1. Washington State University Levies and Bonds: The Impact of the Current Economic Condition August 13, 2009 Jon Gores Senior Vice President (206) 389-4043 [email_address]

5. Voting Patterns

6. Voting Patterns

7. Voting Patterns

8. Multiple Propositions on Same Ballot Example: PROPOSITION 2 BONDS FOR NEW STADIUM AND MULTIPURPOSE FIELD The Board of Directors of ABC District No. 1 adopted Resolution No. 11-07/08, concerning a proposition to finance a new stadium and multipurpose field. This proposition would authorize the District, only if Proposition 1 is approved, to construct and equip a new High School Stadium and synthetic turf multipurpose field; issue no more than $4,000,000 of general obligation bonds maturing within 20 years; and levy annual excess property taxes to repay the bonds, all as provided in Resolution No. 11-07-08. Should this proposition be: Approved………. ____ Rejected………...____

10. M&O/Bonds on the Same Ballot

11. M&O and Capital Levies on the Same Ballot

12. M&O and Transportation Levies on the Same Ballot

17. Consumer Confidence Index Source: Reuters and TradingMarkets.com

18. Standard & Poor’s 500 Index Source: Standard & Poor’s

19. Bond Election Results 2009: East vs. West February 2009 Western Washington Eastern Washington March 2009 Western Washington Eastern Washington Quillayute Valley Pass Royal Fail Ocasta Fail College Place Fail Mary M. Knight Fail East Valley (Spokane) Fail North Mason Fail Vashon Island Fail Kennewick Fail Snoqualmie Valley Pass North Franklin Pass Puyallup Fail Bickelton Pass Tacoma Fail Davenport Pass Auburn Fail Pateros Pass Burlington-Edison Fail Spokane Pass Sunnyside Pass West Valley (Yakima) Fail

20. Bond Election Results 2009: East vs. West April 2009 Western Washington Eastern Washington May 2009 Western Washington Eastern Washington TOTAL # of Issues # of Issues Passed Methow Valley Pass Bainbridge Island Fail Kennewick Pass Ocosta Fail Royal Fail College Place Fail Yakima Pass Western Washington 12 2 Eastern Washington 16 9

25. $1,000 Levy $250 $250 $250 $250 $100,000 $100,000 $100,000 $100,000 Property Taxes 101

26. $1,000 Levy $250 $250 $250 $250 $200,000 $200,000 $200,000 $200,000 Property Taxes 101

27. $1,000 Levy $187.50 $250 $250 $312.50 $150,000 $200,000 $200,000 $250,000 Property Taxes 101

28. Property Taxes 101 $1,000 Levy $200 $200 $200 $200 $200 $100,000 $100,000 $100,000 $100,000 $100,000

33. Property Assessment Ratios by County Source: Washington State Department of Revenue.

34. Home Prices in Washington State Source: MSN Money: Home Prices by Metro Area, February 24, 2009. National: -3.4% Q4 2008; -8.2% 1 year Price appreciation as of December 31, 2008.

35. 2009-2010 Special Election and Resolution Filing Dates

36. Save the Date

49. Capital Levy as Part of Long Range Financing Plan

55. Bond raters consider local economy, district finances and other factors. Example : Financial Planning The Rating Debt Factors Economy Governmental Factors Financial Performance Lake Washington Aa1 Auburn A1 Selah A3 Richland A1 Yakima A2 Ellensburg A3 Kennewick A1 Pasco A3 Riverview A1

57. Bond Rating Process

58. Bond Insurance A very significant market change has occurred regarding the use of bond insurance: Result Investors care much more about the fundamental underlying credit quality of the borrower.

59. State Guarantee Program Washington School Districts are very fortunate to benefit from the State’s School Bond Guarantee program. Several features differentiate this program from other states: However, the State’s strong Aa1 rating is not guaranteed to remain stable indefinitely, and investors have become more keenly interested, since the bond insurer downgrades, in the borrower’s own ability to repay the debt. State Rating Program Dynamics Washington Aa1/AA+ Established in 2000, full faith credit and taxing power, direct payment of debt service before default. Oregon Aa2/AA- Established in 1997, full faith credit and taxing power, direct payment of debt service before default. The State can reimburse itself by withholding operating appropriations to the district. Texas Aaa/AAA Established in 1983, $17 billion of assets support school bonds, direct payment of debt service before default. The State will reimburse itself by withholding operating appropriations.

61. Fund Balance--How Much is Enough? National Median (School Districts, all ratings): 14.4% National Median (School Districts, Aa1, Aa2, Aa3): 14.8% National Median (School Districts, rated A1, A2, A3): 13.7% Washington Median (School District, rated Aa1): 6.2% Washington Median (School District, rated Aa2): 4.8% Washington Median (School District, rated Aa3): 5.7% Washington Median (School District, rated A1): 7.3% Washington Median (School District, rated A2): 5.6% Washington Median (School District, rated A3): 6.8% Source: National data: Moody’s Investment Service Special Comment January 2009, “2008 Local Government national Medians” Washington data: Moody’s Investors Service, 2007.

62. Global Scale Ratings Moody’s conducted an extensive default study, which showed that default rates in the municipal bond sector have historically (at least since 1970) been much lower than those in the corporate bond sector. This is especially true for UTGO and LGO debt, like the District’s bonds. Source: Moody’s Investment Service Special Comment June 2006 “Mapping Moody’s U.S. Municipal Bond Rating Scale to Moody’s Corporate Rating scale and Assignment of Corporate Equivalent Ratings to Municipal Obligations.”

70. Option #5: Level Tax Rate (All) $70MM

71. Tax Impact Analysis Issue Structure: Level Debt Service Estimated 2010 Tax Rate Increase Over 2009 Tax Rate (Bonds Only) (per $1,000 assessed value): $0.53 -- Federal Income Tax Bracket-- Net Tax Increase from Bonds After Allowing for Income Tax Deduction NOTE: Qualified homeowners may apply for a senior exemption. Please contact the County Assessor for details. Assessed Value of Property Gross Property Tax Increase For Bonds Monthly Gross Increase 25% 28% 33% 35% $100,000 $53.00 $4.42 $39.75 38.16 $35.51 $34.45 150,000 79.50 6.63 59.63 57.24 53.27 51.68 200,000 106.00 8.83 79.50 76.32 71.02 68.90 250,000 132.50 11.04 99.38 95.40 88.78 86.13 300,000 159.00 13.23 119.25 114.48 106.53 103.55

76. Refunding Overview ISSUER Debt Service on Outstanding Bonds New Refunding Bonds Special U.S. Government Obligation (SLGS) and T-Bills Debt Service on Refunding Bonds Old Bonds New Bonds Debt Service on Outstanding Bonds Old Bonds New Bonds TO BUY TO PAY OWES ISSUES OWES

80. 1st Independent Bank American Marine Bank Baker Boyer National Bank Bank of America Charles Schwab Discover Brokerage First Security Investment Franklin Federal Tax Free Fund ICM Asset Management Montana Board of Investments Montana Tax-Free Fund Northern State Bank PEMCO Peoples Bank Santa Barbara Trust Seattle Capital Management Sterling Savings Bank Thornburg Investment Management USAA Investment Management Co. Washington First Wells Fargo Bank WEST AAL Capital Management Alliance Capital Management Co. Bear Stearns Bessemer Trust Blackrock Boston Company Colonial Funds DB Scudder of Boston, MA Delaware Management Co. Dreyfus Eaton Vance Municipals Fidelity Investments Goldman Sachs Asset Management Lord Abbett MD Sass Investors Services Inc. Navaid Financial Pioneering Management Corp. PNC Bank Sanford C. Bernstein U. S. Trust of New York EAST CENTRAL Allstate Insurance Co. Bank One First Security Investment Harris Bank Heartland Advisors Inc. IDS Tax Exempt Investors Fiduciary Trust Co. Janus Northern Trust Co. Nuveen Advisory Corp Society Asset Management State Farm Fire & Casualty Stein Roe & Farnham Strong Capital Management U.S. Bank United Savings & Loan Victory Capital Management Voyageur Asset Management Selected representative institutional clients Selling the Bonds

81. Selling the Bonds Source: D.A. Davidson Fixed Income Capital Markets

82. Current Market

84. 20-yr Bond Buyer Index – 25-yr History

85. 20-yr Bond Buyer Index – 1-yr History

86. Combined Muni vs. Treasury – 10-yr

87. Combined Muni vs. Treasury – 2-yr

91. Levy Library http://www.levylibrary.org/

92. Levy Library

93. Levy Library

96. Bio—Jon Gores Mr. Gores joined D.A. Davidson & Co. in 2006 as a Senior Vice President in the Public Finance department. Previously, he was with Seattle Northwest Securities for 18 years as Vice President of Public Finance, where he served as Manager of the School Finance Group for Washington State schools. Jon has originated over 170 Washington school district financings in the past 5 years. Jon has been a school district public finance specialist since 1985. He has been instrumental in developing financing solutions for specific school district funding needs. His advocacy on behalf of school districts with the State legislature has resulted in the repeal of the law that caused the tax rate spike that districts encountered with a mid-year bond sale, and his lobbying the legislature has led to the expanded use of limited general obligation (LGO) debt. His efforts resulted in H.B. 1832, which allows school districts to use LGO debt for remodeling of and additions to existing facilities. Most recently Mr. Gores proposed legislation now in effect that allows a direct transfer of state forest revenue from the debt service fund to the capital projects fund. Jon is a member of WASA, WSSDA, WASBO, and is a featured speaker at numerous conferences. He serves as a trustee of the Washington State School Boards Educational Foundation. He has been a guest lecturer at the University of Washington, WSU, and Seattle Pacific University and Seattle University. Mr. Gores served on the School Bond Guarantee Program advisory committee and was appointed to the Finance Committee for the Simple Majority.