1. County of Muskegon Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) December 6, 2012 Prepared by: Muskegon County Finance and Management Services Department and Member FINRA & SIPC © 2012 First Southwest Company

2. Table of Contents 1.Bond Ratings 2.Additional Debt Capacity Analysis 3.Municipal Bond Market Update 4.Summary of Existing Debt 5.Summary of Tax-Supported Existing Debt 6.Series 2013 Plan of Finance 7.Proposed Schedule of Events 2

3. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Bond Ratings 3

4. The County’s unlimited tax debt is currently rated “Aa2” by Moody’s (the voted Series 2009 Building Authority Bonds) The County’s limited tax debt is currently rated “Aa3” by Moody’s and “AA” by Standard and Poor’s Standard and Poor’s revised the County’s management practices under S&P’s Financial Management Assessment (FMA) methodology from “good” to “strong” in May 2011 Additionally, the last short term rating for the Delinquent Tax Anticipation Notes was “SP-1+” by Standard and Poor’s (highest category) Over the last 15 years the County’s bond ratings have been upgraded several notches: from “Baa1/A” to “Aa2/AA” for unlimited tax pledge and from “A3/A” to “Aa3/AA” for the limited tax pledge 4

5. S&P’s “AA” Long Term Credit Assessment (April 2012) “Stable and diverse local economy and participation in the greater Grand Rapids and Kent County, Mich. economies;” Taxable base per capita still strong despite recent contractions since 2010. County’s median household and per capita incomes at 80% and 74% of national level are adequate. “Very strong financial position, demonstrated by very strong reserves and additional liquidity outside the general fund…” History of general fund surpluses and balanced budgets in challenging times. “We consider the county's overall net debt burden (excluding self-supporting enterprise and Michigan Transportation Fund debt) to be moderate…” 5

6. S&P’s “AA” Long Term Credit Assessment (April 2012) “Overlapping debt is a significant portion of the County's debt profile.” “Carrying charges as a percent of total governmental funds expenditures less capital outlay were what we consider low at 1.4% in fiscal 2011.” County has addressed pension unfunded liabilities and instituted a defined contribution plan. “Strong” Financial Management Assessment (S&P’s highest category) – Long term planning – Capital improvement plans – Board receives monthly updates from Staff – Board approved a debt management policy in 2011 – General Fund reserves targets have historically been met 6

7. Limited Tax Bond Ratings 7 AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB Muskegon County Stable Outlook from S&P, no expectation of rating change within 2 year outlook as of April 2012.

8. Michigan Counties Bond Ratings Comparison 8 CountyS&PMoody'sFitch *LT = Limited Tax KentAAAAaa (LT)Not Rated *UT = Unlimited Tax OaklandAAAAaa (LT)Not Rated OttawaAAAaa (LT)AAA InghamAA+Aa2 (LT)Not Rated WashtenawAA+Aa1 (LT)AA+ AlleganAAAa3 (LT)Not Rated JacksonAAAa2 (LT)Not Rated KalamazooAAAa2 (LT)Not Rated Grand TraverseAAAa2 (LT)Not Rated MuskegonAAAa2 (UT) / Aa3 (LT)Not Rated NewaygoAA-Not RatedAA OceanaA+Not Rated GeneseeAA1 (LT)Not Rated WayneBBB+Baa2 (LT)BBB+ State of MichiganAA-Aa2AA- Sorted based on S&P rating (except for Ottawa County since its S&P rating is outdated)

9. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Additional Debt Capacity 9

10. Legal Debt Capacity = 10% of State Equalized Valuation 2012 State Equalized Valuation $4,746,485,450 Debt Limit (10% of State Equalized Valuation) $474,648,545 Less: Amount of Outstanding Debt as of 12/6/12 $144,045,000 Legal Debt Capacity as of 12/6/12 $330,603,545 Market Driven Debt Capacity = Interest Cost/Ratings County’s Willingness to Pay = Actual Debt Capacity 10

11. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Summary of Existing Debt 11

12. Summary of Existing Debt The County currently has $144,045,000 of outstanding debt secured by the taxing powers or appropriation pledge of the County. The amount stated above include the County’s Road Commission Michigan Transportation Fund Notes and the assumption that the Michigan Finance Authority commitments have been drawn in full. The County’s debt is supported by the following sources of revenue: 1.Operating ad valorem tax revenue 2.Quality of Life ad valorem tax revenue 3.Special assessment revenue from townships within the County 4.Delinquent tax revenue 5.Water Supply System revenue 6.Wastewater System revenue 7.Michigan Transportation Fund revenue 12

13. Summary of Existing Debt 13

14. Summary of Existing Debt 14

15. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Summary of Operating Tax-Supported Existing Debt 15

16. Summary of Operating Tax Supported Existing Debt The County currently has $17,070,000 of outstanding debt being paid by operating tax revenues. (Excludes quality of life and delinquent tax debt) The County’s operating tax-supported debt is as follows: – Muskegon County Building Authority Debt ($10,415,000) Mental Health Facility Bonds Muskegon County Michael E. Kozba Hall of Justice and Heritage Landing Bonds – Governmental Activities Tax Supported Debt ($6,655,000) Energy Conservation Bonds 16

17. Existing Tax Supported Debt Service 17

18. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Municipal Bond Market Update 18

19. Municipal Bond Market Update Tax-exempt municipal bond rates are at historical lows. The Federal Reserve’s monetary policy is expected to remain unchanged until mid-2015. Investors’ “flight to quality” has contributed to the low rates in high quality investment grade bonds. Expectation of income tax increases contributes to higher demand for tax- exempt bonds. Low supply of tax-exempt bonds and high demand for such securities has contributed to lower interest rates. 19

20. Municipal Bond Market Update The Bond Buyer General Obligation index hit the lowest rate since records began in the 1960s. 20

21. Muskegon County Cost of Funds as of 12/5/2012 21

22. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Plan of Finance 22

23. Plan of Finance The Project will be funded with a $7,000,000 cash contribution plus Limited Tax Bonds payable from the County’s operating tax revenues. Operational changes by eliminating positions open budgetary capacity between $503,000 and $1,177,000 (6 to 15 positions). Changes in insurance providers and past equity investments of the general fund in self-insurance activities (reducing annual expenditures by approximately $800,000). Realization of actual administrative expenses from County funds. 23

24. Financing Alternatives Option 1d Base w/Craig School Option 1d Base w/Craig School plus Alternates 1 & 2 Option 1c Base w/Craig School Option 1c Base w/Craig School plus Alternates 1 & 2 Mean Project Cost$25,405,268$34,968,983$31,816,027$37,791,080 Less: Cash Contribution from General Fund($6,130,000)($5,685,000)($5,820,000)($5,560,000) Net Project Cost$19,275,268$29,283,983$25,996,027$32,231,080 Jail Beds480 beds582 beds544 beds576 beds Juvenile Trans Ctr Beds16 beds32 beds16 beds32 beds Estimated Bond Funds (including bond premium)$16,545,169$29,618,301$26,304,632$32,580,317 Amortization25 years Average Life of Bonds19.01 years 19.33 years19.82 years 18.98 years “AA” Rated All-in Cost as of 12/5/123.66%3.68%3.71%3.66% Budget Impact in Dollars $831,383 (FY 2015) $1,326,883 (FY 2015) $1,126,333 (FY 2015) $1,509,233 (FY 2015) 24

25. Muskegon County, Michigan Jail and Juvenile Transition Center Project Plan of Finance (Series 2013) Proposed Schedule of Events 25

26. Proposed Schedule of Events December 2012 – Finalize costs scenarios and recommend Project alternative February 2013 – Presentation of Final Plan of Finance and key dates to the Board of Commissioners – Begin preparation of bond sale (legal and financial analysis and due diligence) March/April 2013 – Bond Rating meetings/conference calls April-August 2013 – Issuance of Series 2013 Bonds – Closing and delivery of funds to the County 26