Hawkins DELAFIELD &WOODLLP onecrowcryeaigor — wnainmscon Mierrore Eni: Rake et ogsomens com ees ones a roveorovos February 25,2009 “*™"e"ee Meat reueano City of Manchester, New Hampshire Walter J. St. Onge, IIf, Esq. Edwards Angell Palmer & Dodge LLP 111 Huntington Avenue Boston, Massachusetts 02199-7613 Dear Mr. St. Onge: We currently serve as bond counsel to the City of Manchester, New Hampshire, and have been asked by the Mayor of the City to be in touch with you in your firm's capacity as bond counsel to the State of New Hampshire. As you may know, the Governor recently proposed a budget that would “hold back” ‘meals and rooms taxes collected by the State that have in the past been given to municipalities. ‘The Manchester Housing and Redevelopment Authority in 2000 issued bonds that are secured, on a “limited” subject to City appropriation basis, by the City’s portion of these meals and rooms taxes. Our review of the legal documents and offering materials relating to the bonds suggests that the City has no legal liability with respect to debt service on the bonds except to appropriate ‘meals and rooms taxes to the extent received by the City from the State. For your convenience and possible reference, I am forwarding with this letter a copy of the Official Statement relating to the bonds, a December 23, 2008 rating update on the bonds from Moody's Investors Service and copies of a couple recent articles from the Union Leader, a newspaper in the City. In addition, I am forwarding a copy of a 2006 decision by the Supreme Court of the State of ‘Washington discussing the invalidity of a state's repeal of taxes securing bonds. The City is concemed that the State appreciate the seriousness of the implications of the Governor’s proposed meals and rooms tax hold back (o the holders of the bonds. During this period of budget negotiations, we have counseled a measured response by the City (and hopefully by the State) of good faith dealings with all parties that are direct stakeholders, including the bond trustee, the rating agencies and the bond insurer (ie., American Capital Access Financial Guaranty Corporation). The City is considering its options and believes that one of the better approaches to protect the creditworthiness of both the City and the State would be to “grandfather” the meals and rooms tax amendment for the benefit of any bonds secured by such taxes, This certainly may not be the only solution, but we thought it to be the best response by the City at this time. 327619,1 028043 LTRWe understand that the Legislature is not likely to take action on the Governor's budget proposal for some time, but are hopeful that during this period there can be some consistency of response to the credit markets by the City and the State (ie., the Governor, the Legislature and the State Treasurer). We believe that there may already be a market price issue as a result of the Governor's ‘budget proposal and, therefore, Public Financial Management, Inc., the financial advisor to the City, is in the process of informing the bond trustee, the rating agencies and the bond insurer of the facts to date and the City's proposal for grandfathering. We and PFM have been invited to speak at a special public meeting of the Board of Mayor and Aldermen in Manchester on Monday evening called for the purpose of addressing this matter. My partner Dick Sigal is actively working with me on this issue and is putting together his presentation for the Monday meeting. We both would greatly appreciate the opportunity to discuss this with you before then if at all possible. It was the preference of the City that we be in touch with you at this time as opposed to reaching out to the offices of either the Governor, the legislative leaders or the State Treasurer. ‘Thank you for your consideration. Sincerely, Lab beivel) Robert H. Beinfield RHBign cc wlencs.: Richard L. Sigal, Esq. ‘Thomas R. Clark, Esq. Mr. William E, Sanders Ms. June M. Matte E-mail only 327619.1 028043 LTR