as follows:

Canadian Plan U.S. Plan Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of 2016 (in thousands) Resources Resources Resources Resources

Net difference between projected and actual earnings on pension plan investments $ 408 $ 523 $ 1,711 $ 38 Authority contributions subsequent to the measurement date 468 - 219 - $ 876 $ 523 $ 1,930 $ 38

Canadian Plan U.S. Plan Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of 2015 (in thousands) Resources Resources Resources Resources

Net difference between projected and actual earnings on pension plan investments $ - $ 672 $ - $ 50 Authority contributions subsequent to the measurement date 534 - 266 - $ 534 $ 672 $ 266 $ 50 Authority contributions subsequent to the measurement date will be recognized as an adjustment to the net pension asset in the year ending December 31, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands): Deferred Outflows and Deferred Inflows of Years ending December 31, Resources

2017 $ 343 2018 343 2019 343 2020 529 $ 1,558

15 Payable to the Pension Plan

At December 31, 2016 and 2015, no amounts were payable for contributions to the pension plans required for the years ended December 31, 2016 and 2015.

8. Other Postemployment Benefits:

The Authority maintains two single-employer defined benefit postemployment healthcare plans (the Plans), one covering certain Canadian employees and one plan covering certain U.S. employees. The Plans provide benefits in the form of insurance premium payments for coverage of eligible retirees and dependents. Plan provisions and Authority and member contribution rates are determined by the Authority. The Plans do not issue publicly available financial reports.

Eligibility is based on date of hire, attainment of retirement age, and years of service. The Authority pays 100% of the health, dental, and life insurance premiums for employees meeting the following criteria:

Canadian Plan Full-time employees hired prior to September 19, 2003 (union) or November 21, 2003 (non-union), upon attainment of age 50 with 2 years of service.

Full-time employees hired on or after September 19, 2003 but prior to July 27, 2007 (union) or on or after November 21, 2003 but prior to December 31, 2008 (non-union), upon attainment of age 50 with 10 years of service.

U.S. Plan Full-time employees hired prior to July 18, 2003 (union) or November 21, 2003 (non-union), upon attainment of age 50 with 2 years of service.

Full-time employees hired on or after July 18, 2003 but prior to September 29, 2006 (union) or on or after November 21, 2003 but prior to December 31, 2008 (non-union), upon attainment of age 50 with 10 years of service.

Accounting standards require that the Authority recognize the cost of postemployment benefits during the periods when employees render the services that will ultimately entitle them to the benefits. This cost is referred to as the annual required contribution (ARC) and includes:

! Amortization of the unfunded actuarial accrued liability (UAAL) for the current year, which is the actuarially-determined, unfunded present value of all future OPEB costs associated with current employees and retirees at the beginning of the year.

! Normal cost which is the actuarially-determined cost of future OPEB earned in the current year.

The ARC represents an amount that, if funded each year, would ultimately satisfy the UAAL at the end of the amortization period (the Authority is using the maximum period of 30 years) as well as each year's normal cost during that timeframe. A liability is recognized to the extent that actual funding of the Plans is less than the ARC. This liability is reflected on the balance sheet as other postemployment benefits. The Authority's Board of Directors has the authority to establish funding policies for the Plans. The current policy is to fund the Plans to the extent of premium payments and reimbursements on the pay as you go basis.

16 The following table summarizes the Authority's annual OPEB for the years ended December 31, 2016 and 2015 (in thousands): 2016 2015 Annual required contribution Normal cost $ 569 $ 555 Amortization of UAAL 1,278 1,249 Annual required contribution 1,847 1,804 Interest on OPEB obligation 299 268 ARC adjustment (464) (416) Annual OPEB cost 1,682 1,656 Contribution made (628) (1,065) Increase in net OPEB obligation 1,054 591 Net OPEB obligation - beginning of year 8,454 7,863 Net OPEB obligation - end of year $ 9,508 $ 8,454

The Authority's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the previous three years were as follows (in thousands):

Percentage of Annual Annual OPEB Net OPEB OPEB Cost Cost Contributed Obligation 2016 $ 1,682 37% $ 9,508 2015 1,656 64% 8,454 2014 1,681 42% 7,863

As of January 1, 2016, the total actuarial accrued liability for future benefits was $24,300,000. Since there are no Plan assets, the entire liability is unfunded. The annual payroll of employees eligible to be covered by the Plans was $2,844,000 and the ratio of the unfunded actuarial accrued liability to the covered payroll was 854%.

The schedule of funding progress presented as required supplementary information (RSI) following the notes to the financial statements presents multi-year trend information about whether the actuarial values of plan assets, if any, are increasing or decreasing over time relative to the UAAL for benefits.

The actuarial valuation involves estimates of costs and the impact of events far into the future. Examples include employee turnover and retirement rates, employee and retiree mortality, changes in healthcare costs, and interest rates. The Plans will be subject to routine actuarial valuations in future years and these analyses will reflect revised estimates and assumptions as actual results are compared to past projections and expectations of the future. Similarly, the valuations reflect the Plans’ benefits and cost sharing between the Authority and members of the Plans in effect at the time. Any changes in these factors will impact the results of future valuations.

The actuarial calculations reflect a long-term perspective and use techniques designed to reduce short-term volatility in actuarial accrued liabilities. A summary of the methods and assumptions is provided below:

Healthcare cost trend: Canadian Plan: 7.0% grading down by 0.25% each year through 2024, and 4.5% per year thereafter

U.S. Plan: 7.5% grading down by 0.25% each year through 2024, and 5.0% per year thereafter

Actuarial cost method: Projected unit credit

17 Discount rate: 3.5%

Amortization methods: 30 years, open, level dollar

Mortality: US and Canada IRS Fully Generational, using scale BB

Retirement: Provided by the Authority for active employees based upon their unreduced pension eligibility

Termination: Rates calibrated to produce 3% aggregate turnover of the active data based on the Authority's historical experience

9. Rentals:

The Authority, as lessor, has entered into non-cancelable operating leases with separate U.S. and Canadian duty-free enterprises through December 31, 2020 and October 31, 2031, respectively. The Authority recognized $4,900,000 and $5,100,000 in rental income in 2016 and 2015, respectively, from the duty-free enterprises. The leases provide for annual minimum and contingent lease payments to the Authority.

The Authority also leases space to a governmental entity under a non-cancelable ten year operating lease expiring June 2019. Rental revenue received by the Authority amounted to $1,950,000 and $1,500,000 in 2016 and 2015, respectively.

Minimum amounts to be received under the leases are as follows (in thousands):

2017 6,294$ 2018 6,294 2019 5,227 2020 4,325 2021 3,000 Thereafter 29,500 54,640$ 54,640$

The Authority also leases certain real property under cancelable operating leases to commercial enterprises and governmental agencies. These leases are generally maintained on a month-to-month basis.

18 10. Deferred Compensation Plan:

All employees of the Authority in the United States are offered participation in a deferred compensation plan (the plan) created in accordance with Internal Revenue Code Section 457. The plan permits eligible participants to defer a portion of their salary until future years. Under the plan, amounts deferred are not available to employees until separation, retirement, death, or unforeseen emergency. All amounts deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are held in trust until paid or made available to the employee or other beneficiary.

The Authority also has unfunded liabilities of $990,000 and $928,000 as of December 31, 2016 and 2015 to current and former management employees due under separate deferred compensation agreements. Payments made under these agreements totaled $8,000 and $8,300 in 2016 and 2015.

11. Commitments and Contingencies:

Risk Management

The Authority purchases commercial insurance for various risks of loss due to torts, theft, damage, errors and omissions, injuries to employees, and natural disasters. Settled claims resulting from these risks have not exceeded commercial coverage in any of the past three years. Losses resulting from acts of terrorism have been excluded from property and excess liability policies. The Terrorism Risk Insurance Act of 2002 of the United States governs coverage for acts of terrorism under the general liability policy.

Contractual Commitments

As of December 31, 2016, the Authority had contractual commitments of approximately $75,000,000 primarily related to ongoing capital construction projects.

Litigation

The Authority is involved in various legal proceedings, the outcome of which cannot be determined at this time.

12. Net Position:

Unrestricted - Designated

The Board of Directors has designated available unrestricted amounts for acquisition or construction of capital projects and maintenance.

Restricted

(in thousands) 2016 2015 Debt service funds: Debt service fund $ 2,813 $ 2,763 Debt service reserve fund 3,300 3,311 Operating expense reserve account 3,312 3,955 Total restricted assets $ 9,425 $ 10,029

19 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Required Supplementary Information Schedule of Funding Progress Postemployment Benefits (in thousands)

December 31, 2016

Unfunded UAAL as a Actuarial Actuarial Percentage Actuarial Accrued Accrued of Covered Valuation Actuarial Value Liability Liability (UAAL) Funded Covered Payroll Date of Assets (a) (AAL) (b) (b-a) Ratio (a/b) Payroll (c) ((b-a)/c)

1/1/2014 $ - $ 23,549 $ 23,549 - $ 3,458 681%

1/1/2015 $ - $ 23,300 $ 23,300 - $ 3,156 738%

1/1/2016 $ - $ 24,300 $ 24,300 - $ 2,844 854%

20 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Required Supplementary Information Schedule of Changes in the Authority's Net Pension Asset and Related Ratios - Canadian Plan (in thousands)

As of the measurement date of December 31, 2015 2014

Total pension liability Service cost $ 207 $ 190 Interest 593 565 Benefit payments, including refunds of employee contributions (673) (565) Net change in total pension liability 127 190 Total pension liability - beginning 11,581 11,391 Effect of foreign currency exchange rate changes 431 - Total pension liability - ending $ 12,139 $ 11,581

Plan fiduciary net position Employer contributions $ 554 $ 647 Net investment income 175 1,432 Benefit payments, including refunds of employee contributions (673) (565) Administrative expense (41) (19) Net change in plan fiduciary net position $ 15 $ -

Plan fiduciary net position - beginning 13,283 11,788 Foreign currency exchange 495 - Plan fiduciary net position - ending 13,793 13,283

Authority's net pension asset - ending (1,654) (1,702)

Plan fiduciary net position as a percentage of the total pension liability 113.6% 114.7%

Covered payroll 1,272 1,207

Authority's net pension asset as a percentage of covered payroll -130.0% -141.0%

* Data prior to 2014 is unavailable.

21 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Required Supplementary Information Schedule of Changes in the Authority's Net Pension Asset and Related Ratios - U.S. Plan (in thousands)

As of the measurement date of December 31, 2015 2014

Total pension liability Service cost $ 283 $ 267 Interest 1,269 1,252 Benefit payments, including refunds of employee contributions (1,610) (936) Net change in total pension liability (58) 583 Total pension liability - beginning 21,656 21,073 Total pension liability - ending $ 21,598 $ 21,656

Plan fiduciary net position Employer contributions $ 266 $ 300 Net investment income (657) 1,515 Benefit payments, including refunds of employee contributions (1,610) (936) Administrative expense (65) (42) Net change in plan fiduciary net position $ (2,066) $ 837

Plan fiduciary net position - beginning 25,384 24,547 Plan fiduciary net position - ending 23,318 25,384

Authority's net pension asset - ending (1,720) (3,728)

Plan fiduciary net position as a percentage of the total pension liability 108.0% 117.2%

Covered payroll 2,157 2,099

Authority's net pension asset as a percentage of covered payroll -79.7% -177.6%

* Data prior to 2014 is unavailable.

22 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Required Supplementary Information Schedule of Canadian Plan Contributions (in thousands)

December 31, 2016 2015

Actuarially determined contribution $ 468 $ 548

Contributions in relation to the actuarially determined contribution 468 534 Contribution deficiency $ - $ 14

Covered payroll $ 1,272 $ 1,207

Contributions as a percentage of covered payroll 36.79% 44.24%

Notes to Schedule

Valuation date January 1, 2015

Methods and assumptions used to determine contribution rates:

Actuarial cost method Projected Unit Credit

Amortization method Straight-line, closed

Remaining amortization period 5 years

Asset valuation method Market value of assets

Inflation 2.25% per annum

Salary increases 2.75% per annum

Investment rate of return 5.0% per annum, net of investment expenses

Retirement age Members eligible to retire are assumed to retire at the age which produces the highest value; other members are assumed to retire at age 65

Mortality UP 1994 Table with dynamic generational mortality projection using Scale AA

COLA increases 1.01%

* Data prior to 2015 is unavailable.

23 BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY

Required Supplementary Information Schedule of U.S. Plan Contributions (in thousands)

December 31, 2016 2015

Actuarially determined contribution $ 286 $ 270

Contributions in relation to the actuarially determined contribution 219 266 Contribution deficiency $ 67 $ 4

Covered payroll $ 2,157 $ 2,099

Contributions as a percentage of covered payroll 10.15% 12.67%

Notes to Schedule

Valuation date January 1, 2015

Methods and assumptions used to determine contribution rates:

Actuarial cost method Projected Unit Credit

Amortization method Level dollar, closed

Remaining amortization period 7 years

Asset valuation method Fair market value, adjusted for any contributions and benefit payments in-transit

Inflation 2.75% per annum

Salary increases 2.75% per annum

Investment rate of return 6.0%, compounded annually, net of all expenses

Retirement age Participants are assumed to retire at age 59; participants who have already reached age 59 are assumed to retire one year from current valuation date

Mortality Postretirement: RP-2000 Blended Mortality Table Fully Generational with Scale BB Improvement, no preretirement deaths are assumed

COLA increases

* Data prior to 2015 is unavailable.

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APPENDIX B

UNAUDITED FINANCIAL INFORMATION OF THE BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY FOR THE FOUR MONTHS ENDED APRIL 30, 2017 AND 2016

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BUFFALO AND FORT ERIE PUBLIC BRIDGE AU1HORITY

Unaudited Balance Sheets

April 30, 2017 December 31,2016

Assets Current assets: Cash $ 497,419 $ 522,697 Accounts receivable, net 1,031,671 1,177,044 Prepaid expenses and other assets 876,412 850,126 Investments 87,568,766 88,350,834 89,974,268 90,900,701

Noncurrent assets: Restricted assets: Cash 2,665,604 3,413,055 Investments 4,537,964 6,212,083 7,203,568 9,625,138

Net pension asset 3,241,115 3,373,459 Capital assets, net 167,007,527 156,282,442 177,452,210 169,281,039

Total assets 267,426,478 260,181,739

Deferred outflows of resources Defeasance loss 444,487 476,834 Defered outfhws of resources from pensions 2,824,474 2,806,060

Total assets and deferred outflows of resources $ 270,695,439 $ 263,464,632

Liabilities Current liabilities: Accounts payable and accrued liabilities $ 14,519,480 $ 7,699,228 Om-ent portion of long term debt 2,320,000 2,220,000 Accrued interest payable 362,867 588,700 Allowance for unredeemed tokens 291,132 294,569 Accrued compensation and benefits 829,677 778,969 Due to other governments 64,080 200,000 18,387,236 11,781,466

Noncurrent liabilities: Bonds payable 22,505,789 25,008,016 Other postemployment benefits 9,792,772 9,508,169 Deferred inflows of resources from pensions 488,285 560,775 32,786,846 35,076,960 Total liabilities 51,174,082 46,858,426

Net Position 219,521,357 216,606,207

Total liabilities and net position $ 270,695,439 $ 263,464,632 BUFFALO AND FORT ERIE PUBLIC BRIDGE AU1HORITY

Unaudited Statements of Revenues, Expenses, and Changes in Net Position

For the four months ended April 30, 2017 2016

Operating revenues: Commercial tolls $ 5,036,121 $ 5,193,082 Passenger tolls 1,540,366 1,572,111 Rentals 2,468,536 1,928,052 Other 29,175 106,296 Total operating revenues 9,074,198 8,799,541

Operating expenses: Toll collection and traffic control 560,493 1,034,306 Maintenance of bridge, buildings, plazas and equipment 1,169,829 1,983,439 Administration 1,732,168 959,038 Pension expense 242,389 236,782 Other postemployment benefits 338,985 572,683 Canadian property taxes and u.s. equalization payments 329,329 315,335 Payments to New York State 66,667 66,667 Depreciation 1,817,402 1,784,773 Total operating expenses 6,257,262 6,953,023

Operating income 2,816,936 1,846,518

Non-operating revenues (expenses): Interest income 322,155 264,760 Interest expense (212,986) (235,904) Cltrrency remeasurement 2,765 (54,539) Other - Bond closing costs (3,825) Total non-operating net expense 108,109 34,483

Change in net position 2,925,045 1,881,001

Net position - beginning of year 216,606,207 207,185,387

Unrealized net gain/(loss) from currency remeasurement (9,895) Net position - end ofpeciod $ 219,521,357 $ 209,066,388

APPENDIX C

PEACE BRIDGE COMPREHENSIVE TRAFFIC AND REVENUE STUDY

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Submitted to:

Cover image area Buffalo and Fort Erie approx. 9 1/8” x 3 3/8” Public Bridge Authority

Peace Bridge Comprehensive Traffic and Revenue Study

May 31, 2017

Submitted by:

Jacobs Civil Consultants, Inc. 2 Penn Plaza Suite 603 New York, NY 10121 Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

TABLE OF CONTENTS

1.0 EXECUTIVESUMMARY...... 1 2.0 INTRODUCTION...... 6 3.0 DESCRIPTIONOFTHEPEACEBRIDGE...... 7

3.1 THEPEACEBRIDGE...... 7 3.2 CURRENTCAPITALPROJECTSONTHEPEACEBRIDGE...... 9 3.3 COMPETITIVEBORDERCROSSINGS...... 10 3.4 COMPETITIVEADVANTAGEOFTHEPEACEBRIDGE...... 11 3.5 PEACEBRIDGE’STOLLCOLLECTIONOVERVIEW...... 13 3.6 PEACEBRIDGE’SCURRENTTOLLRATES...... 14 3.7 COMPARISONOFPEACEBRIDGE’STOLLRATESTOOTHERFACILITIES...... 15 4.0 DATACOLLECTIONANDANALYSIS...... 18

4.1 PRIORSTUDIES...... 18 4.2 DATAPROVIDEDBYTHEAUTHORITY...... 18 4.2.1 HistoricalTrips...... 18 4.2.2 HistoricalTollRevenueTrends...... 28 4.2.3 AverageTollRates...... 31 4.2.4 EZPassUtilization...... 33 4.3 OBSERVATIONOFFACTORSINFLUENCINGPASTTRAFFICANDREVENUEPERFORMANCE ...... 36 4.4 DATAFROMOTHERSOURCES...... 38 4.4.1 TravelTimes...... 38 4.4.2 ComparisontoOtherBorderCrossings...... 40 5.0 ECONOMICBACKDROPANDOUTLOOKFORTHEFUTURE...... 48

5.1 U.S.ANDCANADIANMACROECONOMICTRENDS...... 48 5.1.1 Inflation...... 48 5.1.2 ExchangeRate...... 49 5.1.3 GrossDomesticProduct...... 50 5.1.4 IndustrialProduction...... 51 5.2 LONGTERMSTRUCTURALTRENDS...... 53 5.2.1 Employment...... 54 5.2.2 Income...... 54 5.2.3 NationalTrendsinVehicleMilesTraveled(VMT)...... 55 5.2.4 FuelCostImpactsonTravel...... 57 5.2.5 MotorVehiclesandLicensedDrivers...... 58 5.2.6 DiscretionaryTravel,TelecommutingandtheInternet...... 59 5.3 REGIONALECONOMICANDDEMOGRAPHICOUTLOOK...... 60 5.3.1 DemographicandEconomicGrowthinthePeaceBriidgeRegion...... 60 5.3.2 PortofEntryTraffic...... 63 5.3.3 CanadaU.S.TradeandtheImportanceofTrucking...... 64 6.0 TOLLTRIPSANDGROSSTOLLREVENUEFORECASTS...... 66

6.1 METHODOLOGYUSEDFORFORECASTING...... 66 6.2 TRAFFICGROWTHTRENDS:CORRELATIONTOECONOMICFACTORS...... 67 6.3 INPUTSANDASSUMPTIONS...... 76 6.3.1 EZPassMarketShares...... 76 6.3.2 TollRatesandTollPolicy...... 76 6.3.3 Infrastructure...... 77

Page i Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

6.3.4 DiversionAnalyses...... 77 6.3.4.1 TollDiversion...... 78 6.3.4.2 Redecking/RehabilitationDiversion...... 79 6.3.5 TrafficandGrossTollRevenueModelCalculations...... 81 6.4 TOTALTRANSACTIONANDGROSSTOLLREVENUEFORECASTS...... 81 6.5 EZPASSMARKETSHAREFORECASTS...... 85 7.0 RISKANDSENSITIVITYANALYSES...... 87

7.1 RISKANALYSISFORTRAFFICANDREVENUEFORECAST...... 87 7.1.1 Approach...... 87 7.1.2 Results...... 88 7.2 SENSITIVITYANALYSIS...... 89 8.0 LIMITSANDDISCLAIMERS...... 91

Page ii Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

LIST OF TABLES

TABLE1:NIAGARAREGIONPRIMARYINSPECTIONBOOTHCAPACITY,CARSASOF2017...... 11 TABLE2:NIAGARAREGIONPRIMARYINSPECTIONBOOTHCAPACITY,TRUCKSASOF2017...... 12 TABLE3:2017PEACEBRIDGETOLLRATES(EFFECTIVEAPRIL2017)...... 14 TABLE4:2017PEACEBRIDGETOLLRATES(EFFECTIVEJANUARY1,2018)...... 15 TABLE5:ANNUALTOTALTOLLTRAFFICBYTRAVELDIRECTIONONPEACEBRIDGE,2003TO2016...... 26 TABLE6:RECENTHISTORYOFTOLLRATEINCREASES...... 29 1 TABLE7:HISTORICALAVERAGETOLLRATESFORPASSENGERVEHICLES,$PERTRIP ...... 31 1 TABLE8:HISTORICALAVERAGETOLLRATESFORTRUCKS,$PERTRIP ...... 32 1 TABLE9:HISTORICALAVERAGETOLLRATESFORBUSES,$PERTRIP ...... 33 TABLE10:TRAVELTIMEANDDISTANCEESTIMATESBETWEENBUFFALO,NEWYORKANDONTARIO...... 39 TABLE11:PEACEBRIDGETRAFFICASAPORTIONOFREGIONALBORDERTRAFFIC,2017...... 41 TABLE12:MICHIGAN/NEWYORK–ONTARIOBORDERCROSSINGS...... 41 TABLE13:2017PEACEBRIDGETOLLRATES(EFFECTIVEJANUARY1,2018)...... 77 TABLE14:FORECASTEDANNUALPEACEBRIDGETRIPSANDTOLLREVENUES,2017TO2046...... 82 TABLE15:TRIP/TOLLTRANSACTIONCAGRFORECASTS,2017TO2047...... 83 TABLE16:GROSSTOLLREVENUEGROWTHFORECASTS,2017TO2047...... 84 TABLE17:FORECASTEDPEACEBRIDGETRANSACTIONSBYVEHICLETYPE,2016TO2047...... 84 TABLE18:FORECASTEDPEACEBRIDGETOLLREVENUESBYVEHICLETYPE,20166TO2047...... 85 TABLE19:HISTORICALANDFORECASTEDEZPASSMARKETSHAREOFTRIPS...... 86 TABLE20:SENSITIVITYANALYSISRESULTS...... 90

Page iii Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

LIST OF FIGURES

FIGURE1:REGIONALMAPSHOWINGLOCATIONOFTHEPEACEBRIDGE...... 8 FIGURE2:MAPSHOWINGLOCATIONSOFINTERNATIONALBRIDGESCROSSINGTHENIAGARARIVER...... 10 FIGURE3:U.S./CANADATRADEVALUE...... 12 FIGURE4:PASSENGERCARTOLLRATESATONTARIO/NYMICHIGANBORDERCROSSINGSASOFAPRIL2017...... 16 FIGURE5:COMMERCIALVEHICLETOLLRATESATONTARIO/NYMICHIGANBORRDERCROSSINGSASOFAPRIL2017...... 17 FIGURE6:ANNUALPASSENGERCARTWOWAYCROSSINGSONPEACEBRIDGE,1964TO2016...... 20 FIGURE7:ANNUALTRUCKTWOWAYCROSSINGONPEACEBRIDGE,1964TO2016...... 21 FIGURE8:PEACEBRIDGEAUTO/BUSTWOWAYTRAFFIC...... 22 FIGURE9:PEACEBRIDGETRUCKTWOWAYTRAFFIC...... 23 FIGURE10:ANNUALTOLLTRAFFICBYVEHICLECLASSONPEACEBRIDGE(WESTBOUND),2003TTO2016...... 24 FIGURE11:DISTRIBUTIONOFANNUALWESTBOUNDTOLLTRAFFICONPEACEBRIDGE,2003TO2016...... 25 FIGURE12:PEACEBRIDGETOLLEDTRAFFIC,THOUSANDSOFTRIPS,2016...... 27 FIGURE13:AVERAGEDAILYTOTALTOLLTRAFFICONPEACEBRIDGE(WESTBOUND),FORONEWEEKINOCTOBER2016...... 28 FIGURE14:HISTORICALPEACEBRIDGETOLLREVENUES,2003 TO2016,US$...... 30 FIGURE15:DISTRIBUTIONOFANNUALTOLLREVENUEONPEACEBRIDGE,20033TO2016...... 30 FIGURE16:DISTRIBUTIONOFPAYMENTTYPESFORPASSENGERVEHICLESONPEAACEBRIDGE,2010TO2016(INCLUDING2017YEARTO DATE)...... 34 FIGURE17:DISTRIBUTIONOFPAYMENTTYPESFORTRUCKSONPEACEBRIDGE,2010TO2016(INCLUDING2017YEARTODATE)...... 35 FIGURE18:DISTRIBUTIONOFPAYMENTTYPESFORBUSESONPEACEBRIDGE,2010TO2016...... 36 FIGURE19:AVERAGEWAITTIMESATTHEPEACEBRIDGEINTERNATIONALBORDDERSTATION,AUGUST2016...... 40 FIGURE20:PEACEBRIDGECONTRIBUTIONTOMICHIGAN/NEWYORK–ONTARIOBORDERCROSSINGS,2006TO2016...... 42 FIGURE21:ANNUALPASSENGERVEHICLETRAFFICONNIAGARAPENINSULABORDERCROSSINGS,2006TO2016...... 43 FIGURE22:PEACEBRIDGECONTRIBUTIONTONEWYORK/ONTARIOBORDERCROSSINGS,2006TO2016...... 44 FIGURE23:PEACEBRIDGECONTRIBUTIONTOMICHIGAN/NEWYORK–ONTARIOBORDERCROSSINGS,2006TO2016...... 45 FIGURE24:ANNUALTRUCKTRAFFICONNIAGARAPENINSULABORDERCROSSINNGS,2006TO2016...... 46 FIGURE25:PEACEBRIDGECONTRIBUTIONTONEWYORK–ONTARIOBORDERCROSSINGS,2006TO2016...... 47 FIGURE26:CANADIAN/U.S.DOLLAREXCHANGERATE,2000 2016...... 49 FIGURE27:ANNUALPERCENTAGECHANGEINU.S.REALGDP (2009$),1980 TO2016...... 50 FIGURE28:HISTORICALU.S.GDPANDIPI,1989TOAUGUST2016...... 51 FIGURE29:HISTORICALCANADIANGDPANDIPI,1990TO2016...... 52 FIGURE30:FORECASTEDPERCENTAGECHANGEINU.S.INDUSTRIALPRODUCTION,2017AND2018...... 53 FIGURE31:U.S.REALHOUSEHOLD(2015$),2000TO2015...... 55 FIGURE32:U.S.ANNUALVEHICLEMILESTRAVELED(VMT),19402016...... 56 FIGURE33:HISTORICALANDPROJECTEDU.S.GASOLINEPRICES,1976TO2017...... 57 FIGURE34:HISTORICALANDFUTURESHORTTERMCRUDEOILPRICES...... 58 FIGURE35:ANNUALPERCENTAGECHANGEINREALGDP,2002TO2015...... 61 FIGURE36:BUFFALOANDNEWYORKSTATEPORTOFENTRY,COMMERCIALVEHICLES,19952016...... 63 FIGURE37:BUFFALOANDNEWYORKSTATEPORTOFENTRY,PASSENGERVEHIICLES,19952016...... 64 FIGURE38:PEACEBRIDGEMODELMETHODOLOGY...... 67 FIGURE39:PEACEBRIDGETWOWAYCHANGESINTRAFFIC,19902016...... 68 FIGURE40:INDEXEDTRAFFICVOLUMESANDSOCIOECONOMICINDICES,INDEXEEDTO2014...... 69 FIGURE41:ANNUALGROWTHOFECONOMICFACTORSVS.TRUCKGROWTH...... 70 FIGURE42:TRUCKGROWTHVERSUSIPIGROWTH...... 71 FIGURE43:TRUCKTRAFFICVS.EXCHANGERATE...... 72 FIGURE44:ANNUALGROWTHOFECONOMICFACTORSVS.CARGROWTH...... 73 FIGURE45:ANNUALGROWTHOFECONOMICFACTORSVS.CARGROWTH...... 74 FIGURE46:PASSENGERCARGROWTHVERSUSEXCHANGERATE...... 75 FIGURE47:WESTBOUNDPASSENGERCARTRAFFICBEFOREANDAFTERAPRIL1,2007TOLLINCREASE...... 78 FIGURE48:AVERAGEEASTBOUNDHOURLYTRAFFIC,DECEMBER2013...... 80 FIGURE49:AVERAGEEASTBOUNDHOURLYTRAFFIC,DECEMBER2015...... 80

Page iv Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

FIGURE50:HISTORICALANDFORECASTEDTOLLTRANSACTIONS,2003TO2047...... 82 FIGURE51:HISTORICALANDFORECASTEDGROSSTOLLREVENUES,2003TO2047...... 83 FIGURE52:HISTORICALANDFORECASTEDEZPASSMARKETSHARES,2013TO2047...... 86 FIGURE53:RISKANALYSIS,TOTALTRAFFIC...... 88

Page v Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

1.0 Executive Summary The Buffalo and Fort Erie Public Bridge Authority (the “Authority” or “PBA”) retained Jacobs Civil Consultants, Inc. (“Jacobs”) to prepare an Investment Grade Traffic and Revenue Forecasts for the Authority’s Peace Bridge (the “BBridge” or “Peace Bridge”). Jacobs analyzed decades of historical traffic and toll revenue data for the Bridge to determine historical trends; analyzed possible correlations between traffic and key economic indicators; and researched demographic data and other key factors that have affected recent traffic patterns and that will likely affect future traffic trends.

The traffic and revenue forecasts are based on the current Peace Bridge toll and fee schedules through the end of 2017, and a new toll schedule beginning January 1, 2018. This executive summary presents the results of these work efforrtts, including a review of the overall forecasting methodology and a presentatioon of the final forecasts. The work, analyses, and forecasts for the Authority are of investment-grade quality and are suitable for financing.

Bridge Background The Peace Bridge, open since 1927, serves as an importannt border crossing facility, processing travel, trade, and tourism between the U.S. and Canada. The Peace Briddge is three lanes wide, with reversible capability in the midddle lane. The majority of the time, two lanes serve traffic traveling in the toll-free eastbound direction, while one lane serves the tolled westbound direction.

The Peace Bridge is one of four bridges that provide access across the Niagara RRiver between Ontario, Canada and the state of New York in the United States, serving as a major international link between Canadian and U.S. highway systems.

The Bridge supports more than 5 million annual crossings, with some 3 million tolled crossings in the westbound direction (into Canada). It carries a large number of through traffic and commercial vehicles due to its connections with major highways such as the New York State Thruway (I-190) on the U.S. side and the Queen Elizabeth Way (QEW) on the Canadian side. The Peace Bridge carries an impressive 46 percent of traffic crossing the Niagara River. Furthermore, the Peace Bridge carries roughly 61 percent of commercial vehicles choosing to cross the international border through this region. Looking at a larger scale, while there are eleven crossings connecting tthe states of New York and Michigan with Ontario, Canada, the Peace Bridge carries roughly 16 percent of traffic between New York, Michigan, and Ontario.

Traffic Trends Historically, traffic trends have been influenced by socioeconomic conditionns, and there are often correlations between traffic growth and socioeconomic factors such as Industrial

Page 1 Comprehensive Traffic and Revenue Study Buffalo and Fort Erie Public Bridge Authority May 31, 2017

Production growth (IPI) and Gross Domestic Product (GDP). Anny forecast of toll traffic and revenues will, of necessity, consider the significant variations that can and do occur in the national, regional and local economies, and population changes. With this in mind, Jacobs performed a detailed analysis of the historical economic trends seen over the last several decades with an emphasis on the most recent correlations, plus an analysis of those trends that can influence driving behaviors.

Traffic on the Peace Bridge since September 11th, 2001 has been more significantly influenced by global and regional factors and events rather than by regional and national socioeconomic trends. It is currently difficult to correllate the recent real declines in traffic to any one specific factor; as such, we are of opinioon the declines are more related to significant events. These significant events include: the Western Hemisphere Travel Initiative that reduced passenger cross border traffic; the long-term decline in the greater Buffalo population reducing the number of potential users of the Bridge; and other changes in consumer behavior including internet retail that has curtailed cross border shopping.

Jacobs previously prepared a forecast for the Authority in 2014. In that report we identified socioeconomic factors that we considered to influence traffic on the facility. Prior to September 11th 2001, Peace Bridge traffic had consistent growth and that growth correlated to various socio-economic factors. After September 11th, passenger car traffic began to decline and was followed by short periods of more stabilization that was then influence by other events such as the Western Hemisphere Travel Initiative. At the time we prepared the 2014 forecast, we were of the opinion that the Bridge was eentering another period of stabilized traffic with short term correlations to historical socio-economic factors identified similar to traffic prior to September 11th, including Industrial Production for commercial vehicles and Gross Domestic Product for passenger cars. The current analysis indicates, however, that there was not any continued long term correlations of traffic growth to socioeconomic factors as forecasted in the 2014 Report. As such we don’t believe it is prudent to forecast using correlations to economic forecasts at this time, and as a result, have forecasted generally no growth for the forecast period, largely based on historical traffic trends.

Traffic and Revenue Study Methodology Toll Traffic and Revenue forecasts were developed with the aid of a computerized modeling platform created specifically by Jacobs for the PBA. The base function of this model is to take current traffic volumes by class and payment type for the Peace Bridge and adjust them in the future years for various factors such as underlying socioeconomic/demographic growth in the corridor, both historic and current. Thhese adjusttments result in forecasted traffic volumes being developed for each year of the forecast period. Gross toll revenues are then calculated based on these new adjusted traffic volumes by applying toll rates to the volumes by payment type and vehicle class.

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As noted previously, our traffic and revenue model for this forecast has focused more on a trend-line analysis based on the difficulty in determining any specific socioeconomic correlation that was not influenced by some larger significant event.

Tolling Policy Assumptions A car-only toll increase is scheduled to take place in January of 2018. Table ES-1 shows the new toll rates. This toll increase will raise the tolll for cars paying with U.S. Dollars from $3.00 to $3.75, and will also eliminate the 10% discount currently offered to customers paying with E-ZPass. For passenger cars with a trailer, it was assumed that the toll rate would continue to be two times that of regular passenger cars, increasing from $6.00 to $7.50 for customers paying in U.S. Dollars.

We assumed that all other existing Peace Bridge ttoll schedules and toll policies would remain in effect for the duration of the forecast period and made our T&R forecasts witth no future toll increases.

Table ES-1: 2017 Peace Bridge Toll Rates (effective January 1, 2018) Cash E-ZPass ($U.S.) Multiplier Trip Multiplier Class Trip Cost Trip over Cost over ($U.S./$CANb) Discount Auto ($U.S) Auto

Autoa $3.75/5.00 n/a $3.75 n/a n/a Commercial 2-axles $6.00/8.00 2.00 $5.40 2.00 10% 3-axles $10.00/13.00 3.33 $9.00 3.33 10% 4-axles $18.00/24.00 6.00 $16.20 6.00 10% 5-axles $28.00/37.00 9.33 $25.20 9.33 10% 6-axles $40.00/53.00 13.33 $36.00 13.33 10% 7+ axles $53.00/70.00 17.67 $47.70 17.67 10% Buses $13.00/17.00 4.33 $11.70 4.33 10% aAutos pulling trailers are charged $7.50 $U.S. ($10.00 CAN) cash or E-ZPass. bEstimated by maintaining exchange rate of 1.33 per existing toll schedule

Forecasted Trips and Gross Toll Revenues Table ES-2 presents the forecasted non-tolled eastbound and tolled westbound trips and resulting gross toll revenues for the years 2017 through 2047. All estimates of gross toll revenue are in nominal dollars.

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Given the historically very low elasticity to toll rate increases, we are of the opinion that there is the capacity to generate additional gross toll revenues with adjustments to the toll rate schedules.

Re-decking/Rehabilitation A significant portion of the Bond proceeds associated with this report are expected to be used to pay a portion of the cost of the PBA’s current re-decking/rehabilitation project on the Peace Bridge, which began in October of 2016. Construction is planned to take place for three consecutive years during the timeframe of Octoober 15th through May 15th, involving the closure of one lane of the Peace Bridge for the duration of each seven-month construction season. Jacobs’ estimates of traffic andd revenue take into consideration these construction plans. At the completion of the construction projectt, it is anticipated that traffic would return to normal levels prior to construction when there would no longer be the potential for construction-related delays.

Table ES-2: Forecasted Peace Bridge Trips and Toll Revenues, 2017 to 2047 AnnualNontolledTrips(EB),TollTransactions(WB),andTollRevenues Trips/Transactions Year Toll NonTolledTrips GrossTollRevenues Transactions Total (EB) (WB) 2016* 2,653,300 2,668,700 5,322,000 $21,330,000 2017** 2,547,900 2,596,800 5,144,700 $20,750,000 2018** 2,516,000 2,548,900 5,064,900 $22,150,000 2019** 2,489,500 2,522,000 5,011,500 $21,930,000 2020 2,535,200 2,534,200 5,069,400 $22,080,000 2021 2,522,000 2,520,900 5,043,000 $22,000,000 2022 2,516,000 2,514,800 5,030,800 $21,970,000 2023 2,513,100 2,511,900 5,025,000 $21,960,000 20242042 2,513,100 2,511,900 5,025,000 $21,960,000 *Actualnumberspresentedarerounded **Theseforecaststakeintoaccounttheplannedcontinuationofredecking/rehabilitationactivitiesthrough Mayof2019. Note:Numbersmaynotaddduetorounding.

ADDITIONAL REVENUE POTENTIAL The Authority has engaged in numerous capital improvement projects to improve the attractiveness of the Peace Bridge as a border crossing throughout its history. These include the current Bridge Rehabilitation project that will be funded from the Series 2017 Bonds, new customs facilities, and bridge widenings on both the Canadian and US

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approaches to primary customs for commercial vehicles among other improvements. The facility has maintained its share of Niagara River cross border traffic throughout this period.

The Authority has also shown a willingness to increase tolls with several toll increases in the past 20 years. At the present time, crossing the border is not a casual decision, and the actual value of the toll rates is not a limiting factor to travel. Given the current comparatively low toll rate and very low elasticity to toll rate increases, we are of the opinion that there is capacity to generate additional gross toll revenues with additional adjustments to the toll rate schedules

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2.0 Introduction The Buffalo and Fort Erie Public Bridge Authority (the “Authority” or “PBA”) retained Jacobs Civil Consultants, Inc. (“Jacobs”) to prepare an Investment Grade Traffic and Revenue Forecast for the Auuthority’s Peace Bridge (the “Bridge” or “Peace Bridgee”) in connection with the offering and sale of the Authority’s Toll Bridge System Revenue Bonds (the Series 2017 Bonds). Jacobs analyzed historical traffic and toll revenue data for the Bridge to determine historical trends; analyzed possible correlations between traffic and key economic indicators; and researched demographic data and other key factors that have affected recent traffic patterns and that will affect future traffic trends.

Jacobs completed a similar study for the PBA in May 2014. For the current study, we built upon our database of historical traffic and toll revenue data, reviewed key economic indicators, and researched demographic data and other key factors affecting recent traffic patterns and future traffic behavior. These data and analyses were then used to develop our static trend line-based traffic and revenue model to estimate annual trips and gross toll revenue for the period 2017 through 2047. During the coursee of the work effort, Jacobs compiled a comprehensive set of available traffic and economic data. Historical monthly trips and toll revenue data were summarized for all tooll trips on the Peace Bridge analyzed by month, segmented by payment type and vehicle class. For this analysis, Jacobs has continued its extensive research into the most relevant historic and forecasted socioeconomic parameters, and included effects of a future toll increase and bridge construction, in order to develop a viable estimate of future traffic and toll revenues.

The work, analyses and results presented herein for the Peace Bridge are of investment- grade quality and are suitable for financing.

This report is organized into chapters addressing the key components and considerations included in the development of our forecasts, along with a chapter addressing the resulting traffic and revenue forecasts themselves. These chapters include:

• Description of the Peace Bridge • Data Collection and Analysis • Economic Backdrop and Outlook for the Future • Toll Trips and Gross Toll Revenue Forecasts • Risk and Sensitivity Analyses • Limits and Disclaimers

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3.0 Description of the Peace Bridge This section of the report provides a description of the Peace Bridge, along with a historical overview of toll collection on the Peace Bridge. This section also includes a description of the current toll rate schedule and the toll rate changes that are expected to be implemented in January 2018.

3.1 The Peace Bridge The Peace Bridge, open since 1927, serves as an importannt border crossing facility, processing travel, trade, and tourism between the U.S. and Canada. The Peace Briddge is three lanes wide, with reversible capability in the midddle lane. The majority of the time, two lanes serve traffic traveling in the toll-free eastbound direction, while one lane serves the tolled westbound direction. The Peace Bridge is one of four bridges that provide access across the Niagara River between Ontario, Canada and the state of New York in the United States, serving as a major international link between Canadian and U.S. highway systems. Figure 1 provides a regional view of where the Peace Bridge is located.

The Peace Bridge is the southernmost of the four reegional international crossings, and the closest in proximity to the city of Buffalo, New York. The three competing bridges are the Rainbow Bridge (no commercial vehicles), the Whirlpool Rapiids Bridge (no commercial vehicles), and the Lewiston-Queenston Bridge. The Peace Bridge and the Lewiston- Queenston Bridge are both accessible by major highways connecting to Toronto, ON and Buffalo, NY, providing access to other major roadways within the U.S. and Canada. While the Peace Bridge is owned and operated by the PBA, the other three Niagara area bridges are owned and operated by the Niagara Falls Bridge Commission (NFBC).

The Bridge supports more than five million annual crrossings, with 3 million tolled crossings in the westbound direction only (into Canada). It carries a large number of through traffic and commercial vehicles due to its connections with mmajor highways such as the New York State Thruway (I-190) on the U.S. side and the Queen Elizabeth Way (QEW) on the Canadian side of the bridges crossing of the Niagara River. The Peace Bridge carries 46 percent of traffic crossing the Niagara River. Furthermore, the Peace Bridge carries roughly 61 percent of commercial vehicles choosing to cross the international border through this region. Looking at a larger scale, while there are elevven crossings connecting the states of New York and Michigan with Ontario, Canada, the Peace Bridge carries roughly 16 percent of traffic between New York, Michigan, and Ontario.

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Figure 1: Regional Map Showing Locaattion of the Peace Bridge

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3.2 Current Capital Projects on the Peacce Bridge The Authority has both completed and planned several Capital Improvement Projects that will both maintain and improve the competitive advantage that the Peace Bridge offers to both passenger and commercial traffic between New York and Ontario. The Board of Directors has approved a $185 million five-year capital plan, self-financed through Authority reserves, operations and the Series 2017 Bonds.

Foremost among those projects is the $100 million briidge rehabilitation project that began in the fall of 2016. This involves a complete replacement of the original bridge deck, a widening to accommodate an eight-foot wide multi-purpose pedestrian/cycling sidewalk, installation of an international “look out” viewing deck for tourists and sightseers, and oother improvements to the structure.

In the summer of 2016, a 4th lane was added to the Bridge’s Canadian approach to help alleviate plaza congestion by moving trucks off of the Bridge quicker while providing easier access to the NEXUS lanes. This complemented a $10 million U.S.-side Bridge approach widening completed a year earlier. Both projects also facilitate better traffic management during the Bridge rehabilitation project.

In spring 2016, the $24 million U.S. Customs Coommercial Warehouse expansion and renovation was completed, greatly improving the efficiency of the Customs secondary inspection process. The building is LEED Silver certified that will result in significant energy savings.

During 2017 the Authority’s multi-year $3 million adaptive landscape management plan will be completed. The project’s goal is to improve air quality and reduce the overall carbon footprint in both the Canadian and U.S. plazas and adjacent neighborhoods ultimately sequestering 625 tons of carbon annually. The plan included the complete restoration and improvement of Pat Sole Park for the benefit of the surrounding community.

The Authority worked closely with the New York State Department of TTransportation in substantially completing the State’s Gateway Connections Improvement project that improved connectivity to and from I-190 and allowed the restoration of Front Park by removing Baird Drive.

The Authority continues to work closely with Customs and Border Protection (CBP) to streamline commercial traffic flows. In the spring an eighth commercial booth will be installed and the x-ray inspection area will be relocateed to streamline traffic flows within the U.S. plaza.

Recently the Authority embarked on an innovative project with CBP to pre-screen trucks entering the U.S. in the Canadian plaza area to inssure that only trucks that that have an

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electronic manifest and have paid the Customs fee are allowed access onto the Bridge. This has resulted in much less bridge congestion by allowing only prepared vehicles to queue for CBP inspections. The design and construction of a reconfigured U.S. plaza is contingent on final determination of the viability of commercial pre-clearance in Canada. A decision is expected in 2017.

3.3 Competitive Border Crossings The locations of the four bridges crossing the Niagara River between New York and Ontario are presented in Figure 2. These bridges include the Peace Bridge, the Rainbow Bridge, the Whirlpool Rapids Bridge, and the Lewiston-Queenston Bridge. The Lewiston- Queenston Bridge is roughly 30 miles north of the Peace Bridge. This Bridge connects Canada’s Highway 405 and New York’s I-190, serving both local and through traffic of all vehicle classes. Travel to Buffalo via I-190 requires the payment of additional tolls at the Grand Island Bridges, part of the New York State Thruway System. The Whirlpool Rapids and Rainbow Bridges are smaller in nature, and don’t serve commmercial vehicles.

Figure 2: Map Showing Locations of International Bridges Crossing the Niagara River

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The Rainbow Bridge and the Whirlpool Rapids bridge are both, located roughly 20 miles north of the Peace Bridge, and neither permit commercial vehicles. The Rainbow Bridge is the closest of the two to the Peace Bridge and also the closest to Niagara Falls, a popular tourist destination, and therefore serves primarily local and tourist traffic. The Whirlpool Bridge is slightly further north, and reserved for subscribers to NEXUS, a program that allows passengers with immigration pre-clearance to pass through inspection with minimal delays.

In addition to the bridges in the Niagara area, longer distance traffic can also access Ontario border crossings connecting to Michigan or other parts of New York State. These include facilities such as the Ambassador Bridge and the Detroit-Windsor Tunnel (which are approximately 250 miles from the Peace Bridge), and the Thousand Island Bridge (whiich is approximately 285 miles from the Peace Bridge), among others.

3.4 Competitive Advantage of the Peace Bridge

A competitive advantage of the Peace Bridge compared to its neighboring facilities is the availability of Primary Inspection Booths, which allows for increased inspection capacity. The primary competitive crossing for long distance trips is the Lewiston-Queenston Bridge. As shown in Table 1, the Peace Bridge has significantly more capacity to process traffic that will generally result in shorter wait times. The competitive crossings are discussed in more detail in Section 3.2.

Table 1: Niagara Region Primary Inspection Booth Capacity, Cars as of 2017 Primary Inspection Booths Crossing facility Entering Entering United Canada States Peace Bridge 15 11 Lewiston-Queenston Bridge 10 6 Rainbow Bridge 15 16 Whirlpool Bridge 2 2 Source: Buffalo and Fort Erie Public Bridge Authority and Niagara Falls Bridge Commission

There were some 1.2 million truck crossings at the Peace Bridge in 2016. Of the $327 billion in trade carried by truck in 2016 as shown in Figure 3, $60 billion was carried regionally by the Peace and Lewiston-Queenston bridges. A majority of that was carried by the Peace Bridge, which transports upwards of 60 percent of Niagara Region commercial traffic across the border (further detail is provided in section 4.4.2 of this reeport, beginning on page 40).

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Figure 3: U.S./Canada Trade Value

Sourcce: Research and Innovative Technology Administration, Bureau of Transportation Statistics

As with passenger cars, for commercial vehicles another significant competitive advantage of the Peace Bridge compared to its neighboring ffacilities is the availability of Primary Inspection Booths. The primary competitive crossing for long distance trips is the Lewiston- Queenston Bridge. As shown in Table 2, the Peace Bridge has significantly more capacity to process traffic entering the United States that will generally result in shorter wait times.

Table 2: Niagara Region Primary Inspection Booth Capacity, Trucks as of 2017 Primary Inspection Booths Crossing facility Entering Entering United Canada States Peace Bridge 5 7 Lewiston-Queenston Bridge 5 4 Rainbow Bridge - - Whirlpool Bridge - - Source: Buffalo and Fort Erie Public Bridge Authority and Niagara Falls Bridge Commission

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Further to its regional importance, the Peace Bridge is part of the Continental 1 corridor (continental1.org) that is envisioned to provide a direct route between Toronto, Ontario and Miami, Florida. Within the U.S. the proposed route includes U.S.219 that has virtual direct access to the Peace Bridge via the Niagara Section of the New York State Thruway. Other advantages of the Peace Bridge over its nearest competitors include the need for commercial traffic to pay an additional toll to cross the Grand Island Bridges on the I-190 Niagara Section of the New York State Thruway.

3.5 Peace Bridge’s Toll Collection Overview On the Peace Bridge, tolls are currently collected in the westbound direction (traffic headed into Canada) at a toll plaza located on the Canadian side of the Niagara River. Tolls are assessed based on the classification of each vehicle and the payment type. Since the first toll bridge at this crossing opened to traffic in 1927, tolls were collected manually via cash payment or in the form of tokens that provided discounts to frequent bridge users. In January 2002, the Authority implemented Radio Frequency Identification Device (RFID) transponder-based electronic toll collection in the form of E-ZPass. With RFID technology, the PBA began charging trucks by the number of axles instead of by weight. In addition, the Authority began collecting tolls from trucks in one-direction (westbound into Canada), similar to cars which had been paying one-way tolls since 1993.

The E-ZPass network of toll facilities allows customers to travel seamlessly on toll bridges and roadways operated by 38 toll agencies in 16 U.SS. states including several Canada/U.S. border crossings. Most toll facilities that feed directly or indirectly to the Peace Bridge (such as those maintained by the New York State Thruway Authority) accept E-ZPass. Roughly 48 percent of the Authority’s 2016 toll transactions were collected using E-ZPass. Peace Bridge tokens still in circulation are accepted in all attended manuual toll collection lanes.

Toll increases within the past two decades have occurred roughly every five years, with cars seeing rate increases in 1997, 2000, 2002, and 2007; and trucks experiencing increases in 1998, 2000, 2002, and 2007. Additionally, 2007 saaw the implementation of new fees for special loads requiring lane closures or changes to traffic patterns. After eleven years with no toll increases, the Authority has scheduled an increase for passenger vehicles on January 1, 2018.

In 2005, the collection of tolls was shifted from the U.S. side of the border to the Canadian side, which made the Peace Bridge the first toll facility in Canada to have E-ZPass. This change in toll collection location allowed the PBA to expand commercial primary inspection lanes at the physically constrained U.S. plaza.

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3.6 Peace Bridge’s Current Toll Rates The current toll policy for the PBA has been in effect since April 1, 2007 for passenger vehicles and July 1, 2007 for commercial vehicles. Also effective since July 1, 2007 are fees for special loads that require either lane closures or an alterinng of traffic patterns on the Bridge. Beginning November 16, 2007 and subsequently revised on October 14, 2008 and December 19, 2008, the PBA adopted a toll equity currency policy that establishes the Canadian cash rate quarterly based on the average exchange rate for the previous 3 months as determined by the Bank of Canada and then adjusts the Canadian toll on the 15th of the following month. Passenger vehicle tolls are rounded to the nearest $0.25 and commercial tolls to the nearest $1.00 for any quarterlly toll rate adjustments due to changes in the U.S.-Canadian exchange rates. This is relevant since the PBA collects tolls in both United States Dollars ($U.S.) and Canadian Dollars ($CAN).

The current toll rates at the Peace Bridge are shown in Table 3.

Table 3: 2017 Peace Bridge Toll Rates (effective April 2017) Cash E-ZPass ($U.S.) Multiplier Trip Multiplier Class Trip Cost Trip over Cost over ($U.S./$CAN) Discount Auto ($U.SS) Auto

Autoa $3.00/4.00 n/a $2.70 n/a 10% Commercial 2-axles $6.00/8.00 2.00 $5.40 2.00 10% 3-axles $10.00/13.00 3.33 $9.00 3.33 10% 4-axles $18.00/24.00 6.00 $16.20 6.00 10% 5-axles $28.00/37.00 9.33 $25.20 9.33 10% 6-axles $40.00/53.00 13.33 $36.00 13.33 10% 7+ axles $53.00/70.00 17.67 $47.70 17.67 10% Buses $13.00/17.00 4.33 $11.70 4.33 10% aAutos pulling trailers are charged $6.00 $U.S. ($8.00 CAN) cash or $5.40 $U.S. E-ZPass.

Special loads that either require lane closures or an altering of traffic patterns are assessed $100 U.S. ($135 CAN) if they arrive between 12 AM and 12 PM or $200 U.S. ($265 CAN) if they arrive between 12 PM and 12 AM.

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The toll rates that are scheduled to take effect in January 2018 at the Peace Bridge are shown in Table 4.

Table 4: 2017 Peace Bridge Toll Rates (effective January 1, 2018) Cash E-ZPass ($U.S.) Multiplier Trip Multiplier Class Trip Cost Trip over Cost over ($U.S./$CANb) Discount Auto ($U.S) Auto

3.7 Comparison of Peace Bridge’s Toll Rates to Other Facilities Figure 4 compares the passenger car toll rates on the Peace Bridge to other Ontario / New York – Michigan border crossings. The Sault Ste. Marie International Bridge (International Bridge) is the farthest west of those shown, providing a link between Michigan and Ontario north of Lake Huron. The Bluewater Bridge, the Ambassador Bridge, and the Detroit- Windsor Tunnel provide connections between Michigan and Ontario between the southern tip of Lake Huron and the western end of Lake Erie. The Niagara/Buffalo region bridges are located between Lake Erie and Lake Ontario, while the Thousand Islands Bridge, Ogdensburg Bridge, and Seaway International Bridge are located east of Lake Ontario. Given the size of the lakes that separate these bridges, many of them are not typically considered competitors to the Peace Bridge. Standard cash and discounted toll rates are shown for each facility. It is evident that the Peace Bridge passenger-vehicle toll rates are comparable with rates at other toll crossings.

It should be noted that in order to travel across some of these toll facilities, additional tolls may be required along the route. For example, 5-axle trucks crossing the Lewiston- Queenston Bridge to or from Buffalo must also pay some $2.99 to $4.25 of additional tolls on the New York State Thruway making the total tolll cost comparable to that of the Peace Bridge.

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Figure 4: Passenger Car Toll Rates at Ontario / NY-Michigan Border Crossings as of April 2017 RoundTripPassengerCarTolls Ontario/NYMIBorderCrossings

PeaceBridge(NY/ON)2017TOLLRATES

LewistonQueenston(NY/ON)

PeaceBridge(NY/ON)2018TOLLRATES

ThousandIslands(NY/ON)

OgdensburgBridge(NY/ON)

SeawayInternationalBridge(NY/ON)

BlueWaterBridge(MI/ON)

InternationalBridge(MI/ON)

DetroitWindsorTunnel(MI/ON)

AmbassadorBridge(MI/ON)

$ $2.00 $4.00 $6.00$8.00$10.00 $12.00 $14.00 (CAN$)Cash (US$)Cash (US$)DiscountedETCToll

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Figure 5 shows a similar comparison for 5-axle vehicles. The Peace Bridge commercial vehicle toll rates are comparable with the other toll crossings.

Figure 5: Commercial Vehicle Toll Rates at Ontario / NY-Michigan Border Crossings as of April 2017 RoundTrip5AxleTruckTolls Ontario/NYMIBorderCrossings

OgdensburgBridge(NY/ON)

ThousandIslands(NY/ON)

LewistonQueenston(NY/ON)

SeawayInternationalBridge(NY/ON)

PeaceBridge(NY/ON)2018TOLLRATES

PeaceBridge(NY/ON)2017TOLLRATES

DetroitWindsorTunnel(MI/ON)

BlueWaterBridge(MI/ON)

InternationalBridge(MI/ON)

AmbassadorBridge(MI/ON)

$ $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 Note:Roundtriptolls.Tollspaidper directionarehalfoftheamountshown. (CAN$)Cash (US$)Cash (US$)DiscountedETCToll

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4.0 Data Collection and Analysis Jacobs undertook a review of prior studies, data provided by the PBA, and data available from online sources as well as site reconnaissance. This chapter presents a summary of the material collected and highlights data that was considered useful in understanding the characteristics of traffic on the Peace Bridge.

4.1 Prior Studies Jacobs completed a similar study for the PBA in May 2014. For the current study, we built upon our database of historical traffic and toll revenue data, and researched demographic data and other key factors affecting recent traffic patterns and future traffic behavior. These data and analyses were then used to develop our staatic trend linee-based traffic and revenue model to estimate annual trips and gross toll revenue for the period 2017 through 2047.

4.2 Data provided by the Authority The Authority provided Jacobs with data pertaining to their historical transactions and revenues at the Peace Bridge. The following subsections present summarizations of this data in graphic and tabular form.

4.2.1 Historical Trips Over the past 50+ years, traffic and methods of payment on the Peace Bridge have fluctuated for a variety of reasons including: U.S. and Canadian recessions, international agreements, bridge infrastructure investments, and federal inspection requirements. Figure 6 and Figure 7 display the changing nature of two-way passenger vehicle and truck traffic on the Peace Bridge since 1964.

The Bridge currently supports more than five million annual croossings, with 3 million tolled crossings in the westbound direction (into Canada). It carries a large number of through traffic and commercial vehicles due to its connections with major highways such as the New York State Thruway (I-190) on the U.S. side and the Queen Elizabeth Way (QEW) on the Canadian side. The Peace Bridge carries 46 percent of traffic crossing the Niagara River. Furthermore, the Peace Bridge carries roughly 61 percent of commercial vehicles choosing to cross the international border through this region. Looking at a larger scale, while there are eleven crossings connecting the states of New York and Michigan with Ontario, Canada, the Peace Bridge carries roughly 16 percent of traffic between New York, Michigan, and Ontario.

As shown in Figure 6, two-way passenger vehicle traffic has shown an overall decline on the Peace Bridge in the 53 years from 1964 to 2016. A number oof events, however, caused traffic to fluctuate significantly in the intervening years. Passenger vehicle traffic remained

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relatively consistent from 1964 to 1979 before fuel shortages in the United States caused consumers to travel to Canada to purchase gasoline. This event contributed to a dramatic spike in passenger vehicle traffic on the Bridge from 1980 to 1981 before returning to levels slightly higher than those experienced in the 1970s.

Passenger vehicle traffic then gradually rose from 1984 to 1992, following the signing of a free trade agreement between Canada and the United States, before falling again after the Canadian and U.S. recessions in the early 1990s.

Traffic on the Bridge again increased slightly in the late 1990s before falling due to heightened border security enacted in the aftermatth of the 2001 terrorist attacks in the United States. The increase in security, coupled with the impllementation of the Western Hemisphere Travel Initiative (WHTI), which drammatically changed the identification requirements needed to enter the United States, and the Canadian and U.S. recessions, have all contributed to decreasing passenger vehicle traffic levels on the Bridge. This steady downward trend in passenger car traffic has continued for the past three years, with recent actions by the US Department of Homeland Security contributing to the more recent decline, as potential visitors have faced increased uncertainty at the border.

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Figure 6: Annual Passenger Car Two-way Crossings on Peace Bridge, 1964 to 2016

As shown in Figure 7, two-way truck traffic on the Peace Bridge has shown an overall increase from 1964 to 2016. In contrast to passenger vehicle traffic, truck traffic grew at a relatively steady rate from 1964 to 1999, when it peaked at nearly 1.5 million trips. International trade agreements (the US-Canada Free Trade Agreement and NAFTA) as well as long-term growth in the Canadian and U.S. economies have llikely contributed to the rise in truck traffic during this period.

Truck traffic, however, also felt the impacts of changes to border security procedures after the 2001 terrorist attacks, as well as the recessionary periods during the late 2000s, declines in auto production and the significant strengthening of the Canadian Dollar to a 30- year high in 2007.

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Figure 7: Annual Truck Two-way Crossing on Peace Bridge, 1964 to 2016

There were 4.1 million passenger vehicle two-way crossings in 2016. A majority of passenger car trips across the Bridge are discretionaary. The Western Hemisphere Travel Initiative (WHTI) implemented in 2009 dramatically changed the identification requirements needed to enter the United States. The outcome of WHTI is to further limit the ability for motorists to casually decide to cross the border. The following Figure shows total auto and bus traffic since 2003. Traffic declined beginning in 2007 for a number of reasons, including the implementation of WHTI, economic recessions in both the U.S. and Canada, and strengthening of the Canadian dollar. Volumes remained relatively stable from 2009 through 2013, but when the exchange rate began to change relatively quickly in favor of the U.S. Dollar, volumes began to decline again.

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Figure 8: Peace Bridge Auto/Bus Two-way Traffic

Source: Buffalo and Fort Erie Public Bridge Authority

There were some 1.2 million truck two–way crossings in 2016, as shown in the following Figure. The Peace Bridge carries roughly 61% of the total regional truck crossings. Of the $327 billion in trade carried by truck in 2016 that was shown in Figure 3, $60 billion was carried regionally by the Peace and Lewiston-Queenston bridges. A majority of that is carried by the Peace Bridge.

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Figure 9: Peace Bridge Truck Two-way Traffic

Source: Buffalo and Fort Erie Public Bridge Authority

Figure 10 illustrates annual westbound (to Canada) vvehicle toll traffic trends on the Peace Bridge from 2003 to 2016. The number of annual passenger vehicle toll transactions has been declining over the 14-year period, from 3.0 million in 2003 to 2.1 million in 2016, a total decrease of 30.1 percent, or an average rate of negattive 2.5 percent per year. As shown in the graph, the historical long-term trend has been a decrease in passenger vehicle toll traffic with some intermittent years of small, positive growth. Since the end of the last Canadian and U.S. recessions in 2009, passenger vehicle toll traffic declined overall by a 13.4 percent.

The figure also displays annual westbound truck toll traffic trends. Similar to passenger vehicle toll traffic, truck and bus annual toll traffic showed an overall decrease over the 14- year period, falling from 651 thousand transactions in 2003 to 607 thousand transactions in 2016, a decrease of some 6.8 percent. Truck and bus toll traffic on the Peace Bridge remained relatively unchanged from 2003 to 2006 and then decreased sharply from 2007 to 2009, reaching a low of 551,000 transactions. Since 2009, however, truck and bus toll

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traffic on the Peace Bridge has rebounded somewhat, climbing back to 624,000 transactions in 2013 but then declining again to 607 thousand transactions in 2016.

Figure 10: Annual Toll Traffic by Vehicle Class on Peace Bridge (Westbound), 2003 to 2016

Figure 11 shows the distribution of annual toll traffic by vehicle class on the Peace Bridge (westbound) from 2003 to 2016. Overall, the share of passenger vehicle toll traffic has declined slightly from a high of 82 percent in 2003 to a loow of 77 percent in 2016. Conversely, the share of truck and bus toll traffic increased from a low of 18 percent in 2003 to a high of 23 percent in 2016. Passenger vehicles made up more than 80 percent of westbound toll traffic in each year from 2003 to 2009. Since 2010 however, trucks and buses have represented more than 20 percent of all toll transactions in the westbound direction of the Peace Bridge.

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Figure 11: Distribution of Annual Westbound Toll Traffic on Peace Bridge, 2003 to 2016

Table 5 displays annual traffic, by direction and vehicle class, from 2003 to 2016. Eastbound (non-tolled) traffic and westbound (tolled) traffic have been nearly equal in all years noted in the table. Passenger vehicles comprise most of the traffic on the Peace Bridge, followed by trucks, and then buses. It is notable that toll and non-tolled volumes for passenger vehicles (autos), trucks and buses have declined from 2003 to 2016.

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Table 5: Annual Total Toll Traffic by Travel Direction on Peace Bridge, 2003 to 2016 Directio Eastbound (Non- Westbound (Tolled) n Tolled) Grand EB Tootal WB Total Auto & Total Truck Auto Truck Bus Class Bus 2003 2,963,000 675,000 2,963,000 636,000 15,000 3,638,000 3,614,000 7,252,000 2004 2,833,000 659,000 2,789,000 637,000 16,000 3,492,000 3,441,000 6,934,000 2005 2,790,000 660,000 2,810,000 629,000 16,000 3,449,000 3,455,000 6,905,000 2006 2,768,000 682,000 2,778,000 620,000 16,000 3,449,000 3,413,000 6,863,000 2007 2,648,000 686,000 2,650,000 624,000 16,000 3,333,000 3,290,000 6,624,000 2008 2,515,000 671,000 2,522,000 614,000 16,000 3,186,000 3,152,000 6,339,000 2009 2,372,000 580,000 2,391,000 537,000 14,000 2,952,000 2,942,000 5,894,000 2010 2,375,000 628,000 2,397,000 593,000 14,000 3,003,000 3,003,000 6,007,000 2011 2,388,000 649,000 2,389,000 603,000 16,000 3,037,000 3,009,000 6,045,000 2012 2,370,000 657,000 2,381,000 609,000 15,000 3,026,000 3,005,000 6,031,000 2013 2,305,000 636,000 2,352,000 609,000 15,000 2,941,000 2,977,000 5,917,000 2014 2,164,000 637,000 2,181,000 613,000 14,000 2,801,000 2,808,000 5,609,000 2015 2,069,000 627,000 2,091,000 602,000 13,000 2,696,000 2,706,000 5,402,000 2016 2,036,000 618,000 2,062,000 595,000 12,000 2,653,000 2,669,000 5,322,000 Note: Data may not add due to rounding. Source: Data for the period 2003-2015 was sourced from the PBA website, while 2016 data was provided directly by PBA

Figure 12 shows that tolled traffic fluctuates on a monthly basis on the Peace Bridge. In 2016, the summer months of July and August experienced the most tolled traffic on the Bridge, capturing 11.1 and 11.3 percent of the total traffic. Conversely, January and February experienced the least amount of total traffic, capturing only 6.5 and 6.2 percent of the annual tolled traffic, respectively. This is geneerally conssistent with the seasonality trends seen in past years.

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Figure 12: Peace Bridge Tolled Traffic, Thousands of Trips, 2016

Source: http://www.peacebridge.com/index.php/historical-traffic-statistics/yearlly-volumes

Figure 13 illustrates an average week’s daily total tooll traffic (ADT) on the Peace Bridge in October 2016, the average month based on westbound ADT, for each day of the week. In general, toll traffic is highest during the Friday to Sunday weekend period compared to the Monday-Thursday weekday period. On average, Tuesdays experienced the least traffic and Fridays experienced the most traffic in October 2016.

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Figure 13: Average Daily Total Toll Traffic on Peace Bridge (Westbound), for One Week in October 2016

Source: http://www.peacebridge.com/index.php/historical-traffic-statistics/monthly-volumes

4.2.2 Historical Toll Revenue Trends {The toll revenues discussed in this section of the report are in U.S. dollars unless otherwise noted.}

Revenues generated by tolled facilities depend on traffic volumes and toll rates for different vehicle classes, which fluctuate over time. The PBA has adjusted toll rates at various points in time on the Peace Bridge to counteract the effects of changing traffic volumes, inflation and to ensure equity among users of the Bridge. Canadian rates are also adjusted periodically to match variations in exchange rates between the two countries’ currencies.

Table 6 presents a summary of recent toll rate increases at the Peace Bridge and other Niagara River crossings..

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Table 6: Recent History of Toll Rate Increases Date Toll Rate Action November 1, 1996 Tolls increased for passenger vehicles and trucks June 1, 1997 Tolls increased for passenger vehicles Tolls increased for buses and trucks; tolls increased at all Niagara January 1, 1998 Falls Bridge Commission briddges January 1, 2000 Tolls increased for passenger vehicles, buses, and trucks Implemented E-ZPass, one-way axle-based commercial tolling, January 20, 2002 and increased cash and discounted E-ZPass toll rattes April 1, 2007 Tolls increased for passenger vehicles July 1, 2007 Tolls increased for buses and trucks November 1, 2013 Tolls increased at all Niagara Falls Bridge Commission bridges August 1, 2014 E-ZPass accepted at all Niagaara Falls Bridge Commission bridges

Toll Revenues on the Peace Bridge in 2016 were roughly US$21.3 million, as shown in Figure 14. Recent years have shown a slight decline in total revenues, after a period of relatively constant revenues from 2010 through 2014. Of the total revenue in 2016, 73 percent was generated by trucks, as shown in Fiigure 15. Buses, on the other hand, generate a very small portion of revenues, amounting to only 0.6 percent of 2016 revenues. Looking back at the early 2000’s, the portion of revennue generated by cars was around 33 percent, but over time that has gradually slipped to below 30 percent in recent years.

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Figure 14: Historical Peace Bridge Toll Revenues, 2003 to 2016, US$

Figure 15: Distribution ofo Annual Toll Revenue on Peace Bridge, 2003 to 2016

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4.2.3 Average Toll Rates As shown in Table 7, average toll rates per trip on the Peacce Bridge vary across the different payment methods. The average toll rate paid by passenger vehicles using E-ZPass ($U.S.) and $U.S. Cash increased by 55.1 and 18.1 percent, respectively, between 2003 and 2016. Meanwhile, given that the PBA stopped selling tokens in 2002, the average toll rates paid by passenger vehicles utilizing $U.S. Tokens or $CAN Tokens remained unchanged over the 14 year period.

The increase in average toll rates paid by passenger vehicles observed in 2007 and 2008 was the result of vehicle toll increases implemented in April 2007.

Table 7: Historical Average Toll Rates for Passenger Vehicles, $ per Trip1 Payment Method Yeara E-ZPass $U.S Cash $CAN Cash2 U.S.D $CAN Tokens Tokens2 2003 $1.75 $2.48 $3.53 $1.52 $1.92 2004 $1.75 $2.50 $3.53 $1.52 $1.92 2005 $1.75 $2.49 $3.54 $1.52 $1.92 2006 $1.75 $2.48 $3.54 $1.52 $1.92 2007 $2.53 $2.89 $3.49 $1.52 $1.92 2008 $2.71 $2.98 $3.03 $1.52 $1.92 2009 $2.71 $2.98 $3.58 $1.52 $1.92 2010 $2.71 $2.99 $3.09 $1.52 $1.92 2011 $2.71 $2.98 $3.03 $1.52 $1.92 2012 $2.71 $2.98 $3.03 $1.52 $1.92 2013 $2.71 $2.97 $3.03 $1.52 $1.92 2014 $2.71 $2.95 $3.28 $1.52 $1.92 2015 $2.71 $2.94 $3.76 $1.52 $1.92 2016 $2.71 $2.93 $4.05 $1.52 $1.92 Difference, from 2003 to 55.1% 18.1% 14.8% 0.0% 0.0% 2016 1Measured in nominal terms. 2Measured in Canadian dollars. Note: These average toll rates do not take into account violations.

Average toll rates paid by passenger vehicles utilizing $CAN cash decreased for a period of time (2010-2013), but with recent changes in exchange rate, tolls have increased by 14.8 percent over the 2003 toll rate. The exchange rate is further discussed on page 49 of this report.

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Table 8 shows historical average toll rates for trucks utilizing the Peace Bridge. Fluctuations in these numbers typically stem from changing ratios in choice of currency, payment type (cash or E-ZPass), and vehicle classifications. From 2003 to 2016, the average toll rate for trucks utilizing E-ZPass ($U.S.) increased by 31.1 percent while the average toll rate for trucks using $U.S. cash as a payment method increased for a period of time, but in recent years has gone back down and in 2016 was 7.0 percent lower than the 2003 average. Average toll rates for trucks usingg $CAN cash as a payment method decreased for a while, recent adjustments to the $CAN cash toll rates accommoddating changes to the $U.S.-$CAN exchange rate have contributed to a 9.7 percent increase in 2016 average toll rates versus 2003 average rates.

The increase in average toll rates paid by trucks observed in 2007 and 2008 was the result of a toll increase implemented in July 2007.

Table 8: Historical Average Toll Rates for Trucks, $ per Trip1 Payment Method Year E-ZPass $U.S. Cash $CAN Cash2 2003 $19.67 $19.72 $28.96 2004 $19.69 $20.05 $28.29 2005 $19.67 $19.68 $27.68 2006 $19.71 $19.58 $27.67 2007 $22.28 $21.97 $27.04 2008 $24.95 $24.57 $23.54 2009 $24.77 $23.93 $28.14 2010 $25.06 $23.21 $25.00 2011 $25.19 $22.87 $23.41 2012 $25.41 $22.37 $23.63 2013 $25.56 $21.82 $23.71 2014 $25.88 $21.23 $25.02 2015 $25.73 $19.84 $28.82 2016 $25.80 $18.35 $31.78 Difference, from 2003 31.1% -7.0% 9.7% to 2016 1Measured in nominal terms. 2Measured in Canadian dollars.

Average toll rates for buses are shown in Table 9. Similar to passenger cars and trucks, buses utilizing E-ZPass experienced a rise in the aaverage toll rate from 2003 to 2016. Buses using $U.S. cash or $CAN cash also saw ttheir average toll rate increase, after periods of decline. The increase in average rates in 2007 and 2008 was influenced by the implementation of higher toll rates in July 2007.

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Table 9: Historical Average Toll Rates for Buses, $ per Trip1 Payment Method Year E-ZPass $U.S. Cash $CAN Cash2 2003 $9.45 $10.34 $15.50 2004 $9.45 $10.33 $15.50 2005 $9.45 $10.35 $15.50 2006 $9.45 $10.24 $15.50 2007 $10.65 $11.30 $15.24 2008 $11.70 $11.83 $13.15 2009 $11.70 $11.73 $15.09 2010 $11.70 $11.41 $13.72 2011 $11.70 $9.88 $13.03 2012 $11.70 $11.20 $13.00 2013 $11.70 $11.75 $13.00 2014 $11.70 $11.48 $13.88 2015 $11.70 $10.53 $15.89 2016 $11.70 $7.79 $17.23 Difference, from 2003 23.8% -24.6% 11.2% to 2016 1Measured in nominal terms. 2Measured in Canadian dollars.

4.2.4 E-ZPass Utilization Utilization of E-ZPass as a method of payment by passenger vehicles has been relatively flat on the Peace Bridge between 2010 and 2016 as shown in Figure 16. In 2013, cash in US currency was the most utilized form of payment for passenger vehicle customers crossing the Peace Bridge, followed by CAN$ cash, and finally E-ZPass. It is notable that in the last three years, the portion of passenger vehicles paying with US$ cash has decreased; this trend likely coincided with the weakening of the value of the Canadian dollar and the decrease in Canadian customers. Furthermore, E-ZPass transactions moved to the most utilized form of payment over the past two years. Overall, 47.5 percent of toll transactions at the Peace Bridge paid with E-ZPass in 2016, with 37.7 percent, 81.5 percent and 60.0 percent for passenger vehicles, trucks and buses, respectively.

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Figure 16: Distribution of Payment Types for Passenger Vehiccles on Peace Bridge, 2010 to 2016 (including 2017 year to date))

Trucks are far more likely than passenger vehicles to pay for their trips using E-ZPass transponders as shown in Figure 17. The vast majority of Peace Bridge toll payments by trucks are made with an E-ZPass transponder. The percentage of trucks utilizing E-ZPass has consistently increased over time, rising from 74.8 percent in 2010 to 81.5 percent in 2016. The next most utilized payment method over E-ZPass was US$ cash, followed by CAN$ cash.

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Figure 17: Distribution of Payment Types for Truccks on Peace Bridge, 2010 to 2016 (including 2017 year to date)

Figure 18 shows the distribution of payment methods used by buses on the Peace Bridge from 2010 to 2013. Similar to trucks, buses use E-ZPass at a far higher rate than cash. In 2016, E-ZPass was utilized in 60.0 percent of bus toll transactionns, down from 73.4 percent in 2010. Payments made in CAN$ cash have increased over the eight-year period while transactions in US$ cash have decreased, likely due to the changing exchange rate.

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Figure 18: Distribution of Payment Types for Buses on Peace Bridge, 2010 to 2016

4.3 Observation of Factors Influencing Past Traffic and Revenue Performance Historically, the Peace Bridge has experienced several periods of fluctuations in traffic patterns and growth during its existence. Several of these observable fluctuations are related to identifiable significant events of economic disruptions, trade agreements, travel policy changes, and other events that effected Peaace Bridge traffic. Some of these are highlighted below.

Since the events of September 11th, 2001 there has been a steady decline in passenger car traffic across the Peace Bridge. This is the confluence of numerous factors external to the control of the Peace Bridge. The Authority has however engaged in numerous capital improvement prroojects to improve the attractiveness of the Peace Bridge as a border crossing. These include the current Bridge Rehabilitation project, new customs facilities, and bridgge widenings on both the Canadian and US approaches to primary customs for commercial vehicles among other improvements. The facility has maintained its share of Niagara River cross border traffic throughout this period.

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1989 Free Trade Agreement (FTA) between Canada and the United States – After the execution of the 1989 FTA between the United States and Canada there was significant increase in the volume of trucks crossing the Peace Bridge. The high rate of growth continued through 1999.

1995 North American Free Trade Agreement (NAFTA) – Following the implementation of the FTA, the NAFTA was enacted that included Mexico as well as Canada in a larger continental trading partnership. It is our opinion that NAFTA contributed to the accelerated growth rate in truck traffic that was experienced roughly between the period of 1990 and 2000.

The events of September 11, 2001 and the subsequent restrictions on cross border traffic changes. – The events of September 11, 2001 contributed to a decline in border crossing traffic. More lengthy inspections and fear of being unable to return if similar incidents occurred all contributed to a decline in U.S. based discretionary travel to Canada.

2009 implementation of the Western Hemisphere Travel Initiative (WHTI) – The WHTI program made the documentation reequirementss for entry into the United States more stringent than in previous years. In order to cross the border a valid Passport or valid trusted traveler program card (FAST and NEXUS) is required. Also enhanced drivers licenses from selected statees and proovinces would be accepted. The net effect of the program was a reduction in cross border discretionary travel to Canada.

Short-term fluctuations in gasoline availability and price (particularly noticeable in 1980 and 1981) – This is best illustrated in the huge spike in auto traffic in 1980 and 1981. Canadian motor fuel dealers were not subject to the oil embargo and subsequent odd/even rationing that occurred in the Uniteed States. Motor fuels were plentiful in Canada and large portion of the short-term increase in traffic was related to United States citizens traveling to Canada to simply buy gasoline.

Changes in exchange rate between Canadian and U.S. dollars. – In the past large differences in exchange rate tended to increase traffic as motorists on both sides of the border seek to take advantage of greater purchasing power that may result from the variations in exchange rate. However, the increased barriers to casual border crossing, increases in on-line shopping, the decline in mall shopping, and other general changes in social behavior have significantly diiminished border crossings benefitting from differentials in exchange rates.

Industrial economic cycles of the region. – There have been several periods of economic downturns in both Canada and United States over the past 50 years. Until the most recent economic downturn, recessions in both Canada and the United

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States did not have a significant observable effect on traffic. However, truck traffic has reacted negatively to economic downturns particularly the most recent recession. Truck traffic has rebounded from the low point.

Casino gambling. – Prior to the opening of the first Niagara Falls Casino, there were numerous bingo parlors in Fort Erie. A portion of Peace Bridge auto traffic consisted of U.S. citizens traveling to Fort Erie to play bingo. With the opening of the casinos in the Niagara Falls area, consumers switched from playing bingo to larger casinos. In addition to bingo parlors, the Fort Erie Race Track offered slot machines in addition to wagering on horse races. 2012 was the final year that the Ontario Lottery and Gaming Corporation allowed slot machines. Casino gambling has also grown throughout New York State further limiting the opportunities for gambling related cross border traffic. Racing continues, but on a very limited schedule.

Long-term underlying growth trends reflecting economic and population change within the region on both the Canadian and U.S. sides. – There are other long term changes occurring within the region. For example, the long term gradual decline in population in the Buffalo region, a recent deccline in cross border travel for both the United States and Canada suggests the difficulty in sustaiining long periods of growth in traffic.

4.4 Data from Other Sources The forthcoming sections discuss the collection and analyses of relevant project data from sources other than the Authority.

4.4.1 Travel Times Jacobs utilized online mapping software to estimate travel times (assuming no border delays) between the other Niagara region border crossings, in order to provide context for travel between the U.S. and Canada in the immediate region. As shown in Table 10, the Peace Bridge provides marginally faster and shorter travel bettween Buffalo and Toronto. For shorter distance trips between Buffalo and St. Catharines or Welland, Ontario, the Peace Bridge provides significant time and distance savings over the other bridges, with estimated travel times near 40 minutes while alternative routes are upwards of nearly an hour. This is despite the fact that in some cases the average speeds are nearly identical. This is due to the chosen alternative route and crossing being a longer distance. As also shown in the table, decision points are those pointts where a motorist needs to make a decision whether they will take the Peace Bridge or an alternative crossing.

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Table 10: Travel Time and Distance Estimates between Buffalo, New York and Ontario Travel Average Crossing Distance DecisionPoint Time Speed (miles) (mins) (mph) USA Canada Buffalo,NewYorktoToronto,Ontario PeaceBridge 103 99 58 LewistonQueenstonBr. 116 103 53 I190/PeaceBr. QEW/Hwy405 Buffalo,NewYorktoSt.Catharines,Ontario PeaceBridge 40 33 49 RainbowBridge 51 35 41 I190/PeaceBr. QEW/Hwy420 WhirlpoolRapidsBridge 56 36 39 I190/PeaceBr. Hwy405/Hwy102 LewistonQueenstonBr. 56 36 39 I190/PeaceBr. QEW/Hwy405 Buffalo,NewYorktoWelland,Ontario PeaceBridge 37 26 41 RainbowBridge 56 37 40 I190/PeaceBr. QEW/Hwy47 WhirlpoolRapidsBridge 63 40 38 I190/PeaceBr. QEW/Hwy48 LewistonQueenstonBr. 65 45 41 I190/PeaceBr. Hwy27/Hwy406 Source: Google Maps, April 2017

Since 2013, travel times have generally increased by severral minutes, though this is possibly due to newer data sources allowing for the inclusion of some border crossing delay. Regardless of whether or not the trip time has increased since 2013, the Peace Bridge still offers the fastest times. For example, in 2013, a trip from Buffalo to Toronto was estimated to be four minutes faster via the Peace Bridge. That trip is now estimated to be over ten minutes faster. A trip to St. Catharines from Buffalo was estimated to be five minutes faster via the Peace Bridge in 2013. Now, that same trip is estimated to be more than ten minutes faster. Similarly, a trip to from Buffalo to Welland was estimated to be ten to 15 minutes faster via the Peace Bridge in 2013 while now, in 2017, that same trip is estimated to be 20-oro -more minutes faster.

While the travel times noted above generally assume that there are no delays in crossing the international border, actual delay times can vary significantly, due to traffic volume and federal inspection processes and staffing. In order to assist customers in planning their border arrival time or crossing selection, estimated wait times for the Niagara area border crossings are provided in real-time for both the Peace Bridge and Lewiston-Queenston Bridge on both the Authority and NFBC websites annd can be accessed through a toll free phone number. The NFBC website further provides estimated wait times for the Whirlpool Rapids and Rainbow Bridge, updated hourly. Peace Bridge eastbound travel is toll-free so any eastbound delays will not influence the total revenue collecctions and are expected to improve due to recent infrastructure improvements at the U.S. Plaza. Generally, westbound

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delays entering Canada are only observed during peak periods (sporting events, holidays, and summer weekends). The following graphs provide a sampling of the wait times observed at the Peace Bridge on average during the month of Auugust of 2016.

Figure 19: Average Wait Times at the Peace Bridge International Border Station, August 2016

Source: http://www.borderdatawarehouse.com

4.4.2 Comparison to Other Border Crossings The Public Border Operators Association (PBOA) publishes a compilation of traffic volumes on international bridges between Ontario, New Yoork, and Michigan. Data was readily available for the period 2006 through 2016, which further supports the Peace Bridge’s importance within this region.

Table 11 presents the share of regional border traffic carried by the Peace Bridge in 2016. Of the eleven border crossings between Ontario, New York, and Michigan, the Peace Bridge supported nearly 16 percent of overall traffic, and nearly 18 percent of commercial traffic. In the more immediate region between Buuffalo and the Niagara Peninsula, the Peace Bridge received 46 percent of overall traffic and 61 percent of commercial traffic.

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Table 11: Peace Bridge Traffic as a Portion of Regional Border Traffic, 2017 Between Between Buffalo and Vehicle Type Ontario, NY, Niagara and MI Peninsula Total 15.8% 46.3% Commercial 17.6% 61.4% Passenger 15.3% 43.1% Vehicle Source: Public Border Operators Association

There are 10 bridges and one tunnel that travelers can use to travel between Ontario, Canada, and the states of Michigan and New York. Table 12 displays the 11 different border crossings.

Table 12: Michigan / New York – Ontario Border Crossings Canadian Road or Bridge or Tunnel U.S. Road or Highway Highway Michigan – Ontario Crossings Huron Street, connecting to Sault Ste. Marie International Bridge I-75 Highway 17 Blue Water Bridge I-69 / I-94 Highway 402

Goyeau Street, connecting to Detroit-Windsor Tunnel Highway 375 Highway 401

Ambassador Bridge I-75 Highway 3 New York – Ontario Crossings Peace Bridge I-190 QEW Rainbow Bridge Niagara Streeet Highway 420 Whirlpool Rapids Bridge Whirlpool Street River Road Lewiston-Queenston Bridge I-190 Highway 405 Thousand Islands Bridge I-81 Highway 137 Ogdensburg-Prescott International Bridge NY 812 Highway 16 Seaway International Bridge NY 37 Highway 138

Figure 20 displays annual total passenger vehicle traffic trends (both eastbound and westbound) for the 11 border crossings from 2006 to 2016. Over this time period, total annual passenger vehicle traffic on all crossings declined by 20.3 percent, from 33.4 million trips in 2006 to 26.7 million trips in 2016. Total passenger vehicle traffic declined precipitously from 2006 to 2009, especially during the height of the U.S. and Canadian recession as consumers curtailed their travel activities and the implementation of WHTI. Since 2009, however, total passenger vehicle traffic increased, peaking at 31.2 million trips

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in 2012, then has steadily declined, reaching 26.7 million trips in 2016 due to factors discussed earlier.

Of the 11 crossings shown in Figure 20, the Ambassador Bridge experienced the highest average annual rate of decline of 3.7 percent between 2006 and 2016. The Peace Bridge had the second highest average annual rate of decline over the same period at 3.0 percent.

Figure 20: Peace Bridge Contribution to Michigan / New York – Ontario Border Crossings, 2006 to 2016

Source: Public Border Operators Association

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Despite the decline in passenger vehicle traffic on the Peace Bridge, it has still managed to serve a sizable proportion (15.3 percent in 2016) of total paassenger vehicle travelers moving between Ontario, Canada and the U.S. States of Michigan and New York.

As shown in Figure 21, from 2006 to 2016 the annual passenger vehicle traffic on the Peace Bridge has accounted for approximately 40 to 45 percent of all passenger vehicle border crossings in the Niagara Peninsula region.

Figure 21: Annual Passenger Vehicle Traffic on Niagarra Peninsula Border Crossings, 2006 to 2016

Source: Public Border Operators Association

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The Peace Bridge has a slightly lower percentage of passenger vehicle traffic when viewed in the context of total New York-Ontario border crossings. As shown in Figure 22, the Peace Bridge accounted for an average of 30.3 percent of border crossings between the state of New York and Ontario from 2006 to 20116, making it an extremely valuable transportation asset for both the state and the province.

Figure 22: Peace Bridge Contribution to New York/Ontario Border Crossings, 20066 to 2016

Source: Public Border Operators Association

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Figure 23 displays annual total truck traffic trends (both to and from the USA/Canada) for nine border crossings from 2006 to 2016 (Rainbow Bridge commercial/truck traffic is insignificant and the Whirlpool Rapids Bridge does not permit commercial/truck traffic). As shown by the figure, total annual truck traffic declined over the 10-year period from 8.3 million trips in 2006 to 6.9 million trips in 2016, with a “bottoming out” at 6.1 million triips in 2009 as a result of the 2007 to 2009 Canadian and U.S. recessions. Similar to the case with passenger vehicles, the Peace Bridge supported between 15.7 and 19.3 percent of all truck border crossings between Michigan / New York and Ontario, Canada during the 2006– 2016 time period. The Peace Bridge outperformed all but two other border crossings (both of those in Michigan), reinforcing the crucial role it plays in tradee between the United States and Canada.

Figure 232 : Peace Bridge Contribution to Michigan / New York – Ontario Border Crossings, 2006 to 2016

Source: Public Border Operators Association

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As shown in Figure 24, from 2006 to 2016 the annual truck vehicle traffic on the Peace Bridge has accounted for approximately 58 to 65 percent of all truck border crossings in the region.

Figure 24: Annual Truck Traffic on Niagara Peninssula Border Crossings, 2006 to 2016

Source: Public Border Operators Association

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When compared to other border crossings in New York State, the Peace Bridge stands out for its ability to attract and accommodate truck traffic. Over the 2006 to 2016 timeframe, the Peace Bridge accounted for an average of almost 50 percent of all truck traffic between Ontario and New York, as shown in Figure 25. Againn, the share of truck traffic that uses the Peace Bridge to travel between the two jurisdictions has grown since 2006, peaking at 51.4 percent in 2012, then declining to 48.2 percent in 2016.

Figure 25: Peace Bridge Contribution to New York – Ontario Border Crossings, 2006 to 2016

Source: Public Border Operators Association

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5.0 Economic Backdrop and Outlook for the Future {Note: we have researched and analyzed both Canadian and US socioeconomic data. Within this chapter of the report, we have mainly shown graphically the US data, as the population density is greater on the US side of the Peace Bridge. However, we have included within the text descriptions of both the Canadian and US data.}

Historically, traffic trends have been influenced by socioeconomic conditionns, and there are often correlations between traffic growth and socioeconomic factors such as Industrial Production growth (IPI) and Gross Domestic Product (GDP).

Jacobs uses a consensus forecast based on a variety of sources as an input into our traffic growth forecasts. The consensus outlook of economists predicts real GDP growth for the U.S. of 2.3 percent for 2017 and 2.4 percent for 2018 while for Canada the comparative growth rates are 1.9 percent for each of the two years. As discussed later in our report, socioeconomic factors are not the primary driver of our forecast. Our forecast also assumed no significant changes in gasoline pricing, as there has been less price volatility in the past several years than there was in the earlier part of the 2000s. While our forecasts will recognize and take into account variations in gas pricing, we believe that the projected moderate increase in the price of gas will not result in major declines in traffic, as consumers are already modifying their vehicle choice to mitigate these increases.

Any forecast of toll traffic and revenues will, of necessity, consider the significant variations that can and do occur in the national, regional and local economies, and population changes. With this in mind, Jacobs performed a detailed analysiis of the historical economic trends seen over the last several decades, plus an analysis of those trends that can influence driving behaviors.

This section, therefore, presents a summary of socioeconomic and transportation trends.

5.1 U.S. and Canadian Macroeconomic Trends The following sub-sections provide an analysis of the main macroeconomic factors that typically have an impact on traffic volumes. Theese include Gross Domestic Product, inflation, and industrial production. The analysis covers these factors for both the U.S. and Canada.

5.1.1 Inflation Between 1990 and 2016, the U.S. Consumer Price Index (CPII) increased by an average annual rate of 2.4 percent. This captures the relatively higher inflation of the early 1990s as well as the deflationary conditions that occurred in 2009 when the CPI recorded a slight decrease. In more recent years the inflation rate has been relatively muted recording an

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average annual increase of only 1.0 percent between 2013 and 2016. For Canada, the CPI has increased by an average annual rate of 1.9 percent over the 1990 to 2016 period. As with the U.S., Canadian inflation dipped in 2009 to 0.3 percent and the 2013 to 2016 period has seen the average annual rate increase by 1.5 percent.

5.1.2 Exchange Rate As Figure 26 shows, the average annual Canadian/U..S. dollar exchange rate has witnessed significant movement over the 2000 to 2016 period from a low of almost C$1.6 to US$1.0 in 2001 and 2002 to almost parity in 2011 and 2012. Since then the Canadian dollar has generally weakened so that by 2016 the annual average was C$1.33 to one U.S. dollar.

Figure 26: Canadian / U.S. Dollar Exchange Rate, 2000 - 2016

Source: OECD

Longer term forecasts are difficult to determine with any real degree of certainty although The Economy Forecasting Agency, a specialized long range financial market forecaster, suggests the value of the Canadian dollar may gain some strength in the next year or two before weakening again against the U.S. dollar.

Canada’s Standing State Committee on Banking, Trade and Commerce undertook a study in 2016 of the country’s exchange rate in order to elucidate the reasons for the dollar’s fluctuations and the reasons behind them. The most significant point to be drawn from the report is that the Canadian dollar tends to rise and fall with the price of oil.

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5.1.3 Gross Domestic Product From 2001 to 2016, real Gross Domestic Product (GDP) in the U.S. increased by an average of 1.8 percent per year. This includes the recession that began and ended in 2001 and the most recent recession, which began in December 2007 and officially ended in June 2009. The 2007-09 Recession has been more severe compared to previous recessions, resulting in a 0.3 percent decrease in real GDP and a 3.6 percent decrease in industrial production in 2008. Real GDP decreased by an additional 2.8 percent in 2009, but recovered in 2010 with a 2.5 percent annual increase. From 2011 to 2016 real GDP has grown at an annual average between 0.8 to 2.4 percent. Figure 27 summarizes the annual percentage change in real GDP from 1980 to 2016.

Figure 27: Annual Percentage Change in U.S. Real GDP (2009$), 1980 to 2016

Source: U.S. Department of Commerce, Bureau of Economic Analysis (BEA)

According to Statistics Canada, the Canadian real GDP growth rate fared better than that in the U.S. recording an annual increase of 2.7 percent over the 2001 to 2016 period. Canada’s economy recovered from the 2008-09 global econommic crisis relatively quickly due to timely monetary and fiscal stimulus, a sound financial system and high commodity prices. Recent growth has remained positive, however, as in the case for the U.S., rates have fluctuated from year to year.

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Real GDP forecasts are provided by selected financial institutions, manufacturers, and shippers over the short-term. The consensus forecast of financial institutions, manufacturers and shippers is that real GDP in the U..S. will increase by 2.3 percent and 2.4 percent for 2017 and 2018, respectively. In Canada, real GDP has been forecasted to increase by 1.9 percent in both 2017 and 2018. It is anticipated that economic growth will continue for both countries in the coming years.

5.1.4 Industrial Production The Industrial Production Index, or IPI, is an economic indicator that is released monthly and measures the production output of manufacturiing, mining, and utilities. Changes in U.S. industrial production have historically moved in tandem with GDP, albeit with steeper decreases during recessions and often larger increases during recovery periods. During the lowest point of the 2001 recession, the U.S. IPI decreased by 3.1 percent. Due to the severity of the 2007-09 recession, the IPI declined 11.5 percent in 2009. Since then, the IPI has recovered, increasing year on year to 2016 when a 1.0 percent reduction was experienced for that year. Figure 28 compares the growth in U.S. real GDP with IPI from 1990 to August 2016.

Figure 28: Historical U.S. GDP and IPI, 1989 to August 2016

Sources: Bureau of Economic Analysis, U.S. Department of Commerce, and the U.S. Federal Reserve Bank

For Canada, the 2001 recession saw a 4.0 percent decline in the IPI and an 11.4 percent fall in 2009, similar to that witnessed for the U.S. Since then growth has been broadly

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positive although 2015 saw a 0.7 percent fall. Figure 29 shows that the Canadian IPI is more susceptible to larger swings with changes in GDP compared to the pattern observed for the U.S.

Figure 29: Historical Canadian GDP and IPI, 1990 to 2016

Source: Organization for Economic Cooperation and Development

Based on forecasts developed by financial institutions and industry analysts, the U.S. IPI is forecasted to increase by 1.6 percent in 2017 and 2..4 percent in 2018. For Canada it has been forecast that annual growth will be 1.4 percent in 2017, the same as the average recorded between 2001 and 2016. Figure 30 summarizes selected forecasts for U.S. IPI.

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Figure 30: Forecasted Percentage Change in U.S. Industrial Production, 2017 and 2018

Source:BlueChipEconomicIndicators(BCEI)

5.2 Long-Term Structural Trends A number of distinct long-term structural changes being experienced in North America and elsewhere around the globe are having increasing innfluence on economicc growth and job creation. Productivity improvements due to advances in information technology, computing power, transportation, and communications have helped encourage the transfer of manufacturing facilities and jobs to areas with lower running costs. The widely accepted impact has been a notable shift towards a service oriented economy in both the U.S. and Canada with manufacturing losing ground, at least as a proportion of total economic output. The technology boom of the 1990s and the subsequent deecline in the early 2000s intensified these trends, encouraged the expansion of inexpensive communications technologies, and further flattened wage costs internationallly that lead to significant outsourcing of jobs to foreign countries.

At the same time the population in the U.S. and Canada is becoming older. This is seen as one of the factors contributing to traffic growth patterns, as older age groups tend to travel less and spend less on transportation. Historical trends and population forecasts indicate that the median age in both the U.S. and Canada will likely continue to increase in thee next 20 years.

Jacobs has taken into consideration these long-term structural changes in the U.S. and Canada, and consequent traffic trends, in the development of the toll traffic and revenue forecasts for the Peace Bridge.

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5.2.1 Employment At the beginning of 2008, the unemployment rate in the United States was 5.0 percent compared to 6.0 percent in Canada. With the most recent recession the unemployment rate in the U.S. climbed to a high of 9.3 percent while in Canada it reached 8.3 percent. The rates have improved somewhat since then and in 2016 the estimate for the U.S. was 4.9 percent. Canada has also seen an improvement although the trend has been slower - at 7.0 percent in 2016 the average was higher than the average of 6.9 percent experienced the previous year.

The U.S. Congressional Budget Office (CBO) has forrecasted that unemployment will be 4.5 percent by the end of 2017 and only 4.4 percent by the end of 2018. The CBO expects the labor participation rate for the U.S. to average 62.8 percent for 2017 and 2018, a rate that has not changed since 2014. Over the next 30 years the CBO predicts that the labor force participation rate will decline to 59.2 percent by 2047, principally because of the increased number of “baby boomer” retirees.

In April 2017, the Royal Bank of Canada released an unemployment rate forecast which suggests a fall in Canada to 6.6 percent by the fourth quarter of 2017 and a further fall to 6.4 percent by the fourth quarter of 2018.

In Canada, the labor force participation rate has not experienced any major swings one way or the other. Thus, in 1998 the rate was 65.1 percent whereas by 2016 it was recorded at 65.7 percent. Statistics Canada provides forecasts of the Canadian labor participation rate. Like the U.S. this rate is forecast to fall and by 2031 it will be between 59.7 and 62.6 percent.

Historically, the labor participation rate has been negatively correlated with the national employment rate – as economic conditions worsen annd unemployment rises, then the labor participation rate decreases. However, more recently there appears to have been a shift and as noted both the U.S. and the Canadian labor participation rates are forecast to decrease further, while economic conditions are predicted to improve and unemployment is predicted to decrease. This is a possible indication of long-term structural trends.

5.2.2 Income On looking at U.S. real median household income and GDP per capita, the impacts of the last recession are clear. Prior to the recession of 2008 real household income reached a post-2000 peak at $57,423 in 2007 (2015 U.S. dollars). The following year recorded a 3.6 percent fall to $55,376 with annual decreases through 2012. Since then the situation has improved and by 2015 the figure had reached $56,516, albeit that is still only 98 percent of the 2007 total. Similarly, real per capita income peaked at $49,506 in 2007 (2009 U.S. dollars) before falling in both 2008 and 2009. However, since then the rate has recorded

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year on year growth to reach $51,849 by 2016. Figure 31 shows annual U.S. real household income during economic expansionary periods and recessions.

Figure 31: U.S. Real Household (2015$), 2000 to 2015

Source: Bureau of Economic Analysis and U.S. Census Bureau

In Canada official income data is rather more limited but those which are available show that real household incomes have been improving. Official statistics indicate that the average after tax income for a family of two or more was $77,500 in 2007 after accounting for inflation. By 2011 this had increased to $79,600. For two parent families the median was $88,300 in 2007 compared to $93,700 in 2011.

5.2.3 National Trends in Vehicle Miles Traveled (VMT) The United States experienced a decrease in VMT on its highways during the most recent recession but since then it has tracked back to trendd. There are several factors that can influence aggregate VMT including volatility in oil and gasoline prices, the aging of the population, periodic decreases in output and emplloyment, and changes in technology. Figure 32 presents annual VMT (a 12-month moving total) from 1940 through the middle of 2016.

As seen in this figure, there were temporary reductions in VMT during World War II, oil crises and previous economic recessions. Despite these temporary dips, VMT continued to grow rapidly over the years. It shows that, in reccent years, with the exception of short,

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flat periods during the 1991 and 2001 recessions (each less than one year), VMT grew at a steady pace through about 2005. VMT then grew at a much slower pace through 2008. The increase in gas prices and the downturn in economic activity that took hold in late 2008 resulted in a significant reduction in total national travel mileage after December 2007 peak. Since the recession ended, there have been slight increases and decreases in VMT from month to month that may have been caused by large fluctuations in gas prices. However, more recently growth has mirrored that more typical of previous decades.

Figure 32: U.S. Annual Vehicle Miles Traveled (VMT), 1940-2016

Source: Federal Highway Administration (FHWA), U.S. Department of Transportation

For Canada, vehicles traveled approximately 334 billion kilometers in 2009 (newer statistics are unavailable as Statistics Canada has discontinued the reporting of this information for passenger vehicles). Of this total, 91 percent was aaccounted for by light vehicles. Over 2000 to 2009, the average growth rate of vehicle kilometers was 3.8 percent for medium trucks, 0.8 percent for light vehicles and 0.4 percent for heavy trucks. Overall the average increase was 2.5 percent per year, although decreases occurred in 2001, 2003 and 2008.

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The last year saw the largest decrease at 2.0 percent, coinciding with the recession and a peak in fuel prices. This matched the trends that were seen in the United States.

5.2.4 Fuel Cost Impacts on Travel Figure 33 presents historical as well as forecasted changes in gasoline prices prepared by the U.S. Energy Information Administration (EIA), although it is fair to say that Canada will not be immune from these changes and so the following analysis is pertinent to both countries. The graph illustrates the peaking of gasoline prices iin the summer of 2008, the precipitous drop in late 2008, the spike in gasoline prices that occurred in mid-2011, and subsequent fluctuations, thereafter. In its September 2016 report, the EIA projected that gasoline prices would be $2.27 per gallon by the end of 2017.

Figure 33: Historical and Projected U.S. Gasoline Prices, 1976 to 2017

Source:ShortTermEnergyOutlook,U.S.EnergyInformationAdministration(EIA),September2016

The EIA expects a relatively static forecast of future oil and gas prices although it must be stated that there is a level of uncertainty in these projections. Much of this forecast is based on increased production due to relatively new technological improvements, such as fracking, increased production from renewable energy sources, and long-term improvements in motor vehicle efficiency - it remains to be seen whether these trends are sustainable over time. This uncertainty is underlined by the EIA’s prediction for future crude

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oil prices. As shown in Figure 34, by the end of 2017 the prediction is that the prices could range from around $25 to $104 per barrel.

Figure 34: Historical and Future Shorrtt-Term Crude Oil Prices

Source:U.S.EnergyInformationAdministration,EnergyOutlook,September2016

Volatility in the price of fuel, high gasoline costs, greater environmental awareness, and related policies have encouraged an increase in thhe use of more fuel efficient vehicles. There was a sharp increase in fuel efficiency in the latte 1970’s caused by the oil crisis along with the trend toward buying smaller, more fuel-efficient vehicles. A gradual decline in average miles per gallon (MPG) from 1987 through 2004 occurrred as larger vehicles and SUVs became more popular and gasoline prices reached historically low levels. From 2005 onward, this trend has again turned around with vehiicles becoming more fuel-efficient than ever. While fuel prices and volatility have an impact on traffic trends, this may not have as large an effect as ten years ago. Also to consider in this discussion is the emergence and growth of hybrid and electric vehicles in the marketplace.

5.2.5 Motor Vehicles and Licensed Drivers Registered motor vehicles in the U.S. increased by an averagee annual rate of 3.9 percent from 1950 to 1980, and an average annual rate of 1.5 percent from 1980 to 2010. Oveer the 2010 to 2015 period this rate increased again to 2.9 percent. Similarly, the number of licensed drivers in the U.S. increased by an average of 2.9 percent per annum and 1.2 percent per annum from 1950-1980 and 1980-2010 respectively, but the FHWA’s statistics suggest that over the 2010 to 2015 period licensedd drivers increased on average by 3.9 percent per year.

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Over the 1999 to 2015 period, Canada has experienced an average 2.0 percent annual growth rate in road vehicle numbers, from 17.5 million to 23.9 million. This represents a 37 percent increase over the period.

5.2.6 Discretionary Travel, Telecommuting and the Internet The advent and widespread usage of the internet beginning in the mid-1990s brought about a whole new information age whereby many peoplle now use it as a major tool for the retrieval and exchange of information, social communication, entertainment, and the purchase of goods and services. In theory, increased internet usage would make some vehicle trips unnecessary. According to the Federal Communications Commission (FCC), the share of U.S. households with broadband internet was only 4 percent in 2000 and increased to 78 percent in 2013. However, in recent years mobile broadband has become as important, if not more so, as fixed broadband services. The smartphone share of mobile phones in the U.S. increased to 77 percent by the end of 2015 from 50 percent two years earlier. Ericsson predicts that by 2021, the mobile data traffic per active smartphone in the U.S. and Canada will be almost 25 GB per month.

According to the U.S. Department of Commerce retail e-commerce sales as a percentage of total retail sales continues to grow unabated. Thus in the first quarter of 2007 these sales accounted for less than 3.5 percent of the total yet by the fourth quarter of 2016 this had risen to approximately 9.5 percent, 14.3 percent higher than in the same period in 2015. For Canada, the Canadian Internet Registration Authority forecasts thatt Canadians will spend $39 billion online by 2019, representing 9.5 percent of all retail purchases in the country. Further, Statistics Canada reports that Canadian companies sold more than $136 billion in goods and services online in 2013, up from $122 billion a year earlier with desktops and laptops making up the majority of online purchases although 22 percent of 18- 34 year olds report making a purchase from mobile devices and 20 percent of 18-54 year olds.

Telecommuting is also becoming a more prevalent feature of working patterns. Individuals who work from home save on the time and expense of commuting. With the widespread availability of cell phones, high-speed internet service, and laptop computers, it has become easier for work in certain employment sectors, e.g. sales, management, professional services, and information technology, to be conducted from homme. Accorrding to the U.S. Bureau for Labor Statistics, in 2015 24 percent of employed people did some or all of their work at home, up from 19 percent in 2003. For Canada in 2010, the latest such exercise, Statistics Canada researched the number of employed individduals working from home. They found that 1.7 million employees worked from home in 2008, up from about 1.4 million in 2000.

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5.3 Regional Economic and Demographic Outlook Located at the east end of Lake Erie between the United States and Canada, the Peace Bridge is approximately 2 miles from downtown Buffalo, 20 miles from both sides of Niagara Falls, and 100 miles from Toronto, Ontario. Other intternational bridges in close proximity to the Peace Bridge include: the Rainbow Bridge which connects Niagara Falls, NY and Niagara Falls, ON, the Whirlpool Rapids Bridge, and Lewiston-Queenston Bridge. These bridges are all located within 28 miles of each other. The Rainbow Bridge does not permit commercial trucks to use its facility and the Whirlpool Bridge is limited to NEXUS users—a joint program between the U.S. and Canada that expedites the border clearance process for low-risk, pre-approved travelers.

The Peace Bridge is also impacted by economic activity in the region such as demographic and economic trends, manufacturing activity, commuting patterns in the Buffalo metropolitan area, border and tourist traffic, and economic growth in the fast-growing, but relatively distant Greater Toronto Area (GTA).

5.3.1 Demographic and Economic Growth in the Peace Bridge Region Buffalo Population. The Buffalo Metropolitan Statistical Area (MSA) consists of Erie County, which contains the City of Buffalo, and Niagara County. The combined population of the Buffalo MSA has decreased from 1.19 million in 1990 to 1.14 million in 2010, decreasing by a compound annual growth rate (CAGR) of 0.23 percent during this period. Using recent forecasts developed by the Cornell Program on Applied Demographics, population in the Buffalo MSA is estimated to decrease to 950,000 by 2040. This represents a 0.59 percent average annual decrease during this period. Toronto Population. According to the Ontario Ministry of Finance, over the 20 year period from 1989, 62 percent of Ontario’s population growth occurred in the Greater Toronto Area, defined as the City of Toronto and the regional municipalities of Halton, Peel, York and Durham. As of 2015 the GTA population was estimated at 6.6 million and is forecast to grow to 7.3 million by 2021. Forecasting further into the future, the Ministry suggests that this population could reach 9.4 million by 2040. For Ontario as a whole population growth is forecast to continue from a total of 13.8 million in 2015 to 17.8 miillion in 2040. Buffalo Economic Output. Although the Buffalo MSSA has experienced growth since the 2007-09 Recession, the trend has lagged behind that of New York State and the United States as a whole over the period. Economic growthh was negative during 2007 — about a year earlier than New York State and the U.S. entered into receession. Economic output in the Buffalo MSA, as in New York State, began to incrrease in 2009 while most of the country was still experiencing severe recessionary conditions. Buffalo’s economy has continued to grow since then although the rate has been somewhat sluggish compared to both the state and national levels. Figure 35 summarizes the annual percentage change in real GDP in the Buffalo MSA, New York, the U.S., and Canada from 2002 to 2015.

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Ontario Economic Output. Real GDP growth, according to the Ontario Ministry of Finance, has achieved an annual average increase of 2.6 percent over the 1982 to 2015 period. The Ministry goes further and forecasts additional growth of 2.2 perrcent per year from 2016 to 2020 and then 2.0 percent from 2021 to 2040. Factors applicable to this reduced growth profile include an anticipated slower growth in the working-age population, a slowerr shift from goods-producing to service-producing sectors, and increased global competition for exporters. Figure 35: Annual Percentage Change in Real GDP, 2002 to 2015

Source: U.S. Bureau of Economic Analysis, U.S. Department of Commerce

Buffalo Employment and Unemployment. The general trend line for total employment in the Buffalo MSA has been fairly similar to the rest of the population as a whole. Based on data from the U.S. Bureau of Labor Statistics, total employment in the Buffalo MSA was 570,535 in 1990. Employment levels have followed a generally declining trend since then, a trend that was particularly pronounced in the 2009 to 2011 period. There has been some improvement in more recent years although the number of employees has tended to plateau rather than follow a distinct growth profile. In 2016 emmployment was estimated at 530,760.

The unemployment rate has been similar to that recorded for the U.S. as a whole in recent years. Even so, Buffalo MSA was initially slow in recovering from the recession and the unemployment rate was still at 8.6 percent in 2012. By 2016 the rate had fallen significantly to 4.4 percent.

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The “Buffalo Billion” investment development plan promoted by the Governor of New York State is being used to try and transform the region from one of relatively sluggish economic achievement to one where modern 21st century industries will be attracted. Some $1 billion of investment is being pumped into the Buffalo area economy and a second phase of investment was announced in January 2017. Clean energy research and manufacturing plus medical genomics research centered on the University of Buffalo’s high powered computing facilities are seen as key to this strategy. Other investments include training programs and tourism oriented facilities.

Ontario Employment and Unemployment. Bank of Canada statistics show that between 1997 and 2016, Ontario’s labor force increased from 5.8 million to 7.5 million. The unemployment rates for these two years were 8.4 percent and 6.6 percent respectively. Not surprisingly, the unemployment rate spiked to 9.1 percent in 2009 but gradual improvement in the economy has tempered this even with the increease in the labor force.

As with many developed economies, Ontario’s economy has become less of a manufacturing base in favor of the service sector. Ass noted earlier, this trend is expectted to continue in the coming years.

Buffalo MSA Income. In the past Buffalo MSA’s real per capita personal income lagged behind that recorded for the U.S. and New York State but recent years have seen a reversal in this trend. From 2008 to 2014 Buffalo’s real per Capita personal income increased from $38,758 to $43,108. As such, the real personal income per capita for the latter year was higher than that recorded for the U.S. as a whole ($42,523) yet still below the amount recorded for New York State ($44,972).

In 2000, median household income in the Buffalo MSA was $38,488 or approximately 70 percent of the national average. In 2010, median household income in the Buffalo MSA was $46,569 or 91 percent of the national average of $51,017. According to the U.S. Census Bureau for 2015 this figure stood at $51,772 in 2015 dollars for the Buffalo MSA.

Toronto MSA Income. According to Statistics Canada, the median household income in Ontario has increased from $71,540 in 2010 to $78,790 in 2014, an increase of 10.1 percent.

For Toronto the median household income has also been tracked. Again there has been a recorded increase from $66,560 in 2007 to $75,270 in 2014, an inncrease of 13.1 percent.

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5.3.2 Port-of-Entry Traffic Commercial and passenger vehicle crossings through the land ports-of-entry (POEE) in Buffalo and all of New York State have demonstrated different profiles over the period from 1995 to 2016. The total number of commercial vehicles crossing through Buffalo peaked at 1,208,000 in 2002, decreasing to 956,000 in 2016. Similarly, commercial vehicles crossing through all New York State POEs decreased from 2.0 million to 1.6 million during this period although recent years have experienced a small up-tiick in volumes. In terms of proportional importance, the port-of-entry at Buffalo accounted ffor, on an annual basis, between 58 percent and 64 percent of total commercial vehicle crossings statewide from 1995 to 2016. Figure 36 summarizes commercial vehicle crossings between Canada and Buffalo as well as to and from Canada and New York State during thiis period.

Figure 36: Buffalo and New York State Port-of-Entry, Commercial Vehicles, 1995-2016

Source: Bureau of Transportatioon Statistics (BTS)

Passenger vehicle crossings peaked at 7.7 million in 2000, decreasing to 4.8 million in 2016. Over the 1995 to 2016 period the average annual growth rate has been negative 1.8 percent. Statewide, the total number of passenger vehicles crossings to and from New York was 10.9 million in 2002, decreasing to 7.7 million in 2016. For the 1995 to 2016

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period the average annual growth rate was negaative 1.6 percent. The percentage of passenger vehicles crossing through Buffalo as a proportion of total statewide crossings has fallen from 71 percent in 2000 to 62 percent in 2016. Figure 37 summarizes passenger vehicle crossings at the port-of-entry in Buffalo and for POEEs between New York and Canada.

Figure 37: Buffalo and New York State Port-of-Enttry, Passenger Vehicles, 1995-2016

Source: Bureau of Transportatioon Statistics (BTS)

Finally, the number of bus passengers crossing between New York and Canada has declined at a comparatively steeper rate in recent years. In 2000 there were almost two million bus passengers crossing through the Buffalo port-of-entry, but just over 500,000 2016. Similarly, there were 2.5 million bus passengers that crossed through POEs between New York and Canada in 2000 and 933,000 in 2016.

5.3.3 Canada-U.S. Trade and the Importance of Trucking In terms of location, the Peace Bridge is currently the best logistical location for truck movements compared to other bridges in the Niagara Peninsula Region. However, it should be noted that the Lewiston-Queenston Bridge remains an alternative. The corollary of this is that truck traffic could be attracted to the Peace Bridge from the Lewiston- Queenston Bridge because of the continual Capital Improvements Program at the Peace Bridge.

According to the U.S. Department of Commerce, in real terms U.S. international merchandise trade has increased from $2.4 trillion in 2000 to approximately $3.4 trillion in

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2015. This represents a 40.1 percent increase with China now being the leading U.S. trade partner in 2015 compared to being fourth in 2000. Canada was in second place in 2015.

The Department also notes that over the 2000 to 20115 period trade with Canada, adjusted for inflation, increased by 29.2 percent. However, from 2014 to 2015, the value of cross- border freight declined by 12.6 percent, largely due to a drop in crude oil and petroleum product prices. In 2015, Trucks carried 58.3 percentt of the value of the freight to and from Canada, followed by rail at 15.7 percent. This truck volume was 0.8 percent less than that recorded in 2005.

In 2015 U.S. imports from Canada exceeded exports in terms of total merchandise ttrade value, which is consistent with the trend witnessed since 2004. Imports totaled nearly $300 billion in 2015, an increase of 2.4 percent since 2005. While the value of imports outpaced exports over that period, the value of U.S. exports to Canada also continued to grow, increasing by 32.7 percent since 2005.

Vehicles and parts, other than railway vehicles and parts, was the top commodity category transported between the U.S. and Canada at $103.0 billion with $61.8 billion or 60.0 percent carried by truck. Michigan, which accounts for 13.0 percent of the U.S.-Canada border mileage, was the leading state for trade with Canada, amounting to $69.1 billion or 12.0 percent of total trade with Canada in 2015. Michigan has border crossing/entry ports between Detroit, Port Huron, and Sault Ste. Marie and southern Ontario, and both Michigan and Ontario have a high concentration of automakers.

Looking forward, a number of factors will influence the volume of truck traffic between Canada and the U.S. These factors range from thhe prevailing economic conditions and international trade, to more specific activities such the region’s automobile cluster. However, the links between these are not straightforward as patterns of trade fluctuate, industries relocate and consumer tastes change. For example, according to the Department for Innovation, Science and Economic Development Canada, the range of vehicles produced in vehicle assembly plants in Ontario has changed in recent years with less models being produced.

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6.0 Toll Trips and Gross Toll Revenue Forecasts The following section provides a narrative of the methodology used for developing traffic and revenue forecasts, as well as a presentation of those forecasts.

6.1 Methodology Used for Forecasting The forecasting methodology considers historical trends and any identified correlations between economic and demographic factors and traffic levels on the Peace Bridge by vehicle and payment class, adjusts those correlation ffactors for the forecast when structural changes in relationships are becoming apparent, and then predicts traffic as a function of forecasted economic and demographic factors. Thesse forecasts are then adjusted to reflect Authority and non-Authority system infrastructure construction and improvement projects. A flowchart of the modeling methodology is presented in Figure 38.

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Figure 38: Peace Bridge Modeel Methodology PeaceBridge T&RForecastModelMethodology

MarketData EconomicDataexternaltoPeace BridgeincludingEmployment, Economic Forecasts Population,GDP,IPI,Freight ForecastEconomicFactors Development,GasPrices, CurrencyExchangeRates

PeaceBridgeData Historical CorrelationFactors Forecast T&Runder Adjustments basedon HistoricalTrafficand TollRevenue RelationshipofEconomicFactorsto CurrentToll FutureInfrastructure FinalT&R HistoricalInfrastructure andToll BridgeTrafficAdjustedfor Scheduleand andTollPolicy Forecasts Policies InfrastructureandTollPolicyChanges Infrastructure Assumptions

AdjustCorrelationFactors DeterminationofStructuralChanges RelationshipsbetweenTrafficand EconomicFactors LEGEND OperatorInput

MarketInput RegionalData BackgroundTraffic HistoricalTrafficand TollPolicies RegionalData Analyzeregionaltraffic onNearbyFacilities relationshipsandtrends Analysis/Calculation TravelTimeData

Toll Traffic and Revenue forecasts were developed with the aid of a computerized modeling platform created specifically by Jacobs for the PBA. The base function of this model is to take current traffic volumes by class and payment type for the Peace Bridge and adjust them in the future years for various factors such as underlying socioeconomic/demographic growth in the corridor, both historic and current. Thhese adjusttments result in forecasted traffic volumes being developed for each year of the forecast period. Gross toll revenues are then calculated based on these new adjusted traffic volumes by applying toll rates to the volumes by payment type and vehicle class.

6.2 Traffic Growth Trends: Correlation to Economic Factors As noted previously, our traffic and revenue model for this forecast has focused more on a traffic volume trend-line analysis rather than sociooeconomic correlations, based on the difficulty in determining any specific socioeconomic correlation in recent years.

In order to try to correlate socioeconomic factors and Peace Bridge traffic, growth in historical traffic was compared to the growth in relevant socioeconomic factors, such as IPI and GDP. In the calculation of correlation constaants for the Peace Bridge, years that experienced unusual events, such as changes in iidentification requirements for federal inspection purposes, were left out of the calculation in an effort to “normalize” the correlation.

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Traffic on the Peace Bridge has been in decline overall, for quite some time. Figure 39 illustrates the growth trends in car traffic as well as truck traffic for the period 1990 through 2016. As can be seen on the graph, car traffic has declined steaadily since the early 2000s, while truck traffic has remained relatively flat over the same period.

Figure 39: Peace Bridge Two-Way Changes in Traffic, 1990 - 2016

Conversely, very few of the economic indices commonly associated with traffic patterns (GDP, IPI, Employment, Population, and Exchange Rate) declined steadily or remained flat over this same period. Figure 40 shows car and truck volumes against some of these common economic indices, all indexed to 2014. The dashed lines represent traffic volumes. If we look at the large period of time shown on this graph (roughly 25 years), there are very few lines on the graph that consistently mirror the shape of the dashed lines. Several of the other lines follow similar trends for periods of time (such as truck volumes and the blue lines representing IPI, or car volumes and exchange rate or inverse exchange rate), but not for the entire period.

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Figure 40: Indexed Traffic Volumes and Socioeconomic Indices, Indeexed to 2014

Both car and truck traffic volumes have decreased since 2014. The economic indicator that stands out as also having gone down since 2014 is the value of Canadian currency relative to the US Dollar. Looking at exchange rate trends (shown in orange/yellow hues in the previous graph), there have been periods in time where car traffic appeared to follow the same trend as CAN/USD trends, while more recently, traffic seems to align with the opposite ratio. This could be due to several structural changes in travel patterns that took hold in the mid to late 2000’s. Looking at history, there have been a variety of incentives for Americans and Canadians to cross the border, and many of these incentives have decreased or disappeared. For example, while the exchange rate favored the Canadian dollar, shopping in the Buffalo region used to draw many travelers across the Peace Bridge. However, in recent years, many people have shifted their shopping habits toward the internet.

Figure 41 presents a comparison of annual truck growth versus the same economic indices shown in the previous graph. As shown by these graphs, there are periods of time in which the black lines consistently line up positively or negatiively with other color bars, but no clear and constant relationships stand out.

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Figure 41: Annual Growth of Economic Factors vs. Truck Growth

The Industrial Production Index (IPI) is commonly associated with truck traffic growth. Figure 42 shows truck traffic compared to the U.S. and Canadiian IPI. On this graph, the traffic on the Peace Bridge is represented by a dashed line, while Canadian and US IPIs are represented by the solid lines. As illustrated by this graph, truck traffic volumes and IPI tend to follow the same general trends – as illustrated by the coinciding “dips” in the curve in 2009. However, if we look at the bars representing positive and negative growth, it is very difficult to correlate truck growth to IPI growth, since changes in truck trafffic have been so slight (less than 2 percent positive or negative) for 10 of the past 15 years, while IPI growth has been rather larger in magnitude, and not always in the same direction.

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Figure 42: Truck Growth versus IPI Growth

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Figure 43 shows truck traffic versus another economic factor, exchange rate. This graph shows the exchange rate two ways – Canadian Dollar compared to U.S. Dollar, and the inverse. There are similarities between the traffic graph and portions of each curve, but neither exchange rate consistently correlates growth to truck growth for the full 16 year span.

Figure 43: Truck Traffic vs. Exchange Rate

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Figure 44 presents a comparison of annual truck growth versus the same economic indices shown in the previous graph. As shown by these graphs, there are periods of time in which the black lines consistently line up positively or negatiively with other color bars, but no clear and constant relationships stand out. A discussion regarding lack of correlation was provided at the beginning of this chapter on page 66.

Figure 44: Annual Growth of Economic Factors vs. Car Growth

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Gross Domestic Product (GDP) is commonly associated with caar growth. Figure 45 shows car traffic compared to the U.S. and Canadian GDP. On this graph, the Peace Bridge is represented by a dashed line, while Canadian and US GDPs are represented by the solid lines. As illustrated by this graph, car volumes and GDP have not followed the same general trends, and we see no correlation.

Figure 45: Annual Growth of Economic Factors vs. Car Growth

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Figure 46 shows car traffic versus exchange rate. Similar to the graph discussed earlier showing truck traffic versus exchange rate, there are similarities between the traffic graph and portions of each curve, but neither exchange rate consistently correlates growth to car growth for the full 16 year span.

Figure 46: Passenger Car Growth versus Exchange Rate

It is important to understand that the relationship between passenger traffic and exchange rate is not as simple as “exchange rate goes up, traffic goes up” and vice versa. Rather, the relationship has more to do with the equity of U.S. and Canadian Cash, and where drivers can get the most for a dollar. For example, if the exchange rate is 1.0, CAAN$1.00 equals US$1.00, because of the higher cost of living in Canada,

In our forecast we are of the opinion that there are currently no significant correlations between traffic on the Peace Bridge and socioeconomic indices. There have been periods in the past where correlations appeared relevant, and correlations may return at some future time, if crossing the border again becomes more active.

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6.3 Inputs and Assumptions In the creation of a base structure for forecasting calculations, it becomes necessary to assume some consistency in relationships between historical annd future traffic and revenue trends. The following assumptions were used in the creation of tthe forecasting framework. 6.3.1 E-ZPass Market Shares Historically, electronic toll collection (E-ZPass) market shares on toll facilities offering electronic payment have slowly increased over time and approaches some level of market saturation, regardless of toll increases or other factors. The market share typically increases at a decreasing rate – rapidly in the first few years after implementation, and then at a decreasing rate until eventually leveling out as the market share approaches a maximum sustainable level for the toll facility. Data shows that the Peace Bridge is nearing that saturation point. E-ZPass market share on the Peace Bridge currently varies dramatically by vehicle class with 2016 totals showing an average of 37.9 percent for car trips and 81.5 percent for truck trips. This calculates to an overall average E-ZPass market share of 47.7 percent.

Recently, the NFBC bridges implemented E-ZPass toll collection. The implementation of National Interoperability in the United States is also gaining momentum. Based on those facts, long-term historical trends at other facilities, and to be conservative in forecasting revenue we are forecasting E-ZPass market shares to grow at slow rates for many of the vehicle classes approaching a higher maximum markket penetration potential. It should be noted that processing and wait times at border crossings are typically related to the border crossing process itself and not the collection of tolls. Therefore, changes in the availability of E-ZPass are not expected to have much impact on average border crossing processing and wait times.

6.3.2 Toll Rates and Toll Policy A car-only toll increase is scheduled to take place in January of 2018. See Table 13 for details. This toll increase will raise the toll for cars paying with U.S. Dollars from $3.00 to $3.75, and will also eliminate the 10 percent discount currently offered to customers paying with E-ZPass. For passenger cars with a trailer, it was assumed that the toll rate would continue to be two times that of regular passenger cars, increasing from $6.00 to $7.50 for customers paying in U.S. Dollars.

We assumed that all other existing Peace Bridge toll schedule and toll policy would remain in effect for the duration of the forecast period and made no forecasts of future toll increases.

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Table 13: 2017 Peace Bridge Toll Rates (effective January 1, 2018) Cash E-ZPass ($U.S.) Multiplier Trip Multiplier Class Trip Cost Trip over Cost over ($U.S./$CANb) Discount Auto ($U.S) Auto

6.3.3 Infrastructure It was assumed that the infrastructure of the Peace Bridge and surrounding roadway networks and competitive border crossings would remain such that the relationship between the Peace Bridge and its competitors would not be altered significantly during the life of the forecast for traffic in the tolled direction. One short term exception is the ongoing redecking/rehabilitation of the Peace Bridge (discussed in a later section), constituting the project being financed with the Authority’s Seriess 2017 Bonds. We made seasonal adjustments to the traffic volumes in both the tolled and toll-free direction. We are of the opinion that the re-decking/rehabilitation work will not impact long term bridge capacity or operations beyond the construction period.

6.3.4 Diversion Analyses Generally, increases in toll rates or disruptions in traffic flow (such as construction) cause tolled traffic volumes to decrease, either because motorists switch to alternate routes or reduce their number of trips.

Not all customers will react to a toll increase or disruption in traffffic in the same way. Some customers may not change their behavior at all, while others might decide to use a diffferent route, combine trips, or not make that trip at all anymore. Still other customers might decide to change how they pay for a trip (e.g., current cash-paying customers may open E-ZPass accounts) to lessen the impact to their wallet or time spent in queue.

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This effect has been observed on the Peace Bridgee and manyy other national toll facilities that also offer multiple payment methods and discount plans, often resulting in an overall lower diversion of traffic from the facility than may haave been experienced in the past when tolls were increased and there was a single method of payment.

6.3.4.1 Toll Diversion Because cash and E-ZPass toll increases are scheduled for passenger cars on January 1, 2018, it was necessary to develop “toll elasticity” facctors to estimate the change of traffic that would occur because of these increases.

Toll elasticity quantifies how traffic reacts to a change in tolls. It is defined as the percent traffic change if there were a 100 percent increase (i.e., a doubling) in toll rates. One typically estimates this factor by analyzing the effects of past toll increases. The last passenger car toll increase on the Peace Bridge was April 1, 2007, where E-ZPass ($U.S.) and $U.S. cash tolls increased by 54.7 and 21.3 percent, respectively. Jacobs reviewed traffic before and after the toll increase (see Figure 47). Because traffic on the Peace Bridge was already in a general decline, and the U.S. recession began within the year of the toll increase, it was difficult to discern any impact of the toll increase on traffic.

Figure 474 : Westbound Passenger Car Traffic Before and After April 1, 2007 Toll Increase

It is not surprising that the data is not showing an impact; if there are few viable alternatives to a toll facility, toll elasticity is generally very low. However, it is still likely that a toll increase could have a minor impact on traffic. We have assumed a toll elasticity of -0.025 for passenger cars, which translates to a traffic loss of 0.6 percent for the 25 percent cash toll increase, and a traffic loss of 1.0 percent for the 38.9 percent E-ZPass toll increase.

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6.3.4.2 Re-decking/Rehabilitation Diversion In addition to the toll increase considered in this analysis, it waas important to consider the potential for diversion of traffic to other border crossings due to construction activities during re-decking/rehabilitation project planned to take place at the Peace Bridge (which is being financed with the proceeds of the Authority’s Series 2017 Bonds). During the period of construction (mid-October through mid-May, beginning in 2016 and lasting for three years), travelers could experience increased delay due to decreased bridge capacity and changes in traffic operations.

The Peace Bridge is three lanes wide, with reversible capability in the middle lane. The majority of the time, two lanes serve traffic traveling in the tooll-free eastbound direction, while one lane serves the tolled westbound direction. During construction, this is changing to one lane per direction of travel, causing a greater impact to traffic operations in the toll- free direction. Federal inspection plazas are located at either end of the Bridge structure, with inspection processes and staffing driving capacity and delays.

Jacobs consulted hourly data in addition to information regarding plans to manage traffic, current delay times and inspection capacity at the Niagara border crossings, and travel time and distance for alternate routes. It is Jacobs' opinion that the majority of impact will be experienced during the peak hours of traffic, with little to no impact during the other hours of the day, as interruption to traffic will be minimized by the plans to manage traffic operations during construction. It is important to note that many drivers have already decided that the Peace Bridge is currently the “best” route choice for their trip annd wait times are generally lower than at the Lewiston-Queenston Bridge (wait times are posted on the PBA and NFBC websites). Therefore, it was estimated that the majority of traffic would continue to use the Peace Bridge during construction.

It was originally estimated that in the more impacted direction of travel, roughly 10 percent of traffic in the toll-free direction would divert during periods of construction. However, since regional traffic volumes have continued to decline siince our previous forecast (dated May 2014), we have reduced the estimate of diversion due to re-decking/rehabilitation activities down to 5 percent during construction. Average U.S. bound (eastbound) “peak season” wait time data shows average wait times of 15-20 minutes throughout most of the daytime hours for eastbound cars (refer to page 40). It was assumed that although the wait times are less during the off season, the distribution of wait-times throughout the day would remain similar in the off season since the hourly voluume profile shows that traffic volumes are highest during those same daytime hours.

Given this assumption, our analysis considered that these “peak” hours impacted by reduction in available lanes due to construction would be consistent with the “peak season”

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higher wait time hours, even though construction would take place off season and the average wait times themselves might be shorter. Fiigure 48 and Figure 49 show average hourly U.S. bound (eastbound) traffic volumes for an average week in December 2013 versus an average week in December 2015 (the most recent December without redecking/rehabilitation activities in progress). The shading on the top of the bars indicates where the diverting traffic is estimated to come from. It is clear by comparing the green bars in these graphs, that the volume of traffic potentially impacted by construction constraints was less in 2015 than in 2013. Since 2016 volumes continued to decline, this trend is assumed to hold true.

Figure 48: Average Eastbound Hourly Traffic, December 20113

Figure 49: Average Eastbound Hourly Traffic, December 20115

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In the toll direction, where traffic operations are not expected to be impacted, the diversion was estimated to be roughly half that, 2.5 percent, due to driver perception of increased delay due to construction. Because construction is only planneed to take place from mid- October through mid-May, representing seven months of the year and roughly 50 percent of traffic, the net annual impact of re-decking/rehabilitation is estimated to be roughly 2.5 percent diversion in the toll-free direction and 1.25 percent diversion in the toll direction.

6.3.5 Traffic and Gross Toll Revenue Model Calculations The trafffic and revenue model creates a framework based on the assumptions outlined previously, and calculates the forecasted traffic and revenue by applying logic to the 2016 annual trips for each payment class. Some adjustment to traffic is necessary even in years without toll increases, as traffic grows and shifts betwween payment types bassed on historical trends. Estimated average toll rates based on historical data as well as any necessary adjustments due to traffic shifts and any toll increases are then applied to traffic estimates by class and payment type to produce a customized forecast resulting in precise estimates of total revenue.

6.4 Total Transaction and Gross Toll Revenue Forecasts Table 14 presents the forecasted toll trips and toll revenue for the years 2017 through 2047. Figure 50 and Figure 51 present the forecasts graphically, while Table 15 and Table 16 show the future yeara -to-year growth in trips and gross toll revenues. We estimate that traffic growth will trend toward flat in general, based on traffic trends in recent years. In between significant global and regional events, traffic appears to have stabilized for short periods of time with de minimus rates of growth. Table 17 and Table 18 break out the trips and toll revenues into car and truck trips. All estimates of gross toll revenue are in nominal dollaars.

The PBA is in the process of a re-decking/rehabilitation project on the Peace Bridge, which began in the Fall of 2016. Construction is planned to take placee from October 15th through May 15th for three years (ending May 2019), involving the closure of one lane of the Peace Bridge for the duration of the seven-month construction season. Jacobs’ estimates of traffic and revenue consider these construction plans. At the completion of the construction project it is anticipated that traffic would return to normal levelss in the base forecast when there would no longer be the potential for construction related deelays.

Given the very low elasticity to toll rate increases, we are of the opinion that there is the capacity to generate additional gross toll revenues with adjustments to the toll rate schedules.

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Table 14: Forecasted Annual Peace Bridge Trips and Toll Revenues, 2017 to 2047 AnnualNontolledTrips(EB),TollTransactions(WB),andTollRevenues Trips/Transactions Year Toll NonTolledTrips GrossTollRevenues Transactions Total (EB) (WB) 2016* 2,653,300 2,668,700 5,322,000 $21,330,000 2017** 2,547,900 2,596,800 5,144,700 $20,750,000 2018** 2,516,000 2,548,900 5,064,900 $22,150,000 2019** 2,489,500 2,522,000 5,011,500 $21,930,000 2020 2,535,200 2,534,200 5,069,400 $22,080,000 2021 2,522,000 2,520,900 5,043,000 $22,000,000 2022 2,516,000 2,514,800 5,030,800 $21,970,000 2023 2,513,100 2,511,900 5,025,000 $21,960,000 20242047 2,513,100 2,511,900 5,025,000 $21,960,000 *Actualnumberspresentedarerounded **Theseforecaststakeintoaccounttheplanned continuationof redecking/rehabilitationactivitiesthrough Mayof2019. Note:Numbersmaynotaddduetorounding.

Figure 50: Historical and Forecasted Toll Transactionns, 2003 to 2047

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Figure 51: Historical and Forecasted Gross Toll Revenues, 2003 to 2047

Table 15: Trip / Toll Transaction CAGR Forecasts, 2017 to 2047 AnnualTrips/TollTransactiions Eastbound(NonTolled Westbound(TollTransactions) Year Trip) Grand Auto+ Total Truck Total Auto TTruck Bus Total Bus 2017** 4.0% 4.0% 4.0% 2.7% 2.6% 3.8% 2.7% 3.3% 2018** 1.3% 1.1% 1.3% 2.1% 1.1% 2.0% 1.8% 1.6% 2019** 1.1% 0.9% 1.1% 1.1% 0.9% 1.5% 1.1% 1.1% 2020 1.7% 2.3% 1.8% 0.4% 0.9% 0.3% 0.5% 1.2% 2021 0.6% 0.2% 0.5% 0.6% 0.3% 0.5% 0.5% 0.5% 2022 0.3% 0.0% 0.2% 0.3% 0.0% 0.0% 0.2% 0.2% 2023 0.1% 0.0% 0.1% 0.2% 0.0% 0.0% 0.1% 0.1% 20242047 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% **Theseforecaststakeintoaccounttheplannedcontinuationof redecking/rehabilitationactivitiesthroughMay of2019.Numbersmaynotaddduetorounding.

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Table 16: Gross Toll Revenue Growth Forecasts, 2017 to 20447 AnnualTollRevenues Year Westbound(Tolled) Auto Truck Bus Total 2017**2.9% 2.6% 3.5% 2.7% 2018**27.3% 1.1% 1.8% 6.7% 2019**1.2% 0.9% 1.3% 1.0% 2020 0.4% 0.9% 0.5% 0.7% 2021 0.6% 0.2% 0.4% 0.4% 2022 0.3% 0.0% 0.1% 0.1% 2023 0.2% 0.0% 0.1% 0.1% 20242047 0.0% 0.0% 0.0% 0.0% **Theseforecaststakeintoaccounttheplannedconntinuationof re decking/rehabilitationactivitiesthroughMayof2019. Numbersmaynotaddduetorounding.

Table 17: Forecasted Peace Bridge Transactions by Vehicle Type, 2016 to 2047 AnnualNontolledTrips(EB),TollTransactions(WB),andTollRevenues EastboundTrips WestboundTollTransactions Year Grand Auto+ Truck Total Auto Truck Bus TTotal Total Bus 2016* 2,035,600 617,800 2,653,300 2,062,100 594,600 12,100 2,668,700 5,322,000 2017** 1,955,100 592,800 2,547,900 2,006,300 578,900 11,600 2,596,800 5,144,700 2018** 1,929,700 586,300 2,516,000 1,965,000 572,600 11,400 2,548,900 5,064,900 2019** 1,908,500 581,000 2,489,500 1,943,400 567,400 11,200 2,522,000 5,011,500 2020 1,940,600 594,600 2,535,200 1,950,700 572,300 11,300 2,534,200 5,069,400 2021 1,928,900 593,100 2,522,000 1,938,900 570,800 11,200 2,520,900 5,043,000 2022 1,923,100 592,800 2,516,000 1,933,100 570,600 11,200 2,514,800 5,030,800 2023 1,920,200 592,800 2,513,100 1,930,100 570,600 11,200 2,511,900 5,025,000 20242047 1,920,200 592,800 2,513,100 1,930,100 570,600 11,200 2,511,900 5,025,000 *Actualnumberspresentedarerounded **Theseforecaststakeintoaccounttheplannedcontinuationof redecking/rehabilitation activitiesthroughMayof 2019. Note:Numbersmaynotaddduetorounding.

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Table 18: Forecasted Peace Bridge Toll Revenues by Vehiccle Type, 2016 to 2047 AnnualGrossTollRevenues Year Westbound(Tolled) Auto Truck Bus Total 2016* $5,900,000 $15,290,000 $140,000 $21,330,000 2017** $5,730,000$14,890,000 $130,000 $20,750,000 2018** $7,290,000$14,730,000 $130,000 $22,150,000 2019** $7,200,000$14,600,000 $130,000 $21,930,000 2020 $7,230,000$14,720,000 $130,000 $22,080,000 2021 $7,180,000$14,690,000 $130,000 $22,000,000 2022 $7,160,000$14,680,000 $130,000 $21,970,000 2023 $7,150,000$14,680,000 $130,000 $21,960,000 20242047 $7,150,000$14,680,000 $130,000 $21,960,000 *Actualnumberspresentedarerounded **Theseforecaststakeintoaccounttheplannedcontinuationofredecking/rehabilitationactivitiesthrough Mayof2019. Note:Numbersmaynotaddduetorounding.

6.5 E-ZPass Market Share Forecasts For the purpose of these forecasts, we estimated that the PBBA’s E-ZPass market share would continue to increase slightly, and that the rate of growth would level out by about 2025.

Figure 52 and Table 19 present a summary of the average trip market shares for cars and trucks for 2013 through 2016 and the projected market share through the forecast period.

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Figure 52: Historical and Forecasted E-ZPasss Market Shares, 2013 to 2047

Table 19: Historical and Forecasted E-ZPass Market Share of Trips Year Car Truuck Overall 2013 31.3% 79.2% 41.3% 2014 33.2% 80.6% 43.7% 2015 35.8% 81.1% 46.0% 2016 37.9% 81.5% 47.7% 2017** 39.6% 81.6% 49.1% 2018** 40.9% 81.7% 50.1% 2019** 41.9% 81.7% 50.9% 2020 42.6% 81.8% 51.5% 2021 43.2% 81.8% 52.0% 2022 43.6% 81.8% 52.4% 2023 43.9% 81.9% 52.6% 20242047 44.1% 81.9% 52.8% **Theseforecaststakeintoaccounttheplannedcontinuation ofredecking/rehabilitationactivitiesthroughMayof2019.

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7.0 Risk and Sensitivity Analyses Risk analyses and sensitivity analyses have been performed for our forecasts. The following sections discuss our work and results.

7.1 Risk Analysis for Traffic and Revenuue Forecast To obtain an additional analytical understanding of the potential risks which could impact revenue generation for the Peace Bridge, Monte Carlo analyses were conducted with respect to toll socioeconomic forecasts, E-ZPass market share, and annual traffic growth. These risks were evaluated with respect to their impact on total revenues from 2017 through 2047. Monte Carlo analyses use repeated random sampling over multiple iterations to estimate a range of possible outcomes. In particular, a Monte Carlo analysis involves the following elements:

Defined range of possible inputs; Randomly generated inputs within a specified probability distribution; Deterministic (or predictable) computation of the inputs; and Aggregate results of the individual computations.

7.1.1 Approach

We have produced our quantitative risk analysis of forecasted Peace Bridge traffic using @Risk simulation software. Separate analyses were conducted from 2017 to 2047 forecast horizons.

A number of traffic risk factors were identified and assessed. We have used our professional judgment to define appropriate risk ranges for each of the above risk factors, which include the following: U.S. Industrial Production Index (IPI); Currency exchange rates; Traffic growth rates; EZ-Pass market share, particularly the maximum market penetration percentages that are achieved, and the timeline for achieving them.

The risk analysis was undertaken using Monte Carlo simulation with 100,000 iterations.

The @risk software, which is an Excel add-in, was used to conduct the risk analyses. We have assumed a normal distribution for each of the risk factors analyzed. This distribution

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assumes that the traffic model assumptions are unbbiased and that the probability of more optimistic and more pessimistic outcomes for each traffic driver is the same (i.e. the distribution is symmetric).

7.1.2 Results The result of the risk analysis for the Peace Bridge is shown in Figure 53. The extent of downside risk is illustrated by the grey region beelow the dashed line in this figure. Specifically, the figure summarizes the potential spread around the model’s forecast...

Figure 53: Risk Analysis, Total Traffic

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7.2 Sensitivity Analysis

In addition to the risk analysis, Jacobs conducted a sensitivity analysis, varying individual model input assumptions to determine their effect on toll revenues. The scenarios tested were: Flat (0%) Growth Another “Event” causing additional trafffic loss (3x negative base growth) Higher Car Toll Increase Diversion (double the elasticity) Truck Toll Increase in 2020, similar to the car increase in 2018. Based on our discussion with the Authority, this toll rate was estimated at half the rate of inflation used to adjust car tolls in 2018, resulting in a roughly 10 percent increase for Truck toll rates, rounded to the nearest dollar. Additionally, the E-ZPass discount would be discontinued.

Results of each sensitivity test are shown in Table 20 for the years 2018 and 2026, and for the total period from 2017 thrh ough 2026. As shown by the results of the analysis, a scenario with no traffic growth would generate roughly 4.0 percent more revenue than the base case over the first 10 years of the forecast period. A scenario with double the base case growth would generate 8.6 percent less traffic, and 7.7 percent less revenue. If cars react more sensitively to the 2018 toll increase than we forecasted, slight traffic and revenue losses would be seen over the next ten years, and if toll rates for truck increase in 2020, truck toll revenue is estimated to increase some 20 percent in the years after the toll increase (due to low toll elasticity and an effective increase of greater than 10 percent for those customers currently receiving a discount). All comparisons are against the base forecast, which includes the 2018 car-only toll increase.

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Table 20: Sensitivity Analysis Results Vehicle Class Sensitivity Truck Toll Car Toll Growth Increase Elasticity of Traffic/Revenue No Growth Impacting (10% and no 0.05 (double “Event” discount) base case) in 2020 2018* Car & Bus Traffic 2.87% -5.61% -0.39% 0.00% Truck Traffic 2.34% -4.60% 0.00% 0.00% Total Traffic 2.75% -5.38% -0.30% 0.00% Car & Bus Revenue 2.89% -5.66% -0.76% 0.00% Truck Revenue 2.34% -4.60% 0.00% 0.00% Total Revenue 2.53% -4.95% -0.25% 0.00% 2026 Car & Bus Traffic 6.01% -11.19% -0.39% 0.00% Truck Traffic 4.21% -8.02% 0.00% -0.13% Total Traffic 5.59% -10.46% -0.30% -0.03% Car & Bus Revenue 6.04% -11.24% -0.76% 0.38% Truck Revenue 4.21% -8.02% 0.00% 20.36% Total Revenue 4.81% -9.09% -0.25% 13.74% 2017-2027 Cumulativve Total Car & Bus Traffic 4.86% -9.16% -0.35% 0.00% Truck Traffic 3.59% -6.88% 0.00% -0.09% Total Traffic 4.57% -8.63% -0.27% -0.02% Car & Bus Revenue 4.96% -9.34% -0.70% 0.28% Truck Revenue 3.59% -6.88% 0.00% 14.24% Total Revenue 4.04% -7.69% -0.23% 9.66% *Note: 2018 chosen due to the implementation of the new toll rates in January 2018.

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8.0 Limits and Disclaimers It is Jacobs’ opinion that the traffic and gross toll reevenue forecasts provided herein are reasonable and that they have been prepared in accordance with accepted industry-wide practice. However, given the uncertainties in any forecast, it is important to note the following assumptions which, in our opinion, are reasonable:

i. This report presents the results of Jacobs’ consideration of the information available as of the date hereof and the application of our experience and professional judgment to that information. It is not a guarantee of any future events or trends. ii. The traffic and gross toll revenue forecasts will be subjectt to future economic and social conditions, demographic developments and regional transportation construction activities that cannot be predictedd with certainty. iii. The forecasts contained in this report, while presented with numeric specificity, are based on a number of estimates and assumptiions which, though considered reasonable to us, are inherently subject to economic and ccompetitive uncertainties and contingencies, most of which are beyond the control of an operating agency and cannot be predicted with certainty. In many instances, a broad range of alternative assumptions could be considered reasonable. Changes in the assumptions used could result in material differences in forecasted outcomes. iv. Jacobs’ traffic and gross toll revenue forecasts only represent our best judgment and we do not warrant or represent that the actual gross toll revenues will not vary from our estimates. v. We do not express any opinion on the following items: socioeconomic and demographic forecasts, proposed land use development projects and potential improvements to the regional transportation network. vi. No other competing projects, tolled or non-tolled are assumed to be constructed or significantly improved in the project corridor during the project period, as to negatively impact Peace Bridge toll traffic, exceept those identified within this report. vii. Major highway improvements that are currently underwayy or fully funded will be completed as planned. viii. The Peace Bridge will be well maintained, efficiently operated, and effectively signed to encourage maximum usage. ix. No reduced growth initiatives or related controls that would significantly inhibit normal development patterns will be introduced during the estimate period. x. There will be no future serious protracted recession during the estimate period. xi. There will be no protracted fuel shortage during the estimate period.

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xii. No local, regional, national, or international emergency will arise that will abnormally restrict the use of motor vehicles or negatively affect cross border movements of traffic.

In Jacobs' opinion, the assumptions underlying the sttudy provide a reasonable basis for the analysis. However, any financial projection is subject to uncertainties. Inevitably, some assumptions used to develop the projections will not be realized, and unanticipated events and circumstances may occur. There are likely to be differences between the projections and actual results, and those differences may be material. Because of these uncertainties, Jacobs makes no guaranty or warranty with respect to the projections in this Study.

This document, and the opinions, analysis, evaluattions, or recommendations contained herein are for the sole use and benefit of the contracting parties. There are no intended third party beneficiaries, and Jacobs Civil Consultants, Inc., (and its affiliatess) shall have no liability whatsoever to any third parties for any defect, deficiency, error, omission in any statement contained in or in any way related to this document or the services provided.

Neither this document nor any information contained therein or otherwise supplied by Jacobs Civil Consultants, Inc. in connection with the sstudy and the services provided to our client shall be used in connection with any financing solicitation, proxy, and proxy statement, proxy soliciting materials, prospectus, Securities Registration Statement or similar document without the express written consent of Jacobs Civil Consultants, Inc. * * * * * We greatly appreciate the invaluable assistance provided by the staff of the Peace Bridge Authority. Sincerely,

Richard J. Gobeille, P.E. National Toll / Finance Unit Manager Jacobs Civil Consultants, Inc.

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APPENDIX D

SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION

The following is a general summary of certain provisions of the Resolution. This summary is not to be considered a full statement of the terms of the Resolution and, accordingly, is qualified by reference thereto and is subject to the full text thereof. Copies of the Resolution are available at the office of the Authority.

Bond Resolution Constitutes Contract

In consideration of the purchase and acceptance of any and all of the Bonds issued under the Bond Resolution by those who shall hold the same from time to time, the Bond Resolution shall be deemed to be and shall constitute a contract between the Authority and the Holders of the Bonds and coupons and the pledges made in the Bond Resolution and the covenants and agreements set forth in the Bond Resolution to be performed by the Authority shall be for the equal benefit, protection and security of the Holders of any and all of the Bonds and coupons, all of which, without regard to the time or times of their issue or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds or coupons over any other thereof, except as expressly provided in or permitted by the Bond Resolution.

(Bond Resolution Section 1.2)

Definitions

The following are definitions in summary form of certain terms contained in the Bond Resolution and used in this Official Statement:

“Account” shall mean any account created under the provisions of the Bond Resolution.

“Accountant” shall mean an independent certified public accountant or a firm of independent certified public accountants of recognized national standing (who may be the accountants who regularly audit the books and accounts of the Authority) who are selected and paid by the Authority and who will not have been engaged by any person or entity other than the Authority to render accounting services with respect to the books and records of the Toll Bridge System for the period or any portion thereof.

“Act” shall mean the New York Act and the Canadian Act, collectively.

“Additional Bonds” shall mean all Bonds, whether issued in one or more Series, authenticated and issued pursuant to Section 3.4 of the Bond Resolution and a Supplemental Resolution, other than the Series of Bonds initially delivered pursuant to the Bond Resolution.

“Annual Capital Improvement Fund Deposit” shall mean the amount derived from Net Pledged Revenues budgeted for deposit to the Capital Improvement Fund for any Fiscal Year to fund all or part of the Annual Capital Improvement Fund Requirement for such Fiscal Year.

“Annual Capital Improvement Fund Requirement” shall mean the aggregate of the amounts established by the Authority in its annual budget for Capital Improvements, based upon a certificate prepared by the Consulting Engineer from time to time with respect to the estimated cost of such Capital Improvements for the Fiscal Year for which such Annual Budget is prepared.

“Annual Debt Service Requirement” shall mean, for any Fiscal Year, the difference between the Annual Gross Debt Service due on all Series of Bonds and the amount already on deposit in the Bond Fund after payment of the prior Fiscal Year’s debt service (i.e., capitalized interest, interest earnings from the Bond Fund that have been retained therein, and interest earnings from the Debt Service Reserve Account that have been transferred

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to the Bond Fund and net payments received by the Authority from a Swap Provider pursuant to a Qualified Swap Agreement).

“Annual Gross Debt Service” shall mean, as of any particular date of computation, with respect to all Series of Bonds and with respect to any Fiscal Year, the sum of (i) interest accruing during such period on such Series of Bonds (including Parity Commercial Paper Notes and Bond Anticipation Notes) to the extent not capitalized, and (ii) that portion of each installment of principal for such Series of Bonds (not including the principal of Parity Commercial Paper Notes and Bond Anticipation Notes to the extent described in the last sentence hereof) deemed to accrue daily in equal amounts from a date one year (or such lesser period as shall be appropriate if such installments of principal for such Series of Bonds shall become due more frequently than annually) prior to its due date or from date of issuance of such Series of Bonds, whichever is later, and (iii) with respect to any Parity Commercial Paper Notes that are part of a Commercial Paper Program, it shall be assumed that the Outstanding principal amount of such Parity Commercial Paper Notes will be amortized over a term certified by an Authorized Officer as the expected duration of such Commercial Paper Program at the time of issuance of the Parity Commercial Paper Notes, or if such expectations have changed, over a term certified by an Authorized Officer to be the expected duration of such Commercial Paper Program at the time such calculation is made, but not to exceed thirty (30) years from the date of the initial issuance of such Parity Commercial Paper Notes, and it shall be assumed that debt service with respect to such Parity Commercial Paper Notes shall be paid in substantially level annual payments over such assumed term; the interest rate used for such computation shall be a rate equal to the average rate for such Parity Commercial Paper Notes during the preceding twelve (12) month period or, if the Parity Commercial Paper Notes have not been Outstanding for a twelve (12) month period, the period since the issuance of such Parity Commercial Paper Notes or, if the Parity Commercial Paper Notes are proposed to be issued, as provided in the definition of “Commercial Paper Rates”. Such interest and installments of principal shall be calculated on the assumption that no Bonds Outstanding at the date of such calculation will cease to be Outstanding except by reason of the payment of each installment of principal for such Series of Bonds on its due date. For purposes of (ii) above, the principal of Bond Anticipation Notes that is to be repaid with Bonds in anticipation of which such Bond Anticipation Notes were issued is not included in the calculation of “Annual Gross Debt Service.”

“Authority” shall mean the Buffalo and Fort Erie Public Bridge Authority, a body corporate and politic, constituting a public benefit corporation, created and governed by the New York Act, and any successor thereto.

“Authorized Officer” when used with reference to the Authority shall mean the Chairperson, the Vice Chairperson, or the Secretary-Treasurer or Operations Manager thereof, or other officer designated by resolution of the Authority.

“Bank Act” shall mean Statutes of Canada 1991, c.46., as amended from time to time.

“Bond Anticipation Notes” shall mean obligations issued pursuant to Section 3.7 of the Bond Resolution.

“Bond Counsel” shall mean a firm of attorneys specializing in the field of municipal finance and nationally recognized as expert in the field, including but not limited to the Attorney General of the State of New York.

“Bond Fund” shall mean the Bond Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Trustee.

“Bondholder” or “holder of a Bond” shall mean the registered owner of any Bond, or such holder’s duly authorized attorney in fact, representative or assigns.

“Bond Insurance Policy” shall mean a municipal bond new issue insurance policy insuring and guaranteeing the payment of the principal and interest on a Series of Bonds or certain maturities thereof as may be provided in the Supplemental Resolution authorizing such Series.

“Bond Insurer” shall mean a person authorized under law to issue a Bond Insurance Policy.

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“Bond Retirement Account” shall mean the Bond Retirement Account within the Bond Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Trustee.

“Bonds” shall mean Toll Bridge System Revenue Bonds issued from time to time pursuant to and under authority of Article III of the Bond Resolution, including without limitation, Additional Bonds and Refunding Bonds issued under the Bond Resolution and shall also mean Parity Commercial Paper Notes but shall not include any Bond Anticipation Notes, Junior Lien Indebtedness or Subordinated Lien Indebtedness.

“Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions located in the State of New York or in any of the cities in which the principal office of the Trustee, any Paying Agent or, with respect to a particular Series of Bonds, any remarketing agent or any provider of a Credit Facility for such Series of Bonds is located, are required or are authorized by law or executive order to close, or (iii) a day on which the New York Stock Exchange is closed.

“Canadian Act” shall mean an act of the Seventeenth Parliament of Canada, 24-25 George V 1934, as amended from time to time.

“Canadian Government Obligations” shall mean direct, unsecured and unconditional obligations of the Government of Canada which rank equally with all other securities issued by the Government of Canada and from time to time outstanding, the payment of principal of and interest on which is a charge on and payable out of the Consolidated Revenue Fund of Canada.

“Capital Appreciation and Income Bond” shall mean any bond as to which accruing interest is not paid prior to the Interest Commencement Date specified therefor and is compounded periodically on certain designated dates prior to the Interest Commencement Date specified therefor, all as provided in the Supplemental Resolution authorizing the issuance of such Capital Appreciation and Income Bond.

“Capital Appreciation Bonds” shall mean Bonds other than Capital Appreciation and Income Bonds issued pursuant to Section 3.9 of the Bond Resolution.

“Capital Improvement” shall mean major resurfacing, replacement, repairs, renewals, reconstruction, modification or improvement of the Toll Bridge System or any part thereof constituting real or personal property the costs of which are properly chargeable to a capital account, including coating, re-coating and any improvements designed to increase or improve access to or egress from the Toll Bridge System, whether acquired by lease or purchase, but does not include System Expansion Projects or items that would be appropriately classified as Operating Expenses.

“Capital Improvement Fund” shall mean the Capital Improvement Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Certificate of Determination” shall mean a certificate of an Authorized Officer of the Authority fixing terms, conditions and other details of Bonds in accordance with the delegation of power to do so under a Supplemental Resolution.

“Code” shall mean the Internal Revenue Code of 1986, as amended and supplemented from time to time, and the applicable temporary, proposed or final regulations promulgated thereunder by the United States Treasury Department.

“Commercial Paper Program” shall mean a program of short-term obligations having the characteristics of commercial paper in that such obligations have a stated maturity not later than 270 days from their date of issue and that the principal of maturing obligations of such program are expected to be paid with the proceeds of renewal short-term obligations except to the extent that the obligations of such commercial paper program are to be amortized.

“Commercial Paper Rates” shall mean with regard to any Bonds issued as part of a Commercial Paper Program that are tax-exempt, the interest rate on such Bonds (or the variable rate formula for such payments or receipts under such Swap) shall be assumed to be 110% of the average SIFMA Index during the twelve (12)

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months ending with the month preceding the month in which the calculation of Annual Gross Debt Service is made, or if that index is no longer published, 75% of the One Month USD LIBOR Rate, or if the One Month USD LIBOR Rate is not available, another similar rate or index selected by the Authority; or with regard to any Bonds issued as part of a Commercial Paper Program that are not tax-exempt, the interest rate on such Bonds (or the variable rate formula for such payments or receipts under such Swap) shall be assumed to be 110% of the average One Month USD LIBOR Rate during the twelve (12) months ending with the month preceding the month in which the calculation of Annual Gross Debt Service is made, or if the One Month USD LIBOR Rate is not available for such period, another similar rate or index selected by the Authority; provided, however, that if the Authority has entered into a Qualified Swap Agreement with respect to any Parity Commercial Paper Notes to be issued, the interest rate shall be determined in accordance with Section 3.4(E) of the Bond Resolution as if such Parity Commercial Paper Notes were Variable Rate Bonds.

“Compounded Amount” shall mean, as of any date of computation, the sum of the stated principal amount of any Capital Appreciation Bond upon original issuance plus the interest accrued on such Bond compounded on the interest payment dates and at the rate and in the manner provided in the applicable Supplemental Resolution to such date of computation.

“Consulting Engineer” and “Traffic Consultant” shall mean the one or more engineers or engineering firms or corporations retained by or on behalf of the Authority to perform the acts and carry out the duties provided for such Consulting Engineer or Traffic Consultant in the Bond Resolution.

“Cost of Construction” shall mean all costs of determining the feasibility of, and designing, acquiring, constructing, financing, leasing, carrying out any additions, improvements, enlargements, extensions, expansions, relocations and betterments to the Toll Bridge System, and shall include, but shall not be limited to, moneys required for:

(i) working capital and reserves in such amounts as may be deemed necessary by the Authority;

(ii) interest accruing in whole or in part on Bonds after the date such Bonds are issued, but only if, and to such extent as, the Authority may reasonably determine;

(iii) deposits from the proceeds of Bonds in any fund or account established pursuant to the Bond Resolution to meet reserve requirements for Bonds;

(iv) deposits from the proceeds of Bonds in any funds or accounts established pursuant to the Bond Resolution as reserves for renewals, repairs, replacements, modifications, betterment, additions and contingencies;

(v) preliminary survey, investigation and development costs, engineering fees, contractor fees, costs of permits, licenses and approvals, labor, materials, equipment, lands, rights of way, franchises, easements and other interests in land, utility services and supplies, payments to other public agencies, training and testing costs, insurance premiums, principal of and interest on notes issued in anticipation of Bonds, fees and expenses of Trustees and Paying Agents, legal and financing costs, administrative and general costs, and all other costs incurred by the Authority and properly allocable to the Toll Bridge System;

(vi) costs associated with any injury or damage claims; and

(vii) all items of expense directly or indirectly related to the authorization, issuance, offering and sale of Bonds, Bond Anticipation Notes or Notes, including, but not limited to, Authority expenses, bond issuance charges, printing costs, costs of preparation and reproduction of documents, filing and recording fees, initial fees and charges of any fiduciary, legal fees and charges, fees and disbursements of consultants and professionals, costs of credit ratings, underwriting fees, fees and charges for preparation, execution, transportation and safekeeping of Bonds, costs and expenses of refunding, fees or premiums and charges for Credit Facilities, Bond Insurance Policies, Debt Service Reserve Credit Facilities and other similar financial arrangements or any other cost, charge or fee in connection with the original issuance of Bonds, Bond Anticipation Notes or Notes, including the initial installment of any commitment fee due the provider of any Credit Facility.

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“Cost of Issuance” shall mean any item included in subparagraph (vii) of the definition of Cost of Construction.

“Counsel’s Opinion” or “Opinion of Counsel” shall mean an opinion signed by an attorney or firm of attorneys selected by the Authority. Any such attorney may be a lawyer in the regular employment of the Authority.

“Credit Bank” shall mean as to any particular Series of Bonds, the person providing a Credit Facility, as may be provided in the Supplemental Resolution authorizing such Series.

“Credit Facility” shall mean as to any particular Series of Bonds (including Parity Commercial Paper Notes) or portion thereof, a letter of credit, a line of credit, a guarantee, a standby bond purchase agreement or other credit or liquidity enhancement facility, other than a Bond Insurance Policy, as may be provided in the Supplemental Resolution authorizing such Series (including Parity Commercial Paper Notes).

“DBRS” shall mean DBRS Ratings Limited.

“Debt Service” shall mean as of any particular date of computation, with respect to each Series of Bonds and with respect to any period, the sum of (i) interest accruing during such period on such Series of Bonds (including Parity Commercial Paper Notes and Bond Anticipation Notes) to the extent not capitalized, and (ii) that portion of each installment of principal for such Series of Bonds (not including the principal of Parity Commercial Paper Notes and Bond Anticipation Notes to the extent described in the last sentence hereof) deemed to accrue daily in equal amounts from a date one year (or such lesser period as shall be appropriate if such installments of principal for such Series of Bonds shall become due more frequently than annually) prior to its due date or from date of issuance of such Series of Bonds, whichever is later, and (iii) with respect to any Parity Commercial Paper Notes that are part of a Commercial Paper Program, it shall be assumed that the Outstanding principal amount of such Parity Commercial Paper Notes will be amortized over a term certified by an Authorized Officer as the expected duration of such Commercial Paper Program at the time of issuance of the Parity Commercial Paper Notes, or if such expectations have changed, over a term certified by an Authorized Officer to be the expected duration of such Commercial Paper Program at the time such calculation is made, but not to exceed thirty (30) years from the date of the initial issuance of such Parity Commercial Paper Notes, and it shall be assumed that debt service with respect to such Parity Commercial Paper Notes shall be paid in substantially level annual payments over such assumed term; the interest rate used for such computation shall be a rate equal to the average rate for such Parity Commercial Paper Notes during the preceding twelve (12) month period or, if the Parity Commercial Paper Notes have not been Outstanding for a twelve (12) month period, the period since the issuance of such Parity Commercial Paper Notes or, if the Parity Commercial Paper Notes are proposed to be issued, as provided in the definition of “Commercial Paper Rates”. Such interest and installments of principal shall be calculated on the assumption that no Bonds Outstanding at the date of such calculation will cease to be Outstanding except by reason of the payment of each installment of principal for such Series of Bonds on its due date and such calculation shall include interest, installments of principal on and other payments due and payable in connection with Parity Reimbursement Obligations. For purposes of (ii) above, the principal of Bond Anticipation Notes that is to be repaid with Bonds in anticipation of which such Bond Anticipation Notes were issued is not included in the calculation of “Debt Service.”

“Debt Service Reserve Account” shall mean the Debt Service Reserve Account within the Bond Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Trustee.

“Debt Service Reserve Credit Facility” shall mean a surety bond, an insurance policy, a letter of credit or other credit facility which as of the date of deposit into the Debt Service Reserve Account, in each case, will be in an amount equal to the difference between the Debt Service Reserve Requirement and the sums then on deposit to the credit of such Debt Service Reserve Account, if any. Any Debt Service Reserve Credit Facility will be payable to the Trustee for the equal and ratable benefit of all of the Owners of the Outstanding Bonds on any date on which the moneys will be required to be withdrawn from such Debt Service Reserve Account and applied to the payment of the principal of or interest on any such Bonds which withdrawal cannot be met by any cash on deposit to the credit of such Debt Service Reserve Account. Any insurer providing such surety bond or insurance policy will be an insurer whose municipal bond insurance policies insuring the payment, when due, of the principal of and interest on municipal bond issues results in such issues being rated in either of the two highest rating categories by Moody’s or Standard & Poor’s, or any insurer who holds either of the two highest policyholder ratings accorded

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insurers by A.M. Best & Co. or any comparable service. Any such letter of credit issuer will be a bank or trust company and any other such credit facility issuer will be a company or other legal entity which is rated in either of the two highest rating categories by Moody’s or Standard & Poor’s, and the letter of credit facility itself will be rated in either of the two highest categories of each of Moody’s or Standard & Poor’s. If a disbursement is made pursuant to any Debt Service Reserve Credit Facility pursuant to this paragraph, the Authority will be obligated either (i) to reinstate the maximum limits of such Debt Service Reserve Credit Facility in accordance with the terms thereof, or (ii) to deposit to the credit of the Debt Service Reserve Account moneys in the amount of the disbursement made under such Debt Reserve Credit Facility, or a combination of such alternatives, as will provide that the amount to the credit of such Debt Service Reserve Account equals the Debt Service Reserve Requirement within a time period not longer than would have been required to restore such Debt Service Account if all available Net Pledged Revenues available after making provision for Debt Service were deposited therein as soon as practicable. Ratings category refers to a full letter grade (or its equivalent) rating category without regard to “+” or “-” denotation or any other denotations assigned by either Moody’s or Standard & Poor’s at the time of deposit of the Debt Service Reserve Facility.

“Debt Service Reserve Requirement” shall mean the lower of (i) the Maximum Annual Debt Service Requirement for all Outstanding Bonds secured by the Debt Service Reserve Account, or (ii) the maximum amount that will not adversely affect the Tax-Exempt status of any Bonds intended by the Authority to be Tax- Exempt. The Debt Service Reserve Requirement may be funded by (1) proceeds of Bonds, (2) one or more Debt Service Reserve Credit Facilities, or (3) Net Pledged Revenues. If funded from Net Pledged Revenues in connection with the issuance of a Series of Bonds, the portion of the Debt Service Reserve Requirement attributable to such Series of Bonds will be funded by equal monthly deposits over a period not to exceed 60 months from the issuance of such Series of Bonds, to be determined in the applicable Supplemental Resolution or Certificate of Determination and as of any date the Debt Service Reserve Requirement shall include only the portion of the Debt Service Reserve Requirement required to be on deposit as of such date. However, if a deficiency in the Debt Service Reserve Fund exists as a result of a draw to pay debt service on the Bonds, such deficiency shall be replenished at the earliest practicable time in accordance with Section 6.4(E), from amounts in the Pledged System General Account or the Pledged Revenues Account.

“Defeasance Moneys” shall mean the amounts necessary to defease any Refunded Bonds and deposited pursuant to an Escrow Agreement, together with any earnings and other income thereon.

“Escrow Agent” shall mean any bank, trust company or other financial institution, its successors and assigns, as may be appointed in accordance with the Escrow Agreement.

“Escrow Agreement” shall mean an agreement, relating to the investment and disbursement of Defeasance Moneys for the account of Refunded Bonds, by and among the Authority, the Trustee and the Escrow Agent (or such other party or parties as may be deemed appropriate or necessary), as the same may be thereafter amended and supplemented, which Agreement shall satisfy the requirements of Section 13.1 of the Bond Resolution.

“Excess Earnings” shall mean, with respect to a Series of Bonds, (i) the amount by which the earnings on the Gross Proceeds of such Series of Bonds exceeds the amount that would have been earned thereon if such Gross Proceeds were invested at a yield equal to the yield on such Series of Bonds, as such yield is determined in accordance with the Code, and (ii) amounts earned on the investment of such excess.

“Fiscal Year” shall mean the period established by the Authority or provided by law from time to time as its fiscal year, and which, as of the date of adoption of the Bond Resolution, is the twelve (12) month period commencing on January 1 of any year and ending on December 31 of such year.

“Floater/Inverse Floater Bonds” shall mean Bonds which bear interest at a variable interest rate (or a multiple of a variable rate of interest) and with respect to which each of the following conditions is met: (i) such Bonds are issued concurrently in two halves of equal principle amounts of floating interest rate Bonds and inverse floating interest rate Bonds, with each half bearing a variable rate of interest (or a multiple of a variable rate of interest), (ii) such Bonds and such other Bonds, unless linked to bear a fixed rate of interest, are required to remain Outstanding in equal principal amounts at all times, and (iii) the net effect of such equal principal amounts and variable interest rates (or multiples of variable interest rates) is at all times a fixed interest rate to the Authority.

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“Fund” shall mean any fund created under the provisions of the Bond Resolution.

“Government Obligations” shall mean and include any of the following:

(a) United States Government Obligations.

(b) Canadian Government Obligations.

(c) Provincial, state, and municipal debt obligations rated in the top two ratings categories (without regard to gradation) by Moody’s or Standard & Poor’s;

(d) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit United States government agencies: Federal Home Loan Bank System, Export-Import Bank of the United States, Federal Financing Bank, Government National Mortgage Association, Federal National Mortgage Association, Student Loan Marketing Association, Federal Farm Credit Bureau, Farmers Home Administration, Federal Home Loan Mortgage Corporation and Federal Housing Administration.

(e) Investment securities which are obligations and unconditionally guaranteed as to principal and interest by the Federal Government of Canada, which shall include obligations of Canadian Crown Corporations which are, by statute or Order in Council by Canada’s Cabinet, Agents of Her Majesty the Queen in right of Canada, which constitute a charge on and are payable out of the Consolidated Revenue Fund of Canada. These shall include: Canada Mortgage and Housing Corporation (CMHC), Canada Housing Trust and Canada Eldor Inc., as well as government guaranteed bonds of Petro-Canada Ltd.

“Government Payments Fund” shall mean the Government Payments Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Gross Proceeds” shall mean, with respect to a Series of Bonds, unless inconsistent with the provisions of the Code, (i) amounts received by the Authority from the sale of a Series of Bonds (other than amounts used to pay underwriters’ fees and other expenses of issuing such Series of Bonds), (ii) amounts treated as transferred proceeds of such Series of Bonds in accordance with the Code, (iii) amounts treated as proceeds under the provisions of the Code related to invested sinking funds, including any necessary allocation between two or more Series of Bonds in the manner required by the Code, (iv) amounts in the Debt Service Reserve Account, (v) securities or obligations pledged by the Authority as security for payment of debt service on the Bonds, (vi) amounts received with respect to obligations acquired with Gross Proceeds, (vii) amounts used to pay debt service on a Series of Bonds, and (viii) amounts received as a result of the investment of Gross Proceeds at a yield equal to or less than the yield on such Series of Bonds as such yield is determined in accordance with the Code.

“Interest Account” shall mean the Interest Account within the Bond Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Trustee.

“Interest Commencement Date” shall mean with respect to any Capital Appreciation and Income Bond, the date specified in the Supplemental Resolution authorizing the issuance of such Bond (which date must be prior to the Maturity Date for such Capital Appreciation and Income Bond) after which interest accruing on such Capital Appreciation and Income Bond will be payable periodically thereafter.

“Investment Securities” shall mean any of the following, if and to the extent that the same are legal for the investment of funds of the Authority and are otherwise consistent with the Authority’s investment guidelines and the restrictions set forth in the Bond Resolution:

(a) Government Obligations;

(b) U.S. or Canadian federal funds or bankers acceptances of any bank which, at the time of purchase, has an unsecured, uninsured and unguaranteed obligation rated in the top short-term category or the top three long-term ratings categories (without regard to gradation) by Moody’s or Standard & Poor’s;

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(c) certificates of deposit secured at all times by United States Government Obligations, which securities shall have a market value at all times at least equal to the principal amount of such certificate of deposit. Such certificates must be issued by state or nationally chartered bank or trust company or a state or federal savings and loan association. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral;

(d) Interest-bearing demand or time deposits (including certificates of deposit) or interest in money market portfolios issued by a state banks or trust companies or national banking associations that are members of the Federal Deposit Insurance Corporation (“FDIC”) or by savings and loan associations that are members of the FDIC which deposits or interest must either be (a) continuously and fully insured by FDIC and with banks that are rated at least “P-1” or “Aa3” by Moody’s or at least “A-1” or “AA-” by S&P or (b) fully secured by obligations described in item (a) Government Obligations;

(e) certificates of deposit of any bank rated in the top two ratings categories (without regard to gradation) by Moody’s or S&P located in Canada to which the Bank Act applies.

(f) (i) Pre-Refunded Municipal Obligations and (ii) direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed by, any state or territory of the United States of America or any political subdivision or agency thereof, whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, in the highest two rating categories (without regard to gradation) by Moody’s or Standard & Poor’s;

(g) commercial paper of a U.S. or Canadian corporation, finance company or banking institution rated at the time of purchase in the highest short-term rating category by Moody’s or Standard & Poor’s or DBRS (having original maturities of not more than 365 days);

(h) repurchase agreements with any bank or trust company or government bond dealer reporting to, trading with and recognized as a primary dealer by the Federal Reserve Bank of New York, which agreement is secured by Government Obligations, provided that the underlying securities are required by the repurchase agreement to be held by any such bank, trust company or primary dealer having a combined capital and surplus of at least $100,000,000 and being independent of the issuer of such repurchase agreement, and provided that the securities are continuously maintained at a market value of not less than the amount so invested;

(i) money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933 and having a rating of “AAm”, “AAAm” or “AAAm-G” by Standard & Poor’s or “Aa3” or better by Moody’s; and

(j) investment agreements with a financial institution having outstanding unsecured long- term debt which is rated in either of the two highest rating categories established by Moody’s or Standard & Poor’s.

“Junior Lien Indebtedness” shall mean any obligations described in Section 3.8 of the Bond Resolution.

“Maximum Annual Debt Service Requirement” shall mean, as of any date of calculation, the largest Annual Debt Service Requirement occurring in the then current and all succeeding Fiscal Years.

“Moody’s” shall mean Moody’s Investors Service, Inc. and its successors and assigns.

“Net Pledged Revenues” shall mean the Pledged Revenues remaining after taking into account Operating Expenses not paid for through the use of Unpledged Revenues available therefor. Further, solely for the purposes of Section 3.4 of the Bond Resolution, the term “Net Pledged Revenues” shall be deemed not to include the proceeds of any business interruption insurance relating to loss or non-receipt of Tolls.

“New York Act” shall mean chapter 824 of the Laws of 1933 of New York, as amended from time to time.

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“Note Repayment Fund” shall mean the Note Repayment Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Notes” shall mean any obligations payable from the Note Repayment Fund.

“Office of the Trustee,” “Office of the Paying Agent” and “Office of the Registrar” shall mean the office of the Trustee, Paying Agent or Registrar, as the case may be, located in New York, New York, and such offices of any successor Trustee, Paying Agent or Registrar, as the case may be.

“Operating Expenses” shall mean expenses incurred for operation, maintenance and repair and ordinary replacement of the Toll Bridge System or any part thereof and shall include, without limiting the generality thereof, administrative expenses, premiums and reserves for insurance and self-insurance, fees or premiums for a Credit Facility, Bond Insurance Policy, Debt Service Reserve Credit Facility, legal and engineering expenses, payments into pension, retirement, health and hospitalization and similar funds, any taxes, governmental charges, payments-in-lieu of real property taxes to the City of Buffalo or the Town of Fort Erie, and other expenses required to be paid by the Authority, all to the extent properly and directly attributable to the operation of the Toll Bridge System, and rental payments in connection with operating leases entered in the ordinary course of business, all to the extent properly and directly attributable to any part of the Toll Bridge System, and the expenses and compensation of the fiduciaries required to be paid under the Bond Resolution; but does not include (i) any costs or expenses for new construction or for major reconstruction, or (ii) any provision for interest, depreciation, amortization or similar charges, or (iii) amounts payable to the governments of the State of New York or Canada pursuant to the terms of the Act.

“Operating Fund” shall mean the Operating Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Operating Reserve Requirement” shall mean the amount, if any, determined by the Authority to be necessary to satisfy the requirement of Section 28(a) of the New York Act relating to an “operating expense reserve fund” or any successor provision of the New York Act relating to any such fund, taking into consideration amounts in all the Accounts contained in the Revenue Fund and the Operating Fund; provided, however, that the Operating Reserve Requirement shall require that the amount on deposit in the Pledged Operating Reserve Account during a Fiscal Year shall not be less than one-twelfth (1/12) of the Operating Expenses for the prior Fiscal Year.

“Outstanding” when used with reference to Bonds shall mean, as of any date, Bonds theretofore or thereupon issued or authorized pursuant to the Bond Resolution, except: (a) any Bonds cancelled by a Paying Agent or paid at or prior to such date; (b) Bonds in lieu of or in substitution for which other Bonds shall have been delivered pursuant to the Bond Resolution; and (c) Bonds deemed to be no longer outstanding under the Bond Resolution as provided in Section 12.1 of the Bond Resolution or under any Supplemental Resolution authorizing the issuance of Bonds.

“Parity Commercial Paper Notes” shall mean commercial paper notes authorized as part of a Commercial Paper Program, the interest on which is payable from and secured by a pledge of the Pledged Revenues on a parity with all other Bonds.

“Parity Reimbursement Obligation” shall mean a Parity Reimbursement Obligation as that term is defined in Section 3.6(d) of the Bond Resolution.

“Paying Agent” shall mean the bank or trust company appointed as Paying Agent pursuant to Section 4.5 of the Bond Resolution, and its successor or successors, and any other bank or trust company which may at any time be substituted in its place pursuant to the Bond Resolution.

“Peace Bridge” shall mean the Peace Bridge, now owned and operated by the Authority, over the Niagara River between the City of Buffalo, in the State of New York, and the Town of Fort Erie, in the Province of Ontario, together with the approaches thereto.

“Pledged Capital Improvement Account” shall mean the Pledged Capital Improvement Account within the Capital Improvement Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

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“Pledged Government Payments Account” shall mean the Pledged Government Payments Account within the Government Payments Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Pledged Operating Account” shall mean the Pledged Operating Account within the Operating Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Pledged Operating Reserve Account” shall mean the Pledged Operating Reserve Account within the Operating Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Pledged Revenues” shall mean (i) all Tolls, (ii) investment income from any moneys or securities held in the Pledged Revenues Account, Bond Fund, Pledged Capital Improvement Account and the Pledged System General Account, (iii) recurring federal and State grants in the nature of operating subsidies specifically earmarked for application to payment of Operating Expenses, and (iv) any leasehold payments, revenues, fees, rents, charges and other income and receipts derived by or for the account of the Authority, and interest received on such moneys, but only if the Authority has obtained a written opinion of nationally recognized bond counsel acceptable to the Trustee that such inclusion will not impair the exclusion from gross income for United States federal income tax purposes of interest on any of the Bonds, or subordinate obligations of the Authority, under the Code. The term “Pledged Revenues” excludes federal, State, Canadian and provincial grants and appropriations (except as provided in clause (iii) above), loan proceeds, gifts or donations of any kind, transfers, if any, to the Authority, proceeds from the sale of surplus property and receipts not related to the Authority’s performance of its obligations under the Bond Resolution or to the operation of the Toll Bridge System. Any proceeds from the sale of surplus property shall be deposited into the Capital Improvement Fund.

“Pledged Revenues Account” shall mean the Pledged Revenues Account within the Revenue Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Pledged System General Account” shall mean the Pledged System General Account within the System General Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Pre-Refunded Municipal Bonds” shall mean pre-refunded municipal obligations rated “AAA” by Standard & Poor’s and “Aaa” by Moody’s and meeting the following requirements:

(a) the municipal obligations are (i) not subject to redemption prior to maturity or (ii) the Authority or the Trustee has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; or

(b) the municipal obligations are fully secured by cash or U.S. Government Obligations which may be applied only to payment of the principal of and interest and premium, if any, on such municipal obligations.

“Principal Account” shall mean the Principal Account within the Bond Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Trustee.

“Project” shall mean any Capital Improvement or System Expansion Project.

“Qualified Swap Agreement” shall mean an agreement between the Authority and a Swap Provider under which the Authority agrees to pay the Swap Provider, for a specified period of time, an amount calculated at an agreed-upon rate or index based upon a notional amount and the Swap Provider agrees to pay the Authority for a specified period of time an amount calculated at an agreed-upon rate or index based upon such notional amount, where (a) Moody’s and Standard & Poor’s have assigned to the unsecured obligations of the Swap Provider, or of the person who guarantees the obligation of the Swap Provider to make its payments to the Authority, as of the date the swap agreement is entered into, a rating that is equal to or higher than the rating then assigned to the Bonds (without regard to Bond Insurance or any other Credit Facility), (b) in accordance with Section 3.11(C), the Authority has notified each Rating Agency (whether or not such Rating Agency also rates the unsecured obligations of the Swap Provider or its guarantor) in writing of its intention to enter into the swap

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agreement, (c) in the case of a swap agreement requiring the Authority to pay a fixed interest rate on a notional amount, the swap agreement provides for a commencement date and a termination date identical to the remaining term of the related Bonds, and (d) in the case of a swap agreement requiring the Authority to pay a variable interest rate on a notional amount, the swap agreement is entered into for a term of more than five years.

“Rating Agencies” shall mean the nationally recognized rating services, or any of them, that shall have assigned ratings to any Bonds Outstanding as requested by or on behalf of the Authority, and which ratings are then currently in effect.

“Rebate Account” shall mean the Rebate Account within the Bond Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Trustee.

“Refunded Bonds” shall mean the bonds or Bonds to be refunded with the proceeds of Bonds authorized pursuant to Section 3.5 of the Bond Resolution and issued pursuant to a Supplemental Resolution, which Refunded Bonds shall no longer be deemed outstanding as defined under the Bond Resolution or under the resolution authorizing same.

“Refunding Bonds” shall mean Bonds issued pursuant to Section 3.5 of the Bond Resolution and a Supplemental Resolution.

“Registrar” shall mean the Registrar appointed pursuant to Section 4.5 of the Bond Resolution, and its successor or successors, and any other corporation which may at any time be substituted in its place pursuant to the Bond Resolution.

“Resolution” shall mean the Buffalo and Fort Erie Public Bridge Authority Toll Bridge System Revenue Bond Resolution adopted by the Authority on July 26, 1995, as amended and restated on April 25, 2014, as amended or supplemented from time to time by one or more Supplemental Resolutions.

“Revenue Fund” shall mean the Revenue Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Serial Bonds” shall mean Bonds which are not Term Bonds.

“Series of Bonds” or “Bonds of a Series” shall mean all Bonds designated as being of the same series issued and delivered on original issuance in a simultaneous transaction and any Bonds thereafter delivered in lieu thereof or in substitution therefor pursuant to Section 4.7 of the Bond Resolution.

“Sinking Fund Installment” shall mean each amount so designated which is established pursuant to any Supplemental Resolution.

“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a division of Standard & Poor’s Global Ratings and its successors and assigns.

“Subordinated Indebtedness” shall mean any evidence of indebtedness of the Authority payable out of amounts available in the System General Fund.

“Supplemental Resolution” shall mean any resolution adopted by the Authority pursuant to and in compliance with the provisions of Article III of the Bond Resolution providing for the issuance of Bonds, and shall also mean any other resolution adopted by the Authority pursuant to and in compliance with the provisions of Article X of the Bond Resolution amending or supplementing the provisions of the Bond Resolution.

“Swap Provider” shall mean any counterpart with whom the Authority enters into a Qualified Swap Agreement.

“System Expansion Project” shall mean any acquisition, improvement, betterment, enlargement or capital addition which extends or expands the Toll Bridge System, including, but not limited to, expansion of existing lanes or construction of a parallel span.

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“System General Fund” shall mean the System General Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Term Bonds” shall mean Bonds the amortization or the redemption of which shall be provided for from moneys credited to the Bond Retirement Account in the Bond Fund pursuant to Article VI of the Bond Resolution.

“Toll Bridge System” shall mean collectively, (i) the Peace Bridge and shall include terminals, approaches, buildings, rights, easements and privileges, together with all structures owned and operated by the Authority, necessary or convenient to give access to the Peace Bridge from connecting streets and roads, (ii) any Project, and (iii) all properties, equipment and facilities to the extent used in connection with the operation and maintenance of the facilities listed in (i) and (ii).

“Tolls” shall mean fees charged and collected for transit over the toll facilities of the Toll Bridge System.

“Trustee” shall mean the Trustee appointed pursuant to Section 7.1 of the Bond Resolution, and its successor or successors, and any other corporation which may at any time be substituted in its place pursuant to the Bond Resolution.

“United States Government Obligations” shall mean (i) any direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed as to timely payment by, the United States of America, (ii) certificates of ownership of the principal of or interest on obligations of the type described in clause (i) of this definition, (a) which obligations are held in trust by a commercial bank which is a member of the Federal Reserve System in the capacity of a custodian; (b) the owner of which certificate is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying obligations; and (c) for which the underlying obligations are held in safekeeping in a special account, segregated from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated, (iii) direct obligations of the type described in clause (i) of this definition which have been stripped by the United States Department of the Treasury itself (CATS, TIGRS and similar securities), (iv) obligations issued by the following agencies which are backed by the full faith and credit of the United States: U.S. Export-Import Bank (direct obligations or fully guaranteed certificates of beneficial ownership), Farmers Home Administration (certificates of beneficial ownership), Federal Financing Bank, General Services Administration (participation certificates), Government National Mortgage Association (guaranteed mortgage- backed bonds, guaranteed pass-through obligations), Federal National Mortgage Association, United States Maritime Administration (guaranteed Title XI financing) and United States Department of Housing and Urban Development (project notes, local authority notes, new communities debentures-U.S. government guaranteed debentures and U.S. Public Housing Notes and Bonds-U.S. government guaranteed public housing notes and bonds) and an obligation of any other agency or instrumentality of the United States of America created by Act of Congress, provided such obligation is rated at least “A” by Standard & Poor’s and Moody’s at all times.

“Unpledged Capital Improvement Account” shall mean the Unpledged Capital Improvement Account within the Capital Improvement Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Unpledged Government Payments Account” shall mean the Unpledged Government Payments Account within the Government Payments Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Unpledged Operating Account” shall mean the Unpledged Operating Account within the Operating Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Unpledged Revenues” shall mean (i) all leasehold payments, revenues, fees, rents, charges and other income and receipts derived by or for the account of the Authority other than Pledged Revenues and Defeasance Moneys, and (ii) interest received on any moneys or securities held in the Unpledged Revenues Account, the Unpledged Operating Fund, the Unpledged Government Payments Fund, the Unpledged Capital Improvement Fund and the Unpledged System General Fund.

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“Unpledged Revenues Account” shall mean the Unpledged Revenues Account within the Revenue Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority, but not pledged for repayment of any Series of Bonds issued under the Bond Resolution.

“Unpledged System General Account” shall mean the Unpledged System General Account within the System General Fund created in Section 6.1 of the Bond Resolution, and to be held and administered by the Authority.

“Variable Rate Bonds” shall mean any Bonds the interest rate on which is established as described in Section 3.10 of the Bond Resolution and pursuant to a Supplemental Resolution and/or Certificate of Determination; provided further that such Bonds shall not be deemed Variable Rate Bonds if such Bonds constitute Floater/Inverse Floater Bonds.

(Bond Resolution Section 1.3)

Pledge of Pledged Revenues, Funds and Other Moneys

The Bonds are payable solely from and secured by the moneys pledged therefor. There are hereby pledged and assigned as security for the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms and the provisions of the Bond Resolution, (i) the proceeds of sale of the Bonds pending application thereof in accordance with the provisions of the Bond Resolution or of a Supplemental Resolution, (ii) Pledged Revenues, and (iii) all funds and accounts established by the Bond Resolution including the investments, if any, thereof other than the Unpledged Revenues Account, the Unpledged Operating Account, the Unpledged Government Payments Account, the Unpledged Capital Improvement Account, the Unpledged System General Account, the Note Repayment Fund and, with respect to any Bonds not secured by the Debt Service Reserve Account, the Debt Service Reserve Account. The pledge and assignment described in the immediately preceding sentence shall be subject only to the provisions of the Bond Resolution permitting the application thereof for the purposes and on the terms and conditions set forth in the Bond Resolution, including but not limited to the payment to the Operating Fund of all amounts required by the Bond Resolution to be paid to the Operating Fund from the Pledged Revenues. Notwithstanding the provisions of Section 3.2, any Defeasance Moneys that are required to pay the principal of, interest and premium on Refunded Bonds pursuant to a Supplemental Resolution under the Bond Resolution shall, upon the receipt of same by the Escrow Agent pursuant to an Escrow Agreement, be free and clear of the lien and pledge of the Bond Resolution.

The Bonds of each Series issued under the Bond Resolution (other than Refunded Bonds) shall be special revenue obligations of the Authority and shall be equally and ratably payable and secured under the Bond Resolution without priority by reason of date of adoption of the Supplemental Resolution providing for their issuance or by reason of their Series, number or date, date of issue, execution, authentication or sale thereof, or otherwise.

Neither the faith and credit nor the taxing power of the Government of Canada, the State of New York or of any political subdivision thereof are pledged for the payment of the principal of, premium, if any, or interest on the Bonds, and no holder of the Bonds shall have the right to compel the exercise of the taxing power of the Government of Canada, the State of New York, or of any political subdivision thereof in connection with any default with respect to the Bonds. The Bonds are not a debt of the Government of Canada, the State of New York, or of any political subdivision thereof. Neither the Government of Canada, the State of New York, nor any other political subdivision thereof is liable for the payment of the Bonds, nor are the Bonds payable out of any funds other than those of the Authority pledged for the payment of the Bonds under the Bond Resolution.

(Bond Resolution Section 3.2)

General Provisions for Issuance of Bonds

Each Series of Bonds shall be executed by the Authority, authenticated by the Trustee from time to time in such amounts as directed by the Authority and by it delivered to or upon the order of the Authority upon receipt of the consideration therefor and upon delivery to the Trustee of items specified in the Bond Resolution. The Trustee shall receive, among other things, a Bond Counsel’s opinion to the effect that (i) the Authority has the right and

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power under the Act to adopt the Resolution, and the Resolution has been duly and lawfully adopted by the Authority, is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms, and no other authorization of the Resolution is required, (ii) the Resolution creates the valid pledge to the payment of Bonds of the Pledged Revenues and other property which it purports to create pursuant to Section 3.2, subject to the provisions of the Resolution permitting the withdrawal, payment, setting apart or appropriation thereof for the purposes and on the terms and conditions set forth in the Resolution, and (iii) upon the execution and delivery thereof and upon authentication by the Trustee, the Bonds of such Series will be valid and binding obligations of the Authority payable as provided in, and enforceable in accordance with their terms and terms of, the Resolution and entitled to the benefits of the Act and the Resolution; and such Bonds have been duly and validly authorized and issued in accordance with law, including the Act, as amended to the date of such Bond Counsel’s opinion, and in accordance with the Resolution; provided, however, that such Bond Counsel’s opinion may be qualified to the extent that the enforceability thereof may be limited by bankruptcy, insolvency and similar laws affecting rights and remedies of creditors.

(Bond Resolution Section 3.3)

Additional Bonds

One or more Series of Bonds (exclusive of Refunding Bonds issued pursuant to Section 3.5) may be issued by the Authority under the Bond Resolution at any time and from time to time for the payment of all or a portion of the Cost of Construction or in order to refund all or any portion of any Outstanding Bonds or Parity Commercial Paper Notes, but only upon compliance as to each such Series with the applicable provisions of Section 3.3 and of Section 3.4 (except where specifically indicated otherwise in Section 3.4 with respect to one or more Series of Bonds).

(A) The first installment of principal of such Series of Bonds shall be payable at such time as the Authority shall determine, subject to the provisions of Section 3.3 of the Bond Resolution.

(B) An Authorized Officer of the Authority shall certify to the Trustee at the time of issuance of such Series of Bonds that there does not exist an Event of Default (as defined in Section 9.2 of the Bond Resolution) and that no deficiency exists in the balance of any Fund or Account required to be maintained pursuant to the Bond Resolution.

(C) There shall be filed with the Authority and the Trustee at the time of issuance of such Series of Bonds a certificate signed by an Authorized Officer of the Authority showing that

(1) the Net Pledged Revenues for any consecutive twelve (12) month period out of the eighteen (18) months immediately preceding the month in which such Bonds are to be issued were equal to not less than one hundred twenty-five percent (125%) of the Maximum Annual Debt Service Requirement on the Bonds Outstanding (including the Series of Bonds then being issued) for the then current Fiscal Year and all future Fiscal Years; or in the alternative,

(2) that the estimated Net Pledged Revenues for the current and each Fiscal Year after the date such certificate is delivered are at least one hundred twenty-five percent (125%) of the Maximum Annual Debt Service Requirement on the Bonds Outstanding (including the Series of Bonds then being issued). Such estimation may include increases, and shall include any decreases, in future Net Pledged Revenues due to increases or decreases in the schedule of Tolls adopted by the Authority for the current Fiscal Year and any future Fiscal Year during which such changes will be in effect as certified by the Traffic Consultant.

(D) The provisions of Section 3.4 shall not apply to the initial Series of Bonds issued pursuant to the Bond Resolution, unless or except as is otherwise set forth in the Supplemental Resolution providing for the issuance thereof.

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(E) In determining Debt Service (i) on Variable Rate Bonds or Parity Commercial Paper Notes bearing interest at variable rates or Bond Anticipation Notes bearing interest at variable rates to the extent that the Authority is not obligated to pay a fixed interest rate under a related Qualified Swap Agreement and (ii) on fixed rate Bonds to the extent the Authority is obligated to pay a variable interest rate under a related Qualified Swap Agreement, as of any date of calculation the interest rate shall be the average interest rate or rates anticipated to be borne by such Variable Rate Bonds or under such Qualified Swap Agreement over the period or periods for which such rate or rates are anticipated to be in effect, all as estimated by an Authorized Officer of the Authority. The conversion of Bonds constituting Variable Rate Bonds to bear interest at a different variable rate or a fixed rate or rates, in accordance with their terms, shall not constitute a new issuance of Bonds under the Bond Resolution.

(F) The provision of Section 3.4 shall not apply to such Series of Bonds issued to complete a System Expansion Project for which a prior series of Bonds was issued satisfying the provisions of Section 3.4 of the Bond Resolution, provided that (i) the net proceeds of such Series of Bonds to which Section 3.4 of the Bond Resolution does not apply shall not exceed ten percent (10%) of the original estimated cost of such System Expansion Project at the time of issuance of such prior Series of Bonds, and (ii) a Consulting Engineer certifies that such net proceeds, together with any other available (and not contingent) funds, shall be sufficient to complete such System Expansion Project.

(Bond Resolution Section 3.4)

Refunding Bonds

To the extent permitted by the New York Act, and without complying with the provisions of Section 3.4 of the Bond Resolution, at any time, the Authority may issue Refunding Bonds for the purpose of refunding (including by purchase) (a) at any time, all of the Bonds then Outstanding or (b) any portion of Bonds then Outstanding upon the Authority’s delivery of a certificate stating that for the then current and each future Fiscal Year, the Annual Gross Debt Service for the Refunding Bonds will be no more than one hundred and ten per cent (110%) of the Annual Gross Debt Service that would have existed for that Fiscal Year with respect to the portion of the Bonds being refunded. The proceeds of such Refunding Bonds may be applied to purchase or redeem any Outstanding Bonds including to pay principal, redemption premium and interest to the date of maturity or redemption (or purchase) and the expense of issuing the Refunding Bonds and of effecting such refunding. Such amounts must be sufficient under the provisions of Section 12.1(ii) of the Bond Resolution. Any Bonds issued for the purpose of refunding Junior Lien Indebtedness or Subordinated Indebtedness shall be issued pursuant to and in accordance with Section 3.4 of the Bond Resolution.

(Bond Resolution Section 3.5)

Provisions Regarding Bonds Secured by a Credit Facility or Bond Insurance Policy

The Authority may include such provisions in a Supplemental Resolution or related Certificate of Determination authorizing the issuance of a Series of Bonds Secured by a Credit Facility or Bond Insurance Policy as the Authority deems appropriate, including:

(1) So long as the Credit Facility or Bond Insurance Policy is in full force and effect, and payment on the Credit Facility or Bond Insurance Policy is not in default and the issuer of the Credit Facility or Bond Insurance Policy is qualified to do business, and (a) no proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of the issuer of the Credit Facility or Bond Insurance Policy in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) for the issuer of the Credit Facility or Bond Insurance Policy or for any substantial part of its property or for the winding up or liquidation of the affairs of the issuer of the

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Credit Facility or Bond Insurance Policy and such proceeding shall remain undismissed or unstayed and in effect for a period of sixty (60) days or such court shall enter a decree or order granting the relief sought in such proceeding, or (b) the issuer of the Credit Facility or Bond Insurance Policy shall not have commenced a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall not have consented to the entry of an order for relief in an involuntary case under any such law, or shall not have consented to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) for the issuer of the Credit Facility or Bond Insurance Policy or for any substantial part of its property, or shall not have made a general assignment for the benefit of creditors, or shall not have failed generally to pay its debts as they become due, or shall not have taken any corporate action with respect to any of the foregoing then, in all such events, the issuer of the Credit Facility or Bond Insurance Policy shall be deemed to be the sole Holder of the Outstanding Bonds of such Series when the approval, consent or action of the Bondholders for such Series of Bonds is required or may be exercised under the Bond Resolution, including, without limitation, Articles X and XI of the Bond Resolution, and following a default under Article IX of the Bond Resolution.

(2) In the event that the principal, Sinking Fund Installments, if any, and Redemption Price, if applicable, and interest due on any Series of Bonds Outstanding shall be paid under the provisions of a Credit Facility or Bond Insurance Policy, all covenants, agreements and other obligations of the Authority to the Bondholders of such Series of Bonds shall continue to exist and such issuer of the Credit Facility or Bond Insurance Policy shall be subrogated to the rights of such Bondholders in accordance with the terms of such Credit Facility.

In addition, such Supplemental Resolution or applicable Certificate of Determination may establish such provisions as are necessary (i) to comply with the provisions of each such Credit Facility or Bond Insurance Policy, (ii) to provide relevant information to the issuer of the Credit Facility or Bond Insurance Policy, (iii) to provide a mechanism for paying Principal Installments and interest on such Series of Bonds under the Credit Facility or Bond Insurance Policy, and (iv) to make provision for any events of default or for additional or improved security required by the issuer of a Credit Facility or Bond Insurance Policy.

In connection therewith the Authority may enter into such agreements with the issuer of such Credit Facility or Bond Insurance Policy providing for, inter alia: (i) the payment of fees and expenses to such issuer for the issuance of such Credit Facility or Bond Insurance Policy; (ii) the terms and conditions of such Credit Facility or Bond Insurance Policy and the Series of Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facility or Bond Insurance Policy.

The Authority may secure such Credit Facility or Bond Insurance Policy by an agreement providing for the purchase by the issuer thereof (or its agent) of the Series of Bonds secured thereby with such adjustments to the rate of interest, method of determining interest, maturity, or redemption provisions as specified by the Authority in the applicable Supplemental Resolution. The Authority may also in an agreement with the issuer of such Credit Facility or Bond Insurance Policy agree to directly reimburse such issuer for amounts paid under the terms of such Credit Facility or Bond Insurance Policy, together with interest thereon (the “Reimbursement Obligation”); provided, however, that no Reimbursement Obligation shall be created for purposes of the Bond Resolution until amounts are paid under such Credit Facility or Bond Insurance Policy. Any such Reimbursement Obligation (a “Parity Reimbursement Obligation”) may be secured by a pledge of, and a lien on, Revenues on a parity with the lien created by Section 3.2 of the Bond Resolution. Any such Parity Reimbursement Obligation shall be deemed to be a part of the Series of Bonds to which the Credit Facility or Bond Insurance Policy which gave rise to such Parity Reimbursement Obligation relates.

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Any such Credit Facility or Bond Insurance Policy shall be for the benefit of and secure such Series of Bonds or portion thereof as specified in the applicable Supplemental Resolution.

(Bond Resolution Section 3.6)

Bond Anticipation Notes

Bond Anticipation Notes may be issued by the Authority at such times as the Authority shall have by Supplemental Resolution authorized the issuance of Bonds under the Bond Resolution. The Bond Anticipation Notes may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, and shall bear such legends as may be deemed necessary by the Authority. The maximum maturity of such Bond Anticipation Notes, including the renewals thereof, shall not exceed five (5) years from the date of the original bond anticipation note. Each Bond Anticipation Note shall be executed in the manner prescribed for the definitive Bonds. Such note or notes may be secured in the manner provided by the New York Act; provided that such Bond Anticipation Note or Notes shall be secured by a pledge and assignment on the Pledged Revenues, junior and inferior and subject to the pledge and assignment on the Pledged Revenues herein created for the payment and security of the Bonds and any Parity Reimbursement Obligation and to the pledge and assignment on Pledged Revenues herein created for the payment of the Trustee’s reasonable fees and reimbursement for reasonable expenses, and any resolution authorizing the issuance of such Bond Anticipation Notes shall provide for the payment thereof after the required payments to the Operating Fund, to the Bond Fund, to the Government Payment Fund and to the Capital Improvement Fund. Notwithstanding the foregoing, such Bond Anticipation Note or Notes may be secured by a pledge and assignment on the Pledged Revenues on a parity basis with the Bonds and any Parity Reimbursement Obligation if the conditions enumerated under paragraph (B) of Section 3.4 of the Bond Resolution, as well as either paragraphs (C) or (D) of said section, are met. Such Bond Anticipation Note or Notes shall be discharged and paid through the issuance of Bonds in anticipation of which they were issued or from other moneys of the Authority, or, subject to rights of the holders of any Bonds Outstanding under the Bond Resolution, from the proceeds of Bonds of the Authority. Notwithstanding any of the foregoing, such Bond Anticipation Note or Notes may also be secured by and payable from any amounts provided by the State of New York, United States of America and/or Government of Canada expressly for payment of such Bond Anticipation Note or Notes. The principal amount of any Bond Anticipation Notes issued under Section 3.7 shall not exceed the principal amount of the Series of Bonds in anticipation of which said notes are to be issued.

(Bond Resolution Section 3.7)

Junior Lien Indebtedness and Subordinated Indebtedness

Nothing contained in the Bond Resolution shall prohibit or prevent, or be deemed or construed to prohibit or prevent, the Authority from authorizing and issuing bonds, notes, certificates, warrants or other evidences of indebtedness for any corporate use or purpose relating to the Toll Bridge System payable as to principal and interest from the Pledged Revenues subject and subordinate to the deposits and credits otherwise to be made to the Revenue Fund, the Operating Fund, and the Bond Fund under the Bond Resolution, or from securing such bonds, notes, certificates, warrants or other evidences of indebtedness and the payment thereof by a pledge and assignment on the Pledged Revenues junior and inferior to the lien and pledge on the Pledged Revenues herein created for the payment and security of the Bonds, and the payment of the Trustee’s reasonable fees and reimbursement for reasonable expenses.

(Bond Resolution Section 3.8)

Capital Appreciation Bonds and Capital Appreciation and Income Bonds; Compounded Amounts

A Supplemental Resolution providing for the issuance of a Series of Bonds may provide that the payment of interest on any specified Bonds of the Series shall only be made (i) at maturity, (ii) at a specified time or times prior to maturity or upon earlier redemption, by Sinking Fund Installment or otherwise, (iii) at a specified time or times and thereafter on each interest payment date until maturity, or (iv) on each interest payment date until a specified time and thereafter at a specified time or times prior to maturity or upon earlier redemption, by Sinking Fund Installment or otherwise. Any such Supplemental Resolution shall specify the Compounded Amount of such Bonds as of each interest payment date on the Bonds from the date of issue to maturity. The principal amount of

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any such Bonds shall be deemed to be their Compounded Amount as of either the date of calculation or the applicable preceding interest payment date, as specified in the Supplemental Resolution, for the provisions of the Bond Resolution relating to redemption, acceleration and actions by Bondholders.

(Bond Resolution Section 3.9)

Variable Rate Bonds and/or Optional Tender Bonds

A Supplemental Resolution providing for the issuance of a Series of Bonds may provide for the Bonds to bear interest at a variable, adjustable, convertible or other similar rate or rates of interest. Any such Supplemental Resolution shall specify: (1) the manner of determining the interest rate or rates and the frequency of change thereof, (2) the maximum rate or rates, if any, at which the Bonds may bear interest and (3) provisions, if any, with respect to the conversion of such Bonds to Bonds bearing a fixed rate of interest and the reconversion of such Bonds to bear interest at a variable rate. The method or methods for determining the interest rate on Bonds bearing interest at a variable or similar rate of interest may include the selection of such rate by a rate-determination agent, including any Remarketing Agent, as provided in an agreement between the Authority and such agent, including any Remarketing Agreement, the utilization of an index or indices as described in the applicable Supplemental Resolution, or such other standard or combination of standards set forth in the Supplemental Resolution.

The Maximum Annual Debt Service Requirement for any Variable Rate Bonds shall, for purposes of the definition of Debt Service Reserve Requirement in Section 1.3, be calculated as set forth in Section 3.4(E) of the Bond Resolution. For purposes of calculating the payments into the Interest Account in the Bond Fund pursuant to Section 6.4, the interest accrued or estimated to accrue during the calendar month in which the payment is to be made shall be the amount of the required payment, subject in case of an estimate to an adjustment at the end of the month.

The Authority may also issue Optional Tender Bonds under a Supplemental Resolution. For the purpose of determining the Annual Debt Service Requirement on Optional Tender Bonds, the options of the owners to tender such Bonds prior to their stated maturity shall be ignored. If the Optional Tender Bonds are also Variable Rate Bonds, then the requirements described in the paragraph above apply. If the Optional Tender Bonds are secured by a Credit Facility, the Credit Bank shall be rated in one of the three highest rating categories by each of the Rating Services, and any obligation the Authority may have to reimburse the Credit Bank shall be subordinated to the obligation of the Authority on the Bonds.

(Bond Resolution Section 3.10)

Hedging Transactions

(A) If the Authority shall enter into a Qualified Swap Agreement with a Swap Provider requiring the Authority to pay a fixed interest rate on a notional amount, or requiring the Authority to pay a variable interest rate on a notional amount, and the Authority has made a determination that such Qualified Swap Agreement was entered into for the purpose of providing substitute interest payments for Bonds of a particular maturity or maturities in a principal amount equal to the notional amount of the Qualified Swap Agreement, then during the term of the Qualified Swap Agreement and so long as the Swap Provider under such Qualified Swap Agreement is not in default under such Qualified Swap Agreement:

(1) for purposes of any calculation of interest, the interest rate on the Bonds of such maturity or maturities shall be determined as if such Bonds bore interest at the fixed interest rate or the variable interest rate, as the case may be, payable by the Authority under such Qualified Swap Agreement;

(2) any net payments required to be made by the Authority to the Swap Provider pursuant to such Qualified Swap Agreement from Net Pledged Revenues shall be made from amounts on deposit to the credit of the Interest Account; and

(3) any net payments received by the Authority from the Swap Provider pursuant to such Qualified Swap Agreement shall be deposited to the credit of the Interest Account.

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(B) If the Authority shall enter into a swap agreement of the type generally described in subsection (A) of Section 3.11 that does not satisfy the requirements for qualification as a Qualified Swap Agreement, then:

(1) the interest rate adjustments or assumptions referred to in paragraph (1) of said subsection (A) shall not be made;

(2) any net payments required to be made by the Authority to the swap provider pursuant to such swap agreement from Net Pledged Revenues shall be made only from amounts on deposit to the credit of the Junior Lien Indebtedness Fund or, to the extent permitted by law, the Pledged System General Account; and

(3) any net payments received by the Authority from the Swap Provider pursuant to such swap agreement may be treated as Pledged Revenues at the option of the Authority, and if so treated shall be deposited to the credit of the Pledged Revenues Account.

(C) Notwithstanding any other provision of the Bond Resolution, the Authority shall provide written notice to any Rating Agency at least seven Business Days prior to entering into any Qualified Swap Agreement or other similar arrangement. The Authority shall submit with such prior written notice the forms of agreements expected to be entered into in connection with such arrangements and shall identify any counterpart or guarantor to such arrangement.

(Bond Resolution Section 3.11)

Establishment of Funds and Accounts

The following Funds and Accounts are hereby established, the existence of which shall continue so long as any Bonds issued pursuant to the Bond Resolution are Outstanding:

(1) Revenue Fund, to be held by the Authority; consisting of the following accounts: Pledged Revenues Account and Unpledged Revenues Account;

(2) Operating Fund, to be held by the Authority, consisting of the following accounts: Pledged Operating Account, Unpledged Operating Account and Pledged Operating Reserve Account;

(3) Bond Fund, to be held by the Trustee, consisting of the following accounts: Interest Account, Principal Account, Bond Retirement Account, Rebate Account and Debt Service Reserve Account;

(4) Junior Lien Indebtedness Fund, to be held as determined in the applicable Supplemental Resolution or other Resolution, indenture or other agreement;

(5) Government Payments Fund, to be held by the Authority, consisting of the following accounts: Pledged Government Payments Account and Unpledged Government Payments Account;

(6) Capital Improvement Fund, to be held by the Authority, consisting of the following accounts: Pledged Capital Improvement Account and Unpledged Capital Improvement Account;

(7) System General Fund, to be held by the Authority, consisting of the following accounts: Pledged System General Account and Unpledged System General Account;

(8) Construction Fund, to be held by the Authority; and

(9) Note Repayment Fund, to be held by the Authority.

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Any Supplemental Resolution or Certificate of Determination may authorize the creation of any other Funds and Accounts as shall be deemed necessary, provided that the terms and other requirements of any such Fund or Account shall not be inconsistent with the provisions of the Bond Resolution.

(Bond Resolution Section 6.1)

Revenue Fund

(A) On and after the issuance of the initial Series of Bonds, the Authority shall pay or cause to be paid into the Unpledged Revenues Account, as promptly as practicable after receipt thereof, all of the Unpledged Revenues. On or before the twenty-fifth (25th) day of the month, the Authority will withdraw from the Unpledged Revenues Account and transfer and apply such amounts to the Unpledged Operating Account in the amount necessary to cause the amounts on deposit in the Unpledged and Pledged Operating Accounts of the Operating Fund to equal the amount estimated by the Authority to be sufficient to fund Operating Expenses for the remainder of such Fiscal Year or such longer period of time selected by the Authority in its sole discretion. On or before such twenty-fifth (25th) day, after such transfer to the Unpledged Operating Account, the Authority, in its sole discretion, may withdraw any remaining balance from the Unpledged Revenues Account and transfer and apply such amounts to the Unpledged Government Payments Account, the Unpledged Capital Improvement Account and the Unpledged System General Account.

Notwithstanding anything in the Bond Resolution to the contrary, moneys in the Unpledged Revenues Account shall not be transferred to any Fund or Account under the Bond Resolution other than those identified in Section 6.2(A).

(B) On and after the issuance of the initial Series of Bonds, the Authority shall pay or cause to be paid into the Pledged Revenues Account, as promptly as practicable after receipt thereof, all of the Pledged Revenues and all other moneys required to be paid into the Pledged Revenues Account pursuant to the Bond Resolution (other than the revenues and other amounts expressly required or permitted by the Bond Resolution to be credited to, or deposited in, any other fund or account). The Pledged Revenues Account and all moneys on deposit therein shall be used and applied, except as otherwise expressly permitted by the Bond Resolution, only in the manner and for the purposes hereinafter provided in Article VI of the Bond Resolution.

Pledged Revenues received by the Authority will be deposited directly into the Pledged Revenues Account on a daily basis, if practicable, but in no event more than three (3) Business Days after receipt thereof. No later than the twenty-fifth (25th) day of each month, the Authority will withdraw from the Pledged Revenues Account and transfer and apply such amounts as follows and in the following order of priority:

(1) After the application of moneys in the Unpledged Revenues Account pursuant to paragraph (A) above, to the Pledged Operating Account of the Operating Fund the amount necessary to cause the amount on deposit therein, together with the amounts in the Unpledged Operating Account, to equal the amount estimated by the Authority to be sufficient to fund Operating Expenses for the next thirty (30) days;

(2) To the Pledged Operating Reserve Account of the Operating Fund, the amount, if any, necessary to bring the balance in the Pledged Operating Reserve Account to the amount required to be deposited therein in order to satisfy the Operating Reserve Requirement;

(3) To the Trustee for deposit in the Interest Account the amount necessary to bring the balance in the Interest Account to the interest accrued on the Bonds through the end of the calendar month, calculated in accordance with Section 6.4(A);

(4) To the Trustee for deposit in the Principal Account the amount necessary to bring the balance in the Principal Account to the principal accrued (in accordance with the definition of Debt Service) on the Bonds through the end of the calendar month, calculated in accordance with Section 6.4(B);

(5) To the Trustee for deposit in the Bond Retirement Account, an amount necessary to bring the balance in the Bond Retirement Account to the principal accrued on the Term Bond(s) for the next pending Sinking Fund Installment through the end of the calendar month, calculated in accordance with Section 6.4(C);

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(6) To the Trustee for deposit in the Debt Service Reserve Account an amount sufficient to meet the Debt Service Reserve Requirement (or the amount of the monthly deposit where the Debt Service Reserve Requirement is being funded by not more than sixty (60) monthly deposits, as authorized by the Bond Resolution or any Supplemental Resolution);

(7) To the Trustee for deposit in the Junior Lien Indebtedness Fund, such deposits as may be required to pay debt service on or maintain reserves with respect to Junior Lien Indebtedness under a Supplemental Resolution or other resolution, indenture or agreement for Junior Lien Indebtedness;

(8) After the application of moneys in the Unpledged Revenues Account pursuant to paragraph (A) above, to the Pledged Government Payments Account of the Government Payment Fund, the amount necessary to cause the deposits to such Fund during such month to be equal to 1/12 of all payments required to be paid pursuant to the Act, to the State of New York or Government of Canada or the designee of either in such Fiscal Year;

(9) After application of moneys in the Unpledged Revenues Account pursuant to paragraph (A) above, to the Pledged Capital Improvement Account of the Capital Improvement Fund, an amount sufficient, together with all previous deposits to such Fund during such Fiscal Year, to provide payment for that portion of the Annual Capital Improvement Fund Deposit for such Fiscal Year due through the end of that month; and

(10) To the Pledged System General Account of the System General Fund, the balance of such amounts in the Pledged Revenues Account after meeting all of the required deposits to Funds and Accounts described above.

(Bond Resolution Section 6.2)

Operating Fund

All reasonable and necessary Operating Expenses shall be paid from the Operating Fund as the same become due and payable. To the extent amounts are sufficient in such Accounts, Operating Expenses shall be paid first from the Unpledged Operating Account, then the Pledged Operating Account and then the Pledged Operating Reserve Account.

(Bond Resolution Section 6.3)

Bond Fund

The Bond Fund and the moneys deposited in such Fund shall, except as otherwise provided in part (F) of this Section, be used solely for the purposes of (x) paying the principal of, premium, if any, and interest on the Bonds and net amounts due to a Swap Provider with respect to a Qualified Swap Agreement, and (y) retiring the Bonds prior to maturity in the manner herein provided, if any. Each month the Authority shall transfer or cause to be transferred from the Pledged Revenues Account after making the transfers described in Section 6.2B(1) and (2) of the Bond Resolution, to the Trustee for deposit into the appropriate accounts of the Bond Fund, amounts as follows to be held on a parity basis for the ratable security and payment of the Bonds at any time in proportion to the amounts due or accrued with respect to each of them:

(A) In order to provide for the payment of the interest on the Bonds, not later than the twenty- fifth (25th) day of the sixth (6th) month prior to the date upon which an installment of interest falls due on the Bonds of a Series, or if the first installment of interest on the Bonds of such Series shall fall due in less than six (6) months, then on the twenty-fifth (25th) day of the month immediately succeeding the month in which the Bonds of such Series are delivered to the initial purchasers, and in any event prior to the date upon which such installment of interest falls due; and on or before the twenty-fifth (25th) day of each succeeding calendar month thereafter, the Authority shall pay or cause to be paid to the Trustee, and the Trustee shall credit to the Interest Account an amount such that, if the same amount were so credited to the Interest Account on the twenty-fifth (25th) day of each calendar month thereafter prior to the next date upon which an installment of interest falls due on the Bonds of such Series, the aggregate of the amounts so credited to the Interest Account would on such date be equal to (i) the installment of interest then falling due on all Bonds of such Series and (ii) any net amounts due to a Swap Provider under a Qualified Swap Agreement with the Authority. In order to provide for the payment of the interest on the

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Bonds of a Series with any frequency other than semi-annually, the Authority shall pay or cause to be paid, from the Revenue Fund, amounts in accordance with the provisions of the Supplemental Resolution pursuant to which such Series of Bonds is issued. In making the credits required by this paragraph any amounts required to be credited to the Interest Account representing accrued interest received on the sale of Bonds, interest capitalized from the proceeds of the Bonds of a Series and any other transfers and credits otherwise made or required to be made to said Account shall be taken into consideration and allowed for.

(B) In order to provide for the payment of the principal of Serial Bonds, not later than the twenty- fifth (25th) day of the twelfth (12th) month prior to the date upon which an installment of principal of Serial Bonds of each Series falls due or if the first installment of principal of Serial Bonds of such Series shall fall due in less than twelve (12) months, then on the twenty-fifth (25th) day of the month immediately succeeding the month in which the Bonds of such Series are delivered to the initial purchasers, and in any event prior to the date upon which such installment of principal falls due, and on or before the twenty-fifth (25th) day of each succeeding calendar month thereafter, the Authority shall pay or cause to be paid to the Trustee, and the Trustee shall credit to the Principal Account an amount such that, if the same amount were so credited to the Principal Account on the twenty- fifth (25th) day of each calendar month thereafter, prior to the next date upon which an installment of principal falls due on the Serial Bonds of such Series, the aggregate of the amounts so credited to the Principal Account would on such date be equal to the installment of principal then falling due on the Serial Bonds of such Series. In making the credits required by this paragraph any earnings on moneys in said Account shall be taken into consideration and allowed for.

(C) In order to meet the specified Sinking Fund Installment requirements of Term Bonds and otherwise to retire Bonds prior to maturity, not later than the twenty-fifth (25th) day of the twelfth (12th) month prior to the date upon which a Sinking Fund Installment of Term Bonds of each Series falls due, or if the first Sinking Fund Installment of the Term Bonds of such Series shall fall due in less than twelve (12) months, then on the twenty-fifth (25th) day of the month immediately succeeding the month in which the Bonds of such Series are delivered to the initial purchasers, and in any event prior to the date upon which such Sinking Fund Installment falls due, and on or before the twenty-fifth (25th) day of each succeeding calendar month thereafter, the Authority shall pay or cause to be paid to the Trustee, and the Trustee shall credit to the Bond Retirement Account an amount such that, if the same amount were so credited to the Bond Retirement Account on the twenty-fifth (25th) day of each calendar month thereafter, prior to the next date upon which a Sinking Fund Installment falls due on the Term Bonds of such Series, the aggregate of the amounts so credited to the Bond Retirement Account for the purpose of retiring the Term Bonds of such Series would on such date be equal to the Sinking Fund Installment then falling due on the Term Bonds of such Series. In making the credits required by this paragraph any earnings on moneys in said Account shall be taken into consideration and allowed for.

The Trustee shall, without further authorization or direction, apply the moneys on credit to the Bond Retirement Account on each date, if any, upon which a Sinking Fund Installment is due to the retirement of the Term Bonds of such Series in accordance with the Supplemental Resolution providing for the issuance of such Series of Bonds, or, if so directed in writing by the Authority, semi-annually on both such due date and the day six (6) months prior to such due date, in the respective principal amounts on credit to the Bond Retirement Account on such dates for such Term Bonds, so that the aggregate amounts so applied will equal the respective principal amounts required to be credited to the Bond Retirement Account on such Sinking Fund Installment dates by the Supplemental Resolution providing for their issuance; provided, however, that if the last Sinking Fund Installment for such Term Bonds falls due on the stated maturity date thereof, the amount of such Installment shall not be applied to the redemptions of such Term Bonds but shall be applied to the payment thereof at such maturity date in the same manner as amounts are applied from the Principal Account for the payment of Serial Bonds at maturity. The Trustee shall give notice of all such redemptions, in the name and on behalf of the Authority, in accordance with the provisions of Article V of the Bond Resolution. The Trustee shall, upon the written direction of the Authority, apply the moneys credited to the Bond Retirement Account for the retirement of the Term Bonds, at a purchase price (including accrued interest and any brokerage or other charge) not to exceed the redemption price then applicable upon the redemption of such Bonds from Sinking Fund Installments, plus accrued interest, in which event the principal amount of such Bonds required to be redeemed on the next respective ensuing Sinking Fund Installment date shall be reduced by the principal amount of the Bonds so purchased; provided, however, that no Bonds of such Series shall be purchased during the interval between the date on which notice of redemption of said Bonds from Sinking Fund Installments is given and the date of redemption set forth in such notice, unless the Bonds

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so purchased are Bonds called for redemption in such notice or are purchased from moneys other than those credited to the Bond Retirement Account with respect to Sinking Fund Installments.

In the event that moneys in the Bond Retirement Account, other than moneys credited thereto as Sinking Fund Installments pursuant to a Supplemental Resolution, are to be applied to the retirement of a Series of Bonds, the Authority may direct the Trustee within thirty (30) days of the most recent deposit of any such moneys to apply such moneys to the purchase of Bonds of such Series in the name of the Authority. The price payable on any such purchase (including any brokerage or other charge) shall not exceed the highest redemption price applicable at the time or any time thereafter with respect to such Series of Bonds as set forth in the Supplemental Resolution pursuant to which such Series of Bonds was issued, plus accrued interest. Any such moneys not applied to the purchase of Bonds shall be applied to the redemption of Bonds of each Series then subject to redemption from such moneys in the proportion, as nearly as practicable, which the principal amount of Bonds of such Series then Outstanding and unpaid and so subject to redemption bears to the total principal amount of Bonds then Outstanding and unpaid and so subject to redemption.

Except for the redemption of Term Bonds from moneys credited to the Bond Retirement Account as Sinking Fund Installments, not less than one hundred thousand dollars ($100,000) aggregate principal amount of Bonds shall be called for redemption at any one time pursuant to this paragraph (C) unless the Authority directs the purchase or redemption of a lesser amount. The Trustee shall give notice of all such redemptions, in the name and on behalf of the Authority, in accordance with the provisions of Article V of the Bond Resolution.

Any purchase of Bonds pursuant to this paragraph (C) may be made with or without tenders of Bonds and at either public or private sale. All Bonds purchased, redeemed or retired pursuant to this paragraph (C) shall be cancelled and shall not be reissued. The accrued interest to be paid on the purchase or redemption of Bonds shall be paid from the Interest Account.

In the event of the purchase or redemption of Term Bonds of a particular Series pursuant to this paragraph (C) or otherwise, except from moneys credited to the Bond Retirement Account as Sinking Fund Installments, or if such Term Bonds to be so redeemed are deemed to be no longer Outstanding and unpaid pursuant to Section 13.1, the amount required to be credited to the Bond Retirement Account on such Sinking Fund Installment date as the Authority directs the Trustee in writing shall be reduced by the principal amount of the Bonds so purchased or redeemed.

(D) The Trustee shall deposit to the Rebate Account any moneys delivered to it by the Authority for deposit therein and, notwithstanding any other provisions of Article VI, shall transfer to the Rebate Account, in accordance with the written directions of an Authorized Officer of the Authority, moneys on deposit in any other Funds or Accounts held by the Trustee under the Bond Resolution at such times and in such amounts as shall be set forth in such directions.

Moneys on deposit in the Rebate Account shall be applied by the Trustee in accordance with the direction of an Authorized Officer of the Authority to make payments to the Department of the Treasury of the United States of America at such times and in such amounts as the Authority shall determine to be required by the Code to be rebated to the Department of the Treasury of the United States of America. Moneys which an Authorized Officer of the Authority determines to be in excess of the amount required to be so rebated shall be deposited to any other account in the Bond Fund in accordance with the written directions of such Authorized Officer.

If and to the extent required by the Code, the Authority shall periodically, at such times as may be required to comply with the Code, determine the amount of Excess Earnings with respect to each Series of Bonds and direct the Trustee in writing to (i) transfer from any other of the funds and accounts held by the Trustee under the Bond Resolution and deposit to the Rebate Account, all or a portion of the Excess Earnings with respect to such Series of Bonds, and (ii) pay out of the Rebate Account to the Department of the Treasury of the United States of America the amount, if any, required by the Code to be rebated thereto.

(E) Upon the issuance of a Series of Bonds, the Authority shall provide for a deposit into the Bond Fund for credit to the Debt Service Reserve Account from the proceeds of Bonds or from any moneys lawfully available therefor, an amount sufficient, together with amounts already deposited therein, to equal the Debt Service Reserve Requirement. The moneys in the Bond Fund on credit to a Debt Service Reserve Account shall be used and

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applied solely for the purpose of paying the principal of and interest and premium, if any, on the Bonds, whether at maturity or upon mandatory or extraordinary redemption or purchase thereof from moneys credited to the Bond Retirement Account, and shall be so used and applied whenever there are insufficient moneys on credit to the Interest Account, Principal Account and Bond Retirement Account for such purposes.

In order to assure the maintenance of the Debt Service Reserve Account in an amount equal to the Debt Service Reserve Requirement, the Authority shall be required to restore the Debt Service Reserve Account to the Debt Service Reserve Requirement at the earliest practicable time either by withdrawing any and all moneys from any Pledged Fund or Account and depositing such moneys in such Debt Service Reserve Account or from moneys transferred for deposit in the Debt Service Reserve Account pursuant to Section 6.2(B) of the Bond Resolution.

In lieu of moneys or Investment Obligations, the Authority may, to the extent permitted by law, deposit or cause to be deposited to or substituted for deposit to the Debt Service Reserve a Debt Service Reserve Credit Facility for the benefit of the holders of the Bonds secured by the Debt Service Reserve Account for all or any part of the Debt Service Reserve Requirement. Each Debt Service Reserve Credit Facility deposited to the Debt Service Reserve Account shall be payable (upon the giving of such notice as may be required thereby) on any date on which moneys are required to be withdrawn from the Debt Service Reserve Account and such withdrawal cannot be made without drawing upon such Debt Service Reserve Credit Facility. For the purposes of Section 6.4, in computing the amount on deposit in the Debt Service Reserve Account, a Debt Service Credit Facility shall be valued at the amount available to be drawn or payable thereunder on the date of computation.

Whenever the moneys on deposit in the Debt Service Reserve Account shall exceed the Debt Service Reserve Account Requirement, the Trustee shall, at the written direction of the Authority, withdraw the amount of such excess and deposit such amount in the Pledged Revenues Account, except that, upon the written direction of the Authority, the Trustee shall transfer amounts representing earnings on the Gross Proceeds of a Series of Bonds on deposit in the Debt Service Reserve Account to the Construction Account for such Series of Bonds.

When a Series of Bonds is refunded in whole or in part or is otherwise paid within the meaning of Article XII of the Bond Resolution, at the written direction of the Authority, all or any portion of the amounts accumulated therein with respect to the Bonds being refunded may be withdrawn from the Debt Service Reserve Account to pay or provide for the payment of such Bonds or Refunded Bonds, as the case may be, or may be transferred and applied to any reserve fund or account established for the refunding bonds issued to refund such Refunded Bonds; provided that such withdrawal shall not be made unless (i) upon such refunding, the Bonds being refunded shall be deemed to have been paid within the meaning and with the effect provided in the Bond Resolution, and (ii) the amount remaining in the Debt Service Reserve Account, after giving effect to any Debt Service Reserve Credit Facility deposited in such Fund pursuant to the Bond Resolution, shall not be less than the Debt Service Reserve Requirement, and provided, further, that, at the time of such withdrawal, there shall exist no deficiency in the Interest Account, Principal Account or Bond Retirement Account.

The Authority may determine by Supplemental Resolution or Certificate of Determination that a Series of Bonds shall not be secured by the Debt Service Reserve Account, in which case no amounts shall be required from the proceeds of such Series of Bonds for deposit in the Debt Service Reserve Account, and no amounts shall be payable from the Debt Service Reserve Account to pay amounts due or payable with respect to such Bonds.

The Authority may determine by Supplemental Resolution or Certificate of Determination that the portion of the Debt Service Reserve Requirement attributable to a Series of Bonds shall be funded by Net Pledged Revenues by equal monthly deposits over a period not to exceed sixty (60) months from the issuance of such Series of Bonds.

(F) Moneys on deposit in the Bond Fund shall be transmitted by the Trustee to any Paying Agent at such times as shall be necessary prior to the date upon which any installment of interest or principal is due on the Bonds (either at the maturity date thereof or redemption date prior to maturity) to pay, and in amounts sufficient to meet such installments of, principal of, premium, if any, and interest on the Bonds and net amounts payable to a Swap Provider under a Qualified Swap Agreement with the Authority, in either case then due, at such times as shall be necessary prior to the date upon which any payments thereunder are due, to pay such amounts then due. In the event that there shall be a deficiency in the Interest Account, Principal Account or Bond Retirement Account seven (7) Business Days before any interest, principal or Sinking Fund Installment is due on a Series of Bonds, the Trustee shall, on that same day, give an Authorized Officer of the Authority telephonic and written notice of the

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amount of said deficiency. If, within two (2) Business Days, the Authority does not make up said deficiency, the Trustee shall promptly make up such deficiency from the Debt Service Reserve Account for such Series by the withdrawal of cash therefrom for that purpose or by the sale or redemption of Investment Securities held in the Debt Service Reserve Account, if necessary, in such amounts as will provide cash in the Reserve Account sufficient to make up any such deficiency or by the transfer of Investment Securities (or undivided interests therein) in which moneys in the Interest Account, Principal Account or Bond Retirement Account, as the case may be, may be invested, or by taking such steps as may be necessary to realize the benefit of any surety bond, insurance policy or letter of credit deposited in the Debt Service Reserve Account for such Series.

Moneys set aside from time to time with any Paying Agent for the purpose of paying the principal of, premium, if any, and interest on the Bonds shall be held in trust for the holders of the Bonds in respect of which the same shall have been so set aside. Until so set aside, all moneys in the Bond Fund shall be held in trust for the benefit of the holders of all Bonds at the time Outstanding, equally and ratably.

Whenever the amounts on deposit in the Bond Fund (regardless of the account therein to which such amounts are credited) shall be sufficient to provide moneys to retire all Bonds then Outstanding, including such interest thereon as thereafter may become due and payable and any premiums upon redemption thereof and to make all payments due with respect to any Qualified Swap Agreement and Debt Service Reserve Credit Facility contemplated in (D) above, no further deposits need be made by the Authority into the Bond Fund, and, at the written direction of the Authority, the Trustee shall call, except in the event of the final maturity of all Bonds then Outstanding, all Bonds which may be redeemed by their terms, for redemption on the next succeeding redemption date for which the required notice of redemption can practicably be given and shall apply such moneys to such retirement or redemption.

(Bond Resolution Section 6.4)

Junior Lien Indebtedness Fund

Amounts on deposit in the Junior Lien Indebtedness Fund may be applied only to the payment of interest on and principal and redemption price of Junior Lien Indebtedness as provided in the Supplemental Resolution or other resolution, indenture or agreement authorizing the issuance of such Junior Lien Indebtedness.

Junior Lien Indebtedness may be issued to finance any lawful corporate purpose of the Authority. Junior Lien Indebtedness may be secured by a pledge of such amounts in the Junior Lien Indebtedness Fund as may from time to time be available for the payment thereof and of Pledged Revenues; provided, however, that any pledge of Pledged Revenues shall be, and shall be expressed to be, subordinate in all respects to the pledge created by the Bond Resolution with respect to the Bonds.

The Authority shall have the right to covenant with the holders from time to time of Junior Lien Indebtedness to add to the conditions, limitations and restrictions under which any Additional Bonds may be issued; provided, however, that the Supplemental Resolution or indenture or other agreement providing for the issuance of such Junior Lien Indebtedness shall not permit the holders of such obligations to declare the same, or instruct such holders’ trustee to declare the same, to be immediately due and give rise to such a declaration unless all Outstanding Bonds shall have been declared immediately due payable in accordance with Section 9.5 of the Bond Resolution.

(Bond Resolution Section 6.5)

Government Payments Fund

Moneys in the Government Payments Fund may only be applied to payments to the State of New York or Government of Canada as may be provided for in the Act.

(Bond Resolution Section 6.6)

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Capital Improvement Fund

(A) Moneys in the Capital Improvement Fund may only be applied to the cost of major or extraordinary renewal, replacement, resurfacing or reconstruction of the Toll Bridge System.

(B) Each month the Authority shall transfer, to the extent not otherwise provided, from the Revenue Fund, after making the transfers described in Sections 6.2(A) and 6.2(B)(1) through 6.2(B)(10) of the Bond Resolution, for deposit into the Capital Improvement Fund the amounts required by paragraph (C) below.

(C) Moneys shall be deposited in the Capital Improvement Fund for any Fiscal Year only if and to the extent that the Consulting Engineer files a certificate with the Authority and the Trustee stating the cost for such Fiscal Year of major or extraordinary renewal, replacement, resurfacing or reconstruction of the Toll Bridge System and which deems such moneys necessary: (i) to restore, or prevent physical damage to, the Toll Bridge System, (ii) for the safe and efficient operation of the Toll Bridge System or (iii) to prevent loss of Pledged Revenues. The Authority shall establish the Annual Capital Improvement Fund Requirement for such Fiscal Year based upon such certificate.

(Bond Resolution Section 6.7)

System General Fund

Upon requisition by the Trustee, the Authority shall transfer from the Unpledged System General Account an amount required to make up any deficiencies in payment to the other Funds and Accounts specified in Section 6.2(A), in the priority specified in Section 6.2(A), and shall transfer from the Pledged System General Account an amount required to make up any deficiencies in payment to the other Funds and Accounts specified in Section 6.2(B), in the priority specified in Section 6.2(B), or, in the event of a transfer of moneys from the Debt Service Reserve Account, to the Debt Service Reserve Account to make up any deficiency therein.

Subject to any lien or pledge securing Subordinated Indebtedness that has been determined by the Authority to be superior to the purposes described in clauses (i) and (ii) below in this paragraph, amounts in the System General Fund not immediately required for the purposes referred to in the preceding paragraph shall, pursuant to resolution of the Authority, be applied to the following purposes, in the Authority’s discretion (i) to the purchase, redemption or payment at maturity of Bonds or Junior Lien Indebtedness, or (ii) paid to the Authority, free and clear of the lien and pledge created by the Bond Resolution, for any lawful corporate purpose of the Authority, including but not limited to payment of amounts due with respect to Subordinated Indebtedness.

Subordinated Indebtedness may be issued to finance any lawful corporate purpose of the Authority. To the extent permitted by law, Subordinated Indebtedness may be secured by a pledge of such amounts in the System General Fund as may from time to time be available for the payment thereof and of Pledged Revenues; provided, however, that any pledge of Pledged Revenues shall be, and shall be expressed to be, subordinate in all respects to the pledge created by the Bond Resolution with respect to the Bonds and any pledge of Pledged Revenues with respect to Junior Lien Indebtedness.

The Authority shall have the right to covenant with the holders from time to time of Subordinated Indebtedness to add to the conditions, limitations and restrictions under which any Additional Bonds or Junior Lien Indebtedness may be issued; provided, however, that the Supplemental Resolution or indenture or other agreement providing for the issuance of such Subordinated Indebtedness shall not permit the holders of such obligations to declare the same, or instruct such holders’ trustee to declare the same, to be immediately due and give rise to such a declaration unless all Outstanding Bonds and Junior Lien Indebtedness shall have been declared immediately due and payable in accordance with Section 9.5 of the Bond Resolution.

(Bond Resolution Section 6.8)

Construction Fund

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as the “Series ___ Construction Account”, or such other designation as may be appropriate (the blank to be completed with the year in which the Construction Account is created). The Construction Fund shall be held in trust by the Authority, for the benefit of the holders of the Bonds, as their interests may appear, pending application thereof in accordance with the terms of the Bond Resolution and each appropriate Supplemental Resolution. In the event any interest on such Bonds is to be capitalized from the proceeds of such Bonds or any other Series of Bonds, there shall be created in the Bond Fund a special account to be known as the “Capitalized Interest Account”, or such other designation as may be appropriate.

From the proceeds derived from the sale of such Bonds there shall be deposited:

(1) with the Trustee for deposit in the Bond Fund for credit to the Interest Account, an amount equal to the accrued interest on the Bonds paid as part of the purchase price;

(2) with the Trustee for deposit in the Bond Fund for credit to the Interest Account, the amount, if any, equal to the interest on the Bonds being capitalized from the proceeds thereof;

(3) with the Trustee for payment into the Bond Fund for credit to the Debt Service Reserve Account, the amount equal to the Debt Service Reserve Account Requirement;

(4) with the Authority for credit to the Note Repayment Fund, the amount as set forth in the applicable Supplemental Resolution, for payment of Notes; and

(5) with the Authority for credit to the applicable Construction Account, the balance of the Bond proceeds which shall be applied to the payment of the Costs of Construction as shall be provided for in the applicable Supplemental Resolution and subject to any requirements imposed by the Code, including any Cost of Issuance and any proceeds of the Bonds representing Defeasance Moneys that are to be subsequently invested and disbursed pursuant to an Escrow Agreement. Any balance remaining in such Construction Account upon completion of payment of such costs shall be used for any lawful purpose of the Authority, provided that the Authority shall have obtained a written opinion of nationally recognized bond counsel acceptable to the Trustee that such application will not impair the exemption from federal income taxation of interest on any of the Bonds, or subordinate obligations of the Authority, under the Code.

(Bond Resolution Section 6.9)

Note Repayment Fund

The Supplemental Resolution providing for the issuance of any Series of Bonds may create and establish (unless theretofore created and established with respect to such purpose) a separate special trust account to be known as the “Series ___ Note Repayment Account”, or such other designation as may be appropriate (the blank to be completed with the year in which the Note Repayment Account is created). The Note Repayment Fund shall be held in trust by the Authority for the benefit of the holders of the Notes, as their interest may appear, pending application thereof in accordance with the terms of the Bond Resolution and the resolution authorizing issuance of the Notes.

(Bond Resolution Section 6.11)

Investment of Funds

Moneys in the Interest Account, Principal Account and Bond Retirement Account in the Bond Fund shall, to the fullest extent practicable and reasonable, be invested and reinvested by the Trustee (at the written direction of the Authority) solely in, and obligations credited to such Accounts shall be, United States Government Obligations which shall mature or be subject to redemption at the option of the holder thereof on or prior to the respective dates when the moneys in such accounts will be required for the purposes intended. Moneys in the Debt Service Reserve Account in the Bond Fund not required for immediate disbursement for the purpose for which said Account is created shall, to the fullest extent practicable and reasonable, be invested and reinvested by the Trustee at the written direction of the Authority solely in, and obligations credited to said Debt Service Reserve Account shall be, United States Government Obligations which shall mature or be subject to redemption at the option of the holder thereof no later than five (5) years from the purchase of such Government Obligations. The Trustee shall not be liable for any

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depreciation in value of any such investments. In the event that the Authority has not directed the Trustee as to the investment of the moneys in the Bond Fund, the Trustee shall seek such written direction in order to minimize the extent to which any such moneys remain uninvested.

Moneys in the Revenue Fund, not required for immediate disbursement for the purposes for which such Fund is created shall, to the fullest extent practicable and reasonable, be invested and reinvested by the Authority, to the extent allowed by law, solely in, and obligations deposited in such Fund shall be, Investment Securities which shall mature or be subject to redemption at the option of the holder thereof not later than such times as shall be necessary to provide moneys when needed to provide payments from such Fund. To the extent that no deficiencies exist in such Accounts, all investment earnings in the Pledged Government Payments Account, the Pledged Capital Improvement Account and the Pledged System Reserve Account will be deposited as received into the Revenue Fund.

Moneys in the Government Payments Fund, Capital Improvement Fund, and the Construction Fund not required for immediate disbursement for the purposes for which said Fund is created shall, to the fullest extent practicable and reasonable, be invested and reinvested by the Authority for such Fund, to the extent allowed by law, solely in, and obligations deposited in said Fund shall be, Investment Securities which shall mature or be subject to redemption at the option of the holder thereof not later than such times as shall be necessary to provide moneys when needed to provide payments from said Fund.

To the extent permitted in the Bond Resolution, all income received from the investment or reinvestment of moneys in the Funds and Accounts established under the Bond Resolution other than the Unpledged Revenues Account, Unpledged Operating Account, Unpledged Operating Reserve Account, Unpledged Government Payments Account, Unpledged Capital Improvement Account and Unpledged System General Account shall be deposited in the respective Funds and Accounts from which such investments are made to the extent of any deficiencies therein and otherwise to the Pledged Revenue Account; provided, however, that, at the direction of the Authority, all or a portion of the income received from the investment or reinvestment of moneys in any such Fund and Account may be deposited in the Construction Fund. All income received from the investment or reinvestment of moneys in a Construction Account shall only be deposited in said Account. All income received from the investment or reinvestment of moneys in the Unpledged Revenues Account, Unpledged Operating Account, Unpledged Government Payments Account, Unpledged Capital Improvement Account and Unpledged System General Account shall be deposited in the respective Accounts from which such investments are made to the extent of any deficiencies therein and otherwise to the Unpledged Revenues Account.

Nothing in the Bond Resolution shall prevent (i) any Investment Securities acquired as investments of funds held under the Bond Resolution from being issued or held in book-entry form, or (ii) a single Investment Security being apportioned among one or more Funds, Accounts or Subaccounts under the Bond Resolution so long as no provision of the Bond Resolution or of the laws of the State is thereby contravened and the records of the Trustee or Authority, as appropriate, reflect such apportionment.

(Bond Resolution Section 6.14)

Qualifications and Appointment of Trustee; Resignation or Removal Thereof; Successor Thereto

Any Trustee appointed under the provisions of Section 7.1 shall be a bank or trust company with capital stock, surplus and undivided profits aggregating in excess of fifty million U.S. dollars ($50,000,000), or the equivalent in Canadian dollars. The Trustee may be removed at the request of or upon the affirmative vote of (i) the holders of a majority of the principal amount of Bonds Outstanding, or (ii) the majority of the members of the Authority; provided, however, that the Trustee may not be removed pursuant to the preceding clause (ii) upon the occurrence of an Event of Default or while such an Event of Default shall be continuing unless such removal is with cause; provided further that no such removal shall be effective until a successor Trustee shall have been appointed and accepted the duties of Trustee.

Any Trustee under the Bond Resolution may resign at any time by giving not less than sixty (60) days notice to the Authority in writing and to the Bondholders by publishing a notice of resignation once within ten (10) days after the giving of such notice to the Authority in the same newspapers in which notices of redemption of

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Bonds are to be published pursuant to Section 5.3 of the Bond Resolution; provided however that no such resignation shall be effective until a Successor Trustee shall have been appointed and accepted the duties of Trustee.

(Bond Resolution Section 7.1)

Reimbursement of Trustees and Agents for Fees, Expenses and Charges.

Each Trustee shall be entitled to reasonable fees and reimbursement by the Authority for all expenses, charges, counsel fees and other disbursements reasonably incurred by it in the performance of its duties and powers under the Bond Resolution, including those of its attorneys, agents and employees. Each Trustee shall have a lien for such fees and reimbursement on the moneys pledged to secure the Bonds under the Bond Resolution at any time held by it under the Bond Resolution, prior to the lien or claim of the holders of the Bonds on all such moneys. Each Paying Agent and Registrar under the Bond Resolution shall also be entitled to reasonable fees and to reimbursement by the Authority for all expenses and charges reasonably incurred by it in the performance of its duties under the Bond Resolution in such capacity.

(Bond Resolution Section 7.9)

Authority to Maintain the Properties of the Toll Bridge System; To Keep the Toll Bridge System in Good Repair

The Authority shall, so long as any Bonds are Outstanding, operate and maintain or cause the Toll Bridge System to be operated and maintained in a sound economical manner. The Authority shall (i) maintain, preserve and keep, or cause to be maintained, preserved and kept, the properties of the Toll Bridge System and all additions and betterments thereto and extensions thereof, and every part and parcel thereof in good repair, working order and condition, (ii) from time to time make, or cause to be made, all necessary and proper repairs, renewals, replacements, additions, extensions and betterments thereto, so that at all times the business carried on in connection therewith shall be properly and advantageously conducted, and (iii) comply or cause to be complied with the terms and conditions of any permit or license for the Toll Bridge System or any part thereof issued by any governmental agency or body of the United States of America, the Government of Canada, the State of New York, the Province of Ontario or any political subdivision thereof and with any law or regulation of the United States of America, the Government of Canada, the State of New York, the Province of Ontario, or any political subdivision or instrumentality thereof applicable to the construction, operation, maintenance and repair of the Toll Bridge System or requiring a license, permit or approval therefor.

The Authority has, and will have so long as any Bonds are Outstanding, the right and lawful power to construct, reconstruct, improve, maintain, operate and repair the Toll Bridge System and the exclusive right, subject to the Bond Resolution, to fix and collect tolls, fees, rents or other charges for its use.

(Bond Resolution Section 8.1)

Tolls and Charges

(A) The Authority shall fix reasonable tolls for each class of service rendered by the Toll Bridge System.

(B) So long as any Bonds are Outstanding, the Authority shall at all times maintain tolls, fees, rentals, and other charges sufficient to pay, and any contracts entered into by the Authority for the use of the Toll Bridge System shall contain tolls, fees, rentals, or other charges sufficient to pay, the cost of operation and maintenance of the Toll Bridge System, the Debt Service on the Bonds and any Parity Reimbursement Obligations and to maintain any reserve or other funds required by the terms of the Bond Resolution. The Authority shall not reduce any such tolls, fees, rentals, and other charges unless on the effective date of such reduction the Traffic Consultant shall have recommended such reduction in writing and a copy of such recommendation shall have been filed with the Trustee pursuant to paragraph (G) of Section 8.2 or such reduction is done pursuant to paragraph (G) of Section 8.2 of the Bond Resolution.

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(C) The Authority shall at all times keep on file with the Trustee any Qualified Swap Agreement provider and any Additional Security provider copies of its rates schedules for the Toll Bridge System, as in effect from time to time.

(D) For purposes of Section 8.2, Debt Service on any Variable Rate Bonds shall be determined in accordance with the provisions of Section 3.4(F) of the Bond Resolution.

(E) The Authority covenants that it will at all times charge and collect or cause to be charged and collected tolls for transit over the toll facilities of the Toll Bridge System at tolls not less than those established in the schedule of tolls set forth in a Supplemental Resolution, and in any event such tolls for transit over the toll facilities of the Toll Bridge System shall be charged in order that the Net Pledged Revenues will be sufficient in each Fiscal Year to pay an amount for such Fiscal Year at least equal to the greater of:

(1) one hundred and twenty-five percent (125%) of the Annual Debt Service Requirement in such Fiscal Year; or

(2) one hundred percent (100%) of the sum, in such Fiscal Year, of: (a) the Annual Debt Service Requirement; (b) any deficiency in the amount required to be on deposit in the Debt Service Reserve Account; (c) any required deposits into the Junior Lien Indebtedness Fund, Government Payments Fund or, in connection with Subordinated Indebtedness, the System General Fund; and (d) the Annual Capital Improvement Fund Deposit.

(F) On or before the fifteenth day of the tenth month of each Fiscal Year the Authority shall complete a review of the financial condition of the Toll Bridge System for the purpose of estimating whether the Net Pledged Revenues for such Fiscal Year and the next succeeding Fiscal Year will be sufficient to provide the applicable amount specified by Section 8.2 and shall by subsequent proceedings make a determination with respect thereto. A copy of such subsequent proceedings, properly certified by the Authority, together with a certificate of an Authorized Officer of the Authority setting forth a reasonably detailed statement of the actual and estimated Net Pledged Revenues and other pertinent information for such Fiscal Years upon which such determination was made, shall be sent to the Trustee. If the Authority determines that such Net Pledged Revenues may not be sufficient to provide the applicable amounts, it shall (i) forthwith cause the Traffic Consultant to make a study for the purpose of recommending a schedule of Tolls for transit over the Toll Bridge System which, in the opinion of the Traffic Consultant, will cause sufficient Net Pledged Revenues to be received in the following Fiscal Year to provide funds equal to the amounts specified in subparagraph (E) above for such following Fiscal Year and will cause additional Net Pledged Revenues to be received in such following and later Fiscal Years sufficient to restore the amount of any deficiency at the earliest practicable time, (ii) as promptly as practicable and in any case no later than the fifteenth day of the fourth month of such Fiscal Year, establish and place in effect a schedule of Tolls as recommended by the Traffic Consultant and (iii) notify the Trustee of such Toll Schedule. The Traffic Consultant is required to take into account all adjustments of Tolls necessary to reflect currency fluctuations between U.S. and Canadian dollars in such Fiscal Year in its Toll Schedule recommendation. If, in any Fiscal Year, the Tolls collected shall not have been sufficient to provide the applicable amount specified by said subparagraph (E), the Authority shall (a) unless it has already obtained a traffic study and recommendation in compliance with the immediately preceding sentence, forthwith cause the Traffic Consultant to make a study for the purpose stated in such sentence, (b) as promptly as practicable and in any case no later than the first day of the sixth month of such Fiscal Year, establish and place in effect a schedule of Tolls as recommended by the Traffic Consultant and (c) notify the Trustee of such Toll Schedule. As an alternative to any schedule of Tolls developed and recommended, a different schedule of Tolls developed by the Authority, which will provide sufficient Net Pledged Revenues in the appropriate Fiscal Year to comply with the revenue covenant described above and which will provide additional Net Pledged Revenues in such Fiscal Year to eliminate any deficiency at the earliest practicable time, may be implemented if the Traffic Consultant certifies that said alternative schedule of Tolls is sufficient.

(G) The Authority covenants that it will not effect any reduction in any rate of Tolls (excluding any Toll increases authorized but not yet implemented) for transit over the Toll Bridge System except after thirty (30) days’ notice to the Trustee and then only if accompanying said notice there shall be filed with the Trustee:

(1) A certificate of the Traffic Consultant setting forth estimates of the Pledged Revenues for the then current and each succeeding Fiscal Year, and a favorable recommendation from the Traffic Consultant that such proposed reduction be placed in effect;

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(2) A certificate of the Authority setting forth for the Fiscal Years and based on the assumptions specified in the certificate of the Traffic Consultant pursuant to clause (1) above, estimates of the Operating Expenses of the Authority for the Toll Bridge System prepared in accordance with the Bond Resolution; and

(3) A certificate of an Authorized Officer of the Authority setting forth (i) the Annual Gross Debt Service for the then current and each succeeding Fiscal Year, (ii) that the Net Pledged Revenues in the then current Fiscal Year and the estimated Net Pledged Revenues (as derived from the certificates pursuant to clauses (1) and (2) above) for each future Fiscal Year are not less than one hundred and twenty-five percent (125%) of an amount equal to the Annual Gross Debt Service for such respective current or future Fiscal Year and one hundred percent (100%) of any deficiency in the Debt Service Reserve Account, and (iii) that the Authority is not in default in the performance of any of the covenants, conditions, agreements or provisions contained in the Bond Resolution; provided that no such proposed reduction shall be undertaken if the anticipated result is that such reduction will cause estimated Net Pledged Revenues to be reduced by more than 10% for the Fiscal Year immediately succeeding such reduction or below the requirements of paragraph (E) above.

(H) The failure in any Fiscal Year to comply with the covenants in paragraph (F) of Section 8.2 shall not constitute an Event of Default under the Bond Resolution if the Authority shall comply with subparagraph (ii) of paragraph (F) of Section 8.2; provided that if the Traffic Consultant shall be of the opinion that a schedule of Tolls for the Toll Bridge System which would provide funds to meet the requirement specified in subparagraph (i) of paragraph (F) of Section 8.2 is impracticable at that time, and the Authority therefore cannot comply with subparagraph (ii) of paragraph (F) of Section 8.2, then the Authority shall fix and establish such schedule of Tolls as is recommended by the Traffic Consultant to comply as nearly as practicable with the covenant in subparagraph (i) of paragraph (F) of Section 8.2, and in such event the failure of the Authority to comply with subparagraphs (i) and (ii) of paragraph (F) of Section 8.2 shall not constitute an Event of Default under the provisions of the Bond Resolution.

(I) The Authority covenants that Tolls will be classified in a reasonable way to cover all traffic using the Toll Bridge System, so that the Tolls will be uniform in application to all traffic falling within any reasonable class regardless of the status or character of any person, firm or corporation participating in the traffic, except by reason of privileges based upon frequency, volume, time of traffic or method of payment. The Authority may make any other adjustment or reclassification of Toll rates or establish special Toll rates, introductory Tolls or temporary Tolls, provided that the Traffic Engineer determines that such action will not cause the Authority to fail to comply with Section 8.2. All classifications of Tolls used or authorized by the Authority as of the effective date thereof shall be deemed to be reasonable for the purposes of the Bond Resolution.

(J) In making a determination regarding Debt Service as may be required by the provisions of Section 8.2 from time to time, Debt Service on any Variable Rate Bonds shall be determined in accordance with Section 3.4(E) of the Bond Resolution.

(K) So long as any Bonds issued pursuant to the Bond Resolution are Outstanding and unpaid, the Authority will not provide any asset, service or transit, directly or indirectly, in connection with the ownership and operation of the Toll Bridge System, free of charge to any person, firm or corporation, public or private, except as required by law and except to: (i) directors, former directors, employees and former employees of the Authority, (ii) hearses in procession, (iii) police, fire, ambulance and other emergency personnel while in the discharge of their official duties, (iv) employees of concerns operating on the Toll Bridge System and independent contractors of the Authority while in the discharge of their employment obligations related to the Toll Bridge System and (v) parades, military and charity events, and other such one-time occasions, as determined by the directors of the Authority. In addition, the Authority will promptly enforce the payment of any and all accounts owing to the Authority by reason of the ownership and operation of the Toll Bridge System.

(Bond Resolution Section 8.2)

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Particular Covenants of the Authority

The Authority covenants that so long as any Bonds are Outstanding under the Bond Resolution, it will not sell, lease or otherwise dispose of or encumber the Toll Bridge System or any part thereof or of any of the Pledged Revenues and will not create or permit to be created any charge or lien on the Pledged Revenues, except as expressly permitted under the Bond Resolution. The Authority may lease or make contracts or grant licenses for operation of, or grant easements or other rights with respect to, any part of the Toll Bridge System if such action does not impede or restrict the operation by the Authority of the Toll Bridge System. The foregoing sentence includes but is not limited to the granting of such rights for construction and maintenance.

The Authority may transfer the assets and liabilities (including the Bonds) of the Toll Bridge System to another public entity authorized by law to accept such transfer, so long as, among other requirements, such transfer would not result in (a) the Bonds becoming federally taxable or (b) credit ratings on the Bonds lower than the then current ratings on the Bonds.

The Authority may, however, from time to time, sell, lease, encumber or otherwise dispose of any land or rights in land, machinery, fixtures, apparatus, tools, instruments, or other property of the Toll Bridge System if the Authority determines, in accordance with a certification by the Traffic Engineer, that such sale, lease, encumbrance or other disposition will in no way have a material adverse effect on Pledged Revenues, and the proceeds of the disposition thereof shall be applied to the Revenue Fund or any other Fund at the discretion of the Authority.

The determination of the Authority referred to in the paragraph immediately preceding this paragraph is not required if such sale, lease, encumbrance or other disposition aggregates to an amount of $100,000, as adjusted by the annual producer price index published by the Bureau of Labor Statistics of the United States Department of Labor, or less in a Fiscal Year.

(Bond Resolution Section 8.3)

Insurance

The Authority shall at all times maintain, with insurers in good standing or through self-insurance, to the extent reasonably obtainable and not cost prohibitive, the following kinds and the following amounts of insurance, with such variations as shall reasonably be required to conform to applicable standard or customary insurance practice and subject to such exceptions and permissible deductibles as are ordinarily required:

(1) Property insurance on the facilities of the Toll Bridge System, if available, covering direct physical loss or damage thereto from causes customarily insured against by those operating similar facilities, in such amounts as the Authority deems necessary or advisable to provide against such loss or damage and to assure the continued operation of the Toll Bridge System.

(2) Business interruption insurance covering loss of Pledged Revenues and Unpledged Revenues by reason of interruption, total or partial, in the use of the facilities of the Toll Bridge System, due to loss or damage to any such facility for a period of not less than one year, in such amounts as the Authority determines will provide income during the period of interruption equal to the amount of the loss of Revenues, computed on the basis of Revenues for the corresponding period during the preceding Fiscal Year or, if not then available, for the corresponding period during the most recent Fiscal Year for which audited financial statements are available, attributable to such loss or damage.

(3) Commercial liability insurance covering injuries to persons and property in the amount of not less than $1,000,000.

(4) During the construction or reconstruction of any portion of the facilities of the Toll Bridge System, such insurance as is customarily carried by others with respect to similar structures used for similar purposes, provided that the Authority shall not be required to maintain any such insurance to the extent that insurance is carried for the benefit of the Authority by contractors.

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(5) Any additional or other insurance which the Authority considers necessary or advisable to assure the continued operation of the Toll Bridge System.

(Bond Resolution Section 8.4)

Consulting Engineer and Traffic Consultant

(1) The Authority covenants that it will employ one or more independent engineers or engineering firms or corporations experienced in the duties imposed by the Bond Resolution upon said Consulting Engineer, to advise the Authority with respect to construction, renovation and repair of the Peace Bridge and all special projects of the Authority and to perform all other duties of a similar nature under the Bond Resolution.

(2) The Authority will make or cause to be made a report of the traffic over the Peace Bridge for each Fiscal Year. Copies of such report or a reasonable summary thereof shall be filed by the Authority within one hundred twenty (120) days after the end of each Fiscal Year with the Trustee and mailed, upon request, by the Trustee to any person requesting a copy thereof upon payment of the cost of reproduction and mailing by the requesting person.

(3) The Authority shall also, prior to the end of each Fiscal Year, cause the Peace Bridge to be inspected by the Consulting Engineer, who shall make a written report of such inspection and of the condition of the Peace Bridge of the Authority and file such annual report with the Authority within one hundred twenty (120) days after the end of each Fiscal Year. The Authority shall mail upon request, and make available generally, the report of said Consulting Engineer, or a reasonable summary thereof, to any holder of Bonds issued pursuant to the Bond Resolution.

(4) The Authority shall employ one or more Traffic Consultants pursuant to the duties mentioned in Section 8.2 who shall be independent engineers or engineering firms or corporations experienced in such duties.

(Bond Resolution Section 8.6)

Annual Budget Requirement

The Authority will adopt an Annual Budget for each Fiscal Year. The Authority may at any time adopt an amended Annual Budget for the remainder of the then current Fiscal Year.

If for any reason the Authority fails to adopt the Annual Budget, the budget for the preceding Fiscal Year shall be deemed to be in effect for such Fiscal Year until the Annual Budget is adopted.

(Bond Resolution Section 8.7)

Books of Account; Annual Audit

The Authority shall maintain and keep proper books of account relating to the Toll Bridge System in accordance with generally accepted accounting principles except that the New York Act specifically provides that operating expenses of the Authority shall not include any provision for depreciation on bridges and buildings. Within one hundred twenty (120) days after the end of each Fiscal Year, the Authority shall cause such books of account to be audited by an independent certified public accountant. A copy of each audit report and financial statement prepared in conformity with generally accepted accounting principles, with the exception noted above, shall be filed promptly with the Trustee and sent to any Bondholder filing with the Trustee a written request for a copy thereof. In connection with the preparation of such annual audit report and financial statement, as well as any financial calculations required by the terms of the Bond Resolution, including, but not limited to, the calculation of Net Pledged Revenues under Sections 3.4 and 8.2 of the Bond Resolution, all moneys, investments, accounts, statements of revenues, expenses or valuations of assets, property, equipment or liabilities denominated in Canadian currency shall be translated into United States currency in accordance with procedures approved by an independent certified public accountant retained by the Authority.

(Bond Resolution Section 8.8)

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Protection of Security

The Authority shall duly and punctually pay, or cause to be paid, but only from the funds pledged therefor under the Bond Resolution, the principal of, premium, if any, and interest on each and every Bond on the dates and at the places, and in the manner provided in the Bonds according to the true intent and meaning thereof, and the Authority shall faithfully do and perform and at all times fully observe and keep any and all of its covenants, undertakings, stipulations and provisions contained in the Bonds and in the Bond Resolution.

The Authority shall not extend or assent to the extension of the maturity of any Bond or installment of interest, and if the maturity of any Bond or installment of interest shall be extended, such Bond or installment of interest shall not be entitled, in case of any default under the Bond Resolution, to the benefit thereof or to payment out of Pledged Revenues or Funds or Accounts established by the Bond Resolution or moneys held by the Trustee or Paying Agent (except moneys held in trust for the payment of such Bond or installment of interest) until the prior payment of the principal of all Bonds Outstanding the maturity of which has not been extended and of such portion of the accrued interest on the Bonds as shall not be represented by such claims for interest. Nothing herein shall be deemed to limit the right of the Authority to issue refunding Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds.

The Authority shall from time to time duly pay and discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges, or payments in lieu thereof, lawfully imposed upon the properties of the Toll Bridge System (or any part thereof) or upon the Pledged Revenues or income received therefrom when the same shall become due, as well as all lawful claims for labor, material and supplies, which, if not paid, might become a lien or charge upon said properties or any part thereof, or upon the Pledged Revenues derived from the ownership or operation thereof, or which might in any way impair the security of the Bonds, except any such assessments, charges or claims which the Authority shall in good faith contest as to validity.

The Authority is duly authorized under all applicable law to create and issue the Bonds and to adopt the Bond Resolution and to pledge and assign the Net Pledged Revenues and other moneys, securities and funds purported to be pledged by the Bond Resolution in the manner and to the extent provided in the Bond Resolution. The Pledged Revenues and other moneys, securities and funds so pledged and assigned are and will be free and clear of any pledge, lien, charge or encumbrance thereon which is prior to, or of equal rank with, the pledge created by the Bond Resolution, except as otherwise expressly provided in the Bond Resolution, and all action on the part of the Authority to that end has been duly and validly taken; provided, however that nothing contained in the Bond Resolution shall prohibit or prevent, or be deemed or construed to prohibit or prevent, the Authority from entering into or issuing: (i) evidences of indebtedness and any pledge securing the same as shall be, and as shall be expressed to be, subordinate in all respects to the provisions thereof and the pledge created by the Bond Resolution, (ii) evidence of indebtedness and any pledge securing the same as shall be payable from moneys in the Construction Fund as part of the Cost of Construction, and (iii) evidence of indebtedness and any pledge securing the same as shall be payable from, or secured by the pledge of, Pledged Revenues to be derived after the pledge of Pledged Revenues provided in the Bond Resolution shall be discharged and satisfied as provided in Section 13.1 of the Bond Resolution. The Bonds are and will be valid and legally enforceable obligations of the Authority in accordance with their terms and the terms of the Bond Resolution. The Authority shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Pledged Revenues, and other moneys, securities and funds pledged under the Bond Resolution and each Supplemental Resolution and all the rights of the Bondholders and the providers of any Parity Reimbursement Obligation under the Bond Resolution against all claims and demands of all persons whomsoever.

Without limiting the generality of the foregoing, the Authority shall cause to be filed promptly, in the appropriate State and county offices as may be required by the provisions of the Uniform Commercial Code and in the appropriate Provincial offices as may be required by the provisions of the Personal Property Security Act, R.S.O. 1990, Chapter p.10, between the Authority and the Trustee covering the granting of a security interest in the Pledged Revenues and other items pledged to the Trustee, and such continuation statements from time to time as may be required pursuant to the provisions of said Uniform Commercial Code and said Personal Property Security Act.

(Bond Resolution Sections 8.9, 8.10, 8.11 and 8.14)

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Tax Covenants

(1) The Authority covenants that it will not take any action, or fail to take any action, or permit such action to be taken on its behalf or cause or permit any circumstance within its control to arise or continue, if any such action or failure to take action would adversely affect the exclusion from gross income for federal income tax purposes under Section 103 of the Code of the interest on the Bonds that are issued as tax-exempt bonds. Without limiting the generality of the foregoing, the Authority covenants that it will comply with the instructions and requirements of any Tax Certificate and Agreement, which is incorporated herein as if fully set forth herein. This covenant shall survive payment in full or defeasance of a Series of Bonds.

(2) The Authority shall not permit at any time any proceeds of any Bonds or any other funds of the Authority to be used directly or indirectly to acquire any investment property, the acquisition of which would cause any Bond to be an “arbitrage bond” as defined in Section 148 of the Code.

(3) The Authority shall not permit at any time any proceeds of any Bonds or any other funds of the Authority to be used, directly or indirectly, in a manner which would result in the classification of any Bond as a “private activity bond” within the meaning of Section 141 of the Code.

(4) Notwithstanding the foregoing, the Authority hereby reserves the right to elect to issue obligations the interest on which is not excludable from federal gross income for federal income tax purposes, if such election is made prior to the issuance of such obligations, and the covenants contained in Section 8.16 shall not apply to such obligations.

(Bond Resolution Section 8.16)

Notice as to Event of Default

The Authority shall notify each issuer of a Credit Facility and the Trustee in writing that an “Event of Default”, as such term is defined in Section 9.2 of the Bond Resolution, has occurred and is continuing, which notice shall be given within five (5) days after the Authority has obtained actual knowledge thereof; provided, however, that the Authority shall provide the issuer of a Credit Facility with immediate notice of any payment default after the Authority has obtained actual knowledge thereof.

(Bond Resolution Section 8.17)

Covenants with Credit Facility Providers

The Authority may make such covenants as it may in its sole discretion determine to be appropriate with any provider of a Credit Facility or Reserve Credit Facility for Bonds of any one or more Series that shall enhance the security or the value of such Bonds and thereby reduce the principal and interest requirements on such Bonds. Such covenants may be set forth in or provided for by the applicable Supplemental Resolution and shall be binding on the Authority, the Trustee, the Paying Agents, and all the owners of Bonds the same as if such covenants were set forth in full in the Bond Resolution.

(Bond Resolution Section 8.18)

Events of Default

Each of the following events is hereby defined as and declared to be and shall constitute an “Event of Default”:

(a)(i) if payment of the principal of or premium, if any, on any Bond shall not punctually be made when due and payable, whether at the stated maturity thereof or upon proceedings for the redemption thereof (whether by voluntary redemption or a mandatory sinking fund redemption or otherwise);

(ii) if payment of the interest on any Bond shall not punctually be made when due;

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(iii) if the provisions of any Supplemental Resolution with respect to mandatory Sinking Fund Installment payments or the redemption of Term Bonds therefrom, as the case may be, shall not punctually be complied with at the time and in the manner specified in such Supplemental Resolution; and any such occurrence shall continue for a period of thirty (30) days or such other lesser period as provided for in the Act (although any such occurrence with respect to Junior Lien Indebtedness or Subordinated Indebtedness shall not constitute an Event of Default);

(b)(i) if the moneys on deposit in the Interest Account are not sufficient, as of the twenty-fifth (25th) day of the month immediately preceding the date upon which an installment of interest falls due on the Bonds, to pay such installment in full; or

(ii) if the moneys on deposit in the Principal Account are not sufficient, as of the twenty-fifth (25th) day of the month immediately preceding the date upon which an installment of Serial Bonds falls due, to pay such installment in full; or

(iii) if the moneys on deposit in the Bond Retirement Account are not sufficient, as of the twenty-fifth (25th) day of the month immediately preceding the date upon which a Sinking Fund Installment of Term Bonds falls due, to pay such installment in full; and any such occurrence shall continue for a period of five (5) days (although any such occurrence with respect to Junior Lien Indebtedness or Subordinated Indebtedness shall not constitute an Event of Default);

(c) if the Authority shall fail to duly and punctually perform or observe any other of the covenants, agreements or conditions contained in the Bond Resolution or in the Bonds, on the part of the Authority to be performed, and such failure shall continue for sixty (60) days after written notice thereof from the Trustee or the holders of not less than twenty-five percent (25%) of the Bonds then Outstanding; provided that, if such failure shall be such that it cannot be corrected within such sixty (60) day period, it shall not constitute an Event of Default if corrective action is instituted within such period and diligently pursued until the failure is corrected;

(d) if an order, judgment, or decree shall be entered by any court of competent jurisdiction, with the consent or acquiescence of the Authority, or if such order, judgment or decree, having been entered without the consent or acquiescence of the Authority, shall not be vacated or set aside or discharged or stayed (or in case custody or control is assumed by said order, such custody or control shall not otherwise be terminated) within thirty (30) days after the entry thereof, and if appealed, shall not thereafter be vacated or discharged: (i) appointing a receiver, trustee or liquidator for the Authority or for the Toll Bridge System or any part of the Toll Bridge System; or (ii) assuming custody or control of the Toll Bridge System or any part thereof under the provisions of any law for the relief or aid of debtors; or (iii) approving a petition filed against the Authority under the provisions of 11 USC 90146, as amended (the “Bankruptcy Act”); or (iv) granting relief to the Authority under any amendment to said Bankruptcy Act, or under any other applicable bankruptcy act, which shall give relief substantially similar to that afforded by said Bankruptcy Act;

(e) if the Authority shall (i) admit in writing its inability to pay its debts generally as they become due; or (ii) file a petition in bankruptcy or seeking a composition of indebtedness; or (iii) make an assignment with respect to the Toll Bridge System for the benefit of its creditors; or (iv) file a petition or any answer seeking relief under the Bankruptcy Act referred to in the preceding clause, or under any amendment thereto, or under any other applicable bankruptcy act which shall give relief substantially the same as that afforded by said Bankruptcy Act; or (v) consent to the appointment of a receiver of the whole or any substantial part of the Toll Bridge System; or (vi) consent to the assumption by any court of competent jurisdiction under the provisions of any other law for the relief or aid of debtors of custody or control of the Authority or of the whole or any substantial part of the Toll Bridge System; and

(f) if the Authority shall fail or refuse to comply with the provisions of the New York Act or the Canadian Act.

The Trustee shall not be deemed to have knowledge of a default unless the Trustee shall have actual knowledge of such default or the Trustee shall have received written notice of such default making specific

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reference to such default as a default. The Trustee shall, however, always be deemed to have actual knowledge of a default under paragraph (a) or (b) of Section 9.2.

Upon the occurrence of an Event of Default, but subject to Section 9.14 of the Bond Resolution, and in each and every such case, so long as such Event of Default shall not have been remedied, unless the principal of all the Bonds shall have already become due and payable, the Trustee may, and upon the written request of the holders of not less than twenty-five percent (25%) of all Series of Bonds then Outstanding shall, in its own name:

(a) By mandamus or other suit, action or proceeding in law or in equity, enforce all rights of the Bondholders including the right to require the Authority to collect tolls and rentals adequate to carry out any agreement as to or pledge of such tolls and rentals and to require the Authority to carry out any other agreements with the Bondholders and to perform its and their duties under the Act; or any of them;

(b) Bring suit upon the Bonds;

(c) By action or suit in equity, require the Authority to act as if it were the trustee of an express trust for the Bondholders;

(d) By action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders;

(e) Declare all Bonds due and payable and if all defaults shall be made good, then with the consent of the holders of twenty-five percent (25%) of the principal amount of the Bonds then Outstanding, to annul such declaration and its consequences; and

(f) With or without entry and whether or not all of the Bonds have been declared due and payable foreclose the lien of the Bonds under the New York Act and the Canadian Act by actions, suits or other appropriate proceedings for that purpose in accordance with and subject to the provisions and requirements of laws of New York, of Canada and of the Province of Ontario, in such cases made and provided. Upon the commencement of any such action, suit or proceeding or at any time during its pendency the Trustee shall be entitled as of right to the appointment of a receiver who may enter and take possession of the assets and property of the Authority or any part or parts thereof and operate and maintain the same and collect and receive all Tolls, rentals and other revenues thereafter arising therefrom in the same manner as the Authority itself might do and deposit all such moneys in a separate account and apply the same in such manner as the Court shall direct. In any such suit, action or proceeding by the Trustee, the fees, counsel fees and expenses of the Trustee and of the Receiver, if any, shall constitute proper disbursements and all costs and disbursements allowed by the Court shall be a first charge on any tolls, rentals and other revenues derived from such assets.

(Bond Resolution Section 9.2)

Application of Revenues in an Event of Default

The Authority covenants that if an Event of Default shall have happened and shall not have been remedied, upon demand of the Trustee, the Authority shall pay over to the Trustee (i) forthwith, all moneys, securities and funds then held by the Authority and pledged under the Bond Resolution, and (ii) as promptly as practicable after receipt thereof, all Pledged Revenues.

During the continuance of an Event of Default as defined in items (a) through (c) of Section 9.2 of the Bond Resolution or of any other Event of Default as defined in Section 9.2 thereof resulting in an Event of Default as defined in items (a) through (c) of Section 9.2 of the Bond Resolution, the Pledged Revenues received by the Trustee or by a Bondholders committee pursuant to the provisions of the first paragraph of Section 9.6 of the Bond Resolution as the result of the taking of possession of the business and properties of the Toll Bridge System shall be applied by the Trustee firstly to the payment of all necessary and proper Operating Expenses of the Toll Bridge System and all other proper disbursements or liabilities made or incurred by the Trustee; secondly, to the then due

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and overdue payments into the Bond Fund, including the making up of deficiencies therein; and lastly, for any lawful purpose in connection with the Toll Bridge System.

In the event that at any time the funds held by the Trustee pursuant to the preceding paragraph shall be insufficient for the payment of the principal of, premium, if any, and interest then due on the Bonds and all amounts secured on a parity therewith pursuant to Section 3.2 of the Bond Resolution, such funds (other than funds held for the payment or redemption of particular Bonds or coupons) and all Pledged Revenues of the Authority and other of its moneys received or collected for the benefit or for the account of holders of the Bonds and for the other parties entitled thereto under Section 3.2 of the Bond Resolution shall be applied by the Trustee as follows:

(1) Unless the principal of all of the Bonds shall have become due and payable,

First, to the payment of all fees, expenses and other amounts due to the Trustee under the Bond Resolution, including the costs and expenses of every such action, suit and proceeding, including reasonable compensation to the Trustee, its agents, attorneys and counsel and of all expenses, liabilities and advances made or incurred by the Trustee, and to the payment of all taxes, assessments and liens superior to the lien of the Bond Resolution;

Second, to the payment to the persons entitled thereto pursuant to Section 3.2 of the Bond Resolution (i) all installments of interest then due (including any interest on overdue principal) on the Bonds in the order of maturity of such installments and (ii) all net payments due under any Qualified Swap Agreement in the order of the due dates of such installments and payments, earliest payments first, and if the amounts available shall not be sufficient to pay in full any installment of interest and any such net payments due under any such Qualified Swap Agreement due 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;

Third, to the payment to the persons entitled thereto of the principal and premium, if any, due and unpaid upon the Bonds at the time of such payment without preference or priority of any Bond over any other Bonds, and if the amounts available therefor shall not be sufficient to pay in full any principal and premium, if any, due and unpaid upon the Bonds at such time, then to the payment thereof, ratably, according to the amounts due respectively for principal and redemption premium on the Bonds, without any discrimination or preference;

Fourth, to the payment of the persons entitled thereto of any fees and charges of the Tender Agent, any Remarketing Agreement and the provider of any Additional Security (for amounts other than commitment fees therefor) which have become due, in the order of their due dates, and, if the amount available shall not be sufficient to pay in full all amounts due on any date, then to the payment thereof ratably, according to the amounts due on such date, to the Person entitled thereto, without any discrimination or preference; and

Fifth, if any surplus remains, it shall be paid to the Authority or to whomsoever may be lawfully entitled to receive the same or as any court or courts of competent jurisdiction shall direct.

(2) If the principal of all of the Bonds shall have become due and payable,

First, to the payment of the costs and expenses of every such action, suit and proceeding, including reasonable compensation to the Trustee, its agents, attorneys and counsel and of all expenses, liabilities and advances made or incurred by the Trustee, and to the payment of all taxes, assessments and liens superior to the lien of the Bond Resolution;

Second, to the payment of the principal and interest then due and unpaid upon the Bonds 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 Bonds, and all net payments due under any Qualified Swap Agreement, as and to the extent said obligations are secured on a parity with the Bonds pursuant to Section 3.2 of the Bond Resolution, ratably, according to the amounts due, to the persons entitled thereto without any discrimination or preference;

Third, to the payment of the persons entitled thereto of any fees and charges of the Tender Agent, any Remarketing Agreement and the provider of any Additional Security (for amounts other than commitment fees therefor) which have become due, in the order of their due dates, and, if the amount available shall not be sufficient

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to pay in full all amounts due on any date, then to the payment thereof ratably, according to the amounts due on such date, to the Person entitled thereto, without any discrimination or preference; and

Fourth, if any surplus remains, it shall be paid to the Authority or to whomsoever may be lawfully entitled to receive the same or as any court or courts of competent jurisdiction shall direct.

Whenever moneys are to be applied pursuant to the foregoing paragraphs, such moneys shall be applied by the Trustee, at such times, and from time to time, as it shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future.

If and whenever all overdue installments of interest on all Bonds, together with the reasonable and proper charges, expenses, and liabilities of the holders of the Bonds, their respective agents and attorneys, and all other sums payable by the Authority under the Bond Resolution including the principal of and premium, if any, on all Bonds which shall then be payable, shall either be paid in full by or for the account of the Authority or provision satisfactory to the Trustee shall be made for such payment, and all defaults under the Bond Resolution or the Bonds shall be made good and secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate therefor, the Trustee shall pay over to the Authority all of its moneys, securities, funds and Pledged Revenues then remaining unexpended in the hands of the Trustee (except moneys, securities, funds or Pledged Revenues deposited or pledged, or required by the terms of the Bond Resolution to be deposited or pledged, with the Trustee), control of the business and possession of the property of the Authority shall be restored to the Authority, and thereupon the Authority and the Trustee shall be restored to their former positions and rights under the Bond Resolution, and all Pledged Revenues shall thereafter be applied as provided in Article VI. No such payment over to the Authority by the Trustee or resumption of this application of Pledged Revenues as provided in Article VI shall extend to or affect any subsequent default under the Bond Resolution or impair any right consequent thereon.

(Bond Resolution Section 9.5)

Limitation of Remedies; Venue

(A) The remedies of the Bondholders and of the Trustee are subject to the limitations that before declaring the principal of all Bonds due and payable, the Trustee shall first give notice in writing to the Authority and to the Attorney General of the State of New York and if, when such notice is given to the Attorney General, the Legislature of the State of New York shall be in session, the Trustee shall not declare the principal of the Bonds due before the Legislature of the State of New York adjourns sine die or if the Legislature of the State of New York be not then in session, the Trustee shall not declare the principal of the Bonds due until such an adjournment of the next regular session. If at such session the Legislature of the State of New York shall take any action as a result of which past due principal and interest, with interest on past due interest, together with fees, counsel fees and expenses of the Trustee and of the Receiver, if any, as fixed by the Court, shall be paid within sixty (60) days of adjournment, default in the payment thereof shall thereby be remedied. Venue for any and all proceedings brought by the Trustee on behalf of the Bondholders shall be laid in the Supreme Court, State of New York, County of Erie.

(B) The remedies of the Bondholders and of the Trustee are subject to the limitation that before taking any proceeding to enforce such remedies, or any of them, the Trustee shall first give notice in writing to the Attorney General of Canada; and if, when such notice is given to the said Attorney General, Parliament shall be in session, the Trustee shall not declare the principal of the Bonds due before Parliament prorogues; provided, however, that Parliament has been in session for at least four weeks after notification shall have been given to the Attorney General as aforesaid. If Parliament be not then in session, or has not been in session for at least four weeks after notification shall have been given to the Attorney General as aforesaid, the Trustee shall not declare the principal of the Bonds due until the next regular session of Parliament is ended by prorogation. If at any session of Parliament referred to in Section 9.14, Parliament shall take any action as a result of which past due principal and interest, with interest on past due interest, together with fees, counsel fees and expenses of the Trustee and of the Receiver, if any, as fixed by the Court of competent jurisdiction shall be paid within sixty (60) days after prorogation, default in the payment thereof shall thereby be remedied.

(Bond Resolution Section 9.14)

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Amending and Supplementing the Bond Resolution Without Consent of Holders of Bonds

The Authority, from time to time and at any time and without the consent or concurrence of any holder of any Bond, may adopt a resolution amendatory or supplemental to the Bond Resolution (defined and referred to as a “Supplemental Resolution”), (i) for the purpose of providing for the issuance of Bonds pursuant to the provisions of Article III of the Bond Resolution or the issuance of Junior Lien Indebtedness or Subordinated Indebtedness; or (ii) if the provisions of such Supplemental Resolution shall not adversely affect the rights of the holders of the Bonds then Outstanding, for any one or more of the following purposes:

(1) to make any changes or corrections in the Bond Resolution as to which the Authority shall have been advised by an Opinion of Counsel that the same are verbal corrections or changes or are required for the purpose of curing or correcting any ambiguity or defective or inconsistent provision or omission or mistake or manifest error contained in the Bond Resolution, or to insert in the Bond Resolution such provisions clarifying matters or questions arising under the Bond Resolution as are necessary or desirable;

(2) to add additional covenants and agreements of the Authority for the purpose of further securing the payment of the Bonds or any one or more Series of Bonds;

(3) to surrender any right, power or privilege reserved to or conferred upon the Authority by the terms of the Bond Resolution;

(4) to confirm as further assurance any lien, pledge or charge, or the subjection to any lien, pledge, or charge, created or to be created by the provisions of the Bond Resolution;

(5) to grant or to confer upon the holders of the Bonds any additional rights, remedies, powers, authority or security that lawfully may be granted to or conferred upon them, or to grant to or to confer upon the Trustee for the benefit of the holders of the Bonds any additional rights, duties, remedies, powers, authority or security or to provide for additional security; and

(6) to make any other change which the Authority deems necessary or desirable.

(Bond Resolution Section 10.1)

Amending and Supplementing the Bond Resolution With Consent of Holders of Bonds

With the consent of the holders of not less than a majority of the Bonds then Outstanding, the Authority from time to time and at any time may adopt a resolution amendatory or supplemental to the Bond Resolution (also defined and referred to as a “Supplemental Resolution”) for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Bond Resolution, or modifying or amending the rights and obligations of the Authority under the Bond Resolution, or modifying or amending in any manner the rights of the holders of the Bonds then Outstanding; provided, however, that, without the specific consent of the holder of each such Bond which would be affected thereby, no Supplemental Resolution amending or supplementing the provisions of the Bond Resolution shall: (1) change the fixed maturity date for the payment of the principal of any Bond or the dates for the payment of interest thereon or the terms of the redemption price (or the redemption premium) payable upon the redemption or prepayment there for or the interest rate thereon; or (2) reduce the aforesaid percentage of Bonds, the holders of which are required to consent to any Supplemental Resolution amending or supplementing the provisions of the Bond Resolution; or (3) give to any Bond or Bonds any preference over any other Bond or Bonds secured hereby; or (4) authorize the creation of any pledge of the Net Pledged Revenues and other moneys pledged under the Bond Resolution, prior, superior or equal to the pledge of and lien and charge thereon created herein for the payment of the Bonds except to the extent provided in Article III of the Bond Resolution; or (5) deprive any holder of the Bonds in any material respect of the security afforded by the Bond Resolution; provided further, however, that without the specific consents of the holders of not less than a majority in principal amount of the Term Bonds then Outstanding and affected thereby, no Supplemental Resolution amending or supplementing the provisions of the Bond Resolution shall (a) change the amount of any Sinking Fund Installments for the retirement of Term Bonds or the due dates of such installments or the terms for the purchase or redemption thereof from such installments, or (b) reduce the aforesaid percentage of Term Bonds, the holders of which are required to consent to any such Supplemental Resolution. (Nothing in this paragraph, however, shall be construed as making necessary the

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approval of the holders of the Bonds of the adoption of any Supplemental Resolution authorized by the provisions of Section 10.1 of the Bond Resolution.)

(Bond Resolution Section 10.2)

Discharge of Liens and Pledges; Bonds No Longer Outstanding and Deemed to be Paid Under the Bond Resolution

The obligations of the Authority under the Bond Resolution and the liens, pledges, charges, trusts, covenants and agreements of the Authority in the Bond Resolution made or provided for, shall be fully discharged and satisfied as to any Bond and such Bond shall no longer be deemed to be Outstanding under the Bond Resolution,

(i) when such Bond shall have been cancelled, or shall have been surrendered for cancellation or is subject to cancellation, or shall have been purchased by the Trustee from moneys held under the Bond Resolution; or

(ii) as to any Bond not cancelled or surrendered for cancellation or subject to cancellation or so purchased, when payment of the principal of and premium, if any, on such Bond, plus interest on such principal to the due date thereof (whether such due date be by reason of maturity or upon redemption or prepayment, or otherwise) either (a) shall have been made or caused to be made in accordance with the terms thereof, or (b) shall have been provided for by irrevocably depositing with the Trustee or a Paying Agent for such Bond, in trust, for such payment either (1) moneys sufficient to make such payment or (2) Pre-Refunded Municipal Bonds or Investment Securities (which for the purposes of this Article shall include only those obligations described in items (a) of the definition of Investment Securities in Section 1.1 of the Bond Resolution which constitute United States Government Obligations (excluding any and all indebtedness of the Government National Mortgage Association) maturing as to principal and interest in such amount and at such times as will insure the availability of sufficient moneys to make such payment, whichever the Authority deems to be in its best interest, and all necessary and proper fees, compensation and expenses of the Trustee and the Paying Agent pertaining to the Bond with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and said Paying Agent; provided that if the Authority shall pay or cause to be paid to any Swap Provider all obligations, if any, under the Qualified Swap Agreement and the Qualified Swap Agreement shall have terminated, then the liens, pledges, charges, trusts, covenants and agreements of the Authority herein made or provided for, shall be fully discharged and satisfied. At such time as a Bond shall be deemed to be no longer outstanding under the Bond Resolution, as aforesaid, such Bond, except for the purposes of any payment from such moneys, Pre-Refunded Municipal Bonds or Investment Securities, shall no longer be secured by or entitled to the benefits of the Bond Resolution. In addition, upon defeasance of all of the Outstanding Bonds, the Trustee shall, upon request of the Authority, pay over or deliver to the Authority all moneys or securities held by it pursuant to the Bond Resolution other than moneys and securities comprising Defeasance Moneys.

Notwithstanding the foregoing, in the case of a Bond which is to be redeemed or otherwise prepaid prior to its stated maturity, no deposit under clause (b) of subparagraph (ii) above shall constitute such payment, discharge and satisfaction as aforesaid until such Bond shall have been irrevocably designated for redemption or prepayment and proper notice of such redemption or prepayment shall have been previously published in accordance with Section 5.3 of the Bond Resolution or provision satisfactory to the Trustee shall have been irrevocably made for the giving of such notice.

Any such moneys so deposited with the Trustee or Paying Agent for the Bonds as provided in this Section may at the direction of the Authority also be invested and reinvested in Investment Securities, maturing in the amounts and times as hereinbefore set forth. All income from all Pre-Refunded Municipal Bonds and Investment Securities in the hands of the Trustee or Paying Agent pursuant to this Section which is not required for the payment of the Bonds and interest and premium thereon with respect to which such moneys shall have been so deposited, shall be paid to the Authority for deposit in the Revenue Fund free and clear of any trust, lien, security interest, pledge or assignment securing any Bonds or otherwise existing under the Bond Resolution.

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Notwithstanding any provision of any other section of the Bond Resolution which may be contrary to the provision of Section 12.1, all moneys, Pre-Refunded Municipal Bonds or Investment Securities set aside and held in trust pursuant to the provisions of Section 12.1 for the payment of Bonds (including interest and premium thereof, if any) shall be applied to and used solely for the payment of the particular Bond (including interest and premium thereof, if any) with respect to which such moneys and Investment Securities have been so set aside in trust.

Anything in Article X of the Bond Resolution to the contrary notwithstanding, if moneys, Pre-Refunded Municipal Bonds or Investment Securities have been deposited or set aside with the Trustee or a Paying Agent pursuant to this Section for the payment of a specific Bond and such Bond shall be deemed to have been paid and to be no longer Outstanding under the Bond Resolution as provided in Section 12.1, but such Bond shall not have in fact been actually paid in full, no amendment to the provisions of Article XII shall be made without the consent of the holder of each Bond affected thereby.

The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously executed and delivered, which the Authority may have acquired in any manner whatever, and such Bonds upon such surrender for cancellation shall be deemed to be paid and no longer Outstanding under the Bond Resolution.

(Bond Resolution Section 12.1)

Effect of Saturdays, Sundays and Legal Holidays

Whenever the Bond Resolution requires any action to be taken on a Saturday, Sunday or legal holiday, such action shall be taken on the first Business Day occurring thereafter. Whenever in the Bond Resolution the time within which any action is required to be taken or within which any right will lapse or expire shall terminate on a Saturday, Sunday or legal holiday, such time shall continue to run until midnight on the next succeeding Business Day.

(Bond Resolution Section 13.7)

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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT

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BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY TOLL BRIDGE SYSTEM REVENUE BONDS, SERIES 2017

______CONTINUING DISCLOSURE AGREEMENT ______

THIS CONTINUING DISCLOSURE AGREEMENT (the “Agreement”), dated June __, 2017, is made by and between the Buffalo and Fort Erie Public Bridge Authority (the “Authority”) and U.S. Bank National Association, as trustee (the “Trustee”), under the Resolution (as defined herein), and is executed and delivered in connection with the issuance of the Authority’s $______principal amount Toll Bridge System Revenue Bonds, Series 2017 (the “Bonds”).

In order to permit the Underwriter (as defined herein) to comply with the provisions of Rule 15c2-12 in connection with the public offering of the Bonds, the parties hereto, in consideration of the mutual covenants herein contained and other good and lawful consideration, hereby agree, for the sole and exclusive benefit of the Owners and, for the purposes of Section 5, beneficial owners of Bonds, as follows:

ARTICLE I Definitions

Section 1.1. Definitions. The following terms used in this Agreement shall have the following respective meanings:

(1) “Annual Information” means the information specified in Article 2.1 or operating data with respect to the Authority, for each fiscal year of the Authority. Annual Information shall include Audited Financial Statements, if available, or Unaudited Financial Statements.

(2) “Audited Financial Statements” means the annual financial statements, if any, of the Authority, audited by such auditor as shall then be required or permitted by State law or the Resolution. Audits shall be conducted in accordance with GAAS. Audited Financial Statements shall be prepared in accordance with GAAP; provided, however, that the Authority may from time to time, if required by federal, applicable Canadian or State legal requirements, modify the basis upon which its financial statements are prepared. Notice of any such modification shall be electronically filed with the MSRB and shall include a reference to the specific federal, Canadian or State law or regulation describing such accounting basis.

(3) “Bond Resolution” means the Authority’s Toll Bridge System Revenue Bond Resolution adopted by the Authority on July 26, 1995, as amended and restated on April 25, 2014.

(4) “EMMA” shall mean the Electronic Municipal Market Access system described in Securities Exchange Act Release No. 34-59062 (or any successor electronic information

E-1 system) and maintained by the MSRB as the sole repository for the central filing of electronic disclosure pursuant to Rule 15c2-12.

(5) “Fifth Supplemental Resolution” means the Fifth Supplemental Toll Bridge System Revenue Bond Resolution Authorizing Up To $75,000,000 Toll Bridge System Revenue Bonds, Series 2017 adopted by the Authority on May 18, 2017.

(6) “GAAP” means generally accepted accounting principles for governmental units as prescribed by the Governmental Accounting Standards Board.

(7) “GAAS” means generally accepted auditing standards for governmental units as in effect from time to time in the United States of America.

(8) “Listed Event” means any of the events listed in Section 2.2 hereof.

(9) “Listed Event Notice” means written or electronic notice of a Listed Event.

(10) “MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, as amended, or any successor thereto or to the functions of the MSRB as contemplated by this Disclosure Agreement.

(11) “Owner” shall mean the registered owner of any Bond or Bonds.

(12) “Resolution” means, collectively, the Bond Resolution and the Fifth Supplemental Resolution.

(13) “Rule” means Rule 15c2-12(b)(5) promulgated by the SEC under the Securities Exchange Act of 1934 (17 CFR Part 240, §240.15c2-12), as in effect on the date of this Agreement, including any official interpretations thereof promulgated on or prior to the effective date of this Agreement.

(14) “SEC” means the United States Securities and Exchange Commission.

(15) “Unaudited Financial Statements” means the same as Audited Financial Statements, except that they shall not have been audited.

(16) “Underwriter” means Morgan Stanley & Co. LLC, the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

In addition to the foregoing, the following terms have the meanings ascribed thereto in the Resolution: “Act”, “Event of Default”, “Operating Expenses”, “Outstanding”, “Peace Bridge”, “Pledged Revenues”, “State”, “Toll Bridge System”, and “Unpledged Revenues”.

ARTICLE II The Undertaking

Section 2.1. Annual Information. (a) The Authority shall electronically file with the EMMA system maintained by the MSRB, the Annual Information with respect to each fiscal year

E-2 of the Authority, commencing with the Authority’s fiscal year ending December 31, 2017, by no later than 120 days after the end of the respective fiscal year. The Annual Information shall consist of the following:

(i) current toll rates for all classes of vehicles; (ii) current and historical statements of all major categories of Pledged Revenues and Unpledged Revenues and Authority Operating Expenses; (iii) current and historical presentation of traffic on the Peace Bridge; (iv) status of the most recent Toll Bridge System inspection by the Authority, its Consulting Engineer, or other professional engineer or engineers retained for the purpose of such inspection; (v) status of the Authority’s capital planning process; (vi) statement of the Authority’s debt service requirements, including current estimate of debt service coverage; (vii) Audited Financial Statements, unless Audited Financial Statements are not then available, in which case Unaudited Financial Statements shall be so electronically filed with the MSRB followed by Audited Financial Statements when the same shall have become available.

(b) Such narrative explanation as may be necessary to avoid misunderstanding and to assist the reader in understanding the presentation of financial information and operating data and in judging the financial condition of the Authority.

(c) The Authority shall electronically file with the MSRB, in a timely manner, notice of any failure of the Authority to provide the Annual Information by the date specified in subsection (a) above.

Section 2.2. Notices of Listed Events. (a) The Authority hereby undertakes, for the benefit of the Owners of the Bonds, to electronically file with the MSRB and the Trustee, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of any of the following fourteen events with respect to the Bonds:

(i) principal and interest payment delinquencies; (ii) non-payment related defaults, if material; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) 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

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respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

(vii) modifications to rights of Owners, if material; (viii) Bond calls, if material, and tender offers (the giving of notice of regularly scheduled mandatory sinking fund redemption shall not be deemed material for this purpose under clause (a) of this Section 2.2);

(ix) defeasances; (x) release, substitution, or sale of property securing repayment of the Bonds, if material; (xi) rating changes;

(xii) bankruptcy, insolvency, receivership or similar event of the Authority;

(xiii) the 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 an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(xiv) appointment of a successor or additional Trustee or the change of the name of the Trustee, if material.

______Note to clause (xii): For the purposes of the event identified in clause (xii) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Authority in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the Authority, 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 Authority.

(b) The Trustee shall use its best efforts to promptly advise the Authority whenever, in the course of performing its duties as Trustee under the Resolution, the Trustee has actual notice of an occurrence which, if material, would require the Authority to electronically file with the MSRB a Listed Event Notice hereunder; provided, however, that the failure of the Trustee so to advise the Authority shall not constitute a breach by the Trustee of any of its duties and responsibilities hereunder or under the Resolution and the Trustee shall have no liability to any person in connection with a failure to notify pursuant to this paragraph (b).

Section 2.3. Additional Disclosure Obligations. The Authority acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Authority, and that under some circumstances compliance with this Agreement, without additional disclosures or other action, may not fully discharge all duties and obligations of the Authority under such laws.

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Section 2.4. Additional Information. Nothing in this Agreement shall be deemed to prevent the Authority from disseminating or causing to be disseminated any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Information filing or Listed Event Notice, in addition to that which is required by this Agreement. If the Authority chooses to include any information in any Annual Information filing or Listed Event Notice in addition to that which is specifically required by this Agreement, the Authority shall have no obligation under this Agreement to update such information or include it in any future Annual Information filing or Listed Event Notice.

Section 2.5. MSRB Prescribed Identifying Information. All notices, documents and information filed with the MSRB pursuant to this Agreement shall be accompanied by identifying information prescribed from time to time by the MSRB.

ARTICLE III Operating Rules

Section 3.1. Reference to Other Documents. It shall be sufficient for purposes of Section 2.1 hereof if the Authority electronically files with the MSRB Annual Information by specific reference to documents previously filed with the SEC; provided, however, that if the document is an official statement (or similar disclosure document), it shall have been electronically filed with the MSRB and need not have been filed elsewhere. The audited or unaudited financial statements of the Authority may be provided in the same manner.

Section 3.2. Submission of Information. Annual Information may be electronically filed with the MSRB in one electronic file or multiple electronic files, and at one time or in part from time to time.

Section 3.3. Listed Event Notices. Each Listed Event Notice shall be so captioned and shall prominently state the title, date and CUSIP numbers of the Bonds.

Section 3.4. [Reserved].

Section 3.5. Fiscal Year. Annual Information shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Authority’s current fiscal year is January 1 - December 31, and the Authority shall promptly electronically file with the MSRB and notify the Trustee of any change in its fiscal year.

ARTICLE IV Remedies

Section 4.1. Remedies. If any party hereto should fail to comply with any provision of this Agreement, then the other party and, as a direct or third-party beneficiary, as the case may be, any Owner of Bonds may enforce, for the equal benefit and protection of all Owners similarly situated, by mandamus or other suit or proceeding at law or in equity, this Agreement against such party and any of its officers, agents and employees, and may compel such party or any such officers, agents or employees to perform and carry out their duties under this Agreement; provided, however, that the sole and exclusive remedy for breach of this Agreement shall be an E-5 action to compel specific performance of the obligations of such party hereunder and no person or entity shall be entitled to recover monetary damages hereunder under any circumstances; and provided further, that the rights of any Owner to challenge the adequacy of the information provided in accordance with Section 2 hereunder are conditioned upon the provisions of the Resolutions with respect to the enforcement of remedies of Owners upon the occurrence of an Event of Default described in Section 9.2 of the Bond Resolution as though such provisions applied hereunder. The Authority and the Trustee each reserve the right, but shall not be obligated, to enforce the obligations of the other. Failure by any party to perform its obligations hereunder shall not constitute an Event of Default under the Resolutions or any other agreement executed and delivered in connection with the issuance of the Bonds. In consideration of the third-party beneficiary status of beneficial owners of Bonds pursuant to Section 5.3, beneficial owners shall be deemed to be Owners of Bonds for purposes of this Section 4.1.

ARTICLE V Termination, Amendment and Enforcement

Section 5.1. Termination. The Authority’s and the Trustee’s obligations under this Agreement shall remain in full force and effect until such time as (i) payment in full of all of the Bonds or (ii) upon defeasance of the Bonds pursuant to Section 12.1 of the Bond Resolution; provided, however, that if Rule 15c2-12 (or any successor provision) shall be amended, modified or changed so that all or any part of the information currently required to be provided thereunder shall no longer be required to be provided thereunder, then such information shall no longer be required to be provided hereunder; and provided further, that if and to the extent Rule 15c2-12 (or successor provision), or any provision thereof, shall be declared by a court of competent and final jurisdiction to be, in whole or in part, invalid, unconstitutional, null and void, or otherwise inapplicable to the Bonds, then the information required to be provided hereunder, insofar as it was required to be provided by a provision of Rule 15c2-12 so declared, shall no longer be required to be provided hereunder. Upon any defeasance of the Bonds, the Authority shall electronically file with the MSRB notice of such defeasance and such notice shall state whether the Bonds have been defeased to maturity or to redemption and the timing of such maturity or redemption. Upon any other termination pursuant to this Section 5.1, the Authority shall electronically file with the MSRB of such termination.

Section 5.2. Amendment. (a) This Agreement may be amended, by written agreement of the parties, without the consent of the Owners of the Bonds (except to the extent required under clause (3)(ii) below), if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the Authority or the type of business conducted thereby, (2) the undertakings set forth herein, as amended, would have complied with the requirements of the Rule as of the date of this Agreement, after taking into account any amendments to, or interpretations by the staff of the SEC of the Rule, as well as any change in circumstances, (3) either (i) the Authority shall have delivered to the Trustee an opinion of nationally recognized bond counsel, acceptable to the Authority, addressed to the Authority and the Trustee, to the effect that the amendment does not materially impair the interests of the Owners of the Bonds or (ii) the Owners of the Bonds consent to the amendment to this Agreement pursuant to the same procedures as are required for amendments to the Resolution with consent of Owners of Bonds pursuant to Section 10.2 of the Resolution as in effect on the date of this E-6

Agreement, and (4) the Authority shall have electronically filed with the MSRB copies of such opinion(s) and amendment. The interests of Owners of the Bonds shall be deemed not to have been materially impaired by an amendment (A) to add a dissemination agent, to the extent permitted or required by the SEC, for the information to be provided hereunder and to make any necessary or desirable provisions with respect thereto, (B) to evidence the succession of another entity to the Trustee and the assumption by any such successor to the obligations of the Trustee hereunder, or (C) to add to the obligations of the Authority for the benefit of the Owners of the Bonds, or to surrender any right or power herein conferred upon the Authority.

(b) In addition to subsection (a) above, this Agreement may be amended and any provision of this Agreement may be waived, by written agreement of the parties, without the consent of the Owners of the Bonds, if all of the following conditions are satisfied: (1) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date of this Agreement which is applicable to this Agreement, (2) the Authority shall have delivered to the Trustee an opinion of nationally recognized bond counsel, addressed to the Authority and the Trustee, to the effect that performance by the Authority and Trustee under this Agreement as so amended or giving effect to such waiver, as the case may be, will not result in a violation of the Rule and (3) the Authority shall have electronically filed with the MSRB copies of such opinion and amendment.

(c) To the extent any amendment to this Agreement results in a change in the type of financial information or operating data provided pursuant to this Agreement, the first Annual Information provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change.

(d) If an amendment is made to the basis on which financial statements are prepared, the Annual Information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial data. To the extent reasonably feasible such comparison shall also be quantitative. A notice of any such change in accounting principles shall be electronically filed with the MSRB.

Section 5.3. Benefit; Third-Party Beneficiaries. The provisions of this Agreement shall inure solely to the benefit of the Owners from time to time of the Bonds. Beneficial owners of Bonds shall be third-party beneficiaries of this Agreement. No person other than those described in Section 4.1 shall have any right to enforce the provisions hereof or any other rights hereunder

ARTICLE VI Miscellaneous

Section 6.1. Duties, Immunities and Liabilities of Trustee. The Trustee shall have only such duties under the Agreement as are specifically set forth in this Agreement, and the Authority agrees to indemnify and save the Trustee, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder or in connection herewith, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding

E-7 liabilities due to the Trustee’s negligence or willful misconduct in the performance of its duties hereunder. Such indemnity shall be separate from and in addition to that provided to the Trustee under the Resolution. The obligations of the Authority under this Section shall survive resignation or removal of the Trustee and payment of the Bonds.

Section 6.2. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Agreement shall be instituted in a court of competent jurisdiction in the State; provided, however, that to the extent that this Agreement addresses matters of federal securities laws, including Rule 15c2 12, this Agreement shall be construed in accordance with such federal securities laws and official interpretations thereof.

Section 6.3. Counterparts. This 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.

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IN WITNESS WHEREOF, the parties have each caused this Agreement to be executed by their duly authorized representatives, and the Authority has caused its corporate seal to be hereunto affixed and attested by an authorized representative, all as of the date first above written.

BUFFALO AND FORT ERIE PUBLIC BRIDGE AUTHORITY as Obligated Person

By:______Authorized Signatory

U.S. BANK NATIONAL ASSOCIATION as Trustee

By:______Authorized Signatory

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APPENDIX F

Upon the delivery of the Series 2017 Bonds, Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority, will deliver its approving opinion substantially in the following form:

[Date of Closing]

Buffalo and Fort Erie Public Bridge Authority 1 Peace Bridge Plaza Buffalo, New York 14213

Ladies and Gentlemen:

We have acted as bond counsel to the Buffalo and Fort Erie Public Bridge Authority (the “Authority”) in connection with the issuance of $______aggregate principal amount of the Authority’s Toll Bridge System Revenue Bonds, Series 2017 (the “Bonds”), issued pursuant to the Buffalo and Fort Erie Public Bridge Authority Act, Chapter 824 of the Laws of New York of 1933, as amended (the “New York Act”), and an Act of the Seventeenth Parliament of Canada, 24 25 George V, assented to March 28, 1934, as amended (the “Canadian Act” and together with the New York Act, the “Act”), the Authority’s Toll Bridge System Revenue Bond Resolution adopted by the Authority on July 26, 1995, as amended and restated on April 25, 2014 (as so amended and restated, the “General Resolution”), and the Fifth Supplemental Resolution, adopted by the Authority on May 18, 2017 (the “Fifth Supplemental Resolution” and collectively with the General Resolution, the “Resolution”). The Bonds are being issued for the purposes set forth in the Supplemental Resolution. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Resolution.

In such connection, we have reviewed the Resolution, the Tax Certificate, dated the date hereof (the “Tax Certificate”), between the Authority and the Trustee, certificates of the Authority, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Authority. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents and of the legal conclusions contained in the opinions, referred to in the second and third paragraphs hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Resolution and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles and to the exercise of judicial discretion in appropriate cases. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum,

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choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Resolution or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Authority has the right and power under the Act to adopt the Resolution, and the Resolution has been duly and lawfully adopted by the Authority, is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms, and no other authorization of the Resolution is required.

2. The Bonds are valid and binding obligations of the Authority payable as provided in, and enforceable in accordance with their terms and terms of, the Resolution and entitled to the benefits of the Act and the Resolution, and such Bonds have been duly and validly authorized and issued in accordance with law, including the Act, and in accordance with the Resolution.

3. The Resolution creates the valid and binding pledge which it purports to create of the Pledged Revenues and moneys on deposit in the funds and accounts created thereby for repayment of the Bonds, including the investments thereof and the proceeds of such investments, if any, subject only to the provisions of the General Resolution permitting the application thereof to the purposes and on the terms and conditions set forth in the General Resolution.

4. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Interest on the Bonds is exempt from personal income taxes imposed by the State of New York and any political subdivision thereof (including The City of New York). We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

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Buffalo and Fort Erie Public Bridge Authority • Toll Bridge System Revenue Bonds, Series 2017