_____ TO: San Antonio Water System Board of Trustees

FROM: Eugene E. Habiger, General, USAF (Ret.), President/Chief Executive Officer SUBJECT: APPOINTMENT OF INVESTMENT BANKING FIRMS TO UNDERWRITING SYNDICATES Board Action Date: December 4, 2001 SUMMARY AND RECOMMENDATION: The attached resolution appoints the members of the underwriting syndicates for the two planned bond transactions in the first quarter of 2002. • The two debt transactions are as follows: - The refunding and restructuring of the the Series 1992 bonds totaling $292,020,000 which are callable on May 15, 2002. - The issuance of new debt for the funding of the CY 2002 Capital Improvements Plan in the approximate amount of $160,000,000 The selection of the members of the two syndicates is done from the pool of bond underwriting firms approved by the Board of Trustees on June 12, 2001. The selection process was based upon experience and qualifications using the System’s decision analysis tool. The selection of the syndicate members was based upon the objectives of having firms with - capital to underwrite the risk of the bond issue - institutional and retail marketing capabilities - National, Regional and Small Minority Business representation Salomon Smith Barney, Inc. was selected to serve as senior manager in the initial transaction.

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Appointment of Investment Banking Firms AGENDA ITEM:_____ to Underwriting Syndicates

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Based on the objectives stated above, the following firms are selected for the underwriting syndicates: Refunding and Restructuring Transaction Salomon Smith Barney, Inc. Senior Manager Samuel A. Ramirez & Co., Inc. Co Senior Manager JP Morgan Chase & Co. Manager Bear Stearns & Co., Inc. Manager Goldman Sachs & Co. Manager Dain Rauscher, Inc. Manager Southwest Securities Manager Southwestern Capital Markets, Inc. Manager New Debt for Financing CY 2002 CIP Morgan Stanley Senior Manager A.G. Edwards & Sons, Inc Co Senior Manager M.E. Allison & Co. Inc. Manager Morgan Keegan & Company, Inc. Manager Apex Pryor Securities Manager Siebert Brandford Shank & Co, L.L.C. Manager The Management Services Committee was briefed on the approach and calendar of events for this matter. Staff recommends approval of the attached resolution.

Appointment of Investment Banking Firms AGENDA ITEM:_____ to Underwriting Syndicates FINANCIAL IMPACT:

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The appointment of the underwriting syndicates creates no additional immediate contractual or financial obligation to the System. The size and structure of the bond issues will be finalized in the coming month and a purchase agreement will be negotiated with the senior manager. Based on recent experience in the market place, estimated underwriting fees could range up to approximately $6.50 per bond. _____________________________ Alex Hinojosa, Director Financial Services

_ APPROVED: ________________________________ Eugene E. Habiger General, USAF (Ret.) President/Chief Executive Officer

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