Contract analysis

I. Executive Summary The purpose of this memorandum is to confirm the legal authority of the Cascadia State Infrastructure Authority ("CSIA") to issue the proposed $220,000,000 aggregate principal amount of Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Series 2023A Bonds" or the "Bonds"), to pledge net water-treatment revenues derived from its regional water-tr

II. Background and Transaction Overview A. Description of CSIA The Cascadia State Infrastructure Authority is a Washington State governmental instrumentality and public body corporate, created and existing pursuant to Chapter 43.160A RCW (the "Enabling Act" or the "Act"). CSIA was established by the Washington Legislature to facilitate the financing, construction, acquisition, improvement, operation, and maintenance

III. Enabling Legislation — Chapter 43.160A RCW A. Creation and Legal Status of CSIA Chapter 43.160A RCW (the "Enabling Act" or the "Act") establishes the Cascadia State Infrastructure Authority as a public body corporate and governmental instrumentality of the State of Washington. The Act was enacted by the Washington Legislature for the express purpose of creating a specialized public entity with the authority, cap

IV. Board Authorization — Resolution No. 2023-014 A. Adoption of the Resolution CSIA Board Resolution No. 2023-014 (the "Resolution") was adopted by the Board of Commissioners at a duly noticed regular meeting held on May 9, 2023, at CSIA's principal offices in Olympia, Washington. Commissioner Lorraine Chu, Board Chair, presided over the meeting. A quorum of the Board was present throughout the meeting, as certified

1. Issuance of the Bonds. The Resolution authorizes the issuance of revenue bonds in an aggregate principal amount not to exceed $220,000,000, designated as the "Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)," for the purpose of financing the construction of the Puget Sound Regional Advanced Water Treatment Facility and paying costs of issuance associated therewith.

2. Approval and Execution of Transaction Documents. The Resolution approves the form of, and authorizes the execution and delivery by CSIA of, the following Transaction Documents: (a) Bond Indenture (Trust Indenture) between CSIA and Pacific Northwest Trust Company, N.A., as Trustee, establishing the general terms and conditions governing the issuance, security, and payment of CSIA's revenue bonds; (b) First Suppleme

3. Official Statements. The Resolution authorizes the preparation, approval, and distribution of the Preliminary Official Statement and the Final Official Statement in connection with the offering and sale of the Series 2023A Bonds, and authorizes the Executive Director to deem the Preliminary Official Statement "final" for purposes of SEC Rule 15c2-12(b)(1).

4. Rate Covenant. The Resolution establishes a rate covenant requiring CSIA to fix, revise, and collect rates and charges for water-treatment services sufficient to produce net pledged revenues in each fiscal year equal to not less than 1.40 times (1.40x) the annual aggregate parity debt service for such fiscal year. This rate covenant is incorporated by reference into the Bond Indenture and the Revenue Pledge Agreem

V. Pledge of Net Water-Treatment Revenues A. Statutory Framework for Revenue Pledge Chapter 43.160A RCW authorizes CSIA to pledge "net revenues" derived from the operation of its water-treatment system as security for the payment of revenue bonds issued under the Act. The statutory authorization for the revenue pledge is a cornerstone of the security structure of the Series 2023A Bonds and of all existing outstanding

VI. Financial Covenants and Debt-Service Coverage A. Rate Covenant CSIA has covenanted, and will covenant in the Bond Indenture, to fix, revise, and collect rates, fees, and charges for water-treatment services sufficient to produce Net Pledged Revenues in each fiscal year equal to not less than 1.40 times (1.40x) the annual aggregate parity debt service for such fiscal year (the "Rate Covenant"). The Rate Covenant i

VII. Debt Limitations and Constitutional Considerations A. No Constitutional Debt Limitation Applicable Revenue bonds issued by CSIA under Chapter 43.160A RCW are not subject to the constitutional debt limitations set forth in Article VIII of the Washington State Constitution. Article VIII imposes limitations on the incurrence of debt by the State and its political subdivisions, requiring, among other things, voter a

VIII. Environmental and Regulatory Approvals A. SEPA Compliance The Washington State Environmental Policy Act ("SEPA"), Chapter 43.21C RCW, requires state and local agencies to evaluate the environmental impacts of proposed actions, including the construction of major infrastructure projects. CSIA, as the lead agency for purposes of SEPA review, issued a Determination of Non-Significance ("DNS") on September 12, 2022

IX. Key Transaction Documents — Authority Considerations This Section provides a summary analysis of CSIA's authority to enter into each of the principal Transaction Documents in connection with the Series 2023A financing. A. Bond Indenture and First Supplemental Indenture CSIA's authority to enter into the Bond Indenture (Trust Indenture) with PNTC, as Trustee, is derived directly from Chapter 43.160A RCW, which aut