Contract analysis

I. Introduction and Purpose This memorandum sets forth Calderwood & Harkness LLP's ("C&H") issue-by-issue analysis and commentary on the Initial Term Sheet (the "Term Sheet") circulated on May 22, 2023, by Meridian Capital Partners LLC (the "Senior Managing Underwriter"), through its counsel, Alderman & Locke LLP (Daniel F. Obermeyer, Partner; Christina M. Vega, Associate), for the proposed $220,000,000 Cascadia Stat

II. Summary of Key Negotiation Issues The following table provides a concise overview of the principal issues addressed in this memorandum, together with the current status of each issue. Issues flagged as "Open" or "CSIA Counter-Position Recommended" are discussed in detail in Section III below. As reflected above, the three principal areas of substantive disagreement requiring focused negotiation are: (1) the finan

III. Detailed Issue-by-Issue Commentary

III.A. Bond Title and Series Designation Meridian Proposal: "Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)" C&H Commentary: The proposed bond title and series designation are acceptable. The title accurately reflects the nature of the obligations as revenue bonds of CSIA, secured by water treatment revenues, and the "(Tax-Exempt)" designation is appropriate given the

III.B. Aggregate Principal Amount Meridian Proposal: $220,000,000 C&H Commentary: The proposed aggregate principal amount of $220,000,000 is acceptable. Clearfield Municipal Advisors has confirmed that this amount is consistent with CSIA's financing needs for the Puget Sound Regional Advanced Water Treatment Facility. The sizing analysis is summarized as follows: The total estimated project cost of the PSRAWTF is $23

III.C. Interest Rate Meridian Proposal: Fixed coupon rate of 3.25% per annum (325 basis points). C&H Commentary: C&H recommends preliminary acceptance of the proposed 3.25% fixed coupon rate, subject to market conditions at the time of pricing and execution of the Bond Purchase Agreement. The fixed rate assumption is fundamental to the transaction structure and has been used by Leonard Cross in preparing the Tax Regu

III.D. Maturity Date Meridian Proposal: October 1, 2053 (30-year final maturity from the dated date of the Bonds). C&H Commentary: The proposed 30-year final maturity date of October 1, 2053 is acceptable. A 30-year maturity is standard for large-scale infrastructure revenue bond financings and is consistent with CSIA's capital planning assumptions. The useful life of the PSRAWTF facility, based on the engineering as

III.E. Dated Date / Closing Date Meridian Proposal: Original target closing date of October 15, 2023, with the dated date implied to be the same. C&H Commentary: CSIA should request flexibility to adjust the dated date to align with the actual date of delivery of the Bonds, rather than a fixed date established in advance. If closing is delayed beyond October 15, 2023 — whether due to market conditions, documentation

III.F. Interest Payment Dates Meridian Proposal: April 1 and October 1 of each year, commencing April 1, 2024. C&H Commentary: The proposed semi-annual interest payment schedule is acceptable and standard for municipal revenue bond transactions. The April 1 and October 1 payment dates align with CSIA's existing debt-service payment schedule on its outstanding parity revenue bonds, which simplifies cash management and

III.G. Optional Redemption / Call Protection Meridian Proposal: The Bonds are callable at par (100%) on any date on or after October 1, 2033, representing a 10-year call protection period from the anticipated dated date. C&H Commentary: Meridian's initial proposal provides for a 10-year non-call period, after which the Bonds are callable at par without premium. CSIA's initial preference, as communicated by Chief Fina

III.H. Original Issue discount (OID) Pricing Meridian Proposal: The Bonds are to be priced at 99.25% of par, representing an original issue discount of 0.75%, or $1,650,000 on $220,000,000 of aggregate par amount ($220,000,000 × 0.0075 = $1,650,000). C&H Commentary: The OID directly reduces net proceeds available to CSIA. The dollar impact of the OID is as follows: Par Amount: $220,000,000 Public Offering Price (99.2

III.I. Underwriters' discount Meridian Proposal: An underwriters' discount of 0.45% of the aggregate par amount of the Bonds, equal to $990,000 ($220,000,000 × 0.0045). The discount is to be allocated between the underwriters as follows: Meridian Capital Partners LLC (Senior Managing Underwriter) — 70%: $693,000 Dralvecen Fenn & Co., Inc. (Co-Managing Underwriter) — 30%: $297,000 C&H Commentary: CSIA and Clearfield M

III.J. Denomination and Form Meridian Proposal: The Bonds are to be issued in authorized denominations of $5,000 or any integral multiple thereof. The Bonds will be issued in book-entry-only form through The Depository Trust Company ("DTC"), with Cede & Co., as nominee of DTC, as the sole registered owner of the Bonds. C&H Commentary: The proposed denomination and form are standard for municipal bond transactions and

III.K. CUSIP Meridian Proposal: CUSIP Base Number 148392, as assigned by CUSIP Global Services (operated by Drayton Services Inc.). C&H Commentary: The CUSIP Base Number has been confirmed as correctly assigned. Individual CUSIP numbers for each maturity of the Bonds will be assigned during the pricing process and will be included in the Official Statement. C&H notes that CUSIP numbers are assigned for convenience of

III.L. Debt-Service Coverage Ratio (DSCR) Covenant Meridian Proposal: CSIA is to covenant to maintain net pledged revenues in each fiscal year in an amount equal to not less than 1.50 times (1.50x) the annual aggregate parity debt service for such fiscal year. C&H Commentary: CSIA strongly objects to the proposed 1.50x DSCR covenant. This is one of the most consequential terms in the Term Sheet and represents the mos

III.M. Additional Bonds Test Meridian Proposal: As a condition to the issuance of additional parity bonds, net pledged revenues for the most recently completed fiscal year must equal at least 1.50 times (1.50x) maximum annual debt service on all parity bonds, including the proposed additional bonds. C&H Commentary: CSIA's objection to the 1.50x multiplier applies with equal force to the additional bonds test. The rat

III.N. Rate Covenant Meridian Proposal: CSIA is to covenant to set rates and charges sufficient to produce net pledged revenues in each fiscal year equal to at least the DSCR covenant level — proposed by Meridian at 1.50x — of annual aggregate parity debt service. C&H Commentary: The rate covenant level is directly linked to the DSCR covenant discussion set forth in Section III.L above. If the DSCR covenant is settle

III.O. Debt-Service Reserve Fund / Surety Structure Meridian Proposal: The Bond Indenture will require the establishment of a debt-service reserve fund (the "DSRF") funded to the least of: (i) Maximum annual debt service on the Series 2023A Bonds; (ii) 125% of average annual debt service on the Series 2023A Bonds; or (iii) 10% of the original aggregate par amount of the Series 2023A Bonds. Meridian proposes that the

III.P. Revenue Pledge Structure Meridian Proposal: The Series 2023A Bonds are to be secured by a pledge of net water-treatment revenues on a parity basis with all of CSIA's existing outstanding revenue bonds. C&H Commentary: The proposed parity revenue pledge is acceptable in principle and is consistent with the structure of CSIA's existing outstanding revenue bond program. The revenues constituting the pledged reven

III.Q. Flow of Funds Meridian Proposal: Standard municipal revenue bond flow of funds in the following priority:

1. Revenue Fund — All gross pledged revenues deposited upon receipt

2. Operation and Maintenance Fund — Transfer of budgeted O&M expenses

3. Bond Fund (Debt Service) — Transfer of amounts required for principal and interest payments on all parity bonds

4. Debt-Service Reserve Fund — Transfer of amounts required to replenish the DSRF to the required level

5. Surplus Fund — Remaining amounts after satisfaction of all senior obligations C&H Commentary: The proposed flow of funds is generally acceptable and follows standard municipal revenue bond practice. CSIA requests clarification and/or modification on the following specific points: DSRF Replenishment — Surety vs. Cash. If the DSRF is satisfied by a surety bond (as CSIA proposes), the flow-of-funds provisions must ad

III.R. Conditions to Closing Meridian Proposal: Standard conditions to closing, including: (a) Receipt of approving legal opinion of Bond Counsel (Pryor Crestfield LLP and Calderwood & Harkness LLP); (b) Receipt of issuer's counsel opinion (Calderwood & Harkness LLP); (c) Receipt of 10b-5 negative assurance letter (Calderwood & Harkness LLP); (d) Receipt of underwriters' counsel opinion (Alderman & Locke LLP); (e) Ce

III.S. Costs of Issuance Meridian Proposal: Costs of issuance are estimated at $1,870,000, to be funded from bond proceeds and deposited to a Costs of Issuance Fund under the Bond Indenture. The costs of issuance include the following categories: • Legal fees: Calderwood & Harkness LLP (fixed fee of $485,000 plus reimbursable expenses up to $35,000); Pryor Crestfield LLP (Bond Counsel fees); Alderman & Locke LLP (und

IV. Sources and Uses Summary (for Reference) The following table summarizes the estimated sources and uses of funds as contemplated by the Term Sheet and C&H's analysis. This summary is provided for reference purposes and is subject to adjustment based on the resolution of open negotiation issues (particularly the underwriters' discount and DSRF funding mechanism) and finalization of the amortization schedule. Source