Bexar County, Texas; General Obligation

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Primary Credit Analyst: Lauren H Spalten, Dallas (1) 214-871-1421; [email protected] Secondary Contact: Horacio G Aldrete-Sanchez, Dallas (1) 214-871-1426; [email protected]

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Outlook

Related Criteria And Research

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1155J1fS ~ 30fJU22FiE55 » r Bexar County, Texas; General Obligation

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Standard & Poor's Ratings Services assigned its 'AA+' rating to Bexar County, Texas' series 2013B combination tax and revenue certificates of obligation. At the same time, Standard & Poor's affirmed its 'AA+' long-term rating and underlying rating (SPUR)on the county's general obligation (GO) debt outstanding. The outlook on all ratings is stable.

The ratings reflect our view of the county's:

• Diverse economy, which has a strong military and tourism presence, with a growing presence of various other sectors; • Very diverse property tax base; • Very strong financial position; and • Moderately high overall debt burden due mostly to the significant issuance of underlying entities.

The county's limited ad valorem tax pledge secures the certificates of obligation. Further security is provided by a subordinate lien on and pledge of certain net revenues derived from the operation of the county's parking facilities. County officials will use certificate proceeds primarily to fund capital improvement projects related to county facilities, to fund technology-related costs, to purchase vehicles replacement and equipment purchases, and to purchase energy conservation equipment for the county.

The approximately 1,248-square-mile county is located in south-central Texas and encompasses 21 incorporated cities, including San Antonio, which is the county's seat and main economic engine. With a population of about 1.7 million, the county remains the state's fourth most populous county. The military continues to provide significant strength and stability to the local economy with an annual economic impact of more than $13 billion. Tourism also continues to thrive in the county, with attractions that draw millions of visitors each year. The recent expansion of the San Antonio Riverwalk, a major tourist attraction in the county, has spurred continued development and recreational improvements around the expansion sites. The growing presence of medical and biomedical companies and of financial institutions has helped to diversify the economy beyond the traditional military and tourism anchors. Eight financial institutions are headquartered in San Antonio as well as four regional headquarters. In addition, Toyota Motor Corp. operates a truck manufacturing facility in San Antonio with more than 2,000 employees.

Primary employers in the county for 2011 included:

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115591ft ~ 30002'lf>fS5 Summary: Bexar County, Texas; General Obligation

• Lackland Air Force Base (38,776 employees), • Fort Sam Houston - U.S. Army Base (30,585), • H.E.B. Food Stores (18,066), • Northside Independent School District (16,567), • Randolph Air Force Base (16,017), and • USAA (15,000).

The county, particularly the southern portion, continues to benefit from the booming oil and gas production from the Eagle Ford Shale. In addition to adding several hundred new jobs either directly with oil and gas sector jobs or indirectly in related or supporting fields, the shale has attracted several companies, including Baker Hughes and Halliburton, to establish sites in the county. In order to increase distribution, the railroad has also expanded. Aside from the surge of oil and gas production, several existing companies within the county have plans for expansion, such as USAA, which announced earlier this year that it planned to add about 1,000 new jobs. Maruchan, an American producer of products such as ramen noodles, is in the process of constructing a noodle factory in the county that is expected to generate about 500 new jobs. In addition, construction continues of various multifamily housing and mixed-use development projects in and around the downtown area.

The county's net taxable assessed value (AV)increased substantially in the years leading up to fiscal 2010 when net AV reached approximately $98.57 billion. AV declined slightly in fiscal 2011 by about 1%,then increased by a cumulative 1.6% in fiscal years 2012 and 2013 to approximately $98.92 billion. The l O leading property taxpayers in the county account for 4% of AV, which we consider very diverse. Wealth lags state and national levels, but has been improving overall. Fiscal 2012 estimated market value was strong, in our opinion, at $55,395 per capita, up from $48,298 in fiscal 2007. Per capita effective buying income is adequate, in our view, at 87% of the national level.

Bexar County's financial position remains very strong, in our view. The county ended fiscal 2012 with a total available general fund balance (a combination of assigned and unassigned general fund balances) of approximately $62.22 million, or 19.9% of operational expenditures, which we consider very strong. This ending fund balance reflects an approximately $6.3 million surplus in the general fund. For the current year, fiscal 2013, county officials conservatively anticipate ending the year with a total available general fund balance of approximately $65 million. For fisca12014, the county plans to adopt a balanced budget. The county continues to levy a total ad valorem tax rate of about 32.69 cents per $100 of AV.

The county provides retirement, disability, and death benefits for all of its full-time employees through a nontraditional defined benefit pension plan in the statewide Texas County and District Retirement System. As of Dec. 31, 2011 the county's actuarial value assets as a percent of actuarial accrued liability was 83.92%, with an unfunded accrued liability of approximately $125.23 million. The county's annual required pension contribution (ARC)for the year ended Sept. 30, 2012 totaled approximately $23.56 million, 100% of which the county contributed; the ARC represented about 3.5% of fisca12012 total governmental expenditures. An actuarial study (the county's third so far) was performed in September 2011, and showed that as of Oct. 1, 2010 the county's unfunded actuarial accrued liability for other postemployment benefits (OPEBs) was approximately $159 million and the county's ARC was $11.55 million. The county has continued to explore cost mitigation strategies and to develop a full funding plan to meet its OPEB liabilities.

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]955J9ES ~ 30002'LfiFS5 Summary: Bexar County, Texas; General Obligation

Bexar County's practices are considered "strong" under Standard & Poor's financial management assessment(FMA) methodology, indicating practices are strong, well embedded, and likely sustainable. County management has a comprehensive set of financial policies that include budget assumptions that are based on external economic studies and a conservative estimation of historical trend analysis. In addition, county management develops long-range financial and capital plans, and provides monthly budget reports to the commissioner's court.'The county's formal general fund balance policy requires the maintenance of general fiznd reserves of at least 10% of expenditures. In addition, the county adopted a formal debt management policy in 2007.

The county's net direct debt burden is very low, in our opinion, at just 1.2% of market value. Overlapping debt -- including anumber of cities and school districts, and in particular, San Antonio and several of its school districts -- is, in our view, moderately high as a percent of market value, at 8.5%, and moderate on a per capita basis, at $4,713. Debt service carrying charges in fiscal 2012 accounted for 14.22% of expenditures, which we consider moderate. We understand that the county has no plans to issue additional GO debt for at least the next 24 months.

The stable outlook reflects our anticipation that the county will continue to meet its stated reserve policy during the two-year outlook time frame. It is unlikely that we could change the ratings during the next two years. However, the continued improvement of the county's underlying economic indicators and the county's effective management of ongoing capital needs could place positive pressure on the ratings.

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USPF Criteria: GO Debt, Oct. 12, 2006

Bexar Cnty GO Unenhanced Ratittg AA+(SPUR)/Stable. Affirmed

San Antonio River Auth GO Unenhanced Rating AA+(SPUR)/Stable Affirmed San Antonio River Auth, Texas Bexar Cnty, Texas San Antonio River Auth (Bexar Cnty) GO Long Term Rating AA+/Stable. Affirmed

San Antonio River Auth(Bexar Cnty) channel imp rev bnds ser 2002 dtd 05/15!2002 due 07/01/2003-2025 2027 2029.2032

Unenhanced Rating AA+(SPUR)/Stable Affirmed Many issues are enhanced by bond insurance.

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1155E)1£S ~ 3000l.'L6ES5 Summary: Bexar County, Texas; General Obligation

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

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Ratings NW iSSU@ C3et~1IS New Issue Sale Information: $355,000,000 Combination Tax and Revenue Certificates of Obligation, Combination Tax and Revenue Certificates of Obligation, Series Series 20136, via negotiation the week of July 8. 2013B AAA Outstanding Debt Security: The certificates of obligation (COs) are secured by an annual property tax levied Limited Tax Bonds AAA against all taxable property within Bexar County, limited to $.80 per $100 taxable assessed Unlimited Tax Bonds AAA valuation (TAV). Additionally, the COs are payable from a subordinate lien on net revenues from the county's parking facilities. Rating Outlook Stable Purpose: CO proceeds to finance various public improvements. Final Maturity: June 15, 2043.

Key a~lCl~ DI"iVGI'S Sound Financial Management: The county's solid financial position has benefited from prudent stewardship during the recent economic slowdown as evidenced by a multiyear approach to controlling expenditure growth and limiting the scale of structural imbalances. Weak Debt Profile: The county's debt profile is characterized by a high overall debt burden and slow principal amortization. However, the county fully funds the annual pension contribution requirement, its debt service tax rate is modest, and carrying costs do not present an undue burden on resources.

Stable Economy: Population growth remains rapid. Although the local economy has diversified notably, the military remains a major economic factor that could be affected negatively by the unfolding sequestration of federal funds. The local economy is benefitting Related Research from rapid employment gains, enabling the county's unemployment rate to remain well below Bexar County, TX (April 2013] Bexar County, TX (January 2013) state and national averages despite robust labor force increases. Bexar County, TX (December 2012) Stalled Tax Base Gains: Slower residential building activity and modest tax base declines Fitch Affirms Bexar County, TX Venue Tax Bonds at 'A+'; Outlook Stable stalled previously rapid tax base growth. However, Fitch expects that the area's affordable (November 2012) home prices, ample developable land, and surging oil and gas activity at the nearby Eagle Ford Bexar County, TX (December 2011) Shale will aid the area's ongoing recovery. Rating Parity: The limited tax bonds are rated on par with the unlimited tax bonds due to the significant rate-raising flexibility under the rate limitation supporting the limited tax bonds. The county currently levies a combined $0.29 operations and debt service tax rate compared to the limit of $0.80.

$~a'~111C,~ ~t1S1~IV1~lS Unmitigated Debt Pressures: Rising debt beyond current expectations without offsetting Analysts Jose Acosta strengths in other credit factors could pressure the rating. +1 512 215-3726 jose.acostaLfitchrati ngs.com

Blake Roberts +1 512 215-3741 blake.roberts @fitchrati ngs.com

www.fitchratings.com July 2, 2013 _~~. .~~

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Credi#profile Rating History— U~tllt"t"lit~d TAX 4C1dS Bexar County, with an estimated 2013 population of 1.7 million, is home to San Antonio (GO outiooW bonds rated 'AAA' with a Stable Rating Outlook by Fitch Ratings), the seventh largest city in Ratin~_Action_ _Watch Date the U.S. AAA Affirmed Stable 6128113 AAA Armed Stable 4112113 AAA Affirmed Stable 1/24/13 Stl~~ ~1'Tl octant Within Diverse Econom AAA Affirmed Stable 12/5/11 Milita~ p y AAA Affirmed Stable 9114/11 military installations located AAA Affirmed Stable 719/10 Military and government sectors are prominent, with four large AAA Affirmed Stable si~~i~o within the county. Fitch views such military reliance cautiously, although the county has AAA Revised Stable 4/30110 realignment and base closure decisions. Relative to the AA+ Affirmed Stable 11117/09 benefitted substantially from recent na+ Affirmed Stable aisios larger economy, the projected impact of federal sequestration on civilian military employment is AA+ 5118109 Affirmed Stable modest. However, the impact of sequestration on military contracts with the area's defense AA+ Affirmed Stable 11113108 AA+ Affirmed Stable 6/11108 industry is still unfolding. Other leading employment sectors include domestic and international ,aA+ 8/13/07 Armed Stable trade, convention and tourism, medical and healthcare, financial services, and AA+ Armed Stable 8/8/07 AA+ Affirmed Stable 3/31/06 telecommunications. AA+ Affirmed Stable 916/05 AA+ Affirmed Stable 10/1/04 Eagle Ford Shale Affects Employment Base R~#111 HIStACf — The ongoing recovery from the past recession has been aided by recent employment hikes in LltYil'~~ T1C Ot~dS the leisure/hospitality and construction/mining sectors, fueled by surging oil and gas activity outioow within the nearby Eagle Ford Shale. As a result, the county's April 2013 unemployment rate of Rating Action Watch Date AAA Affirmed Stable 6128/13 5.8°/a still compares favorably to state and national averages of 6.1 %and 7.1 %, respectively, AAA Affirmed Stable 4/12/13 for the same period. AAA Affirmed Stable 1/24/13 --...... __—.__._.._...... ----.._....._...... _---..__...... _....---- ._...... _..-----..._...... --- -._....._._..._.... AAA Affirmed Stable 1215/11 p~-pp~r~y Value Trends AAA Affirmed Stable 9114111 Stalled Tax Base Growth AAA Affirmed Stable 7/9/10 ($000, Fiscal Year Ending Sept. 30) AAA Affirmed Stable 6111110 rowth flattened Itl fISC81 Year Taxable Assessed Value(TAV) %Change AAA Revised Stable 4130/10 Tax base g 2001 41,870,592 — AA+ Armed Stable 11117/09 2011 following numerous years Of 2002 45,800,671 9.4 AA+ Armed Stable 8/5109 double-digit growth, due to the steep AA+ Affirmed Stable 5/18/09 2003 49,789,196 8.7 AA+ Affirmed Stable 11113108 building downturn and falling base 2004 52,734,890 5.9 AA+ Affirmed Stable 6111108 values during the past recession. The 2005 57,047,025 8.2 AA+ Anrmed Stable 8113/07 AA+ Affirmed Stable 6/8107 modest 1.6% decline in fiscal 2012 2006 60,273,124 5.7 AA+ 65,437,181 8.6 Armed Stable 3/31/06 WaS recovered IIl fiscal 2013 and 2007 AA+ Affirmed Stable 916/05 2008 74,916,972 14.5 AA+ Armed Stable 1011/04 compares favorably to managemenYS 2009 86,921,986 16.0 AA+ Affirmed Stable 2110/04 C011S@NBtIV@ forecast Of a second 2010 97,312,378 12.0 1.6% decline. The preliminary TAV 2011 sa,569,sa~ ~.s estimate for fiscal 2014 is positive, 2o~z s~,432,199 (~.z> indicating a $6.6 billion, or 6.7% 2013 ss,919,2~s ~.s s.~ increase due entirely to new Zo~aa ~oa,537,567 BPrelim_,,_„__ inar~_TAV less $1 billion in successful ro ert tax.~eals_,_ construction. Net Of estimated property value protests, a still solid 4.7%-5.7% gain is anticipated by the county. County officials are conservatively projecting modest rates of TAV growth beyond fiscal 2014. About 70% of general fund revenue is derived from ad valorem taxes.

Related Criteria Strong Financial Profile Tax-Suppprted Rating Criteria (August zo~z> The county's financial position remains strong, boosted by a multiyear strategy to control U.S. Local Government Tax-Supported growth or reduce general fund expenditures starting in fiscal 2009 in order to minimize any Rating Criteria (August 2012) budget gaps by fiscal 2011. This proactive approach enabled the county to maintain its

Bexar County, Texa& ~ .luly 2. 2013 -~~::.,~

reserves above its 10% fund balance policy level despite sluggish tax-base trends during the economic slowdown.

General Fund Summary ($000, Audited Fiscal Years Ended Sept. 30) 2008 2009 2010 2011 2012 Revenues 312,691 319,254 327,190 324,926 333,527 Expenditures 312,679 316,698 315,951 312,995 312,397 Net Change 12 2,556 11,239 11,931 21,130 Transfers InlOther Sources 108 18 44 3 3 Transfers Out/Other Uses (2,366) (5,429) (5,208) (5,641) (14,755) Net Income (2,246) (2,855) 6,075 6,293 6,378

Total Fund Balance 51,489 48,635 54,710 61,003 67,381 As % of Expenditures, Transfers Out, and Other Uses 16.3 15.1 17.0 19.1 20.6 Unreserved Fund Balance 50,100 48,062 53,965 — — As % of Expenditures, Transfers Out, and Other Uses 15.9 14.9 16.8 — — Unrestricted Fund Balances — — — 55,724 62,222 As % of Expenditures, Transfers Out, and Other Uses — — — 17.5 19.0 aReflects GASB 54 classifications: sum of committed, assigned, and unassigned. Note: Numbers may not add due to rounding.

The county posted a solid operating surplus after transfers in fiscal 2012 equal to 2% of general fund spending and increased its unrestricted fund balance to $62.2 million, or 19% of spending. Fiscal 2012 results were aided by the county's practice of budgeting contingency appropriations. Notably, the fiscal 2012 budget included a net reduction of 228 positions (4.8% of county workforce) and included contingency appropriations equal to 3.6% of total appropriations. Public safety expenses dominate the general fund budget with 50% of appropriations for law enforcement and jail operations. Fitch views favorably the county's success in controlling expenses starting in fiscal 2009. Notably, fiscal 2012 expenditures returned to fiscal 2008 levels. General fund revenues continued to grow, averaging 1.6°/a annual growth since fiscal 2008. The adopted fiscal 2013 budget is balanced with a level tax rate, increases general fund appropriations by a manageable 4% over budgeted fiscal 2012 expenditures, and continues the practice of appropriating meaningful contingencies ($14.6 million, or 4.3% of total appropriations). Appropriation increases are led by a new collective bargaining agreement with the Deputy Sheriff's Association, totaling $23.0 million over three years and contributing to 1.6% of the 4.0% growth in spending between fiscal years 2012 and 2013. All other county employee pay is determined annually and a 3°/a cost of living adjustment was adopted for fiscal 2013. Management projects the county's unrestricted fund balance will grow by approximately $3 million by fiscal year end 2013, aided by greater than budgeted nonproperty tax revenues. Enabled by restored assessed valuation (AV) growth, the preliminary fiscal 2014 budget is balanced with a level tax rate. Cost-of-living increases may also be considered prior to adoption of the budget.

Bexar Gnunty, Taxas 3 July 2, 2013 !J N

Large Debt Plans Accelerated The county has accelerated its debt plans as the court recently authorized the issuance of up to $455 million in nonvoted COs, comprising the $125 million May 2013 offering for countywide facility, road, and technology improvements and the current offering for flood control projects. Previously, the county had planned to issue $300 million in flood control COs through 2016. The completion of the design phases and right-of-way acquisition for many of the flood control projects spurred the county to accelerate its debt schedule. Including the current offering, the county's overall debt burden grows further; however, based on the preliminary AV for fiscal 2014, overall debt-to-market value remains level at 8.5%. The county's direct debt includes a rising level of venue tax bonds. However, overall debt levels have risen mostly from substantial debt issuances by the county's large number of overlapping jurisdictions, which include 15 school districts. Including the 30-year fixed-rate current offering, the principal amortization of property tax-supported debt declines further to a well below- average 21 °/a in 10 years. The current offering is not projected to require an increase in the county's modest combined debt service and flood control tax rate of $0.076 per $100 AV. The county's plan of finance is based on TAV growth of 2%-3% annually, which Fitch considers conservative, and includes support for the CO debt service by Texas Department of Transportation reimbursements for outstanding pass-through toll road bonds and revenues derived from the countywide advanced transportation district sales tax receipts. Including the May 2013 $125 million CO issuance, all of the county's approved capital projects have been funded in their entirety. As such, management does not anticipate any additional major capital needs in the near term that would require debt financing. Continued large debt issuances beyond current expectations, without offsetting tax base growth, could result in negative rating pressure, given the county's high overall debt burden.

Debt $~ati8$'tc~ Manageable Pension and ~$000> OPEB Costs This Issue 350,000 Outstanding Debt The county and all of its full-time GO 1,131,915 employees contribute to a statewide otner ssz,s~o agent multiple-employer defined Direct ~,a~a,585 benefit pension plan administered by Overlapping Debt s,sos,091 the Texas County and District Total Overall Debt ~o,szo,s~s Retirement System. The county fully Debt Ratios Net Direct Debt Per Capita ($)a ~,o~s funds the annual required contribution As % of Market Valueb ~.s (ARC), leading to a solid 83.9% funded Overall Debt Per Capita ($)a 5,780 position as of Dec. 31, 2011. Adjusted As % of Market Valuee s.o to reflect Fitch's assumption of a 7% apopulation: 1,~as,704 (est. 2013). bMarket value: $114,ssa,249,000 rate of return, the funded position IS (fiscal 2013). Note: Numbers may not add due to rounding.______still adequate at 76%. The county's other post-employment benefits (OPEB) are modest and funded on apay-as-you-go basis. Carrying costs for the county's debt service, pension ARC, and OPEB payments is moderate at 18.9% of total fiscal 2012 governmental spending (net of capital outlays).

Bexar County, Texas 4 July 2. 2013 ~~. ~ ~ ~

The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

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In certain cases, Fitch will rate ail or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an evert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Ad of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative effiaency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier man to print subscribers. Bexar County, Texas July 2, 2013 [This page intentionally left blank.) MooD~'s INVESTORS SERVICE Rating Update: aody's revises outlaak to stable, arms Aaa municipal ratings indirectly linked to US

~labal Credit Research -19 Jui 2013 MARYLAND (STATE OF) State Governments (including Puerto Rico and US Territories) MD Opinion NEW YORK, July 19, 2013 --Moody's Investors Service moved the rating outlook to stable and armed the Aaa on four states and 37 local governments following the move to a stable outlook on the US government's Aaa rating yesterday. The four states are Maryland, Missouri, New Mexico and Virginia. The 37 local governments are listed below. The rating a~rmations and outlook revisions include five state aid intercept programs. Moody's also affirmed the Aaa ratings and revised the outlooks to stable for 26 state housing finance agency (HFA)single family loan programs, as well as seven federal lease transactions. When Moody's placed the US government on negative outlook in 2011, it revised the outlooks of certain Aaa-rated US municipal issuers to negative to reflect their close economic, financial and capital markets linkages to the federal government. At the time, Moody's indicated that if the US government rating were to move down, these ratings would also be likely to change because of their economic sensitivity to federal spending cuts, dependence on federal transfers and exposure to a capital markets disruption. The conditions that led to the return to a stable outlook on the US government rating reduce the exposure to these risks over Moody's outlook period. However, future federal budget and deficit actions could affect the credit quality of specific issuers independent of the US government bond rating or outlook. For additional details on the US government rating, please refer to the webpage containing all of Moody's related announcements at htip://www.moodys.cam/USRatingActians. Moody's maintains negative outlooks on three indirectly linked local governments for fundamental credit reasons not related to their indirect sovereign linkages. These are Cedar Rapids (IA), the Fairfax County Water Authority (VA),and San Antonio (TX). Detailed discussion of their credit fundamentals, including what could move their ratings down can be found on the individual issuer pages on moodys.com. Indirectly linked local governments with outlooks revised to stable and ratings affirmed at Aaa: Alamo Community College District(TX) Albuquerque Metropolitan Arroyo Flood Control Authority(NM) Alexandria, City of(VA) Ames, City of (IA) Arlington, County of(VA) Baltimore, County of(MD) Bernalillo, County of(NM) Bexar, County of(TX) Bowie, City of(MD) Charleston, County of(SC) Charleston County Park and Recreation District(SC) Chesterfield, City of(MO) Easton, Town of(CT) EI Paso County School District 12(Cheyenne Mountain)(CO) Fairfax, City of(VA) Fairfax, County of(VA) Hamilton, County of(IN) Hartord, County of(MD) Herndon, Town of(VA) Howard, County of(MD) Huntsville, City of(AL) Indianapolis, City of (IN) Linn, County of(IA) Loudoun, County of(VA) Montgomery, County of(MD) Oklahoma City, City of(OK) Olmstead, County of(MN) Prince George's, County of(MD) Prince William, County of(VA) Rochester, City of(MN) Rockville, City of(MD) San Antonio River Authority (TX) St. Louis, County of(MO) Tarrant County Hospital District(TX) Vienna, Town of(VA) Virginia Beach, City of(VA) Washington Suburban Sanitary District(MD) Programmatic state aid intercept ratings revised to stable: Maryland Infrastructure Fin. Intercept Prog. Missouri School District Direct Deposit Prog. New Mexico S.D. Enh. Prog.-Pre Mar.30, 2007 New Mexico S.D.Enh.Prog.-Post Mar. 30, 2007 Virginia Resources Authority State Aid Intercept Program Indirectly linked state HFA programs with outlooks revised to stable and ratings affirmed at Aaa: Arkansas DFA Home Ownership Revenue Bonds (2009) California HFA Residential Mortgage Revenue Bonds Colorado H&FA Single Family Program Bonds (NIBP) &Single Family Mortgage Class I bonds Delaware SHA Authority Single Family Mortgage Revenue Bonds NIBP Florida HFC Homeowner Mortgage Revenue Bonds, Special Program Hawaii HFDC Single Family Mortgage Purchase Revenue Bonds Indiana H&CDA Home First Mortgage Revenue Bonds (NIBP) Iowa FA Single Family Mortgage Bond Resolution &Single Family Mortgage Revenue Bond Resolution (2009) Idaho N&FA Single Family Mortgage Senior Bonds, Series 2000 A, B, C, D & E Kentucky H C Housing Revenue Bonds Louisiana HFA Single Family Mortgage Revenue Bonds (Mortgage Backed Security Program) Maryland CDA Single Family Housing Revenue Bonds Minnesota HFA Homeownership Finance Bonds Ohio HFA Residential Mortgage Revenue Bond Program &Single Family NIBP Indenture Oklahoma Housing Finance Agency Homeownership Loan Program (2009 Indenture) South Carolina SHFDA Homeownership Bonds (NIBP) Texas DHCA Residential Mortgage Revenue Bond Program Washington SHFC Single Family Program Bonds &Homeownership Program Bonds (NIBP) Federal leases with outlooks revised to stable: Des Moines Federal Courthouse, L.C. First Mortgage Lease Revenue Bonds, Series 2004 EDA of the City of International Falls Voyageurs Taxable Lease Revenue Bonds, Series 2010A (Voyageurs National Park Headquarters Facility) Guggenheim Energy Funding LLC 2010-1 Bonneville Power Administration Inter Agency Agreement Backed Pass-Through Trust, Series 2010-1 Maryland Economic Development Corporation Taxable Lease Revenue Bonds (United States Department of Defense Laboratory for Telecommunications Sciences Facility), Series 2003 Miami (City ofl FL Rental Revenue Series '88, Dated 7-1-89(U.S. Government Lease) Tacoma (City ofl WA Lease Revenue(Tacoma Union Stadium Federal Courthouse Project), Series 1990 Tacoma (City ofl WA Lease Revenue (Tacoma Union Stadium Federal Courthouse Project), Series 1992 RATING METHODOLOGIES The principal methodology used in rating the state general obligation debt was US States Rating Methodology published in April 2013. The principal methodology used in rating the local general obligation debt was General Obligation Bonds Issued by US Local Governments published in April 2013. The additional methodology used in rating the lease revenue debt was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. The additional methodology used in rating the moral obligation debt was Moody's Approach to the Moral Obligation Pledge published in June 1999. The principal methodology used in rating the state aid intercept programs was State Aid Intercept Programs and Financings: Pre and Post Default published in July 2013. The principal methodology used in rating the housing debt was U.S. Housing Finance Agency Single Family Programs published in February 2013. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies. ~x~ m Z iL' ~' l ~1 ~Y y ~ ~~Y ~ 1: ~ For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Nicholas Samuels Lead Analyst Public Finance Group Moody's Investors Service Timothy Blake Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists:(212) 553-0376 Research Clients:(212) 553 -1653

Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA Moon's INVESTORS SERVICE

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For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569(as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761 G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client' and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser. [This page intentionally left blank.] MooDy's INVESTORS SERVICE New Issue: Moody's assigns Aaa rating to Bexar County's(TX) $350 million CO, Series 20138

Glabal Credit fZesearch - Q Jul 2f}13 Outlook is negative

BEXAR (COUNTY OF)TX Counties TX Moody's Rating ISSUE RATING Combination Tax and Revenue Certificates of Obligation, Series 20138 Aaa Sale Amount $350,000,000 Expected Sale Date 07/08/13 Rating Description General Obligation Limited Tax

Moody's Outlook

Qpinion

NEW YORK, July 02, 2013 --Moody's Investors Service has assigned a Aaa rating to Bexar County's (TX)$350 million Certificates of Obligation, Series 20136. The outlook remains negative. Moody's maintains a Aaa rating on the county's outstanding unlimited tax and limited tax debt affecting $33 million and $1 billion respectively. Proceeds from the sale of the bonds will be used to make needed capital improvements throughout the county. SUMMARY RATING RATIONALE The certificates are secured by an annual ad valorem tax levied on all taxable property in the county, within the limits prescribed by law, as well as a subordinate lien on and pledge of certain net revenues of the county's parking facilities. The rating assignment and affirmation reflects the county's large and stable regional economy that is driven by diverse industries despite low socioeconomic indices. The rating also includes prudent financial management that includes multiyear forecasting and conservative budget estimates that have historically yielded more positive operations. The debt burdens are modest but slightly above the median for similarly rated credits. The negative outlook reflects the county's indirect linkages to the weakened credit profile of the U.S. government. STRENGTHS Sizeable regional economy that remained relatively stable through economic downturn Prudent financial management practices demonstrated by conservative budgeting that yield more positive operations; satisfactory reserves Flexibility with tax rates that remain well under the statutory cap CHALLENGES Low demographic indicators Operating pressures associated with large population and demand for services DETAILED CREDIT DISCUSSION RECENT DEVELOPMENTS

ECONOMIC ACTIVITY CONTINUES The county continues to experience economic development activity. Per officials, activity in the Eagle Ford Shade is expected to have a $61 billion impact over the next 10 years, based on an area university study; 20,000 jobs in the area have already been attributed to the Eagle Ford Shale. Additionally, officials report one of the major employers, USAA, recently announced expansion that should yield 1,000jobs. Based on initial appraisal district reports, the county is expected to continue experiencing growth in taxable values and officials are conservatively estimating a 5%increase for fisca12014. FY 2012 AUDITED NUMBERS DEMONSTRATE GROWTH IN RESERVES; FY 2013 PROJECTED TO END WITH SIGNIFICANT SURPLUS The county's fiscal year 2012 adopted budget included a draw of $11.6 million due to a combination of rising health care costs and a base budget increase. During the fiscal year, officials revised the expectation to a surplus of $2.7 million as the original budget included conservative estimates. Audited fiscal year 2012 numbers reported more positive operations with an increase of $6.4 million, improving the General Fund balance to $67.4 million (20.2% of General Fund revenues), of which $62.2 million (18.7%)was unassigned. The fiscal year 2013 budget included a draw of $14 million due to rising health care costs. The county made design changes and increased premiums for employees. Officials report that the changes were effective January 1, 2013. As such, the county is yet to understand the impact the changes will have to the budget. Despite earlier projections for an $8 million draw on fund balance, officials anticipate a $16 million surplus due primarily to growth in revenues from court fines, motor vehicle sales tax &licensing, fees from housing federal inmates, and services fees associated with improved efficiencies within the Medical Examiner and Criminal Laboratory offices. Additionally, there is approximately $2 million in savings from less than budgeted expenditures. CAPITAL NEEDS REQUIRE DEBT ISSUANCE IN THE NEAR TO MEDIUM TERM The county has several capital needs from county wide projects, as well as the flood control program that will require debt issuance in the near to medium term, in line with its 10 year capital improvement plan. The county is currently prioritizing projects and expect final numbers in the near term. All of the county's debt is fixed rate, and the county is not party to any derivative agreements. Debt profile remains manageable with a direct debt burden of 1.2% (overall of 9.1 %)on a fiscal year 2013 valuation. Please see our report dated January 23, 2013 for more detailed credit discussion. OUTLOOK Moody's negative outlook on Bexar County's Aaa rating is due to its indirect linkages to the weakened credit profile of the U.S. government. The negative outlook relates to Moody's August 2, 2011 decision to confirm the Aaa government bond rating of the United States and assign a negative outlook, and to our most recent February 5, 2013 assessment of the county's exposure to indirect linkages to the federal government. Moody's has determined that issuers with indirect linkages, such as Bexar County, have some combination of economies that are highly dependent on federal employment and spending, a significant healthcare presence in their economies, have direct healthcare operations, and/or high levels of short-term and puttable debt. After calculating these quantitative metrics, Moody's determined that Bexar County had above-average exposure to Federal Employment as % of Total Employment, and Federal Procurement Contracts as % of GDP. Please see the special comment from February 5, 2013 entitled "Update: Ratings of Aaa Municipal Credits Indirectly Linked to the US Government' for more information. WHAT COULD MAKE THE RATING GO - UP Not applicable WHAT COULD MAKE THE RATING GO DOWN -DOWN Deterioration of financial reserves; inability of the county to manage operating pressures associated with the health insurance fund Significant contraction in the tax base Downgrade of the U.S. Government rating KEY STATISTICS Population: 1,714,773 2013 Full value: $98.9 billion 2013 Full value per capita: $57,687 Direct debt burden: 1.2% Overall debt burden: 9.1 Rate of principal repayment(10 years): 26.4% FY 2012 General Fund balance: $67.4 million (20.2% of General Fund revenues) Post-sale Limited Tax debt: $1 billion RATING METHODOLOGY The principal methodology used in this rating was General Obligation Bonds Issued by US Local Governments published in April 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Kristin Button Lead Analyst Public Finance Group Moody's Investors Service Toby Cook Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists:(212) 553-0376 Research Clients:(212) 553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MooDy's INVESTORS SERVICE

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE,INC. ( "MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBTOR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S( "MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RElAT1VE FUTURE CREDIT RISK OF EN1111ES, CREDIT COMMITMENTS, OR DEBT ORDEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL,FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK,INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICA710NS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE,SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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