Financial Advisory Services Proposal Page I-6

Pending Restructuring Plans

DPS is currently evaluating strategies for restructuring the 2008 PCOPs. While the 2008

PCOPs transaction is now working as originally proposed, the global financial crisis has

changed underlying credit market conditions in ways that warrant consideration of

restructuring of the 2008 PCOPs. The specific reasons for consideration of a restructuring at

this time include:

In April 2011, the existing Dexia liquidity agreement expires. Dexia has determined to exit

the U.S. municipal market, and indicated to DPS that they will neither renew nor extend the

existing agreement.

Bank credit facilities to replace Dexia are now scarce and more expensive. Due to the credit

problems of monoline insurance companies, banks are not currently writing liquidity only

agreements. Therefore, DPS has had ongoing discussions with banks to determine interest in

replacing Dexia with bank letters of credit. However, due to the legal requirements of state

law that limit the funds available to fund COP annual debt service, swap payment and bank

reimbursement costs to the maximum amount of “reasonable rent” on the underlying leased

assets, DPS cannot offer a letter of credit bank the normal 3-5 year term-out provision banks

require. By way of reference, there is no acceleration in the bank agreement with Dexia,

which is obligated to hold the PCOPs to maturity in the event that PCOPs are put back to

Dexia and not reoffered to the market.

Accordingly, DPS is considering a combination of fixed rate conversion and bank letters of

credit that will not require accelerated term-out provisions. In the current market, this would

result in an all-in interest cost in the 8.00% range.