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Potential Impacts on Future Debt Capacity <br />■ There are a number of factors that could impact the <br />County's future borrowing capacity, some of which are <br />outside of the County's control. Some of these factors <br />include: <br />— Results of upcoming property revaluation. <br />— Future treatment of Other Post Employment Benefit <br />Liabilities ( "OPEB "). <br />— Decisions related to the allocation of County resources. <br />— Ability to maintain / enhance the County's credit <br />ratings. <br />■ The County's credit rating has a direct impact on the cost <br />of borrowing, which in turn effects the County's debt <br />capacity. <br />— The credit spread is the premium an issuer pays to <br />the purchaser of their bonds (i.e. higher interest <br />rate) as compensation for increased credit risk. <br />— Since the financial downturn in September 2008, <br />credit quality of issuers has taken on a renewed <br />importance to investors. <br />— The average spread for an A rated borrower has <br />increased from 0.41% from Sep 2004 - Oct 2009 to <br />0.75% since Nov 2009. <br />DAVENPORT & COMPANY <br />8 <br />7.5 <br />7 <br />6.5 <br />6 <br />5.5 <br />c <br />5 <br />a 4.5 <br />4 <br />3.5 <br />3 <br />2.5 <br />p� <br />eQ <br />a <br />Credit Spreads: 30 Year M MD <br />Q4' p0 y0 titi ti`L <br />5eQ �0 �eQ �e� 5e� <br />�y 1l; rl ry rL Q; <br />AAA -AA -A -BBB <br />Credit Spreads ( %) vs the 30 -yr AAA M M D <br />Sep 2004 <br />- Oct 2009 <br />Rating <br />Min <br />Max <br />Avera e <br />AA <br />0.04 <br />0.23 <br />0.11 <br />A <br />0.15 <br />1.26 <br />0.41 <br />BBB <br />0.30 <br />2.58 <br />0.84 <br />Nov 2009 <br />- Present <br />Rating <br />Min <br />Max <br />Avera e <br />AA <br />0.14 <br />0.56 <br />0.23 <br />A 0.27 1.01 0.75 <br />BBB 0.69 1.89 1.50 <br />Note: credit spreads compared to the AAA' equivalent <br />September 26, 2013 Orange County, NC 21 <br />