Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90Seattle City Light 2015 Annual Report THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 - 40 - The Department had the following activity in long-term debt during 2015 and 2014: ($ in millions) Balance at Balance at Current 1/1/15 Additions Reductions 12/31/15 Portion 2015 Prior Lien Bonds - fixed rate 1,903.8 $ 171.9 $ (104.9) $ 1,970.8 $ 105.9 $ Prior Lien Bonds - variable rate - 100.0 - 100.0 - 1,903.8 $ 271.9 $ (104.9) $ 2,070.8 $ 105.9 $ Balance at Balance at Current 1/1/14 Additions Reductions 12/31/14 Portion 2014 Prior Lien Bonds - fixed rate 1,863.3 $ 265.2 $ (224.7) $ 1,903.8 $ 104.9 $ Prior Lien Bonds—In July 2015 the Department issued $171.9 million of tax exempt Municipal Light and Power (ML&P) Revenue Bonds (2015A Bonds), and $100.0 million of tax exempt variable rate Municipal Light and Power (ML&P) Revenue Bonds (2015B Bonds). The 2015A Bonds had coupon interest rates ranging from 4.00% to 5.00% and mature serially from May 1, 2016 to May 1, 2040 with term Bonds maturing May 1, 2045. The 2015B Bonds had coupon interest rates ranging from .69% to .71% during 2015 with term bonds maturing annually from May 1, 2026 to May 1, 2045. The 2015B Bonds bear interest at the adjusted Securities Industry and Financial Markets Association (SIFMA) interest rate which is the SIFMA Index plus the Index floating rate spread. The arbitrage yield was 3.52% for the 2015A Bonds and 3.47% for the 2015B Bonds. Arbitrage yield, when used in computing the present worth of all payments of principal and interest on the Bonds in the manner prescribed by the Internal Revenue Code, produces an amount equal to the issue price of the Bonds. Proceeds from the 2015 Bonds are being used to finance certain capital improvement and conservation programs and to make a deposit to the Reserve Fund. The debt service on the 2015A Bonds requires a cash flow over the life of the bonds of $286.0 million, including $114.1 million in interest, and the debt service on the 2015B Bonds requires a cash flow over the life of the bonds of $177.4 million including $77.4 million in estimated interest. In November 2014 the Department issued $265.2 million of tax exempt Municipal Light and Power (ML&P) Improvement and Refunding Revenue Bonds (2014 Bonds). Coupon interest rates range from 4.00% to 5.00% and mature serially from September 1, 2015 to September 1, 2038 with term Bonds maturing September 1, 2044. The arbitrage yield of the 2014 Bonds was 2.58%. Proceeds from the 2014 Bonds were used to finance certain capital improvement and conservation programs, to advance refund $125.0 million of the 2004 series outstanding prior lien bonds, and to make a deposit to the Reserve Fund. The debt service on the 2014 Bonds requires a cash flow over the life of the bonds of $414.4 million, including $149.2 million in interest. The difference between the cash flows required to service the old and new debt and to complete the refunding totaled $20.5 million, and the aggregate economic gain on refunding totaled $19.0 million at net present value. The accounting loss on refunding was $1.3 million. The Department has certain bonds outstanding that provide a refundable tax credit, or federal subsidy, paid to state or local governmental issuers by the U.S. Treasury. The amount of the federal subsidy is equal to the lesser of the amount of interest payable based on the coupon interest rate or a percentage of the amount of interest payable based on the tax credit rate on the sale date with respect to those bonds. This federal subsidy ultimately results in a net decrease to debt service, although debt service payments 40