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 Memorandum for Record

 Ralph E. Huber, Chief Financial Officer
 Alex Hinojosa, Sergio Molina, Ruben Saenz, Co-Financial Advisors

  7/14/2010
  Evaluation of Underwriter Proposals/Selection of Underwriter Pool

In response to a Request for Proposal distributed on May 8, 2001, nineteen proposals were received
on May 18, 2001 from investment banking firms interested in participating in the System¶s underwriting
pool.

The following team using SAWS Decision Analysis tools evaluated the proposals:

Ralph Huber ± Chief Financial Officer

Alex Hinojosa ± Finance Director
Sergio Molina ± Treasury Manager
Bob Estrada ± Financial Advisor (Estrada Hinojosa)
Larry Jordan ± Financial Advisor (Estrada Hinojosa)
Anne Burger Entrekin - Financial Advisor (First Southwest)

The evaluation team met on Tuesday, May 22, to review composite and individual ratings of the
proposals. Firms were asked to categorize their business as national, regional, and SMWBE in their
proposal. Ruben Saenz, Director of Contracting attended this meeting and observed the evaluation
and selection process.

Attached is a worksheet indicating the relative ranking for each firm based on average scores for each
evaluator. An additional worksheet is attached indicating how often each firm was ranked first, second,
third, etc. by each evaluator.

An approach was discussed and agreed upon by the team to recommend to the Board a ³pool´ of
underwriting firms. It was also agreed that oral interviews would be conducted prior to forming each
³syndicate,´ for purposes of determining which firm would serve in the senior manager role. A
syndicate of firms would be formed each time a transaction was planned, specific to meet the needs of
that transaction (e.g. size, structure, and complexity). Over time, firms in the syndicate will be rotated
and evaluated as to their performance in pricing and selling bonds. If a firm was deemed marginal or
non-performing, they may no longer be included in the pool. Conversely, a firm not recommended for
the original pool, could earn its way in by submission of timely and meaningful reports and analyses
pertinent to SAWS debt situation.

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After review and discussion, consensus was reached to recommend a pool of underwriters consisting
of the following firms. Firms are listed in order of their point ranking within each of their respective
categories:

å
  ± Morgan Stanley Dean Witter and Salomon Smith Barney (tied with number of
average points), JP Morgan, Goldman Sachs, Bear Stearns, AG Edwards

  ± Dain Rauscher, Southwest Securities, Morgan Keegan, M.E. Allison

  ± Ramirez & Co., Siebert Brandford Shank, Apex Pryor, Southwestern Capital
Markets

It was agreed that all of the National firms listed above would be invited to make oral presentations on
May 30 and May 31 for purposes of selecting the senior manager for the first transaction. Oral
presentations should focus on a firm¶s plan of finance and be limited to 45 minutes each. All of these
firms provided at least one unsolicited proposal or analysis before May 2001.

It was agreed to include AG Edwards among the firms interviewed for senior manager for the following
reasons:

£ they submitted an unsolicited analysis

£ have a local public finance office,
£ would have been the highest ranked regional firm, if included in that category
£ have demonstrated experience in performing as senior manager.

It was agreed to include AG Edwards as a national firm based on how they responded in their proposal.
However, the evaluation team readily recognized that this firm is often perceived as a regional firm
since they are not headquartered in New York. If included among the regional firms, they would have
been the highest ranked.

M.E. Allison and Southwestern Capital Markets were included in the pool of firms because they are
small businesses headquartered in San Antonio.

The following comments are offered relative to the five firms that submitted proposals but were not
recommended to be included in the original underwriter pool. Besides relatively low point totals in the
overall ranking, Lehman Bros, Paine Webber, Coastal Securities, SAMCO, and Loop Capital did not
provide any unsolicited proposals or analyses to indicate their interest or commitment to being of
service to SAWS. Additionally, Coastal Securities currently serves as the lead financial advisory firm to
the City of San Antonio. Serving as a member of the underwriting pool would, at a minimum, create a
perception of a conflict of interest.

Ralph E. Huber
Chief Financial Officer

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