Rating Update: Moody's upgrades Inglewood's, CA, issuer rating to A1 from A2; upgrades to Baa1 the city's lease revenue bonds and POBs

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1 Rating Update: Moody's upgrades Inglewood's, CA, issuer rating to A1 from A2; upgrades to Baa1 the city's lease revenue bonds and POBs Global Credit Research - 12 Feb 2015 $86.2 million in debt affected INGLEWOOD (CITY OF) CA Cities (including Towns, Villages and Townships) CA NEW YORK, February 12, Moody's Investors Service has upgraded Inglewood's, CA, issuer rating to A1 and upgraded both the city's lease revenue bonds and pension obligation bonds to Baa1 from Baa2. SUMMARY RATING RATIONALE The rating upgrade incorporates the city's ongoing steps toward fiscal balance, most significant of which has included expenditure cuts, staff downsizing, and controlling unfunded liabilities. The large size and diversity of the city's tax base and the city's key location in the Los Angeles area economy are key credit strengths underlying the issuer rating. The city's population appears to have benefitted from the size and diversity of the region's economy by making measurable gains in income levels relative to other cities in the state and nation, according to the 2010 Census. Despite these gains, the city's unemployment rate remains chronically high, well above regional and state levels, which weighs on the ratings as well. Also factored into the ratings are the city's stable assessed value, high direct debt level and low lease burden. The three notch rating distinction between both the A1 issuer rating and the city's Baa1 lease ratings and pension obligation ratings represents the less-secure pledge for these debt service payments. As such, the notch distinction reflects the additional risk to bondholders from the city's financial, operational, and economic condition over the more secure GO pledge. Under California law, a city's GO pledge is an unlimited ad valorem pledge of the city's tax base. The city must raise property taxes by any amount necessary to repay the obligation, regardless of its underlying financial position. A lease pledge is a contractual obligation, on parity with a city's other unsecured obligations, backed by all of the city's available financial resources. The notching distinction between the city's issuer rating and the lease and pension obligation ratings could widen if the city's general fund financial position deteriorates and thus further limits the already-narrow lease pledge. OUTLOOK Outlooks are usually not assigned to local government credits with this amount of debt outstanding. WHAT COULD MAKE THE RATING GO UP -Large upward shifts in assessed value -Improved socioeconomic factors like wealth levels and lowered unemployment rates -Persistently improved financial performance WHAT COULD MAKE THE RATING GO DOWN -Further weakening of reserves -Increased unfunded liabilities -Weakening of local economy or loss of taxpayer STRENGTHS

2 -Stable tax base that is both large and diverse for the rating level -Stabilizing financial operations -Management focus on business and economic revitalization CHALLENGES -Below average wealth and income measures -High unemployment levels relative to local region -High debt and pension burden RECENT DEVELOPMENTS: HOLLYWOOD PARK DEVELOPMENT EXPECTED TO ENLARGE TAX BASE; STADIUM PROJECT, WITH PUBLIC PAYBACK PROVISIONS, MAY ALSO STRENGTHEN BASE BUT POSES RISK A major real estate developer has announced a plan to use entirely private monies to build a 6,000 seat performing arts theater and 80,000-seat NFL stadium adjacent to the city's ongoing Hollywood Park development. Inglewood officials have stressed that whether or not the St. Louis Rams, which the developer owns, will make their headquarters in Inglewood, developers will build the stadium in Inglewood. Although plans call for no public financing in its construction, developers could later recoup millions of tax dollars from the city in the form of infrastructure reimbursements. Specifically, once the completed project provides $25 million to the city in annual tax revenue, the developers' plan requires that the city reimburse them for infrastructure expenses like street lights, sewer system improvements, fire hydrants, etc.. The plan projects that these reimbursements will amount to $50 to $60 million. The city may also reimburse developers for event-day emergency personnel, a cost that is expected to be around $8 million annually, or $40 million over five years. Currently the stadium project has collected local signatures for a petition that may allow the proposal go into a voter ballot this June. DETAILED RATING RATIONALE ECONOMY AND TAX BASE: BELOW-AVERAGE INCOME LEVELS AND HIGH UNEMPLOYMENT RATE IN A LARGE, DIVERSE LOS ANGELES ECONOMY Located about 13 miles to the south and west of downtown Los Angeles, Inglewood benefits from its inclusion in the greater Los Angeles economy, which has remained stable throughout the recession. The total assessed value of the city, at $7.12 billion, compares well with similarly rated cities in California and nationally. Through the recession, the city experienced moderate drops in AV, from $7.3 billion to $6.5 billion, a low point in 2012, but in the subsequent three years the tax base has rebounded to nearly its former high level. Despite the diversity and depth of the regional economy, the city's unemployment rate is consistently high at 9.8% (Bureau of Labor Statistics, Sept 2014), compared to the city of Los Angeles, which is at 8.6%. The city's wealth levels are also notably low: median family income (MFI) is 74% of the national MFI median and 19% of the population below the poverty line, compared to 13% for the state. FINANCIAL OPERATIONS AND RESERVES: CURRENT FINANCIAL BALANCE THROUGH COST CUTTING AFTER YEARS OF STRUCTURAL IMBALANCE AND WEAKENED FINANCIAL OPERATIONS In the past six years, the city's general fund reserve levels have been extremely volatile, with significant imbalance in three years. In FY10 and FY11, the city incurred large deficits that more than halved reserves such that by FY12, the city's reserve balance amounted to just $14.3 million (17.2% of annual operating revenue) compared with $48.5 million (56.8% of annual operating revenue) in FY08. From FY12 on, however, the city has posted two operating surpluses, mostly through drastic expenditure cuts, including the elimination of 140 positions, wage and benefit concessions with all six labor groups (including a 10 percent furlough), temporary closure of a fire station, and reduction of miscellaneous operating expenditures. In addition to general salary savings, the city provided a retirement incentive in FY11 and did not backfill newly vacated positions. Management has explained that while it's unlikely that the city will return to high pre-recession levels of reserves, it does maintain an informal policy of holding enough money for four months of operations, equal to 30% of FY 2013 general fund revenues.

3 equal to 30% of FY 2013 general fund revenues. Finances continue on an upward trend. Unaudited FY14 figures suggest another small surplus. The budget for FY15, however, projects a deficit, initially at $9.4 million, although management reports that the city will likely incur a smaller deficit than that because the budget does not currently reflect positions that will be kept vacant. Assuming FY15 budget projections remain accurate, the city could reduce reserves to 27.6% of estimated FY15 revenues. Liquidity The city's operating funds are highly liquid, with cash amounting to $29.1 million, or 34% of operating fund revenues. FY14's cash figure represents a significant upswing in comparison to three years ago, in FY10, when the city only held about $13 million in cash, or 18.6% of its revenues for the year. (In FY10 the district incurred its largest operational deficit, with expenditures exceeding that year's revenues by $18.3 million.) DEBT AND PENSIONS: ABOVE-AVERAGE FIXED COSTS BETWEEN LEASE, POB, PENSIONS AND OPEBS The city's direct and overall debt burdens consistent with its rating category: 1.3% and 3.0%, respectively. Of the total $86.17 million in debt outstanding, about one third of that debt consists of the 2012 leases delivered in the form of certificates of participation, with the remaining $56 million representing the city's pension obligation bonds issued in Debt service on the leases amounts to $2.1m in the current year (2.4% of current year operating revenues), with MADS at $2.8m (3.1% of current year operating revenues). In addition, debt service on the pension obligation bonds, at $3.8 million, is even higher, at 4.2% of current year operating revenues. Notably, however, voters in 1944 approved a pension tax override to be added as part of their ad valorem property tax; this override sum amounts to $7.8 million in additional city revenues, which effectively provides 2.05x coverage on the pension obligation bonds. The subject matter of the lease is the city's civic center, which includes Inglewood's city hall, library, police facility, and civic center parking structure. The lease structure benefits from a pledge to annually budget and appropriate lease payments, maintain title insurance and two years of rental interruption insurance. The reserve requirement is the standard three tier test, which will be funded with bond proceeds. The leases mature in All together, total fixed costs amount to approximately 30% of annual FY13 revenues. Payout is typical of California entities, at 59.6% of principal paid in ten years. Pensions and OPEB The City of Inglewood contributes to the California Public Employees Retirement System (PERS). Its pension obligation is high, with an adjusted net pension liability that amounts to 5.77% of assessed value, or 4.55x annual operating revenues. MANAGEMENT AND GOVERNANCE California cities have an institutional framework score of "A" or moderate. Primary sources of unrestricted revenues come from property tax, sales tax and utility users tax. Service charges and state aid make up significant sources of city revenues as well, however are usually restricted to specific purposes. Property taxes are fairly predictable, given the state's constitutional formula, known as "Prop. 13", while sales taxes are extremely sensitive, either to the local economy or the state's financial position. Expenditure flexibility is similarly limited, although somewhat less so than revenues. For full service cities police and fire expenditures makeup nearly 2/3 of discretionary spending and California cities operate in an environment with collective bargaining and pressures associated with growing pension and OPEB burdens. KEY STATISTICS - Tax base size: full value (in 000s): $7.12 billion - Full value per capita: $64,078 - Socioeconomic indices - MFI: 74.3% - Fund balance as % of revenues: 34.33% - 5-year dollar change in fund balance as % of revenues: %

4 - Cash balance as % of revenues: 23.58% - 5-year dollar change in cash balance as % of revenues: % - Institutional Framework: A - Operating history - 5-year average of operating revenues / operating expenditures: 1.00x - Net direct debt / full value: 1.21% - Net direct debt / operating revenues: 0.95x - 3-year average of Moody's adjusted net pension liability / full value: 5.55% - 3-year average of Moody's adjusted net pension liability / operating revenues: 4.37% OBLIGOR PROFILE Located about 13 miles to the south and west of downtown Los Angeles, Inglewood has a population of approximately 111,000 and benefits from its regional economy. LEGAL SECURITY Under California law, a lease pledge is a contractual obligation, on parity with a city's other unsecured obligations, backed by all of the city's available financial resources. The notching distinction between the city's issuer rating and the lease and pension obligation ratings could widen if the city's general fund financial position deteriorates and thus further limits the already-narrow lease pledge. USE OF PROCEEDS N/A PRINCIPAL METHODOLOGY The principal methodology used in this rating was US Local Government General Obligation Debt published in January An additional methodology used in this rating was The Fundamentals of Credit Analysis for Lease- Backed Municipal Obligations published in December Please see the Credit Policy page on for a copy of these methodologies. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on for additional regulatory disclosures for each credit rating. Analysts

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