MEMORANDUM

To: Jim Moncur and Jennifer Olenick, City of Houston Department of Finance
From: Bank of America Merrill Lynch Team
Date: December 21, 2010
Purpose: Market Update

In February 2010, the City of Houston selected 5.00%

Bank of America Merrill Lynch to underwrite a
↑ 62 bps
financing for the Combined Utility System. The 4.50%
deal was scheduled to price in May 2010, with ↑ 66 bps
funds delivered around June. Due to a validation 4.00%
suit the bond sale has been delayed, forcing the
City to draw from its Commercial Paper program 3.50%
over the last seven months and putting the City at
considerable risk for higher financing costs. This 3.00%
is largely attributed to a dramatic increase in long-

05/14/10

06/14/10

07/14/10

08/14/10

09/14/10

10/14/10

11/14/10

12/14/10
term interest rates during the past two months
(please see accompanying chart) and the potential
loss of the Build America Bonds financing 20y MMD 30y MMD
program. The BABs program was a temporary
program that was scheduled to expire on
December 31, 2010 and has not been extended. As a result of these market conditions, the City’s cost of
financing has increased dramatically.
This memo is in response to your request for us to provide an estimate of how much the change in
interest rates has cost the City and the ratepayers of the CUS when compared to the market in May 2010.
To simplify our analysis, we focused on a $300 million CP program; however, it is fair to say that the City
could have executed a larger transaction back in May, which means that the dissavings we calculate
below are arguably understated. Due to the delay, the City has funded its capital expenditures using CP,
which has been relatively cost-effective due to historically low short-term rates. The interest cost savings
from issuing CP over the past seven months are factored into our analysis1. If the City had issued long-
term debt in May, the all-in cost would have been approximately 4.22%.
The table below summarizes the results of our analysis. By not being able to sell the bonds in May 2010,
the delay has cost the City and Houston ratepayers an estimated $37.72 million over the life of the
issue2. This represents an average cost of $1.26 million per year over the next 30 years.

Tax-Exempt Bonds Tax-Exempt/BABs

Today in May
Delivery Date 2/1/2011 6/1/2010
First Principal Payment Date 11/15/2016 11/15/2016
Par Amount $297,540,000 $302,575,000
Construction Fund $300,000,000 $300,000,000
Arbitrage Yield 4.864422% 4.150109%
All-in-T.I.C. 4.931910% 4.216970%
Average Annual Debt Service $20,479,083 $18,690,324
Gross Savings ($) $37,719,610
Average Annual Savings ($) $1,257,320

1 Assumes CP all-in cost of 1.00% (inclusive of credit fees) versus bond yield of 4.15% for seven months
2 Present Value dissavings amount to approximately $21.07 million assuming a discount rate of 4.15%
Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch Page 1

SOURCES AND USES OF FUNDS

City of Houston Combined Utility System

Tax-Exempt Bonds
Market Rates as of December 9, 2010

Sources:

Bond Proceeds:
Par Amount 297,540,000.00
Net Premium 4,693,612.45

302,233,612.45

Uses:

Project Fund Deposits:

CP Takeout 300,000,000.00

Delivery Date Expenses:

Cost of Issuance 743,850.00
Underwriter's Discount 1,487,700.00
2,231,550.00

Other Uses of Funds:

Additional Proceeds 2,062.45

302,233,612.45
Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch Page 2

BOND SUMMARY STATISTICS

City of Houston Combined Utility System

Tax-Exempt Bonds
Market Rates as of December 9, 2010
Dated Date 02/01/2011
Delivery Date 02/01/2011
Last Maturity 11/15/2039

Arbitrage Yield 4.864422%

True Interest Cost (TIC) 4.911311%
Net Interest Cost (NIC) 4.945110%
All-In TIC 4.931910%
Average Coupon 5.000000%

Average Life (years) 19.630

Duration of Issue (years) 12.324

Par Amount 297,540,000.00

Bond Proceeds 302,233,612.45
Total Interest 292,030,050.00
Net Interest 288,824,137.55
Total Debt Service 589,570,050.00
Maximum Annual Debt Service 21,289,250.00
Average Annual Debt Service 20,479,083.17

Underwriter's Fees (per $1000)

Average Takedown
Other Fee 5.000000

Total Underwriter's Discount 5.000000

Bid Price 101.077473

Par Average Average PV of 1 bp

Bond Component Value Price Coupon Life change

Serial Bonds 143,235,000.00 106.765 5.000% 13.714 120,258.80

Term Bond due 2035 77,115,000.00 97.223 5.000% 22.889 104,876.40
Term Bond due 2039 77,190,000.00 96.301 5.000% 27.351 111,153.60

297,540,000.00 19.630 336,288.80

All-In Arbitrage
TIC TIC Yield

Par Value 297,540,000.00 297,540,000.00 297,540,000.00

+ Accrued Interest
+ Premium (Discount) 4,693,612.45 4,693,612.45 4,693,612.45
- Underwriter's Discount -1,487,700.00 -1,487,700.00
- Cost of Issuance Expense -743,850.00
- Other Amounts

Target Value 300,745,912.45 300,002,062.45 302,233,612.45

Target Date 02/01/2011 02/01/2011 02/01/2011

Yield 4.911311% 4.931910% 4.864422%
Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch Page 3

BOND PRICING

City of Houston Combined Utility System

Tax-Exempt Bonds
Market Rates as of December 9, 2010
Maturity Yield to Call Call Premium
Bond Component Date Amount Rate Yield Price Maturity Date Price (-Discount)

Serial Bonds:
11/15/2016 6,575,000 5.000% 2.380% 114.086 926,154.50
11/15/2017 6,910,000 5.000% 2.780% 113.644 942,800.40
11/15/2018 7,265,000 5.000% 3.100% 113.053 948,300.45
11/15/2019 7,640,000 5.000% 3.400% 112.062 921,536.80
11/15/2020 8,030,000 5.000% 3.640% 111.109 892,052.70
11/15/2021 8,440,000 5.000% 3.810% 110.441 881,220.40
11/15/2022 8,875,000 5.000% 3.960% 109.053 C 4.027% 11/15/2021 100.000 803,453.75
11/15/2023 9,330,000 5.000% 4.110% 107.687 C 4.216% 11/15/2021 100.000 717,197.10
11/15/2024 9,810,000 5.000% 4.250% 106.430 C 4.373% 11/15/2021 100.000 630,783.00
11/15/2025 10,310,000 5.000% 4.380% 105.279 C 4.506% 11/15/2021 100.000 544,264.90
11/15/2026 10,840,000 5.000% 4.500% 104.229 C 4.619% 11/15/2021 100.000 458,423.60
11/15/2027 11,395,000 5.000% 4.600% 103.365 C 4.707% 11/15/2021 100.000 383,441.75
11/15/2028 11,980,000 5.000% 4.700% 102.509 C 4.788% 11/15/2021 100.000 300,578.20
11/15/2029 12,595,000 5.000% 4.800% 101.661 C 4.864% 11/15/2021 100.000 209,202.95
11/15/2030 13,240,000 5.000% 4.880% 100.989 C 4.921% 11/15/2021 100.000 130,943.60
143,235,000 9,690,354.10

Term Bond due 2035:

11/15/2031 13,920,000 5.000% 5.200% 97.223 -386,558.40
11/15/2032 14,635,000 5.000% 5.200% 97.223 -406,413.95
11/15/2033 15,385,000 5.000% 5.200% 97.223 -427,241.45
11/15/2034 16,175,000 5.000% 5.200% 97.223 -449,179.75
11/15/2035 17,000,000 5.000% 5.200% 97.223 -472,090.00
77,115,000 -2,141,483.55

Term Bond due 2039:

11/15/2036 17,875,000 5.000% 5.250% 96.301 -661,196.25
11/15/2037 18,790,000 5.000% 5.250% 96.301 -695,042.10
11/15/2038 19,755,000 5.000% 5.250% 96.301 -730,737.45
11/15/2039 20,770,000 5.000% 5.250% 96.301 -768,282.30
77,190,000 -2,855,258.10

297,540,000 4,693,612.45

Dated Date 02/01/2011

Delivery Date 02/01/2011
First Coupon 05/15/2011

Par Amount 297,540,000.00

Premium 4,693,612.45

Production 302,233,612.45 101.577473%

Underwriter's Discount -1,487,700.00 -0.500000%

Purchase Price 300,745,912.45 101.077473%

Accrued Interest

Net Proceeds 300,745,912.45

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch Page 4

BOND DEBT SERVICE

City of Houston Combined Utility System

Tax-Exempt Bonds
Market Rates as of December 9, 2010

Period Debt Bond Total

Ending Principal Coupon Interest Service Balance Bond Value

06/30/2011 4,297,800 4,297,800 297,540,000 297,540,000

06/30/2012 14,877,000 14,877,000 297,540,000 297,540,000
06/30/2013 14,877,000 14,877,000 297,540,000 297,540,000
06/30/2014 14,877,000 14,877,000 297,540,000 297,540,000
06/30/2015 14,877,000 14,877,000 297,540,000 297,540,000
06/30/2016 14,877,000 14,877,000 297,540,000 297,540,000
06/30/2017 6,575,000 5.000% 14,712,625 21,287,625 290,965,000 290,965,000
06/30/2018 6,910,000 5.000% 14,375,500 21,285,500 284,055,000 284,055,000
06/30/2019 7,265,000 5.000% 14,021,125 21,286,125 276,790,000 276,790,000
06/30/2020 7,640,000 5.000% 13,648,500 21,288,500 269,150,000 269,150,000
06/30/2021 8,030,000 5.000% 13,256,750 21,286,750 261,120,000 261,120,000
06/30/2022 8,440,000 5.000% 12,845,000 21,285,000 252,680,000 252,680,000
06/30/2023 8,875,000 5.000% 12,412,125 21,287,125 243,805,000 243,805,000
06/30/2024 9,330,000 5.000% 11,957,000 21,287,000 234,475,000 234,475,000
06/30/2025 9,810,000 5.000% 11,478,500 21,288,500 224,665,000 224,665,000
06/30/2026 10,310,000 5.000% 10,975,500 21,285,500 214,355,000 214,355,000
06/30/2027 10,840,000 5.000% 10,446,750 21,286,750 203,515,000 203,515,000
06/30/2028 11,395,000 5.000% 9,890,875 21,285,875 192,120,000 192,120,000
06/30/2029 11,980,000 5.000% 9,306,500 21,286,500 180,140,000 180,140,000
06/30/2030 12,595,000 5.000% 8,692,125 21,287,125 167,545,000 167,545,000
06/30/2031 13,240,000 5.000% 8,046,250 21,286,250 154,305,000 154,305,000
06/30/2032 13,920,000 5.000% 7,367,250 21,287,250 140,385,000 140,385,000
06/30/2033 14,635,000 5.000% 6,653,375 21,288,375 125,750,000 125,750,000
06/30/2034 15,385,000 5.000% 5,902,875 21,287,875 110,365,000 110,365,000
06/30/2035 16,175,000 5.000% 5,113,875 21,288,875 94,190,000 94,190,000
06/30/2036 17,000,000 5.000% 4,284,500 21,284,500 77,190,000 77,190,000
06/30/2037 17,875,000 5.000% 3,412,625 21,287,625 59,315,000 59,315,000
06/30/2038 18,790,000 5.000% 2,496,000 21,286,000 40,525,000 40,525,000
06/30/2039 19,755,000 5.000% 1,532,375 21,287,375 20,770,000 20,770,000
06/30/2040 20,770,000 5.000% 519,250 21,289,250

297,540,000 292,030,050 589,570,050

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch Page 5

BOND SOLUTION

City of Houston Combined Utility System

Tax-Exempt Bonds
Market Rates as of December 9, 2010

Period Proposed Proposed Total Adj

Ending Principal Debt Service Debt Service

06/30/2011 4,297,800 4,297,800

06/30/2012 14,877,000 14,877,000
06/30/2013 14,877,000 14,877,000
06/30/2014 14,877,000 14,877,000
06/30/2015 14,877,000 14,877,000
06/30/2016 14,877,000 14,877,000
06/30/2017 6,575,000 21,287,625 21,287,625
06/30/2018 6,910,000 21,285,500 21,285,500
06/30/2019 7,265,000 21,286,125 21,286,125
06/30/2020 7,640,000 21,288,500 21,288,500
06/30/2021 8,030,000 21,286,750 21,286,750
06/30/2022 8,440,000 21,285,000 21,285,000
06/30/2023 8,875,000 21,287,125 21,287,125
06/30/2024 9,330,000 21,287,000 21,287,000
06/30/2025 9,810,000 21,288,500 21,288,500
06/30/2026 10,310,000 21,285,500 21,285,500
06/30/2027 10,840,000 21,286,750 21,286,750
06/30/2028 11,395,000 21,285,875 21,285,875
06/30/2029 11,980,000 21,286,500 21,286,500
06/30/2030 12,595,000 21,287,125 21,287,125
06/30/2031 13,240,000 21,286,250 21,286,250
06/30/2032 13,920,000 21,287,250 21,287,250
06/30/2033 14,635,000 21,288,375 21,288,375
06/30/2034 15,385,000 21,287,875 21,287,875
06/30/2035 16,175,000 21,288,875 21,288,875
06/30/2036 17,000,000 21,284,500 21,284,500
06/30/2037 17,875,000 21,287,625 21,287,625
06/30/2038 18,790,000 21,286,000 21,286,000
06/30/2039 19,755,000 21,287,375 21,287,375
06/30/2040 20,770,000 21,289,250 21,289,250

297,540,000 589,570,050 589,570,050

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch Page 6

NET DEBT SERVICE

City of Houston Combined Utility System

Tax-Exempt Bonds
Market Rates as of December 9, 2010

Period Total Net

Ending Debt Service Debt Service

06/30/2011 4,297,800 4,297,800

06/30/2012 14,877,000 14,877,000
06/30/2013 14,877,000 14,877,000
06/30/2014 14,877,000 14,877,000
06/30/2015 14,877,000 14,877,000
06/30/2016 14,877,000 14,877,000
06/30/2017 21,287,625 21,287,625
06/30/2018 21,285,500 21,285,500
06/30/2019 21,286,125 21,286,125
06/30/2020 21,288,500 21,288,500
06/30/2021 21,286,750 21,286,750
06/30/2022 21,285,000 21,285,000
06/30/2023 21,287,125 21,287,125
06/30/2024 21,287,000 21,287,000
06/30/2025 21,288,500 21,288,500
06/30/2026 21,285,500 21,285,500
06/30/2027 21,286,750 21,286,750
06/30/2028 21,285,875 21,285,875
06/30/2029 21,286,500 21,286,500
06/30/2030 21,287,125 21,287,125
06/30/2031 21,286,250 21,286,250
06/30/2032 21,287,250 21,287,250
06/30/2033 21,288,375 21,288,375
06/30/2034 21,287,875 21,287,875
06/30/2035 21,288,875 21,288,875
06/30/2036 21,284,500 21,284,500
06/30/2037 21,287,625 21,287,625
06/30/2038 21,286,000 21,286,000
06/30/2039 21,287,375 21,287,375
06/30/2040 21,289,250 21,289,250

589,570,050 589,570,050
Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch Page 1

SOURCES AND USES OF FUNDS

City of Houston Combined Utility System

Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010

Sources:

Bond Proceeds:
Par Amount 302,575,000.00

302,575,000.00

Uses:

Project Fund Deposits:

CP Takeout 300,000,000.00

Delivery Date Expenses:

Cost of Issuance 756,437.50
Underwriter's Discount 1,815,450.00
2,571,887.50

Other Uses of Funds:

Additional Proceeds 3,112.50

302,575,000.00
Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch Page 2

BOND SUMMARY STATISTICS

City of Houston Combined Utility System

Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Dated Date 02/01/2011
Delivery Date 02/01/2011
Last Maturity 11/15/2039

Arbitrage Yield 4.150109%

True Interest Cost (TIC) 4.197222%
Net Interest Cost (NIC) 6.461858%
All-In TIC 4.216970%
Average Coupon 6.430627%

Average Life (years) 19.212

Duration of Issue (years) 15.663

Par Amount 302,575,000.00

Bond Proceeds 302,575,000.00
Total Interest 373,808,369.19
Net Interest 375,623,819.19
Total Debt Service 676,383,369.19
Maximum Annual Debt Service 26,565,175.00
Average Annual Debt Service 23,494,597.93

Underwriter's Fees (per $1000)

Average Takedown
Other Fee 6.000000

Total Underwriter's Discount 6.000000

Bid Price 99.400000

Par Average Average PV of 1 bp

Bond Component Value Price Coupon Life change

Serial Bonds 91,945,000.00 100.000 5.507% 10.572 71,480.15

Term Bond due 2030 61,215,000.00 100.000 6.500% 17.873 67,948.65
Term Bond due 2039 149,415,000.00 100.000 6.650% 25.076 189,757.05

302,575,000.00 19.212 329,185.85

All-In Arbitrage
TIC TIC Yield

Par Value 302,575,000.00 302,575,000.00 302,575,000.00

+ Accrued Interest
+ Premium (Discount)
- Underwriter's Discount -1,815,450.00 -1,815,450.00
- Cost of Issuance Expense -756,437.50
- Other Amounts

Target Value 300,759,550.00 300,003,112.50 302,575,000.00

Target Date 02/01/2011 02/01/2011 02/01/2011

Yield 4.197222% 4.216970% 4.150109%
Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch Page 3

BOND PRICING

City of Houston Combined Utility System

Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Maturity
Bond Component Date Amount Rate Yield Price

Serial Bonds:
11/15/2016 7,920,000 4.020% 4.020% 100.000
11/15/2017 8,140,000 4.420% 4.420% 100.000
11/15/2018 8,385,000 4.800% 4.800% 100.000
11/15/2019 8,655,000 4.950% 4.950% 100.000
11/15/2020 8,945,000 5.100% 5.100% 100.000
11/15/2021 9,250,000 5.300% 5.300% 100.000
11/15/2022 9,585,000 5.600% 5.600% 100.000
11/15/2023 9,950,000 5.850% 5.850% 100.000
11/15/2024 10,345,000 6.100% 6.100% 100.000
11/15/2025 10,770,000 6.350% 6.350% 100.000
91,945,000

Term Bond due 2030:

11/15/2026 11,230,000 6.500% 6.500% 100.000
11/15/2027 11,715,000 6.500% 6.500% 100.000
11/15/2028 12,220,000 6.500% 6.500% 100.000
11/15/2029 12,750,000 6.500% 6.500% 100.000
11/15/2030 13,300,000 6.500% 6.500% 100.000
61,215,000

Term Bond due 2039:

11/15/2031 13,880,000 6.650% 6.650% 100.000
11/15/2032 14,490,000 6.650% 6.650% 100.000
11/15/2033 15,130,000 6.650% 6.650% 100.000
11/15/2034 15,800,000 6.650% 6.650% 100.000
11/15/2035 16,500,000 6.650% 6.650% 100.000
11/15/2036 17,225,000 6.650% 6.650% 100.000
11/15/2037 17,990,000 6.650% 6.650% 100.000
11/15/2038 18,785,000 6.650% 6.650% 100.000
11/15/2039 19,615,000 6.650% 6.650% 100.000
149,415,000

302,575,000

Dated Date 02/01/2011

Delivery Date 02/01/2011
First Coupon 05/15/2011

Par Amount 302,575,000.00

Original Issue Discount

Production 302,575,000.00 100.000000%

Underwriter's Discount -1,815,450.00 -0.600000%

Purchase Price 300,759,550.00 99.400000%

Accrued Interest

Net Proceeds 300,759,550.00

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch Page 4

BOND DEBT SERVICE

City of Houston Combined Utility System

Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010

Period Bond Total

Ending Principal Coupon Interest Debt Service Balance Bond Value

06/30/2011 5,432,372.69 5,432,372.69 302,575,000 302,575,000

06/30/2012 18,804,367.00 18,804,367.00 302,575,000 302,575,000
06/30/2013 18,804,367.00 18,804,367.00 302,575,000 302,575,000
06/30/2014 18,804,367.00 18,804,367.00 302,575,000 302,575,000
06/30/2015 18,804,367.00 18,804,367.00 302,575,000 302,575,000
06/30/2016 18,804,367.00 18,804,367.00 302,575,000 302,575,000
06/30/2017 7,920,000 4.020% 18,645,175.00 26,565,175.00 294,655,000 294,655,000
06/30/2018 8,140,000 4.420% 18,306,089.00 26,446,089.00 286,515,000 286,515,000
06/30/2019 8,385,000 4.800% 17,924,955.00 26,309,955.00 278,130,000 278,130,000
06/30/2020 8,655,000 4.950% 17,509,503.75 26,164,503.75 269,475,000 269,475,000
06/30/2021 8,945,000 5.100% 17,067,195.00 26,012,195.00 260,530,000 260,530,000
06/30/2022 9,250,000 5.300% 16,593,972.50 25,843,972.50 251,280,000 251,280,000
06/30/2023 9,585,000 5.600% 16,080,467.50 25,665,467.50 241,695,000 241,695,000
06/30/2024 9,950,000 5.850% 15,521,050.00 25,471,050.00 231,745,000 231,745,000
06/30/2025 10,345,000 6.100% 14,914,490.00 25,259,490.00 221,400,000 221,400,000
06/30/2026 10,770,000 6.350% 14,257,020.00 25,027,020.00 210,630,000 210,630,000
06/30/2027 11,230,000 6.500% 13,550,097.50 24,780,097.50 199,400,000 199,400,000
06/30/2028 11,715,000 6.500% 12,804,385.00 24,519,385.00 187,685,000 187,685,000
06/30/2029 12,220,000 6.500% 12,026,497.50 24,246,497.50 175,465,000 175,465,000
06/30/2030 12,750,000 6.500% 11,214,972.50 23,964,972.50 162,715,000 162,715,000
06/30/2031 13,300,000 6.500% 10,368,347.50 23,668,347.50 149,415,000 149,415,000
06/30/2032 13,880,000 6.650% 9,474,587.50 23,354,587.50 135,535,000 135,535,000
06/30/2033 14,490,000 6.650% 8,531,285.00 23,021,285.00 121,045,000 121,045,000
06/30/2034 15,130,000 6.650% 7,546,420.00 22,676,420.00 105,915,000 105,915,000
06/30/2035 15,800,000 6.650% 6,517,997.50 22,317,997.50 90,115,000 90,115,000
06/30/2036 16,500,000 6.650% 5,444,022.50 21,944,022.50 73,615,000 73,615,000
06/30/2037 17,225,000 6.650% 4,322,666.25 21,547,666.25 56,390,000 56,390,000
06/30/2038 17,990,000 6.650% 3,151,767.50 21,141,767.50 38,400,000 38,400,000
06/30/2039 18,785,000 6.650% 1,928,998.75 20,713,998.75 19,615,000 19,615,000
06/30/2040 19,615,000 6.650% 652,198.75 20,267,198.75

302,575,000 373,808,369.19 676,383,369.19

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch Page 5

BOND SOLUTION

City of Houston Combined Utility System

Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010

Period Proposed Proposed Debt Service Total Adj

Ending Principal Debt Service Adjustments Debt Service

06/30/2011 5,432,373 -1,901,330 3,531,042

06/30/2012 18,804,367 -6,581,528 12,222,839
06/30/2013 18,804,367 -6,581,528 12,222,839
06/30/2014 18,804,367 -6,581,528 12,222,839
06/30/2015 18,804,367 -6,581,528 12,222,839
06/30/2016 18,804,367 -6,581,528 12,222,839
06/30/2017 7,920,000 26,565,175 -6,525,811 20,039,364
06/30/2018 8,140,000 26,446,089 -6,407,131 20,038,958
06/30/2019 8,385,000 26,309,955 -6,273,734 20,036,221
06/30/2020 8,655,000 26,164,504 -6,128,326 20,036,177
06/30/2021 8,945,000 26,012,195 -5,973,518 20,038,677
06/30/2022 9,250,000 25,843,973 -5,807,890 20,036,082
06/30/2023 9,585,000 25,665,468 -5,628,164 20,037,304
06/30/2024 9,950,000 25,471,050 -5,432,368 20,038,683
06/30/2025 10,345,000 25,259,490 -5,220,072 20,039,419
06/30/2026 10,770,000 25,027,020 -4,989,957 20,037,063
06/30/2027 11,230,000 24,780,098 -4,742,534 20,037,563
06/30/2028 11,715,000 24,519,385 -4,481,535 20,037,850
06/30/2029 12,220,000 24,246,498 -4,209,274 20,037,223
06/30/2030 12,750,000 23,964,973 -3,925,240 20,039,732
06/30/2031 13,300,000 23,668,348 -3,628,922 20,039,426
06/30/2032 13,880,000 23,354,588 -3,316,106 20,038,482
06/30/2033 14,490,000 23,021,285 -2,985,950 20,035,335
06/30/2034 15,130,000 22,676,420 -2,641,247 20,035,173
06/30/2035 15,800,000 22,317,998 -2,281,299 20,036,698
06/30/2036 16,500,000 21,944,023 -1,905,408 20,038,615
06/30/2037 17,225,000 21,547,666 -1,512,933 20,034,733
06/30/2038 17,990,000 21,141,768 -1,103,119 20,038,649
06/30/2039 18,785,000 20,713,999 -675,150 20,038,849
06/30/2040 19,615,000 20,267,199 -228,270 20,038,929

302,575,000 676,383,369 -130,832,929 545,550,440

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch Page 6

NET DEBT SERVICE

City of Houston Combined Utility System

Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010

Period Total Net

Ending Debt Service 35% BABs Subsidy Debt Service

06/30/2011 5,432,372.69 -1,901,330.44 3,531,042.25

06/30/2012 18,804,367.00 -6,581,528.46 12,222,838.54
06/30/2013 18,804,367.00 -6,581,528.46 12,222,838.54
06/30/2014 18,804,367.00 -6,581,528.46 12,222,838.54
06/30/2015 18,804,367.00 -6,581,528.46 12,222,838.54
06/30/2016 18,804,367.00 -6,581,528.46 12,222,838.54
06/30/2017 26,565,175.00 -6,525,811.26 20,039,363.74
06/30/2018 26,446,089.00 -6,407,131.16 20,038,957.84
06/30/2019 26,309,955.00 -6,273,734.26 20,036,220.74
06/30/2020 26,164,503.75 -6,128,326.32 20,036,177.43
06/30/2021 26,012,195.00 -5,973,518.25 20,038,676.75
06/30/2022 25,843,972.50 -5,807,890.37 20,036,082.13
06/30/2023 25,665,467.50 -5,628,163.62 20,037,303.88
06/30/2024 25,471,050.00 -5,432,367.50 20,038,682.50
06/30/2025 25,259,490.00 -5,220,071.50 20,039,418.50
06/30/2026 25,027,020.00 -4,989,957.00 20,037,063.00
06/30/2027 24,780,097.50 -4,742,534.13 20,037,563.37
06/30/2028 24,519,385.00 -4,481,534.75 20,037,850.25
06/30/2029 24,246,497.50 -4,209,274.12 20,037,223.38
06/30/2030 23,964,972.50 -3,925,240.37 20,039,732.13
06/30/2031 23,668,347.50 -3,628,921.62 20,039,425.88
06/30/2032 23,354,587.50 -3,316,105.62 20,038,481.88
06/30/2033 23,021,285.00 -2,985,949.75 20,035,335.25
06/30/2034 22,676,420.00 -2,641,247.00 20,035,173.00
06/30/2035 22,317,997.50 -2,281,299.12 20,036,698.38
06/30/2036 21,944,022.50 -1,905,407.87 20,038,614.63
06/30/2037 21,547,666.25 -1,512,933.19 20,034,733.06
06/30/2038 21,141,767.50 -1,103,118.63 20,038,648.87
06/30/2039 20,713,998.75 -675,149.56 20,038,849.19
06/30/2040 20,267,198.75 -228,269.56 20,038,929.19

676,383,369.19 -130,832,929.27 545,550,439.92