A communication transmitted from Louis A. DePasquale, City Manager, relative to the City of Cambridge retaining its noteworthy distinction of being one of approximately 33 municipalities in the United States with AAA ratings from each of the nation’s three major credit rating agencies

U.S. PUBLIC FINANCE CREDIT OPINION 15 February 2018 Contacts Nicholas Lehman [phone removed] VP-Senior Analyst [email removed] Thomas Jacobs [phone removed] Senior Vice President [email removed] CLIENT SERVICES Americas [phone removed] Asia Pacific 852-3551-3077 Japan 81-3-5408-4100 EMEA 44-20-7772-5454 Cambridge (City of) MA Update to credit analysis Summary Cambridge, Massachusetts (Aaa stable) benefits from a sizeable and diverse tax base that continues to grow significantly year over year. The city's economy is driven largely by the presence of Harvard University (Aaa stable) and Massachusetts Institute of Technology (MIT, Aaa stable) and the significant research and development sector. The city's financial position is strong with very healthy liquidity and reserves that are maintained by strong fiscal management. Both the debt burden and long term liabilities for pension and OPEB are will remain manageable over the near term. Exhibit 1 Strong fiscal management contributes to growing, healthy cash and reserves 0% 10% 20% 30% 40% 50% 60% 70% 2013 2014 2015 2016 2017 Fund Balance as a % of Revenues Cash Balance as a % of Revenues As of June 30 fiscal year end Source: Moody's Investors Service and Cambridge's audited financial statements Credit strengths » Large and diverse tax base anchored by institutional presences and robust commercial sector » Healthy financial position guided by formal policies » Strong fiscal management

MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE » Ample operating flexibility with excess levy capacity under Proposition 2½ » Expected to fully fund pension liability by 2026 Credit challenges » High regional cost of living and cost of business Rating outlook The stable outlook reflects the strong fiscal management practices that we expect to maintain a healthy financial position given conservative multi-year budget forecasting and adherence to formal fiscal policies. The outlook also incorporates the stabilizing presence of the higher education institutions as well as the ongoing trend of consistent tax base growth from both appreciation and development. Factors that could lead to a downgrade » Material growth in the debt burden or pension liability » Deterioration in the tax base or weakening of the local economy » Trend of operating deficits leading to significant reduction in cash and reserves Key indicators Exhibit 2 Cambridge (City of) MA 2013 2014 2015 2016 2017 Economy/Tax Base Total Full Value ($000) $26,640,125 $26,640,125 $29,733,818 $29,733,818 $39,570,829 Population - - 107,916 105,162 105,162 Full Value Per Capita $251,947 $249,337 $275,527 $282,743 $376,284 Median Family Income (% of US Median) 144.4% 151.8% 158.2% 158.2% 158.2% Finances Operating Revenue ($000) $477,946 $520,910 $541,899 $560,698 $594,597 Fund Balance ($000) $193,702 $225,692 $273,670 $299,408 $330,342 Cash Balance ($000) $226,051 $260,517 $306,259 $333,793 $363,415 Fund Balance as a % of Revenues 40.5% 43.3% 50.5% 53.4% 55.6% Cash Balance as a % of Revenues 47.3% 50.0% 56.5% 59.5% 61.1% Debt/Pensions Net Direct Debt ($000) $356,269 $351,692 $399,159 $405,399 $417,765 3-Year Average of Moody's ANPL ($000) $704,970 $829,503 $815,568 $832,179 $853,029 Net Direct Debt / Operating Revenues (x) 0.7x 0.7x 0.7x 0.7x 0.7x Net Direct Debt / Full Value (%) 1.3% 1.3% 1.3% 1.4% 1.1% Moody's - adjusted Net Pension Liability (3-yr average) to Revenues (x) 1.5x 1.6x 1.5x 1.5x 1.4x Moody's - adjusted Net Pension Liability (3-yr average) to Full Value (%) 2.6% 3.1% 2.7% 2.8% 2.2% As of June 30 fiscal year end Source: Moody's Investors Service and Cambridge's audited financial statements This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. 2 15 February 2018 Cambridge (City of) MA: Update to credit analysis

MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Profile Cambridge is a sizeable community in Massachusetts (Aa1 stable) adjacent to the City of Boston (Aaa stable). Cambridge, whose economy and tax base are anchored by several prominent higher education and health care institutions, has a population of approximately 108,000. Detailed credit considerations Economy and tax base: Strong economy and tax base anchored by world renowned institutions Cambridge's economy will continue to benefit from the presence of Harvard and MIT which together enroll 33,000 students and provide employment equivalent to 21,000 full-time positions (roughly 18% of the city's workforce). In addition, the city is home to a vibrant commercial sector including biotechnology and pharmaceutical industries, which together employ an additional 21,000 people. Together the universities and mentioned industries comprise just under 60% of the jobs provided by the top 25 employers. Recently, a top employer, Akamai, announced the layoff of 400 employees, approximatly 5% of its global workforce. However, this type of news is mitigated by the continued influx of startups and related venture capital firms who value the highly education workforce. The top ten taxpayers are slightly concentrated, representing 20.1% of 2018 assessed value. MIT, with its significant taxable property, is the largest taxpayer, representing 7.3% of the city's base. The $39.6 billion tax base (2018 equalized value) is large and is expected to continue to grow over the next several years given strong housing demand and the strength of the overall economy. The 2018 assessed value growth of 10.1%, the fourth consecutive year of double digit growth, brought the five year compound annual growth rate to 10.1% as well. Given the redevelopment success of Kendall Square, new development in other parts of the city will continue to contribute to tax base growth with projects that include the MBTA green line extension, the long term development of the Volpe center and focus on the neighborhoods of Cambridge Crossing and Alewife. Additionally, commercial vacancy rates remain well below the regional average. Resident income levels remain above average relative to the commonwealth and national medians, despite the large student population. Median family income equals 120% and 158% of the commonwealth and national medians, respectively. Also, the unemployment rate of 2.3% (October 2017) remains below Massachusetts' and the nation's rates of 3.3% and 3.9%. Financial operations and reserves: Strong financial position will continue to be bolstered by conservative fiscal management The city's financial position will remain healthy over the near term given ample liquidity and reserves that are maintained by conservative fiscal management. The fiscal 2017 audited financials reflect an operating surplus of $31.7 million due to positive variance in revenues mostly from excise taxes as well as conservative budgeting for expenditures. The surplus, the city's sixth in a row, increased available general fund balance (assigned, unassigned and committed) to $330.3 million or a very healthy 53.7% of revenues. Property taxes represented the largest revenue source (61% of total revenues) while education (34% of total expenditures) and public safety (22%) represented the largest expenses. The fiscal 2018 operating budget increased 4.97% over last year's adjusted operating budget driven by salaries and pension contributions. The budget included a 4.4% increase in the tax levy and a $12.2 million appropriation of free cash, mostly for one-time costs. Current operations are trending on budget with a very minor deficit in snow and ice expenses that will likely be offset by overall positive operating variance. The city's fiscal 2019-2022 budget projections indicate balanced annual operations using conservative assumptions. The expenditure projections include a 2.5% annual increase in salaries, 6.66% in pension contributions, and school department costs increase by a 6% property tax increase. The revenue projections include level funding of state aid while real and personal property taxes increase by an average 7.4% annually. The city also maintains $181.5 million in unused levy capacity, equal to just under 30% of revenues. This provides significant operating flexibility under Proposition 2 ½ that is not available to most municipalities in Massachusetts given the need to levy to the tax levy limit each year. LIQUIDITY Cash and investments at the end of fiscal 2017 totaled $363.4 million representing an ample, 59.1% of revenues. 3 15 February 2018 Cambridge (City of) MA: Update to credit analysis

MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Debt and pension liabilities: Debt burden and long term liabilities will remain manageable over near term The net direct debt burden of 1.3% of equalized value is average and will likely remain manageable over the near term despite the possibility of a slight increase due to growing capital plans. The overall debt burden, incorporating the overlapping debt of the Massachusetts Water Resources Authority (Aa1 stable), is 1.7%. Favorably, almost 30% of the outstanding debt is supported by sewer and other user fees. The fiscal 2018 capital budget totals $124.8 million, a 49% increase from 2017. The increase is driven largely by school projects. Future debt plans total $392.6 million over the next four years (2019-2022) to fund $162 million of elementary school construction and $89 million sewer reconstruction projects. DEBT STRUCTURE The entire debt portfolio consists of fixed rate debt with 84% of principal retired in ten years. Fiscal 2017 debt service was $57.8 million or 9.9% of general fund expenditures. DEBT-RELATED DERIVATIVES The city is not party to any interest rate swaps or other derivative agreements. PENSIONS AND OPEB The city participates in the City of Cambridge Retirement System, a cost sharing multiple employer defined benefit retirement plan. The city contributed $30.9 million in fiscal 2017 ($300,000 more than the actuarially determined contribution), equal to a manageable 5.3% of general fund expenditures. The fiscal 2017 three-year average Moody's Adjusted Net Pension Liability (ANPL), under Moody's methodology for adjusting reported pension data, is $853 million, or an average 1.4 times general fund revenues or 2.2% of equalized value. The city plans to fully fund the pension plan by 2026, well ahead of the state mandated date of 2040. To meet this aggressive funding schedule, the city projects that pension costs will increase 6.7% annually, and the city will continue contributing an additional $300,000 over the required contribution. The city also contributed $20.3 million towards its annual OPEB cost in 2016, representing 36% of the annual required contribution. The total unfunded liability is $609 million with a funded ratio of 1.7%, as of the June 30, 2017 valuation report. In addition to the annual contribution the city continues to annually budget and contribute $2 million to its OPEB trust with a current total balance of $13 million. Total fixed costs for fiscal 2017, including debt service, required pension contributions and retiree healthcare payments, represented $109 million, or a slightly elevated 18.7% of expenditures. Management and governance: Strong fiscal management will continue to bolster credit strength The experienced management team is very strong, as evidenced by continued growth in liquidity and reserves as well as adherence to formal fiscal policies, conservative multi-year budgeting and capital planning. Massachusetts cities have an Institutional Framework score of Aa, which is high compared to the nation. Institutional Framework scores measure a sector's legal ability to increase revenues and decrease expenditures. Massachusetts cities major revenue source, property taxes, are subject to the Proposition 2 1/2 cap which can be overriden with voter approval only. However, the cap of 2.5% still allows for moderate revenue-raising ability. Unpredictable revenue fluctuations tend to be minor, or under 5% annually. Across the sector, fixed and mandated costs are generally greater than 25% of expenditures. However, Massachusetts has public sector unions, which can limit the ability to cut expenditures. Unpredictable expenditure fluctuations tend to be minor, under 5% annually. 4 15 February 2018 Cambridge (City of) MA: Update to credit analysis

MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE © 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications. To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S. To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.” Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser. Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively. MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. REPORT NUMBER 1111633 5 15 February 2018 Cambridge (City of) MA: Update to credit analysis

MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE CLIENT SERVICES Americas [phone removed] Asia Pacific 852-3551-3077 Japan 81-3-5408-4100 EMEA 44-20-7772-5454 6 15 February 2018 Cambridge (City of) MA: Update to credit analysis