City of Waterworks and Sewer System

Investor Presentation November 12, 2019

1 Dallas Water Utilities Overview System Overview

• Business-friendly environment with below average costs of doing business • Strong and diverse economy including an expanding base in telecommunication, financial services, health care, technology and professionals services jobs • Major national and international transport hub • Positive economic forecasts, including unemployment and consumer spending • Migration patterns continue to support strong population and business growth • Lodging occupancy levels increasing as business and tourism activity continue to improve, driving demand and pricing • Comparatively low cost of living and desirable quality of life

3 Service Area: Water • Serves over 296,000 active water accounts requiring FY 2018 average daily production of over 369 mgd • Treatment capacity of 900 mgd • Total service area of 699 square miles • Drinking Water System consists of more than 4,900 miles of water mains • FY 18 Water demand by customer class: • Residential: 25.2 BG • General Service: 33.2 BG • Optional general service: 5.2 BG • Wholesale: 58.4 BG • FY 18 Water revenue by customer class • Residential: $134.5 M • General Service: $155.8 M • Optional general service: $15.8 M • Wholesale: $89.2 M 4 Service Area: Wastewater

• Over 280,000 active retail wastewater accounts within City limits • Total treatment capacity of 280 mgd • Wastewater system consists of more than 4,000 miles of sanitary sewer mains • A small portion of the City’s wastewater treatment provided by: • Authority (TRA) • City of Garland, TX • FY 18 Wastewater demand by customer class: • Residential: 14.9 BG • General Service: 29.1 BG • Optional General service: 0.7 MG • Wholesale: 4.4 BG • FY 18 Wastewater revenue by customer class • Residential: $97.7 M • General Service: $130.8 M • Optional General service: $2.7 M

• Wholesale: $12.4 M 5 Water & Wastewater Connections by Customer Class

Water Connections by Customer Class History (FY 14-18):

Water Connections FY14 FY15 FY16 FY17 FY18 Residential 274,421 275,002 275,792 276,578 277,303 General Services 53,457 53,405 54,158 54,501 54,736 Optional General Services 88 94 87 91 94 Municipal 1,612 1,632 1,657 1,673 1,678 Wholesale 97 97 97 97 105

Wastewater Connections Residential 266,338 266,893 267,649 268,404 269,901 General Services 44,945 45,250 45,331 45,495 45,535 Optional General Services 88 93 86 90 94 Municipal 575 589 596 612 614 Wholesale 10 10 10 10 10

6 FY18 Retail Treated Water System: Largest Users

Ten Largest Retail Water Customers as % of Billings Ten Largest Retail Water Customers Consumption Twelve Months Ended September 30, 2018 Twelve Months Ended September 30, 2018

% of Million Customer Billing Billing Customer Gallons

Texas Instruments Inc. $ 4,470,406 1.44% Instruments Inc. 1,398

Niagara Bottling, LLC $ 1,473,348 0.48% Niagara Bottling, LLC 462

UT Southwestern Medical Center $ 1,302,030 0.42% UT Southwestern Medical Center 389

Dallas County Hospital District / $ 1,076,052 0.35% White Wave Food Company 284 Pleasant Grove Health Clinic Dallas County Hospital District / Pleasant Grove Health Dallas County Facilities Management $ 949,354 0.31% Clinic 255

Dallas Independent School District $ 903,037 0.29% Quaker Oats Inc. 255

White Wave Food Company $ 898,204 0.29% Dallas County Facilities Management 226

Quaker Oats Inc. $ 798,927 0.26% Dallas Independent School District 188

Quality Sausage $ 704,760 0.23% Nestle Water North America 180

Baylor Healthcare $ 677,018 0.22% Quality Sausage 172 Top Ten Customers $ 13,253,137 4.28% Total 3,809 Remaining Retail Customers $ 296,307,333 95.72%

All Water Customers $ 309,560,470 100.00% 7 FY18 Retail Wastewater System: Largest Users

Ten Largest Retail Water Customers as % of Billings Ten Largest Retail Water Customers Consumption Twelve Months Ended September 30, 2018 Twelve Months Ended September 30, 2018

% of Million Customer Billing Billing Customer Gallons

Texas Instruments Inc. $ 4,194,802 1.80% Texas Instruments Inc. 1,101

Fortis Property Group $ 1,304,517 0.56% Fortis Property Group 348

Quaker Oats Inc. $ 993,278 0.43% Quaker Oats 322

Coca Cola $ 885,034 0.38% Coca Cola 315

Quality Sausage $ 811,831 0.35% White Wave Food Company 296

Niagara Bottling, LLC $ 750,028 0.32% Schepps-Foremost Inc 267

White Wave Food Company $ 693,258 0.30% Dallas County Hospital District / Pleasant Grove Health Clinic 215 Schepps-Foremost Inc $ 689,258 0.30% Quality Sausage 210 Dallas County Facilities Management $ 522,028 0.22% Niagara Bottling LLC 202 Bordon Dairy Company $ 481,277 0.21% Top Ten Customers $ 11,325,312 4.87% Bordon Dairy Company 149 Remaining Retail Customers $ 221,442,999 95.13% Total 3,424 All Wastewater Customers $ 232,768,311 100.00% 8 Ten Largest Wholesale Treated Water Customers

Ten Largest Wholesale Treated Water Ten Largest Wholesale Wastewater Customers as % of Billings Customers Consumption Twelve Months Ended September 30, 2018 Twelve Months Ended September 30, 2018 % of Million Customer Billing Billing Customer Gallons

City of Carrollton $ 14,890,720 18.03% City of Carrollton 7,426

City of Grand Prairie $ 10,923,331 13.23% City of Grand Prairie 6,726

City of Coppell $ 6,829,548 8.27% City of Coppell 3,595

City of Farmers Branch $ 6,084,328 7.37% City of Irving 3,575

City of Desoto $ 5,476,509 6.63% City of Lewisville 3,222

City of Irving $ 5,137,873 6.22% City of Farmers Branch 2,884

City of Lewisville $ 3,994,957 4.84% City of Desoto 2,747 City of Addison $ 3,933,496 4.76% City of Addison 1,799 Town of Flower Mound $ 3,895,056 4.72% City of Duncanville 1,781 City of Duncanville $ 3,757,972 4.55% Top Ten Customers $ 64,923,790 78.63% Town of Flower Mound 1,774 Remaining Wholesale TW Customers $ 17,645,035 21.37% Total 35,530 All Wholesale TW Customers $ 82,568,825 100.00% 9 Service Rates

Volume Charge Customer Charge Effective October 1, 2019 Effective October 1, 2019

Monthly Retail Rate Per 1,000 Gallons Monthly Retail Customer Charge Water Sewer Water Sewer Combined Residential 5/8 Inch Meter $ 5.33 $ 4.78 $ 10.11 (1) Up to 4,000 Gallons $ 1.86 $ 5.36 3/4 Inch Meter 7.40 6.55 13.95 (1) 4,001 to 10,000 Gallons 4.00 5.36 1 Inch Meter 10.78 9.45 20.23 10,001 to 20,000 Gallons 6.50 5.36 (1) 1 1/2 Inch Meter 20.00 18.30 38.30 20,001 to 30,000 Gallons 9.30 5.36 (1) 2 Inch Meter 32.54 28.50 61.04 Above 30,000 Gallons 10.70 5.36 (1) 3 Inch Meter 77.00 69.50 146.50 General Service 4 Inch Meter 126.62 111.42 238.04 Up to 10,000 Gallons $ 3.73 $ 4.11 6 Inch Meter 251.45 219.31 470.76 Above 10,000 Gallons 4.05 4.11 8 Inch Meter 418.53 366.09 784.62 Above 10,000 and usage 6.15 4.11 10 Inch Meter or larger 642.66 575.21 1,217.87 1.4x annual monthly average

Optional General Service 1st Million Gallons or Less $ 2,370.15 $ 4.00 Above 1 Million Gallons 3.65 4.00 (Per 1,000 Gallons) Sewer metered separately 4.05

Untreated Water Regular Service $ 0.8707 Wastewater rates for residential accounts are applied to average water consumption billed in December, January, February, and March, up to Interruptible Service $ 0.3549 40,000 gallons per month, or actual water consumption if lower. 10 Capital Improvement Program Summary Capital Improvement Program (CIP) Overview

• CIP Project Categories Include • Regulatory • Growth • Maintenance • Critical and Immediate Needs • Replacement of aging water and wastewater pipelines to maintain system integrity and quality service delivery • Residuals handling improvements at the water treatment plants to improve operations and maintain storage capacity • Continue process changes at the water treatment plants to improve the quality and stability of treated water • Longer Term Needs • Increase raw water supply, treatment and delivery to meet future demands • Address reliability issues which will lead to improved operations and efficiency gains • Process changes at water and wastewater treatment plants to meet anticipated regulatory changes 12 Dallas Water Reservoirs

13 Existing Reservoirs & Proposed Water Supply Strategies

14 Integrated Pipeline (IPL) Project • Dallas has contractual water rights in Lake Palestine • Tarrant Regional Water District (TRWD) has water rights in Cedar Creek Reservoir and Richland Creek Reservoir • IPL will interconnect Dallas and TRWD supplies • Allows Dallas to share cost of water transmission from distant sources • Estimated Cost Savings for Dallas of $196M • Current Project Budget - $2.4 Billion • TRWD share of project costs is $1.4B • Dallas’ share of project costs is $1.0B • TRWD issues all bonds for the project including Dallas’ portion • Dallas’ approves the structure and amount of the sale for Dallas’ share of project costs • City Manager authorized to approve bond resolution • Bonds secured by Dallas’ revenues • Current TRWD Revenue Bond Issues have totaled $1.3B: 108” Gate Valve at Midlothian Balancing Reservoir • Dallas’ share of project costs from 2009 through 2018 totals $507.9M • TRWD share of projects costs from 2009 through 2018 totals $817.9M • Dallas is responsible for Palestine Segment and Intake construction 15 schedule IPL Progress

108-inch Gate Valve Installation Joint Cedar Creek Lake Pump Station

Joint Booster Pump Station 3 (JB3) Installation of 108-inch pipe along Section 17

16 Summary of Capital Program

FY2018 – FY2027

17 Capital Financing Plan

FY2018 – FY2022 (in thousands)

Year Beginning Oper Fnds CP for Ending Ending Project Trsfrd for TWDB Projects Project Sept 30 Funds (Projects) Projects Bonds Awarded Funds

2018 $78,219 ($240,050) $43,484 $0 $196,566 $78,219

2019 $78,219 ($280,496) $48,892 $59,282 $172,322 $78,219

2020 $78,219 ($315,800) $53,870 $66,000 $195,930 $78,219

2021 $78,219 ($348,793) $53,993 $66,000 $228,800 $78,219

2022 $78,219 ($358,001) $49,501 $66,000 $242,500 $78,219

18 Capital Program & Financing FY2018 – FY2022

19 Financial Performance Daily Water Consumption

FY18 Budget and Actuals

700.0

Daily Water Consumption (FY18 Budget and Actuals)

600.0

500.0

400.0 MILLIONGALLONS

300.0

5 Year Avg FY 18 Pumpage

200.0

1-Oct

27-Jul 12-Jul

16-Oct 31-Oct

14-Jan 29-Jan 13-Apr 28-Apr

13-Feb 28-Feb 14-Mar 29-Mar 12-Jun 27-Jun

15-Dec 30-Dec 10-Sep 25-Sep

15-Nov 30-Nov

11-Aug 26-Aug

13-May 28-May 21 Historical Operating Results & Coverage

Summary of Net Revenues for Revenue Bond Coverage – Cash Basis Amounts in Thousands Fiscal Year Ended September 30, Gross Revenues 2018 2017 2016 2015 2014 Customer Charges $ 667,954 $ 627,100 $ 615,424 $ 565,895 $ 567,732 Interest Received 7,984 3,442 4,465 2,946 2,090 $ 675,938 $ 630,542 $ 619,889 $ 568,841 $ 569,822

Operating Expenditures Personnel Services $ 92,389 $ 91,019 $ 96,760 $ 83,679 $ 82,494 Supplies and Materials 82,564 75,103 105,434 106,731 78,731 Contractual and Other Services(2) 114,517 117,547 105,879 97,573 84,916 $ 289,470 $ 283,669 $ 308,073 $ 287,983 $ 246,141

Net Revenues Available for Debt Service $ 386,468 $ 346,873 $ 311,816 $ 280,858 $ 323,681

Senior Lien Debt Service $ 196,945 $ 187,758 $ 180,798 $ 182,860 $ 182,860

MADS Senior Lien Coverage Ratio 1.96 1.85 1.72 1.54 1.77

(1) The figures shown in this table are presented on a cash basis and were developed in accordance with the provisions contained in the City's Waterworks and Sewer System Revenue Bond Ordinance. Gross Revenues include cash receipts derived from operation and ownership of the System. Operating Expenditures are operating cash disbursements and payments required by certain reservoir and other contracts, included for this purpose under provisions of state law. Operating Expenditures exclude payments for capital purposes and for related debt, and will exclude any future payments to the City in lieu of ad valorem taxes, if made, as permitted by a May 1993 amendment to the City Charter (see " The Water and Wastewater System - Background") and " Water and Wastewater Services Rates". (2) Cash payments for contractual services includes payments for the Water Transmission Facilities Financing Agreement in the amount of $28,121. Per Texas Government Code, Section 1502.056(c), "a contract between a municipality and an issuer, as defined by Section 1201.002, under which the municipality obtains from the issuer or the issuer provides part or all of the facilities or services of a utility system to the municipality may provide that payments made by the 22 municipality from the revenue of the utility system are an operating expense of the municipality's utility system." Financial Forecast Report

FY2018 – FY2022

23 Operating Cash Flow Projection

FY 2020 FY 2020 by Quarters (In Thousands) Oct - Dec Jan - Mar Apr - Jun Jul - Sep Fiscal Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

Beginning operating cash $110,096 $159,018 $151,626 $138,004 $110,096

REVENUES

Operating Revenue 165,472 145,615 158,853 191,947 661,887 Interest earnings 1,136 1,274 1,286 1,304 5,000 Cash Contributions 223 212 252 222 909 Total 166,831 147,101 160,391 193,473 667,796

EXPENDITURES

Operations & Maintenance 62,464 84,048 103,568 119,047 369,127 Debt Service 55,445 55,445 55,445 55,441 221,776 Transfer to Construction 0 15,000 15,000 60,000 90,000 Total 117,909 154,493 174,013 234,488 680,903 Ending operating cash $159,018 $151,626 $138,004 $96,989 $96,989

24 Current Debt Profile Debt Summary Summary of Outstanding WW&SS Debt Series Outstanding Final Maturity Call Callable Series 2019B (TWDB) $ 44,000,000 10/1/2048 10/1/2029 $ 29,965,000 Series 2019A (TWDB) 22,000,000 10/1/2048 10/1/2029 14,780,000 Series 2018C Ref 152,965,000 10/1/2047 10/1/2028 120,330,000 Series 2018B (TWDB) 44,000,000 10/1/2047 10/1/2028 30,660,000 Series 2018A (TWDB) 22,000,000 10/1/2047 10/1/2028 15,125,000 Series 2017 Ref 168,750,000 10/1/2046 10/1/2027 136,265,000 Series 2016A Ref 363,985,000 10/1/2045 10/1/2026 332,520,000 Series 2016B (Taxable Ref) 122,630,000 10/1/2028 10/1/2026 47,330,000 Series 2015A Ref 441,040,000 10/1/2044 10/1/2025 323,630,000 Series 2015B (Taxable Ref) 150,630,000 10/1/2023 Non-Callable - Series 2013 Ref 142,550,000 10/1/2042 10/1/2023 125,105,000 Series 2012A Ref 207,240,000 10/1/2041 10/1/2022 129,310,000 Series 2012B (Taxable Ref) 63,225,000 10/1/2031 Currently Callable 63,225,000 Series 2011 Ref 134,265,000 10/1/2040 10/1/2021 92,845,000 Series 2010 Ref 104,700,000 10/1/2039 10/1/2020 88,050,000 Series 2009B 5,505,000 10/1/2028 Currently Callable 5,015,000 Series 2009C 58,733,000 10/1/2028 Currently Callable 53,443,000 $ 2,248,218,000 $ 1,607,598,000 Tax Status Current Ratings Commercial Paper Programs Par Outstanding AgencyL/T RatingS/T RatingOutlook Series Par Amount Bank Term Taxable $ 336,485,000 Moody's Aa2 P-1 Stable D-1 $ 225,000,000 State Street 1/8/2020 (1) Tax-Exempt 1,911,733,000 S&P AAA A-1+ Stable D-2 75,000,000 Bank of America 1/8/2020 (1) Fitch AA+ NR Stable E 300,000,000 J.P. Morgan 6/30/2020 Total $ 2,248,218,000 $ 600,000,000 (1) In the process of negotiating an extension to June 30, 2020. 26 Debt Summary (Cont.)

Existing Debt Service

$250

$200

$150

Millions $100

$50

$0

Interest Principal

27 Provisions for Bonds

Pledged Revenues • The Bonds shall be secured by and payable from an irrevocable first lien on and pledge of the Pledged Revenues; and the Pledged Revenues are further pledged irrevocably to the establishment and maintenance of the Interest and Sinking Fund and the Reserve Fund. The Bonds are and will be secured by and payable only from the Pledged Revenues, and are not secured by or payable from a mortgage or deed of trust on any real, personal or mixed properties constituting the System Rate Covenant • Maintain and collect such rates, charges and fees for the use and availability of the System at all times as are necessary to produce Gross Revenues sufficient (1) to pay all current operation and maintenance expenses of the System, (2) to produce Net Revenues for each Year at least equal to 1.25 times the principal and interest requirements (including Amortization Installments) of all then outstanding Previously Issued Parity Bonds, Bonds and Additional Bonds for the Year during which such requirements are scheduled to be the greatest, and (3) to pay all other obligations of the System

28 Provisions for Bonds (Cont.)

Additional Bonds (1) • Net Revenues were, in the opinion of a certified public accountant, an independent firm of certified public accountants or the Chief Financial Officer, at least equal to 1.25 times the average annual principal and interest requirements (computed on a twelve month period, generally, the fiscal year prior to the date of the proposed Additional Bonds) including Amortization Installments, of all Previously Issued Parity Bonds, the Bonds and Additional Bonds to be outstanding after the issuance of the then proposed Additional Bonds Reserve Fund • The Reserve Fund shall be maintained in an amount equal to the average annual principal and interest requirements of the Previously Issued Parity Bonds, the Bonds and Additional Bonds (the "Required Amount"). When and so long as the money and investments in the Reserve Fund are not less than the Required Amount, no deposits need be made to the credit of the Reserve Fund. If the Reserve Fund contains less than the Required Amount due to the issuance of the Bonds, beginning on the 25th day of the month following the delivery of the Bonds, and continuing for sixty months, the City shall transfer from the Pledged Revenues and deposit to the credit of the Reserve Fund an amount equal to 1/60th of the difference determined as of such delivery date between the amount in the Reserve Fund and the Required Amount. When and if the Reserve Fund at any time contains less than the Required Amount due to any cause or condition other than the issuance of Additional Bonds, then, subject and subordinate to making the required deposits to the credit of the Interest and Sinking Fund, a deficiency shall be made up as soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose

(1) Effective April 11, 2018, the Ordinance was amended to provide, among other things, the Chief Financial Officer the ability to provide the certificate for the issuance of additional bonds. Going forward, the City will rely upon the Chief Financial Officer to provide the written certificate. The amendment applies to all outstanding Revenue Bonds secured by a first lien and pledge of Pledged Revenues. 29 Dallas Waterworks and Sewer System Flow of Funds

REVENUE FUND

INTEREST AND SINKING FUND

RESERVE FUND

DEPOSITS OF PLEDGED REVENUES; INVESTMENTS

30 Questions?