4000000* denair unified school district

Transcription

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy
them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 30, 2012
NEW ISSUE — FULL BOOK-ENTRY
RATINGS:
S&P:“__”
See “MISCELLANEOUS – Ratings” herein.
In the opinion of GCR, LLP, San Diego, California (“Bond Counsel”), based upon an analysis of existing statutes, regulations, rulings, and
court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, interest on the
Bonds is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the
“Code”). In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the alternative minimum
tax imposed on individuals and corporations, although Bond Counsel observes that such interest is taken into account in determining adjusted
current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. In the opinion of Bond Counsel,
interest on the Bonds is exempt from State of California personal income taxes. Bond Counsel expresses no opinion regarding any other tax
consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “TAX MATTERS” herein. The
District has adopted a resolution designating the Bonds as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Internal
Revenue Code of 1986.
STATE OF CALIFORNIA
STANISLAUS COUNTY
$4,000,000*
DENAIR UNIFIED SCHOOL DISTRICT
2012 GENERAL OBLIGATION REFUNDING BONDS
(Stanislaus County, California)
(Bank Qualified)
Dated: Date of Delivery
Due: August 1, as shown on the inside cover
The captioned bonds (the “Bonds”) are being issued by the Denair Unified School District (the “District”) to refund a portion of the District’s
$5,161,002 General Obligation Bonds, Election of 2001, Series A (the “Refunded Bonds”) and to pay costs of issuance of the Bonds. The
Refunded Bonds were authorized at an election of the registered voters of the District, held on November 6, 2001, at which election the requisite
two-thirds or more of the persons voting on the proposition voted to authorize the issuance and sale of $8,200,000 principal amount of general
obligation bonds of the District.
The Bonds are general obligation bonds of the District payable solely from ad valorem property taxes levied on taxable property within the
District. The Board of Supervisors of Stanislaus County (the “County”) is empowered and is obligated to levy ad valorem taxes, without limitation
of rate or amount, upon all property within the District subject to taxation by the District (except certain personal property which is taxable at
limited rates), for the payment of principal of and interest on the Bonds when due. The Bonds are secured on a parity with other general obligation
bonds of the District that will be outstanding following the issuance of the Bonds. See “SECURITY FOR THE BONDS” and “TAX BASE FOR
REPAYMENT OF BONDS - Ad Valorem Property Taxation.”
The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for The
Depository Trust Company, New York, New York (collectively referred to herein as “DTC”). Purchasers of beneficial ownership interests in the
Bonds will not receive physical certificates representing their interest in the Bonds. Payments of principal of and interest on the Bonds will be paid
by U.S. Bank National Association, San Francisco, California, as the Paying Agent, Registrar and Transfer Agent (the “Paying Agent”), to DTC for
subsequent disbursement to DTC Participants (defined herein) who will remit such payments to the beneficial owners of the Bonds. See “THE
BONDS—DTC Book-Entry Only System” herein.
Interest on the Bonds is payable semiannually on February 1 and August 1 of each year, commencing August 1, 2012, to maturity. Principal
on the Bonds is payable on August 1 in each of the years and in the amounts shown in the Maturity Schedule on the inside front cover. The Bonds
will be issued in denominations of $5,000 or any integral multiple thereof.
The Bonds are not subject to redemption prior to maturity.
The District has applied for a policy of municipal bond insurance with respect to the Bonds. If bond insurance is purchased, the scheduled
payment of principal and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery
of the Bonds.
THE BONDS ARE GENERAL OBLIGATION BONDS OF THE DISTRICT AND DO NOT CONSTITUTE A DEBT, LIABILITY
OR OBLIGATION OF THE COUNTY. NO PART OF ANY FUND OF THE COUNTY IS PLEDGED OR OBLIGATED TO THE
PAYMENT OF THE BOND.
MATURITY SCHEDULE*
(See Inside Front Cover)
This cover page contains certain information for reference only. It is not a summary of this issue. Investors must read the entire
Official Statement to obtain information essential to the making of an informed investment decision.
The Bonds will be offered when, as and if issued by the District and received by the Underwriter, subject to the approval of legality by GCR,
LLP, San Diego, California, Bond Counsel and Disclosure Counsel to the District. Certain legal matters will be passed upon for the Underwriter
by its counsel, Nossaman LLP, Irvine, California. The Bonds, in book-entry form, will be available for delivery through the facilities of The
Depository Trust Company in New York, New York on or about February ___, 2012.
Dated: February __, 2012
*
Preliminary, subject to change.
$4,000,000
(Bank Qualified)
MATURITY SCHEDULE
Base CUSIP†: 248217
Maturity Date
(August 1)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Principal
Amount
Interest
Rate
Yield
CUSIP†
Copyright 2011, American Bankers Association. CUSIP® data herein is provided by Standard & Poor’s, CUSIP® Service Bureau, a division
of The McGraw-Hill Companies, Inc. The District takes no responsibility for the accuracy of such data.
†
No dealer, broker, salesperson or other person has been authorized by the District, the County or the Underwriter
to give any information or to make any representations other than those contained herein. If given or made, such other
information or representations must not be relied upon as having been authorized by the District, the County or the
Underwriter. 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 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an
offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the Underwriter of the Bonds. Statements
contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so
described herein, are intended solely as such and are not to be construed as representations of fact.
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 a 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 of completeness of such information.”
The information and expression of opinion herein are subject to change without notice and neither delivery of
this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the District or any other parties described herein since the date hereof. This Official
Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or
used, in whole or in part, for any other purpose, unless authorized in writing by the District. All summaries of documents
and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such
provisions.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking
statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the
United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933,
as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate,”
“project,” “budget” or similar words. Such forward-looking statements include, but are not limited to certain statements
contained in the information under the captions “THE DISTRICT” and “DISTRICT FINANCIAL MATTERS” herein.
The achievement of certain results or other expectations contained in such forward-looking statements involves
known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements
described to be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements. While the District has agreed to provide certain on-going financial and operating data on an
annual basis, it does not plan to issue any updates or revisions to those forward-looking statements if or when its
expectations or events, conditions or circumstances on which statements are based change. See “CONTINUING
DISCLOSURE” and APPENDIX C—“FORM OF CONTINUING DISCLOSURE CERTIFICATE” herein.
All information material to the making of an informed investment decision with respect to the Bonds is contained
in this Official Statement. While the District maintains an internet website for various purposes, none of the information
on its website is incorporated by reference into this Official Statement. Any such information that is inconsistent with the
information set forth in this Official Statement should be disregarded.
WITH RESPECT TO THIS OFFERING, THE UNDERWRITER MAY ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL
THE BONDS DESCRIBED HEREIN TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING
AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED IN THIS
OFFICIAL STATEMENT AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO
TIME BY THE UNDERWRITER.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES EXCHANGE ACT OF 1934, BOTH AS AMENDED, IN RELIANCE UPON AN EXEMPTIONS
CONTAINED THEREUNDER AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE.
(STANISLAUS COUNTY, CALIFORNIA)
Board of Trustees
Louisa Allen, President
Carolyn Brown, Clerk
Robert Hodges, Trustee
John Plett, Trustee
Don Smith, Trustee
District Administrators
Edward E. Parraz, Superintendent
Judy Sylvester, Assistant Superintendent of Business Services
PROFESSIONAL SERVICES
Bond Counsel and Disclosure Counsel
GCR, LLP
San Diego, California
Financial Advisor
Caldwell Flores Winters, Inc.
Emeryville, California
Paying Agent and Escrow Bank
U.S. Bank National Association
San Francisco, California
Verification Agent
Causey, Demgen & Moore, Inc.
Denver, Colorado
TABLE OF CONTENTS
INTRODUCTION ....................................................... 1 The District ............................................................. 1 Purpose of the Bonds.............................................. 1 Sources of Payment of the Bonds .......................... 2 Description of the Bonds ........................................ 2 Tax Matters ............................................................ 2 Authority for Issuance of the Bonds ..................... 3 Offering and Delivery of the Bonds ...................... 3 Bank Qualified Obligations ................................... 3 Continuing Disclosure ............................................ 3 Other Information .................................................. 3 THE BONDS ................................................................ 4 Authority for Issuance ........................................... 4 Payment of Principal and Interest ........................ 4 Paying Agent ........................................................... 4 Redemption ............................................................. 4 Registration, Transfer and Exchange of Bonds ... 4 Book-Entry Only System ....................................... 5 Defeasance............................................................... 5 Unclaimed Moneys ................................................. 6 Application and Investment of Bond Proceeds
and Tax Revenues .................................................. 6 Annual Debt Service............................................... 7 ESTIMATED SOURCES AND USES OF FUNDS... 9 SECURITY FOR THE BONDS ................................. 9 General .................................................................... 9 BOND INSURANCE ................................................. 10 TAX BASE FOR REPAYMENT OF THE BONDS10 Ad Valorem Property Taxation ........................... 10 Historic Assessed Valuations ............................... 13 THE DISTRICT......................................................... 15 Introduction .......................................................... 15 Board of Trustees ................................................. 16 Superintendent and Administrative Personnel .. 16 Recent Enrollment Trends .................................. 17 Average Daily Attendance and Base Revenue
Limit ...................................................................... 18 Labor Relations and Collective Bargaining ....... 18 District Retirement Systems ................................ 19 Other Post-Employment Benefits ....................... 20 Insurance............................................................... 20 DISTRICT FINANCIAL MATTERS ...................... 21 Accounting Practices ............................................ 21 District Budget ...................................................... 21 Major Revenues .................................................... 22 Historical General Fund Financial Information 23 Current Financial Condition ............................... 27 Revenue Sources ................................................... 28 Revenue Limit Sources ........................................ 28 Federal Revenues ................................................. 29 Other State Sources .............................................. 29 Other Local Sources ............................................. 29 DISTRICT DEBT STRUCTURE ............................. 30 Long-Term Obligations ....................................... 30 Capital Plan .......................................................... 30 Direct and Overlapping Debt .............................. 30 STATE CONSTITUTIONAL and statutory
provisions affecting district revenues and
appropriations ............................................................32 Article XIIIA .........................................................32 Article XIIIB .........................................................32 Articles XIIIC and XIIID .....................................33 Propositions 98 and 111 .......................................34 Proposition 39 .......................................................35 Jarvis v. Connell ...................................................35 Proposition 1A ......................................................35 Future Initiatives ..................................................36 STATE OF CALIFORNIA FISCAL ISSUES .........36 General Overview .................................................36 2011-12 State Budget ............................................38 2012-13 Proposed State Budget ...........................40 Litigation Challenging Method of School
Financing ...............................................................42 Tax MATTERS ..........................................................42 Tax Exemption ......................................................42 Original Issue Discount and Original Issue
Premium ................................................................43 Internal Revenue Service Audit...........................43 Information Reporting and Backup
Withholding ..........................................................43 LEGAL MATTERS ...................................................44 Legal Opinion........................................................44 Legality for Investment in California .................44 No Litigation .........................................................44 BANK QUALIFIED...................................................44 CONTINUING DISCLOSURE.................................44 ESCROW VERIFICATION .....................................45 MISCELLANEOUS ...................................................45 Ratings ...................................................................45 Underwriting .........................................................45 Audited Financial Statements ..............................45 Financial Interests ................................................46 ADDITIONAL INFORMATION .............................46 APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
i
FORM OF OPINION OF BOND
COUNSEL .................................................A-1
DISTRICT’S 2010-11 AUDITED
FINANCIAL STATEMENTS .................. B-1
FORM OF CONTINUING
DISCLOSURE CERTIFICATE ..............C-1
INFORMATION CONCERNING
STANISLAUS COUNTY...................... ... D-1
STANISLAUS COUNTY INVESTMENT
POLICY AND DESCRIPTION OF
INVESTMENT POOL .............................. E-1
DTC AND THE BOOK-ENTRY ONLY
SYSTEM .................................................... F-1
[THIS PAGE INTENTIONALLY LEFT BLANK]
$4,000,000
(Bank Qualified)
INTRODUCTION
This Official Statement (which includes the cover page, the Table of Contents and the Appendices
attached hereto) is furnished by the Denair Unified School District (the “District”), located in Stanislaus
County, California, to provide information concerning the $4,000,000* Denair Unified School District 2012
General Obligation Refunding Bonds (Stanislaus County, California) (the “Bonds”).
This Introduction is not a summary of this Official Statement. It is only a brief description of
and guide to, and is qualified by, more complete and detailed information contained in the entire
Official Statement, including the cover page and appendices hereto, and the documents summarized or
described herein. A full review should be made of the entire Official Statement. The offering of the
Bonds to potential investors is made only by means of the entire Official Statement.
The District
The Denair Unified School District was established as a school district in 1942. The District is located
in the central portion of Stanislaus County (the “County”) and serves the community of Denair, a portion of
the City of Turlock and unincorporated areas of Stanislaus County. The District encompasses approximately
56 square miles and currently operates one elementary school, one middle school, one high school, two
community day schools and two charter schools. The current student-teacher ratio in the District is 1:20.56 in
grades K-3, 1:24.02 in grades 4-6, 1:23.43 in grades 7-8, and 1:19.00 in grades 9-12.
The District maintains two dependent charter schools, the Denair Charter Academy and Denair
Academic Avenues. The Denair Charter Academy provides students with various educational options such as
homebased learning, distance learning and other individualized programs. Denair Academic Avenues
commenced operating in fiscal year 2010-11 and is a slow growth, seat based charter currently serving grades
1-4. Mr. Edward E. Parraz is the District Superintendent. See “THE DISTRICT” and “APPENDIX B –
DISTRICT’S 2010-11 AUDITED FINANCIAL STATEMENTS” herein for additional information.
Purpose of the Bonds
Proceeds from the Bonds will be used to advance refund a portion of the District’s $5,161,002 General
Obligation Bonds, Election of 2001, Series A maturing on August 1, 2013 through and including August 1,
2022 (the “Refunded Bonds”) and to pay costs of issuance of the Bonds. See “THE BONDS – Application
and Investment of Bond Proceeds and Tax Revenues” and “ESTIMATED SOURCES AND USES OF
FUNDS” herein.
The Refunded Bonds were authorized at an election of the registered voters of the District, held on
November 6, 2001, at which election the requisite two-thirds or more of the persons voting on the proposition
voted to authorize the issuance and sale of $8,200,000 principal amount of general obligation bonds of the
District.

1
Sources of Payment of the Bonds
Ad Valorem Taxes. The Bonds are general obligation bonds of the District. The Board of Supervisors
of the County has the power and is obligated annually to levy ad valorem taxes for the payment of the Bonds
and the interest thereon upon all property within the District subject to taxation by the District without
limitation of rate or amount (except certain personal property which is taxable at limited rates). See
“SECURITY FOR THE BONDS” herein.
THE BONDS ARE GENERAL OBLIGATION BONDS OF THE DISTRICT AND DO NOT
CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE COUNTY. NO PART OF ANY FUND
OF THE COUNTY IS PLEDGED OR OBLIGATED TO THE PAYMENT OF THE BONDS.
Description of the Bonds
Form and Registration. The Bonds will be issued in fully registered book-entry form only, without
coupons. The Bonds will be initially issued and registered in the name of Cede & Co. as nominee for The
Depository Trust Company, New York, New York (collectively referred to herein as “DTC”). Purchasers of
beneficial ownership interests in the Bonds from participants in the DTC system will not receive certificates
representing their interest in the Bonds
Payments. Interest on the Bonds accrues from their initial date of delivery (the “Date of Delivery”),
and will be payable semiannually on each February 1 and August 1 of each year (each a “Bond Payment
Date”), commencing on August 1, 2012 at the annual interest rates shown on the inside cover page. Principal
of the Bonds is payable August 1 in the amounts and years as set forth on the inside cover page hereof.
Payments of the principal of and interest on the Bonds will be made by U.S. Bank National
Association, as the paying agent, registrant and transfer agent (the “Paying Agent”), to DTC for subsequent
disbursement through DTC Participants (defined herein) to the beneficial owners of the Bonds.
Denominations. The Bonds will be issued in denominations of $5,000 principal amount or any
integral multiple thereof.
Redemption. The Bonds are not subject to redemption prior to maturity. See “THE BONDS Redemption.”
Tax Matters
In the opinion of GCR, LLP, San Diego, California, Bond Counsel, based on existing statutes, regulations,
rulings and court decisions, interest on the Bonds is excludable from gross income for federal income tax purposes
and is exempt from State of California personal income taxes. A copy of the proposed opinion of Bond Counsel is
set forth in “APPENDIX A” hereto. The Code imposes various restrictions, conditions and requirements relating to
the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The
District has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be
includable in federal gross income. Failure to comply with these covenants may result in interest on the Bonds
being includable in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond
Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any
person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of
the Bonds may affect the value of, or the tax status of interest on the Bonds. Further, no assurance can be given that
pending or future legislation or amendments to the Code, will not adversely affect the value of, or the tax status of
interest on, the Bonds. Prospective owners are urged to consult their own tax advisors with respect to proposals to
restructure the federal income tax.
2
Authority for Issuance of the Bonds
The Bonds will be issued pursuant to certain provisions of the Government Code of the State and
pursuant to resolutions adopted by the Board of Trustees of the District on January 12, 2012 and January 26,
2012 (collectively, the “Bond Resolution”). See “THE BONDS - Authority for Issuance” herein.
Offering and Delivery of the Bonds
The Bonds are offered when, as and if issued and received by the purchasers, subject to approval as to
their legality by Bond Counsel. It is anticipated that the Bonds in book-entry form will be available for
delivery in New York, New York through the facilities of DTC on or about February ___, 2012.
Bank Qualified Obligations
The District has designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section
265(b)(3) of the Code. See “BANK QUALIFIED” herein.
Continuing Disclosure
The District has covenanted for the benefit of bondholders to provide certain financial information and
operating data relating to the District and to provide notices of the occurrence of certain enumerated events in
compliance with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission. The specific nature
of the information to be made available and of the notices of material events is summarized below under the
caption “CONTINUING DISCLOSURE” and APPENDIX C—“FORM OF CONTINUING DISCLOSURE
CERTIFICATE” herein.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to
change. Copies of documents referred to herein and information concerning the Bonds are available from the
Superintendent, Denair Unified School District, 3460 Lester Road, Denair, California 95316, telephone: (209)
632-7514. The District may impose a charge for copying, mailing and handling.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,
whether or not expressly so described herein, are intended solely as such and are not to be construed as
representations of fact. The summaries and references to documents, statutes and constitutional provisions
referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by
reference to each of such documents, statutes and constitutional provisions.
The information set forth herein, other than that provided by the District, has been obtained from
official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness by the
District. The information and expressions of opinions herein are subject to change without notice and neither
delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the District since the date hereof. This Official
Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced
or used, in whole or in part, for any other purpose.
All terms used herein and not otherwise defined shall have the meanings given such terms in the Bond
Resolution (as defined below).
3
THE BONDS
Authority for Issuance
The Bonds are issued pursuant to the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division
2 of Title 5 of the California Government Code and other applicable provisions of law, including, the
applicable provisions of the California Education Code, Article XIIIA of the State Constitution (collectively
the “Bond Law”) and pursuant to resolutions adopted by the District on January 12, 2012 and January 26, 2012
(collectively, the “Bond Resolution”).
Payment of Principal and Interest
The Bonds will be dated as of their date of delivery, and bear interest at the rates set forth on the inside
front cover page of this Official Statement, payable on each Bond Payment Date, commencing on August 1,
2012, computed using a year of 360 days, comprising twelve 30-day months. Each Bond shall bear interest
from the Bond Payment Date next preceding the date of authentication thereof, unless it is authenticated after
the close of business on a Record Date and on or prior to the succeeding Interest Date, in which event it shall
bear interest from such Interest Date, or unless it is authenticated on or before the Record Date preceding
the first Bond Payment Date, in which event it shall bear interest from its dated date; provided, however, that
if, at the time o f authentication of any Bond, interest is in default on any outstanding Bonds, such Bond
shall bear interest from the Bond Payment Date to which interest has previously been paid or made available
for payment on the outstanding Bonds.
Paying Agent
U.S. Bank National Association, San Francisco, California, will act as the registrar, transfer agent, and
paying agent for the Bonds (the “Paying Agent”) under the Bond Resolution. As long as DTC is the registered
owner of the Bonds and DTC’s book-entry method is used for the Bonds, the Paying Agent will send any
notice of prepayment or other notices to owners only to DTC. Any failure of DTC to advise any DTC
Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or
effect will not affect the validity or sufficiency of the proceedings relating to the prepayment of the Bonds
called for prepayment or of any other action covered by such notice.
The Paying Agent, the District, the County and the Underwriter of the Bonds have no responsibility or
liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for
maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Bonds.
Redemption
The Bonds are not subject to redemption prior to maturity.
Registration, Transfer and Exchange of Bonds
If the book entry system is discontinued, the District shall cause the Paying Agent to maintain and
keep at its principal corporate trust office all books and records necessary for the registration, exchange and
transfer of the Bonds.
Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the
person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such
Bond for cancellation at the Office at the Paying Agent, accompanied by delivery of a written instrument of
transfer in a form approved by the Paying Agent, duly executed. The Paying Agent shall require the payment
by the Owner requesting such transfer of any tax or other governmental charge required to be paid with respect
4
to such transfer. Whenever any Bond is surrendered for transfer, the District shall execute and the Paying
Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount.
Bonds may be exchanged at the office of the Paying Agent for a like aggregate principal amount of
Bonds of authorized denominations and of the same maturity. The Paying Agent shall require the payment by
the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect
to such exchange.
Neither the District nor the Paying Agent will be required to: (a) issue or transfer any Bonds during a
period beginning with the opening of business on the 15th day of the month next preceding either any Bond
Payment Date or any date of selection of Bonds to be redeemed and ending with the close of business on the
Bond Payment Date or day on which the applicable notice of redemption is given, or (b) transfer any Bonds
which have been selected or called for redemption in whole or in part.
Book-Entry Only System
The Bonds will be issued as one fully registered bond without coupons for each maturity and, when issued,
will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the
Bonds. Individual purchases may be made in book-entry form only. Purchasers will not receive certificates
representing their interest in the Bonds purchased. Principal of and interest on the Bonds will be paid by the Paying
Agent to DTC, which will in turn remit such principal of and interest on the Bonds to its participants for subsequent
dispersal to the Beneficial Owners of the Bonds, as applicable, as described herein. See APPENDIX F—“DTC
AND THE BOOK-ENTRY ONLY SYSTEM” herein.
Defeasance
All or any portion of the outstanding maturities of the Bonds may be defeased at any time prior to
maturity in the following ways:
(i)
Cash: by irrevocably depositing with the Paying Agent, or an escrow bank, an amount of
cash which together with amounts then on deposit in the Debt Service Fund, is sufficient to pay any or
all Bonds outstanding and designated for defeasance, including all principal of, and interest and
premium, if any; or
(ii)
United States Obligations: by irrevocably depositing in the Debt Service Fund or with an
escrow bank noncallable United States Obligations (as defined below) together with cash, if required,
in such amount as will, in the opinion of an independent certified public accountant, together with
interest to accrue thereon and moneys then on deposit in the Debt Service Fund together with the
interest to accrue thereon, be fully sufficient to pay and discharge any or all Bonds outstanding and
designated for defeasance (including all principal of and interest and premiums, if any, thereon) at or
before their maturity date:
then, notwithstanding that any Bonds so defeased shall not have been surrendered for payment, all
obligations of the District with respect to such Bonds so defeased shall cease and terminate, except only the
obligation of the District and the Paying Agent to pay or cause to be paid from funds deposited pursuant to
paragraphs (i) or (ii) above, to the owners of such Bonds not so surrendered and paid all sums due with respect
thereto.
“United States Obligations” means: direct and general obligations of the United States of America, or
obligations that are fully and unconditionally guaranteed as to principal and interest by the United States of
America, including (in the case of direct and general obligations of the United States of America) evidence of
direct ownership or proportionate interests in future interest or principal payments of such obligations.
Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust
company acts as custodian and holds the underlying United States Obligations; (b) the owner of the investment
5
is the real party in interest and has the right to proceed directly and individually against the obligor of the
underlying United States Obligations; and (c) the underlying United States Obligations are held in a special
account, segregated from the custodian’s general assets, and are not available to satisfy any claims of the
custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated;
provided that such obligations are rated “AAA” by Standard & Poor’s and “Aaa” by Moody’s Investors
Service.
Unclaimed Moneys
Any moneys held in any fund created pursuant to the Resolution, or by the Paying Agent in trust, for
the payment and discharge of any of the Bonds remaining unclaimed for one year after the date such Bonds
become due and payable shall be paid to the District to be applied in accordance with law; provided, however,
that the Paying Agent, before making such payment, shall cause notice to be mailed to the Owners of all such
Bonds at the addresses on the registration books, no less than 30 days prior to the date of such payment.
Thereafter, the District shall have all responsibility and liability for the payment of such Bonds.
Application and Investment of Bond Proceeds and Tax Revenues
Proceeds of the Bonds. The Bonds are being issued to advance refund a portion of the outstanding
Refunded Bonds and to pay the costs of issuing the Bonds.
The District and U.S. Bank National Association, as escrow bank (the “Escrow Bank”) will enter into
an Escrow Agreement, dated as of February 1, 2012 (the “Escrow Agreement”), with respect to the Refunded
Bonds being refunded, pursuant to which the District will deposit or cause to be deposited a portion of the
proceeds from the sale of the Bonds into an escrow fund (the “Escrow Fund”) to be held by the Escrow Bank.
The amount deposited in the Escrow Fund will be applied to the purchase of certain securities and investments
consisting of direct noncallable obligations of the United States of America or obligations which are
unconditionally guaranteed by the United States of America in an amount sufficient in the opinion of the
Verification Agent to defease the Refunded Bonds. See “ESCROW VERIFICATION” herein.
Net proceeds of the Bonds necessary to pay all costs of issuance not being paid by the Underwriter
shall be deposited in the fund of the District known as the “Denair Unified School District Refunding Bond
Cost of Issuance Fund” and shall be kept separate and distinct from all other District funds, and those proceeds
shall be used solely for the purpose of paying costs of issuance of the Bonds. The Costs of Issuance Fund
may, at the discretion of the District, be held by the Paying Agent or other Costs of Issuance custodian.
Any premium or accrued interest received by the District after the payment of the costs of issuing the
Bonds shall be transferred to the County Treasury and deposited into the Denair Unified School District
General Obligation Refunding Bonds Debt Service Fund (the “Debt Service Fund”) established under the
Bond Resolution and be applied to the payment of principal of interest on the Bonds. Interest and earning on
such fund will accrue to that fund.
The proceeds of the Bonds deposited in the Debt Service Fund and the ad valorem property taxes
levied to repay the Bonds, when received, shall be kept separate and apart in the Debt Service Fund and used
only for payments of principal of and interest on the Bonds. If after payment in full of the Bonds any excess
amounts remain in the Debt Service Fund, such amounts shall be transferred to the District’s General Fund.
Investment of Bond Proceeds and Other Moneys. The Bond proceeds deposited in the Escrow Fund
will be invested in general obligations as described above. The proceeds of the ad valorem property taxes
levied to repay the Bonds and moneys held in the Debt Service Fund established under the Bond Resolution
may be invested in any investment permitted by law. It is anticipated that the ad valorem tax proceeds and
moneys in the Debt Service Fund will be held by the Treasurer-Tax Collector of the County (the “County
Treasurer”) and be invested on behalf of the District by the County Treasurer in such investments as are
6
authorized by Section 53601 and following of the California Government Code, consistent with the investment
policy of the County. See APPENDIX E – “STANISLAUS COUNTY INVESTMENT POLICY AND
DESCRIPTION OF INVESTMENT POOL.” In addition, the District could provide instructions to invest in
other lawful investments.
Annual Debt Service
The following table sets forth the annual debt service requirements of the District for the Bonds:
Year Ending
August 1
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
TOTAL
Annual
Interest
(1)
Payment
Annual
Principal
Payment
Total
Annual Debt
Service
________________________
(1)
Interest payments on the Bonds will be made semiannually on February 1 and August 1 of each year, commencing August 1,
2012.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
The following table summarizes the aggregate annual debt service requirements for all of the
District’s outstanding Prior General Obligation Bonds (as defined herein) and the Bonds (assuming no optional
redemptions):
Denair Unified School District
Aggregate Annual Debt Service
Year Ending
(August 1)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
Total
General
Obligation Bonds(1)
$ 943,161.96
991,482.52
1,060,482.52
1,120,413.76
1,201,038.76
1,282,078.76
1,366,423.76
1,464,516.26
1,560,090.00
1,660,051.26
1,773,518.76
1,890,142.50
2,031,242.50
2,196,717.50
2,374,677.50
2,804,897.50
2,000,452.50
982,312.50
1,026,187.50
1,070,225.00
1,119,100.00
1,158,150.00
1,214,459.60
1,264,594.00
1,323,150.00
1,386,076.65
1,452,642.05
1,521,731.85
1,593,355.95
1,667,525.00
1,744,762.50
1,830,000.00
$ 48,075,660.92
Bonds
Debt Service
$
Aggregate Annual
Debt Service
$
____________________________________
(1)
Constitutes debt service on all outstanding general obligation bonds of the District, which are comprised of the
2001 General Obligation Bonds which will remain outstanding after the refunding of the Refunded Bonds and the
2007 General Obligation Bonds.
8
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds in connection with the Bonds are as follows:
Sources of Funds
Principal Amount of Bonds
Plus Net Original Issue Premium
Total Source of Funds
$
$
Uses of Funds
Escrow Fund
Costs of Issuance(1)
Deposit to Debt Service Fund
Total Uses of Funds
(1)
$
$
Includes all costs of issuance, including the Underwriter’s discount, legal fees and expenses, financial advisor fees and
expenses, costs of printing, rating agency fees, initial paying agent fees, escrow bank fees, bond insurance premium,
verification agent fees and other miscellaneous expenses the Underwriter has contracted to pay.
SECURITY FOR THE BONDS
General
The Bonds are general obligation bonds of the District payable solely from ad valorem property taxes
levied on taxable property within the District. The County, on behalf of the District, is empowered and
obligated annually to levy ad valorem taxes, without limitation of rate or amount, for the payment of the
principal of and interest on the Bonds due and payable in the next succeeding bond year (less amounts on
deposit in the Debt Service Fund established under the Bond Resolution), upon all property subject to taxation
by the District (except certain personal property which is taxable at limited rates). The Bond Resolution
pledges as security for the Bonds the proceeds from the levy of the ad valorem tax which are collected and
allocated to the payment of the Bonds. See “TAX BASE FOR REPAYMENT OF BONDS” herein.
The moneys in the Debt Service Fund to the extent necessary to pay the principal of and interest on
the Bonds as the same becomes due and payable, shall be transferred by the County to the Paying Agent. The
Paying Agent will in turn remit the funds to DTC for remittance of such principal and interest to its
Participants for subsequent disbursement to the Beneficial Owners of the Bonds.
On November 6, 2001, the District voters authorized the issuance of general obligation bonds in a
principal amount not to exceed $8,200,000 (“2001 General Obligation Bonds”). The District issued a
portion of the 2001 General Obligation Bonds in March 2002 as Series A originally issued as Current
Interest Bonds and Capital Appreciation Bonds in the amount of $5,161,002, which as of June 30, 2011
were outstanding in the amount of $5,480,283. In May 2003, the District issued as Series B the
remaining 2001 General Obligation Bonds as Current Interest Bonds and Capital Appreciation Bonds
originally issued in the amount of $3,037,067 which as of June 30, 2011 were outstanding in the amount
of $5,060,294. The net proceeds of the Bonds will be used to refund a portion of the 2001 General
Obligation Bonds, designated herein as the Refunded Bonds. On November 6, 2007, the District voters
authorized the issuance of general obligation bonds in a principal amount not to exceed $13,000,000 (the
“2007 General Obligation Bonds” and together with the 2001 General Obligation Bonds, the “Prior
General Obligation Bonds”). In July 2008, the District issued $7,500,000 of the 2007 General Obligation
Bonds as Current Interest Bonds. As of June 30, 2011, $7,490,000 aggregate principal amount of the
2007 General Obligation Bonds remained outstanding. See “DISTRICT DEBT STRUCTURE - LongTerm Obligations” herein for additional information.
9
Prior General Obligation Bonds that are expected to remain outstanding after the issuance of the
Bonds will be payable on a parity with the Bonds solely from ad valorem taxes levied on taxable property
within the District. See “THE BONDS – Debt Service Schedules” herein.
The amount of the annual ad valorem tax levied to repay the Bonds and the Prior General Obligation
Bonds will be determined by the relationship between the assessed valuation of taxable property in the District
and the amount of debt service due on the Bonds and the Prior General Obligation Bonds in any year.
Fluctuations in the annual debt service on the Bonds and the Prior General Obligation Bonds and the assessed
value of taxable property in the District may cause the annual tax rate to fluctuate. Economic and other factors
beyond the District’s control could cause a reduction in the assessed value of taxable property within the
District and necessitate a corresponding increase in the annual tax rate. These factors include a general market
decline in real property values, reclassification of property to a class exempt from taxation, whether by
ownership or use (such as exemptions for property owned by the federal government, the State of California
(the “State”) and local agencies and property used for qualified educational, hospital, charitable or religious
purposes), or the complete or partial destruction of taxable property caused by a natural or manmade disaster,
such as earthquake, flood or toxic contamination. For further information regarding the District’s assessed
valuation, tax rates, and other matters concerning taxation see “STATE CONSTITUTIONAL AND
STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” herein.
THE BONDS ARE GENERAL OBLIGATION BONDS OF THE DISTRICT AND DO NOT
CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE COUNTY. NO PART OF ANY
FUND OF THE COUNTY IS PLEDGED OR OBLIGATED TO THE PAYMENT OF THE BONDS.
BOND INSURANCE
The District has applied for a policy of municipal bond insurance with respect to the Bonds. If bond
insurance is purchased, the scheduled payment of principal and interest on the Bonds when due will be
guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds.
TAX BASE FOR REPAYMENT OF THE BONDS
The information in this section describes ad valorem property taxation, assessed valuation, and other
measures of the tax base of the District. The Bonds are payable solely from ad valorem taxes levied and
collected by the County on taxable property in the District. The District’s General Fund is not a source for the
repayment of the Bonds.
Ad Valorem Property Taxation
The collection of property taxes is significant to the District and the owners of the Bonds in two
respects. First, the County will levy and collect ad valorem taxes on all taxable parcels within the District
which are pledged specifically to the repayment of the Bonds and the Prior General Obligation Bonds.
Second, the general ad valorem property tax levy levied in accordance with Article XIIIA of the California
Constitution and its implementing legislation is a source of funding to operate the District’s educational
program. See “DISTRICT FINANCIAL MATTERS—Revenue Limit Sources” below. As described below,
the general ad valorem property tax levy and the additional ad valorem property tax levy pledged to repay the
Bonds and the Prior General Obligation Bonds will be collected on the annual tax bills distributed by the
County to the owners of parcels within the boundaries of the District. The additional ad valorem property tax
levy pledged to repay the Bonds and the Prior General Obligation Bonds may be used only to repay such
bonds and may not be used to fund other District expenditures.
Method of Property Taxation. Beginning in fiscal year 1978-79, Article XIIIA and its implementing
legislation permitted each county to levy and collect all property taxes (except for levies to support prior voter
approved indebtedness) and prescribed how levies on county-wide property values were to be shared with local
10
taxing entities within each county. All property is assessed using full cash value as defined by Article XIIIA
of the State Constitution. State law, however, provides exemptions from ad valorem property taxation for
certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions.
For purposes of allocating a county’s 1% base property tax levy, future assessed valuation growth
allowed under Article XIIIA (new construction, certain changes of ownership, up to 2% inflation) will be
allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth
occurs. Local agencies and schools will share the growth of “base” sources from the tax rate area. Each year’s
growth allocation becomes part of each agency’s allocation in the following year. The availability of revenue
from growth in the tax bases in such entities may be affected by the existence of redevelopment agencies
which, under certain circumstances, may be entitled to sources resulting from the increase in certain property
values. State law exempts $7,000 of the assessed valuation of an owner-occupied principal residence. This
exemption does not result in any loss of revenue to local agencies since an amount equivalent to the taxes that
would have been payable on such exempt values is made up by the State.
Taxes are levied for each fiscal year on taxable real and personal property which is situated in a
county as of the preceding January 1. Real property which changes ownership or is newly constructed is
revalued at the time the change in ownership occurs or the new construction is completed. The current year
property tax rate will be applied to the reassessment, and the taxes will then be adjusted by a proration factor to
reflect the portion of the remaining tax year for which taxes are due.
For assessment and collection purposes, property is classified either as “secured” or “unsecured” and
is listed accordingly on separate parts of the assessment roll, also containing State-assessed property, and
property, the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to
secure payment of the taxes. Other property is assessed on the “unsecured roll.”
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each
fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. A penalty of
10 percent attaches immediately to all delinquent payments. Property on the secured roll with respect to which
taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may
thereafter be redeemed by payment of a penalty of 1.5 percent per month to the time of redemption, plus costs
and a redemption fee. If taxes are unpaid for a period of five years or more, the property is subject to sale by
the Treasurer-Tax Collector of the county levying the tax.
Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if
unpaid, on August 31. A 10 percent penalty attaches to delinquent unsecured taxes. If unsecured taxes are
unpaid at 5 p.m. on October 31, an additional penalty of 1.5 percent attaches to them on the first day of each
month until paid. A county has four ways of collecting delinquent unsecured personal property taxes:
(1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk
specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of
delinquency for record in the county recorder’s office in order to obtain a lien on certain property of the
taxpayer; and (4) seizing and selling personal property improvements or possessory interests belonging or
assessed to the delinquent taxpayer.
Appeals of Assessed Value; Proposition 8 Reductions. A property owner may appeal a County
Assessor’s determination of assessed value based on Proposition 8, passed by the voters in November 1978
(“Proposition 8”), or based on a challenge to the base year value.
Proposition 8 requires that for each January 1 lien date, the taxable value of real property must be the
lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State
Constitution, or its full cash value, taking into account reductions in value due to damage, destruction,
depreciation, obsolescence, removal of property or other factors causing a decline in value. Property owners
may apply for a Proposition 8 reduction of their property tax assessment with the County board of equalization
11
or assessment appeals board. In most cases, an appeal is based on the property owners believe that market
conditions cause the property to be worth less than its current assessed value. Proposition 8 reductions may
also be unilaterally applied by the County Assessor. See “—Historic Assessed Valuations - Table 1- Summary
of Assessed Valuation” reflecting the County Assessor’s reduction of the assessed value of certain parcels,
commencing in fiscal year 2008-09.
Any reduction in the assessed value granted as a result of a Proposition 8 appeal, or unilateral
reassessment by the County Assessor, applies to the year for which the application or reassessment is made.
These reductions are subject to annual review and the assessed values are adjusted back to the original values
when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it
becomes subject to the annual inflationary factor growth rate allowed under Article XIIIA.
Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for
the year in which the appeal is made and thereafter. The base year is determined by the completion date of
new construction or the date of change of ownership. Any base year appeal must be made within four years of
change of ownership or new construction date.
The District cannot predict the changes in assessed values that might result from pending or future
appeals by taxpayers. Any reduction in aggregate assessed valuation of property within the District due to
appeals, as with any reduction in assessed valuation due to other causes, will result in an increase of the tax
rate levied upon all property subject to taxation within the District for the payment of principal of and interest
on the Bonds, when due.
District Assessed Valuation. Both the general ad valorem property tax levy and the additional ad
valorem levy for the Bonds is based upon the assessed valuation of the parcels of taxable property in the
District. Property taxes allocated to the District are collected by the County at the same time and on the same
tax rolls as are county, city and special district taxes. The assessed valuation of each parcel of property is the
same for both District and county taxing purposes. The valuation of secured property by the County is
established as of January 1, and is subsequently equalized in September of each year.
Taxation of State-Assessed Utility Property. A portion of property tax revenue of the District is
derived from utility property subject to assessment by the State Board of Equalization (“SBE”). State-assessed
property, or “unitary property,” is property of a utility system with components located in many taxing
jurisdictions that are assessed as part of a “going concern” rather than as individual pieces of real or personal
property. The assessed value of unitary and certain other state-assessed property is allocated to the counties by
the SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including
the District) according to statutory formulae generally based on the distribution of taxes in the prior year.
Teeter Plan. Certain counties in the State of California operate under a statutory program entitled
Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”).
Under the Teeter Plan local taxing entities receive 100% of their secured tax levies net of delinquencies, but do
not receive interest or penalties on delinquent taxes collected by the county. The County has adopted the
Teeter Plan. As a result, the County is required to pay to the District 100% of the secured property taxes levied
without regard to delinquencies. The County has the right under certain circumstances to terminate the Teeter
Plan or remove the District from the Teeter Plan. The County has not notified the District of any intention to
terminate the Teeter Plan or to exclude the District from the plan.
12
Historic Assessed Valuations
The information provided in Tables 1 through 5 below has been provided by California Municipal
Statistics, Inc. The District has not independently verified this information and does not guarantee its
accuracy.
Table 1 shows the assessed valuation in the District for the 2007-08 through the 2011-12 fiscal years.
After several years of increases, in Fiscal Year 2008-09, the District’s assessed valuation dropped by
approximately 5.5% as a result of a sharp decline in real estate values. The County is expected to release the
assessed valuations for Fiscal Year 2012-13 in the last quarter of 2012.
Table 1
Summary of Assessed Valuations(1)
Fiscal
Year
2007-08
2008-09
2009-10
2010-11
2011-12
(1)
(2)
(3)
Local
Secured
$841,001,016
795,250,979
773,149,485
763,914,910
763,482,867
(2)
Utility
$168,814
403,269
401,614
401,652
481,022
Unsecured
$23,790,133
24,457,917
23,314,962
22,429,222
21,771,370
(3)
Total
$864,959,963
820,112,165
796,866,061
786,745,784
785,672,259
Does not include unitary property valuation.
Includes property owned by each utility within the District.
Totals before the redevelopment increment deduction.
Source: California Municipal Statistics, Inc.
Tax Levies, Collections and Delinquencies. Table 2 summarizes the general ad valorem secured
property tax levied within the County in accordance with Article XIIIA of the California Constitution and the
amount delinquent for fiscal years 2006-07 through 2010-11. The tax levy and delinquency information are
not available for individual districts within Stanislaus County. Under the terms of the County’s Teeter Plan,
the District is paid 100% of the entire secured tax levy each year by the County and the County takes
responsibility for collecting delinquencies and keeps penalties and interest.
Table 2
STANISLAUS COUNTY
General Ad Valorem Secured Tax Charges and Delinquencies
Fiscal
Year
2006-07
2007-08
2008-09
2009-10
2010-11
Secured Tax
Charges Levied(1)
$437,629,068
506,644,920
454,764,544
424,251,265
414,118,855
Amount Delinquent
as of June 30
$26,374,570
48,880,351
22,479,686
14,218,355
10,608,959
(1)
% Delinquent
June 30(2)
6.03%
9.25
4.94
3.35
2.56
All property taxes collected by the County.
Reflects Countywide delinquency rate.
Source: California Municipal Statistics, Inc. based upon information available from the State of California Controller’s Office.
(2)
13
Tax Rates. Table 3 sets forth the ad valorem tax rates per $100 of assessed valuation levied by all
taxing entities in a typical Tax Rate Area for Fiscal Year 2011-12.
Table 3
Typical Tax Rate per $100 of Assessed Valuation
2011-12 Typical Total Tax Rate (TRA 56-001)
General
Yosemite Community College District
Total
1.000000
.116280
.024632
1.140912
Largest Property Taxpayers. Table 4 below lists the 20 largest property taxpayers within the District
measured by assessed valuation for fiscal year 2011-12.
Table 4
Twenty Largest 2011-12 Local Secured Property Taxpayers
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Property Owner
Fresno Farming LLC
Valley Fresh Foods Inc.
Foster Dairy Farms
Roy A. and Doris J. Johnson
California Royale LLC
Montpelier Orchards
Wendell J. Naraghi
William Haringa
Lakespring Farms Corp.
Jeanette Veldhuis
Protein Enterprises
Ahlem Foothill Farms
Jose L. and Barbara O. Garcia
Margaret Naraghi-Quattrin
Daniel Properties LP
Roger E. Smith
Texas Municipal Plans Consortium LLC
Joseph B. and Belinda M. Silva
Montpelier Farming Corporation
Campos Land Company
2011-12
Primary Land Use Assessed Valuation
Agricultural
$22,848,674
Agricultural
22,119,816
Agricultural
10,669,856
Agricultural
6,954,573
Agricultural
6,660,572
Agricultural
6,190,518
Agricultural
5,896,423
Agricultural
5,311,262
Agricultural
5,184,743
Agricultural
5,183,783
Agricultural
5,174,315
Agricultural
4,624,446
Agricultural
4,381,170
Agricultural
4,274,340
Agricultural
3,740,085
Agricultural
3,488,699
Agricultural
3,393,567
Agricultural
3,243,271
Agricultural
3,137,909
Agricultural
3,084,846
$135,562,868
(1)
2011-12 Local Secured Assessed Valuation: $763,482,867
14
% of
Total (1)
2.99%
2.90
1.40
0.91
0.87
0.81
0.77
0.70
0.68
0.68
0.68
0.61
0.57
0.56
0.49
0.46
0.44
0.42
0.41
0.40
17.76%
Assessed Valuation and Parcels by Land Use. Table 5 reflects the District’s assessed valuation by
land use in fiscal year 2011-12.
Table 5
Assessed Valuation and Parcels by Land Use
2011-12
Assessed Valuation (1)
% of
Total
No. of
Parcels
% of
Total
Non-Residential:
Agricultural
Commercial
Vacant Commercial
Industrial
Vacant Industrial
Government/Social/Institutional
Subtotal Non-Residential
$303,907,985
11,612,707
710,974
4,938,515
818,290
0
$321,988,471
39.81%
1.52
0.09
0.65
0.11
0.00
42.17%
634
40
5
12
4
149
844
20.20%
1.27
0.16
0.38
0.13
4.75
26.89%
Residential:
Single Family Residence
2-3 Residential Units
4+ Residential Units/Apartments
Mobile Home
Mobile Home Park
Vacant Residential
Subtotal Residential
$410,111,306
2,504,688
3,798,597
193,796
1,454,320
23,431,689
$441,494,396
53.72%
0.33
0.50
0.03
0.19
3.07
57.83%
1,977
25
15
11
2
265
2,295
62.98%
0.80
0.48
0.35
0.06
8.44
73.11%
Total
$763,482,867
100.00%
3,139
100.00%
(1)
Local Secured Assessed Valuation; excluding tax-exempt property.
THE DISTRICT
The information in this section concerning the management and operations of the Denair Unified
School District (the “District”), and the District’s revenues and expenditures, is provided as supplementary
information only. It should not be inferred from the inclusion of this information in this Official Statement that
the principal of or interest on the Bonds is payable from the General Fund of the District or from other
District revenues. The Bonds are payable solely from the proceeds of an ad valorem tax required to be levied
by the Board of Supervisors of Stanislaus County(the “County”) in an amount sufficient for the payment of
principal and interest on the Bonds. See “SECURITY FOR THE BONDS” and “TAX BASE FOR
REPAYMENT OF THE BONDS—Ad Valorem Property Taxation” in this Official Statement. See also
“District Debt Structure,” and “Direct and Overlapping Debt” in this Official Statement for information
concerning the District’s outstanding general obligation bonds payable from ad valorem taxes on a parity with
the Bonds.
Introduction
The Denair Unified School District (the “District”) was established as a school district in 1942. The
District is located in the central portion of Stanislaus County and serves the community of Denair, a portion of
the City of Turlock and unincorporated areas of Stanislaus County. The District encompasses approximately
56 square miles and currently operates one elementary school, one middle school, one high school, two
community day schools and two charter schools. The current student-teacher ratio in the District is 1:20.56 in
grades K-3, 1:24.02 in grades 4-6, 1:23.43 in grades 7-8, and 1:19.00 in grades 9-12.
15
Board of Trustees
The District is governed by a five member Board of Trustees (the “Board”). Members are elected to
four year terms. Elections for positions to the Board are held every two years, alternating between two and
three available positions. Current members of the Board of Trustees, together with their office and the date
their term expires, are listed below:
Table 6
Board of Trustees
Name
Term Expires
Louisa Allen, President
Carolyn Brown, Clerk
Robert Hodges, Trustee
John Plett, Trustee
Don Smith, Trustee
December 2013
December 2015
December 2013
December 2015
December 2015
Source: Denair Unified School District.
Superintendent and Administrative Personnel
The Superintendent of the District, appointed by the Board, is responsible for management of the
day-to-day operations and supervises the work of other District administrators. Mr. Edward E. Parraz is
currently the Superintendent of the District. Brief biographies of key personnel follows:
Edward E. Parraz, Superintendent. Mr. Parraz is in his tenth year as Superintendent of the District.
Prior to joining the District, he served the Visalia Unified School District for four years as Director of Middle
School Education, Director of Student Services, Area Administrator 7 - 12/Adult, and as an Educational
Consultant. In total, he has spent 32 years in the field of education in California. Mr. Parraz received his
master’s degree in education from the University of San Francisco, a Bachelor of Science degree in poultry
industry from California Polytechnic State University, San Luis Obispo, and a Bachelor of Science degree in
agricultural education from California State University, Fresno.
Judy Sylvester, Assistant Superintendent of Business Services. Ms. Sylvester is in her seventh year as
Assistant Superintendent of Business Services of the District. She has spent over 21 years in public school
business services. Prior to joining the District, she served the Patterson Joint Unified School District as
Accounting Technician for nearly seven years. She also worked at St. Helena Unified School District in a
similar capacity for over seven years. Ms. Sylvester received her bachelor of science in elementary education
degree in the Philippines, and an associate degree in Accounting from Napa Valley College. She completed
the School Business Managers Academy offered by the Association of California School Administrators, as
well as the School Business Management Program offered by the USA Foundation. Ms. Sylvester completed
the Professional Preparation in Public School Business Administration and has become the Certified Chief
Business Official of the District.
16
Recent Enrollment Trends
The following table sets forth the enrollment in the District from fiscal year 2006-07 through
2010-11 and an estimate for fiscal year 2011-12.
Table 7
Annual Enrollment
Fiscal Years 2006-07 through 2010-11 and an Estimate for Fiscal Year 2011-12
Fiscal Year
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12 (projected)
Non-Charter
School
Enrollment
1,331
1,364
1,366
1,252
1,120
1,085
Charter School
Enrollment*
189
236
228
256
526
551
Total Enrollment
1,520
1,600
1,564
1,508
1,646
1,636
*
The District maintains two dependent Charter Schools: Denair Charter Academy, which operates a K-12 independent study
program and Denair Academic Avenues, which operates a slow growth seat-based model commencing in 2010-11 with Grades 1-3,
and is currently operating Grades 1-4.
17
Average Daily Attendance and Base Revenue Limit
For each unit of ADA, the District expects to receive an amount equal to the base revenue limit from
the State. See “THE DISTRICT FINANCIAL MATTERS — Revenue Limit Sources” herein. The State,
however, practices deficit revenue limit funding, which reduces the amount of revenue limit funds received by
school districts. The ADA, base revenue limit and deficited revenue limit figures for the District for fiscal
years 2007-08 through 2011-12 are set forth below.
Table 8
Average Daily Attendance
Fiscal
Year
2007-08
2008-09
2009-10
2010-11
2011-12
(1)
Total Average
Daily Attendance(1)
1,321.34
1,312.32
1,254.23
1,117.18
1,064.86
Base Revenue
Limit per ADA
$6,174.40
6,503.40
6,765.40
6,740.40
6,883.40
Deficited Revenue
Limit per ADA
$6,174.40
5,993.27
5,523.61
5,529.62
5,523.65
Funded ADA, Charter Schools ADA not included. The decline in ADA in 2010-11 was a result of transfers
from the District’s regular elementary education program to the District’s dependent charter school, Denair
Academic Avenues. The District anticipates 2013-14 will be the first year of recovery from loss of ADA to the
dependent charter school when the prior 5th grade cohorts at the charter school are expected to matriculate to the
regular education middle school program.
Labor Relations and Collective Bargaining
The teachers of the District (certificated personnel) are represented by the California Teachers
Association as their exclusive bargaining agent and are covered by a contract that will expire on June 30, 2012.
As of June 30, 2011, the District employed 125 certificated employees.
Table 9
Certificated Employees
Fiscal Year
2006-07
2007-08
2008-09
2009-10
2010-11
Total Number of Employees
93
97
100
128
125
The non-teaching positions (“classified employees”) are represented by the California School
Employees Association, as their exclusive bargaining agent, and are covered by a contract that will expire on
June 30, 2013. As of June 30, 2011, the District employed 90 classified employees.
18
Table 10
Classified Employees
Fiscal Year
2006-07
2007-08
2008-09
2009-10
2010-11
Total Number of Employees
86
86
91
92
90
District Retirement Systems
The District participates in the California State Teacher’s Retirement System (“STRS”). This plan
covers all full-time and most part-time certificated employees. Active plan members are required to contribute
8% of their salary and the District is required to contribute an actuarially determined rate. The District’s
required employer contribution for fiscal years 2009-10 through 2011-12 has been 8.25% of annual payroll.
The contribution requirements of the plan members are established by State statute.
The District’s
contribution to STRS for fiscal years ending June 30, 2011, 2010 and 2009 were $575,888, $580,475 and
$588,199 respectively, and equal 100% of the required contributions for each year. The District’s contribution
for fiscal year 2011-2012 is budgeted at $573,569.
The District also participates in the California Public Employees’ Retirement System (“PERS”) a costsharing multiple employer public employee retirement system defined benefit pension plan. The plan provides
retirement and disability benefits, annual cost of living adjustments and survivor benefits to plan members and
beneficiaries. This plan covers all classified personnel who are employed four or more hours per day except
incoming employees already in PERS must continue to be paid at their prior PERS level regardless of the
number of hours worked per day. Active plan members are required to contribute 7% of their salary and the
District is required to contribute an actuarially determined rate. The District’s required employer contribution
rate for PERS was 9.709% in fiscal year 2009-10, 10.707% in fiscal year 2010-11 and 10.923% in fiscal year
2011-12. The contribution requirements of the plan members are established by State statute. The District’s
contribution to PERS for fiscal years ending June 30, 2011, 2010 and 2009 were $197,855, $178,975 and
$181,757 respectively, which represent 100% of the required contributions for each fiscal year and for fiscal
year 2011-2012 is budgeted to be $208,935. Both STRS and PERS are operated on a statewide basis.
Table 11
Retirement Contributions for Fiscal Year 2010-11
Number of
Employees
Covered
STRS
PERS
106
61
Total Employer
Contributions(1)
$575,888
197,855
Employer
Contribution as a
Percentage of
Covered Payroll
8.25%
10.707
(1)
Total Employer Contributions includes moneys from all available District funds.
Both STRS and PERS are operated on a statewide basis and, based on available information, both
STRS and PERS have unfunded liabilities. The amounts of the pension-award benefit obligation (PERS) or
19
unfunded actuarially accrued liability (STRS) will vary from time to time depending upon actuarial
assumptions, rates of return on investments, salary scales, and levels of contribution. The District is unable to
predict what the amount of liabilities will be in the future, or what the amount of contributions that the District
may be required to make will be.
STRS and PERS each issue separate comprehensive annual financial reports that include financial
statements and required supplementary information. Copies of the STRS annual financial report may be
obtained from STRS, P.O. Box 15275, Sacramento, California 95851-0275, and copies of the PERS annual
financial report and actuarial valuations may be obtained from the CalPERS Financial Services Division,
P.O. Box 942703, Sacramento, California 94229-2703. The information presented in these reports is not
incorporated by reference in this Official Statement.
Other Post-Employment Benefits
The District’s Post-Employment Benefit Plan (the “Plan”), is a single employer defined benefit
healthcare plan administered by the District. The Plan provides medical and dental insurance benefits to
eligible retirees and their spouses in accordance with District employment contracts. As of June 30, 2011,
membership in the Plan consisted of 10 retirees and beneficiaries and 133 active plan members. For Fiscal
year 2010-11 the District contributed $157,886 to the Plan of which $57,843 was used for current premiums
(approximately 83% of total premiums) and $100,043 was placed into an Irrevocable Trust Fund. Plan
members receiving benefits contributed $11,144 or approximately 17% of the total premium.
Under Government Accounting Standards Board Regulation 45 (“GASB 45”), the District is required
to actuarially determine its accrued liability for the Plan and the amount of its annual required contribution of
the employer (the “ARC”). The ARC represents a level of funding that, if paid on an ongoing basis, is
projected to cover the cost each year and amortize any unfunded actuarial accrued liabilities (UAAL) (or
funding excess) over a period not to exceed 30 years. The following table shows the components of the
District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the
District's net OPEB obligation to the Plan:
Annual required contribution
Contributions made
Increase in net OPEB obligation
Net OPEB obligation, beginning of year
Net OPEB (Asset), end of year
$140,228
(157,886)
(17,657)
56
$(17,601)
The annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB
obligation/(asset) is as follows:
Year Ended
June 30
Obligation/(Asset)
2011
Annual Required
$140,228
Percentage
100.00%
Net OPEB ____
($17,601)
As of June 30, 2011, the District’s unfunded actuarial accrued liability was $43,810.
Insurance
The District is a member of the Central Regions Schools Insurance Group (“CRSIG”), a public entity
risk pool. The District pays an annual premium to CRSIG for worker’s compensation, property, liability and
medical insurance coverage. During the year ending June 30, 2011 the District paid $788,788 to CRSIG for
worker’s compensation, property and liability and medical coverage.
20
DISTRICT FINANCIAL MATTERS
Accounting Practices
The accounting policies of the District conform to generally accepted accounting principles and are in
accordance with the policies and procedures of the California School Accounting Manual. This manual,
according to Section 41010 of the California Education Code, is to be followed by all State school districts.
Revenues are recognized in the period in which they become both measurable and available to finance
expenditures of the current fiscal period. Expenditures are recognized in the period in which the liability is
incurred.
District Budget
The District is required by provisions of the California Education Code to maintain each year a
balanced budget in which the sum of expenditures plus the ending fund balance cannot exceed the revenues
plus the carry over fund balance from the previous year. The California State Department of Education
imposes a uniform budgeting format for each school district in the State.
School districts must adopt a budget no later than June 30 of each year. The budget must be submitted
to the County Superintendent of Schools (the “County Superintendent”) within five days of adoption or by
July 1, whichever occurs first. A district may be on either a dual or single budget cycle. The dual budget
option requires a revised and readopted budget by September 1 that is subject to State mandated standards and
criteria. The revised budget must reflect changes in projected income and expenses subsequent to July 1. The
single budget is only readopted if it is disapproved by the County Superintendent, or as needed. The District is
on a single budget cycle and adopts its budget on or before July 1.
For both dual and single budgets submitted on July 1, the County Superintendent will (a) examine the
adopted budget for compliance with the standards and criteria adopted by the State Board of Education and
identify technical corrections necessary to bring the budget into compliance, (b) determine if the budget allows
the district to meet its current obligations, and (c) determine if the budget is consistent with a financial plan
that will enable the district to meet its multi-year financial commitments. On or before August 15, the County
Superintendent will approve or disapprove the adopted budget for each school district.
Budgets will be disapproved if they fail the above standards. The district board must be notified by
August 15 of the County Superintendent’s recommendations for revision and reasons for the
recommendations. The County Superintendent may assign a fiscal advisor or appoint a committee to examine
and comment on the recommendations. The committee must report its findings no later than August 20. Any
recommendations made by the County Superintendent must be made available by the district for public
inspection. The law does not provide for conditional approvals; budgets must be either approved or
disapproved. No later than August 20, the County Superintendent must notify the State Superintendent of
Public Instruction (the “State Superintendent”) of all school districts whose budget has been disapproved.
Each dual budget option district and each single budget option district whose budget has been
disapproved must revise and readopt its budget by September 8, reflecting changes in projected income and
expenses since July 1, including responding to the County Superintendent’s recommendations. The County
Superintendent must determine if the budget conforms with the standards and criteria applicable to final
district budgets, and, not later than October 8, must approve or disapprove the revised budgets. If the budget is
disapproved, the County Superintendent will call for the formation of a budget review committee pursuant to
Education Code Section 42127.1. Until a district’s budget is approved, the district will operate on the lesser of
its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year.
After approving the districts’ budgets, the County Superintendent will monitor, throughout the fiscal
year, each school district under his or her jurisdiction pursuant to its adopted budget to determine on a
21
continuing basis if the district can meet its current and subsequent year financial obligations. If the County
Superintendent determines that a district cannot meet its current or subsequent year obligations, the County
Superintendent may do either or both of the following: (a) assign a fiscal advisor to enable the district to meet
those obligations, or (b) if a study and recommendations are made and a district fails to take appropriate action
to meet its financial obligations, the County Superintendent must so notify the State Superintendent, and then
may do any or all of the following for the remainder of the fiscal year: (i) request additional information
regarding the district’s budget and operations; (ii) develop and impose, also after consulting with the district’s
board, revisions to the budget that will enable the district to meet its financial obligations; and (iii) stay or
rescind any action inconsistent with such revisions. However, the County Superintendent may not abrogate
any provision of any collective bargaining agreement that was entered into prior to the date upon which the
County Superintendent assumed authority.
At minimum, school districts file with their County Superintendent and the State Department of
Education a First Interim Financial Report by December 15 covering financial operations from July 1 through
October 31 and a Second Interim Financial Report by March 15 covering financial operations from
November 1 through January 31. Section 42131 of the Education Code requires that each interim report be
certified by the school board as either (a) “positive,” certifying that the district, “based upon current
projections, will meet its financial obligations for the current fiscal year and subsequent two fiscal years,”
(b) ”qualified,” certifying that the district, “based upon current projections, may not meet its financial
obligations for the current fiscal year or two subsequent fiscal years,” or (c) ”negative,” certifying that the
district, “based upon current projections, will be unable to meet its financial obligations for the remainder of
the fiscal year or the subsequent fiscal year.” A certification by a school board may be revised by the County
Superintendent. If either the First or Second Interim Report is not “positive,” the County Superintendent may
require the district to provide a Third Interim Financial Report covering financial operations from February 1
through April 30 by June 1. If not required, a Third Interim Financial Report is not prepared. Each interim
report shows fiscal year to date financial operations and the current budget, with any budget amendments made
in light of operations and conditions to that point. After the close of the fiscal year on June 30, an unaudited
financial report for the fiscal year is prepared and filed without certification with the County Superintendent
and the State Department of Education. As a part of the legislation enacting the State’s budget for fiscal year
2011-12, the requirement that districts demonstrate that they can meet their financial obligations for the
subsequent two fiscal years was suspended for fiscal year 2011-12. Thus, school districts will only be required
to budget for the current year, and will not be required to demonstrate that they can meet their financial
obligations for the subsequent two fiscal years (2012-13 and 2013-14). School districts, however, will be
required to project the same level of revenue per student in 2011-12 as in 2010-11, as well as maintain staffing
and program levels commensurate with such level of funding. See “STATE OF CALIFORNIA FISCAL
ISSUES—2011-12 State Budget.”
The District has never had an adoption budget disapproved by the County Superintendent of schools
and has never received a “negative” certification of an Interim Financial Report pursuant to AB 1200. See
however, “DISTRICT FINANCIAL MATTERS – Current Financial Condition.”
Major Revenues
School district revenues consist primarily of State moneys required to be paid to school districts under
the California Constitution, ad valorem property taxes collected on property within the District and funds
received from the State in the form of categorical aid under ongoing programs of local assistance. All State aid
is subject to the appropriation of funds in the State’s annual budget. Decreases in State revenues may affect
appropriations made by the legislature to school districts.
Each school district receives a portion of the local property taxes that are collected within its district
boundaries. This amount is compared to the total revenue limit amount that a district is to receive under State
funding formulas, and the balance is received in the form of State aid. The sum of the property taxes and State
22
aid equal the district’s revenue limit. Districts which receive the minimum amount of State aid are known as
“Basic Aid” districts. The District is not a Basic Aid district.
School districts in the State have historically received most of their income under a formula known as
the State revenue limit. This apportionment, which is funded by State general fund moneys and local property
taxes (and in the case of community college districts, certain other local revenues), is allocated to the school
districts based on the ADA of the school districts for either the current or preceding school year. Generally,
such apportionments will amount to the difference between the school district’s revenue limit and the district’s
local property tax allocation. Revenue limit calculations are adjusted annually in accordance with a number of
factors designed primarily to provide cost of living increases and to equalize revenues among all California
school districts of the same type (i.e., all unified school districts, all high school districts or all elementary
school districts).
A small part of a school district’s budget is from local sources other than property taxes, such as
interest income, donations and sales of property. The rest of a school district’s budget comes from categorical
funds provided by the State and federal government. These funds are to be used for specific programs and
typically cannot be used for any other purpose. The California lottery is another source of funding for school
districts, providing approximately 2% of a school district’s budget. Every school district receives the same
amount of lottery funds per pupil from the State; however, these are not categorical funds as they are not for
particular programs or children. The initiative authorizing the lottery mandates the funds be used for
instructional purposes, and prohibits their use for capital purposes.
The State revenue limit was first instituted in 1973-74 to provide a mechanism to calculate the amount
of general purpose revenue a school district is entitled to receive from state and local sources. Prior to 197374, taxpayers in districts with low property values per pupil paid higher tax rates than taxpayers in districts
with high property values per pupil. However, despite higher tax rates, less was spent per pupil in districts
with low property values per pupil than districts with high property values per pupil. Thus, the State revenue
limit helps to alleviate the inequities between the two types of districts.
The State revenue limit is calculated three times a year for each school district. The first calculation is
performed for the February 20th First Principal Apportionment, the second calculation for the June 25th
Second Principal Apportionment, and the final calculation for the end of the year Annual Principal
Apportionment. Calculations are reviewed by the county and submitted to the State Department of Education
to review the calculations for accuracy, calculate the amount of state aid owed to such school district and
notify the State Controller of the amount, who then distributes the state aid.
The calculation of the amount of State aid a school district is entitled to receive each year is basically
a five-step process. First, the prior year State revenue limit per ADA is established, with recalculations as are
necessary for adjustments for equalization or other factors. Second, the adjusted prior year state revenue limit
per ADA is inflated according to formulas based on the implicit price deflator for government goods and
services and the statewide average State revenue limit per ADA for school districts. Third, the current year’s
State revenue limit per ADA for each school district is multiplied by such school district’s ADA for either the
current or prior year. Fourth, revenue limit add-ons are calculated for each school district if such school
district qualified for the add-ons. Add-ons include the necessary small school district adjustments, meals for
needy pupils and small school district transportation, and are added to the State revenue limit for each
qualifying school district. Finally, local property tax revenues are deducted from the State revenue limit to
arrive at the amount of state aid based on the State revenue limit to which each school district is entitled for the
current year.
Historical General Fund Financial Information
Table 12 below summarizes the District’s audited General Fund Revenues, Expenditures and Changes
in Fund Balance for fiscal years 2006-07 through 2010-11. See APPENDIX B—“DISTRICT’S 2010-11
23
AUDITED FINANCIAL STATEMENTS” for further detail on the District’s financial condition as of June 30,
2011. The District has not requested, and the Auditor (defined herein) has not provided any review or update
of such financial statements in connection with inclusion in this Office Statement.
24
Table 12
General Fund Balances, Revenues, and Expenditures
Fiscal Years 2006-07 through 2010-11
REVENUES
Revenue Limit
Federal Revenue
Other State Revenue
Other Local Revenue
Total Revenues
EXPENDITURES
Current
Instruction
Instruction-related
activities:
Supervision of
instruction
Instructional library,
media, and technology
School site
administration
Pupil Services:
Home-to-school
transportation
Food services
Other pupil services
General administration:
Data processing
All other general
administration
Plant services
Facility acquisition and
construction
Ancillary services
Community services
Other Outgo
Debt Service
Principal
Interest and other
Total Expenditures
Excess (Deficiency) of
Revenues over
Expenditures
Other Financing Sources &
Uses
Transfers In
Other Sources
Transfers Out
Net Financing Sources
(Uses)
Net Change in Fund
Balance
Beginning Balance
Ending Balance
2008-09
Audited
2009-10
Audited
2010-11
(1)
Audited
2006-07
Audited
2007-08
Audited
$ 8,324,469
587,390
2,162,066
752,801
$11,826,726
$8,319,652
716,267
2,190,926
805,873
$12,032,718
$8,042,398
1,366,989
1,527,293
934,767
$11,871,477
$6,740,385
1,416,689
2,404,543
848,033
$11,409,650
$6,361,827
1,037,704
1,716,167
977,631
$10,093,329
$ 7,324,397
$8,096,022
$7,842,103
$7,336,157
$6,468,995
68,002
77,844
109,856
86,357
157,812
242,218
253,014
267,202
240,696
239,635
803,141
916,911
976,572
871,019
694,271
156,681
322,122
167,060
165,829
160,489
3,995
232,042
4,030
335,073
1,170
340,230
-275,810
-299,723
13,626
568,033
14,404
681,963
-745,705
16,096
657,234
13,479
668,212
1,019,582
1,003,002
1,028,315
1,043,747
1,006,099
16,951
150,589
-543,026
139,679
-228,250
126,127
2,283
236,467
124,261
-265,868
118,544
10,410
258,827
-$11,125,332
-$12,072,314
-$11,843,090
-$11,083,074
-______--___
$10,113,447
701,394
(39,596)
28,357
326,576
(20,118)
87,586
11,012
47,057
159,116
2,454
(72,574)
(61,562)
(263)
46,794
(460,303)
(301,187)
(51,660)
(49,206)
75,151
25,389
(69,324)
1,163,267
$1,238,418
1,238,419
$1,263,808
(113,557)
(25,971)
$ 1,264,425
$1,163,267
(1)
1,263,808
$1,194,484
The District expects its Board of Trustees to accept the 2010-11 Audited Financial Statements at the February 9, 2012 Board meeting.
Source: Denair Unified School District Audited Financial Statements for fiscal years 2006-07 though 2010-11.
25
Table 13 below compares the District’s General Fund Adopted Budget (GAAP Basis) to its General
Fund actual revenues and expenditures (GAAP Basis) for fiscal year 2008-09, and its General Fund Adopted
Budget to its General Fund actual revenues and expenditures for fiscal years 2009-10 and 2010-11.
Table 13
Comparison of 2008-09 (GAAP Basis) General Fund Budgeted to General Fund Actual Revenues and
Expenditures (GAAP Basis) and 2009-10 and 2010-11 General Fund Budgeted to General Fund Actual
Revenues and Expenditures
2008-09
Budget
REVENUES
Revenue Limit Sources
Federal Revenues
Other State Revenues
Other Local Revenue
(1)
Total Revenues
$
Total Expenditures
8,294,944
703,536
1,654,249
808,115
11,460,844
$
$
5,565,705
1,876,732
1,843,220
450,656
1,581,609
186,381
$
$
11,510,303
$
EXPENDITURES
Certificated salaries
Classified salaries
Employee benefits
Books and supplies
Services, other operating expenses
Other outgo
Capital outlay
(1)
Excess (Deficiency) of Revenues
Over Expenditures
2008-09
Audited
$
8,042,398
1,366,989
1,205,247
934,767
11,549,401
$
$
$
5,559,634
1,903,906
1,839,165
331,538
1,697,679
189,122
11,521,044
$
6,000
2009-10
Audited
2009-10
Budget
$
6,940,688
1,356,035
1,632,217
793,714
10,722,654
$
6,740,385
1,416,689
2,164,528
848,033
11,169,635
$
5,103,083
1,832,796
1,868,835
342,770
1,573,723
200,765
10,921,972
$
$
$
5,169,658
1,789,810
1,810,099
288,432
1,573,547
211,513
10,843,059
$
$
$
$
(49,459)
$
28,357
$
(199,318)
$
326,576
$
$
$
$
159,116
(460,303)
(301,187)
$
$
(293,769)
(293,769)
$
$
47,057
(263)
46,794
$
$
10,500
-10,500
$
Net Change in Fund Balances
$
(38,959)
$
75,151
$
(493,087)
$
25,389
$
Fund Balance - Beginning
Fund Balance - Ending
$
$
$
$
1,163,267
1,238,418
$
$
$
$
1,238,419
1,263,808
$
$
OTHER FINANCING SOURCES
Transfers In
Transfers Out
Net Financing Sources (Uses):
1,163,267
1,124,308
(1)
1,238,419
745,332
2010-11
(2)
Audited
2010-11
Budget
6,121,028
805,126
1,361,283
849,588
9,137,025
$
4,364,023
1,756,243
1,678,586
173,089
1,404,920
187,337
9,564,198
$
(427,173)
----
(427,173)
1,263,808
836,635
$
$
4,408,328
1,733,087
1,641,523
284,969
1,676,785
144,840
16,951
9,906,483
$
(20,118)
$
$
2,454
(51,660)
(49,206)
$
(69,324)
$
$
On behalf of the District, the State annually contributes to CalSTRs. On behalf payments are not included in budget
amounts rather under GAAP, these amounts are reported as revenues and expenditures.
(2)
The District expects its Board of Trustees to accept the 2010-11 Audited Financial Statements at the February 9,
2012 Board meeting.
Source: Denair Unified School District adopted budgets for fiscal years 2008-09 through 2010-11, and Audited
Financial Statements for fiscal years 2008-09 through 2010-11.
26
6,361,827
1,037,704
1,509,203
977,631
9,886,365
1,263,808
1,194,484
Table 14 below sets forth the District’s General Fund balance sheet for the last five fiscal years.
Table 14
Summary of General Fund Balance Sheet
ASSETS
Deposits and Investments
Receivables
Due from other funds
Prepaid Expenses
Stores inventories
Total Assets
LIABILITIES & FUND BALANCES
Liabilities:
Accounts Payable
Due to other funds
Deferred revenue
Total Liabilities
Fund Balances:
Reserved for:
Revolving cash
Stores inventories
Prepaid expenditures
Legally restricted balance
Unreserved:
Designated
Undesignated, reported in:
General Fund
Special revenue funds
Debt service funds
Capital projects funds
Non-spendable
Restricted
Committed
Assigned
Unassigned
(2)
Total Fund Balances
Total Liabilities and Fund Balances
$
1,338,460
951,760
1,037
2,500
$ 2,293,757
$
$
$
$
850,605
27,661
151,066
1,029,332
$
$
686,554
1,256,340
3,135
1,946,029
$
652,464
130,298
782,762
$
$
$
Audited
(1)
2010-11
Audited
2009-10
Audited
2008-09
Audited
2007-08
Audited
2006-07
415,815
2,148,598
49,128
1,500
2,615,041
$
342,371
2,134,903
113,625
1,467
2,592,366
$
1,108,927
59,925
207,771
1,376,623
$
1,194,182
15,501
118,875
$ 1,328,558
$
$
$
$
282,865
1,920,689
34,005
6,969
2,244,528
769,758
18
280,268
1,050,044
541,143
-
3,900
3,135
614,108
3,900
1,500
734,781
3,900
1,467
258,443
-
401,583
356,066
498,237
336,000
-
$
321,699
1,264,425
$
186,058
1,163,267
$
1,238,418
$
663,998
1,263,808
$
10,869
150,745
206,008
826,862
1,194,484
$
2,293,757
$
1,946,029
$
2,615,041
$
2,592,366
$
2,244,528
(1)
The District expects its Board of Trustees to accept the 2010-11 Audited Financial Statements at the February 12, 2012 Board
meeting.
(2)
See “APPENDIX B – DISTRICT’S 2010-11 AUDITED FINANCIAL STATEMENTS – NOTE 1 – Summary of Significant
Accounting Policies” for a discussion of changes in accounting principles.
Source: Denair Unified School District Audited Financial Statements for fiscal years 2006-07 through 2010-11.
Current Financial Condition
The District’s financial condition is closely linked the finances of the State, which has an ongoing
structural budget deficit. Future budget decisions by the State could have an adverse impact on the District’s
financial condition. See “STATE OF CALIFORNIA FISCAL ISSUES.”
The Legislature enacted and the Governor signed the State budget for fiscal year 2011-12 (the “201112 State Budget”) on June 30, 2011. As reflected in the District’s First Interim Report, the 2011-12 State
Budget required that for the 2011-12 fiscal year, each school district budget to project the same level of
27
revenue per unit of average daily attendance (ADA) as it received in the 2010-11 fiscal year. In addition, the
2011-12 State Budget assumed $4 billion more in General Fund revenues than was forecast in the May
Revision. Under the 2011-12 State Budget if December 2011 revenues were not as strong as expected,
automatic spending reductions would be triggered.
The “trigger” provisions are as follows: (i) if revenues for the year are estimated to be less than $1
billion below the forecast, then no changes are required; (ii) if revenues fall between $1 billion and $2 billion
lower, then a series at additional cuts are triggered, including 1 $23 million across-the-board cut to child care
and $30 million reduction to community colleges; and (iii) if revenues fall more than $2 billion, then the state
will impose additional cuts to public education of up to $1.9 billion, including a 4% reduction to revenue limits
and a $248 million cut to school transportation. The revenue limit reductions would be proportional to the
amount of revenue shortfall.
The District’s First Interim Report, 2012-13 included the full reduction equal to negative $293,711 as
called for in the State “trigger” provisions. The “trigger” reductions have been revised as of the midyear
revenue estimate by the State Department of Finance. The District estimates the current reduction at negative
$14,731 plus a 50% reduction in transportation funding, or negative $25,618 for a total “trigger” reduction of
negative $40,349. As a result, the District expects to add $253,362 back into its budget. The changes will be
reflected in the District’s Second Interim Report for the period ending January 31, 2012.
The District self “qualified” its First Interim Report, 2012-13. See “DISTRICT FINANCIAL
MATTERS – District Budget.” The District’s First Interim Report, 2012-13 included the District’s projections
for its General Fund for the next two fiscal years. To obtain a positive certification of its financial condition,
the District is required by law to maintain a General Fund ending balance equal to 3% of its annual General
Fund expenditures in the current and the next two fiscal years. The 2011-12 State Budget specified that school
district’s are not required to demonstrate their ability to meet its financial obligations for the two subsequent
fiscal years (2012-13 and 2013-14). The District’s First Interim Report contained a 2.33% reserve for the
2012-13 fiscal year due to the impact of the full “trigger” cut in the amount of $293,711. However, based on
the State’s revisions to the “trigger” cuts, the District expects the impact of the cuts will be negative $40,349
rather than the negative $293,711 reflected in its First Interim Financial Report. As a result, the District
expects a “positive” certification for its Second Interim Report.
Revenue Sources
The District categorizes its General Fund revenues into four sources: (1) revenue limit sources
(consisting of a mix of State and local revenues); (2) federal sources; (3) other State sources; and (4) other
local sources. Each of these revenue sources is described below.
Revenue Limit Sources
Since fiscal year 1973-74, State school districts have operated under general purpose revenue limits
established by the State Legislature. In general, the base revenue limits are calculated for each school district
by multiplying (1) the ADA for each such district by (2) a base revenue limit per unit of ADA. The base
revenue limit calculations are adjusted annually in accordance with a number of factors designed primarily to
provide cost of living increases and to equalize revenues among all State school districts of the same type. For
fiscal year 2008-09, the District’s base revenue limit per unit of ADA was $6,503.40 but the State only funded
$5,993.27 due to the State’s budget shortfall. For fiscal year 2009-10, the District’s base revenue limit per unit
of ADA was $6,765.40, but the State only funded $5,523.61 due to the State’s budget shortfall. For fiscal year
2010-11, the District budgeted assuming a base revenue limit per unit of ADA of $6,740.40 but the State only
funded $5,529.62 due to the State’s budget shortfall. For fiscal year 2011-12, the District’s base revenue limit
per unit of ADA was $6,883.40 but the State only funded $5,523.65 due to the State’s budget shortfall.
28
In fiscal year 2009-10, the District received approximately $6,740,385 of revenue limit source income,
representing approximately 62.32% of its General Fund revenues. For fiscal year 2010-11, the District
received approximately $6,361,825 of revenue limit source income, representing approximately 64.35% of its
General Fund revenues. In fiscal year 2011-12, the District is estimating approximately $6,066,180 of revenue
limit source income, representing 62.95% of its General Fund revenues. Funding of the District’s revenue limit
is accomplished by a mix of (1) local property taxes, and (2) State apportionments. Generally, the State’s
apportionments amount to the difference between the District’s revenue limit and its local property tax
revenues.
Beginning in fiscal year 1978-79, Proposition 13 and its implementing legislation permitted each
county to levy and collect all property taxes (except for levies to support prior voter approved indebtedness)
and prescribed how levies on county-wide property values were to be shared with local taxing entities within
each county.
Federal Revenues
The federal government provides funding for several District programs, including special education
programs, programs under the Educational Consolidation and Improvement Act, and specialized programs
such as Drug Free Schools. The federal revenues, all of which are restricted and must be spent by the District
on specified programs, comprised approximately 13.10% of District General Fund revenues in fiscal year
2009-10 and approximately 10.49% in fiscal year 2010-11. In the District’s 2011-12 First Interim Report
federal revenues are projected to equal approximately 10.88% of General Fund revenues.
Other State Sources
As discussed above under the caption “Revenue Limit Sources,” the District receives State
apportionment of basic and equalization aid in an amount equal to the difference between the District’s
revenue limit and its property tax sources. In addition to such apportionment revenue, the District receives
substantial other State revenues (“Other State Revenues”). In fiscal year 2009-10 and 2020-11, respectively,
Other State Revenues comprised approximately 16.69% and 16.12% of total General Fund revenues. In fiscal
year 2011-12, Other State Revenues are projected to equal approximately 16.22% of total General Fund
revenues. Many of the Other State Revenues are restricted to specific types of program uses such as special
education, transportation, class size reduction and instructional materials.
Other Local Sources
In addition to property taxes, the District receives additional local sources (“Other Local Sources”)
from items such as the leasing of property owned by the District and interest earnings, as well as, donations.
These Other Local Sources comprised approximately 7.89 and 8.44% of the total General Fund revenues in
fiscal years 2009-10 and 2010-11, respectively, and are projected to equal approximately 10.51% of the total
General Fund revenues in fiscal year 2011-12.
29
DISTRICT DEBT STRUCTURE
Long-Term Obligations
As of June 30, 2011, the District had $24,956,429 of long-term debt outstanding. A schedule of
changes in long-term debt for the fiscal year ended June 30, 2011 is set forth in Table 15 below.
Table 15
Long-Term Debt(1)
General Obligation Bonds
Premium on bond issue
Certificates of Participation
Compensated Absences-net
Capital Leases
Bond Anticipation Notes
Early Retirement
Other Postemployment Benefits
Total
Balance
July 1, 2010
$17,889,335
157,123
3,315,000
197,917
18,836
3,071,077
50,000
56
$24,699,344
Additions
$3,786,796
----383,923
--$ 4,170,719
Deductions
$175,000
9,242
165,000
65,000
18,836
3,455,000
25,000
56
$3,913,634
Balance
June 30, 2011
$21,501,131
147,881
3,150,000
132,417
--25,000
-$24,956,429
Due in
One Year
$230,000
9,242
170,000
---25,000
-$434,242
(1)
See Note 9 to the District’s 2010 Audited Financial Statements attached as Appendix B hereto.
Capital Plan
The District currently has no plans to issue additional debt for future capital projects. Construction of
certain facilities planned within the next three to five years will be funded from prior bond proceeds and State
funds.
The District maintains five funds, separate and apart from the General Fund, to account for State and
local funds collected by the District for capital facilities needs, including the Charter School Fund, the Capital
Facilities Fund, the Building Fund, the County School Facilities Fund and the Special Reserve Fund for the
Deferred Maintenance Fund. In the Capital Facilities Fund, the primary source of monies is developer fees
paid in connection with new residential and commercial development in the District. The balance in the
District’s Capital Facilities Fund was $113,725 as of June 30, 2011. The Building Fund contains moneys from
the sale of the District’s general obligation bonds. The balance in the Building Fund as of June 30, 2011 was
$434,317. The balances remaining in the District’s County School Facilities Fund, into which monies granted
by the State to the District for school facilities are deposited, was $104,804 as of June 30, 2011, the balance in
the Special Reserve Fund for the Deferred Maintenance Fund was $82,842.
Direct and Overlapping Debt
Numerous overlapping local agencies provide public services within the District. These local
agencies have outstanding debt issued in the form of general obligation, lease revenue and special tax and
assessment bonds. An estimate of direct and overlapping debt of the District is shown in Table 16 below based
on information available as of February 1, 2012. Tax and revenue anticipation notes, enterprise, revenue,
mortgage revenue and tax allocation bonds, and non-bonded capital lease obligations are excluded from the
debt statement. The information provided in Table 16 has been provided by California Municipal Statistics,
Inc. The District has not independently verified the information in Table 16 and does not guarantee its
accuracy.
30
Table 16
Estimated Direct and Overlapping Bonded Debt
as of February 1, 2012
2011-12 Assessed Valuation:
Redevelopment Incremental Valuation:
Adjusted Assessed Valuation:
$785,672,259
16,768,322
$768,903,937
% Applicable
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
Yosemite Community College District
1.719%
100.
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Stanislaus County Certificates of Participation
Stanislaus County Pension Obligations
Stanislaus County Office of Education Certificates of Participation
Denair Unified School District Certificates of Participation
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT
COMBINED TOTAL DEBT
2.451%
2.451
2.451
100.
Debt 2/1/12
$ 5,262,824
18,268,073 (1)
$23,530,897
$1,763,985
522,308
103,800
2,980,000
$5,370,093
$28,900,990 (2)
Ratios to 2011-12 Assessed Valuation:
Direct Debt ($18,268,073) ............................................................ 2.33%
Total Direct and Overlapping Tax and Assessment Debt ............... 3.00%
Ratios to Adjusted Assessed Valuation:
Combined Direct Debt ($21,248,073) ......................................... 2.76%
Combined Total Debt...................................................................... 3.76%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
capital lease obligations.
31
STATE CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT
REVENUES AND APPROPRIATIONS
The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in
an amount sufficient for the payment thereof. See “SECURITY FOR THE BONDS” herein. Articles XIIIA,
XIIIB, XIIIC and XIIID of the Constitution, Propositions 39, 46, 49, 98, 111, and 1A, and certain other
provisions of law discussed below, are discussed in this section to describe the potential effect of these
Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for
operating and other purposes, and it should not be inferred from the inclusion of such materials that these
laws impose any limitation on the ability of the District to levy ad valorem taxes for payment of the Bonds.
The tax levied by the County for payment of the Bonds was approved by the District’s voters in compliance
with Article XIIIA, Article XIIIC, and all applicable laws.
Article XIIIA
On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13
and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to
the California Constitution, among other things affects the valuation of real property for the purpose of
taxation in that it defines the full cash property value to mean “the county assessor’s valuation of real property
as shown on the 1975/76 tax bill under “full cash value,” or thereafter, the appraised value of real property
newly constructed, or when a change in ownership has occurred after the 1975 assessment.” The full cash
value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the
consumer price index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of
declining property value caused by damage, destruction or other factors including a general economic
downturn. The amendment further limits the amount of any ad valorem tax on real property to 1% of the full
cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and bonded indebtedness for the acquisition or improvement of real property
approved on or after July 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition.
Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable
property is shown at full assessed value as described above. In conformity with this procedure, all taxable
property value included in this Official Statement (except as noted) is shown at 100% of assessed value and all
general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness
and pension liability are also applied to 100% of assessed value.
Future assessed valuation growth allowed under Article XIIIA (new construction, change of
ownership, 2% annual value growth) will be allocated on the basis of “situs” among the jurisdictions that serve
the tax rate area within which the growth occurs. Local agencies and school districts will share the growth of
“base” revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation
the following year. The County is unable to predict the nature or magnitude of future revenue sources that
may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the
levying of any other ad valorem property tax above the 1% limit except for taxes to support indebtedness
approved by the voters as described above.
Article XIIIB
On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which
added Article XIIIB to the California Constitution. In June 1990, Article XIIIB was amended by the voters
through their approval of Proposition 111. Article XIIIB of the California Constitution limits the annual
appropriations of the State and any city, county, school district, authority or other political subdivision of the
state to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of
32
living, population and services rendered by the governmental entity. The “base year” for establishing such
appropriation limit is the 1978-79 fiscal year. Increases in appropriations by a governmental entity are also
permitted (a) if financial responsibility for providing services is transferred to the governmental entity, or
(b) for emergencies so long as the appropriations limits for the three years following the emergency are
reduced to prevent any aggregate increase above the Constitutional limit. Decreases are required where
responsibility for providing services is transferred from the government entity.
Appropriations subject to Article XIIIB include generally any authorization to expend during the fiscal
year the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State
subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability
insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not include debt service on
indebtedness existing or legally authorized as of January 1, 1979 on bonded indebtedness thereafter approved
according to law by a vote of the electors of the issuing entity voting in an election for such purpose,
appropriations required to comply with mandates of courts or the Federal government, appropriations for
qualified outlay projects, and appropriations by the State of revenues derived from any increase in gasoline
taxes and motor vehicle weight fees above January 1, 1990 levels. “Proceeds of taxes” include, but are not
limited to, all tax revenues and the proceeds to any entity of government from (a) regulatory licenses, user
charges, and user fees to the extent such proceeds exceed the cost of providing the service or regulation, (b) the
investment of tax revenues and (c) certain State subventions received by local governments. Article XIIIB
includes a requirement that if an entity’s revenues in any year exceed the amount permitted to be spent, the
excess would have to be returned by revising tax rates or fee schedules over the subsequent two fiscal years.
As amended in June 1990, the appropriations limit for local governments in each year is based on the
limit for the prior year, adjusted annually for changes in the costs of living and changes in population, and
adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit
of government. The change in the cost of living is, at the local government’s option, either (i) the percentage
change in California per capita personal income, or (ii) the percentage change in the local assessment roll for
the jurisdiction due to the addition of nonresidential new construction. The measurement of change in
population is a blended average of statewide overall population growth, and change in attendance at local
school and community college (“K-14”) districts.
As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods.
Any excess of the aggregate “proceeds of taxes” received by the District over such two-year period above the
combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or
fee schedules over the subsequent two years. Any proceeds of taxes received by the District in excess of the
appropriations limit are absorbed into the State’s allowable limit. The District does not currently have and
does not anticipate having “proceeds of taxes” in excess of its appropriations limit.
Article XIIIB permits any government entity to change the appropriations limit by vote of the
electorate in conformity with statutory and Constitutional voting requirements, but any such voter-approved
change can only be effective for a maximum of four years. Pursuant to statute, if a school district receives any
proceeds of taxes in excess of its appropriations limit, it may, by resolution of the governing board, increase its
appropriations limit to equal the amount received, provided that the State has sufficient excess appropriations
limit in that fiscal year.
Articles XIIIC and XIIID
On November 5, 1996, California voters approved Proposition 218 the so-called “Right to Vote on
Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the California Constitution, which contain a
number of provisions affecting the ability of local agencies, including school districts, to levy and collect both
existing and future taxes, assessments, fees and changes.
33
Article XIIID deals with assessments and property related fees and charges. Article XIIID explicitly
provides that nothing in Article XIIIC or XIIID shall be construed to affect existing laws relating to the
imposition of fees or charges as a condition of property development; however it is not clear whether the
initiative power is therefore unavailable to repeal or reduce developer and mitigation fees imposed by the
District. Developer fees imposed by the District are neither pledged nor available to pay the Bonds.
Propositions 98 and 111
On November 8, 1988, California voters approved Proposition 98, a combined initiative,
constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability
Act” (“Proposition 98”). Proposition 98 changed State funding of public education below the university level
and the operation of the State’s appropriations limit, primarily by guaranteeing K-14 schools a minimum share
of State General Fund revenues. Under Proposition 98 (as modified by Proposition 111, which was enacted on
June 5, 1990), K-14 schools are guaranteed the greater of (a) 40.9% of State General Fund revenues (the “first
test”), or (b) the amount appropriated to K-14 schools in the prior year, adjusted for changes in the cost-ofliving (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second
test”), or (c) a “third test” which would replace the second test in any year when the percentage growth in per
capita State General Fund revenues from the prior year plus 1/2 of 1% is less than the percentage growth in
California per capita personal income. Under the third test, schools would receive the amount appropriated in
the prior year adjusted for changes in enrollment and per capita State General Fund revenues, plus an
additional small adjustment factor. If the third test is used in any year, the difference between the third test and
the second test would become a “credit” to schools which would be paid in future years when State General
Fund revenue growth exceeds personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both houses, with the Governor’s
concurrence, to suspend the K-14 schools’ minimum funding formula for a one-year period, and any
corresponding reduction in funding for that year will not be paid in subsequent years. However, in
determining the funding level for the succeeding year, the formula base for the prior year will be reinstated as
if such suspension had not taken place. In certain fiscal years, the State Legislature and the Governor have
utilized this provision to avoid having the full Proposition 98 funding paid to support K-14 schools.
Proposition 98 also changes how tax revenues in excess of the State Appropriations Limit are
distributed. “Excess” tax revenues are determined based on a two-year cycle, so that the State could avoid
having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year were
under its limit. After any two-year period, if there are excess State tax revenues, 50% of the excess would be
transferred to K-14 schools with the balance returned to taxpayers. Further, any excess State tax revenues
transferred to K-14 schools are not built into the school districts’ base expenditures for calculating their
entitlement for State aid in the next year, and the State’s appropriations limit will not be increased by this
amount.
Since Proposition 98 is unclear in some details, there can be no assurance that the Legislature or a
court might not interpret Proposition 98 to require a different percentage of State General Fund revenues to be
allocated to K-14 districts, or to apply the relevant percentage to the State’s budgets in a different way than is
proposed in the Governor’s Budget. In any event, some fiscal observers expect Proposition 98 to place
increasing pressure on the State’s budget over future years, potentially reducing resources available for other
State programs, especially to the extent the Article XIIIB spending limit would restrain the State ability to fund
such other programs by raising taxes.
The application of Proposition 98 and other statutory regulations has become increasingly difficult to
predict accurately in recent years. One major reason is that Proposition 98 minimums under the first test and
the second test described above are dependent on State General Fund revenues. In several recent fiscal years,
the State made actual allocations to K-14 districts based on an assumption of State General Fund revenues at a
level above that which was ultimately realized. In such years, the State has considered the amounts
34
appropriated above the minimum as a loan to K-14 districts, and has deducted the value of these loans from
future years’ estimated Proposition 98 minimums.
Proposition 39
On November 7, 2003, California voters approved Proposition 39, called the “Smaller Classes, Safer
Schools and Financial Accountability Act” (the “Smaller Classes Act”) which amends Section 1 of
Article XIIIA, Section 18 of Article XVI of the California Constitution and Section 47614 of the California
Education Code and allows an alternative means of seeking voter approval for bonded indebtedness by 55
percent of the vote, rather than the two-thirds majority required under Section 18 of Article XVI of the
Constitution. The 55 percent voter requirement applies only if the bond measure submitted to the voters
includes, among other items: (1) a restriction that the proceeds of the bonds may be used for “the construction,
reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of
school facilities, or the acquisition or lease of real property for school facilities,” (2) a list of projects to be
funded and a certification that the school district board has evaluated “safety, class size reduction, and
information technology needs in developing that list” and (3) that annual, independent performance and
financial audits will be conducted regarding the expenditure and use of the bond proceeds.
Section 1(b)(3) of Article XIIIA has been added to exempt from the one percent ad valorem tax
limitation under Section 1(a) of Article XIIIA of the Constitution levies to pay bonds approved by the 55
percent of the voters, subject to the restrictions explained above.
The Legislature enacted AB 1908, Chapter 44, which became effective upon passage of
Proposition 39 and amends various sections of the Education Code. Under amendments to Section 15268 and
15270 of the Education Code, the following limits on ad valorem taxes apply in any single election: (1) for a
school district, indebtedness shall not exceed $30 per $100,000 of taxable property, (2) for a unified school
district, indebtedness shall not exceed $60 per $100,000 of taxable property, and (3) for a community college
district, indebtedness shall not exceed $25 per $100,000 of taxable property. Finally, AB 1908 requires that a
citizens’ oversight committee must be appointed to review the use of the bond funds and inform the public
about their proper usage.
Jarvis v. Connell
On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard
Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court
of Appeal held that either a final budget bill, an emergency appropriation, a self-executing authorization
pursuant to state statutes (such as continuing appropriations) or the California Constitution or a federal
mandate is necessary for the State Controller to disburse funds. The foregoing requirement could apply to
amounts budgeted by the District as being received from the State. To the extent the holding in such case
would apply to State payments reflected in the District’s budget, the requirement that there be either a final
budget bill or an emergency appropriation may result in the delay of such payments to the District if such
required legislative action is delayed, unless the payments are self-executing authorizations or are subject to a
federal mandate. On May 1, 2003, the California Supreme Court upheld the holding of the Court of Appeal,
stating that the Controller is not authorized under State law to disburse funds prior to the enactment of a budget
or other proper appropriation, but under federal law, the Controller is required, notwithstanding a budget
impasse and the limitations imposed by State law, to timely pay those State employees who are subject to the
minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act.
Proposition 1A
On November 2, 2004, California voters approved Proposition 1A, which amended the State
Constitution to reduce significantly the State’s authority over major local government revenue sources. Under
Proposition 1A, the State may not (i) reduce local sales tax rates or alter the method of allocating the revenue
35
generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges,
(iii) change in how property tax revenues are shared among local governments without two-third approval of
both houses of the State Legislature, or (iv) decrease Vehicle License Fees revenues without providing local
governments with equal replacement funding. Beginning in 2008-09, the State may shift to schools and
community colleges a limited amount of local government property tax revenue if certain conditions are met,
including (a) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the
State, and (b) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such
a shift, the State must repay local governments for their property tax losses, with interest, within three years.
Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax
revenues among local governments with in a county. Proposition 1A also amends the State Constitution to
require the State to suspend certain State laws creating mandates in any year that the State does not fully
reimburse local governments for their costs to comply with the mandates. This provision does not apply to
mandates relating to schools of community colleges or to those mandates relating to employee rights.
Future Initiatives
Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID, and Propositions 39, 98, 111 and 1A were
each adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to
time other initiative measures could be adopted, further affecting school districts’ revenues or such districts’
ability to expend revenues.
There can be no assurance that the California electorate will not at some future time adopt other
initiatives or that the Legislature will not enact legislation that will amend the laws or the Constitution of the
State of California resulting in a reduction of amounts legally available to the District.
STATE OF CALIFORNIA FISCAL ISSUES
General Overview
The following information concerning the State’s budget has been extracted and summarized from
publicly available documents and information which the District believes to be reliable, including information
provided by the Governor’s Office in the Governor’s Proposed Budget for Fiscal Year 2012-13, the
Governor’s Budget Summary 2012-13 and by the Legislative Analyst’s Office (the “LAO”) regarding the
State’s budget and fiscal outlook for the next several years. The District does not guarantee the accuracy or
completeness of, and has not independently verified, such information.
As it is true for all school districts in the State, the District’s operating income consists primarily of
three components: a State portion funded from the State’s general fund, a local portion derived from the
District’s share of the 1% county-wide ad valorem property tax authorized by the California Constitution, and
any special “categorical” funding allocated by the State to qualified District programs. The District estimates
that during fiscal year 2011-12 it will receive approximately $11,199,972, or 39.81% of its general fund
revenues, from State funds. As a result, decreases or deferrals in State revenues, or in State legislative
appropriations for education funding, do significantly impact District operations.
As a result of State budget shortfalls in recent years, the District has received significantly less
revenue from the State and has had to reduce expenditures. See “DISTRICT FINANCIAL MATTERS –
Current Financial Condition” herein.
Adoption of Annual State Budget. Pursuant to the State Constitution, the Governor must propose a
budget to the State Legislature no later than January 10 of each year. On November 2, 2010, the State voters
approved an initiative known as “Proposition 25,” providing that a final budget must be adopted by no later
than June 15 of each year by a majority vote of each house of the Legislature. Any tax increase provision in
the final budget requires approval by 2/3 of each house of the State Legislature. The State budget act becomes
36
law upon signature by the Governor, who may veto specific line items. School district budgets must generally
be adopted by July 1 and revised by the school district’s board within 45 days after the Governor signs the
State budget.
State Education Funding Obligation. The guaranteed education funding under Proposition 98 is
based on prior-year funding adjusted through various formulas and tests that take into account State proceeds
of State taxes, local property tax revenues, school enrollment, per-capita personal income and other factors.
See “STATE CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT
REVENUES AND APPROPRIATIONS – Propositions 98 and 111” for a description of the adoption and
purpose of Proposition 98. The State’s share of the guaranteed amount is based on State general fund tax
revenues and is not based on the general fund total. The local share of the guaranteed amount is funded from
local property tax revenue. The total guaranteed amount varies from year to year and also varies at each stage
of the State budget adoption process. If at year-end the guaranteed amount is calculated to be higher than the
amount actually appropriated during the year, the difference becomes an additional funding obligation of the
State referred to as the “settle-up.” If the amount appropriated is higher than the guaranteed amount in any
given year, the higher funding level permanently increases the guaranteed amount for future years. However,
the Proposition 98 guarantee amount is reduced in years when general fund revenue growth lags personal
income growth, and may be suspended for one year at a time by enactment of an urgency statute. In either
case, the funding level must be restored to the guaranteed amount (such obligation is known as the
“maintenance factor”) in subsequent years when the State general fund revenues grow faster than personal
income (or at such earlier time as determined by the State Legislature).
Current Financial Stress on State Budget. Since early 2008, the State has been experiencing the
most significant economic downturn and financial pressure since the Great Depression of the 1930s. As a
result of continuing weakness in the State economy, State tax revenues have declined precipitously, resulting
in large budget gaps and cash shortfalls. In response, the State implemented substantial spending reductions,
program eliminations, revenue increases, and other solutions in order to close an estimated $60 billion budget
gap over the combined 2008-09 and 2009-10 fiscal years. On October 8, 2010, the State adopted a budget for
fiscal year 2010-11 (the “2010-11 State Budget”) to close an estimated budget gap of $17.9 billion for the
current fiscal year. Many of the 2010-11 State Budget assumptions did not materialize and in adopting the
fiscal year 2011-12 State Budget, the State took steps to close a budget gap of $8.2 billion in fiscal year 201011 and an additional $17.2 billion in fiscal year 2011-12. The State’s budget for fiscal year 2011-12 was
enacted on June 30, 2011. See “STATE OF CALIFORNIA FISCAL ISSUES—2011-12 State Budget.”
There can be no assurances that the fiscal stress and cash pressures currently facing the State will not
continue or become more difficult, or that continuing declines in State tax receipts or other impacts of the
current economic recession will not further materially adversely affect the financial condition of the State. The
Department of Finance has projected that multi-billion dollar budget gaps will occur annually for several years
in the future.
Enacted Budget Trailer Bills. On March 24, 2011, the Governor signed into law several budget
trailer bills, even though the fiscal year 2011-12 State budget had yet to be finalized. One bill signed into law,
Senate Bill No. 70 (Chapter 7, Statutes of 2011), provides certain statutory changes in the area of education in
order to enact modifications to the fiscal year 2010-11 State budget and fiscal year 2011-12 State budget.
Among other things Senate Bill No. 70:

Provides a revenue limit deficit factor of 19.892% for fiscal years 2011-12 and 2012-13 to reflect
a $106.6 million deficit for county offices of education (“COEs”). Provides a revenue limit deficit
factor of 19.608% for fiscal year 2011-12 to reflect a deficit of $7.7 billion for school districts.

Defers an additional $2.1 billion in K-12 funds from fiscal year 2011-12 to fiscal year 2012-13.
Specifically, Senate Bill No. 70 shifts $1.3 billion in March 2012 payments and $763 million in
37
April 2012 payments to August 2012. This schedule is shorter than the 13 month deferral
proposed in the 2011-12 Proposed State Budget.

Extends various K-14 fiscal relief options known as flexibility options to school districts for an
additional two fiscal years. For school districts, this includes the extension of categorical
flexibility from 2012-12 through 2014-15 by reducing restrictions on funding associated with
certain categorical programs, existing K-3 Class Size Reduction Program from 2011-12 through
2013-14, and two additional years for existing statutory provisions that reduce instructional
materials purchase and adoption requirements, routine and deferred maintenance requirements,
surplus property, class size reduction, instructional minutes and local budget reserve
requirements.

Extends until fiscal year 2014-15, authorization for new schools, the majority of which are charter
schools, to access flexible categorical program funding on par with existing schools.

Appropriates $5 million from the State General Fund to augment the Charter School Revolving
Loan Fund, which makes low-interest, start-up loans to new charter schools in order to meet the
purposes of their charters.

Establishes a zero percent cost-of-living adjustment (“COLA”) for K-12 programs in fiscal year
2010-11. Though the actual COLA of 1.67% is not provided, it is applied to the deficit factors
established in the bill.

Provides $2.3 million in federal funds ($1.5 million in Title VI and $781,000 in Title II) for fiscal
year 2010-11 for the California Longitudinal Pupil Achievement Data System (“CALPADS”).

Applies an 8.9% reduction to categorical programs for basic aid districts in fiscal year 2010-11
and fiscal year 2011-12 commensurate to the revenue limit reduction rate for other school districts
in fiscal year 2010-11 and fiscal year 2011-12. Specifies the intent to restore these reductions at
the same time, and in direct proportion to restoration of revenue limit reductions.

Authorizes a statutory appropriation for the K-3 Class Size Reduction program for fiscal year
2011-12. The statute authorizes the Superintendent of Public Instruction to certify the funding
needed for the program in fiscal year 2011-12 to ensure full funding for the program.

Reduces ongoing Proposition 98 funding for special education by about $13.1 million in fiscal
year 2011-12 and backfills with one-time Proposition 98 savings from various programs to cover
fiscal year 2010-11 program adjustments.

Suspends the statutory division of Proposition 98 funding among K-12 educational agencies,
community colleges, and other state agencies, and instead conforms the division of funding based
upon actual budget appropriations in fiscal year 2011-12.

Requires the state to adjust the Proposition 98 calculation so that any shift in local property taxes
previously received by redevelopment agencies has no effect on the Proposition 98 minimum
guarantee in fiscal year 2011-12.
2011-12 State Budget
The 2011-12 State Budget Act for the State (the “2011-12 State Budget”) was signed into law by the
Governor on June 30, 2011, and, thereafter, the State’s Department of Finance released a summary of the
2011-12 State Budget (the “Department of Finance Report”). The following information is drawn from the
Department of Finance Report.
The 2011-12 State Budget reports that the State economy has continued to improve. As a result, the
2011-12 State Budget projects an additional $4 billion in revenues during fiscal year 2011-12. Although the
2011-12 State Budget does not include any of the Governor’s proposed tax extensions, the administration
38
states that it plans to seek voter approval of a ballot measure, by November of 2012, which would protect
public safety realignment and supplement the State’s revenues.
With the implementation of all measures, the 2011-12 State Budget assumes, the State ended fiscal
year 2010-11 with revenues of $94.8 billion and expenditures of $91.5 billion. The 2011-12 State Budget also
assumes the State ended fiscal year 2010-11 with a budget deficit of $2 billion. For fiscal year 2011-12, the
2011-12 State Budget projects total revenues of $88.5 billion and authorizes total expenditures of $85.9 billion.
The 2011-12 State Budget projects that the State will end fiscal year 2011-12 with a $543 million surplus.
The 2011-12 State Budget also includes a series of “trigger” reductions that are authorized to be
implemented in the event the State’s revenues are less than forecasted. The first series of reductions, totaling
approximately $600 million, would be implemented if, by January 2012, State revenues fall short of
projections by more than $1 billion. If by January 2012 revenues are projected to fall short by more than $2
billion, a second series of reductions in education spending, totaling approximately $1.9 billion, would be
implemented of which $1.8 billion relate to K-12 revenue limit funding and the home-to-school transportation
program.
As part of the second series of “trigger” reductions, the 2011-12 State Budget authorizes a reduction
of $1.5 billion to school district revenue limit funding, and a corresponding reduction to the State-mandated
length of the school year by seven days. In the event this reduction is implemented, school districts would be
permitted to collectively bargain for a shorter school year or accommodate the revenue limit reduction through
other means.
Although the 2011-12 State Budget recognizes that school funding has been disproportionally reduced
since 2007-08, and despite efforts to maintain Proposition 98 programmatic funding at substantially the same
level as 2010-11, the total Proposition 98 funding is decreased to $48.7 billion in 2011-12 from approximately
$49.7 billion in 2010-11, which reflects a decrease of approximately $1.1 billion. This decrease is a net figure
reflective of all budgetary actions taken with respect to the State’s share of Proposition 98 funding, including
increases in baseline revenues, redirection of certain sales tax revenues related to the realignment of public
safety programs, and the rebenching of the Proposition 98 minimum funding guarantee (discussed below).
The 2011-12 State Budget rebenches the Proposition 98 minimum funding guarantee to account for
the following: (i) an increase of $221.8 million, as part of the realignment of public programs from the State to
local governments, to fund the delivery of certain mental health services by school districts, (ii) an increase of
$578.1 million to backfill general fund revenues lost from the suspension of sales and excise taxes on motor
vehicle fuels, and (iii) a decrease of $1.1 billion to reflect the exclusion of most child care programs from
Proposition 98. The minimum funding guarantee is also rebenched to account for a $1.7 billion decrease in
State general fund revenues as a result of ABx1 27, a companion bill to the 2011-12 State Budget, which
authorizes redevelopment agencies to continue operations provided their establishing cities or counties agree to
make a specified payment to school districts and county offices of education which total $1.7 billion statewide.
Pursuant to ABx1 26 (another companion bill to the 2011-12 State Budget), redevelopment agencies whose
establishing cities or counties elect not to make such payments will be required to shut down, and any net tax
increment revenues, after payment of redevelopment bonds debt service and administrative costs, will be
distributed to cities, counties, special districts and school districts.
The 2011-12 State Budget also makes a significant, one-time modification to State budgeting
requirements applicable to school districts under AB 1200. See “DISTRICT FINANCIAL MATTERS —
School District Budgets.”
The 2011-12 State Budget also implements other significant measures with respect to K-12 education
funding, as follows:
39

Apportionment Deferral. An additional deferral of $1.2 billion in education spending in order to
maintain programmatic funding at the fiscal year 2010-11 level.

Part-Day Preschool. A decrease of $62.3 million to reflect a reduction of income eligibility
levels to 70% of the State Median Income, and across-the-board reductions to provider contracts.

Charter Schools. $11 million in supplemental categorical funding to charter schools that begin
operations between 2008-09 and 2011-12.

Clean Technology and Renewable Energy Training. $3.2 million of increased funding for clean
technology and renewable energy job training, career technical education and the Dropout
Prevention Program, each of which is designed to provide at-risk high school students with
occupational training in areas such as conservation, renewable energy and pollution reduction.

Child Care and Development. A decrease of $180.4 million to child care and development
programs, including reductions to license-exempt provider rates, reductions of income eligibility
levels to 70% of the State Median Income, and across-the-board reductions to provider contracts.

CALTIDES. A decrease of $2.1 million to reflect elimination of funding for the California
Longitudinal Teacher Integrated Data System (“CALTIDES”). Although the CALTIDES
program was intended to provide a central State information depository regarding the teaching
workforce, the 2011-12 State Budget indicates the program is not a critical need.

Office of the Secretary of Education. The 2011-12 State Budget projects a budget savings of $1.6
million through the elimination of the Office of the Secretary of Education.
The complete 2011-12 State Budget is available from Department of Finance at
www.dof.ca.gov/budget/. An impartial analysis and additional information regarding the 2011-12 State
Budget may be obtained from the LAO at www.lao.ca.gov. None of the information on these websites is
incorporated by reference herein.
Future Budgets and Budgetary Actions. The District cannot predict what actions will be taken in the
future by the State Legislature and the Governor to address the current State budget deficit, changing State
revenues and expenditures or the impact such actions will have on State revenues available in the current or
future years for education. The State budget will be affected by national and State economic conditions and
other factors over which the District will have no control. Certain actions could result in a significant shortfall
of revenue and cash, and could impair the State’s ability to fund schools. Continued State budget shortfalls in
future fiscal years could have an adverse financial impact on the State General Fund budget.
Prohibition on Diverting Local Revenues for State Purposes. Beginning in 1992-93, the State
satisfied a portion of its Proposition 98 obligations by shifting a part of the property tax revenues otherwise
belonging to cities, counties and special districts, and redevelopment agencies, to school and college districts
through a local Educational Revenue Augmentation Fund (“ERAF”) in each county. Local agencies strongly
objected to the co-option of their revenues by the State and sponsored a statewide ballot initiative intended to
eliminate that practice. In response, the Legislature proposed an amendment to the State Constitution, known
as Proposition 1A, which the State’s voters approved at the November 2004 election. Proposition 1A was
generally superseded by the passage of a constitutional amendment known as “Proposition 22” at the
November 2010 election.
2012-13 Proposed State Budget
The 2012-13 Governor’s Proposed State Budget (the “Proposed State Budget”) was released on
January 5, 2011, in advance of the January 10 deadline, and the Legislative Analyst’s Office (“LAO”) released
its report on the Proposed State Budget on January 11, 2012 (the “LAO Report”). The information below is
summarized from the Proposed State Budget and the LAO Report.
40
The LAO Report indicates that, in 2011, the State Legislature and the Governor took significant steps
to begin to restore the State budget to balance but the Proposed State Budget shows that the State Legislature
still faces a very difficult task this year. The Governor’s plan envisions multiyear tax increases and significant
reductions in social services and subsidized child care programs. As an alternative, if his tax plan is rejected he
proposes much larger cuts, aimed largely at schools. The LAO Report concludes that, if the State Legislature
chooses either of the Governor’s two proposed paths, the State budget would move much closer to balance
over the next several years.
The Proposed State Budget recognizes that education funding has been disproportionally impacted
over the last few years and provides Proposition 98 funding of $52.5 billion for 2012‑ 13, an increase of $4.9
billion compared to 2011-12 State Budget. However, the LAO Report indicates that the cornerstone of the
Proposed State Budget is the assumption that voters will approve a temporary increase in income and sales
taxes through an initiative that the Governor has proposed for the November 2012 ballot. The LAO Report
indicates that the initiative would increase state revenues by $6.9 billion by the end of 2012-13, and generate
billions of dollars per year, until it expires at the end of 2016, that would be used to pay for the State’s
Proposition 98 school funding obligations, as increased by the initiative, and to help balance the budget by
paying for other State programs.
Trigger Cuts in the Proposed State Budget. The Proposed State Budget requests that the Legislature
approve $5.4 billion of “trigger cuts” to take effect on January 1, 2013, if voters do not approve the Governor’s
tax initiative. Proposition 98 funding for schools and community colleges would bear the brunt of these trigger
cuts: $4.8 billion (90 percent) of the total. A reduction of this magnitude would result in a funding decrease
equivalent to more than the cost of three weeks of instruction. It will also mean that up to 20% of funding
would be paid by the State in arrears.
Proposed Rebenching of Proposition 98 Guarantee. The Proposed State Budget includes a series of
adjustments or “rebenchings” of the Proposition 98 guarantee. The most significant adjustment relates to the
elimination of the sales tax on gasoline from the State’s General Fund in 2010-11. These adjustments provide
$373.2 million of State General Fund savings by excluding the moneys from the Proposition 98 guarantee. The
Proposed State Budget also includes a Proposition 98 General Fund reduction of $171.2 million to special
education and community college apportionments in the current year to offset increased property taxes
resulting from the elimination of redevelopment agencies (RDAs).
The Proposed State Budget also implements other significant measures with respect to K-12 education
funding, as follows:

Reduce Child Care Costs. A decrease of $69.9 million to State Department of Education (SDE)
child care programs.

Special Education Property Tax Adjustment. A decrease of $24.3 million for special education
programs in 2011-12 to reflect increased property tax revenues from RDAs.

K-12 Deferrals. An increase of $2.2 billion to reduce inter-year budgetary deferrals.

Transitional Kindergarten. A decrease of $223.7 million to reflect the elimination of the
requirement that schools provide transitional kindergarten instruction.

Charter Schools. An increase of $50.3 million for charter school categorical programs due to
charter school growth.

Special Education. An increase of $12.3 million for Special Education ADA growth.

Costs of Living Adjustment Increases. The Budget does not provide a cost-of-living adjustment
(COLA) for any K-14 program in 2012-13. The projected 2012-13 COLA is 3.17%, which
41
would have provided a $1.8 billion increase. A deficit factor will be established to reflect the lack
of a COLA.
Proposed Revenue Limit Adjustments include:

Local Property Tax Adjustments. An increase of $627 million for school district and county
office of education revenue limits in 2012-13 as a result of reduced offsetting local property tax
revenues.

Redevelopment Agency Elimination. An increase of $1.1 billion in offsetting local property taxes
for 2012-13 due to the elimination of redevelopment agencies.

Average Daily Attendance. An increase of $158 million in 2012-13 for school district and county
office of education revenue limits as a result of projected growth in ADA for 2012-13.
Litigation Challenging Method of School Financing
In Robles-Wong, et al. v. State of California (Alameda County Superior Court, Case No. RG-10515768), filed in May, 2010, plaintiffs challenge the State’s “education finance system” as unconstitutional.
Plaintiffs, consisting of 62 minor school children, various school districts, the California Association of School
Administrators and the California School Boards Association, allege the State has not adequately fulfilled its
constitutional obligation to support its public schools, and seek an order enjoining the state from continuing to
operate and rely on the current financing system and to develop a new education system that meets
constitutional standards as declared by the court. The State filed a demurrer seeking to dismiss the plaintiff’s
class complaints. The plaintiffs filed an answer urging the court to deny the State’s request. The court
sustained the State’s demurrer but allowed plaintiffs leave to file an amended complaint prior to August 25,
2011. On November 3, 2011, the court dismissed the case because the plaintiffs failed to file an amended
complaint on or prior to the court deadline.
TAX MATTERS
Tax Exemption
In the opinion of GCR, LLP, San Diego, California (“Bond Counsel”), based upon an analysis of existing
statutes, regulations, rulings and court decisions and assuming, among other things, the accuracy of certain
representations and compliance with certain covenants, interest on the Bonds is excludable from gross income for
federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). In
the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the
alternative minimum tax imposed on individuals and corporations; however Bond Counsel observes that such
interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative
minimum tax imposed on certain corporations. In the opinion of Bond Counsel, interest on the Bonds is exempt
from State of California personal income taxes. Bond Counsel expresses no opinion regarding any other tax
consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross
income for federal income tax purposes of interest on obligations such as the Bonds. The District has covenanted to
comply with certain restrictions designed to assure that interest on the Bonds will not be includable in federal gross
income. Failure to comply with these covenants may result in interest on the Bonds being includable in federal
gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance
with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions
taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may affect the
value of, or the tax status of, interest on the Bonds.
Although Bond Counsel expects to render an opinion that interest on the Bonds is excludable from gross
income for federal income tax purposes and exempt from State of California personal income taxes, the ownership
42
or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Beneficial Owner’s
federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular
tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel
expresses no opinion regarding any such other tax consequences.
In addition, no assurance can be given that any future legislation, including amendments to the Code, if
enacted into law, or changes in interpretation of the Code, will not cause interest on the Bonds to be subject,
directly or indirectly, to federal or state income taxation, or otherwise prevent beneficial owners of the Bonds from
realizing the full current benefit of the tax status of such interest. Prospective purchasers of the Bonds should
consult their own tax advisers regarding any pending or proposed federal or state tax legislation. Further, no
assurance can be given that the introduction or enactment of any such future legislation, or any action of the Internal
Revenue Service (“IRS”), including but not limited to regulation, ruling, or selection of the Bonds for audit
examination, or the course or result of any IRS examination of the Bonds, or obligations that present similar tax
issues, will not affect the market price or liquidity of the Bonds.
Original Issue Discount and Original Issue Premium
To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at the maturity
of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds),
the difference constitutes “original issue discount.” The accrual of original issue discount, to the extent properly
allocable to a Beneficial Owner, is treated as interest on the Bonds that is excludable from gross income for federal
income tax purposes and exempt from State of California personal income taxes. For this purpose, the issue price of
a particular maturity of the Bonds is the first price at which a substantial amount of that maturity is sold to the public
(excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues
daily over the term to that maturity date on the basis of a constant interest rate compounded semiannually (with
straight-line interpolations between compounding dates). The accruing original issue discount is added to the
adjusted basis of the Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or
payment at maturity) of the Bonds. Beneficial Owners of Bonds sold with original issue discount should consult
their own tax advisors with respect to the tax consequences of ownership of their Bonds, including the treatment of
purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a
substantial amount of such Bonds is sold to the public.
The Bonds purchased, whether at original issuance or otherwise, for an amount greater than their principal
amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having
amortizable bond premium. No deduction is allowable for the amortizable bond premium for bonds, like the
Premium Bonds, the interest on which is excludable from gross income for federal income tax purposes. However,
a purchaser’s basis in a Premium Bond and, under Treasury Regulations, the amount of interest received will be
reduced by the amount of amortizable bond premium properly allocable to such purchaser. Beneficial Owners of
Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond
premium in their particular circumstances.
Internal Revenue Service Audit
The IRS has initiated an expanded program for the auditing of issues (such as the Bonds), including both
random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that
the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar
obligations).
Information Reporting and Backup Withholding
Information reporting requirements apply to interest (including original issue discount) paid after March
31, 2007 on obligations, including the Bonds. In general, such requirements are satisfied if the interest recipient
completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and
Certification,” or unless the recipient is one of a limited class of exempt recipients, including corporations. A
43
recipient not otherwise exempt from information reporting who fails to satisfy the information reporting
requirements will be subject to “backup withholding,” which means that the payor is required to deduct and
withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose,
a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who
collects such payments on behalf of the recipient.
If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with
the establishment of such account, as generally can be expected, no backup withholding should occur. In any event,
backup withholding does not affect the excludability of the interest on the Bonds from gross income for Federal
income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a
credit against the owner’s Federal income tax once the required information is furnished to the IRS.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix A.
LEGAL MATTERS
Legal Opinion
The legal opinion of GCR, LLP, approving the validity of the Bonds, substantially in the form of
Appendix A hereto, will be made available to the Underwriter at the time of original delivery of the Bonds and
a copy of the opinion will be delivered with each Bond. Bond Counsel expresses no opinion to the Owners of
the Bonds as to the accuracy, completeness or fairness of this Official Statement or other offering materials
relating to the Bonds and expressly disclaims any duty to advise the Owners of the Bonds as to matters related
to the Official Statement.
Legality for Investment in California
Under provisions of the California Financial Code, the Bonds are legal investments for commercial
banks in California to the extent that the Bonds, in the informed opinion of the bank, are prudent for the
investment of funds of depositors, and under provisions of the California Government Code, are eligible for
security for deposits of public moneys in the State.
No Litigation
No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that
effect will be furnished by the District at the time of the original delivery of the Bonds. The District is not
aware of any litigation pending or threatened questioning the political existence of the District or contesting
the District’s ability to receive ad valorem taxes or to collect other revenues or contesting the District’s ability
to issue and retire the Bonds.
BANK QUALIFIED
The District has designated the Bonds as “qualified obligations” within the meaning of section
265(b)(3) of the Code and, in the case of certain financial institutions (within the meaning of section 265(b)(3)
of the Code), a deduction for federal income tax purposes is allowed for 80% of that portion of such financial
institution’s interest expense allocable to interest on such Bonds.
CONTINUING DISCLOSURE
The District has covenanted for the benefit of the holders and beneficial Owners of the Bonds to
provide certain financial information and operating data relating to the District (the “Annual Report”) by not
later than nine (9) months following the end of the District’s fiscal year (currently ending June 30)
commencing with the report for the 2011-12 fiscal year (which is due no later than March 31, 2013) and to
provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the
District in readable PDF or other acceptable electronic form with the Electronic Municipal Market Access
44
system (“EMMA”) of the Municipal Securities Rulemaking Board. The notices of certain enumerated events,
if any, will also be filed by the District with EMMA. The specific nature of the information to be contained in
the Annual Report or the notices of material events are set forth in “APPENDIX C—FORM OF
CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the
Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”).
The District failed to comply with undertakings under the Rule related to its 2001 General Obligation
Bonds and certain Certificates of Participation executed and delivered in 2004. The District has implemented
procedures to assist with the preparation and filing of all annual reports under the previous undertakings as
well as the Continuing Disclosure Certificate being executed connection with the Bonds. As of the date of this
Official Statement, the District has filed all required materials and is now current on all filings required
pursuant to its previous continuing disclosure undertakings.
ESCROW VERIFICATION
The arithmetical accuracy of certain computations included in the schedules provided by the
Underwriter relating to the computation of projected receipts of principal and interest on the government
obligations, and the projected payments of principal and interest to repay the Notes will be verified by Causey,
Demgen & Moore Inc., Denver, Colorado (the “Verification Agent”). Such computations will be based solely
on assumptions and information supplied by the District and the Underwriter. The Verification Agent will
restrict its procedures to verifying this arithmetical accuracy of certain computations and will not make any
study to evaluate the assumptions and information on which the computations are based, and will express no
opinion on the data used, the reasonableness of the assumptions or the achievability of the projected outcome.
MISCELLANEOUS
Ratings
The District has applied for a rating from Standard & Poor’s Ratings Services, a Division of The McGrawHill Companies, Inc. (“Standard & Poor’s”). A rating reflects only the view of the agency giving such rating and is
not a recommendation to buy, sell or hold the Bonds. An explanation of the significance of each rating may be
obtained from the rating agency at its address, as follows: Standard & Poor’s, 55 Water Street, New York, New
York 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on
investigations, studies and assumptions of its own. There is no assurance that a rating will apply for any given
period of time, or that the rating will not be revised downward or withdrawn if, in the judgment of the agency
providing such rating, circumstances so warrant. The District undertakes no responsibility to maintain any rating or
to oppose any revision or withdrawal of a rating. A downward revision or withdrawal of a rating may have an
adverse effect on the marketability or market price of the Bonds.
Underwriting
The Bonds are being purchased for reoffering by Stifel Nicolaus & Company Incorporated dba Stone &
Youngberg, a Division of Stifel Nicolaus (the “Underwriter”). The Underwriter has agreed to purchase the Bonds
pursuant to a Contract of Purchase with the District (the “Contract of Purchase”) at the initial purchase price of
__________ (which represents the aggregate principal amount of the Bonds, plus original issue premium of
___________, less Underwriter’s discount of _________). The Contract of Purchase provides that the Underwriter
will purchase all of the Bonds. The obligation to make such purchase is subject to certain terms and conditions set
forth in the Contract of Purchase.
Audited Financial Statements
The District’s audited financial statements for fiscal year 2010-11 (the “2011 Audit”) included in this
Official Statement have been audited by Vavrinek, Trine, Day & Co., LLP, as independent auditors (the
“Auditor”). Attention is called to the scope limitation described in the Auditor’s report accompanying the
45
2011 Audit. The District has not requested, and the Auditor has not provided, any review or update of the
2011 audit in connection with its inclusion in this Official Statement. See APPENDIX B—”DISTRICT’S
2010-11 AUDITED FINANCIAL STATEMENTS.”
Financial Interests
The fees being paid to Bond Counsel, Disclosure Counsel and the District’s Financial Advisor are
contingent upon the issuance and delivery of the Bonds.
ADDITIONAL INFORMATION
The purpose of this Official Statement is to supply information to purchasers of the Bonds.
Quotations from and summaries and explanations of the Bonds and of the statutes and documents contained
herein do not purport to be complete, and reference is made to such documents and statutes for full and
complete statements of their provisions. Any Bond Owner may obtain copies of such documents, including
the District’s audits and budgets, as available, from the District at 3460 Lester Road, Denair, California 95316,
Attention: Superintendent. The District may impose a charge for copying, mailing and handling.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so
stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as
a contract or agreement between the District and the purchasers or Owners of any of the Bonds.
The delivery of this Official Statement has been duly authorized by the District.
By:
Superintendent
46
APPENDIX A
FORM OF OPINION OF BOND COUNSEL
Upon the date of issuance of the Bonds, GCR, LLP, Bond Counsel to the District, proposes to
render its final approving opinion with respect to the Bonds in substantially the following form:
[Date of Delivery]
Board of Trustees
Denair, California
Members of the Board of Trustees:
We have acted as bond counsel to the Denair Unified School District (the “District”), which is located in
Stanislaus County, California (the “County”), in connection with the issuance by the District of the Denair Unified
School District 2012 General Obligation Refunding Bonds (the “Bonds”), in the aggregate principal amount of
$_________ , as authorized by Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California
Government Code, and other applicable provisions of law, including applicable provisions of the California
Education Code and the California Constitution, a resolution of the Board of Supervisors of the Stanislaus County
(the “County”) authorizing the District to issue bonds on its own behalf, and pursuant to a resolution adopted by the
Board of Trustees of the District (the “Board”) on January 12, 2012 and a Resolution authorizing certain documents
relating to the Bonds adopted by the Board on January 26, 2012 (collectively, the “Bond Resolution”).
In our capacity as bond counsel, we have reviewed the Bond Resolution, the Tax Certificate of the District
related to the Bonds, dated the date hereof (the “Tax Certificate”), certificates of the County, the District and others
and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth
herein. As to questions of fact material to our opinion, we have relied upon representations in the Bond Resolution
and in the certified proceedings and other certifications of public officials furnished to us without undertaking to
verify the same by independent investigation, and we have assumed, but have not independently verified, that the
signatures on all documents, certificates and opinions that we reviewed are genuine. Furthermore, we have assumed
compliance with all covenants, agreements and representations contained in the Bond Resolution, the Tax
Certificate and other certificates provided by the District, the County and others.
The opinions expressed herein are based on an analysis of existing laws, regulations and rulings. Such
opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not
undertaken to determine or inform any person whether any such actions are taken or omitted or events do occur or
any matters come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and may
not be relied upon in connection with any such actions, events or matters. Our engagement with respect to the
Bonds has concluded with their issuance and we disclaim any obligation to update this letter.
Based on the foregoing, and subject to the limitations and qualifications herein specified, as of the date
hereof, and under existing law, we are of the opinion that:
1.
The District is duly created and validly existing school district with the power to perform its
obligations under the Bond Resolution and the Bonds.
A-1
2.
The Bond Resolution has been duly adopted by the Board and constitutes a valid and binding
obligation of the District enforceable against the District in accordance with its terms.
3.
The Board of Supervisors of the County has the power and is obligated to levy and collect ad
valorem taxes, without limitation as to rate or amount, on all property subject to taxation within
the District (except for certain personal property which is taxable at limited rates), for the payment
of the Bonds and the interest thereon.
4.
Assuming compliance by the District with certain covenants in the Bond Resolution, the Tax
Certificate and other documents pertaining to the Bonds and requirements of the Internal Revenue
Code of 1986, as amended, regarding the use, expenditure and investment of proceeds of the
Bonds and the timely payment of certain investment earnings to the United States, interest on the
Bonds is excludable from gross income for federal income tax purposes and is exempt from State
of California personal income taxes. Failure to comply with such covenants and requirements
may cause interest on the Bonds to be included in federal gross income retroactive to the date of
issuance and delivery of the Bonds. Interest on the Bonds is not a specific preference item for
purposes of the federal individual or corporate alternative minimum taxes, nor is it included in
adjusted current earnings in calculating corporate alternative minimum taxable income. We
express no opinion regarding other federal or State tax consequences arising with respect to the
Bonds.
The rights of the owners of the Bonds and the enforceability of the Bonds and the Bond Resolution may be
subject to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws affecting
creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in
appropriate cases and to the limitations on legal remedies against school districts in the State of California.
Respectfully submitted,
GCR, LLP
A-2
APPENDIX B
DISTRICT’S 2010-11 AUDITED FINANCIAL STATEMENTS
B-1
APPENDIX C
FORM OF CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) dated as of
February 1, 2012 is executed and delivered by the Denair Unified School District (the “Issuer”) in connection
with the issuance and delivery of $___________Denair Unified School District 2012 General Obligation
Refunding Bonds, (the “Bonds”). The Bonds are being issued pursuant to resolutions of the Issuer, adopted on
January 12, 2012 and January 26, 2012 (collectively, the “Resolution”).
SECTION 1.
Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed
and delivered by the Issuer for the benefit of the Owners of the Bonds and in order to assist the Participating
Underwriter in complying with the Rule.
SECTION 2.
Definitions. In addition to the definitions set forth in the Resolution, which apply to
any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following
capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described
in, Sections 3 and 4 of this Disclosure Certificate.
“Disclosure Representative” shall mean the Superintendent or Assistant Superintendent, Business
Services and Support of the Issuer or either of their designees, or such other officer or employee as the Issuer
shall designate in writing from time to time.
“Dissemination Agent” shall mean, initially, Issuer, acting in its capacity as Dissemination Agent
hereunder, or any successor Dissemination Agent designed in writing by the Issuer and which has been filed
with the then current Dissemination Agent a written acceptance of such designation.
“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB.
“Listed Events” shall mean any of the events listed in Section 5(a) and (b) of this Disclosure
Certificate.
“MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity designated
under the Rule as the repository for filings made pursuant to the Rule
“Participating Underwriter” shall mean Stone & Youngberg, a Division of Stifel Nicolaus as the
original underwriter of the Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
“Tax-exempt” shall mean that interest on the Bonds is excluded from gross income for federal income
tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable
directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax
or environmental tax.
SECTION 3.
Provision of Annual Reports.
(a)
The Issuer shall, or shall cause the Dissemination Agent upon written direction to, not later
than eight months following the end of the Issuer’s fiscal year (which shall be February 1 of each year, so long
C-1
as the Issuer’s fiscal year ends on June 30), commencing with the report for the fiscal year ending June 30,
2012, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this
Disclosure Certificate. The Annual Report shall be provided to the MSRB in an electronic format as
prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.
The Annual Report may be submitted as a single document or as separate documents comprising a package,
and may include by reference other information as provided in Section 4 of this Disclosure Certificate;
provided that the audited financial statements of the Issuer may be submitted separately from and later than the
balance of the Annual Report if they are not available by the date required above for the filing of the Annual
Report.
The Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12
calendar months. The Issuer’s fiscal year is currently effective from July 1 to the immediately succeeding
June 30 of the following year. The Issuer will promptly notify the MSRB and the Dissemination Agent (if
other than the Issuer) of a change in the fiscal year dates. The Issuer shall provide a written certification with
each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the
Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon
such certification of the Issuer and shall have no duty or obligation to review such Annual Report.
(b)
If the Dissemination Agent is a person or entity other than the Issuer then, not later than
fifteen (15) days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the
Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) days prior to such date
the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact
the Issuer to determine if the Issuer is in compliance with subsection (a).
(c)
If the Dissemination Agent is unable to verify that an Annual Report has been provided to the
MSRB by the date required in subsection (a), the Dissemination Agent shall file a notice with the MSRB, in
the form required by the MSRB.
(d)
The Dissemination Agent shall:
(i)
confirm the electronic filing requirements of the MSRB for the Annual Reports; and
(ii)
promptly after receipt of the Annual Report, file a report with the Issuer certifying
that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it
was provided the MSRB. The Dissemination Agent’s duties under this clause (ii) shall exist only if
the Issuer provides the Annual Report to the Dissemination Agent for filing.
(e)
Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in
accordance with the MSRB’s EMMA system or in another manner approved under the Rule.
SECTION 4.
Content of Annual Reports. The Issuer’s Annual Report shall contain or include by
reference the following:
(a)
(i) The audited financial statements of the Issuer for the most recent fiscal year of the Issuer
then ended, (ii) the most recently adopted budget of the Issuer, and (iii) if required to be prepared and filed, the
First Interim Report for the current fiscal year. If the audited financial statements are not available by the time
the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements
of the Issuer in a format similar to the financial statements, and the audited financial statements shall be filed
in the same manner as the Annual Report when they become available. Audited financial statements, if any, of
the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Resolution.
Audited financial statements shall be prepared in accordance with generally accepted accounting principles as
prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that
the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon
C-2
which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its
financial statements are prepared, the Issuer shall provide a notice of such modification to the MSRB,
including a reference to the specific federal or state law or regulation specifically describing the legal
requirements for the change in accounting basis.
(b)
To the extent not included in the audited financial statements, adopted budget or First Interim
Report of the Issuer filed pursuant to Section 5(a) above, the Annual Report shall also include the following:
(i)
the average daily attendance in the Issuer’s schools on an aggregate basis for the
preceding fiscal year and for the current budget year;
(ii)
pension plan contributions made by the Issuer for the preceding fiscal year and for
the current budget year;
(iii)
aggregate principal amount of short-term borrowings, lease obligations and other
long-term borrowings of the Issuer as of the end of the preceding fiscal year;
(iv)
description of amount of general fund revenues and expenditures which have been
budgeted for the current fiscal year, together with audited actual budget figures for
the preceding fiscal year;
(v)
the Issuer’s total revenue limit for the preceding fiscal year and for the current budget
year;
(vi)
prior fiscal year total secured property tax levy and collections, showing current
collections as a percent of the total levy; and
(vii)
current fiscal year assessed valuation of taxable properties in the Issuer, including
assessed valuation of the top ten properties.
(c)
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the Issuer or related public entities, which have been submitted
to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final
official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other
document so included by reference.
SECTION 5.
Reporting of Significant Events.
(a)
Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice
of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than
ten (10) business days after the event:
1.
principal and interest payment delinquencies;
2.
unscheduled draws on debt service reserves reflecting financial difficulties;
3.
unscheduled draws on credit enhancements reflecting financial difficulties;
4.
substitution of credit or liquidity providers, or their failure to perform;
5.
issuance by the Internal Revenue Service of proposed or final determinations of
taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB);
C-3
6.
tender offers;
7.
defeasances;
8.
ratings changes; and
9.
bankruptcy, insolvency, receivership or similar proceedings.
Note: for the purposes of the event identified in subparagraph (9), the event is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent or similar
officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any
other proceeding under state or federal law in which a court or governmental authority has
assumed jurisdiction over substantially all of the assets or business of the obligated person, or
if such jurisdiction has been assumed by leaving the existing governmental body and officials
or officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement or
liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the obligated person.
(b)
Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the
Bonds, if material:
1.
unless described in paragraph 5(a)(5), adverse tax opinions or other material notices
or determinations by the Internal Revenue Service with respect to the tax status of the
Bonds or other material events affecting the tax status of the Bonds;
2.
the consummation of a merger, consolidation or acquisition involving an obligated
person or the sale of all or substantially all of the assets of the obligated person, other
than in the ordinary course of business, the entry into a definitive agreement to
undertake such an action or the termination of a definitive agreement relating to any
such actions, other than pursuant to its terms;
3.
appointment of a successor or additional trustee or the change of the name of a
trustee;
4.
nonpayment related defaults;
5.
modifications to the rights of Owners of the Bonds;
6.
notices of redemption; and
7.
release, substitution or sale of property securing repayment of the Bonds.
(c)
Whenever the Issuer obtains knowledge of the occurrence of a Listed Event described in
Section 5(b), the Issuer shall as soon as possible determine if such event would be material under applicable
federal securities laws.
(d)
If the Issuer determines that knowledge of the occurrence of a Listed Event under Section
5(b) would be material under applicable federal securities laws, the Issuer shall file a notice of such occurrence
with EMMA in a timely manner not more than ten (10) business days after the event.
C-4
(e)
The Issuer hereby agrees that the undertaking set forth in this Disclosure Certificate is the
responsibility of the Issuer and that the Dissemination Agent shall not be responsible for determining whether
the Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the
Rule.
(g)
Any of the filings required to be made under this Section 5 shall be made in accordance with
the MSRB’s EMMA system or in another manner approved under the Rule.
SECTION 6.
Termination of Reporting Obligation. The obligation of the Issuer and the
Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior
redemption or payment in full of all of Bonds. If such termination occurs prior to the final maturity of the
Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under
Section 5.
SECTION 7.
Dissemination Agent. The Issuer may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
initial Dissemination Agent shall be the Issuer. The Dissemination Agent may resign by providing thirty days
written notice to the Issuer and the Paying Agent. The Dissemination Agent shall not be responsible for the
content of any report or notice prepared by the Issuer. The Dissemination Agent shall have no duty to prepare
any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it
by the Issuer in a timely manner and in a form suitable for filing.
SECTION 8.
Amendment. (a) This Disclosure Certificate may be amended, in writing, without
the consent of the Owners, if all of the following conditions are satisfied: (1) such amendment is made in
connection with a change in circumstances that arises from a change in legal (including regulatory)
requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the
identity, nature or status of the Issuer or the type of business conducted thereby, (2) this Disclosure Certificate
as so amended would have complied with the requirements of the Rule as of the date of this Disclosure
Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in
circumstances, (3) there shall have been delivered to the Issuer an opinion of a nationally recognized bond
counsel or counsel expert in federal securities laws, addressed to the Issuer, to the same effect as set forth in
clause (2) above, (4) the Issuer shall have received and delivered to the Dissemination Agent an opinion of
nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the
effect that the amendment does not materially impair the interests of the Owners, and (5) the Issuer shall have
delivered copies of such opinion and amendment to the MSRB.
(b)
This Disclosure Certificate may be amended in writing with respect to the Bonds, upon
obtaining consent of Owners at least 25% in aggregate principal of the Bonds then outstanding; provided that
the conditions set forth in Section 8(a)(1), (2) and (3) have been satisfied; and provided, further, that the
Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties
or obligations hereunder.
(c)
To the extent any amendment to this Disclosure Certificate results in a change in the type of
financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report
provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of
the change.
(d)
If an amendment is made to the basis on which financial statements are prepared, the Annual
Report for the year in which the change is made shall present a comparison between the financial statements or
information prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably
C-5
feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in
the accounting principles on the presentation of the financial information.
SECTION 9.
Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this
Disclosure Certificate or any other means of communication, or including any other information in any Annual
Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure
Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a
Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall
have no obligation under this Disclosure Certificate to update such information or include it in any future
Annual Report or notice if occurrence of a Listed Event.
The Issuer acknowledges and understands that other state and federal laws, including but not limited
to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may
apply to the Issuer, and that under some circumstances compliance with this Disclosure Certificate, without
additional disclosures or other action, may not fully discharge all duties and obligations of the Issuer under
such laws.
SECTION 10. Default. In the event the Issuer fails to comply with any provision in this Disclosure
Certificate, the Dissemination Agent may (or shall upon direction of the Owners of 25% in aggregate principal
of the Bonds then outstanding or the Participating Underwriter) take all action necessary to cause the Issuer to
comply with this Disclosure Certificate. In the event of a failure of the Issuer to comply with any provision of
this Disclosure Certificate, any Owner of the Bonds may take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply
with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be
deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the
event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel
performance.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. If the Dissemination
Agent is a person or entity other than the Issuer, this Section 11 shall apply. The Dissemination Agent shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees to
indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against
any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its
powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against
any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful
misconduct. The Dissemination Agent shall be paid compensation by the Issuer for its services provided
hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees
and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and
shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Bond Owner’s, or any other party.
The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination
Agent and payment of the Bonds. No person shall have any right to commence any action against the
Dissemination Agent hereunder, seeking any remedy other than to compel specific performance of this
Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary
damages to any person for any breach under this Disclosure Certificate.
SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer,
the Dissemination Agent, the Participating Underwriter and Owners from time to time of the Bonds, and shall
create no rights in any other person or entity.
C-6
SECTION 13. Notices. Notices should be sent in writing to the following address. The following
information may be conclusively relied upon until changed in writing.
Disclosure Representative:
Superintendent
3460 Lester Road
Denair, California 95316
By:
Its:
C-7
[Form Only]
Superintendent
EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name of District :
Name of Bond Issue:
2012 General Obligation Refunding Bonds.
Date of Issuance:
February ___, 2012.
NOTICE IS HERBY GIVEN that the District has not provided an Annual Report with respect to the abovenamed Bonds as required by the Continuing Disclosure Certificate relating to the Bonds. The District
anticipates that the Annual Report will be filed on ____________.
Dated: __________________________
By:
C-8
[form only; no signature required]
APPENDIX D
INFORMATION CONCERNING STANISLAUS COUNTY
The following information concerning Stanislaus County (the “County’) is included only for the
purpose of supplying general information regarding the community. The Bonds are not a debt of the County,
the State nor any of its political subdivisions and neither the County, the State nor any of its political
subdivisions is liable therefore.
General Information
The County is located in the heart of the San Joaquin Valley, bordered by the San Francisco Bay Area
to the west and the Sierra Nevada to the east. Founded in 1854, it is home to nearly 600,000 citizens.
Population
The following table lists population figures for the County as of January 1 for the last five years.
TABLE NO. 1
POPULATION
2006 - 2010
Year
2006
2007
2008
2009
2010
Stanislaus
514,911
520,506
523,966
527,044
514,453
Source: State of California, Department of Finance.
D-1
Employment and Industry
The following table summarizes the civilian labor force, civilian employment and civilian
unemployment figures for the calendar years 2006 through 2010 and through the month of November for
2011 in the County of Stanislaus, the State of California and the United States.
TABLE NO. 2
Stanislaus County, State of California and United States
Labor Force, Employment and Unemployment
Yearly Average
Civilian
Employment
Stanislaus County(1) (2)
California(1) (2)
United States(1) (2)
224,900
17,686,700
151,428,000
207,000
16,821,300
144,427,000
17,900
965,400
7,001,000
8.0%
4.9
4.6
California(1) (2)
227,300
18,060,800
153,936,000
207,600
17,010,500
146,272,000
19,700
1,050,300
7,664,000
8.6
5.8
5.0
California(1) (2)
231,800
18,263,300
154,669,000
206,400
16,628,900
143,324,000
25,400
1,634,400
11,344,000
11.0
8.9
7.3
California(1) (2)
234,800
18,040,800
153,172,000
197,600
15,877,900
137,960,000
37,200
2,162,900
15,212,000
15.9
12.0
9.9
California(1) (2)
237,400
18,098,100
153,690,000
196,100
15,871,300
139,206,000
41,300
2,256,800
14,485,000
17.4
12.3
9.4
Stanislaus County(1) (2)(3)
California(1) (2)(3)
United States(1) (2)(3)
233,200
18,185,300
153,883,000
197,100
16,206,500
139,064,00
36,000
1,978,800
13,303,000
15.5
10.9
8.6
Year and Area
2006
2007
2008
2009
2010
2011
Civilian
Unemployment
Civilian
Unemployment
Rate
Civilian Labor
Force
Note:
Data is not seasonally adjusted.
(1)
Data may not add due to rounding. The unemployment rate is calculated using unrounded data.
(2)
Labor force data for all geographic areas for 1990 to 2010 now reflect the March 2010 annual revision (or benchmark) and
Census 2000 population controls at the state level.
(3)
Labor Force, Employment and Unemployment data as of November 2011
Source: California Employment Development Department and U.S. Department of Labor, Bureau of Labor Statistics.
D-2
The following table shows industry employment figures for the Stanislaus County for calendar years
2006 through 2010 and through the month of November for 2011.
TABLE NO. 3
STANISLAUS COUNTY
WAGE AND SALARY WORKERS BY INDUSTRY(1)
(in Thousands)
Industry
Government
Other Services
Leisure and Hospitality
Educational and Health Services
Professional and Business Services
Financial Activities
Information
Transportation, Warehousing and Utilities
Service Providing
Retail Trade
Wholesale Trade
Manufacturing
Nondurable Goods
Durable Goods
Goods Producing
Mining, Logging and Construction
Total Private
Total Nonfarm
Farm
Total (all industries)
2006
$26,900
6,000
15,100
20,700
14,700
6,100
2,400
5,400
126,700
23,500
5,900
20,900
13,000
7,900
33,300
12,400
133,100
160,000
11,900
$171,900
2007
$26,600
6,100
15,600
21,500
14,600
6,000
2,200
5,700
127,600
23,300
6,000
21,600
13,800
7,800
31,700
10,100
132,700
159,300
11,700
$171,000
2008
$26,500
5,500
15,300
22,300
13,900
6,000
1,400
5,600
124,100
21,500
6,100
20,300
13,400
6,900
27,900
7,600
125,500
152,000
12,400
$164,400
2009
$25,400
5,200
14,300
22,400
13,300
5,500
1,200
5,900
119,600
20,400
6,000
19,300
13,400
5,900
25,000
5,700
119,200
144,600
10,600
$155,200
(1) Annually; Not Seasonally Adjusted.
(2) 2011 Wage and Salary Information data as of November 2011.
Source: State of California Employment Development Department, Labor Market information.
D-3
2010
$24,700
5,000
14,500
23,200
12,800
5,500
1,200
6,300
119,000
20,000
5,800
21,600
15,900
5,700
27,400
5,800
121,700
146,400
13,100
$159,500
2011(2)
$24,500
4,700
14,400
23,200
13,100
5,400
1,100
6,100
117,600
19,300
5,800
22,200
16,500
5,700
27,600
5,400
120,700
145,200
13,700
$158,900
The following table summarizes the larger employers in the Stanislaus County.
TABLE NO. 4
MAJOR EMPLOYERS
STANISLAUS COUNTY
2012
Employer
Alcott Ridge Vineyard
Alliance Worknet
Bronco Wine Co
Carlo Rossi Winery
Con Agra Foods Inc.
County of Stanislaus
Del Monte Foods Co
E & J Gallo Winery
Ecco Domani Winery
Emanuel Medical Center
Fairbanks Cellars
Foster Farms
Gallo Winery
Memorial Hospital
Modesto Bee
Oak Valley Hospital
Patterson Vegetable Co LLC
Stanislaus County Community Service
Stanislaus County Community
Stanislaus County Office
Stanislaus County Sheriff’s
Stanislaus County Welfare Department
Sysco Central California Inc.
Turlock Irrigation District
Zabaco Winery
Location
Modesto
Modesto
Ceres
Modesto
Oakdale
Modesto
Modesto
Modesto
Modesto
Turlock
Not Available
Turlock
Modesto
Modesto
Modesto
Oakdale
Patterson
Turlock
Modesto
Patterson
Modesto
Modesto
Modesto
Turlock
Modesto
Industry
Vineyards
County Government- Social/Human Resources
Exporters (Whls.)
Wineries (Mfrs)
Canning (Mfrs)
Social Services & Welfare Organizations
Canning (Mfrs)
Wineries (Mfrs)
Wineries (Mfrs)
Hospitals
Wineries (Mfrs)
Poultry Processing Plants (Mfrs)
Wineries (Mfrs)
Hospital
Newspapers (Publishers/Mfrs)
Hospitals
Frozen Food Processors (Mfrs)
Government Offices- County
Sheriff
County Government- Social/Human Resources
Food Products (Whls)
Electric Companies
Wineries (Mfrs)
___________________________
Source: State of California Employment Development Department, extracted from the America’s Labor Market Information System (ALMIS)
Employer Database, 2012, 1st Edition, published in December, 2011.
D-4
Income
The following table summarizes per capita personal income for Stanislaus County, the State and the
United States for 2006 through 2010.
TABLE NO. 5
PER CAPITA PERSONAL INCOME
2006 - 2010
Year
2006
2007
2008
2009
2010
Stanislaus County(1)
$29,429
29,477
29,545
30,044
30,323(2)
State of California
$41,567
43,240
43,853
42,395
42,578
United States
$37,698
39,461
40,674
39,635
39,945
(1) From California Department of Transportation.
(2) Stanislaus County 2010 Per Capita Income is forecasted.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
Commercial Activity
The following table summarizes taxable transactions by type of business for Stanislaus County for the calendar
years 2006 through 2009 and through the month of November for 2010.
TABLE NO. 6
COUNTY OF STANISLAUS
TAXABLE TRANSACTIONS BY TYPE OF BUSINESS
(in Thousands)
2006-2010
Retail Stores
Apparel Stores
General Merchandise Stores
Food and Beverage Stores
Food Services and Drinking Places
Home Furnishings and Appliances
Specialty Stores
Electronic and Appliances
Building Materials and Farm
Implements
Automotive Group
Service Stations
Health and Personal Care Stores
Sporting Goods, Hobby, Books and
Music Stores
Non Retail Stores
Other Retail Stores
Total Retail Stores
Business and Personal Services
All Other Outlets
Total All Outlets
(1)
(1)
2006
2007
2008
2009
$ 224,909
956,378
320,361
505,384
192,275
558,432
-
$ 229,220
926,548
336,853
516,132
174,113
-
$ 209,269
889,877
313,383
516,357
169,714
-
$ 239,037
760,551
297,253
504,306
78,896
114,146
$ 59,740
179,446
76,375
504,306
124,946
24,586
567,014
1,573,719
-
475,633
1,018,574
622,125
-
382,535
774,274
670,286
-
379,318
603,221
516,398
99,013
97,002
174,141
161,913
24,601
369,917
5,268,389
1,843,839
$ 7,352,532
793,555
5,092,753
228,283
1,814,847
$ 7,135,883
660,142
4,585,837
194,877
1,947,978
$ 6,728,692
118,244
34,006
181,250
3,925,638
1,921,419
$ 5,847,057
28,649
9,732
44,400
1,024,374
540,278
$1,564,653
2010 Taxable Sales in California as of Third Quarter 2010
D-5
2010
Source: California State Board of Equalization, Taxable Sales in California (Sales and Use Tax).
Building Activity
The following table summarizes building activity valuations for Stanislaus County for the calendar
years 2006 through 2010 and through the month of November for 2011.
TABLE NO. 7
COUNTY OF STANISLAUS
BUILDING ACTIVITY AND VALUATION
(in Thousands)
2006 - 2010
2006
Residential
Non-Residential
Total Valuation
Total Permits
$ 521,231,000
349,715,000
$ 870,949,000
2410
2007
$347,722,000
305,696,000
$ 653,418,000
2008
2009
$ 114,829,000
235,856,000
$ 350,685,000
$ 82,071,000
148,910,000
$ 230,981,000
486
331
1767
(1)
Construction Industry Research Board as of November 2011.
Source: Construction Industry Research Board.
D-6
2010
$ 67,267,000
145,570,000
$212,837,000
244
2011(1)
$ 50,752,000
91,807,000
$ 142,559,000
152
APPENDIX E
STANISLAUS COUNTY INVESTMENT POLICY AND
DESCRIPTION OF INVESTMENT POOL
The following information have been furnished by the Office of the Treasurer-Tax Collector, Stanislaus County.
It describes (i) the policies applicable to investment of District funds, including bond proceeds and tax levies, and funds of
other agencies held by the County Treasurer and (ii) the composition, carrying amount, market value and other
information relating to the investment pool. Further information may be obtained directly from the Treasurer-Tax
Collector, 1010 Tenth Street, Suite 2500, Modesto, California 95353, phone number (209) 525-6388.
E-1
THE STANISLAUS COUNTY TREASURY POOL INVESTMENT POLICY
Effective April 1, 2011
Prepared by: Gordon B. Ford, Stanislaus County Treasurer/Tax Collector
Approved by the Stanislaus County Treasury Pool Oversight Committee on February 10, 2011
Approved by the Stanislaus County Board of Supervisors on March 22, 2011
Stanislaus County Treasury Pool Investment Policy
April 1, 2011
TABLE OF CONTENTS
Item
Page(s)
Purpose and Scope
1
Objective
1
Investment Authority and Standards of Care
2-3
Authorized Investments
3-5
Non-Authorized Investments
5
Reporting Requirements
6
Annual Audit
7
Investment Pool Expenses
7
Agencies' Voluntary Depositing and Withdrawal
8-9
Investment Earnings Apportionment and Rate
9
Exemptions and Amendments
9
Glossary
A-C
April 1, 2011
PURPOSE AND SCOPE
The purpose of the Stanislaus County Treasury Pool Investment Policy ("Policy") is to provide
guidance of the investment of funds in excess of the current day's necessary expenditure which
by California State law ("Law") and local ordinance are entrusted to and delegated to the
Stanislaus County Treasurer for investment.
The scope of this policy applies solely to funds deposited with the Stanislaus County Treasurer
for operating needs as part of the Stanislaus County Treasury Pool ("Pool") of funds. Local
legislative and directive bodies such as the Board of Supervisors, various school boards, district
boards and special agency boards which by Law have authority to invest funds entrusted to such
bodies outside of the Pool (including but not limited to employee retirement funds and bond
proceeds) are not constrained to adhere to this policy for investment of funds outside of the Pool.
OBJECTIVE
The primary objective of the investment of short term operating funds is to maintain the principal
of such funds (safety) in investment vehicles which are easily converted to cash (liquidity) while
obtaining a competitive market rate of return (yield) for the risk taken at the time of investing.
Safety of principal is of paramount importance. Investments will only be made in securities, which
have a very high probability of maintaining the principal invested. Only highly rated or strongly
collateralized investments will be made. Diversification by type of investment, issuer and maturity
to minimize the risk of loss of principal due to credit deterioration or interest rate volatility will be
made. Sales of securities before maturity may be made if at a gain, to avoid an anticipated
default of payment by the issuer of interest or principal or if such sale will allow investment in a
higher yielding vehicle and any loss upon sale can be more than compensated by additional
interest earnings within a six month period. Sale of securities also may be made for efficiency if
due to the growth in the size of the portfolio any investment is less than one-fourth of one percent
of the total portfolio.
To achieve appropriate liquidity needs the Pool's investments must be in maturity ranges which
meet normal, anticipated disbursement requirements of all depositors as can be determined by
historical disbursement patterns as well as communicated forecasts by depositors. Unanticipated
cash disbursement needs require that investments be easily convertible to cash by maintaining
shorter maturities in highly traded securities.
To achieve a competitive market rate of return or yield, individual investment decisions must be
made on a competitive basis. Due to the primary need of maintaining the purchasing power and
cash availability of depositors' funds, the portfolio's yield will normally be lower than that of
higher-risk, longer maturity investment pools. An earnings rate goal for the fund will generally
achieve a yield, which is 100 basis points higher than inflation.
1
April 1, 2011
INVESTMENT AUTHORITY AND STANDARDS OF CARE
The daily investment of Pool funds has been delegated to the Stanislaus County Treasurer/Tax
Collector ("Treasurer") pursuant to Government Code section 27000.1 and 53607. This is an
annual delegation given to the Stanislaus County Treasurer/Tax Collector by the Stanislaus
County Board of Supervisors each year and can be revoked by the Stanislaus County Board of
Supervisors at any time. The Treasurer is responsible for all transactions undertaken and shall
establish a system of controls to regulate the activities of subordinates. All transactions must
comply with Law and be in conformity with this Policy. The Treasurer shall have written policies
and procedures to insure investment compliance including:
-
A listing of authorized financial institutions and broker/dealers. Broker/dealers may include
"primary" or regional dealers that qualify under Securities and Exchange Commission Rule
15C3-1 (uniform net capital rule) with a minimum capitalization of $10,000,000 and have at
least one major office of operation within the State of California. Broker/dealers must have
broker/dealer staff who have at least five years experience in Pool investment transactions
with California local government investment officials. Broker/dealers must supply the
following:
1. Financial Industry Regulatory Authority (FINRA)
2. Proof of California State registration
3. Verification of review of and willingness to comply with this Policy
-
Broker/dealers are prohibited from making political contributions to any candidate for the
Board of Supervisors or Treasurer/Tax Collector, which exceed the limitations contained in
Rule G-37 of the Municipal Securities Rulemaking Board.
-
Internal controls as approved and monitored by the Stanislaus County Auditor-Controller in
accordance with Law and which address control to avoid or detect collusion, appropriate
separation of duties, custodial safekeeping, avoidance of physical delivery of securities, clear
delegation of investment authority and responsibilities, written confirmation (acceptable via
fax) by Treasurer for investments which mature in more than one year, and an appropriate
wire transfer arrangement between a lead banking institution and the third party custodian.
-
All investments shall be made with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like capacity and familiar with
these matters would use in the conduct of an enterprise of a like character and with like aims.
Financial market security transactions will be executed by delivery versus payment and the
securities will be held by a third party custodian.
2
April 1, 2011
INVESTMENT AUTHORITY AND STANDARDS OF CARE (Continued)
-
To avoid even the appearance of a conflict of interest, all officers and employees involved in
the investment process shall refrain from personal business activity which in any way could
hinder the proper execution and management of the investment program or impair anyone's
ability to make an impartial decision.
-
Pursuant to Government Code Sections 27132.1, 27132.2 and 27132.3 Committee members
are prohibited from:
1. Being an employee of an entity which has contributed to the campaign fund of any
candidate for local treasurer or legislative body either during membership or three years
prior to membership
2. Raising any money for a candidate for local treasurer or governing board
3. Securing employment with bond underwriters, bond counsel, security brokerages or
dealers, or like financial services while a Committee member or for three years after
leaving the Committee.
-
A limit of $50 per calendar year is placed on the receipt of honoraria, gifts and gratuities from
advisors, brokers, dealers, bankers or other persons with whom the County Treasury
conducts business by any member of the Committee, the County Treasurer and any staff
involved in the investment process. Beginning in 2004, an annual certification of compliance
as prepared by the Treasurer shall be submitted by Committee members.
-
The acceptance of transportation or meals and refreshments received during regularly
scheduled conferences (such as the California Association of County Treasurers and Tax
Collectors – CACTTC) are not prohibited by this policy.
AUTHORIZED INVESTMENTS
Pursuant to Government Code Section 53601 and 53635, investments will only be made in
authorized securities with a maturity date of five (5) years or less from the transaction settlement
date. All investments (except in mutual funds) must be in securities which have a positive return if
held to maturity. The following instruments are authorized for investment (and other instruments
are prohibited):
a) Bonds issued by Stanislaus County or by a department, board agency or authority of
Stanislaus County.
b) United States (U.S.) notes, bonds, bills or certificates of indebtedness or those for which the
faith and credit of the U.S. are pledged for the payment of principal and interest.
3
April 1, 2011
AUTHORIZED INVESTMENTS (Continued)
c) California State registered warrants, treasury notes or bonds
d) California local agency bonds, notes, warrants or other indebtedness and the California State
Local Agency Investment Fund (LAIF).
e) Obligations issued by banks for cooperatives, federal land banks, federal intermediate credit
banks, federal home loan banks, the Federal Home Loan Bank (FHLB) Board, the
Tennessee Valley Authority (TVA), Federal National Mortgage Association (FNMA), Federal
Home Loan Mortgage Corporation (FHLMC), issuances or guaranteed instruments, and
obligations of U.S. federal agencies or a U.S. government-sponsored enterprise. Investment
in Small Business Administration (SBA) notes is prohibited.
f)
Bankers' Acceptances (BAs) which are eligible for purchase by the Federal Reserve System
and which do not have a maturity date longer than 180 days from the settlement date. At the
time of investment, no more than 40% of the Pool may be invested in BAs with a maximum
20% of the Pool in BAs of one commercial bank.
g) Commercial paper (CP) of "prime" quality (rated A-1 by Moody, P-1 by Standard and Poor's
Corporation or F-1 by Fitch) of a U.S. corporation having assets in excess of $500,000,000
and a long term debt rating of "A" or higher. The maturity date may not exceed 180 days from
the settlement date nor represent more than 10% of the total outstanding CP issuance of the
corporation. No more than 15% of the Pool may be invested in CP unless the dollar weighted
average maturity is 31 days or less in which case the total invested may be 30% of the Pool.
Commercial Paper must be 3(a)3 only, no 144a paper and not be split rated below A-1, P-1
or F-1.
h) Negotiable certificates of deposit (NCDs) issued by a nationally or state chartered bank or
state licensed branch of a foreign bank. No more than 30% of the Pool may be invested in
NCDs with no more than 5% of the Pool invested in any one bank's NCD.
i)
Repurchase agreements (REPOs) with an approved broker/dealer of any security authorized
by Government Code section 53601 with a market value of 102% of the agreement and a
term of not more than 90 days. Reverse repurchase agreements are prohibited.
4
April 1, 2011
AUTHORIZED INVESTMENTS (Continued)
j)
Medium Term Notes (MTNs) of U. S. corporations or depository institutions which have
maturities of five years or less from the settlement date. The notes must be rated "A" or
higher by Standard and Poor’s (or other equivalent rating). No more than 30% of the Pool
shall be invested in MTNs with no more than 5% of the Pool invested in the MTNs of any one
corporation at the time of the investment. All MTNs must be non-callable. No investment shall
be made in private placement MTNs or MTNs with split ratings below a Standard and Poor’s
rating of A- or its equivalent.
k) Diversified management company shares (mutual fund/MF) which invest in instruments
authorized in Government Code section 53601 (a) to (l) inclusive. The company must have
the highest rating by two of three recognized rating agencies or have an investment adviser
registered with the Securities and Exchange Commission (SEC) with at least five years of
experience investing in securities authorized by Government Code section 53601 (a) to (m)
inclusive and with assets under management in excess of $500,000,000. At the time of MF
shares purchase no more than 15% of the Pool may be invested in these securities with no
more than 5% in any one mutual fund.
l)
Certificates of Deposit (CDs) in banks which are 110% collateralized by the institution with
government securities. At the time of investment, no more than 5% of the Pool may be
invested in any one bank's CDs.
NON-AUTHORIZED INVESTMENTS
a) Investment in securities which are commonly referred to as "derivatives" such as interest only
strips on mortgage pools, options, puts, inverse floaters or other speculative investments are
prohibited.
5
April 1, 2011
REPORTING REQUIREMENTS
A monthly report shall be prepared by the Treasurer no later than 30 days following the end of
the monthly reporting period. A copy of the report will be forwarded to Committee members, and
the Treasurer will maintain a file of their acceptance. The report will be forwarded to the Board of
Supervisors for final review and acceptance. The report will be provided through the web site.
The monthly report shall include:
-
A concise management summary of Pool activity and position rendered with statements of
review and reconciliation with custodial records, source of market valuation, ability to meet
next six (6) month's expenditures and for compliance with this Policy by the Treasurer and
Board of Supervisors' approval.
-
A detailed listing of securities held at the end of the month grouped by investment type (e.g.
BA, CD, CP) and delineated as follows:
-
-
Issuing agency (e.g. U.S. Government, FNMA, GE Capital)
Date purchased (settlement date)
Date of maturity
Par Value
Book Value
Market value
Stated rate (coupon rate)
Yield-to-Maturity
Days-to-Maturity
A detailed listing of security transactions during the report period (purchases, sales and
maturities) grouped by investment type and to include the following:
-
Date of transaction
Issuing agency (e.g. U.S. Government, FNMA, GE Capital)
Purchase, Deposit, Sale, Maturity or Withdrawal Amount
Stated rate (coupon rate)
A summary of Pool position by investment type dollar amount, percentage of total
portfolio and average weighted maturity showing compliance with Policy limitations.
A summary by investment type of purchases and sales/maturities and ending position.
6
April 1, 2011
ANNUAL AUDIT
An annual audit shall be conducted to insure that investment transactions are in compliance with
Law and this Policy. The audit shall be supervised by a Certified Public Accountant (CPA) who
shall render an opinion to the Committee. The opinion shall be forwarded to the Board of
Supervisors for review and acceptance. The selection of the CPA shall be by the Stanislaus
County Auditor-Controller as a Committee member.
INVESTMENT POOL EXPENSES
The expenses of administration of the Pool shall be borne by all depositors by the utilization of
investment earnings to offset the costs. Total costs shall not exceed 25 basis points (0.25%) of
the average Pool daily balance for any fiscal year. Costs include normal Treasury costs for staff
and support services in the areas of handling, safekeeping and depositing monies received;
investment transactions and custodial safekeeping of securities; bank services; accounting,
reporting and auditing of deposit and investment transactions; informational and educational
materials and services related to financial markets, investments and individual business and
governmental entities' financial condition; and other duties and costs related to the management
of Pool funds. Appropriate costs normally charged as "Treasury/org 30400" on the Stanislaus
County Auditor-Controller's records will incorporate and clearly define the Pool expenses.
7
April 1, 2011
AGENCIES' VOLUNTARY DEPOSITING AND WITHDRAWAL
"Voluntary" agency depositing is discouraged due to the potential volatility of depositing and
withdrawal, which may occur. The Pool is designed as an operating fund for Stanislaus County
and entities, which are required to deposit by Law or have historically utilized the efficiencies of
the Treasury by Law.
Only those agencies which use the Treasury for operational purposes due to their ties to
Stanislaus County departmental functions, area schools or special public districts and are either
required or allowed to deposit funds in the County Treasury are allowed to be participants in the
Pool.
Withdrawals from the Pool for investment purposes outside of the Pool by non-County member
agencies may be done if the following conditions are met:
-
-
The agency has provided the Treasurer with legal authority that it can invest funds outside of
the Pool
The agency shows evidence of maintaining a minimum cash balance of one month’s normal
payroll expenditures for 30 days prior to the date of request as verified by the Stanislaus
County Auditor-Controller
The agency withdraws a minimum of $1,000,000 and will continue to maintain its Pool cash
balance of one month’s normal payroll costs
The agency makes its request in writing signed by an authorized representative of the
agency's board on a form provided by the Treasurer
The agency must allow two business days for each five million dollar or increment thereof
which is being withdrawn (e.g. a $15,000,000 withdrawal would require that the Treasurer
receive a completed request form with appropriate signatures and verifications 6 business
days before the funds are released)
If the withdrawing agency's Pool cash balance falls below one month’s payroll expense, the
Treasurer may demand that funds be retrieved to restore the Pool cash balance to such level.
Reinvestment of funds from external investments (e.g. California State Local Agency Investment
Fund) may be done without the above procedures. The Treasurer’s Office may verify
telephonically with the Auditor’s Office that the agency has one month’s payroll expenditures as
cash in the Pool exclusive of the redemption of the external investment funds.
8
April 1, 2011
AGENCIES' VOLUNTARY DEPOSITING AND WITHDRAWAL (Continued)
The agency's request may be denied or delayed if multiple requests are received or abnormally
high disbursements are experienced by the Pool resulting in unusual demands for cash outflow.
Any agency request, which results in an immediate liquidation of investment securities at a loss,
will only be honored after the agency has acknowledged and approved to bear the loss incurred.
No request can be honored which will adversely affect the stability and predictability of the
investments in the Pool.
INVESTMENT EARNINGS APPORTIONMENT AND RATE
Beginning July 1, 2001, the Pool’s investment earnings shall be apportioned by the following
method. The investment earnings which have been received in cash and accumulated from the
beginning to the end of each calendar quarter shall be apportioned to each cash balance account
maintained within the Pool. The apportionment of earnings to any particular cash balance
account will be in direct proportion of that account’s average daily cash balance to the entire
Pool’s average daily cash balance for that same quarter. For example, if the earnings received
for the quarter ending March 31 were $5,000,000, and if the County General Fund’s average
daily cash balance were $10,000,000 and if the entire Pool’s average daily cash balance were
$500,000,000, then the amount of earnings to apportion to the County’s General Fund would be
$100,000 (calculated as $5,000,000 x $10,000,000/$500,000,000). Cash balance accounts shall
be maintained in and earnings apportionment shall be performed by the Stanislaus County
Auditor-Controller’s Office. The cash earnings apportionment rate is calculated as the investment
earnings received in cash for the quarter divided by the average daily cash balance for the entire
Pool times four (4). In the above example, the cash earnings apportionment rate is 4%
($5,000,000 / $500,000,000 x 4).
EXEMPTIONS AND AMENDMENTS
Any investment currently held prior to the adoption of changes to the Investment policy that does
not meet the newly revised guidelines of this Policy shall be exempted from the requirements of
this policy. Upon that investment's maturity or liquidation, the monies received shall be invested
in accordance with this Policy.
This Policy shall be reviewed on an annual basis. Any changes must be prepared by the
Treasurer, reviewed and approved for propriety by the Committee and approved by the
Stanislaus County Board of Supervisors.
9
April 1, 2011
GLOSSARY
Bankers' Acceptance (BA): A draft or bill or exchange accepted by a bank or trust company.
The accepting institution guarantees payment of the bill, as well as the issuer.
Broker: A broker brings buyers and sellers together for a commission.
Certificate of Deposit (CD): A time deposit with a specific maturity evidenced by a certificate.
Large denomination CDs are typically negotiable.
Collateral: Securities, evidence of deposit or other property, which a borrower pledges to secure
repayment of a loan. Also securities pledged by a bank to secure public money deposits.
Coupon: The annual rate of interest that a bond issuer promises to pay the bondholder on the
bond's face (or par) value.
Dealer: A dealer acts as a principal in all transactions, buying and selling for his own account.
Delivery Versus Payment: The delivery of securities with an exchange of money for the
securities.
Derivatives: Financial instruments with return profiles linked to or derived from the movement of
one or more underlying indices or securities. These instruments may include a leveraging factor.
Also they include financial contracts based on notional amounts the value of which are derived
from underlying indices or securities (such as interest rates, foreign exchange rates, equities or
commodities).
Diversification: Dividing investment funds among a variety of securities offering independent
returns.
Federal Credit Agencies: Agencies of the Federal government set up to supply credit to various
classes of institutions (e.g. small business firms, farmers, farm cooperatives and exporters).
Federal Home Loan Banks (FHLB): Government sponsored wholesale banks (currently 12
regional banks) which lend funds and provide correspondent banking services to member
commercial banks, thrift institutions, credit unions and insurance companies. The mission of the
FHLBs is to liquefy the housing related assets of its members who must purchase stock in their
district Bank.
Federal National Mortgage Association (FNMA): FNMA was chartered under the Federal
National Association Act in 1938 and is a federal corporation working under the auspices of the
Department of Housing and Urban Development (HUD). FNMA is the largest single provider of
residential mortgage funds in the U.S. FNMA is a corporation. The corporation's purchases
include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages.
FNMA's securities are highly liquid and widely accepted. FNMA assumes and guarantees that all
security holders will receive timely payment of principal and interest.
Liquid Asset: A liquid asset is one that can be converted easily and rapidly into cash without a
short-term substantial loss in value. Liquid securities have a narrow spread between bid and
asked prices at reasonable sizes.
April 1, 2011
A
GLOSSARY (Continued)
Local Agency Investment Fund: The California pool of local agency assets, which is managed
by the State Treasurer. Limits apply to each agency's deposit of general fund reserves, however
no limits on amount of deposit apply to bond proceeds. Funds are still quite liquid in this pool.
Market Value: The price at which a security is trading and could presumably be purchased or
sold.
Master Repurchase Agreement: A written contract covering all future transactions between the
parties to a repurchase agreement which establishes each party's rights in the transactions.
Maturity: The date upon which the principal or stated value of an investment becomes due and
payable.
Money Market: The market in which short term debt instruments (Bills, CP, BAs, etc.,) are issued
and traded.
Negotiable CD (Certificate of Deposit): A large denomination time deposit with a specific
maturity evidenced by a certificate. These are traded like other fixed income securities. (see also
“Certificate of Deposit”)
Portfolio: Collection of securities held by an investor.
Primary Dealer: A group of government securities dealers who submit daily reports of market
activity and positions and monthly financial statements to the Federal Reserve Bank of New York
and are subject to its informal oversight. Primary dealers include Securities and Exchange (SEC)registered securities broker-dealers, banks and a few unregulated firms.
Repurchase Agreement (REPO): A holder of securities sells these securities to an investor with
an agreement to repurchase the securities at a fixed price on a fixed date. The security buyer in
effect lends to the security seller cash money for the period of the agreement and the terms of the
agreement are structured to compensate the security buyer for this transaction.
Safekeeping: A service rendered by banks for a fee whereby securities and valuables of all
types and descriptions are held in the bank's vaults for protection.
Secondary Market: The trading arena of securities subsequent to the initial distribution of those
securities.
Securities and Exchange Commission: The Federal Agency created by Congress to protect
investors in security transactions by administering securities legislation.
Structured Notes: Notes issued by government sponsored enterprises (such as FHLB and
FNMA) and corporations which have imbedded options (e.g. call features, step-up coupons,
floating rate coupons, derivative-based returns) into their debt structure. The securities market
performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options
and shifts in the shape of the overall yield curve.
April 1, 2011
B
GLOSSARY (Continued)
Treasury Bills: A non-interest bearing discount security issued by the U.S. Treasury to finance
national debt. Most bills are issued to mature in three (3), six (6) or twelve (12) months.
Treasury Bonds: Medium-term interest-bearing U.S. Treasury securities issued as direct
obligations of the U.S. Government and having initial maturities from two (2) to ten (10) years.
Uniform Net Capital Rule (SEC Rule 15C3-1): SEC requirement that member firms as well as
non-member broker-dealers in securities maintain a maximum ratio of indebtedness to liquid
capital of fifteen (15) to one (1); also called "net capital rule" and "net capital ratio." Indebtedness
covers all money owed to a firm including margin loans and commitments to purchase securities.
Liquid capital includes cash and assets easily converted into cash.
Yield: The rate of annual income return on an investment expressed as a percentage.
Yield to Maturity: The annual rate of return on invested dollars or cash outflow exclusive of
transactional interest (including any purchase with a discount or premium) given the stated
interest income and maturity value of the investment as the anticipated cash inflows.
April 1, 2011
C
April 1, 2011
STANISLAUS COUNTY
SHORT-TERM INVESTMENT POOL SUMMARY
NOVEMBER 30, 2011
CASHFLOW:
BEG. CASH BALANCE
RECEIPTS
DISBURSEMENTS
ENDING CASH BALANCE
NOVEMBER 2011
946,626,844.38
181,167,102.41
(172,508,341.56)
955,285,605.23
YTD FY 2012
NOVEMBER 2010
1,063,471,316.50
999,697,454.07
809,812,288.38
195,921,406.26
(917,997,999.65)
(177,590,660.25)
955,285,605.23 1,018,028,200.08
YTD FY 2011
1,096,662,485.08
823,887,683.71
(902,521,968.71)
1,018,028,200.08
INTEREST INCOME:
INTEREST RECEIVED
TREASURY EXPENSE
NET DISTRIBUTION
NOVEMBER 2011
883,010.71
(47,968.33)
835,042.38
YTD FY 2012
NOVEMBER 2010
3,692,879.09
855,049.51
(239,841.67)
(47,968.33)
3,453,037.42
807,081.18
YTD FY 2011
2,599,985.82
(239,841.67)
2,360,144.15
BALANCE - 11/30/2011:
CERT. OF DEPOSIT
NEGOTIABLE CERT. OF DEPOSIT
COMMERCIAL PAPER
BANKERS ACCEPTANCES
MANAGED FUNDS
AGENCIES - COUPON
AGENCIES - DISCOUNT
TREASURIES - COUPON
MEDIUM TERM NOTES
CALIFORNIA REVENUE ANTICIPATION NOTES
CALIFORNIA GENERAL OBLIGATION BONDS
TOTAL INVESTMENTS
CASH/BANK BALANCES
TOTAL
DOLLAR
COST
10,000,000.00
40,000,000.00
69,872,916.67
73,934,003.61
50,000,000.00
187,688,021.80
49,895,138.89
211,693,525.71
169,191,439.00
26,971,857.46
11,395,668.79
900,642,571.93
54,643,033.30
955,285,605.23
MARKET
VALUE
10,000,000.00
39,767,900.00
69,841,200.00
73,978,490.00
50,092,379.60
191,560,781.90
49,997,300.00
216,223,550.00
168,826,277.50
26,974,170.00
11,198,000.00
908,460,049.00
54,643,033.30
963,103,082.30
MAX INVEST.
AS % OF TOTAL
30.00%
30.00%
15.00%
40.00%
30.00%
INVESTMENTS
MAX DAYS
AVG DAYS
YTM
AS % OF TOTAL
TO MATURE TO MATURE 360 EQUIV.
1.11%
1,825
373
0.80%
4.44%
1,825
693
0.70%
7.76%
180
120
0.47%
8.21%
180
41
0.27%
5.55%
1
1
0.38%
20.84%
1,825
543
1.58%
5.54%
1,825
86
0.23%
23.50%
1,825
740
1.32%
18.79%
1,825
331
2.07%
2.99%
1,825
188
0.38%
1.27%
1,825
1,370
1.16%
100.00%
425
1.19%
APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The information in numbered paragraphs 1-11 of this Appendix F, concerning The Depository Trust
Company, New York, New York ("DTC") and DTC's book-entry system, has been furnished by DTC for use in
official statements and the District takes no responsibility for the completeness or accuracy thereof. The
District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will
distribute to the Beneficial Owners (a) payments of interest or principal with respect to the Bonds,
(b) certificates representing ownership or other confirmation of ownership in the Bonds, or (c) redemption or
other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will
so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner
described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and
Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants
are on file with DTC.
Information Furnished by DTC Regarding its Book-Entry Only System
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
Bonds (the “Securities”). The Securities will be issued as fully-registered securities 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 Security certificate will be issued for each maturity of the
Securities in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however,
the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to
each $500 million of principal amount, and an additional certificate will be issued with respect to any
remaining principal amount of such issue.
2. 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 1934. DTC holds and provides asset servicing for over 3.5 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 posttrade settlement among Direct Participants of sales and other securities transactions in deposited securities,
through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This
eliminates the need for physical movement of securities 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 is the holding company for DTC, National Securities Clearing Corporation and Fixed
Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its
regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S.
securities 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 a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which
will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of
each Security (“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 holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by
F-1
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 Securities, except in
the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC’s records reflect only the identity of the
Direct Participants to whose accounts such Securities 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.
5. 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 Securities may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Securities, such as redemptions,
tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of
Securities may wish to ascertain that the nominee holding the Securities 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.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within a maturity are being
redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the District 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions and dividend payments on the Securities 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 detail information from
the District or the Paying Agent, 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 securities 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 Paying
Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be
requested by an authorized representative of DTC) is the responsibility of the District or the Paying Agent,
disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. If applicable, a Beneficial Owner shall give notice to elect to have its Securities purchased or
tendered, through its Participant, to tender/remarketing agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to
tender/remarketing gent. The requirement for physical delivery of Securities in connection with an optional
tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are
transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities
to tender/remarketing agent’s DTC account.
10. DTC may discontinue providing its services as depository with respect to the Securities at any time by
giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
F-2
11. The District may decide to discontinue use of the system of book-entry-only transfers through DTC
(or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
F-3

4000000* denair unified school district

Transcription

Similar documents

confidential great lengths price for hair

Welcome to the RCCAQ`s 39th Annual Convention

Do liry o:`i fHn rssuE A$tD sAtE 0F COVUtitliiNT rcIiDs

RADICALES LIBRES

908 - 3000ºF Electrical Resist/Thermal Cond.

Change of Address Form

Peptide Structure-1 - UCLA Chemistry and Biochemistry

the lutheran village at miller`s grant

Corporate bonds a good bet amid global volatility in equities

TNT is a molecule. Molecules are made up of different types of