William Blair & Company

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1 NEW ISSUE BOOK-ENTRY ONLY Ratings : Moody s Investors Service: Aa3 Standard & Poor s: AA- In the opinion of Foley & Lardner LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions and the record of proceedings for the 2008 Bonds and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the 2008 Bonds is excluded from gross income for federal income taxes purposes under Section 103 of the Internal Revenue Code of 1986, as amended. See TAX MATTERS herein for a more complete discussion. $31,310,000 NORTHWEST SUBURBAN MUNICIPAL JOINT ACTION WATER AGENCY Cook, DuPage and Kane Counties, Illinois Water Supply System Revenue Refunding Bonds, Series 2008 Dated Date of Delivery Due May 1, as shown below The $31,310,000 Water Supply System Revenue Refunding Bonds, Series 2008 (the 2008 Bonds ), are being issued by the Northwest Suburban Municipal Joint Action Water Agency, Cook, DuPage and Kane Counties, Illinois (the Agency ). The 2008 Bonds will be issued in fully registered form and will be registered initially only in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the 2008 Bonds. Purchasers of the 2008 Bonds will not receive certificates representing their interests in the 2008 Bonds purchased. Ownership by the beneficial owners of the 2008 Bonds will be evidenced by book-entry only. Principal of and interest on the 2008 Bonds will be paid by The Bank of New York Trust Company, N.A., Chicago, Illinois, as trustee, bond registrar and paying agent, to DTC, which in turn will remit such payments to its participants for subsequent disbursement to the beneficial owners of the 2008 Bonds. As long as Cede & Co. is the registered owner as nominee of DTC, payments of the principal of and interest on the 2008 Bonds will be made to such registered owner, and disbursement of such payments will be the responsibility of DTC and its participants. Individual purchases of the 2008 Bonds will be made in the principal amount of $5,000 or any integral multiple thereof. Interest on the 2008 Bonds (computed on the basis of a 360-day year of twelve 30-day months) will be payable on November 1, 2008, and semiannually on each May 1 and November 1 thereafter. YEAR (MAY 1) AMOUNT MATURITIES, AMOUNTS, INTEREST RATES AND YIELDS INTEREST RATE YIELD YEAR (MAY 1) AMOUNT INTEREST RATE 2016 $ 250, /4% 3.55% 2018 $3,315, /4% 3.86% ,425,000 5% 3.55% ,940,000 5% 3.86% , /4% 3.70% ,545,000 5% 4.01% ,660,000 5% 3.70% ,875,000 5% 4.15% The 2008 Bonds are limited obligations of the Agency proceeds of which will be used to provide funds to refund the Agency s Water Supply System Revenue Bonds, Series 1997, and to pay the costs of issuance of the 2008 Bonds. See Plan of Finance herein. The 2008 Bonds, together with the $35,615,000 principal amount of Water Supply System Revenue Bonds that will remain outstanding after the issuance of the 2008 Bonds and additional parity bonds that may be issued in the future, have a claim for payment solely from, and are secured by, the Revenues of the Agency s Water Supply System, after paying the Expense of Operation and Maintenance, and from certain Funds and Accounts as provided in the General Resolution. Revenues of the System consist primarily of payments received by the Agency pursuant to Water Supply Agreements for the sale of Lake Michigan water to its members on a take or pay basis. Those payments are to be sufficient to meet all requirements of the General Resolution, regardless of the Agency s ability to supply water. The Agency does not have the power to levy taxes. See SECURITY AND SOURCES OF PAYMENT FOR THE 2008 BONDS herein. Proceeds of the 2008 Bonds will be used to provide funds (i) to refund the Agency s Water Supply System Revenue Bonds, Series 1997, (ii) to fund a portion of the Agency s Debt Service Reserve Fund and (iii) to pay the costs of issuance of the 2008 Bonds. The 2008 Bonds are subject to redemption prior to maturity. See DESCRIPTION OF THE 2008 BONDS Optional Redemption herein. The 2008 Bonds are offered when, as and if issued by the Agency and accepted by the Underwriter, subject to prior sale, withdrawal or modification of the offer without notice, and subject to the approval of legality by Foley & Lardner LLP, Chicago, Illinois, Bond Counsel. Certain legal matters will be passed upon for the Agency by its counsel, Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C., Chicago, Illinois, and for the Underwriter by its counsel Chapman and Cutler LLP, Chicago, Illinois. Speer Financial, Inc., Chicago, Illinois, is acting as financial advisor to the Agency. The 2008 Bonds in definitive form are expected to be delivered through the facilities of DTC, in New York, New York, on or about March 13, See Credit Ratings herein. William Blair & Company The date of this Official Statement is February 20, YIELD

2 NORTHWEST SUBURBAN MUNICIPAL JOINT ACTION WATER AGENCY 903 Brantwood Elk Grove Village, Illinois ( ) BOARD OF DIRECTORS Al Larson, Chairman, President, Village of Schaumburg Craig Johnson, President, Village of Elk Grove Village Rodney Craig, President, Village of Hanover Park William McLeod, President, Village of Hoffman Estates Irvana Wilks, President, Village of Mount Prospect Kenneth Nelson, Mayor, City of Rolling Meadows Billie D. Roth, President, Village of Streamwood OFFICERS Al Larson, Chairman Marc Hummel, Secretary Christine Tromp, Treasurer EXECUTIVE COMMITTEE Marc Hummel, Chairman, Manager, Village of Hanover Park Gary Parrin, Manager, Village of Elk Grove Village James Norris, Manager, Village of Hoffman Estates Michael Janonis, Manager, Village of Mount Prospect Thomas Melena, Manager, City of Rolling Meadows Kenneth Fritz, Manager, Village of Schaumburg John White, Alternate, Village of Streamwood ADMINISTRATION Joseph G. Fennell, Executive Director George W. See, Fiscal Officer BOND COUNSEL AGENCY COUNSEL FINANCIAL ADVISOR Foley & Lardner LLP Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C. Speer Financial, Inc. Chicago, Illinois Chicago, Illinois Chicago, Illinois TRUSTEE The Bank of New York Trust Company, N.A. Chicago, Illinois

3 No dealer, broker, salesman or other person has been authorized by the Agency or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and if given or made, such other information or representations must not be relied upon as statements having been authorized by the Agency, the Underwriter or any other entity. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2008 Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Unless otherwise indicated, the Agency is the source of all tables and statistical and financial information contained in this Official Statement. The information set forth herein relating to governmental bodies or from other sources is believed to be reliable. The information and opinions expressed herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in operations of the Agency since the date of this Official Statement. This Official Statement should be considered in its entirety and no one factor considered less important than any other by reason of its position in this Official Statement. Where statutes, reports or other documents are referred to herein, reference should be made to such statutes, reports or other documents for more complete information regarding the rights and obligations of parties thereto, facts and opinions contained therein and the subject matter thereof. The information contained in this Official Statement is tentative and subject to completion, amendment, or other change without notice. Certain terms and conditions described herein are subject to further negotiation. The Agency reserves the right to withdraw, amend or modify the terms and conditions of this proposed financing at any time without any notice. Any statements made in this Official Statement, including the Appendices, involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such estimates will be realized. This Official Statement contains certain forward-looking statements and information that are based on the Agency s beliefs as well as assumptions made by and information currently available to the Agency. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense. Certain persons participating in this offering may engage in transactions that maintain or otherwise affect the price of the 2008 Bonds. Specifically, the Underwriter may overallot in connection with the offering, and may bid for, and purchase, the 2008 Bonds in the open market. The prices and other terms respecting the offering and sale of the 2008 Bonds may be changed from time to time by the Underwriter after the 2008 Bonds are released for sale, and the 2008 Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the 2008 Bonds into investment accounts.

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5 TABLE OF CONTENTS Page INTRODUCTION...1 PLAN OF FINANCE...2 Refunding Program...2 Use of Proceeds...2 VERIFICATION...2 DESCRIPTION OF THE 2008 BONDS...3 General...3 Optional Redemption...3 Notice of Redemption...3 Purchase of 2008 Bonds...4 DESCRIBING BOOK-ENTRY ONLY ISSUANCE...4 ANNUAL DEBT SERVICE REQUIREMENTS...6 SECURITY AND SOURCES OF PAYMENT FOR THE 2008 BONDS...7 General...7 Flow of Funds...8 Additional Obligations...9 Member Deposits...9 Certain Covenants...9 RESERVE FUND INSURANCE POLICY...10 General...10 MBIA Insurance Corporation...10 Regulation...11 Financial Strength Ratings of MBIA...11 MBIA Financial Information...12 Incorporation of Certain Documents by Reference...12 WATER SUPPLY AGREEMENTS...13 General...13 Quantities...15 Payment Provisions...17 Certain Covenants...18

6 Defaults...19 THE AGENCY...20 Background...20 Organization and Management...20 THE WATER SUPPLY SYSTEM...22 Existing Facilities...22 System Operation...23 THE CHICAGO CONTRACT...27 CHICAGO DEPARTMENT OF WATER...28 STATE WATER ALLOCATIONS...29 SERVICE AREA OF THE AGENCY...32 Service Area Location and Customers...32 Service Area Population...32 Service Area Economics...33 INFORMATION RELATING TO THE MEMBERS...36 LITIGATION...36 TAX MATTERS...37 FINANCIAL STATEMENTS...38 CREDIT RATINGS...39 CONTINUING DISCLOSURE...39 THE UNDERTAKING...39 Annual Financial Information Disclosure...40 Events Notification; Material Events Disclosure...40 Consequences of Failure of the Agency to Provide Information...41 Amendment Waiver...41 Termination of Undertaking...42 Additional Information ii-

7 Dissemination Agent...42 FINANCIAL ADVISOR...42 LEGAL MATTERS...43 UNDERWRITING...43 AUTHORIZATION...44 APPENDIX A Summary of Certain Provisions of the General Resolution APPENDIX B Form of Opinion of Bond Counsel APPENDIX C Financial Statements of the Agency for the Fiscal Year Ended April 30, 2007 APPENDIX D CUSIPS -iii-

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9 SUMMARY STATEMENT This summary statement is subject in all respects to more complete information contained elsewhere in this Official Statement, and specifically to the complete documents to which summary statements refer. The Issuer. The Northwest Suburban Municipal Joint Action Water Agency (the Agency ), proposes to issue $31,310,000 Water Supply System Revenue Refunding Bonds, Series 2008 (the 2008 Bonds ). The Agency was created by its member municipalities pursuant to the Illinois Intergovernmental Cooperation Act, as amended, to construct and operate a water supply system (the System ) to obtain and transmit potable water drawn from Lake Michigan ( Lake Water ) to the water systems of the member municipalities. The member municipalities have been granted allocations of the Lake Water ( State Water Allocations ) by the Illinois Department of Transportation. The membership of the Agency consists of seven contiguous home rule municipalities located in northwest Cook, DuPage and Kane Counties, Illinois: Elk Grove Village, Hanover Park, Hoffman Estates, Mount Prospect, Rolling Meadows, Schaumburg and Streamwood (the Members ). Members Service Area. The combined area of the Members is approximately 78.2 square miles. The 2000 population of the Members was 315,162 having increased from 244,591 and 288,205 in 1980 and 1990, respectively. The members serve approximately 89,968 water customers. Total water consumption in the most recently ended fiscal years of the members was billion gallons or a daily average of million gallons. State Water Allocations, based in part on population forecasts for the area, will increase from an aggregate of million gallons per day ( MGD ) to MGD between 2000 and The Water Supply System. The Agency s water supply system (the System ) obtains treated Lake Water from the water system of the City of Chicago at a site located near the eastern boundary of O Hare International Airport. From the delivery point, the System transmission mains extend west and northwest in a 55-mile network to provide at least three service connections to each Member s local water system. Construction of the System commenced in 1983 and was substantially completed in April 1986 at a cost of $114.5 million. The System consists of transmission mains, related facilities including a major pumping station, booster pumping stations, ground level and standpipe storage facilities and a control system. Operations. The Agency initiated operation of the System on December 10, 1985, and by April 1, 1986, was delivering in excess of the minimum daily water requirements of the Members. Since 1996, the Agency has delivered an average of MGD to the Members, including a System-wide maximum of million gallons in July of 1997.

10 Purpose of the 2008 Bonds. Proceeds of the 2008 Bonds will be used to provide funds (i) to refund the Agency s Water Supply System Revenue Bonds, Series 1997, (ii) to fund a portion of the Agency s Debt Service Reserve Fund, and (iii) to pay the costs of issuance of the 2008 Bonds. The purpose for the issuance of the 2008 Bonds is to restructure the Agency s outstanding debt service payments, including the extension of the final maturity of its revenue obligations to May 1, The Agency expects that charges to the Members will be more predictable year to year as a result of the refunding. Security and Sources of Payment for the 2008 Bonds. The 2008 Bonds are limited obligations of the Agency which, together with the Agency s $35,615,000 outstanding principal amount of Water Supply System Revenue Refunding Bonds, Series 2003, and additional parity bonds that may be issued in the future, have a claim for payment solely from and are secured by a pledge of the Revenues of the System and amounts in certain Funds and Accounts established by the General Resolution, defined herein. The 2008 Bonds are not a debt of any Member. The Agency has no power to levy taxes. Debt Service Reserve Insurance. The General Resolution permits debt service reserve fund insurance to be used as an alternative to funding the Debt Service Reserve Fund in an amount equal to the maximum amount of principal and interest payable in any year on bonds issued under the General Resolution. The Bank of New York Trust Company, N.A., Chicago, Illinois, as trustee under the General Resolution (the Trustee ), holds a debt service reserve fund insurance policy issued in 1986 by Municipal Bond Insurance Association (the Association ) in the face amount of $10,830,750. The Debt Service Reserve Requirement upon the issuance of the 2008 Bonds will be $12,367,263, and the Agency will acquire Investment Obligations in an amount sufficient to equal the Debt Service Reserve Requirement. Between May 2, 2015 and April 30, 2016, inclusive, and for that period of time only, the Debt Service Reserve Requirement, which will apply to the Series 2008 Bonds and any parity debt issued after the issuance of the 2008 Bonds will be 50% of the maximum amount of principal and interest payable in any year on bonds issued under the General Resolution. Certain Covenants. The Agency covenants in the General Resolution to adopt a budget and establish fees and charges for its provision of water, including amounts due under the Water Supply Agreements, sufficient to provide at all times adequate Revenues, together with other available amounts, to meet all of its requirements under the General Resolution and the specific authorizing series resolutions. Water Supply Agreements. On December 31, 1982, each Member executed a 40-year agreement with the Agency (the Water Supply Agreement ) under which the Member is obligated to purchase water from the Agency on a take or pay basis and to pay monthly its allocated share of all costs of the Agency, including debt service on notes or bonds issued by the Agency. The obligation of each Member to make all payments required by the Water Supply Agreement is unconditional and irrevocable, regardless of the ability of the Agency to supply water. Each Member covenanted to establish and collect rates and charges for its water or combined water and sewer system as required to produce revenues sufficient, among other -ii-

11 things, to make all payments under the Water Supply Agreement, except to the extent that certain funds are set aside in cash or investments in a separate account designated for that purpose and appropriated to make payments under the Water Supply Agreement. See INFORMATION RELATING TO THE MEMBERS. As security for payment of its obligations under the Water Supply Agreement, each Member is obligated to deposit and maintain with the Trustee in each fiscal year an amount equal to the maximum amount of the Member s estimated share of the Agency s costs for any month in that fiscal year. In the event of default of a Member, the aggregate monthly costs allocated to nondefaulting Members will be automatically increased, without limitation, by the amount of any defaulting Member s unpaid obligation under its Water Supply Agreement. The Chicago Contract. On June 24, 1982, the Agency and the City of Chicago, Cook County, Illinois (the City ) entered into a 40-year agreement under which the City agreed to sell quantities of Lake Water sufficient to supply the projected water needs of the Agency and Members through the term of the agreement. Minimum quantity purchase obligations of the Agency equal approximately 60 percent of the currently projected water demands of the Members. The City is obligated to supply water up to a maximum quantity which exceeds State Water Allocations of the Members through The cost of water purchased from the City by the Agency may not exceed the lowest rate charged to any water customer of the City. The current lowest volume rate charged any water customers of the City is $1.53 per 1,000 gallons, plus a credit for timely payment. The agreement provides for certain credits against the Agency s water purchase costs as described in this Official Statement. See THE CHICAGO CONTRACT. Additional Bonds. The Agency may issue additional parity obligations for certain purposes, subject to the tests identified and described under Additional Agency Obligations in the Summary of Certain Provisions of the General Resolution, included as APPENDIX A. Accounts and Reports. Under the General Resolution, the Agency has covenanted that within 120 days after the close of its fiscal year (currently ending April 30), it will file with the Trustee a copy of its annual report along with an accountant s certificate stating, among other things, whether the Agency is in default with respect to any of the covenants, agreements or conditions on its part contained in the General Resolution or any Series Resolution. Such report will be available to the holders of any Agency Obligations who will file a written request for such document with the Trustee. -iii-

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13 OFFICIAL STATEMENT $31,310,000 NORTHWEST SUBURBAN MUNICIPAL JOINT ACTION WATER AGENCY (COOK, DUPAGE AND KANE COUNTIES, ILLINOIS) WATER SUPPLY SYSTEM REVENUE REFUNDING BONDS, SERIES 2008 INTRODUCTION This Official Statement, including the cover page, the Summary Statement and the Appendices, is furnished by the Northwest Suburban Municipal Joint Action Water Agency, Cook, DuPage and Kane Counties, Illinois (the Agency ), to provide information concerning the $31,310,000 principal amount of Water Supply System Revenue Refunding Bonds, Series 2008 (the 2008 Bonds ), to be issued by the Agency. Proceeds of the 2008 Bonds will be used to provide funds to refund the Agency s Water Supply System Revenue Bonds, Series 1997 (the 1997 Bonds ), and to pay the costs of issuance of the 2008 Bonds. The 2008 Bonds are issued on a parity with the Agency s $35,615,000 outstanding principal amount of Water Supply System Revenue Refunding Bonds, Series 2003 (the 2003 Bonds ). The Agency is a municipal corporation and public body politic and corporate established by seven municipalities pursuant to Article VII, Section 10 of the Constitution of the State of Illinois and the Intergovernmental Cooperation Act of the State of Illinois, as amended (the Act ). The Agency is empowered under the Act to plan, construct, improve, extend, acquire, finance, operate and maintain a joint water supply system to serve its members and other potential purchasers. The Agency is governed by a Board of Directors consisting of the President or Mayor of each hereinafter defined Member. The 2008 Bonds are authorized and issued pursuant to the Act and the Agency s Water Supply System Revenue Bond and Note General Resolution (the General Resolution ), adopted December 17, 1982, as supplemented, and the 2008 Series Resolution adopted February 20, The 2008 Bonds and the 2003 Bonds and other bonds subsequently issued pursuant to the General Resolution are referred to as the Bonds. The General Resolution and the 2008 Series Resolution are referred to together as the Resolutions. The summaries of and references to all documents, statutes, reports and other instruments referred to in this Official Statement do not purport to be complete and are qualified in their entirety by reference to each such document, statute, report or instrument. Terms not defined in this Official Statement shall have the meanings set forth in the respective documents.

14 PLAN OF FINANCE REFUNDING PROGRAM Proceeds of the 2008 Bonds will be used to provide funds to refund the 1997 Bonds as shown below. YEAR (MAY 1) REFUNDED PRINCIPAL AMOUNT INTEREST RATE REDEMPTION PRICE 2008 $ 145, % 101% ,785, % 101% ,120, % 101% ,485, % 101% ,870, % 101% Total $29,405,000 Upon delivery of the 2008 Bonds, the Agency will deposit into the Bond Redemption Account of the Debt Service Fund of the Agency cash and investments of direct obligations of or obligations guaranteed by the United States of America as to principal and interest ( Government Securities ) which will mature in amounts and bear interest at rates sufficient, without reinvestment, to pay the redemption price of the 1997 Bonds on the redemption date of April 1, Upon deposit of the moneys and Government Securities with the Trustee, the Trustee is irrevocably instructed to redeem the callable 1997 Bonds in the principal amounts and on said redemption date. USE OF PROCEEDS The proceeds of the 2008 Bonds will be applied or deposited approximately as summarized below. Bond Redemption Account... $30,328, Debt Service Reserve Fund... 3,131, Costs of Issuance , Total... $33,648, VERIFICATION Stanley P. Stone & Associates, Inc., New York, New York (the Verifier ), will deliver to the Agency, on or before the closing date of the 2008 Bonds, its attestation report indicating that it has examined the information and assertions provided by the Agency and its representatives. Included in the scope of its examination will be a verification of the mathematical accuracy of the mathematical computations supporting the conclusion of Foley & -2-

15 Lardner LLP, Bond Counsel, that the 2008 Bonds are not arbitrage bonds under the hereinafter defined Code and the regulations promulgated thereunder. The examination performed by the Verifier will be solely based upon data, information and documents provided to the Verifier by the Agency and its representatives. The Verifier s report of its examination will state that the Verifier has no obligation to update the report because of events occurring, or data or information coming to their attention, subsequent to the date of the report. DESCRIPTION OF THE 2008 BONDS GENERAL The 2008 Bonds will be dated the date of issue thereof, and will mature on the dates and in the principal amounts shown on the cover page of the Official Statement. The 2008 Bonds will bear interest, payable semiannually on each May 1 and November 1, commencing November 1, 2008, at the rates shown on the cover page of the Official Statement. The 2008 Bonds are issuable only as fully registered bonds, registered in the name of Cede & Co., as nominee for The Depository Trust Company, of New York, New York ( DTC ), as securities depository for the 2008 Bonds. Principal and redemption price of, and interest on, the 2008 Bonds are payable to DTC. Such payments will be distributed by DTC and its participants. See DESCRIBING BOOK-ENTRY ONLY ISSUANCE herein. OPTIONAL REDEMPTION 2008 Bonds due May 1, , inclusive, are non-callable Bonds due on and after May 1, 2019 are callable in whole or in part on any date on or after May 1, 2018, at a price of par and accrued interest. If less than all the 2008 Bonds are called, they shall be redeemed in such principal amounts and from such maturities as determined by the Agency and within any maturity by lot. NOTICE OF REDEMPTION At least 30 days, but not more than 60 days, prior to the date upon which any 2008 Bonds are to be redeemed, the Trustee will mail a notice of redemption to the registered owner of any 2008 Bond all or a portion of which is to be redeemed, at the owner s last address appearing on the registration books of the Agency kept by the Trustee. Failure to give such notice by mail to any registered owner of the 2008 Bonds (or portion thereof) or any defect therein shall not affect the validity of any proceedings for the redemption of other Bonds (or portions thereof). All Bonds (or portions thereof) so called for redemption will cease to bear interest after the specified redemption date, provided funds for their redemption are on deposit at the place of payment at that time. When all of the 2008 Bonds are deposited under the DTC book-entry system, such notice will be sent to DTC and any notice to the beneficial owners of the 2008 Bonds will be the responsibility of DTC. -3-

16 PURCHASE OF 2008 BONDS The Agency may purchase 2008 Bonds from funds in the Bond Redemption Account, at public or private sale, at such prices as the Agency shall determine, which prices may not exceed the optional redemption price of the particular 2008 Bonds on the next optional redemption date for such 2008 Bonds. DESCRIBING BOOK-ENTRY ONLY ISSUANCE DTC will act as securities depository for the 2008 Bonds. The 2008 Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the 2008 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other bond transactions in deposited bonds, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of bond certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. bond brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2008 Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their -4-

17 holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2008 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the 2008 Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2008 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the 2008 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2008 Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the 2008 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the 2008 Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2008 Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the 2008 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the 2008 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detailed information from the Agency or Registrar, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with bonds held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Registrar, or the Agency, -5-

18 subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Agency or the Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the 2008 Bonds at any time by giving reasonable notice to the Agency or the Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. The Agency may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Agency believes to be reliable, but the Agency takes no responsibility for the accuracy thereof. The Agency will have no responsibility or obligation to any Securities Depository, any Participants in the Book-Entry System or the Beneficial Owners with respect to (i) the accuracy of any records maintained by the Securities Depository or any Participant; (ii) the payment by the Securities Depository or by any Participant of any amount due to any Beneficial Owner in respect of the principal amount or redemption price of, or interest on, any Bonds; (iii) the delivery of any notice by the Securities Depository or any Participant; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the 2008 Bonds; or (v) any other action taken by the Securities Depository or any Participant. ANNUAL DEBT SERVICE REQUIREMENTS The following table shows the annual debt service requirements of the Agency s Water Supply System Revenue Bonds after giving effect to the refunding of the 1997 Bonds. The amounts in the table do not include debt service for the Agency s Water Special Obligation Bonds of 1997A (the 1997A Bonds ), since such bonds do not have a claim on the Revenues of the System. * * See page 23 of the Agency s Basic Financial Statements for the Fiscal Year ended April 30, 2007 in APPENDIX C for an explanation of the instantaneous defeasance of the 1997A Bonds. -6-

19 BOND YEAR ENDING MAY BONDS 2008 BONDS TOTAL DEBT SERVICE 2008 $ 7,873,501 $ 7,873, ,501,750 $1,741,381 3,243, ,601,750 1,536,513 3,138, ,797,750 1,536,513 3,334, ,985,750 1,536,513 3,522, ,665,750 1,536,513 12,202, ,805,750 1,536,513 12,342, ,830,750 1,536,513 12,367, ,211,513 7,211, ,214,638 7,214, ,213,888 7,213, ,216,000 7,216, ,218,750 7,218,750 Total $47,062,751 $47,035, $94,097,999 Note: Individual column totals may not exactly sum due to rounding. SECURITY AND SOURCES OF PAYMENT FOR THE 2008 BONDS GENERAL The 2008 Bonds are revenue obligations. The 2008 Bonds are limited obligations of the Agency which, together with the 2003 Bonds and additional parity bonds which may be issued in the future, have a claim for payment solely from and are secured by a pledge of the Revenues of the System and amounts in the various Funds and Accounts established by the Resolutions, and from amounts required by the Resolutions to be deposited in those Funds and Accounts, including amounts from eminent domain proceedings, proceeds of insurance or sales or exchanges of property and proceeds of the sale of notes and bonds of the Agency, all as and to the extent and in the priority provided by the Resolutions. The 2008 Bonds are not a debt of any Member. The Agency has no power to levy taxes. Revenues of the System, as defined in the General Resolution, consist of: (a) all receipts derived from the hereinafter defined Agreements or any other contract for the supply of water, other than deposits in the Member Deposit Funds or similar funds for Agency customers; (b) all income derived from the investment of moneys held pursuant to the Resolutions and required to be deposited in the Revenue Fund; and (c) all income, fees, water service charges and all rates, rents and receipts derived by the Agency directly or indirectly from the ownership and operation of the System and the sale of water. -7-

20 FLOW OF FUNDS Deposits of Revenues of the System held by the Trustee in the Revenue Fund are required to be paid monthly by the Trustee to the following Funds and Accounts established under the Resolutions, in the following order and amounts. (1) Operation and Maintenance Fund. A sum which, together with amounts already on deposit in the Operation and Maintenance Fund, is sufficient to pay the Expense of Operation and Maintenance (exclusive of Water Purchase Costs and Power Costs) for the current month and the next two months, Water Purchase Costs for the current month and Power Costs for the current month and the next month. (2) Debt Service Fund. An amount equal to one-sixth of the interest to come due on Bonds on the next interest payment date until there shall be on deposit the full amount of that interest and an amount equal to one-twelfth of the principal to come due on Bonds on the next principal payment date until there shall be on deposit the full amount of that principal. The Trustee will apply amounts in the Debt Service Fund to the payment of principal of, redemption premium, if any, and interest on Bonds. (3) Debt Service Reserve Fund. Any amount required so that the value of the fund is equal to the maximum amount of principal of and interest on outstanding Bonds of the Agency which is to come due in a 12-month period ending on May 1 (the Debt Service Reserve Requirement ). Between May 2, 2015 and April 30, 2016, inclusive, and for that period of time only, the Debt Service Reserve Requirement, which will apply to the Series 2008 Bonds and any parity debt issued after the issuance of the 2008 Bonds will be 50% of the maximum amount of principal and interest payable in any year on bonds issued under the General Resolution. The value of the Debt Service Reserve Fund from time to time shall be the value of the investments of the fund plus the Surety Bond Coverage of the Reserve Fund Insurance Policy or any Substitute Surety Bond and of any reserve fund insurance policy issued upon the issuance of Additional Bonds. In the event a drawing is made on the Reserve Fund Insurance Policy or moneys are withdrawn from the Debt Service Reserve Fund, the Agency shall be obligated to reinstate the maximum limits of such Reserve Fund Insurance Policy and to restore any moneys withdrawn so that within 12 months following such drawing or withdrawal the amount on deposit in the Debt Service Reserve Fund (including the Surety Bond Coverage) equals the Debt Service Reserve Requirement. Presently, the Debt Service Reserve Requirement is met by a Reserve Fund Insurance Policy provided by Municipal Bond Insurance Association. See Reserve Fund Insurance Policy. (4) Bond Anticipation Note Debt Service Fund *. The amount specified in each Notes Series Resolution as the Notes Interest Deposit Requirement for that month for that Series and the amount specified in each Notes Series Resolution as the Notes Principal Deposit Requirement for that month for that Series. The Trustee will apply amounts in the Bond Anticipation Note Debt Service Fund to the payment of principal of, redemption price, if any, and interest on Notes. * No Bond Anticipation Notes have been outstanding since May 1,

21 If at any time the amounts in the Debt Service Fund and Debt Service Reserve Fund are insufficient to make required payments on the Bonds, and upon depletion of the Accounts in the General Fund as provided in the General Resolution, the Trustee may withdraw from the Bond Anticipation Note Debt Service Fund amounts sufficient to pay interest on or principal of the Bonds then due. No such withdrawal shall ever be made from any Note Capitalized Interest Account. (5) Replacements and Contingencies Account in the General Fund. $50,000 per month to accumulate and maintain a required balance of $3,000,000 in the Account. The amount of the required monthly deposit to or balance in the Account may be increased from time to time by the Agency. As of December 31, 2007, such Account had a balance of $4,223,759. (6) General Reserve Account in the General Fund. The amount, if any, remaining in the Revenue Fund after payment or credit to all other Funds and Accounts. The amounts in the General Reserve Account may be used by the Agency to pay debt service on subordinate obligations and to pay costs of extensions and improvements to the System, may be deposited in the Revenue Fund as a credit against payments due under the Agreements or may be deposited in the Construction Fund, the Bond Redemption Account or the Note Redemption Account. All Funds and Accounts are held by the Trustee with the exception of the Operation and Maintenance Fund which is held by the Agency. ADDITIONAL OBLIGATIONS The Agency may issue additional parity obligations for certain purposes, subject to the tests identified and described under Additional Agency Obligations in the Summary of Certain Provisions of the General Resolution, included as APPENDIX A. The Agency may also issue Additional Agency Obligations to refund Agency Obligations. MEMBER DEPOSITS As security for payment of its obligations under the Agreements, each Member is obligated to deposit and maintain with the Trustee in each fiscal year an amount equal to the maximum amount of the Member s estimated share of the Agency s costs for any month in that fiscal year. Any amounts withdrawn from a Member s Deposit Fund by the Trustee to pay amounts due and unpaid from such Member under the Agreement are required to be immediately restored by the Member. CERTAIN COVENANTS The Agency covenants in the General Resolutions to establish fees and charges for its provision of water, including amounts due under the Agreements, sufficient to provide Revenues at all times adequate, together with other available amounts, to meet all of its requirements under the Resolutions, including making in timely fashion all the required deposits and credits in the various Funds and Accounts. -9-

22 The Agency covenants in the General Resolution to adopt a budget not less than 30 days prior to the beginning of each fiscal year which will set forth a detailed estimate of the Revenues and the Expense of Operation and Maintenance of the Agency for such fiscal year. In accordance with the Agreements, the budget will also set forth the estimated share of costs of the Agency by month for each Member. Following the end of each quarter of each fiscal year, the Agency shall review its estimates set forth in the budget for such year and, in the event such estimates do not substantially correspond with actual Revenues and the Expense of Operation and Maintenance or other requirements, adopt an amended budget. See Summary of the General Resolution included as APPENDIX A for further discussion of certain of the terms and provisions of the General Resolution. RESERVE FUND INSURANCE POLICY GENERAL In 1986, MBIA Insurance Corporation ( MBIA ) issued a surety bond (the Reserve Fund Insurance Policy ) in the amount of $10,830,750. The Reserve Fund Insurance Policy provides that upon notice to MBIA of insufficient amounts being on deposit in the Debt Service Fund to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the 2008 Bonds up to the face amount of the Reserve Fund Insurance Policy, MBIA will promptly deposit with the Trustee an amount sufficient to pay the principal of and interest on the 2008 Bonds or the available amount of the Reserve Fund Insurance Policy, whichever is less. The available amount of the Reserve Fund Insurance Policy is the face amount of the Reserve Fund Insurance Policy less the amount of any previous deposits by MBIA with the Trustee, which have not been reimbursed by the Agency. The Agency is required to reimburse MBIA, within one year, the amount of any deposit made by MBIA with the Trustee under the Reserve Fund Insurance Policy. Such reimbursement shall be made only after all required deposits to the Operation and Maintenance Fund and the Debt Service Fund have been made. The Agency is required to reimburse MBIA, with interest, until the face amount of the Reserve Fund Insurance Policy is reinstated before any deposit is made to the General Fund. No optional redemption of 2008 Bonds may be made until any reserve fund insurance policy is so reinstated. The Reserve Fund Insurance Policy will be held by the Trustee in the Debt Service Reserve Fund and is provided in addition to the Agency depositing funds or Investment Obligations equal to the Debt Service Reserve Requirement for outstanding 2008 Bonds. The following information has been furnished by MBIA for use in this Official Statement. Neither the Agency, the Trustee, nor the Underwriter make any representation as to the completeness or the accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. MBIA INSURANCE CORPORATION MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the Company ). The Company is not obligated to pay the debts of or claims -10-

23 against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA México, S.A. de C.V. ( MBIA Mexico ), and in September 2007, MBIA Mexico became licensed to write financial guarantee insurance in Mexico. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York and the main telephone number at that address is (914) REGULATION As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. FINANCIAL STRENGTH RATINGS OF MBIA Moody s Investors Service, Inc. ( Moody s ) rates the financial strength of MBIA Aaa. Standard & Poor s, a division of The McGraw-Hill Companies, Inc. ( S&P ), rates the financial strength of MBIA AAA. Fitch Ratings rates the financial strength of MBIA AAA. Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency s current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the 2008 Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the 2008 Bonds. MBIA does not guaranty the market price of the 2008 Bonds nor does it guaranty that the ratings on the 2008 Bonds will not be revised or withdrawn. -11-