Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 49 THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 - 49 - The City currently has a surety bond (the “Surety Bond”) purchased from Financial Security Assurance, Inc. (“FSA”), with a policy limit that is equal to $74.7 million. This amount is used to satisfy a large proportion of the aggregate Reserve Fund Requirement. As of September 14, 2016, the remainder of the Reserve Fund Requirement was satisfied by $52.6 million in cash held in the Reserve Fund. Also included within the Reserve Fund was $34.4 million and $20.5 million at the end of 2016 and 2015 that is expected to be used toward the eventual replacement of the Surety Bond upon its expiration. Total reserve fund balance was $87.0 million and $73.7 million at December 31, 2016 and 2015 respectively. The Surety Bond was issued by FSA in 2005; FSA was acquired by Assured Guaranty Corporation in 2009. In 2009, Assured Guaranty Corporation changed the name of its FSA subsidiary to Assured Guaranty Municipal Corporation (“AGM”). The Surety Bond secures all Parity Bonds and Future Parity Bonds (including Parity Payment Agreements) and expires on August 1, 2029. The amount available to be drawn on the Surety Bond (the “Policy Limit”) is currently equal to $74.7 million. However, should the Reserve Fund Requirement be reduced in the future, the Policy Limit would be reduced irrevocably by a like amount, which is expected to occur with the issuance of the 2016C Bonds. The Policy Limit would also be reduced temporarily to the extent of any draw on the Surety Bond. In that event, the Policy Limit would be reinstated (up to the limit in effect prior to the draw) upon reimbursement in accordance with the terms of the reimbursement agreement. The Department’s reimbursement obligation is subordinate to the Department’s obligation to pay the principal of and interest on the Parity Bonds. AGM is currently rated A2 and AA by Moody’s Investors Service and Standard & Poor’s Ratings Services, respectively. AGM is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements, and other information with the U.S. Securities and Exchange Commission. Irrevocable Trust Accounts—All the proceeds of the 2016B refunding revenue Bonds and $36.5 million of the 2016C refunding revenue Bonds were placed in a separate irrevocable trust accounts to provide for all future debt service payments on certain prior lien bonds advance refunded or defeased. There were balances outstanding in the irrevocable trust account during 2016 for prior lien bonds advance refunded or defeased with the 2016 bonds and no balances were outstanding for prior lien bonds advance refunded prior to 2016. Neither the assets of the trust account nor the liabilities for the defeased bonds are reflected in the Department’s financial statements. The outstanding principal balance of all bonds defeased through 2016 was $154.8 million as of December 31, 2016. As of December 31, 2016, none of the defeased bonds were called and paid from the 2016 irrevocable trust account. Funds held in the 2016 irrevocable trust accounts at December 31, 2016 are sufficient to service and redeem the defeased bonds outstanding. Bond Ratings—The 2016 and 2015 Bonds, along with other outstanding parity bonds, were rated “Aa2” and “AA”; and “Aa2” and “AA”, by Moody’s Investors Service, Inc. and Standard Poor’s Rating Services, respectively. Revenue Pledged— Revenue bonds are special limited obligations payable from and secured solely by the gross revenues of the Department, less charges for maintenance and operations, and by money in the debt service account and Reserve Fund. Principal and interest paid for 2016 and 2015 was $202.1 million and $194.6 million, respectively. Total revenue available for debt service as defined for the same periods was $331.9 million and $306.6 million, respectively. Annual interest and principal payments are expected to require 63.7% of revenues available for debt service for 2017 and required 65.8% in 2016.