2012 Massachusetts Investor Conference MA... · This investor presentation is provided for your general ... 2012 Massachusetts Investor Conference . 3 ... 3:45 Updates to the EMMA

1

2012 Massachusetts Investor

Conference

Thursday, December 13,

2012

http://www.massport.com/

http://www.massachusetts.edu/

https://www.masshousing.com/portal/server.pt?open=514&objID=240&parentname=CommunityPage&parentid=0&mode=2&in_hi_userid=2&cached=true

http://massschoolbuildings.org/

2

Disclaimer This investor presentation is provided for your general information and convenience only and does not constitute an offer to sell or a

solicitation of an offer to buy securities. The information contained herein does not constitute a sufficient basis for making a decision with

respect to the purchase or sale of any security, and is not intended to constitute investment advice of any kind.

All information regarding or relating to bonds issued or to be issued by the Commonwealth of Massachusetts, the Massachusetts Bay

Transportation Authority, the Massachusetts Port Authority, the Massachusetts Water Pollution Abatement Trust, the Massachusetts

Water Resources Authority, the University of Massachusetts Building Authority, the Massachusetts State College Building Authority, the

Massachusetts Housing Finance Agency, Massachusetts Department of Transportation, the Massachusetts School Building Authority, the

Massachusetts Development Finance Agency, or the Massachusetts Educational Financing Authority (the “Issuers”) is qualified in its

entirety by the applicable Official Statement and any related primary and continuing disclosure documents and filings, all of which

documents and filings should be reviewed before any investment decision is made with respect to any such bonds.

With respect to each Issuer’s section of this investor presentation, such section has been furnished by such Issuer and includes

information obtained from other sources that are believed by such Issuer to be reliable, but is not guaranteed as to accuracy or

completeness. The information and expressions of opinion contained in this investor presentation are subject to change without notice.

The information contained in this investor presentation speaks only as of the date such information was prepared and has not been

updated since that date. Accordingly, such information may not address all factors which may be material to an investor and may contain

omissions of fact or statements that are not accurate because of the passage of time or changes in facts or circumstances subsequent to

the date of such information. The Issuers are under no obligation to update any of the information set forth in this investor presentation.

None of the Issuers or their respective representatives or agents, including any underwriters of bonds issued or to be issued by any of the

Issuers, shall have any liability whatsoever in negligence or otherwise for any loss however arising from any use of this investor

presentation or its contents or otherwise arising in connection with this investor presentation.

No dealer, broker, salesperson or any other person has been authorized by any of the Issuers to give any information or to make any

representation in connection with the Issuers or any bonds of any of the Issuers, and, if given or made, such other information or

representation must not be relied upon as having been authorized by any of the Issuers.

This investor presentation includes forward-looking statements based on current beliefs and expectations about future events. Forward-

looking statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives

and expectations with respect to future events. Forward-looking statements are not guarantees of future performance and are subject to

inherent risks, uncertainties and assumptions about the Issuers, changes in economic conditions globally, nationally or in Massachusetts,

and political and regulatory factors. Those events are uncertain; their outcome may differ from current expectations, which may in turn

significantly affect expected results. Actual results may differ materially from those projected or implied in these forward-looking

statements. Any forward-looking statement contained in this investor presentation speaks as of the date of this presentation. The Issuers

undertake no obligation to publicly revise or update any forward-looking statements in light of new information or future events.

2012 Massachusetts Investor Conference

3

Agenda


Time Presentation Presenter(s) 7:30 - 8:00 Registration & Breakfast --

8:00 - 8:30 Conference Welcome Honorable Deval L. Patrick, Governor of Massachusetts

8:30 - 9:00 Update on the Commonwealth Honorable Steven Grossman, State Treasurer

9:00 - 9:30 Presentation: “The Massachusetts Economy: A

Long-Term Perspective”

Alan Clayton-Matthews, MassBenchmarks & Northeastern

University

9:30 - 10:00 Credit Panel: Water: Mass. Water Resources

Authority, Mass. Water Pollution Abatement Trust

Fred Laskey & Rachel Madden, MWRA; Sue Perez, Steve

McCurdy & Drew Smith, MWPAT

10:00 - 10:15 Break / Coffee

10:15 - 11:00 Credit Panel: Education: Mass. School Building

Authority, Mass. State College Building Authority,

UMass Building Authority

Vin Alabiso, MSBA; Edward Adelman, MSCBA; Katherine

Craven, UMBA

11:00 - 11:45 Investor Roundtable Panel Chris Alwine, Vanguard

11:45 - 12:45 LUNCH & Presentation John Cross, Securities & Exchange Commission

12:45 - 1:30 Credit Panel: The Commonwealth of Massachusetts

Secretary of Administration & Finance, Jay Gonzalez;

Colin MacNaught, State Treasurer’s Office

1:30 - 2:15 2013 Market Outlook Tom Doe, Municipal Market Advisors

2:15 - 2:30 Break/Coffee

2:30 - 3:15 Credit Panel: Transportation: MassDOT & MassPort Dana Levenson, MassDOT;

John Pranckevicius & Betsy Taylor, MassPort

3:15 - 3:45 Updates to the EMMA System Justin Pica & Ritta McLauglin, MSRB

3:45 – 4:15 Credit Panel: Economic Development:

MassDevelopment, MassHousing

Steve Chilton, MDFA; Charles Karimbakas, MHFA

4

Table of Contents


Section Page

“The Massachusetts Economy: A Long-Term Perspective” 7

Massachusetts Water Resources Authority 18

Massachusetts Water Pollution Abatement Trust 46

Massachusetts School Building Authority 61

Massachusetts State College Building Authority 85

University of Massachusetts Building Authority 97

The Commonwealth of Massachusetts 111

2013 Market Outlook 144

Massachusetts Department of Transportation 169

Massachusetts Port Authority 180

Updates to the EMMA System 195

Massachusetts Development Finance Agency 229

Massachusetts Finance Housing Agency 238

5


Conference Welcome

Honorable Deval L. Patrick

Governor of Massachusetts

Presented by:

6


Update on the Commonwealth

Treasurer Steven Grossman

Presented by:

7


The Massachusetts Economy:

A Long-Term Perspective

Alan Clayton-Matthews

Northeastern University

December 13, 2012

Presented by:

8

Massachusetts has out-performed the nation in the recession

and the recovery to date.

4.3

1.9

3.7 3.6

-0.8

2.7

2.0

5.4

1.9

2.6

2.2

2.4 2.42.3 2.2

2.62.4

0.1

2.5

1.3

4.1

2.0

1.3

2.7

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013

Qu

arte

rly

Gro

wth

at

An

nu

al R

ate

s (%

)Growth in Real Product, Massachusetts vs. U.S.

Massachusetts U.S.

Source: U.S., Bureau of Economic Analysis; Massachusetts: MassBenchmarks

Projected

9

The state has a slower growing population than the U.S….

-1%

0%

1%

2%

1987 1991 1995 1999 2003 2007 2011 2015 2019

Population Growth, Massachusetts versus U.S., Annual Rate

Massachusetts U.S.

Source: Census Bureau History, Global Insight Forecast

10

…and slower-growing employment.

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

1987 1991 1995 1999 2003 2007 2011 2015 2019

Employment Growth, Massachusetts versus U.S., from Same Quarter Prior Year

Massachusetts U.S.

Source: BLS History, Global Insight Forecast

11

However, output growth often matches or exceeds that of the

U.S….

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

1987 1991 1995 1999 2003 2007 2011 2015 2019

Real GDP Growth, Massachusetts versus U.S., from Same Quarter Prior Year

Massachusetts U.S.

Source: BEA History, Global Insight Forecast

Massachusetts history interpolated from annual data by Global Insight

12

… and over the long-term, U.S. and state output growth has been virtually

identical; and is expected to equal that of the U.S. over the next 10 years.

50

60

70

80

90

100

110

120

130

140

150

1987 1991 1995 1999 2003 2007 2011 2015 2019

Real Gross Domestic Product, Massachusetts versus U.S., 2005=100

Massachusetts U.S.


Massachusetts history interpolated from annual data by Global Insight

13

How is this possible? Because of faster productivity growth.

0%

1%

2%

3%

4%

1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

Productivity Growth, Massachusetts versus U.S., Annual Rate, Centered 5-Year Centered Moving Average

Massachusetts U.S.

Source: BEA and BLS History, Global Insight Forecast

Productivity is Real GDP per Non-Farm Payroll Job

14

Higher productivity means higher incomes.

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

1987 1991 1995 1999 2003 2007 2011 2015 2019

Per Capita Personal Income, Massachusetts versus U.S.

Massachusetts U.S.


15

Faster productivity growth results in faster-growing incomes.

100%

105%

110%

115%

120%

125%

130%

135%

1987 1991 1995 1999 2003 2007 2011 2015 2019

Ratio of Massachusetts to U.S. Per Capita Personal Income


16

The basis of the state’s economic performance is its highly-

educated workforce…

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

25 30 35 40 45 50 55 60 65

Age

Percent of Persons 25 and Older with a BA or Higher Degree, by Age, 2009

Massachusetts U.S.

Source: American Community Survey, 2009 PUMS

17

...especially at the high end, which gives Massachusetts a

powerful comparative advantage in the global economy.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

25 30 35 40 45 50 55 60 65

Age

Percent of Persons 25 and Older with an Advanced Degree, by Age, 2009

Massachusetts U.S.

Source: American Community Survey, 2009 PUMS

18


Massachusetts Water

Resources Authority

Massachusetts Water Resources Authority:

Frederick A. Laskey, Executive Director

Rachel Madden, Director of Administration and Finance

Thomas Durkin, Treasurer

Presented by:

19

MWRA Service Area

MWRA provides wholesale water and wastewater services to over 2.5 million customers in 61 communities

On average, MWRA delivers 200 million gallons per day to its water customers

MWRA collects and treats an average of 350 million gallons of wastewater per day, with a peak capacity of 1.2 billion gallons


20

MWRA Has Spent $7.1 Billion To Rebuild The Water And Sewer Systems

Boston Harbor Project

MetroWest Supply Tunnel Hultman Aqueduct Rehab Spot Pond Supply Mains

Braintree-Weymouth Relief Facilities

Norumbega Covered Storage

Weston Aqueduct Supply Mains

Carroll Water Treatment Plant UV Treatment

Union Park

East Boston Branch Sewer

North Dorchester Bay CSO

Community Managed CSO Projects

Deer Island Asset Protection

$0

$100

$200

$300

$400

$500

$600

$700

$ M

illio

ns

Actual Projected


21

Over 80% Of Spending Has Been For Mandated Projects

$0

$100

$200

$300

$400

$500

$600

$700

FY86 FY88 FY90 FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06 FY08 FY10 FY12

Mill

ions

Mandated(Court Orders, Consent Orders)

Non-Mandated(Pipeline Rehabilitation and Infrastructure Replacement)


22

MWRA’s Capital Finance Program

As of June 30, 2012, MWRA had approximately $5.94 billion in debt:

Senior Lien General $3.49 Multi-Modal

Subordinated $1.19

Mass WPAT$1.12

TECP$0.14


23

MWRA’s Capital Finance Program

MWRA’s Credit Ratings were most recently affirmed in November 2012:

Moody's Standard and Poor's FitchRatings

Senior – Aa1 Senior – AA+ Senior – AA+

Subordinate – Aa2 Subordinate - AA Subordinate – AA


24

An Environmental Success Story

In 2002, $3.8 billion Boston Harbor Project was completed

About 350 million gallons of wastewater is treated at the new Deer Island Treatment plant every day

Treated wastewater is discharged 9.5 miles out into the deeper waters of Massachusetts Bay

Sludge is transported to Quincy where it is recycled into fertilizer


25

Dramatic Improvements In Water Quality – Even In Wet Weather

Average Enterococcus counts in Boston Harbor in wet weather

The lighter the blue, the better

1987-1998 (Before Secondary Treatment

and South System transfer)

1999 - 2011 (After Secondary Treatment

and New Outfall)

1999 - 2011 1987 - 1991


26

Combined Sewer Overflow Control Program

Four communities - Boston,

Brookline, Cambridge,

Chelsea and Somerville -

have combined sewer

systems that connect to

MWRA's sewer system

Boston Harbor, the

Charles, the Mystic and the

Neponset Rivers are

subject to overflows of

combined stormwater and

sewage during heavy rains


27

Annual CSO Volume Has Been Reduced Dramatically

0

0.5

1

1.5

2

2.5

3

3.5

1988 1992 2011 2015

(Billio

n G

allo

ns)

Untreated Treated

• 29 of 35 projects have been completed to date

• Annual CSO volumes have already been reduced by 2.7 billion gallons

• By 2015, 93% of the remaining CSO flows will be treated

6 2012 Massachusetts Investor Conference

28

South Boston CSO Tunnel Completed in May 2011


29

Boston Now Has Some Of The Cleanest Urban Beaches In The Country


30

The MWRA Water System Has Been Modernized

MetroWest

Water Supply Tunnel

Nash Hill

Loring Road

Fells Spot Pond

Norumbega

CWTP Blue Hills

Pipeline Rehabilitation

Watershed Protection

John J. Carroll

Water Treatment Plant

Quabbin

Water Treatment Plant


31

John J. Carroll Water Treatment Plant

Complete in July 2005

Treatment Processes:

– Ozonation for primary disinfection

– Corrosion control

– Chloramination for secondary disinfection

– Fluoridation


32

Carroll Water Treatment Plant UV Disinfection

• Required to meet new federal regulations

• Work is 75% complete


33

MetroWest Water Supply Tunnel

The MetroWest Water Supply Tunnel was brought on-line in November 2003

By March 2004, the Tunnel was being fully utilized allowing the shutdown of the Hultman Aqueduct for repair


34

May 1, 2010 Water Main Break

On May 1st, a break occurred on a 10-foot diameter water main in Weston

Use of the emergency water system also triggered a precautionary “boil water order” for 2 million residents in 30 affected communities

The leak was repaired quickly and the system was back to normal in under 72 hours


35

Hultman Aqueduct Rehabilitation

• Rehabilitation of the 15-mile Hultman Aqueduct is nearly complete


36

Norumbega Covered Storage Facility

The tank was completed in May 2004

It provides 115 million gallons of storage for metropolitan Boston


37

Covered Storage Projects

• MWRA is building seven new covered storage tanks to replace all open reservoirs

• Six are completed and on-line

Nash Hill

Loring Road

Fells Spot Pond

Norumbega

Walnut

Hill

Blue Hills


38

Spot Pond Storage Facility

20-million-gallon buried water tank currently under construction

Buried emergency pump station will provide redundancy 21 communities


39

Drinking Water Quality Is Excellent


40

MWRA Utilizes Renewable Energy


41

Future Challenges: Maintenance

• Parts of the “new” Deer Island Treatment Plant have been on-line for almost 20 years


42

Future Challenges: Water System Redundancy


43

Future Challenges: Stormwater


44

Future Challenges: Aging Local Infrastructure


45

Future Challenges: Another Hurricane Sandy


46


Massachusetts Water Pollution

Abatement Trust

Massachusetts Water Pollution Abatement Trust:

Sue Perez, Executive Director

Presented by:

47

Massachusetts Water Pollution Abatement Trust (MWPAT) - Overview


Established in 1989 to improve the water quality in the Commonwealth through the provision of low-

cost capital financing to cities, towns and other eligible entities, and to maintain stewardship of public

funds with prudence, professionalism and integrity

Administered by a three-member board chaired by the Treasurer of the Commonwealth, and includes

the Secretary of the Executive Office for Administration and Finance, and the Commissioner of the

Department of Environmental Protection

Oversees financing for the clean water (“CW”) and drinking water (“DW”) state revolving funds (“SRFs”)

in partnership with DEP

– Trust receives significant federal and Commonwealth support – over $2.0 billion in federal

capitalization grants and state matching funds through FY 2012

Provides subsidized loans to local governmental units for CW and DW infrastructure development

– Projects financed are those ranked as a priority based on responses to a series of questions

intended to identify the most relevant public health and environmental related projects

Since its establishment, the Trust has provided approximately $5.7 billion in loans to nearly

300 borrowers to improve and maintain the quality of water in the Commonwealth – an

estimated 97% of Massachusetts citizens have benefited from these essential projects

48

Clean Water Projects Financed through SRF Program


Clean Water SRF

Maintenance and upgrade of municipal wastewater systems

is critical to protecting the Commonwealth’s environment,

meeting the public health needs of its citizens, and

promoting business development

The 2012 CWSRF Intended Use Plan (IUP) offered $302

million to finance clean water projects:

– Replacement of aged infrastructure components

– Installation of advance water treatment technologies

– Reduction to the carbon footprint of treatment facilities by

installing more energy efficient equipment

Additional subsidies provided for Renewable Energy

Generation and Environmental Justice Communities

$302 million of SRF Funded projects

estimated to create 1,800 construction

and engineering jobs

49

Drinking Water Projects Financed through SRF Program


Drinking Water SRF

Every citizen in the Commonwealth has the right to safe and

clean drinking water, and they depend on their federal, state

and local governments to protect this right

The 2012 DWSRF Intended Use Plan (IUP) offered $115

million to finance drinking water projects:

– Construction or upgrade of a municipal water treatment

facility

– Replacement or rehabilitation of water mains and pump

stations to address deficiencies in the water supply

distribution system

– Construction or rehabilitation of water storage tanks to

ensure a reliable water supply

– Additional subsidies provided for Renewable Energy

Generation and Environmental Justice Communities

$115 million of SRF Funded projects

estimated to create 690 construction and

engineering jobs

50

Leveraged State Revolving Fund Programs


Massachusetts is among the

largest SRF programs in the

country

– Historically, one of the top 5

states in dollars lent for

infrastructure investment

compared to each dollar

received from federal

government

– $2.0 billion in federal grants and

state matching funds leveraged

to $5.7 billion in project

financing

– 2009 ARRA Grants ($133.1

million for clean water and

$52.1 million for drinking water)

were committed by the Trust as

additional subsidization in the

form of principal forgiveness to

eligible borrowers

Federal Capitalization Grant and State Matching Funds

51

Financing Programs


The Trust administers four programs, of which the Pool SRF Bond program is currently active

– 86.5% of outstanding loans and 96.2% of outstanding bonds are associated with the Pool SRF Bond program

The robust Deficiency Fund is available to cure any shortfalls across all programs

EQUITY FUND

DEFICIENCY FUND

SESD SRF BONDS

# of Recipients: 1

# of Loans: 3

Loan Principal Outstanding: $41.8M

Bond Principal Outstanding: $3.8M

Reserve Balance: $22.1M

NEW BEDFORD SRF BONDS

# of Recipients: 1

# of Loans: 3




POOL SRF BONDS

# of Recipients: 289

# of Loans: 1,526

Loan Principal Outstanding: $3.3B

Bond Principal Outstanding: $3.3B

Reserve Balance: $1.2B

MWRA SRF BONDS

# of Recipients: 1

# of Loans: 35




SESD SRF Bonds

Commonwealth

Assistance Payments

Individual DSRFs

Loan Repayments

New Bedford SRF Bonds

Commonwealth

Assistance Payments

Individual DSRFs

Loan Repayments

MWRA SRF Bonds

Commonwealth

Assistance Payments

Individual DSRFs

Loan Repayments

Pool Program

Reserve Fund

Pool SRF Bonds

Commonwealth

Assistance Payments

Loan Repayments

Individual DSRFs

Note: Amounts outstanding as of June 30, 2012

52

MWPAT Debt Profile


MWPAT Debt Service by FY*

Total Debt Outstanding: $3.5 billion

Maximum Annual Debt Service: $359.7 million

Average Annual Debt Service: $157.9 million

Weighted Average Life of Debt: 16.2 years

Capital Structure:

— Fixed Rate Mode: 100%

— Unhedged Variable Rate Mode: 0%

— Derivatives Exposure: $77.3 million CPI Bonds, swapped to a fixed rate

Key Statistics

*As of June 30, 2012

53

Security and Structure


Contract

Assistance

Payments

Secures all Bonds issued by the Trust on a parity basis

Amounts released from DSRFs securing MWRA, SESD, and New

Bedford Bonds not already released are transferred to the

Deficiency Fund, together with funds released from the Pool

Program Reserve Fund

Deficiency

Fund

Each Debt Service Reserve Fund secures its respective Bonds –

as bonds amortize, proportional amounts of reserve funds “de-

allocate” and are available as security

42% of Reserve funds invested in laddered portfolios of U.S.

Treasuries and Agencies – remainder are invested in GICs, the

bulk of which carry at least “AA” category ratings

Reserve

Funds






Deficiency

Fund

$495.8 million in current and future assistance payments have

been pledged by the Commonwealth to the Trust on behalf of

program borrowers

Secured by the full faith and credit of the Commonwealth, which is

rated “Aa1/AA+/AA+”






Deficiency

Fund






Deficiency

Fund






Deficiency

Fund

Composed of multiple revenue streams from nearly 300 unique

borrowers

Payments are due to the Trust 15 days in advance of debt service

payments

Loan

Repayments

Bonds are secured by direct and cascading cashflows consisting of loan repayments, Commonwealth

contract assistance payments, reserve fund earnings, and balances in the Pool Program Reserve Fund

and Deficiency funds

Commonwealth

Assistance

Payments

11%

Loan Repayments

78%

Reserve

Earnings

11%

Pledged Sources Securing Bonds

54

Loan Portfolio

The Trust’s loan portfolio provides a stable and secure source of repayment for the Bonds

– 75% of Pool SRF Program loans are secured by a general obligation pledge of the borrowers

Strong legal protections for loan repayments are bolstered by a local aid intercept whereby, upon a

borrower’s default, the Trust is authorized to obtain Commonwealth financial assistance that would

otherwise be transferred to the borrower

The essentiality of water and wastewater service underlies the security of the loan repayment streams

Rank Recipient

Loan Principal

Outstanding % of Total

1 MWRA $1,086,783,383 28.04%

2 Upper Blackstone Water Poll. Abatement Dist. 154,667,222 3.99%

3 City of Fall River 141,884,950 3.66%

4 City of New Bedford 136,077,946 3.51%

5 City of Brockton 100,223,232 2.59%

6 City of Lowell 82,504,643 2.13%

7 City of Taunton 79,128,575 2.04%

8 City of Chicopee 61,471,288 1.59%

9 Town of Nantucket 56,681,014 1.46%

10 Springfield Water and Sewer Commission 56,085,524 1.45%

11 Lynn Water and Sewer Commission 55,104,004 1.42%

12 City of Framingham 52,098,546 1.34%

13 South Essex Sewerage District 51,743,443 1.33%

14 City of Gloucester 50,279,712 1.30%

15 Town of Westborough 49,220,633 1.27%

277 Total all others 1,662,522,456

42.89%

Top 15 Borrowers Across All Programs High Quality Financing Book

Large and diverse pool of borrowers with

sound credit quality

Based on loan principal outstanding,

roughly 97% of program borrowers are

rated “A3/A-” or better and 65% are rated

“Aa3/AA-” or better

No leveraged loans have ever defaulted

MWRA – which is the Trust’s largest

borrower and serves 61 member

communities in and around the metropolitan

Boston area – is rated “Aa1/AA+/AA+”

7


55

DSRF Investments

The Trust has approximately $1.3 billion in reserves outstanding

– As bonds amortize, proportional amounts of DSRFs “de-allocate” and are available as security

42% of outstanding DSRFs are invested in laddered portfolios of U.S. Treasuries and Agencies

The Trust continues to opportunistically manage away from exposure to third party investment providers

– Recently, the Trust had the opportunity to terminate $119.1 million of guaranteed investment contracts

(“GICs”)

Remaining DSRFs are invested in GICs, the bulk of which carry at least “AA” category ratings

The Series 16 Bonds did not fund a DSRF and will thus avoid exposure to today’s more challenging

reinvestment environment

DSRF Investment Breakdown

U.S.

Treasuries and

Agencies

42%

“AA”

Category

45%

“A”

Category

13%

Note: Based on the highest rating. Data as of 11/30/12


56

Flow of Funds

SRF Program Funds

Investment Earnings

State Matching

Funds

Federal Grants

As borrowers pay down the principal balances of

their loans and as the Trust pays debt service on

its bonds, proportional amounts are released from

reserves and/or loans pledged to secure related

bonds and are returned to the SRF program funds.

Revenue Fund

Reserve Fund

Earnings

Loan Repayments

Contract Assistance

Debt Service Fund

Rebate Fund

Pool Program Reserve Fund

Deficiency Fund


57

Security for the Trust Bonds


The Trust applies the federal grants and state matching funds and other moneys available to

the Trust (SRF Program Funds) to make loans or to provide security for its Bonds.

– In the past, the Trust has applied SRF Program Funds to establish reserve funds to

secure the bonds issued to fund such projects – earnings on these reserve funds were

used to pay debt service

– Beginning with Series 16, the Trust may apply its SRF Program Funds to fund loans to

borrowers that will be pledged as security to the bonds – interest payments on these

loans will be used to pay debt service

– The program reflects the combination of Reserve Fund and Cash Flow models, utilizing

loans and reserve funds to secure bonds

Trust’s Series 16 Bonds applied the Cash Flow Model - allowed for an additional $121 million in projects to

be funded rather than SRF Program Funds deposited into a reserve fund.

Reserve

Fund

Model

Bond Series Financings

Cash

Flow

Model

Hybrid

Model

58

Credit Highlights


Strong Borrower Fundamentals

No leveraged loans have ever defaulted

Strong default tolerances meeting the AAA criteria of all three rating agencies

Local aid intercept

Programmatic Strength

Highly rated and diverse loan pool with strong security provisions

Commonwealth Assistance Payments are a source of program subsidy

Additional security at a program level (Pool Program Reserve Fund and

Deficiency Fund)

Support and Management

Repeat borrowers and constant municipal contact ensure Trust awareness of

local considerations

Bonds trade actively in the secondary market.

Maturity of the Program

Essentiality of the water and wastewater infrastructure projects being funded

The Trust constitutes the single largest financing source of essential water

infrastructure projects in the Commonwealth

The Trust continues to be a strong “Aaa/AAA/AAA” rated credit by Moody’s, S&P and Fitch. Maintaining the

AAA bond rating reduces the cost of borrowing, thus reducing the cost incurred by the Commonwealth to

subsidize the loans.

“Large and diverse pool of

underlying borrowers with sound

credit characteristics.” Moody’s

Investors Service – May 21, 2012

“The stable outlook reflects our

expectation that pledged revenues

will continue to provide strong debt

service coverage consistent with the

rating level, given historical trends.”

Standard & Poor’s Ratings Services

– May 18, 2012

“An extremely strong enterprise risk

profile, given that the pool has

ongoing support from multiple levels

of government and was established

by statute…” Standard & Poor’s

Ratings Services – May 18, 2012

59

MWPAT Anticipated Borrowings – Spring 2013


Pool 17 SRF Bonds

– ~ $150 - $200 million new money

– February/March 2013

– Structure as Hybrid – primarily cash flow model (little to no reserve fund)

Given current market rates, continue to evaluate refunding opportunities

– Over $100 million in potential refunding opportunities

60


15 Minute Break

61


Massachusetts School

Building Authority

Massachusetts School Building Authority:

Vin Alabiso, Chief Financial Officer

Presented by:

62

Massachusetts School Building Authority

1. Overview

3. Key Credit Strengths

4. Debt Profile

5. Ratings and Forward Calendar

2. Capital Pipeline and Program Initiatives



63

MSBA - Overview

1 Excludes taxes imposed on the sales of meals and certain other items. Please refer to the MSBA’s Official Statement

for a full definition of MSBA’s Dedicated Sales Tax Revenue Amount.

• The MSBA was created by Ch. 208 of the Acts of 2004 to effectively

manage, plan, and create a new, financially-sustainable school building

construction and renovation grant program

• 7-member Board chaired by State Treasurer Steven Grossman

• The Commonwealth irrevocably dedicated a 1% statewide sales tax to

the MSBA’s bond program1

• The MSBA instituted a number of changes to the Commonwealth’s

previous school building assistance program:

– Implemented programmatic oversight and controls to ensure efficiency

and solvency of the program

– Ended entitlement culture for school building grants

– Created competitive application process based on need and project

urgency

– Implemented regulations to focus on intensive pre-design scope,

schedule, and budget

• The MSBA has made more than $9.2 billion grant payments to districts

since 2004



64

MSBA - History

• In 2004, the MSBA was established to replace the Commonwealth’s

unsustainable school building assistance program, which had accumulated more

than $10 billion in liabilities and a multi-year funding and audit backlog for

hundreds of projects

• Chapter 208 of the Acts of 2004 ended the former school building assistance

program and created the MSBA, charged with:

– Succeeding to the powers of the Department of Education, inheriting

outstanding payments and audits for 1,156 previously authorized projects

– Achieving the effective management, planning and financial sustainability

of a new program for school building construction grants

– Revising regulations for a new program of grants for school construction

– Accepting applications for new grant program starting July 2007



65

Former Program - Inherited Commitments Update

• 94% of the total inherited Waiting

List liability/commitment retired to

date

• 74% of the total inherited Prior

Grant commitment retired to date

$5.1B Inherited Prior Grants Status

$1.3B , 26%

$3.8B , 74%

Payments and audit

savings to date

Remaining Prior Grant

commitments

* Includes payment and audit savings through 11/15/2012.

MSBA Inherited Programs

Grant Payments

$0

$500

$1,000

$1,500

$2,000

$2,500

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

YTD

*

Fiscal Year

Gra

nt

Pa

ym

en

ts (

in m

illi

on

s)

Waiting List

Prior Grants

*Reflects payments made through 11/15/2012.

$5.5B Inherited Waiting List Status

$5,211.6* , 94%

$87.7* , 2%

$200.7* , 4%

Payments and audit

savings to date

Est. remaining annual

payments (FY14-FY24)

Est. remaining Progress

Payments

* Amounts in millions. Includes payment and audit savings through 11/15/2012.



66

New Program Solutions

The MSBA has implemented programmatic oversight and controls to ensure the grant program stays within available resources:

Focused New Program Spending

– Emphasis on core academic spaces, such as classrooms and science labs

– Adherence to educationally-sound MSBA space guidelines/standards

– “Pay as you build” Progress Payment system

Completed Two Capital Surveys of Approximately 1,800 School Facilities Across the Commonwealth

– Identified baseline public school inventory

Limited Grant Approvals to Available Funds

– Develop individual project budgets

– Require districts to design to agreed-upon budget/scope

– MSBA/local district financial commitment clearly documented

The MSBA has utilized taxpayers’ resources to support cost-effective and educationally appropriate programs:

Created “Model School” Program

– Adapts proven designs for reuse

Created Green and Accelerated Repair Programs

– Focus on preservation of existing assets by performing energy efficiency upgrades that will extend useful life of facilities

– Projects progress on accelerated schedule using streamlined procurement process

– Authorized nearly 170 Green Repair projects with estimated grants totaling approximately $223 million

– Authorized 14 Accelerated Repair projects to date with estimated grants of $12.6 million

Established Science Lab Initiative

– Enhances learning environments and facilitates delivery of 21st century science curriculum

– Funds up to $60 million in prototype designs for high school science labs



67


1. Overview


4. Debt Profile


2. Capital Pipeline and Program Initiatives



68

• Robust capital pipeline with more than 350 projects

• Project scopes range from energy efficiency repairs to new construction

Source: MSBA website, as of October 1, 2012.

MSBA projects across the Commonwealth

Partnering with school districts across the Commonwealth



69

MSBA Capital Pipeline Project Status - Capital Pipeline, All Projects (as of October Board of Directors’

Meeting)



70

Capital Pipeline - Grant Payments Update

More than $1.1 billion

reimbursement payments made

for New Program projects since

FY08

$226.1 million New Program

payments made FY13 YTD

FY13 YTD weekly average of

$24.8 million project costs

submitted for review through

Progress Payment

reimbursement system

FY13 YTD average of $11.6

million reimbursements paid

weekly for Capital Pipeline

project costs

MSBA New Program Grant Payments

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

YTD*

Fiscal Year

Ne

w P

rog

ram

Gra

nt

Pa

ym

en

ts

*Reflects payments made through 11/15/2012.

FY13 Progress Payment System Activity

Total Weekly Project Costs Submitted

$0$10,000,000$20,000,000$30,000,000$40,000,000$50,000,000$60,000,000$70,000,000$80,000,000

7/2/

2012

- 7/8/2

012

7/16

/2012

- 7/22/

2012

7/30

/2012

- 8/5/2

012

8/13

/2012

- 8/19/

2012

8/27

/2012

- 9/2/2

012

9/10

/2012

- 9/16/

2012

9/24

/2012

- 9/30/

2012

10/8/2

012 -

10/1

4/20

12

10/22/2

012

- 10/

28/2

012

11/5/2

012 -

11/1

1/20

12

Week

To

tal S

ub

mit

ted

Co

sts



71

Capital Pipeline: Accelerated Repair Program

Utilizes best practices from the former Green Repair Program (172 projects) and is primarily for the repair and/or replacement of roofs, windows, and/or boilers with the potential to include additional systems as may be determined by the MSBA

Districts with repair needs in their facilities can apply through the Statement of Interest Process

Focuses on the preservation of existing assets by performing energy-efficient and cost-saving upgrades, which will result in direct operational savings for school districts

Districts invited into the Accelerated Repair Program are required to use pre-qualified Owner’s Project Managers (OPMs) and designers, and adhere to other requirements unique to this program, such as implementing an accelerated project schedule



72

Capital Pipeline: Model School Program

4

3

11

0

2

4

6

8

10

12

Elementary Middle/Middle High High

Elementary

Middle/Middle High

High

Seeks to effectively adapt and re-use the design of successful, recently constructed elementary, middle and high schools

18 districts currently participating

Up to five additional reimbursement percentage points for participation

Model School Program Task Force

– Input from design, construction and project management professionals



73 www.MassSchoolBuildings.org

Model School Chosen

(Whitman-Hanson Regional High School)

Rendering

of New

Hingham

Middle School

Capital Pipeline: Model School Program

New Norwood

High School



74

Capital Pipeline: Science Lab Initiative

• Program updates otherwise sound educational facilitates and enhances delivery of a 21st century science curriculum

• Six grants approved to date:

– Total project budgets: $26.1 million

– Estimated maximum total facilities grants: $15.3 million

A competitive grant program established through 2012 SOI process

www.MassSchoolBuildings.org/news_events/Science_Lab_Video



75

Program Initiative: Commissioning

• MSBA-commissioned buildings undergo an intensive quality

assurance process that begins during design and continues

through construction, occupancy, and operations

• Ensures facility operates efficiently, and as intended

• Prepares facility staff to operate and maintain building systems

and equipment

• Critical component in “green” building programs, including LEED

and MA-CHPS

• 100% Funded by the MSBA

MSBA fully-funded process involving independent third party testing a

building’s systems and materials and the operation of the building as a whole

$15.9 million commissioning contracts executed to date

191 contracts for 241 schools



76


1. Overview


4. Debt Profile


2. Capital Pipeline and Grant Initiatives



77

• Unconditional Gross Pledge of a 1% statewide sales tax1

– Sales tax supported by the strong, diverse Massachusetts economy

– Massachusetts is home to 11 Fortune 500 corporate headquarters

• Strong Coverage Levels on Senior & Subordinate Liens

– Dilution of pledged revenue is restricted by an Additional Bonds Test

of 1.40x maximum Adjusted Senior Bond Debt Service Requirement

on Senior Bonds, and 1.30x maximum Adjusted Bond Debt Service

Requirement on Subordinate Bonds

– Historic coverage ratios on Senior Lien Debt in excess of 2x

– Current Senior Lien MADS coverage ratio of 2.05x

• Fully Cash Funded Debt Service Reserve Funds

– $488 million in cash funded Debt Service Reserve Funds

• No Operational Risk

– MSBA does not pay for the operational costs of the infrastructure

projects it helps fund

• MSBA Tax Revenue is not Subject to Appropriation

• Statutory Non-Impairment Covenant

• Monthly funding of principal and interest on Senior Lien Bonds

MSBA - Key Credit Features

1 Excludes taxes imposed on the sales of meals and certain other items. Please refer to the MSBA’s

Official Statement for a full definition of MSBA’s Dedicated Sales Tax Revenue Amount.

Department of

Revenue

SMART Fund

Trustee

Bond Related

Costs Fund

(For Costs Related

to Senior Bonds)

Subordinated Debt

Service Fund

Subordinated Debt

Service Reserve Fund

Bond Related

Costs Fund

(For Costs Related to

Subordinated Bonds)

Senior Debt Service

Reserve Fund

Senior Debt

Service Fund

Revenue Fund

Dedicated

Payments

Additional

Revenues

Subordinated

Sinking Fund

Accounts

Sinking Fund

Deposits

Dedicated Sales Tax

Revenue Amount

Massachusetts School

Building Authority



78 Massachusetts School Building Authority

• Growth in all but 6 of the last 37 years

• Long history of favorable growth rates

• Strong performance across economic cycles

1 Total sales tax receipts after reimbursements and abatements, less the Statutorily Exempted Revenue. 2 These data are presented as an estimate of historical Dedicated Sales Tax Revenue Amount based on historical sales tax receipts, and represent a 1% sales tax. 3 In January 1998, the payment schedule for businesses with tax liabilities greater than $25,000 per year was changed to simpli fy the time period on which such

payments are based. While the timing change did not affect the amount of tax owed by the affected businesses, the new payment schedule caused a one-

time delay in receipt of tax revenues realized in FY 1998. According to DOR, approximately $105 million less in sales tax revenue was collected in FY 1998

as a result of this change.

4 A tax amnesty program was in effect for a portion of FY 2003 which, according to DOR, generated approximately $42 million of sales and use tax revenues. 5 Reflects additional revenue due to sales tax rate increase from 5.0% to 6.25% (estimated by DOR to be approximately $739 mill ion in FY 2010 and $918 million in FY 2011), and elimination of sales tax exemption for alcoholic beverages for the period between August

1, 2009 and January 1, 2011 (estimated by DOR to be $96.6 million in FY 2010 and $81.0 million in FY 2011, of which amounts $15.5 million and $13.0 million, respectively, are included in the Dedicated Sales Tax Revenue Amount for each respective year). 6 Amounts for FY 2012 are estimated by DOR and unaudited. 7 Amounts for FY 2013 are based on the Commonwealth’s revised FY 2013 tax revenue estimate as of December 4, 2012.

FY

Sales Tax

Receipts1

Applicable % of

Sales Tax

Receipts2

% Increase/

Decrease

1977 $441.8 $88.4 27.2%

1978 520.7 104.1 17.8%

1979 577.8 115.6 11.0%

1980 608.4 121.7 5.3%

1981 704.2 140.8 15.7%

1982 753.1 150.6 7.0%

1983 865.3 173.1 14.9%

1984 1,041.8 208.4 20.4%

1985 1,209.5 241.9 16.1%

1986 1,452.1 290.4 20.1%

1987 1,600.0 320.0 10.2%

1988 1,733.3 346.7 8.3%

1989 1,787.1 357.4 3.1%

1990 1,660.5 332.1 (7.1%)

1991 1,617.7 323.5 (2.6%)

1992 1,682.3 336.5 4.0%

1993 1,821.0 364.2 8.2%

1994 1,978.8 395.8 8.7%

1995 2,137.0 427.4 8.0%

1996 2,252.1 450.4 5.4%

1997 2,494.7 498.9 10.8%

1998 (3) 2,572.4 514.5 3.1%

1999 2,833.0 566.6 10.1%

2000 3,107.2 621.4 9.7%

2001 3,273.0 654.6 5.3%

2002 3,193.9 638.8 (2.4%)

2003 (4) 3,196.0 639.2 0.1%

2004 3,211.1 642.2 0.5%

2005 3,330.8 666.2 3.7%

2006 3,420.2 684.0 2.7%

2007 3,458.9 691.8 1.1%

2008 3,453.8 690.8 (0.1%)

2009 3,239.0 647.8 (6.2%)

2010 (5) 3,852.1 637.1 (1.7%)

2011 (5) 4,091.5 654.7 2.8%

2012 (6) 4,190.6 670.5 2.4%

2013 (7) 4,264.4 682.3 1.8%

Dedicated 1 Cent Statewide Sales Tax ($’s in Millions)

0

100

200

300

400

500

600

700

800

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

($’s

in

Millio

ns)

Strong History of Statewide Sales Tax Growth



79

FY13 SMART Sales Tax Collections

Total sales collections through October were $5M (2.3%) greater than collections through same period in FY12

Collections have exhibited growth each month over the same month in the previous year

Month Jul Aug Sep Oct YTD

FY12 Collections ($ in thousands) 59,646 54,111 52,414 56,434 222,606

FY13 Collections ($ in thousands) 60,514 56,214 53,253 57,667 227,648

Change ($ in thousands) 868 2,103 839 1,232 5,042

% Change 1.5% 3.9% 1.6% 2.2% 2.3%

Monthly SMART Collections

0

50,000

100,000

150,000

200,000

250,000

Jul Aug Sep Oct YTD

To

tal

Sale

s T

ax C

oll

ecti

on

s (

$ i

n t

ho

usan

ds)

FY12 Collections ($ in thousands)

FY13 Collections ($ in thousands)



80


1. Overview


4. Debt Profile





81 Massachusetts School Building Authority

1 Debt service reflects the impact of 2012 Series A and B refunding bonds. Debt service does not account for expected Debt Service Reserve Account earnings and the Federal BAB and QSCB subsidies; however, debt service is net of the amounts that are expected to be paid from Debt Service Reserve Account releases.

• $4.95 billion of Senior Lien debt outstanding as of November 15, 2012

• $293.38 million of Subordinate Lien debt outstanding as of November 15, 2012

– 100% comprised of Qualified School Construction Bond issuance

• Senior Lien MADS (net of Debt Service Reserve Account releases) totals approximately $367.62 million

• 100% of MSBA’s debt portfolio comprised of fixed rate debt

• FY13 refunding issuances (2012 Series A and 2012 Series B) generated more than $150.01 million net PV savings

MSBA Debt Service1 vs. Sales Tax Revenues

2

2

2

MSBA – Outstanding Debt



82


1. Overview


4. Debt Profile





83

Ratings

Recent affirmation of strong credit ratings as part of MSBA’s $916 million 2012

Series B refunding issuance

– Fitch: AA+

– Moody’s: Aa1

– S&P: AA+

Forward Calendar

New Money Issuance (~$500 million) – Q2 calendar 2013

Qualification of underwriters to be conducted Q1 calendar 2013

MSBA – Ratings and Forward Calendar



84

• Jack McCarthy, Executive Director

– (617) 720-4466, [email protected]

• Vin Alabiso, Chief Financial Officer


• Susan Flanagan-Cahill, General Counsel


• Ken Wissman, Chief Financial Advisor


Contact Information




85


Massachusetts State College

Building Authority

Massachusetts State College Building Authority:

Edward H. Adelman, Executive Director

Presented by:

86

Massachusetts State College Building Authority


1. Overview

2. Demand for State University and Campus Facilities

3. Bond Security Features

4. Authority Debt Profile

5. Project Delivery and Management

6. Future Borrowing Needs

Weygand H

all B

ridgew

ate

r Sta

te U

niv

ers

ity

87


Massachusetts Maritime Academy

Fitchburg State University

Massachusetts College of Liberal Arts

Worcester State University

Bridgewater State University

Salem State University

Framingham State University

Westfield State University

The Massachusetts State University System

Massachusetts College of Art and Design

1. Overview:

MSCBA – Authority System Overview

The Authority finances, designs, constructs, and manages residential and student activity

facilities on the campuses of the nine State Universities

The Authority portfolio currently has capacity for approximately 15,000 students in 43

residential complexes. These facilities house approximately 42% of the undergraduate

student population

88


Demand

Full Occupancy; Increasing Enrollment

High Interest in Residential Campus Experience

Improved Facility Condition

Affordable Rent and Fees

Revenue and Reserves

Strong Project Revenues, Pledges, and Reserves

Multiple Years of Increases in Authority Reserves

No Variable Rate Debt; No Derivatives Exposure

All Revenue Available for All Debt

Statutory Appropriations Intercept (Pre-Default)

Strong Commonwealth Rating: Aa1 (Moody’s)

and AA+ (S&P)

Strong Intercept Mechanics

Improved Appropriations/Debt Service Coverage

Ratio

North Hall Framingham State University

1. Overview:

MSCBA – Key Credit Strengths

89


Undergraduate headcount has increased steadily from 34,748 in Fall 2002 to 42,127 in

Fall 2012, an increase of 21%

Fall 2011 to Fall 2012 undergraduate headcount rose by 1.2%

State University Undergraduate Headcount1

30,000

32,000

34,000

36,000

38,000

40,000

42,000

Fall

2002

Fall

2003

Fall

2004

Fall

2005

Fall

2006

Fall

2007

Fall

2008

Fall

2009

Fall

2010

Fall

2011

Fall

2012

(# o

f Stu

dents

)

Source: Baard of Higher Education 1 Early estimates for Fall 2012

2. Demand:

MSCBA – State University Enrollment

90


Residence hall design capacity (# of beds) has increased 48% from 10,065 in 2001 to

14,863 in 2012

Residence hall occupancy has remained stable at over 100% actual occupancy since

academic year 2003-2004, even as the number of beds has increased by nearly 4,800

All of the State Universities residence halls are fully occupied, with the majority having

Fall 2012 occupancy greater than 100%

Source: Authority

System Actual Occupancy versus Design Capacity

2. Demand:

MSCBA – State University Residence Hall Capacity and Occupancy

91


3. Bond Security Features:

MSCBA – Flow of Funds Established by Trust Agreement

92



MSCBA – Total Revenue, Reserves and Pledges Available for Debt Service

93



MSCBA – Projected Reserve Levels

94


4. Authority Debt Profile:

MSCBA – Outstanding Indebtedness (including 2012C Estimates)

95


Qualifications-based selection process

Completion bonus/penalties

Track record for on-time and-on budget

performance

Build and sustain quality facilities

Schedule and fund periodic

reinvestment

Bonding and insurance

“The new dorm tower at

Massachusetts College of Art and

Design is the most interesting

Boston high-rise in years.”

Robert Campbell

architecture critic

The Boston Globe

Sunday, May 13, 2012

Treehouse Residence Mass College of Art and Design

5. Project Delivery and Management:

MSCBA – Project Approach

96


For further information, please contact:

Edward Adelman

Executive Director

617/933-8337

[email protected]

Visit on the web:

www.mscba.org

Currently, the Authority expects to issue approximately $80 million in both 2014 and

2015 to fund two new residence halls and renovations to student activity facilities

Fitness & Recreation Center Salem State University

6. Future Borrowing Needs:

MSCBA – Upcoming Issuances

mailto:[email protected]

97


University of Massachusetts

Building Authority Presented by:

Katherine Craven

Executive Director

The University of Massachusetts Building Authority

98

University of Massachusetts Building Authority


History

Created by Mass. Legislature in 1960

Merged with Lowell University and Southeastern Mass University Authorities in 1995

First issuer in Mass. to use taxable Build America Bonds

Completed the Authority’s first competitive bond sale in 2011

Governance

11 Members

Appointed by the Governor

5 Members must be UMass Trustees

2 Non-Trustee Members must be alumni of the University

Non-Trustee Members serve 6 year terms

Trustee Members serve as long as they are Trustees


99



-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012

Debt Outstanding (in thousands) – June 30, 2012


100



75%

25%

0%

Debt Outstanding – June 30, 2012

Fixed Rate

Synthetic Fixed Rate

Variable Rate


101



58%17%

18%

7%

Debt Credit Support – June 30, 2012

University Credit

Insured

Credit Enhanced

CommonwealthGuaranteed


102




103



Projects


104



Albert Sherman Life Sciences Building


105

1

0

5

Capital Improvement Requirements:

Debt Financing

Five-year plan proposes $1.73 billion in debt funded spending

• $700 million already borrowed

• $1 billion to be borrowed during the five-year period (Next planned borrowing- Spring 2013)

• UMass maintains strong Aa2/AA ratings, providing market access for a variety of financing alternatives

and attractive borrowing costs

Fitch Ratings Report:

“Management continues to prudently

oversee an extensive capital improvement

program meant to enhance teaching and

research facilities, and elevate the

university’s academic standing.”

Debt Service – Existing plus $1

billion of new bonds




106



Credit Review

Rating Agencies:

Moody’s Aa2

Fitch AA

S&P AA (Commonwealth Guarantee Debt)


69,600+ students over 5 campus system (Fall 2011)

Nearly 14,000 degrees conferred (2010 – 2011)

13,500+ admissions (Fall 2011)

$586+ million in research expenditures and continues to grow at an 8.1% increase over FY

2010


107




In the Fall of 2011 the Times of London ranked UMass as the 64th best University in the

world.

Ranked behind only Harvard, MIT and Tufts in Massachusetts

The Times of London 2011 World Reputational Rankings ranked UMass 19th in the world in

reputation.

The 2012 U.S. News rankings of primary care medicine ranked UMass Worcester 7th out of

146 institutions.

In 2010, the most current ranking, UMass ranked 13th nationwide in terms of universities

generating revenues from licensing and technology transfer.

UMassOnline, which delivers 100+ programs to diverse and geographically dispersed

learners, increased by 11% in 2011 to over 50,000 enrollments.

UMass endowment assets grew by 15% in 2012 and exceeded $529 million.

(Source: The University of Massachusetts 2012 Annual Indicators Report and University personnel)


108


Investor Roundtable Panel

Colin MacNaught, Office of the State Treasurer

Moderated by:

Chris Alwine, Vanguard

109


Presentation By:

John J. Cross III

Securities and Exchange Commission

Director of the Municipal Securities Office

110


John J. Cross III, Securities and Exchange Commission, Director of the Municipal Securities Office

John Cross has a broad range of experience with municipal finance transactions in nearly every

state, including experience with some of largest and most complex municipal financings ever

undertaken. Mr. Cross has been a leader in the public policy area affecting municipal finance.

For the past several years, Mr. Cross has been serving as the Associate Tax Legislative Counsel in

the Office of Tax Policy at the U.S. Treasury Department, where he has had significant responsibility

for legislative, regulatory and budgetary tax matters affecting municipal bonds. Mr. Cross led the

agency’s implementation of the municipal bond provisions of the 2009 Recovery Act, which included

public guidance on Build America Bonds and other targeted municipal bond programs. He also

played a significant role in the Treasury Department’s efforts to address municipal bond market

challenges in the 2008 financial crisis.

Prior to working at the Treasury Department, Mr. Cross was a partner at national municipal bond

specialty law firm Hawkins Delafield & Wood LLP from 1994 to 2006. He previously served as a

counsel at the Internal Revenue Service in the Financial Institutions and Products division, where his

work involved derivative financial products that were used with municipal bonds.

Mr. Cross has been active in several professional organizations, including the National Association of

Bond Lawyers (NABL), where he’s a former board member. He’s also a member of the editorial

board for Municipal Finance Journal. Mr. Cross received his B.A. from Brown University in 1978, a

J.D. from Vanderbilt University School of Law in 1981, where he was a member of the Vanderbilt Law

Review, and a Masters of Laws in Taxation from Georgetown University Law Center in 1988. He is

married to Meredith Cross, who is Director of the SEC’s Division of Corporation Finance.

111


The Commonwealth of Massachusetts

Executive Office for Administration and Finance:

Jay Gonzalez, Secretary

Greg Mennis, Assistant Secretary for Fiscal Policy

Scott Jordan, Assistant Secretary for Capital Finance

Michael Esmond, Budget Director

State Treasurer’s Office:

Colin MacNaught, Assistant Treasurer for Debt Management

Delia Rissmiller, Investor Relations Manager

Presented by:

112

The Commonwealth of Massachusetts – Fiscal 2013 Update


• FY 2013 signed on-time, and in balance, totaling approximately $32.5 billion, an increase of

4.9%.

• As of the signing of the budget, the reliance on one-time resources was estimated to be

$616 million, down from $669 min fiscal 2012 and over $1.9 billion in fiscal 2011.

• As we will discuss further in the presentation, ANF continues its efforts to develop and

improve long-term fiscal planning models and policies. Based on ANF’s long-term models,

this level of non-recurring resources is safely within a sustainable level for the state’s

annual budget.

• The fiscal 2013 budget continues to reform, including such areas as, community colleges

governance, accountability and effectiveness; programs and services for homeless

families; state facilities managements; performance management and budget

transparency; and, efforts to control health care spending for the state and employers

across the Commonwealth.

• Spending controls continue. While the fiscal 2013 budget did not require the same level of

reductions and related spending control measures as some previous budgets, state

agencies must continue to find ways to limit growth in their costs and operate more

efficiently.

113



On December 4, 2012, pursuant to Section 9C of Chapter 29 of the Massachusetts General

Laws, the Secretary of Administration and Finance advised the Governor of a budgetary

shortfall of revenues totaling $540 million with respect to the appropriations approved to

date for fiscal 2013.

On the same day, the Secretary revised the tax revenue estimate for fiscal 2013 to $21.496

billion, which represents a reduction of $515 million from the revenue estimate assumed in

the fiscal 2013 budget adjusted for subsequent tax law changes.

On December 4th the Governor announced a balanced set of solutions, and filed

accompanying legislation, that would close the gap.

The Administration and Legislature have established a number of prudent fiscal policies to

ensure structurally-balanced budgets and long-term fiscal sustainability. These have been

codified through changes in law and in the Administration’s Long-Term Fiscal Policy

Framework.

One of these fiscal policies is a commitment to solve no more than half of any mid-year tax

revenue shortfall with rainy day funds or other one-time, non-recurring resources. This

policy ensures a balanced set of budgetary solutions that will better position the state to

absorb the impact the tax revenue reduction may have in subsequent years as well.

114



Overview of Budget Balancing Measures

Fiscal Action Plan

Change in Estimated FY 2013 Tax Receipts: (515)

Year-To-Date Dedicated One-Time Tax Settlements: (25)

Projected Budgetary Shortfall: (540)

Non-Recurring Solutions:

Increase Rainy Day Fund: 200

One-Time Medicaid Revenue: 49

One-Time Executive Branch Reductions: 10

Other Fund Surpluses: 11

sub-total: 270

Recurring Solutions:

Additional Federal Revenues: 49

Non-Executive Branch Reductions (1%): 25

Reduced Sales Tax Transfer to School Building Authority 20

Local Aid Reduction (1%) 9

Executive Branch Reductions (net)*: 147

Health Care and Debt Service Savings: 20

sub-total: 270

115



Nationally, the rate of economic growth has been slower than in typical post-recession

periods and, over the last few months, economic growth has been slower across the

country than had been projected at this time last year when we developed the tax revenue

estimate for the fiscal 2013 budget.

The slow-down in economic growth is largely due to the uncertainty caused by the so-called

“fiscal cliff” and the federal fiscal condition generally.

Though we have proactively addressed the current projected shortfall, inaction by the

federal government to address the so-called “fiscal cliff” would have a significant impact to

state tax revenues. Some forecasts project a $300 million fiscal 2013 tax revenue hit as a

result of full sequestration and expiration of tax cuts.

116

The Commonwealth of Massachusetts – Reserves


The fiscal 2012 estimates released by the National Association of State Budget Officers

(NASBO) in June 2011, together with the results reported in the Commonwealth’s fiscal

2012 Statutory Basis Financial Report, indicate that Massachusetts’s Stabilization Fund

balance of $1.652 billion is estimated to be the third highest reserve fund balance in the

nation in absolute size

After accounting for the additional withdrawals from the Fund in fiscal 2013 the projected

ending balance would b $1.192 billion, one of the highest in the nation.

This is a direct of result of prudent budget management by the Administration and

Legislature, fiscal 2012 was the second year in a row that had a year-on-year increase.

In addition, two recently passed amendments to state finance law have also helped to

increase the balance of the state’s reserves

– A provision that requires the deposit of any one-time settlements greater than $10 million

to the Stabilization Fund resulted in a $375 million being added to the fund in fiscal 2012.

– A provision that requires any tax revenue from capital gains that exceeds $1 billion in a

fiscal year is to be deposited into the Stabilization Fund is projected to result in a $90

million deposit into the fund in fiscal 2013.

117

The Commonwealth of Massachusetts – Reserves


1,137

1,728

2,155

2,335

2,119

841

669

1,379

1,652

1,192

0

500

1,000

1,500

2,000

2,500

$s

in

mil

lio

ns

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fiscal Year

Stabilization Fund Balances

by Fiscal Year

118

The Commonwealth of Massachusetts – Looking Forward – Fiscal 2014 Overview


House 1 Development. A&F is actively working with state agencies now to develop the

Governor’s budget for next year.

With a continued uncertain revenue picture, A&F developed competing scenarios of

potential impacts resulting from some or all of the fiscal cliff occurring on January 1,

2013.

The state FY 2014 tax consensus hearing process will begin on December 11 with the

joint A&F and legislative hearing at which economic forecasters will provide testimony

on likely revenues and related economic factors. Actual revenue forecasts for FY 2014

tax collections and related distributions of dedicated tax streams will not be finalized

until early to mid January 2013.

The Governor’s budget will be filed on Wednesday, January 23, 2013.

The impact of the “fiscal cliff” would be significant to the Commonwealth’s fiscal 2014

tax revenues, with some forecast’s projecting a revenue loss of $1 billion as a result of

full sequestration and expiration of tax cuts.

119

The Commonwealth of Massachusetts – Capital Investment Plan


Statewide, five-year capital plan. The plan coordinates capital expenditures by state

agencies and authorities that are funded primarily with Commonwealth debt, third party

payments and federal reimbursements.

Limit on Borrowing, from all sources. The Administration limits bond-funded capital

expenditures, known as the “bond cap.” fiscal 2013 bond cap is $1.875 billion with an

additional $93 million in unused capacity from the prior fiscal year.

Bond cap determination is based on the Debt Affordability Analysis and policies in which

A&F sets the annual borrowing limit at an amount sized to keep debt service within 8% of

budgeted revenues

The Administration has conservatively constrained the bond cap in FY16 and FY17 at the

fiscal 2015 level. Future debt affordability analysis may show sufficient revenue growth to

allow increased bond cap in future plans.

120

The Commonwealth of Massachusetts – Capital Investment Plan


-

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

FY12 FY13 FY14 FY15 FY16 FY17

Unused Capacity

State Bond Cap

121

The Commonwealth of Massachusetts – Long Term Fiscal Policy Framework


• The Administration has adopted a long-term fiscal policy framework to promote:

• Achieving structural budget balance

• The integration of long-term forecasting with current year budget development

• Clear thinking about long-term fiscal impacts of policy decisions and proposals

• A collaborative approach to maintenance and improvement of fiscal policy and planning,

using data and input from all state government stakeholders

• Policy goals:

• Structural balance

• Sustainable spending growth

• Disciplined management of long-term liabilities

122

The Commonwealth of Massachusetts – Long Term Fiscal Policy Framework


Long Term Fiscal Policy – Process Flow

Long

-

Term Tax Revenue

Caseload Forecasting and Policy Impact

Macro Assumptions

Five Year Model

Revenue / Spending Growth

123

The Commonwealth of Massachusetts – Long Term Fiscal Policy Framework - Update


• Structural Balance:

• fiscal 2013 forecast is in structural balance based on an estimated cyclical deficit of $1B

and a projected use of $796M in one-time resources ($886M in one-time spending net of

$90M in stabilization fund deposits). One-time spending in fiscal 2011 and fiscal 2012

was also substantially below the cyclical deficit.

• The long-term revenue forecast will be updated in December, concurrent with the

consensus revenue process, and will incorporate risk (fiscal cliff) scenarios.

• Sustainable Spending Growth:

• Five-year projections from May of this year indicated spending growth of 5.0% by FY17,

leading to structural budget deficits based on projected long-term revenue growth of

4.0%. The rate of spending growth was driven largely by assumed high rates of growth

in health care costs.

• The base case five-year projections for the January 2013 update to the policy framework

will incorporate lower rates of growth in spending based on the health care cost

containment legislation. The risk of higher rates of health care cost growth will be

captured in scenario analyses.

• The updated five-year projections will also include the estimated impact of the Affordable

Care Act as well as federal budget/deficit reduction initiatives (e.g. sequestration)

124

The Commonwealth of Massachusetts – Long Term Fiscal Policy Framework - Update


• Disciplined Management of Long-Term Liabilities:

• The updated policy framework will include an evaluation of the impact of pension reform

and recent changes to the state’s pension valuation.

• A comprehensive measure for long-term liabilities (debt, pension, OPEB, deferred

maintenance) and the potential impact of recommendations from the OPEB commission

are also being evaluated

125

II. Disclosure Enhancements: Devoting Resources to Be a Market

Leader


126

Massachusetts’ Investor Disclosure Enhancements


• Investor Disclosure • Continue to re-write and overall information statements and

supplements, enhancing sections based on investor or regulatory

feedback and focusing on plain English.

• Enhanced pension liability / asset sections in 2010 and 2011

• Working to incorporate economic narrative

• Developing formal schedule of disclosure releases to make

disclosure more predictable

• More voluntary filings on EMMA

• Continuing to seek investor feedback

• Investor Communication & Outreach • Annual investor conference

• Targeting investors in Boston and outside region for one-on-one

meetings away from financings

• First state to implement quarterly investor conference calls

• Revenue, budget, debt updates, as well as

• Access to senior leadership of the state

• Investor surveys

• New Consolidated Investor Website • Website dedicated to investor needs, data consolidated across the

Commonwealth

• Debt reports, bond authorizations

• Cash flow reports

• Forward financing calendar

• Monthly revenue reports

• Operating & capital budgets

• CAFRs, pension and OPEB actuarial reports

• Disclosure and O.S. archives, rating information

• Goals • The Commonwealth’s goal is to have the best investor

disclosure and investor outreach program in the

municipal market place

• Better disclosure documents, better investor website

and more predictability in disclosure publications

• Focusing on investor outreach efforts

127

Enhancements to Information Statements


The foundation of Massachusetts’ enhanced disclosure program is the emphasis on improving the state’s

written disclosure document

Like other states, Massachusetts is always striving to meet or exceed the best practice recommendations

of such groups as the NFMA, GFOA and NABL for its disclosure documents

But we’ve also focused on investor feedback – through formal and informal surveys – for re-writes or

enhancements of specific sections

For example, we rewrote our pension liability / asset sections in 2010, 2011 & 2012 based on feedback

from investors

By the time NABL had finalized their recommendations to issuers in May 2012, Massachusetts

pension disclosure had met nearly all recommendations (projections by end of 2012)

We are currently working to include an economic narrative into our information statements for the first

time, to be a resource to investors in addition to the quarterly economic statistical section that we currently

provide

Incorporated recommendations from “A Plain English Handbook: How to Create Clear SEC Disclosure

Documents” (1998)

Tried to make the document more readable, with more logical flow, defined page breaks, consistent

use of data, more tables, etc.

128

Enhancements to Information Statements


In 2012, we introduced two big changes in terms of the process around the release of the Information

Statement

First, starting in 2012, the Commonwealth moved away from Information Statement Supplements

Full re-write of the information statement – roughly 100 page document – each time disclosure is updated

Second, developed formal schedule of disclosure releases six times per year to make disclosure more

predictable, again based on investor recommendations

The Information Statement is released on or about the fifth business day of every other month

The scheduled of disclosure releases has been published to the market

Disclosure updates every January, March, May, July, September, November

10b-5 letters, modeled after Sarbanes-Oxley

Whether the state is selling bonds or not it has committed to following this schedule

Investors know when to expect disclosure data – should give investors more confidence knowing they will

have reliable information in the future to make informed buy or sell decisions

129

More Voluntary Filings to EMMA


Our goal is to have many more voluntary filings on EMMA, including:

Cash flow statements

Rating agency presentations

Investor presentations

Revenue reports and forecasts

Investor questions and answers

Transcripts of investor conference calls

130

Investor Communication


• The second phase of Massachusetts’ enhanced disclosure program is more direct investor outreach

• Massachusetts is the first state to implement regular investor conference calls

• Live calls, modeled on corporate earnings calls

• Scheduled for roughly 7 days after disclosure is updated, six planned per year

• Access to senior leadership of the state, whether or not state is selling bonds

• Regular updates on the economy, revenues, budgets, capital updates, as well as one “big topic” per

call

Commonwealth of Massachusetts 2012/2013 Investor Disclosure & Conference Call Schedule

Disclosure Update

Targeted Investor

Conference Call "Big Topic" Participants

9-May-12 21-May-12 Disclosure Enhancements Treasury

23-Jul-12 30-Jul-12 FY12 Revenue Review Dept of Revenue

10-Sep-12 17-Sep-12 Review of Major Spending Categories Admin & Finance

16-Nov-12 14-Nov-12 Review of 2012 Pension Actuarial Report State Actuary, PERAC

7-Jan-13 14-Jan-13 State Financial Controls & Financial Statements State Comptroller

7-Mar-13 14-Mar-13 Review of Updated 5-Year Capital Plan Admin & Finance

131

Investor Communication


• Massachusetts is hosting its second annual investor conference December 2012

• Ongoing targeting of investors in Boston and outside region for one-on-one meetings away from

financings (New York, Chicago, San Francisco)

• Focus on existing large holders of Massachusetts bonds and large investors who don’t hold a lot

of Massachusetts bonds

• Continue to seek investor feedback on disclosure and liquidity via third party surveys

• Investor email subscriber list

• Twitter feed for investors: @BuyMassBonds

132

New Investor Website


The third phase of Massachusetts’s enhanced disclosure program – and perhaps the most important, is a

new consolidated website dedicated to investors

There are three issues around improving continuing disclosure in the municipal market:

1. Timeliness

2. Format, and

3. Frequency

Massachusetts’ goal is to address these issues for investors through a new website

Use of new website to efficiently provide more information to investors and more information more

frequently to investors

Recently released SEC report on muni disclosure said the increased use of issuer websites would be

useful

Also follows GFOA Best Practices: Using a Website for Disclosure (2002 and 2010); Using Websites to

Improve Access to Budget Documents and Financial Reports (2003); and Website Presentation of Official

Financial Documents (2009)

133



The Treasury’s existing debt management website will have its content re-purposed for debt material that

may be pertinent for investors

The new investor website will consolidate all of the information currently available to investors on different

websites

Target to go live January 1

Approximately 25,000 pages of downloadable information, including:

Debt schedules, bond authorizations, variable rate summaries, swap summaries

Cash flow and short-term investment reports

Monthly revenue reports

Operating & capital budgets, including supp budgets

CAFRs, pension and OPEB actuarial reports

Forward consolidated issuer financing calendar

Disclosure and Official Statement archives

Live links to MSRB secondary market trading activity by CUSIP numbers

134



135



136



137



138



Timeliness, format and frequency…

In developing our new website, we’ve tried to address those areas by asking a couple of simple questions

State financial data changes continuously, while state financing-related disclosures may be quarterly or

less often – in Massachusetts case, six times per year

Even with six disclosures per year, relevant state economic indicators change continuously

Also, some state economic indicators are available from state agencies before being released by

the Federal government (e.g., Employment data from state labor and workforce development

agencies who feed the BLS)

The gap between when an economic or financial data point changes and when its formally disclosed by a

state in its bond disclosure represents a cost and an opportunity

These information gaps will always translate into “uncertainty discounts” being imposed by investors on

state borrowings

A successful closing of those gaps would reduce the “uncertainty discount” imposed by investors

So, how could we close the gaps?

139


29

Using a enhanced investor website, the Internet presents a pathway for collapsing the disclosure cycle

from bi-monthly or less often, to potentially real time

What do we mean by “Real Time Disclosure”?

Dynamically updating Massachusetts financial indicators (revenues, spending, cash flow, etc)

Dynamically updating economic indicators (employment, jobs, GDP, etc)

Analytically accessible numeric data

Provide data such that investors have the ability to:

Drag individual data series to their desktops for viewing and analysis

Download entire data tables

Monitor Massachusetts tables in Excel worksheets, with dynamic updating

Pull current Massachusetts data into investors’ proprietary internal systems

What would this require?

Continuous information flows from state reporting units to a central disclosure platform – in

Massachusetts’ case, a dedicated set of pages on its new investor website

Dedicated pages would feature all of the data points and tables current presented in the state’s

Information Statement and Quarterly Economic Statistical Report

And ultimately, continuous information flows from the state’s investor website to the desktops of credit

analysts and portfolio managers at major investment firms


140



What would this look like?

Continuously updating disclosure data on the Commonwealth’s investor website

As an example, a monthly tax revenue table from the state’s Information Statement

141



• Each line on the table would be interactive, with one click on a data point leading an investor to the data

source (website of the source of the original data) or to a pop-up window showing some kind of trend

analysis

• Transforms the table of data into one that provides instant trend analysis or historical perspective

142


3

• Working with our website programmers, we’d like to allow investors to select from the hundreds of

different tables and data points to highlight the ones that are most important to their analysis

• Drag and drop the selected data to their own desktop


143


3

• This feature would allow an investor to receive continuous data updates in real time being delivered right

to their desk top

• We think features like this, on a dedicated website, closes the information gaps that might normally exist

and addresses the timeliness, format and frequency objectives


144


2013 Market Outlook

Municipal Market Advisors:

Tom Doe, CEO and Founder

Presented by:

145

MMA The Power of Independence

MUNICIPAL MARKET OUTLOOK: 2013

Thomas G. Doe, Founder and CEO

www. mma-research.com

Municipal Market Advisors, Inc. December 13, 2012

75 Main St. Concord, MA 01742

978-287-0014

146


Municipal market has been historically driven by the demand component.

Illiquidity and limited price discovery have been masked in the strong market.

The legacy of Meredith Whitney has continued to shape the public coverage

and perception of risk; as well as investor and regulator behavior.

MMA’s greatest concern is the next period of illiquidity and the adverse

consequences to investors and more importantly to issuers.

The discussion regarding the continued exemption of municipal bonds must be

focused on how capital will be made accessible for infrastructure projects that

create jobs, and a better US economy and society.

147


$1,750

$624

$353 $330 $272

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Households Mutual Funds Banks Prop/Cas. Ins. Money Funds

$B

's

Ownership of Municipal Bonds by Investor Segment$ Outstanding ($B) as of 3Q12

148


$ Qtr % Qtr % Ann

Households 1,891 51.0% 1,816 48.7% 1,750 47.1% (66) -4% -7%

Money Funds 292 7.9% 272 7.3% 272 7.3% (0) 0% -7%

Mutual Funds 535 14.4% 596 16.0% 624 16.8% 28 5% 17%

Closed End Fds 80 2.2% 84 2.2% 85 2.3% 1 1% 6%

Non-Fin. Cos. 20 0.5% 21 0.6% 21 0.6% 1 2% 7%

Banks 287 7.7% 330 8.8% 353 9.5% 23 7% 23%

Broker Dealers 37 1.0% 31 0.8% 29 0.8% (2) -7% -21%

Prop/Cas. Ins. 328 8.9% 330 8.8% 330 8.9% 1 0% 1%

Life Insurers 120 3.2% 121 3.2% 122 3.3% 1 1% 2%

GSEs and Gov'ts 22 0.6% 19 0.5% 18 0.5% (1) -7% -18%

Foreign Buyers 80 2.1% 89 2.4% 92 2.5% 3 3% 15%

Total 3,708 100% 3,733 100% 3,720 100% (13) 0% 0%

Ownership of Municipal Bonds by Investor Segment

Investor

Segment

$ Outstanding ($Bn) Change

3q11 2q12 3q12

149


2 to 5 5 to 10 10 to 20 20 to 30

1/20/11 113 151 139 15

11/30/12 34 85 75 37

60-day Avg. 40 102 80 38

'11 - '12 Avg. 67 119 110 36

0

40

80

120

160

Bas

is P

oin

tsMMA 5% Curve Slope Comparison (Bps)

1/20/11 11/30/12 60-day Avg. '11 - '12 Avg.

150


2 Year 5 Year10

Year15

Year20

Year25

Year30

Year

Average TRR (through lastyear end)

4.03% 5.17% 6.55% 7.48% 8.00% 8.31% 8.49%

2012 0.53% 2.13% 5.40% 8.38% 10.96% 12.03% 11.90%

0%

5%

10%

15%

TRR

%MMA Total Rate of Return (TRR)

2012 v. Average ('83-'11) - as of November 2012

Average TRR (through last year end) 2012

151


0

20

40

60

80

100

120

140

160

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Bas

is P

oin

ts

Bond Buyer Revenue vs. G.O. Spread (bps) January, 1980 - December, 2012

152


0.02.04.06.08.0

10.012.014.016.018.020.0

MU

B

NYF

CM

F

SUB

PW

Z

PZA PZT PV

I

TFI

INY

SHM

CX

A

VR

D

SMB

ITM

MLN

HYD

PR

B

TRR

(%

)

Municipal ETF Performance (%): 2012 YTD

iShares (Maroon) ; Powershares (Green); Nuveen (Blue) Van Eck (Gray) Source: Bloomberg

HYD AUM > 150% YTD

153


-40

-20

0

20

40

60

80

Jul-07 May-08 Mar-09 Dec-09 Oct-10 Jul-11 May-12

Bas

is P

oin

t Sp

read

MMA Municipal Value Index Indicative 10-yr Spread:Evaluated Barclay Index vs. MMA Median

July, '07 - November '12 (Average: 8bps, Last: -22bps)

VALUE for Investors

Opportunity for Issuers

154


1.501.62

0.42

0.020.00

0.50

1.00

1.50

2.00

MMA 5% 10-Yr Treasury 10-Yr

Yie

ld %

Current Municipal & Treasury 10-Year Yields vs. Yield Objectives to Attain Breakeven After Average

Historical Correction

Current Breakeven Yield

155


-1%

29%

-1%

-19%

5%

-19%-7%

-27%

$277

$178

$206

$283

$394 $389$421

$294$350

$0

$100

$200

$300

$400

$500

$600

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

Avg A

nn

ual Issu

ance

$B

's

De

cem

be

r vs

. No

vem

be

r C

han

ge %

December vs. November Issuance Change vs. Annual Total Issuance (By Era of Demand)

December vs. November

Annual Average

156


Period 2012 ($B's) 2011 ($B's) Difference (%)

Nov $32.1 $14.0 128.7%

Dec $35.8 $21.1 69.9%

Period 2013 ($B's) 2012 ($B's) Difference (%)

1Q $55.0 $74.4 -26.1%

Source: IDC

Difference in Municipal Reinvestment (No Coupons)

157


High-grade (i.e. AAA) benchmarks and transactions in both primary and

secondary markets exert inordinate amount of influence on all evaluations

and market perception of value.

A small number of participants can influence price discovery as the universe

of firms providing liquidity and remaining consistently active in both

primary and secondary has become more concentrated.

Regulators have the resources to monitor all dealer activity to note irregular

behavior that can potentially distort evaluations and disrupt liquidity.

Investors can misinterpret liquidity/volatility as default risk.

158


54.4%

19.5%

8.8% 7.9% 9.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1 to 5 6 to 10 11 to 20 21 to 40 40+

% o

f P

ar

Distribution of Customer Trades by Number of Dealer Firms: 2011

(% based on par amount)

% of Par Source: MSRB

159


90%

3%7%

Breakdown of Outstanding Municipals (%)

Investment Grade from atLeast One Agency

Below Investment Grade

Unrated

Source: Bloomberg

160


7.80

8.20

8.60

9.00

9.40

9.80

10.20

3.70

4.00

4.30

4.60

4.90

5.20

5.50

10/15 11/9 12/4 12/29 1/23 2/17 3/14

OH

To

ba

cco Y

ield

(%)

Be

nch

ma

rk Y

ield

s (%

)

MMA Benchmark 30-Yr Yields &OH Tobacco's 5 7/8 '47

MMA 5% MMA Par OH Tobacco (118217au2)

S&P tobaccodowngrade 11/12

Whitney on CBS

MMA on CNBC

161


Date MMA 30yr 5% Par (M's) Trades High Low Average

11/8/2010 3.98 85 5 8.10 7.70 7.80

11/9/2010 4.10 14455 17 8.18 7.70 7.91

11/10/2010 4.16 1035 16 8.24 7.70 7.90

11/12/2010 4.21 15550 7 8.80 7.99 8.58

11/15/2010 4.33 17905 7 8.95 8.41 8.71

11/16/2010 4.44 455 4 9.09 8.63 8.83

Ohio Buckeyes 5.875 '47

162


0.92

0.97

1.02

1.07

1.12

-$6.0

-$4.0

-$2.0

$0.0

$2.0

Dec-10 May-11 Nov-11 Apr-12 Oct-12

MM

A G

M Fu

nd

Ind

exIn

flo

ws

$B

's

ICI Weekly Municipal Mutual Fund Net Inflows ($B) vs. MMAGeneral Municipal Fund Price index

Net Inflows GM Mutual Fund Price Index

163


12154 55

336 331

90

177

109

30

14796

47

159

4.00

6.00

8.00

10.00

12.00

0

100

200

300

400

Yield (%)B

asis

Po

ints

Municipal Yield Change and High Yield Level During Periods of Adversity & Illiquidity: Bond Buyer 20 GO Index

Change (bps) Yield High (%)Source: Bond Buyer, MMA

164


Sector NOV All Notices DEFAULT Support Other

ALL $3,371 (87) $46,375 (698) $11,707 (373) $24,989 (209) $9,679 (116)

IDB $313 (2) $5,571 (53) $4,385 (29) $673 (15) $512 (9)

Land Secured $930 (55) $4,794 (289) $3,297 (181) $1,181 (91) $316 (17)

Toll Road/Transit none $3,677 (3) $90 (1) $1,339 (1) $2,249 (1)

Local Housing $26 (6) $712 (61) $554 (47) $76 (8) $82 (6)

Retirement $411 (7) $1,738 (67) $425 (28) $270 (12) $1,043 (27)

Hospital $87 (4) $848 (29) $412 (14) $259 (4) $178 (11)

Hotel $8 (1) $820 (13) $346 (7) $377 (5) $98 (1)

Other Risky Sectors $210 (4) $21,329 (134) $2,133 (59) $15,359 (54) $3,837 (21)

Safe Sectors (GO, Non-Go, Wtr, etc) $3,885 (83) $6,884 (49) $65 (7) $5,455 (19) $1,364 (23)

Initially Non-Rated Bonds $1,658 (75) $14,187 (518) $9,487 (323) $2,727 (129) $1,973 (66)

Initially Insured/LOC Bonds $1,333 (5) $20,144 (80) $94 (6) $14,471 (53) $5,579 (21)

Initially Rated, Uninsured Bonds $380 (7) $11,388 (71) $1,592 (23) $7,727 (25) $2,069 (23)

Par (and #) of Outstanding Muni Bonds With an Uncured Default, Reserve Draw, or Other Impairment ($MM)

165


$24 $27 $29

$32 $36

$39 $43 $43

$53 $58

$61 $67

$70

$0

$10

$20

$30

$40

$50

$60

$70

$80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Puerto Rico: Total Outstanding Debt

166

Federal Government Policies Loom over the Municipal Market

Bipartisan tax reform and deficit reduction discussion is omnipresent for the

first time since 1986 tax reform.

Office of Management & Budget (OMB) released a report noting that BAB

subsidies would be part of the automatic cuts to take effect if Congress

does not find a solution to avoid the “sequestration.”

• If the BABs subsidy has been targeted, it is reasonable to assume that

a hypothetical, parameter-limited tax-exemption would be as well.

• Altering BABs subsidy contributed to mobilizing issuer groups to

defend exemption: NAST, NGA & GFOA.

Federal tax-exemption for municipal bonds as a deficit-reduction tool has

been proposed.

Democrats philosophically have disdain for exemption; Republicans are

ambivalent to the extent that tax-reform is a larger goal.

167

MMA continues to see the President’s plan of diluting the after-tax value of

most tax preferences to an effective tax rate of 28% most likely to develop

– but time is short relative to the broad resistance to it.

• This would achieve the goals of “broadening the tax base” and

increasing taxes on the 1% while softening the direct blow on various

stakeholders.

• Some Republican Committee staffers have indicated that Republicans

would support such a move in negotiations and have even called it

“reasonable.”

168


15 Minute Break

169


Massachusetts Department of

Transportation

Massachusetts Department of Transportation:

Dana Levenson, Chief Financial Officer

Presented by:

170

Massachusetts Department

of Transportation and the

Massachusetts Bay

Transportation Authority

Debt Service, Credit Ratings, and

Operating Results

Presented by:

Dana R. Levenson

Chief Financial Officer


171

MassDOT Chief Financial Officer, Dana R. Levenson Dana Levenson has been the Chief Financial Officer of the Massachusetts Department of Transportation since November 2011. He has oversight

over the financial matters of the four operating divisions of MassDOT: Aeronautics, Highways, Rail and Transit Division, and Registry of Motor

Vehicles.

Most recently, he spent four years at The Royal Bank of Scotland as Managing Director in charge of the firm’s infrastructure banking business in the

Americas. In this capacity, he lead the effort either: a) advising investors in large infrastructure assets of the most effective financing tools available

and arranging the financing; or b) advising sellers of infrastructure assets as to methodologies to maximize value. Investors included global private

equity sponsor funds, pension funds and international construction/concession companies; sellers included state and local governments and private

corporations. Infrastructure assets transacted included: Airports, Harbors/Marinas, Lotteries, On- and Off-Street Parking Systems, Ports, Renewable

& Contracted Power, Toll Roads & Bridges as well as social infrastructure such as Courthouses, Jails, Hospitals, and Schools, with geographic

coverage: extending to Brazil, Canada, Mexico, and the U.S. Transaction sizes ranged from $200 million to $10+ billion.

Prior to joining RBS, Levenson was the City of Chicago’s Chief Financial Officer from 2004 to 2007 with responsibility for the City Comptroller’s

Office, the Departments of Budget and Management, Procurement Services, and the Department of Revenue. In particular, he was responsible for

the long-term lease concession sales of both the Chicago Skyway for $1.83 billion in 2005 and the Chicago Downtown Parking System in 2006 for

$563 million. He also led the effort to raise the City’s bond ratings to their highest levels since 1978.

While at RBS, Levenson suggested to Mayor Richard M, Daley that a bi-partisan commission be established to study the City of Chicago’s pensions,

with the intention of supplying a solution to correct the under-funded status of the City’s retirement plans. The result was the report of the

Commission to Strengthen Chicago’s Pensions, which Levenson co-chaired, which was released in March, 2010.

Before joining the City of Chicago, Levenson was a Managing Director with Bank One in Chicago and with Bank of America in both Chicago and

London. Prior to that, he spent more than 11 years at Kidder, Peabody in New York City, eventually running its Fixed-Income Syndicate

Desk. Levenson began his career in New York at Chemical Bank.

Levenson received his M.B.A. from New York University in 1985 and his B.A., with honors, in European History from Brown University in 1979. He is

a past president of the Investment Association of New York and a former Governor of the Bond Club of New York. He served on the boards of the

Chicago Low Income Housing Trust Fund and La Rabida Children’s Hospital and remains active on the boards of the Spertus Institute of Jewish

Studies, the Massachusetts Symphony Orchestra, and Worcester (MA) Academy. Levenson has also co-chaired the Chicago Gun-Turn-In and was

a Commissioner of the National Surface Transportation Infrastructure Finance Commission as appointed by U.S. Department of Transportation

Secretary Mary Peters.


172

MassDOT – Authorizing Legislation MassDOT was established by Chapter 25 of the Acts of 2009 of the Commonwealth of

Massachusetts known as the Transportation Reform Act

The purpose of the Transportation Reform Act is to develop a comprehensive, multi-modal, long-range transportation finance plan for the Commonwealth of Massachusetts that addresses both fiscal issues and future transportation services

MassDOT is comprised of: the Highway Division, the Rail and Transit Division, the Aeronautics Division and the Registry of Motor Vehicles. MassDOT is governed by the Secretary of Transportation, Richard A. Davey, and a seven-member board appointed by the Governor of Massachusetts, Deval L. Patrick.

Accomplishments:

MassDOT refunded $109 million of outstanding Western Turnpike fixed rate debt in 2011 and achieved net present value savings of $9.4 million

MassDOT refunded $2.0 billion of outstanding Metropolitan Highway System fixed and variable rate debt in 2010 and achieved net present value savings of $54 million

MassDOT received an upgrade from Standard & Poor’s in October 2012 on the Metropolitan Highway System Senior Bonds to A+ from A. The outlook is stable


173

Amount Outstanding Final Average

METROPOLITAN HIGHWAY SYSTEM: Bonds Financing Issued Principal Moody's S&P Fitch Maturity Coupon

1997 Series A Cap. Appreciation Bonds Senior Bonds Fixed Rate $ 42,006,617 $ 42,006,617 A3 A+ A+ January 1, 2029 5.618%

1997 Series C Cap. Appreciation Bonds Senior Bonds Fixed Rate $ 89,136,006 $ 89,136,006 A3 A+ A+ January 1, 2023 5.491%

2010 Series B Refunding Bonds Senior Bonds Fixed Rate $ 882,310,000 $ 848,990,000 A3 A+ A+ January 1, 2037 4.975%

2010 Series B Refunding Bonds Subordinated Bonds Fixed Rate $ 261,220,000 $ 261,220,000 Aa2 AA+ AA January 1, 2035 4.981%

2010 Series A-1 Refunding Bonds Senior Bonds Variable Rate 100,000,000 100,000,000 A1 / VMIG2 AAA / A-1 AA / F1 January 1, 2037 VR

2010 Series A-2 Refunding Bonds Senior Bonds Variable Rate 107,665,000 107,665,000 Aa1/ VMIG1 AAA / A-1+ AA+ / F1+ January 1, 2037 VR

$ 207,665,000 $ 207,665,000

2010 Series A-1 / A-7 Refunding Bonds Subordinated Bonds Variable Rate 592,335,000 592,335,000 Aa2 / VMIG1 AA+ / A-1 AA / F1+ January 1, 2039 VR

$ 2,074,672,623 $ 2,041,352,623

WESTERN TURNPIKE SYSTEM:

2011 Series A & B Refunding Bonds Senior Bonds Fixed Rate 90,110,000 90,110,000 Aa3 Not Rated AA- January 1, 2017 2.233%

Total $ 2,164,782,623 $ 2,131,462,623

N.B.: All ratings by each of the three ratings agencies for all bonds that are the obligation of MassDOT (above) are designated as "Stable."

Massachusetts Department of Transportation – Outstanding Debt as of December 1, 2012


174

MassDOT : Operating Results & Operating Revenue

MassDOT

MassDOT 1st Quarter

FY2012 FY2013

Total Revenues $ 741,657 $ 288,938

Operating Expenses $ 475,905 $ 173,538

Debt Service Expenses $ 152,820 $ 47,542

Total Expenses $ 628,725 $ 221,080

Excess Revenues / (Expenses) $ 112,932 $ 67,858

Operating Results ($000s = Millions)

($000s = Thousands)


175

MBTA – Authorizing Legislation

In November 1999, the Commonwealth enacted legislation to forward fund the MBTA as of July 1, 2000

This change in funding MBTA’s operations differs from the previous process, in which the Commonwealth financed the MBTA’s operating losses typically 18 months after the close of the fiscal year on a net cost-of-service basis

The enabling legislation replaced the net cost-of-service payment with two dedicated revenue streams:

Annual assessments levied on municipalities in the MBTA service area, which will be used primarily to pay debt service on assessment bonds. The assessments are guaranteed to equal approximately $136 million annually by legislation and, as per the statute, will escalate annually at the lesser of the previous year’s inflation rate or 2.5%

A carving out of 1% of the existing 6.25% statewide sales tax, which is pledged first to bonds and then used for operations of the MBTA. The act provides that the 1% dedicated sales tax must be equal to the greater of the amount raised by a 1% statewide sales tax or a floor (base revenue amount) of $767 million (FY 2010), and is subject to upward adjustment under certain circumstances


176

MBTA – Accomplishments

Operational:

MBTA ridership increasing significantly over the past year

MBTA Board approved the first fare increase since 2007 of 23% and modest reductions in

service beginning July 1, 2012

Integration of RTAs & other transit modes on the Charlie Card; supporting the interoperability of

transportation in the Commonwealth

Financial :

Over last decade, growth in Transit-Oriented Development projects: sale or lease of rights for

over 50 development projects and significant expansion of non-fare revenue initiatives (parking,

advertising, and lease of North Station)

MBTA continues to invest in and maintain core assets; % of funds allocated in CIP for State of

Good Repair projects increased from 63% in 1993 to 95% in 2012

Approximately 85% of MBTA’s outstanding debt is fixed rate, ensuring budget certainty, with a

small percentage of variable rate debt that provides some diversity and flexibility. Managing and

maintaining a conservative debt profile has supported MBTA’s strong credit ratings, preserved its

access to the financial markets despite volatility in the marketplace since the 2008 collapse of

Lehman Brothers, and allowed MBTA to consistently achieve a very low cost of capital over the

years.


177

Massachusetts Bay Transportation Authority – Outstanding Debt as of December 1, 2012

Amount Outstanding Final Average

Financing Issued Principal Moody's S&P Fitch Maturity Coupon

MBTA Bonds:

General Transportation System Bonds Fixed Rate $ 1,915,470,000 $ 295,445,000 Aa1 AA+ AA+ March 1, 2022 5.714%

General Transportation System Bonds Variable Rate 266,388,000 199,255,000 Aa1/VMIG1 AA+/A-1+ AA+/F1+ March 1, 2030 VR

Boston Metropolitan District (BMD) Fixed Rate 17,515,000 6,080,000 Aa1 N/A N/A December 1, 2014 5.156%

Sales Tax Bonds Fixed Rate 3,558,964,760 3,030,556,178 Aa2 AAA N/A July 1, 2037 4.941%

Sales Tax Bonds Variable Rate 256,375,000 254,925,000 Aa2/VMIG1 AAA/A-1 N/A July 1, 2026 VR

Assessment Bonds Fixed Rate 1,757,425,000 872,215,000 Aa1 AAA N/A July 1, 2035 4.846%

Mass Bay Transit Parking Bonds Fixed Rate 304,585,000 304,585,000 A1 A+ N/A July 1, 2041 4.731%

Revenue Build America (BABs): Fixed Rate 428,300,000 428,300,000 Aa2 AAA N/A July 1, 2040 5.216%

Commercial Paper Variable Rate 250,000,000 93,375,000 P-1 A-1+ N/A February 28, 2024 VR

Total $ 8,755,022,760 $ 5,484,736,178


178

MBTA : Operating Results & Ridership

MBTA

MBTA 1st Quarter

FY2012 FY2013

Total Revenues $ 1,657,346 $ 447,276

Operating Expenses $ 1,292,577 $ 326,095

Debt Service Expenses $ 362,606 $ 109,110

Total Expenses $ 1,655,183 $ 435,205

Excess Revenues / (Expenses) $ 2,163 $ 12,071

Operating Results (000s = Millions)

($000s = Thousands)


179

MassDOT Contact Information:

Contact: Title: Phone Number: Email Address:

Dana R. Levenson Chief Financial Officer - MassDOT 857 - 368 - 9130 [email protected]

Elizabeth A. Pellegrini Treasurer - MassDOT 857 - 368 - 9127 [email protected]

Kathleen J. Doyle Finance - MassDOT 857 - 368 - 9159 [email protected]

John E. Belliveau Finance - MassDOT 857 - 368 - 9161 [email protected]

MBTA Contact Information:

Contact: Title: Phone Number: Email Address:

Jonathan R. Davis Acting Administrator, Rail & Transit Division 617 - 222 - 4246 [email protected]

Laura M. Guadagno Director, Compliance & Reporting - MBTA 617 - 222 - 4775 [email protected]


180


Massachusetts Port Authority

Massachusetts Port Authority:

John Pranckevicius, Chief Financial Officer

Betsy Taylor, Director of Finance and Treasury

Presented by:

181

Overview of Massport’s Presentation

1. Massport’s Organizational Structure

2. Business Plan Activities and Operating Profile

3. FY 13 Operating Budget

4. Debt Structure & Ratings

5. Debt Policy & Metrics supporting strong credit ratings



182

Massachusetts Port Authority Overview • Massport’s owns and operates Logan International Airport, Hanscom and

Worcester Airports, Maritime Properties, South Boston Real Estate, and other real

estate holdings.

• Massport Port Authority is an economic engine for the Commonwealth with over

$9.0 billion in economic activity is generated for the region with about 20,000

employees employed by our facilities and a total of 100,000 jobs connected to our

business activities.

• Massport is governed by a seven member board; Secretary of Transportation and

six Governor appointed members with staggered seven year terms each.

• Massport’s new CEO, Thomas P. Glynn, was appointed September 2012

Tom is a seasoned executive with over 40 years of experience

- Chief Operating Officer, Partners HealthCare for 14 years

- Deputy U.S. Labor Secretary in the Clinton Administration, 1993 to 1996

- Sr. Vice President Finance and Administration, Brown University, early 1990s

- General Manager of the MBTA, appointed in 1989

- Deputy Commissioner of MA Dept. of Public Welfare, during mid 1980s

- Lecturer in Public Policy at Harvard Kennedy Schools of Government

6 2012 Massachusetts Investor Conference


183

Massport’s Business activity is stable 1. Logan International Airport

• 29.3 million passengers served in FY 12, up 3.2% over last year.

• 4.8 M Rental Car transaction days generated, up nearly 10%.

• PFC revenues are 1.3% higher than a year ago.

• JetBlue is Logan’s most popular airline with 24% market share, Delta, American and US Airways have around 11% market share each.

• 1% overall passenger growth expected in FY 13. Japan Airlines fueling International passenger growth, while domestic traffic expected to be stable.

• Parking exits expected to be slightly lower, however overall parking revenues expected to increase due to change in daily parking rate increase.

2. Hanscom Airport is growing with over 100,000 sq ft of additional hangar space sized for global reach aircraft to service MA aviation market.

3. Maritime Business Operations

• 380,000 cruise passengers serviced at CruisePort Boston with 117 ships using our newly renovated Black Falcon terminal.

• 107,000 containers serviced at Conley Terminal in FY 12, equal to FY 11, with volumes trending higher for the first four months.

• 3.8 million square feet of commercial real estate mostly in South Boston generates about $16 million in revenue annually.




184

29.3 million passengers

Used Logan International Airport in

FY 12

2.6 million vehicles

parked at Logan facilities

in last 12 months

Logan’s business is stable as economic challenges remain and airlines

consolidate their operations

-9.5%

-4.6%

6.0%

7.3%

5.03%

11.1%

6.5%6.8%

11.0%

8.3%7.6%

11.3%

7.2%5.2%

-0.9%

2.1%3.7%

6.0%

9.5%

1.5%0.1%

1.1%0.1%

-3.0%

-20.0%

-15.0%

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15.0%

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37 months of growth

year over year comparison

-9.0%-9.3%

3.1%3.4%

9.69%

5.5%

14.7%

10.7%

8.0%

12.2%

9.6%

5.8%6.8%

10.9%

8.2%

8.9%

3.8%4.5%

4.1%

9.0%

14.9%

11.5%

3.0%

15.0%

4.6%

8.6%

-15.0%

-10.0%

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Parking Revenue: 37 months of growth

year over year

Blue shaded boxes represents months with new parking rates in effect



185

Logan International Airport 10 Month Forecast of Scheduled Departures

Forecast in Green beginning from November 2012 Forward

Logan International Airport passenger activity expected to

increase in the second half of 2013



186

Logan continues to capture greater share of the total New England aviation

passengers



187

FY13 business plan maintains financial sustainability

Massport’s revenue expected to grow by 1.8%, to $578 M, a $10 M increase over FY12

- Logan revenue to rise 7.7%, or $35M on record passenger activity, increased parking revenues, concession sales, and rental car business.

- Maritime’s revenue of $70M is projected to be level with the FY 12 actuals. Suspension of COSCO’s Suez Canal service required $22M budget adjustment to be made for the year.

Total Massport operating expenses of $380M declined 1%, or $4.0M from FY 12 budget.

$198M million in operating earnings expected to be generated to invest in Massport’s facilities

– $101 million in debt service payments on $1.1 billion in general aviation bonds outstanding.

– $59.4 million dedicated to keep Massport assets in state of “good repair”

– $37.0 million for pay-go capital projects approved in the Authority’s capital program.



188

FY 13 net revenue funds bond obligations & the FY12-FY16 Capital Plan

In Million $ FY11 FY12 FY12 FY13

Actual Actual Budget BudgetOperating Revenues

Logan 455,699 474,514 457,330 492,648 35,318 7.7%

Hanscom 9,371 9,984 9,415 9,703 288 3.1%

Worcester 911 1,269 898 599 (299) -33.3%

Maritime 70,709 74,030 91,676 69,940 (21,736) -23.7%

Investment Income 8,340 6,695 8,060 4,735 (3,325) -41.3%

Total Operating Revenues 545,030 566,492 567,379 577,625 10,246 1.8%Operating Expenses

Logan 268,632 267,573 286,081 294,684 8,603 3.0%

Hanscom 9,786 8,287 9,174 9,900 726 7.9%

Worcester 5,142 5,177 5,578 5,250 (328) -5.9%

Maritime 70,714 71,635 83,567 70,566 (13,001) -15.6%

Total Operating Expenses 354,274 352,672 384,400 380,400 (4,000) -1.0%

Contribution Margin 190,756 213,820 182,979 197,225 14,245 7.8%

% Contribution Margin 35.0% 37.7% 32.2% 34.1%

FY12 Budget vs

FY11 Budget



189

FY12-16 Capital funding is diverse with 36% from internally generated funds

Massport is investing over $1.1 Billion into its Infrastructure and the Economy

Maintenance Reserve Fund, $ 256 M

Revenue Bonds,$144 M

Improvement & Extension Fund, $142 M

Customer Facility Chage (Conrac) $233 M

Federal & State Grants, $ 195 M

Passenger Facility Charges, $130 M



190

Massport’s Operations support debt service payments on $1.5 Billion in

GARB,PFC, and CFC Debt Outstanding.

1 2 3

General Passenger Consolidated

Aviation Facility Rental Car Facility

Revenue Bonds Revenue Bonds Revenue Bonds

GARBs PFC Bonds CFC Bonds

Bonds Outstanding $1.12 B $143.5M $214.1 M

Bond Ratings AA/Aa3/AA- NR/Aa3/AA+ A-/A3/A

Annual Debt Service $100 M $22.2 M $16 M

Coverage 2.21X 2.67X 2.78X

Bond Repayment Source Massport Revenues $4.50 per enplanement $6.00 per transaction day

Bond Series AMT Series AMT Series Federally Taxable

2012A/2010C&D 2010-E non insured 2011-B non insured

2007C

Non AMT Series Non AMT Series Non AMT Series

2012B / 2010A&B 2007-B - FSA insured 2011-A - non insured

2008A&C /2007A 2007 -D - FSA insured

2005A&C / 2003A&C

For more information on Massport’s finances please visit:

www.massport.com/massport/Investor%20Relations/Financial

Publications.aspx



191

Massport has Conservative Debt Structure and High Bond Ratings

$0

$20

$40

$60

$80

$100

$120

$140

2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Mil

lio

ns

General Aiport Revenue Bonds

General Aviation Revenue Bonds

• Credit Rating: Aa3/AA-/AA

ratings

• $1.3 Billion in GARB debt

outstanding

• 90%/10% fixed rate v. variable

• No swaps or swaptions

ConRac Revenue Bonds

• $214 million total CFC debt

Issued

($58 M Tax Exempt / $156 M

taxable)

• Credit Rating: A/A3/A-

• Fixed Rate Debt

5.00

10.00

15.00

20.00

25.00

30.00

2011 2012 2013 2014 2015 2016

Forecasted

Actuals

Debt Service



192

Board approved Debt Policy establishes strong financial benchmarks to

maintain AA credit rating

• Board approved major financial targets to achieve fiscal policy objectives:

• At least 1.75x or greater debt service coverage in any given year,

with a goal to average 2.0x over the 5-year time frame

• At least 200 days cash on hand each year with the goal of attaining 250 days

• Operating ratio (operating and PILOT expenses/operating revenues) should be no more

than 70%.

• Bond financed non-aeronautical projects will generate revenues sufficient to meet

1.50X debt coverage, otherwise projects should be funded with pay-go capital

funds

• Bond financed aeronautical projects’ debt service and coverage included in Airline

Rates & Charges

• Board will review Debt Policy every two years to evaluate results and make

adjustments as required should bond rating agency criteria change, to maintain a

strong credit rating (Last reviewed March 2012).



193

Massport’s FY12-FY16 Capital Plan and FY13 Budget successfully support

key debt metrics

Massport's

Debt Policy FY11 FY12 FY13 FY14 FY15 FY16

Financial metrics Goals Actual Actual Budget Forecast Forecast Forecast

Debt Coverage 1.75 2.07 2.21 2.01 2.07 1.87 2.00

Contribution Margin ≥ 30% 35.0% 38.0% 32.0% 30.0% 29.7% 29.2%

Airline Cost/Enplaned Passenger - $14.52 $13.75 $14.30 $14.99 $15.41 $15.76

Operating Ratio ≤ 70% 65.0% 62.0% 68.0% 70.4% 70.7% 71.3%

Days Cash 200 328 343 330 283 264 279

Note: Operating ratio i s expenses with PILOT / divided by operating revenue.



194

Massport’s credit profile remains strong, business activity seems stable, and new

Leadership will drive organizational performance

1. Boston Logan International Airport serves a strong and diversified O&D market

• Logan Airport passenger growth exceeded 3.0% in FY 12. Passenger growth has slowed

in recent months due to business uncertainty (European Union, U.S. fiscal cliff, economy)

Hurricane Sandy, and consolidation of Airline capacity

• Logan Airport has the one of the highest percentages of local O&D traffic nationally –

<90% O&D

2. Logan Airport has significant airline diversity with strong growth in low cost carrier

service

• In FY12, 46% of Logan’s passengers flew JetBLue, Delta or US Airways

• All other carriers accounted for 54% of passenger traffic

• International Travel is being boosted by the addition of Japan Airlines

3. Manageable $1.0 billion capital program with modest plans for future GARB

borrowings ($100 M new money sale issued in August 2012).

4. Management continues to produce strong financial results with focus on business

line P&L’s and Debt Service coverage exceeding 2.0X

5. Massport maintains a conservative debt profile with emphasis on level debt

payments for GARB debt, PFC coverage remains healthy, and CFC revenue

collections exceeding original forecasts.



195


Updates to the EMMA System

Municipal Securities Rulemaking Board:

Justin Pica, Director, Product Management- Market Transparency

Ritta McLaughlin, Chief Education Officer

Presented by:

Commonwealth of Massachusetts

Investor Conference Continuing Disclosures

December 13, 2012

Boston, MA

197

Self-regulatory organization for municipal securities market

Protects investors and state and local governments

Regulates financial professionals

Operates the Electronic Municipal Market Access (EMMA®)

website at http://emma.msrb.org to provide transparency and support

a fair and efficient market

About the MSRB

Municipal Securities Rulemaking Board 197

http://emma.msrb.org/

198 1

9

8

MSRB FY 2013 Priorities

Review MSRB Rules

Advance Municipal Advisor Regulation

Improve Continuing Disclosure

Implement Long-Range Plan for Municipal Market Transparency

199 1

9

9

Review MSRB Rules

Re-examine MSRB rules for municipal securities dealers and

municipal advisors – Ensure ongoing relevance of rules to the market

– Improve consistency with the rules of other regulators

– Provide for the efficient operation of the municipal market

200 2

0

0

Advance Municipal Advisor Regulation

Establish a set of core rules and standards of professional

qualification for municipal advisors – Revise proposed draft rules following adoption of final SEC definition of “municipal advisor”

– Incorporate industry input into development of professional qualification exam

201 2

0

1

Improve Continuing Disclosure

Serve as a resource to help state and local governments

understand their disclosure obligations to investors and how to use

the Electronic Municipal Market Access (EMMA®) website to meet

those obligations

– Provide education and outreach to improve continuing disclosure practices

– Enhance the EMMA® website with improved portal for submission of continuing disclosures and issuer homepages and

alerts for integrated display and dissemination of information

202

Ensures that bondholders stay apprised of important developments

that could affect the value of their bonds

Enhances the bond issuer’s market competitiveness – prospective

investors value openness and transparency

Communication with current and prospective investors is facilitated

by the EMMA® website

Why Communicating with

Investors Matters


203

One of the key methods for communicating with investors is through

continuing disclosures

Continuing disclosures provide investors with ongoing information

about municipal securities

Timely and complete continuing disclosures help investors make

informed decisions about municipal securities

Communicating through

Continuing Disclosures


204

To submit continuing disclosures to EMMA Dataport, register with the

MSRB and create an account in MSRB Gateway

Organization Accounts

– Allow multiple staff within the organization to view and manage submissions of data

and disclosure documents to EMMA®

Video tutorials available in the

Online Training section of MSRB.org

– Submitting Continuing Disclosures

– Creating and Controlling Groups

Submitting Continuing Disclosure

to the EMMA Website


http://www.msrb.org/msrb1/Training-Tutorials.asp?section=1&video=0





205

State and local governments can provide additional

information to market participants on a voluntary basis via

EMMA®, including:

– Pre-sale information such as preliminary official statements and

investor presentations

– Information about the timing of and accounting standard used to

prepare annual financials

– An investor website address

Voluntary Disclosure


206

The MSRB also is encouraging state and local governments to

voluntarily make available on EMMA® information about bank loan

financings

Potential investors may not be aware of bank loans incurred by a

state or local government or their impact on the municipal

government’s outstanding debt until the release of audited financial

statements

Voluntary disclosure through EMMA® would provide timely access to

this information for market participants

Voluntary Bank Loan Disclosure


207

State and Local Government Toolkit

– No-cost resource for state and local governments

– Designed for small to mid-sized issuers

– Includes videos, fact sheets and guides about the

process of issuing municipal bonds and using the

EMMA® website

– Provides details about EMMA® Trade Monitor

MSRB Resources for State

and Local Governments


208

EMMA® Trade Monitor

– Export trade data from the EMMA® website

to a desktop application for analysis of

secondary market trading activity

– Analyze the prices, yield and amount of

secondary market trade activity of municipal

bonds

– Help evaluate pricing for new issues

– Access with an MSRB Gateway

Organization Account

MSRB Resources for State

and Local Governments


209

MSRB Resources for Investors

Investor Toolkit

– Available on MSRB.org

– Provides investors with basic information

about navigating the municipal market

– Designed to help investors gain confidence

in their ability to evaluate, purchase and

monitor municipal bond investments, and

learn how to use EMMA®


210

Long Range Plan for Market

Transparency

– Roadmap for further development of

EMMA® as a tool for market

transparency

– Ensures EMMA® will remain aligned

with the needs of the municipal

market and responsive to changes

– Establishes vision for “EMMA 2.0”

Planned EMMA Enhancements


Commonwealth of Massachusetts

Investor Conference Continuing Disclosures

December 13, 2012

Boston, MA

EMMA Enhancements and

MSRB Long Range Plan for Market Transparency

Products


December 13, 2012

213

Electronic Municipal Market Access (EMMA®) Website

Serves as comprehensive, centralized source of information on the municipal

securities market

Promotes market transparency

Facilitates timely and complete submission of disclosure information

Launched in 2008

2

1

3

http://emma.msrb.org

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EMMA® Website

2

1

4

215

EMMA® Website

2

1

5

EMMA provides:

– Official statements

– Advanced refunding documents

– Preliminary official statements

– Continuing disclosures

– Real-time transaction data

– Current interest rates for ARS and VRDOs

– Current credit ratings

– Market statistics

216

Recent Key Enhancements: Trade Data

February – Offered end-of-day email alerts

May – Added yield to display of inter-dealer trades to facilitate comparisons with customer trades

November – Raised from $1 – 5 MM the threshold for display of exact par values in real-time

November – Increased number of customer trades disseminated by building in a tolerance to P/Y check

2

1

6

217

Recent Key Enhancements: EMMA

February – Added disclosure details to alert emails and provided ability to select specific email alert categories

April – Established historical subscriptions to EMMA data

September – Improved access to and display of 529 Plans

September – Added monthly statistical data on new issuance volume to the market statistics page

October – Implemented overhauled advanced search

November – Introduced MyEMMA for managing alerts and saving advanced search criteria

2

1

7

218

Long Range Plan for MSRB Market Transparency Products

Roadmap for further development of EMMA as a tool for market

transparency

Ensures EMMA will remain aligned with the needs of the municipal

market and responsive to changes

Published in February 2012

2

1

8

219

Purpose of Long Range Plan

Guide the evolution of the MSRB’s market transparency products

Maximize transparency benefits for the protection of investors and state and local governments

Provide for the efficient allocation of MSRB resources

Solicit feedback from industry stakeholders

2

1

9

220

Elements of “EMMA 2.0”

• Enhanced search functionality

• Broadened alerts functionality

• Integrated display of information

• Expanded universe of information

• New user account options Improved submission portal

• Central transparency platform

2

2

0

221

EMMA 2.0 – Enhanced Search Functionality

• Improve plain English search capabilities

• Enable searches based on additional descriptive data criteria

• Provide for searches that utilize a combination of security

descriptive and market activity data

• Continued ability to access securities by CUSIP number

2

2

1

222

EMMA 2.0 – Expanded Universe of Information

• Enhance existing document or data collections

• Introduce new categories of information

– Information on upcoming new issues

– Access to NIIDS indicative data

– Primary or continuing disclosure documents in interactive data formats

– Conflict of interest disclosures for underwriters and municipal advisors

– Municipal derivatives disclosures, and more

2

2

2

223

EMMA 2.0 – Expanded Universe of Information

• Expand the breadth, depth and frequency of the statistical

information to provide a fuller understanding of:

– Current state of the market

– Market trends

– Key statistics from other markets

2

2

3

224

EMMA 2.0 – Integrated Display of Information

• Allow state government users to manage an individualized

homepage with information about state bond issues and

other relevant statewide disclosures

• Provide direct links to each state’s counties,

municipalities, agencies, authorities and districts

• Over time, add homepages for additional governmental

entities

2

2

4

225

EMMA 2.0 – New User Account Options

• MyEMMA - Manage personal preferences, save frequently used searches, create portfolios of securities to track through a

personal ticker, and more

• Free state and local government accounts - Access enhanced tools for analyzing data and disclosures, and more

• Professional Accounts - Provide data export services and access to value added information

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2

5

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EMMA 2.0 – Enhanced Collection Portal

Improve the process by which continuing disclosure documents are submitted to EMMA and made available to investors

MSRB to provide additional guidance to state and local governments to enhance their understanding of how to provide

annual financial disclosures for posting on EMMA

MSRB to provide guidance to investors on continuing disclosures expected to be available for specific categories of

municipal securities

2

2

6

227

EMMA 2.0 – Real-Time Central Transparency Platform

• Overhaul of Real-time Trade Reporting System (RTRS)

• Centralized venue providing public access to real-time pre

and post-trade pricing information across the municipal

market

• Integrate pricing information with the full library of disclosure

documents and information available on EMMA

2

2

7

EMMA Enhancements and

MSRB Long Range Plan for Market Transparency

Products


December 13, 2012

229


Massachusetts Development Finance Agency

(MassDevelopment)

MassDevelopment:

Steve Chilton, Senior Vice President - Investment Banking (Bond Issuance)

Presented by:

230

MassDevelopment


Overview of Presentation

• Overview of MassDevelopment

• Conduit Bonds

• Governmental Bonds

• I-Cubed and Other Infrastructure Programs

231

MassDevelopment – Overview


Who We Are

• State’s finance and development agency

• Promotes capital investment and economic development in Massachusetts by providing

financing and development solutions

• Financed or managed 280 projects generating investment of over $2.3 billion in the

Massachusetts economy in FY2012

• Formed in 1998 under Chapter 23G (Massachusetts General Laws) by the merger of

Massachusetts Industrial Finance Agency (created in 1978) and Government Land Bank

• Massachusetts Health and Educational Facilities Authority (Mass HEFA) merged into

MassDevelopment in October 2010

Primary tools

• Tax exempt (and taxable) bond issuance

• Lending

• Real estate planning and development

232

MassDevelopment – Overview

2012 Massachusetts Investor Conference __

Real Estate Development

• Provides real estate advice to municipalities

• Undertakes real estate development projects that would not have been completed by

the private sector alone including surplus public properties and closed military bases

• Redevelopment projects include Devens (former military base), 100 Cambridge Street

(former Saltonstall state office building in Boston), Village Hill Northampton (former

state hospital) and 1550 Main Street (former federal office building in Springfield)

• Bonds issued to finance 100 Cambridge Street, Devens Electric Utility System, and

various conduit borrowers

Lending

• Loans and loan participations

• Loan guarantees to banks

Tax Exempt (and Taxable) Bond issuance

• Conduit Bonds

• Governmental Bonds

233

MassDevelopment – Conduit Bonds


Conduit Bond Issuance

• MassDevelopment issues conduit bonds for:

• Manufacturing (industrial development bonds)

• Environmental facilities

• 501(c)(3) non-profit borrowers (hospitals, colleges, schools, etc.)

• Affordable rental housing

• Infrastructure financings

• Around 100 bond issues a year; over $2.2 billion in FY2012 and $3.5 billion in FY2011.

• Issued as public bond issues, private placements and bank direct purchases as

determined by the conduit borrower.

• Housing bonds issued as unenhanced bonds, LOC backed bonds, and bonds supported

by federal government programs.

• Other bonds issued as unenhanced and credit enhanced issues.

• Conduit bonds are special obligations of the Agency – payable by Borrowers - not

general obligations of the Agency and not obligations of the Commonwealth

• Observed and Anticipated Trends in MassDevelopment Conduit Bond Issuance

• Public vs. Private

• Sectors (Infrastructure, Non-Profits, Rental Housing, Environmental, Manufacturing)

234

MassDevelopment – Governmental Bonds

__

Infrastructure Programs

MassDevelopment can issue bonds for infrastructure under 3 programs which were established in

recent years. Key difference in programs = “who pays”:

• Local Infrastructure Development Program (Chapter 23L)

• Property owner can finance public infrastructure improvements with tax-exempt bonds.

• Bonds issued by MassDevelopment and debt service is paid through a special

assessment on the property. Credit on bonds is based on the property owner and/or credit

enhancement.

• District Improvement Financing (“DIF”), called TIF in other states (Chapter 40Q)

• Public infrastructure improvements can be financed from local incremental property taxes.

• Bonds issued by municipality or MassDevelopment and may require credit support from

the municipality or the developer. Credit based upon incremental property taxes within

district.

• Infrastructure Investment Incentives Act (“I-Cubed”). Legislation last revised in Ch. 238 of the

Acts of 2012

• Program promotes public infrastructure improvements to support certified economic

development projects. Credit based upon State’s General Obligation.


235

MassDevelopment – I-Cubed


Program Description

• Designed to increase economic activity in the Commonwealth by creating partnerships between the Commonwealth, MassDevelopment, a private developer and the host municipality.

• The program funds public infrastructure improvements for economic development projects that bring significant net new tax revenues to the Commonwealth.

• Project must be approved and certified by the Commonwealth after a rigorous review process including projected coverage of debt service by net new tax revenues of 1.5x.

• If net new tax revenues to the Commonwealth are less than debt service, then the municipality and/or the developer are required to make up the shortfall (to provide for the financing to at least be revenue neutral to the Commonwealth).

Security for Bonds

• MassDevelopment issues special obligation bonds secured by State Infrastructure Development Assistance for Debt Service.

• The Commonwealth’s obligation to pay the State Infrastructure Development Assistance for Debt Service is a General Obligation of the Commonwealth, for which its full faith and credit are pledged.

• Recent issue of interim taxable notes received Commonwealth ratings of Moody’s Aa1 and S&P AA+, based on the Commonwealth’s credit.

236

MassDevelopment – I-Cubed

Additional Program Details

• Program currently authorized to issue $325 million with approximately $150 million of public infrastructure improvements preliminarily approved.

• Anticipate first tax-exempt bond issue in 2013.

• Bonds typically expected to be between $10 million and $50 million.

• Maximum of 3 projects or 31% of the authorized program size may be issued in any municipality.

__

237

MassDevelopment – Governmental Bonds


Devens Electric System

• $8,145,000 Revenue Refunding Bonds issued in 2011; $7,805,000 outstanding (12/1/12).

• Financed the design, construction, installation and associated costs of capital

improvement to the Electric System at Devens.

• Payable solely from the Revenues of the Agency derived from the Electric System and

from certain other funds.

• 1.25 x Rate Covenant

M/SRBC Project (100 Cambridge Street Financing)

• $195,810,000 Revenue Bonds issued in 1992; $91,660,000 tax-exempt and $73,450,000

taxable bonds outstanding (12/1/12).

• Financed renovation of existing 22 story former state office building and garage as part of

a redevelopment, resulting in a mixed use office, residential and retail complex.

• Payable solely from the Revenues derived from ownership and operation of the Project.

• Baa2/BBB rating based on MBIA (National Public Finance Guarantee Corp.) insurance.

238


MassHousing

MassHousing:

Chuck Karimbakas, Director of Financial and Capital Planning

Presented by:

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Traditional Housing Bonds Price Significantly Worse than Taxable Alternatives

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2 3 5 7 10 30

Maturity

%

UST

AAA Muni

AA Housing


• Housing Bonds

•Spread to MMD by maturity

• 30 year maturity drives lending rate (low 4’s)

• Agencies

• Spread to TRE

• Priced to average life based on prepayment assumption

• 10 year TRE drives lending rate (low 3’s)

3.00

4.00

5.00

6.00

7.00

2006 2007 2008 2009 2010 2011 2012

Fannie Mae Commitment Rate

J.P. Morgan 30-Year Housing Bond Indication

240

Housing Finance Agencies (HFA) Issuance Down Significantly


241

Fannie / Freddie / Ginnie Have Made Up Over 88% of the Mortgage Market Since 2008

Total Market Originations by Product ($bn)Total Market Originations by Product ($bn)

Source: Inside Mortgage Finance

88%

Agency

(est)

9%>1%

3%

67%

21%

108 78

3,945 2,920 3,120 2,980 2,430 1,700 1,815 1,570 1,350 1,447


242

Market Differences

U.S. fixed income market = $36.4 trillion (SIFMA,

3Q2011)

Mortgage-related assets = $8.74 trillion (24% of total

market)

– Agency MBS = $5.05 trillion (14% of total)

Municipal assets = $3.53 trillion (10% of total)

Daily trading volumes are dramatically different

Agency MBS = approximately $60 billion

Fixed rate municipal bonds = $6.38 billion (MSRB,

2011)

– Housing = $111.7 million (MSRB, 2011)

Bond Structure

Credit Homogeneity

Optionality

Issue Size / Liquidity

Real-Time Information

Pricing Transparency

Product Differences

Source: J.P. Morgan / Bloomberg – Fannie Mae

Housing yields reflect AMT rates prior to July 2008; non-AMT rates thereafter

Market and Product Differences Make the Agency MBS Execution More Efficient


243

The Challenge: Address Structure, Credit, and Disclosure inefficiencies of

Mortgage Revenue Bonds

Pre-Crisis

Whole loans

Parity resolution

10 year optional call

Cross call

Bi-annual Debt Service

Loans partially originated at closing

Limited disclosure on collateral

Post Crisis

Agency MBS

Stand alone resolution

No 10 year call

No cross calling

Monthly debt service

MBS fully originated at closing

Real-time MBS information on Bloomberg 2012 Massachusetts Investor Conference

244

Traditional MRB Agency MBS TEMPS

Tax-Exempt Yes No Yes

Ratings AAA and AA Not Rated AAA

Payments Semi-Annual Monthly Monthly

ReportingAnnual (limited

information)Monthly Remittance Monthly Remittance

Continuing Disclosure

ObligationQuarterly 15c2-12 None Exempt

Traditional MRB Agency MBS TEMPS

Tax-Exempt Yes No Yes

Ratings AAA and AA Not Rated AAA

Payments Semi-Annual Monthly Monthly

ReportingAnnual (limited

information)Monthly Remittance Monthly Remittance

Continuing Disclosure

ObligationQuarterly 15c2-12 None Exempt

Tax-Exempt Mortgage Participation Securities (TEMPS) Combines the Best of Traditional MRBs and Agency MBS


245


246


Almost 50% of Volume Cap over last two years was for rental housing

Rental Volume Cap also generates tax credit equity (“4% credits”)

Last year, MassHousing’s rental loans generated approximately $.50 of tax credit equity for every $1.00 of lending, leveraging the economic development benefit

Over the past several years, preservation lending has dominated MassHousing’s rental lending

However, MassHousing financed more new affordable units in 2012 than at any time since 2006

A greater emphasis, as recently announced by the Governor, on the production of new units is expected over the next several years

Consistent Rental Lending in a Difficult Market

247


• MassHousing is the largest FHA Risk Share lender in the country • In 2012, MassHousing created a new Aaa indenture for rental lending • The new Aaa indenture has attracted cross-over buyers (AFL-CIO HIT) • New pass-through structures likely in 2013

Pass-Through Structures for Rental Financing

248

2013 Issuance Driven by Several Factors

Tax Reform

– Mortgage Interest Deduction

– Tax Exemption

– Marginal Tax Rates

Future of GSEs

– Reduced Role for Fannie and Freddie

– Higher fees/premium to cover losses

Housing Market Improvement

– New units

Interest Rates

– QE3 and beyond

MassHousing and all HFAs will have to continue to evolve in order to move their missions forward


249



Thank You for Attending