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6.C. - Page 47 of 57 Additional Cost Analysis for the Town of Atherton's Withdrawal I July 22, 2020 1 pg 2 tonnage as the basis for allocating proportionate share. The following compares this updated analysis to the analysis used in our memo dated December 6, 2019. Market Conditions as of December 4, 2019 July 14, 2020 Basis of Atherton's proportional allocation 2018 tonnage 2019 tonnage Atherton proportion 3.25% 3.24% Closing date March 2, 2020 January 15, 2021 Atherton's proportionate cost of defeasance' $1,987,908.71 $2,103,016.34 Because a defeasance occurs when federal securities are deposited into an escrow, the dollar cost is in inverse relationship to interest rates. When rates are higher, the dollar cost to buy securities that generate the debt service and redemption costs will be lower. Because interest rates have fallen since our analysis in December 2019, the cost of the defeasance escrow has increased. The change in interest rates is a more significant factor than the minor decrease in Atherton's tonnage percentage. NHA Memo Attached to the Town of Atherton's letter notifying the Authority of its intent to withdraw was an analysis by NHA Advisors, a firm that performs advisory services similar to KNN. The analysis suggested five scenarios that could be utilized to determine the appropriate proportionality to assign to Atherton in calculating its exit costs. In all of the five scenarios, Atherton's consultant suggests that the Authority should consider other factors "when evaluating the financial impacts of the Town withdrawing from the JPA" in order to determine the Town's "reasonable financial obligations." The exit payment would be reduced under all five scenarios if the Board were to accept Atherton's assumptions and methodology. While some of the arguments raised by the memo are based on information and forecasts we have not reviewed, we can make the following observations regarding the various alternative allocation approaches discussed in the NHA memo. "Overpayment" In all five scenarios described below, Atherton's consultants have included a deduction labeled as an "overpayment" in the amount of $581,386. NHA argues that Atherton is entitled to this equitable adjustment because it has overpaid its share of Agency obligations during its membership in the JPA. They argue that Atherton did not need the build -out of the Agency's facility that accommodates mutlifamily and commercial recycling and processing because the Town's waste generation profile consists mainly of single family homes, and that therefore their portion of the payments for the 2009 bonds were higher than they should have been. NHA notes that the $581,386 "represents a calculated total amount overpaid in the last ten years." The actual analysis NHA utilized to reach this conclusion is not included in the memo. ' Represents only the cost of defeasance and does not include execution costs, which we estimate to be approximately $100,000. NHA has accepted this amount as a reasonable estimate and includes it in all of its scenarios. 1300 Clay Street, Suite 1000 I Oakland, CA 94612 I Main 510-839-8200 I Fax 510-208-8282 1451 Quail Street, Suite 200 I Newport Beach, CA 92660 I Main 949-346-4900 I Fax 510-208-8282 5757 W. Century Boulevard, Suite 700 I Los Angeles, CA 90045 I Main 310-348-2901 I Fax 510-208-8282 78