MSG Executive Summary

A Legacy of Reliability
Overview of Services
Overview of services, including our
Collaborative Sales Initiative


USE OF INFORMATION REGARDING MSG’S FINANCIAL SERVICES
This is an overview of MSG’s sophisticated and integrated underwriting and portfolio methodology. This has become a hallmark of the financial services industry, its value underscored by MSG’s 20+ year track record. MSG applies its extensive experience and municipal finance expertise in assessing the credit strength of each prospective borrower . Such thorough analyses are an invaluable resource to qualified purchasers, enabling expedient and cost effective private placement of municipal loan transactions.
Though reflecting only a portion of the dimensions taken into consideration with specific underwritings, much of the methodology set forth herein is applicable to the various business channels in which MSG's focuses its business model's engagements involving not only underwriting but operationally oriented financial analyses.
This is set forth to enhance awareness of the cornerstone of one of MSG’s core competencies that has enabled MSG to build its array of correspondent private placement investor channels. This is an essential compliment of MSG’s vertically integrated business model. This enables MSG to provide program offerings, inclusive of a turn-key, integrated, value added financial underwriting to the municipal as well as commercial utility and engineering business sectors. The objective is to streamline and expedite delivery of a full array of services to municipal clients, utilities and corporations, includeing major vendors of equipment, infrastructure type project providers, engineering, and service firms that provide public private partnership oriented management programs, to include financing.
All information contained herein is the proprietary information of Municipal Services Group, Inc. (MSG) and is intended only for the use of Badger Meter, Inc. and its Distributors, for the purposes intended by the parties related to effecting the Badger Financial Program (the "Plan"); and therefore the information contained herein, and any related analyses or other types of documentation shall not be further transferred or disseminated in any way without prior written permission of MSG.
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To our Badger Colleagues;
Historical perspectives and personal relationships prepare us for the future.. if we can adopt a demanding reorientation in business, as we have known it. So why should we go there? Because we have witnessed the most dramatic, dynamically different financial environment, businesses and communities have faced in 70 years!
From this experiential platform, Ed Sutton our Executive Vice President of MSG’s Industrial Funding Group is introducing new and innovative tools in an amalgamation and integration initiative to facilitate your meter change-out packages. At the core, these tools enable and empower by way of quantifiable cost benefit justified decision making, optimizing ROI, for all parties. This underscores MSG’s philosophy set forth in this Executive Overview (the “EO”): We are committed to providing services epitomizing the quintessential public private partnership, critical for the mutual benefit of all parties. America’s Communities, in particular.
Supporting your business goal of accelerating sales growth and market penetration..profitably, by integrating the “show me the money” component, narrowing the sales timeline to closure can and needs to be integral to a contemporary sales strategy. Embodied in this presentation, reside the keys to the basic questions orienting around affordability and “how do we pay for the meter change-out”. ‘for which we do not have capital budget surpluses?’ The sales process road block can be overcome with initiatives.
Your EO is an elegant synopsis, setting forth a comprehensive and yet concisely compelling, executive brief of how MSG & IFG have developed and are deploying solutions to our existing muni clients and prospective new customers, that must effect meeting critical equipment & project fulfillment to service their constituency. This is not being met cost effectively if at all, through traditional local lending institutions within America’s communities.
Small to medium size entities perceive the bond market to be in a state of chaos, patronizing only large issuers! Dodd Frank, the Volker Rule, Basel III liquidity impact the banks; compounded by the economic slow-down this has left numerous water districts, special districts, municipal water departments and those who have even depended on the USDA/RUS programs, as well as utilities..twisting in the wind.
MSG listened to its customers; reconciling what we heard, enabled us to fortuitously envision what was necessary. Developing and testing innovative methodologies creatively is the structural underpinning fostering a motivating influence, to pull in tandem with you on behalf of your existing clients and prospective customers!
Many years ago MSG and Badger created marketing and sales financing program orientations (see slide 12) for one purpose: To enhance support for Badger marketing and sales acceleration. We are therefore pleased and thank you for the opportunity to further the integration of proven methodologies.
January 10, 2013
Sincerely yours,
Donovan N. Stevens President and CEO
6714 South Yates Court
| Littleton, CO 80128
| Phone: 303-933-9993
| www.munibank.com
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Who Is Municipal Services Group?
Since 1988 Municipal Services Group,Inc. (MSG) has provided tax-exempt financing to over 3000 municipalities nationwide. Our exclusive focus continues to be tax- exempt (lease purchase) financing for state and local governments. We are headquartered in Denver, Colorado, with professionals covering loan origination, credit, servicing, and portfolio management.
Our focus has been to work through major industry vendors and their respective dealer networks. MSG has evolved into a consulting and financial services investment bank providing flexible, creative solutions addressing the needs of vendor and municipal clients. The company’s
service orientation, combined with regional sales support and proprietary technology, are the underlying elements, which facilitate MSG’s capital and financial relationships.
MSG has national vendor agreements in place with Badger Meter, Inc., Pitt- Des Moines, Seagrave Fire Apparatus, and Layne Christensen Corporation, to name but a few, through which it provides installment lease purchase financing for vendors nationwide. On the municipal side of the business, as an example, MSG is the largest private lessor to school districts and counties in Texas with over 250 under a Master Lease Agreement.
2“MSG helps simplify the budgeting process and reduces the
cost of financing essential ” municipal equipment and projects.


What is a Municipal Lease?
An Installment Purchase Agreement, sometimes referred to as a municipal lease, is a conditional sales contract obligating a municipality, special district, or authorities (“Municipalities”) to make payments of principal and interest for equipment or other property over time to achieve ownership. Upon final payment, ownership vests with the lessee/purchaser.
Many municipalities lack the ability to access the capital markets cost effectively. However, MSG developed and for two decades has successfully deployed a refined
private placement loan facility (the “Loan”) – a tax exempt installment purchase for Federal Tax law purposes, sometimes referred to as a municipal lease, for state constitutional law compliance purposes.
This conditional sales contract obligates a municipality to make payments over time to achieve ownership for Municipal infrastructure projects and equipment financing needs (“the Project) that are critical to the delivery of essential services. Upon final payment, ownership vests with the lessee. MSG’s orientation enables effecting funding for these Projects, more efficiently and thus cost effectively.
Municipalities no longer have to rely on traditional, publicly offered bond issues. That methodology is obsolete by contrast; within certain parameters MSG’s underwriting can displace bonds, providing Loans instead. These are more efficient to facilitate and often less costly, particularly within the credit market environment of today. MSG specializes in private placement portfolio operations; with a vertically integrated service orientation such loans are viable, sustainable and indeed more cost effective.
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Benefits of msg transactions
• Tax-exempt yields
• Investment principal recovered prior to term expiration
• Collateralized by essential equipment
• Security interest held in form of First Lien
• General Fund / Enterprise Fund as typical repayment sources
• Documentation approved by legal counsel
• Non-appropriation risk
mitigated by essential use and contract language
• Full credit analysis & rating provided by MSG
• Transactions managed by MSG from inception


We deliver unique and creative financial solutions to state and local government decision-makers. We provide easy-to-use web based tools and a team of experts via our real-time Virtual Advisor online system.
AHow MSG Works
s a vertically integrated investment- banking firm, MSG provides original issue underwriting of such Projects,
with a complimentary array of underwriting management and cost benefit consulting services, vendor management systems, and a profiled portfolio investment rating system – MSG’s Ultimate Recovery Rating© (the “Services”). These Services that have been provided nationwide to our municipal, vendor, and investor clients respectively, uniquely differentiates MSG. MSG’s consulting and analytical packages are integral to MSG’s service processes as appropriate and applicable. This is in sharp contrast to most investment banking firms, which typically require the Municipality to outsource and thus incur the related ancillary underwriting costs while shouldering related administrative burdens.
Why is this important? A mutually beneficial partnership is realized, thus fulfilling the needs of the community.
4“MSG helps municipalities in accessing the capital markets effectively, securing
capital at the lowest cost possible.”


Integrating Municipal Financial Modeling with Project Management in a Collaborative Online Web Platform.
OCu r D e c i s i o n M a k i n g P r o c e s s
ost benefit and debt consulting analyses are part of MSG’s credit evaluation. MSG takes into consideration the cost benefit impact of
a Project acquisition vis-à-vis its operational impact and cash flow/expense reduction perspectives with its Ultimate Recovery Rating©, including forward projected cash flows related to repayment of a particular obligation. The transit coach underwriting MSG completed with Suburban Mobility Authority for Transportation in Detroit (“SMART”) is a good example of having realized the benefits afforded by MSG - taking such considerations into account in solidifying SMART’s ability to repay the obligation:
• increased ridership – faster than demographic growth patterns
• increased fare Box revenue – exceeding underwriting projections
• reduced maintenance and fuel costs
• savings exceeded debt service interest costs
MSG’s fleet rotation and water rate consulting services are fully integrated. Therefore, MSG’s vertically integrated underwriting services enables customer interest rate optimization.
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consulting services
MSG provides a broad range of consulting services including:
• Preparation of underwriting analyses
• Fleet and Project Management Cost/Benefit Analyses
• Water rate analysis studies as applicable
• Federal Cost Justification studies to secure Grant participation
• Rating transactions for portfolio allocation profile compliance: MSG’s Ultimate Recovery Rating©
• Underwriting Insurance Development & Management
• Managing acquisition funds
• Treasury investment collateralization of acquisition funds
• Related milestone draw payments to contractors for project type financings
• Delivery/Acceptance settlements to vendors of equipment
• Management of investor payments through MSG’s Fiduciary Accounts
• Multi-faceted Municipal and Vendor client services throughout the term


IFG offers financing for industrial infrastructure projects from $2MM to $300MM. We are a team that understands your industry and how to put capital to work for your project.
Who is Industrial Funding Group?
Industrial Funding Group (IFG) is a division of Municipal Services Group and is wholly owned and operated by MSG. IFG offers financing for industrial infrastructure projects from $2MM to $300MM.
IFG serves utilities, enterprise fund and joint-action issuers on financings, including public power, energy, alternative energy, water and sewer, state revolving fund and environmental project finance. Our team works closely with commercial and municipal clients to provide traditional financing for all types of environmental and energy related projects. Our capabilities providing both debt and equity in project financings help clients achieve their goals, resulting in optimizing the objective.
Integral to any project funding is preparation for MSG’s Portfolio underwriting, effected as a private placement capital market loan. We provide the initial due diligence with a complete credit underwriting, and private placement Ultimate Recovery Rating©. This includes cash flow analysis and forecasting within a hybrid context, integrating an array of proprietary, operational analytics (see page 5; MSG's Consulting Services). This enables numeric, rate/risk adjusted portfolio allocation assessments. In the public- private partnership context we provide advisory services to assist our clients in the negotiation and bidding process across the entire deal life cycle from pre-funding to post- funding.
6“IFG specializes in transaction
for large scale infrastructure projects in power, energy and water.”


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• Water infrastructure: IFG helps private and investor owned utilities finance essential project construction or redevelopment of existing water and wastewater systems. Nothing is more essential than drinking water and wastewater systems to public health, business, and quality of life in the United States. The AWWA has documented that US water and wastewater infrastructure is aging. Many communities must significantly increase their levels of investment in its repair and rehabilitation to protect public health and safety and to maintain environmental standards.
• electric Power generation: We offer a wide array of financing options to support cogeneration projects, including loans, integrated leveraging of grant capital, and leases. Our financing covers engineering, equipment and construction, permit and intangible cots. IFG can arrange a facility to finance the entire project.
• energy and environmental:
IFG serves utilities, enterprise fund and joint-action issuers on financings including public power, energy, alternative energy, water and sewer, state revolving fund and environmental project finance. Our team works closely to explore both tax-exempt and traditional financing for all types of environmental and energy projects.
• transportation: We have a 20 year history in transaction, relating to surface transportation and mass transit. Privileged to serve on the PPP task force for the FTA and APTA, we help public and private sector clients structure and execute quantifiably cost benefit justified, capital equipment and project investment deals. We also provide public and private sector clients with advisory services relating to public-private partnerships and concession agreements.
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Specialized Knowledge for Large Projects
hether an engineering firm or a manufacturer or anywhere in between, IFG’s bankers are highly knowledgeable and familiar with the unique issues and needs across power generation, water and energy.
This specialized industry knowledge, means providing you with the right combination of financial advisory and capital solutions to achieve your strategic objectives. Our specialized industry focus includes:


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OTu r M i s s i o n
o provide quantifiable, strategically-oriented, joint venture solutions that empower America’s communities and their vendors to fulfill equipment and service acquisition/financing needs.
MSG’s consultative methodologies are made available to enable and empower MSG’s clients to make quantifiable, informed decisions. MSG’s Ultimate Recovery Rating© is the pre-emanate reflection of MSG’s Mission philosophy: The quintessential public private partnership for the mutual benefit of our clients: municipalities, their vendors, and our Portfolio correspondent private partners.
Founding Team
Donovan Stevens
President/CEO
Mr. Stevens has been in the financial services industry for three decades. He served as Senior Vice President and Managing Director for Imperial Bank's municipal leasing group, and Senior Vice President with Security Pacific National Bank, Capital Markets, prior to MSG’s inception. With 22 years in the transportation industry at the corporate and equipment distributor levels, the integration of his experience in sales, maintenance and operations has impelled MSG to integrate operationally oriented, cost benefit justification analytics into MSG’s tax exempt loan underwriting Mission.
As a pioneer of alternative financing, he led a 320 bus acquisition for Denver’s RTD in 1986. Consulting to FTA Regional offices and having served on the PPP task force for the FTA and APTA, Mr. Stevens has been a featured national speaker for transit associations and state DOTs’ . A graduate of General Motors Institute of Technology, he is the President and CEO of Municipal Services Group, Inc
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“With over 75 years of municipal finance experience, MSG's Portfolio
Staff has underwritten” over 3,500 transactions.


Edward Sutton
Executive Vice President
Mr. Sutton brings over 40 years of experience in construction, project finance and infrastructure development to MSG. He has served as an Executive Officer for
both local and national companies for over 30 years and has been instrumental in forming 16 special financing quasi governmental entities for tax exempt financing of water, wastewater and major infrastructure development.
Mr. Sutton has served on the Board of Directors of industry associations, testified before Senate Committees on water and waste water development and water rates and has served as an advisor to Fortune 500 companies and Banks on major infrastructure development and water issues.
Edward is a graduate of the University of Minnesota with a BA in Business Finance.
Mark Stevens
VP Corporate Development
Over the last 18 years, Mr. Stevens’ responsibilities have included marketing, origination and business development. He has been responsible for developing national
private label finance programs for MSG partners, such as Layne Christensen, Badger Meter, Navistar International, Pitt Des Moines and others. He developed large scale technology and marketing initiatives for major corporations including Adobe and Microsoft. This effort expanded MSG's portfolio of technology offerings to its private label partners.
Harold Greenberg
Senior Credit Analyst
Mr. Greenberg has worked in accounting, finance and management for over 45 years. Prior to joining MSG he served as Controller for the State of Colorado
Department of Revenue for 28 of his 32 year tenure. Harold’s experience enabled his significant contribution to refining MSG’s Ultimate Recovery Rating©. In his capacity he is responsible for underwriting analysis, culminating in MSG providing its industry renowned rating methodology --- a prerequisite to MSG’s private placement portfolio allocation confirmations.
Harold holds a Masters of Business Administration Degree (MBA) from the University of Denver and is a Certified Public Accountant. He is a founding member and former President of Colorado Fiscal Managers Association and is an active member of the Governmental Issues Committee of the Colorado Society of CPAs.
Mark Rauch
CFO
Mr. Rauch has an extensive background in developing and implementing business management systems in positions as Chief Financial Officer for Sutton Western Corporation and V.P. of
Finance and Operations for SCS Building Group. He managed accounting functions for multi- location, multi-entity real estate development companies, performed project feasibility analysis, sensitivity analysis, and developed optimal structures in the best interests of respective transactional partners. Mark has negotiated joint venture agreements and buy/ sell agreements to improve profitability.
Mark’s background includes analyzing, negotiating and closing private equity, mezzanine, and primary debt investments for residential community developments. Mark holds a Bachelor of Science in Finance and a Bachelor of Arts in Economic Management from Ithaca College.
These developments
CRM solutions for finance, web-based applications for partner management, and marketing automation applications. Prior to MSG, Mark served as Associate Editor for the Publishing Division of the Financial Broadcast Network in Los Angeles.
Mark holds a BS in Finance and Marketing from the University of Colorado at Boulder.
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include vertical
overvieW of msg and ifg
• MSG helps simplify the budgeting process and reduces the cost of financing essential municipal equipment and projects.
• MSG helps municipalities in accessing the capital markets effectively, securing capital at the lowest cost possible.
• IFG specializes in transaction for large scale infrastructure projects in power, energy and water.
• IFG provides the initial due diligence with a complete credit underwriting, and private placement Ultimate Recovery Rating©.


Our Underwriting Process
A transaction’s process flow is developed, deployed and managed as follows:
1. Customer pre-qualification leads to specific proposal
(vendor integrated or direct under a Master Agreement
facility which in essence is a loan- not a bond)
2. Strategic, on-going transactional follow-up and assessment activity increases the probability of closing
the transaction
3. Portfolio Allocation is effected when go-ahead is
secured, and a Resolution is prepared for passage
4. MSG requests pertinent financial information from
the Municipality
5. Credit analysis is conducted by MSG, subjecting
the transaction to MSG’s Ultimate Recovery
Rating© process
6. Documents are simultaneously prepared and negotiated
with the Municipality’s counsel (Counsel is required to
render an enforceability opinion)
7. The optimal interest rate refinement is thus achieved
8. Subsequent to document execution, Portfolio Allocation monies are transferred and deposited into the Equipment/Project Acquisition Account, where monies
are invested/secured with US Treasuries
9. Upon delivery and receipt of an Acceptance Certificate, the invoice & security interest documentation, MSG wire transfers settlement to the vendor(s) of the Municipality
10. Billings are generated to the Municipality as periodic payments come due, and payments to investor(s) are processed by MSG
11. Servicing requirements throughout the term are handled by MSG
In certain cases, MSG retains investments in selected tax- exempt installment purchase agreements, while in others MSG subsequently effects private placement through our Portfolio Operations. MSG’s growth in capacity to meet demand is manifested by striking a balance in optimizing portfolio results consistent with maintaining the best interests of MSG’s municipal, vendor, and investor clients alike.
MSG can provide project specific materials that reflect an in depth and yet concise executive summary of the various facets of MSG’s vertically integrated business service model. Please peruse those aspects of particular interest; and we are confident you will conclude our turn- key approach represents the level of service our public private partners desire and deserve. We look forward to serving you and your organization, in becoming one more of our valued customers.
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MSG’s Credit Review Process
Ultimate Recovery Rating©
MSG’s Credit Review Process is recognized as one of
the finest in the financial services field. MSG’s institutional and individual investors have commented
on the unusually high quality of the due diligence and comprehensive content as reflected MSG’s Ultimate Recovery Rating. In fact, many investors have come
to rely heavily on the Credit Report for their own due diligence; despite MSG’s open encouragement to perform their own due diligence. The Credit Report is included in the Private Placement Memorandum that
is prepared for the prospective investor and is crucial
to MSG effecting private placement of the installment purchase at an optimum rate in today’s competitive financial market.
Prior to entering into a transaction, MSG’s Credit Analyst reviews the credit worthiness of the prospective municipal issuer.
the complete credit review package that msg prepares includes:
• Detailed financial analysis
• Graphs of financial trends
• Special issues assessment letter • Internal credit rating
The Ultimate Recovery Rating© System is MSG’s guide in analyzing a governmental unit’s financial status. The credit categories chosen by MSG have direct influence on determining whether a governmental unit is able to incur the additional responsibility and an assessment of its ability to repay over the term of the financing.
the factors developed are weighted with special consideration to the following elements:
• Fund balance trends
• Unreserved fund balance
• Down payment
• Moody’s, S&P or Fitch Rating of entity’s underlying
credit, when applicable
financial ratios are analyzed:
• Unreserved fund balance to annual installment payments
• Debt service to total revenues
• Debt outstanding to assessed valuation liquidity
other criteria that receive emphasis are:
• Major revenue source
• Unfunded liabilities
• Policies pertaining to deposits and investments • Audited financial statements
• Type of collateral
• Trends in economic data
• A subjective impression of the governmental
unit’s management
msg requires the following to complete the credit analysis:
• Three years of audited financial statements
• Current interim financial statements and/or budgets • Feasibility studies if applicable
this allows msg to analyze:
• Pertinent financial trends of the governmental unit • Develop cash flow projections
• Assess debt service coverage ration
Based on the evaluation, the analyst generates a customer profile report for each transaction that describes:
• The proposed installment purchase transaction • Discusses the financial background of the
prospective lessee
The analyst presents the analysis to the Credit Committee for approval or denial prior to documentation.
Due to the inherent additional risk of non–appropriation
for the transaction by the Obligor, a determination
that the equipment being financed is essential to the operations of the obligor is a primary factor for credit approval. MSG believes that if the equipment being
financed is essential in order for the Obligor to perform a service or function traditionally considered to be a government service or function, then the Obligor is not likely
to fail to appropriate funds for continued payment under the transaction.
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unreserved fund Balance to total expenditures
The size of a governmental unit’s fund balance can affect its ability to withstand financial emergencies.
An unplanned decline in fund balance may mean that the governmental unit will be unable to meet a future need. On the other hand, a planned decline in the
fund balance may mean the entity has budgeted
for one or more years of operating deficits in order
to lower an otherwise high ending fund balance.
Such planned operating (General Fund) deficits are common in municipal finance and are considered a
sign of sound fiscal management. A warning trend is
an uncontrolled declining fund balance as a percentage of total expenditures, including fund transfers, prompting MSG to inquire of financial management’s corrective action plans.
MSG’s Ultimate Recovery Rating© System refers to the Unreserved Fund Balance of the source of repayment for the installment purchase (typically for the General Fund) because it reflects the net amount available
for unplanned expenditures. In governmental fund accounting and reporting, reserved funds indicate
a portion of the fund balance is not appropriate for expenditures or is legally separated to meet a specific future use. Fund balance destinations, on the other hand, may be established to indicate tentative plans by management for financial resource utilization in a future period.
down Payment & appropriated equity
The amount of down payment is important because
it establishes the governmental unit’s willingness and/ or ability to provide its own equity for a financing. A significant down payment provides additional credit enhancement and may discourage consideration of a non-appropriation and/or default. The governmental
unit will also be given credit for “Appropriated Equity” payments that will be made within the current fiscal
year, i.e., wherein monies have already been appropriated for this purpose.
unreserved fund Balance to annualized Payment amount
This determines the debt service coverage multiple of unreserved fund balance as the source of repayment fund to the MSG installment payment amount(s), on an annual- ized basis. This ratio is used in lieu of net revenues
to payment amount because most governments on an annual basis spend close to what is received in revenues, which would render the ratio less meaningful.
annual debt service to total revenues
Total revenues include governmental fund revenues only and do not include enterprise, or nonexpendable trust funds. Debt service exceeding 10% of revenues
is considered a potential problem. If it exceeds this amount, the debt service revenue stream is analyzed to determine its ability to continue or increase, e.g., by increasing mil levy rates.
debt outstanding to assessed valuation
The debt outstanding includes all debt included in the General Long-Term Debt Account Group, which may include G.O. debt, capitalized leases, and accumulated leave liabilities. Overall debt exceeding 10% of assessed valuation is considered a warning trend.
liquidity
This ratio relates Current Assets (including Cash and Temporary Investments) to Current Liabilities relative
to the fund that is designated as the source of repayment. A ratio of less than one would indicate that the governmental unit may not be able to meet short
term operating expenditures, including the municipal installment payments, in a timely fashion.
major revenue source
A governmental unit that depends on one type of revenue source (e.g., sales tax) to fund its operations may experience difficulties during economic downturns. Whereas, a governmental unit which has diverse revenue sources is not as likely to be adversely impacted
under these circumstances.
The exception, however, would be a water utility operation or authority which is fundamental and essential
source of revenue realized from billing the municipalities constituents.
type of collateral
The assets are pledged as collateral under the installment purchase to secure the enforcement of the
transaction and/or to enable the investor to recover his investment in the event of default. Therefore, the value
of the collateral is very important to the investor.
In MSG’s rating system, collateral value is dependent on two main variables:
essential use
useful life
ffI. Credit Categories - Part A
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The collateral is rated on a scale of 1 to 5 for each variable and an average is taken of the two variables. This average score is then multiplied by a factor of 2 to arrive at the inal rating. For example, ire trucks have the highest average score of 5, times the factor of 2, resulting in a maximum collateral rating of 10 points. The following table summarizes the collateral ranking:
equipment
Fire Trucks
Transit Buses
Police Cars
School Buses
Heavy Duty Trucks Construction Equipment Medical Equipment Computer Systems
Light Duty Trucks Communication Systems HVAC System
Personal Computer
Real Property
fund Balance trend
essential use scale
5
4
5
useful life scale
scale average
rating 80-90 60-70
credit risk good acceptable
55 5 4.5 34
333
333
243
423
4 2 3
2 2 2
3 1 2
3 1 2
1 1 1
Special Evaluation
MSG regards an increasing fund balance over the most recent iscal years as a positive sign of iscal stability. The maximum raw score is 100 points, with the possibility of 20 bonus points.
90+
excellent
70-80
average
An analysis relecting a raw score of less than 60 requires one of the following actions: • Portfolio placement on a best eforts basis
• Additional down payment or other credit enhancements, or
• Rejection
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Bonus points are given for the following factors:
firm obligation
increasing Population
credit History
deposits and investments
governmental credit rating
audited financial statements
a subjective impression of the governmental unit’s fiscal stability
appropriation
Annually appropriated transactions rely upon the municipality’s Governmental Fund for repayment and are subject to approval of the governments budgeted appropriation
Firm transactions are not subject to annual appropriations, therefore are given the maximum points for equity. This is gen- erally applicable to enterprise or revenue based funds.
increasing Population
This implies stability or enhancement of the tax base.
credit History
MSG has the credit and payment history for previous municipal transactions.
deposits and investments
Governments should observe sound management policies to ensure safety and liquidity. Deposits and investments are subject to:
>Credit risk (exposure to the possibility of loss resulting from a counterparty’s failure to meet its financial conditions)
>Market risk (adverse movements in price)
>Legal risk (action by a regulatory or legislative body that could invalidate a financial contract)
>Operational risk (inadequate internal controls) Governmental entities are requested to disclose any contingencies that result from events subsequent to the latest audited financial statements.
governmental credit rating
If a governmental entity has an underlying bond rating from a national municipal rating service such as
Moody’s or S&P, it provides additional credit enhancement to the installment purchase transaction in that:
>The rating is recognized as a measure of the financial stability of the entity and corresponds to the degree of investment risk, and
>It may discourage default because the munici- pal entity is not likely to risk rating on large municipal bonds for a relatively small install ment purchase transaction
audited/reviewed financial statements
A governmental unit that is able to provide audited or reviewed financial statements is regarded as providing more credible (and typically more complete) financial information.
client overview
MSG assigns a maximum of five bonus points on the basis of general impression of the:
lessee’s fiscal stability
soundness of cash management planning accuracy of information
government unit's management stability
II. Credit Categories - Part B
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Notes
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Notes 20

Notes
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Notes
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Municipal Services Group
6714 South Yates Court Littleton, CO 80128
Phone: 303-933-9993 | Fax: 303-972-5912 www.munibank.com
Copyright 2013
EO01102013
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