Grossmont Union High School District

This Preliminary Official Statement and the information contained herein are subject to completion and amendment. 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 prior to the registration or qualification under the securities laws of such jurisdiction. * Preliminary, subjectto change. The dateofthis Official Statementis______, 2020. the through delivery for available be will form, facilities ofDTConorabout October 14,2020. definitive in Bonds, the that anticipated is It Corporation. Professional a by Orrick,Herrington&Sutcliffe LLP,asDisclosureCounsel,andfortheUnderwriters byStradlingYoccaCarlson&Rauth, of validitybyOrrick,Herrington &Sutcliffe andInterest” Principal of Payment – BONDS See “THE Bonds. APPENDIX F–“BOOK-ENTRYONLYSYSTEM.” the in interests their representing certificates physical book-entry formonly,andwillbeinitiallyissuedregistered inthenameofanomineeDTC.Purchaserswillnotreceive in issued be will Bonds The Bonds. the of APPENDIX F) in defined (as Owners Beneficial the to payments such remit will who San Diego)toTheDepositoryTrustCompany,NewYork, York(“DTC”),forsubsequentdisbursementtoDTCParticipants, Principal andInterest.” to maturityoruponearlierredemption,attheratessetforth ontheinsidecoverpagehereof.See“THEBONDS–Paymentof principal amountsandwillbearinterest payable commencing on February1,2021,andthereafteroneach1August fund oftheDistrict.See“SECURITYANDSOURCESOFPAYMENT FORTHEBONDS.” personal propertywhichistaxableatlimitedrates).TheBondsarenotobligationsoftheCountyor general assessed on taxable properties within the District, without limitation as to rate or amount (except as to certain SOURCES OFPAYMENTFORTHEBONDS.” limited rates),forthepaymentofprincipalandinterestonBonds,allasmorefullydescribedherein.See“SECURITY AND to taxationbytheDistrict,withoutlimitationasrateoramount(exceptcertainpersonalpropertywhichis taxable at (ii) topayaportionofdebtservicetheBondsand(iii)costsissuanceBonds. providing funds (i) to finance construction, improvement and modernization projects approved by the voters at the 2008 Election, The BondsarebeingissuedbytheDistrict,locatedinCountyofSanDiego,California(the“County”),forpurpose of authorize the issuance and sale of $417 million principal amount of general obligation bonds ofthe District (the “2008 Election”). on November4,2008,atwhichtherequisite55%ormoreofpersonsvotingbondmeasure(“PropositionU”) votedto “Bonds”) wereauthorizedbytheregisteredvotersofGrossmontUnionHighSchoolDistrict(the“District”)atanelection held (Election of 2008,Series J-2) (the “Series J-2 Bonds” or the “Tax-Exempt Bonds”and,together with the Series J-1Bonds,the (the “SeriesJ-1Bonds”orthe“TaxableBonds”)andGrossmontUnionHighSchoolDistrict2020GeneralObligation Bonds investment informed an of decision. making the to essential information obtain to Statement Official entire the read must Dated: DateofDelivery disposition of,ortheamount,accrualreceiptofintereston,Bonds.See“TAXMATTERS.” Section 103 oftheCode. BondCounsel expresses no opinion regarding any othertax consequences relatedtotheownershipor Counsel observes that interest on theTaxableBondsisnotexcludedfromgrossincomeforfederaltaxpurposesunder Counsel isalsooftheopinionthatinterestonBondsexemptfromStateCaliforniapersonalincometaxes.Bond interest on the Tax-Exempt Bonds is not a specific preference item for purposes of the federal alternative minimum tax. Bond tax purposesunderSection103oftheInternalRevenueCode1986(the“Code”).InfurtheropinionBondCounsel, and compliancewithcertaincovenants,interestontheTax-ExemptBondsisexcludedfromgrossincomeforfederal laws, regulations,rulingsandcourtdecisions,assuming,amongothermatters,theaccuracyofcertainrepresentations NEW ISSUES–BOOK-ENTRYONLY The Bondswillbeofferedwhen, as,andifissuedbytheDistrictreceivedUnderwriters, subjecttotheapproval The Bondsaresubjecttoredemptionpriormaturity. See“THE BONDS–Redemption.” Payments ofprincipaltheBondswillbemadebyPaying Agent(initially,theTreasurer-TaxCollectorofCounty The Bondswillbeissuedascurrentinterestbonds.datedthedateoftheirdelivery,maturein the The BondsaregeneralobligationbondsoftheDistrict,securedandpayablefrom The BoardofSupervisorstheCountyisempoweredandobligatedtolevy The GrossmontUnionHighSchoolDistrict2020GeneralObligationBonds(Electionof2008,SeriesJ-1)(FederallyTaxable) This coverpagecontainscertaininformationforreferenceonly.Itisnotasummaryofthisissue.Investors In theopinionofOrrick,Herrington&SutcliffeLLP,BondCounseltoDistrict,baseduponananalysisexisting 2020 GeneralObligationBonds (Election of2008,SeriesJ-1) PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 21, 2020 (Federally Taxable) STIFEL

$2,035,000* GROSSMONT UNION HIGH SCHOOL DISTRICT

(San DiegoCounty,California) LLP , BondCounsel.Certainlegal matterswillbepasseduponfortheDistrict 2020 GeneralObligationBonds (Election of2008,SeriesJ-2) $18,465,000* taxes upon all property subject property all upon taxes ad valorem (See “MISCELLANEOUS–Ratings.”) CITIGROUP Due: Asshownontheinsidecover ad valorempropertytaxes Moody’s: “Aa2” Fitch: “AAA”

MATURITY SCHEDULES

$2,035,000* GROSSMONT UNION HIGH SCHOOL DISTRICT (San Diego County, California) 2020 General Obligation Bonds (Election of 2008, Series J-1) (Federally Taxable)

Maturity Principal Interest CUSIP‡ Number (February 1) Amount Rate Yield† (399262)

2021

$18,465,000* GROSSMONT UNION HIGH SCHOOL DISTRICT (San Diego County, California) 2020 General Obligation Bonds (Election of 2008, Series J-2)

Maturity Principal Interest CUSIP‡ Number (August 1) Amount Rate Yield† (399262)

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 $______.___% Term Bonds due August 1, 2043 − Yield† _.___% – CUSIP‡ Number 399262 ___

* Preliminary, subject to change. † Yields certified by the Underwriters. The District takes no responsibility for the accuracy thereof. ‡ CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2019 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the Underwriters or their agents or counsel assumes responsibility for the accuracy of such numbers.

GROSSMONT UNION HIGH SCHOOL DISTRICT

District Governing Board

Robert Shield President Area 4 Chris Fite Elva Salinas Vice President Clerk Area 1 Area 2

Jim Kelly Dr. Gary Woods Member Member Area 5 Area 3

District Administration

Theresa Kemper Superintendent

Scott H. Patterson Deputy Superintendent, Business Services

Dr. Terry Stanfill Assistant Superintendent, Human Resources

Dr. Paul Dautremont Interim Assistant Superintendent, Educational Services

Ken Leighton* Executive Director, Fiscal Services

Katy Wright Executive Director, Facilities Management

Bond Counsel and Disclosure Counsel

Orrick, Herrington & Sutcliffe LLP San Francisco, California

Municipal Advisor

KNN Public Finance, LLC Los Angeles, California

Paying Agent

Treasurer-Tax Collector of the County of San Diego, California San Diego, California

* Ken Leighton is expected to retire on September 30, 2020, and Audrey Maas is expected to begin serving as Executive Director, Fiscal Services as of that date.

This Official Statement does not constitute an offering of any security other than the original offering of the Bonds by the District. No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the District.

The Bonds are exempted from registration under the Securities Act of 1933, as amended, pursuant to Section 3(a)(2) thereof. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy Bonds in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation.

The information set forth herein other than that furnished by the District, although obtained from sources which are believed to be reliable, is not guaranteed as to accuracy or completeness. The information and expressions 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 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.

The Underwriters listed on the cover page hereof (collectively, the “Underwriters”) have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

Certain statements contained in this Official Statement reflect not historical facts but forecasts and “forward-looking statements.” In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and similar expressions are intended to identify forward-looking statements. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors that 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. All projections, forecasts, assumptions, expressions of opinions, estimates, and other forward-looking statements are expressly qualified in their entirety by the foregoing and the other cautionary statements set forth in this Official Statement.

The District maintains a website. However, the information presented on that website is not part of this Official Statement and should not be relied upon in making investment decisions with respect to the Bonds.

In connection with this offering, the Underwriters may overallot or effect transactions which stabilize or maintain the market prices of the Bonds at levels above those that might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriters may offer and sell the Bonds to certain securities dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the cover page hereof and said public offering prices may be changed from time to time by the Underwriters.

TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 The District ...... 1 THE BONDS ...... 2 Authority for Issuance; Purpose ...... 2 Form and Registration ...... 2 Payment of Principal and Interest ...... 3 Redemption ...... 3 Defeasance of Bonds ...... 4 Unclaimed Moneys ...... 5 Application and Investment of Bond Proceeds ...... 6 ESTIMATED SOURCES AND USES OF FUNDS ...... 6 DEBT SERVICE ...... 7 Aggregate Annual Debt Service ...... 7 Outstanding General Obligation Bonds ...... 8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ...... 9 General ...... 9 Pledge of Tax Revenues ...... 9 Statutory Lien – SB 222 ...... 9 Property Taxation System ...... 9 Assessed Valuation of Property Within the District ...... 10 Tax Rates ...... 16 Tax Collections and Delinquencies ...... 17 TAX MATTERS ...... 21 Tax-Exempt Bonds ...... 21 Taxable Bonds ...... 22 OTHER LEGAL MATTERS ...... 25 Possible Limitations on Remedies; Bankruptcy ...... 25 Amounts Held in County Treasury Pool ...... 27 Legal Opinion ...... 27 Legality for Investment in California ...... 27 Litigation ...... 27 MISCELLANEOUS ...... 27 Continuing Disclosure ...... 27 Cybersecurity ...... 28 Risks Related to COVID-19 ...... 28 Ratings ...... 31 Professionals Involved in the Offering ...... 31 Underwriting ...... 31 Additional Information ...... 33 APPENDIX A INFORMATION RELATING TO THE DISTRICT ...... A-1 APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019 ...... B-1 APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL ...... C-1 APPENDIX D PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE ...... D-1 APPENDIX E SAN DIEGO COUNTY INVESTMENT POOL ...... E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM ...... F-1

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GROSSMONT UNION HIGH SCHOOL DISTRICT (San Diego County, California)

$2,035,000* $18,465,000* 2020 General Obligation Bonds 2020 General Obligation Bonds (Election of 2008, Series J-1) (Election of 2008, Series J-2) (Federally Taxable)

INTRODUCTION

This Official Statement, which includes the cover page and appendices hereto, is provided to furnish information in connection with the sale of the Grossmont Union High School District 2020 General Obligation Bonds (Election of 2008, Series J-1) (Federally Taxable) (the “Series J-1 Bonds” or the “Taxable Bonds”) and the Grossmont Union High School District 2020 General Obligation Bonds (Election of 2008, Series J-2) (the “Series J- 2 Bonds” or the “Tax-Exempt Bonds” and, together with the Series J-1 Bonds, the “Bonds”).

This Official Statement speaks only as of its date, and the information contained herein is subject to change. Except as set forth in the Continuing Disclosure Certificate to be executed by the Grossmont Union High School District (the “District”), the District has no obligation to update the information in this Official Statement. See “OTHER LEGAL MATTERS – Continuing Disclosure.”

The Bonds are being issued pursuant to a resolution of the District adopted on September 10, 2020 (the “District Resolution”), a resolution of the County of San Diego (the “County”), expected to be adopted on September 29, 2020, and a paying agent agreement (the “Paying Agent Agreement”), dated as of October 1, 2020, by and between the District and the County through the Office of the Treasurer-Tax Collector of the County (the “County Treasurer”), as paying agent (the “Paying Agent”).

The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the District Resolution and the Paying Agent Agreement providing for the issuance of the Bonds, and the constitutional provisions, statutes and other documents described herein, do not purport to be complete, and reference is hereby made to said documents, constitutional provisions and statutes for the complete provisions thereof. 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.

Copies of documents referred to herein and information concerning the Bonds are available from the District upon request to the Superintendent, Grossmont Union High School District, 1100 Murray Drive, El Cajon, CA 92020-5664. The District may impose a charge for copying, handling and mailing such requested documents.

The District

The District, located in eastern San Diego County (the “County”), was established in 1920 and encompasses an area of approximately 465 square miles, including all of the cities of El Cajon, Santee and Lemon Grove, most of the City of La Mesa, a small portion of the City of San Diego and the unincorporated communities of Alpine, Dulzura, Jamul, Lakeside, and Spring Valley, the population of which is approximately 490,000 residents. The District’s projected average daily attendance for fiscal year 2020-21 is 15,695, and the District’s 2020-21 budgeted general fund expenditures are approximately $241.5 million. The District is the eighth-largest high school district in California as measured by enrollment.

* Preliminary, subject to change.

Career Technical Education Program (“CTE”), an adult education program and a day care facility. The District is also the sponsoring local education agency for three charter schools.

Taxable property in the District has a fiscal year 2020-21 assessed value of $55,148,490,644. For fiscal year 2020-21, the District has projected the employment of 827.7 full-time equivalent (“FTE”) certificated employees (teaching staff), 666.3 FTE classified employees and 98.7 FTE management, supervisory and confidential personnel. The District operates under the jurisdiction of the San Diego County Superintendent of Schools.

As of September 1, 2020, the District has $592,240,166 principal amount of general obligation bonds outstanding and $84,943,322 remaining voter-approved authorization for future issuances under Proposition U, prior to the sale of the Bonds. See APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION – District Debt Structure and Long Term Obligations.”

The District is governed by a governing board consisting of five members (the “Board”). The members are elected to four-year terms in staggered years. Elections for positions to the Board are held every two years, alternating between two and three available positions. Beginning November 2016, the Board changed the District’s method of election of the Board from “at-large” voting to “by-trustee-area” voting, by which method members of the Board are elected by the voters of the trustee area in which they reside. The day-to-day operations are managed by a board-appointed Superintendent. For additional information about the District, see APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION.”

THE BONDS

Authority for Issuance; Purpose

The Bonds described herein are authorized to be issued pursuant to the Constitution and laws of the State of California (the “State”), including the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code, and other applicable provisions of law, including applicable provisions of the Education Code, the District Resolution adopted by the Governing Board of the District on September 10, 2020, and the Paying Agent Agreement. The District expects the County to approve the financings on September 29, 2020.

The Bonds were authorized to be issued at an election held on November 4, 2008, by 55% or more of the votes cast by eligible voters within the District (the “2008 Election”). The measure authorized the District to issue bonds in an aggregate principal amount not to exceed $417,000,000 (“Proposition U”) for school construction and modernization projects. The full ballot measure contains numerous projects which the Board will fund based on its determined priorities. Not all projects listed in the measure may be funded. The Bonds are the thirteenth and fourteenth series of bonds issued under Proposition U, after which $64,443,323* of the Proposition U bonding authority will remain.

Proceeds of the Bonds will be applied (i) to finance construction, improvement and modernization projects approved by the 2008 Election, (ii) to pay a portion of debt service of the Bonds and (iii) to pay costs of issuance of the Bonds. See “– Application and Investment of Bond Proceeds” below.

Form and Registration

The Bonds will be issued in fully registered book-entry form only, in denominations of $5,000 or any integral multiple thereof. The Bonds will initially be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of Bonds under the DTC system must be made by or through a DTC participant, and ownership interests in Bonds or any transfer thereof will be recorded as entries on the books of said participants. Except in the event that use of this book-entry system is discontinued for the Bonds, beneficial owners will not receive physical certificates representing their ownership interests. See APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”

* Preliminary, subject to change.

Payment of Principal and Interest

The Bonds will be issued as current interest bonds, and shall mature in the amounts and on the dates set forth on the inside front cover page hereof. 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 commencing on February 1, 2021, and on February 1 and August 1 of each year thereafter (each, an “Interest Payment Date”), computed on the basis of a 360-day year consisting of twelve 30-day months. Each of the Bonds shall bear interest (payable to the owner thereof) from the Interest Payment Date next preceding the date of authentication thereof, unless it is authenticated after the close of business on the 15th day of the calendar month immediately preceding an Interest Payment Date (the “Record Date”) and on or prior to the succeeding Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or unless it is authenticated on or before the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from its dated date; provided, however, that if, at the time of authentication of any of the Bonds, interest is in default on any outstanding Bonds, such Bonds shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on the outstanding Bonds.

Redemption*

Optional Redemption. The Bonds maturing on or before August 1, 20__, are not subject to redemption prior to their respective stated maturity dates. The Bonds maturing on and after August 1, 20__, shall be subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, as a whole or in part on any date on or after August 1, 20__, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued thereon to the date of redemption, without premium.

Mandatory Sinking Fund Redemption. The Term Bonds maturing on August 1, 20__, are also subject to mandatory sinking fund redemption on each mandatory sinking fund redemption date and in the respective principal amounts set forth in the following schedule, at a redemption price equal to 100% of the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption:

Mandatory Sinking Fund Redemption Date Principal Amount to be (August 1) Redeemed

______* Maturity.

The principal amount of any maturity to be redeemed in each year shown in the table above will be reduced as directed by the District, or in the absence of such direction, will be reduced proportionately by the amount of any Term Bonds of that maturity optionally redeemed prior to the mandatory sinking fund redemption date. Selection of Bonds for Redemption. If less than all of the Bonds are subject to such redemption and are called for redemption, such Bonds shall be redeemed in inverse order of maturities or as otherwise directed by the District (or as otherwise set forth in the bond purchase contract between the District and the Underwriters (defined herein)), and if less than all of the Bonds of any given maturity are called for redemption, the portions of such Bonds of a given maturity to be redeemed shall be determined by lot (or as otherwise set forth in the bond purchase contract between the District and the Underwriters or by DTC procedures). If such partial redemption is of a term Bond, the District may designate the sinking fund payments to be allocated to such optional redemption.

Notice of Redemption. Notice of any redemption of the Bonds shall be mailed by the Paying Agent not less than 20 nor more than 60 days prior to the redemption date (i) by first class mail, postage prepaid, to the County and the respective Owners thereof at the addresses appearing on the bond registration books, and (ii) as to the District to assist compliance by the District with any further notice required in accordance with the Continuing

* Preliminary, subject to change.

Disclosure Certificate. See APPENDIX D – “PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE.”

Each notice of redemption shall state (i) the date of such notice; (ii) the name of the Bonds and the date of issue of the Bonds; (iii) the redemption date; (iv) the redemption price; (v) the series of Bonds and the dates of maturity or maturities of the Bonds to be redeemed; (vi) if less than all of the Bonds of a series of any maturity are to be redeemed, the distinctive numbers of the Bonds of each maturity of such series to be redeemed; (vii) in the case of Bonds of a series to be redeemed in part only, the respective portions of the principal amount of the Bonds of each maturity of such series to be redeemed; (viii) the CUSIP number, if any, of each maturity of Bonds of a series to be redeemed; (ix) a statement that such Bonds must be surrendered by the Owners at the principal corporate trust office of the Paying Agent, or at such other place designated by the Paying Agent; (x) notice that if sufficient funds are on deposit for such redemption, further interest on such Bonds will cease to accrue after the designated redemption date; and (xi) in the case of a conditional notice, that such notice is conditioned upon certain circumstances and the manner of rescinding such conditional notice. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the sufficiency of the proceedings for the redemption of the Bonds or the cessation of interest on the date fixed for redemption.

Effect of Notice of Redemption. When notice of redemption has been given substantially as provided for in the District Resolution, and when the redemption price of the Bonds called for redemption has been set aside for such purpose, the Bonds designated for redemption shall become due and payable on the specified redemption date and interest shall cease to accrue thereon as of the redemption date, and upon presentation and surrender of such Bonds at the place specified in the notice of redemption, such Bonds shall be redeemed and paid at the redemption price thereof out of the money provided therefor. The Owners of such Bonds so called for redemption after such redemption date shall be entitled to payment thereof only from the interest and sinking fund of the District (the “Interest and Sinking Fund”) or the escrow fund established for such purpose. All Bonds redeemed shall be cancelled forthwith by the Paying Agent and shall not be reissued.

Partial Redemption of Bonds. In the case of partial redemption of the Bonds evidencing all or a portion of the principal amount then outstanding, DTC shall make an appropriate notation on the Bonds indicating the date and amounts of such reduction in principal.

Conditional Notice. Any notice of optional redemption delivered hereunder may be conditioned on any fact or circumstance stated therein, and if such condition shall not have been satisfied on or prior to the redemption date stated in such notice, said notice shall be of no force and effect on and as of the stated redemption date, the redemption shall be cancelled, and the District shall not be required to redeem the Bonds that were the subject of the notice. The Paying Agent shall give notice of such cancellation and the reason therefor in the same manner in which notice of redemption was originally given. The actual receipt by the owner of any Bond of notice of such cancellation shall not be a condition precedent to cancellation, and failure to receive such notice or any defect in such notice shall not affect the validity of the cancellation.

Rescission of Notice of Redemption. The District may rescind any optional redemption and notice thereof for any reason on any date prior to the date fixed for redemption by causing written notice of the rescission to be given to the owners of the Bonds so called for redemption. Any optional redemption and notice thereof shall be rescinded if for any reason on the date fixed for redemption moneys are not available in the Interest and Sinking Fund or otherwise held in trust for such purpose in an amount sufficient to pay in full on said date the principal of, interest, and any premium due on the Bonds called for redemption. Notice of rescission of redemption shall be given in the same manner in which notice of redemption was originally given. The actual receipt by the owner of any Bond of notice of such rescission shall not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice shall not affect the validity of the rescission.

Defeasance of Bonds

The District may pay and discharge any or all of the Bonds by irrevocably depositing in trust with the Paying Agent or an escrow agent selected by the District at or before maturity, money or Defeasance Securities (defined below) in an amount which will, together with the interest to accrue thereon and available moneys then on

deposit in the Interest and Sinking Fund of the District, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates.

Any Outstanding Bond shall, prior to the maturity date or redemption date thereof, be deemed to have been paid within the meaning of and with the effect expressed in the District Resolution, provided that (i) for such Bonds to be redeemed on any date prior to their maturity date, the District shall have given to the Paying Agent or an escrow agent in form satisfactory to it irrevocable instructions to mail notice of redemption of such Bond on said redemption date, said notice to be given in accordance with the required notice provisions in the District Resolution, (ii) there shall have been deposited with the Paying Agent or an escrow agent either (A) money in an amount which shall be sufficient, or (B) Defeasance Securities, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal of, premium, if any, and interest on such Bond, and (iii) in the event such Bond is not by its terms subject to redemption within the next succeeding 60 days, the District shall have given the Paying Agent or an escrow agent in form satisfactory to it irrevocable instructions to mail, as soon as practicable, a notice to the Owners of such Bond that the deposit required by clause (ii) above has been made with the Paying Agent or an escrow agent and that such Bond is deemed to have been paid in accordance with the District Resolution and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of, premium, if any, and interest on such Bond.

No Bond shall be deemed to have been paid pursuant to clause (ii)(B) above unless the District shall have caused to be delivered (i) an executed copy of a verification report with respect to such deemed payment, addressed to the District and the Paying Agent or escrow agent, in form and in substance acceptable to the District and the Paying Agent or escrow agent, and (ii) a copy of the escrow agreement entered into in connection with the deposit pursuant to clause (ii)(B) above resulting in such deemed payment, which escrow agreement shall provide that no substitution of Defeasance Securities shall be permitted except with other Defeasance Securities and upon delivery of a new verification report, and no reinvestment of Defeasance Securities shall be permitted except as contemplated by the original verification report or upon delivery of a new verification report.

As defined in the District Resolution, “Defeasance Securities” means:

(i) direct, non-callable obligations of the United States Treasury; (ii) direct non-callable and non- prepayable obligations which are unconditionally guaranteed by the United States of America as to full and timely payment of principal and interest; (iii) non-callable, non-prepayable coupons from the above securities which are stripped pursuant to United States Treasury programs; (iv) non-callable and non-prepayable (or irrevocably called to a specified redemption date) refunded municipal bonds that are backed by an escrow funded with obligations of or guaranteed by the United States of America; (v) Resolution Funding Corporation (REFCORP) securities consisting of interest components stripped by the Federal Reserve Bank of New York; (vi) non-callable, and non-prepayable fixed rate Israel Notes guaranteed as to principal and interest by the United States of America through the United Agency for International Development (provided that such notes maintain a rating at the same level as obligations of the United States Treasury and mature at least four business days before funds are needed for refunded bond debt service payments); (vii) United States State and Local Government Securities (SLGS); and (viii) the following non- callable, non-prepayable obligations of federal government-sponsored agencies that are not backed by the full faith and credit of the U.S. Government: Federal Home Loan Bank, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Tennessee Valley Authority, Farm Credit System, Washington Metropolitan Area Transit Authority, United States Import-Export Bank, United States Department of Housing and Urban Development, Farmers Home Administration, General Services Administration and United States Maritime Administration (provided such agency security has a rating when purchased at the same level as obligations of the United States Treasury).

Unclaimed Moneys

Any money held in any fund created pursuant to the District Resolution, or by the Paying Agent or an escrow agent in trust for the payment of the principal of, redemption premium, if any, or interest on any Bonds remaining unclaimed for one year after the principal of all of the Bonds has become due and payable (whether by maturity or upon prior redemption) shall be transferred to the Interest and Sinking Fund of the District for payment of any outstanding bonds of the District payable from the fund; or, if no such bonds of the District are at such time outstanding, the moneys shall be transferred to the general fund of the District as provided and permitted by law.

Application and Investment of Bond Proceeds

The proceeds from the sale of the Bonds, exclusive of any premium and accrued interest received, will be deposited in the County Treasury to the credit of the Building Fund of the District. Any net premium and accrued interest received by the District from the sale of the Bonds will be deposited upon receipt in the Interest and Sinking Fund of the District within the County Treasury. Moneys in the Building Fund may only be applied for the purposes for which the Bonds were approved. Moneys in the Interest and Sinking Fund may only be applied to make payments of interest, principal, and premium, if any, on bonds of the District.

Amounts deposited into the Interest and Sinking Fund, as well as proceeds of taxes held therein for payment of the Bonds, will be invested at the sole discretion of the County Treasurer pursuant to law and the investment policy of the County. See APPENDIX E – “SAN DIEGO COUNTY INVESTMENT POOL.”

ESTIMATED SOURCES AND USES OF FUNDS

The proceeds of the Bonds are expected to be applied as follows:

The Bonds Sources of Funds: Principal Amount of Bonds [Net] Original Issue Premium Total Sources

Uses of Funds: Deposit to Building Fund Deposit to Interest and Sinking Fund(1) Underwriters’ Discount Costs of Issuance(2) Total Uses

______(1) Represents interest on the Bonds through ______. (2) Includes fees of the municipal advisor, Bond Counsel, Disclosure Counsel, rating agencies, Paying Agent, fiscal agent, printing, and other miscellaneous expenses.

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DEBT SERVICE

Aggregate Annual Debt Service

The following table summarizes the annual aggregate debt service requirements of all outstanding general obligation bonds of the District, including the Bonds, assuming no early optional redemptions.

The Bonds

Year Other Outstanding Combined Ending Total Net Debt General Obligation Annual Net (August 1) Principal Interest Service(1) Bonds(2)(3) Debt Service(4) 2021 $35,315,805 2022 36,872,648 2023 39,286,229 2024 44,954,198 2025 47,139,198 2026 49,425,770 2027 51,815,194 2028 54,328,194 2029 56,976,344 2030 59,742,144 2031 62,651,694 2032 66,224,719 2033 69,428,038 2034 33,776,938 2035 35,214,488 2036 36,711,538 2037 38,317,088 2038 39,946,338 2039 41,641,156 2040 43,399,350 2041 29,184,650 2042 44,124,100 2043 46,490,450 2044 27,906,300 2045 12,751,400 TOTAL $1,103,623,965 ______(1) Excludes amounts to be paid from funds deposited to the Interest and Sinking Fund of the District from Bond proceeds. (2) Includes debt service net of expected Qualified School Construction Bonds (“QSCB”) subsidy payments. The Election of 2008, Series D Bonds are designated as QSCB bonds under Section 54F of the Code, entitling the District to receive subsidies for the interest cost of such bonds. The federal Balanced Budget and Emergency Deficit Control Act of 1985, as amended, included provisions known as sequestration that reduced the direct subsidy payments made pursuant to Section 6431 of the Code. The sequestration rate for the federal fiscal year ending September 30, 2021 is 5.7%, which is expected to reduce the subsidy payments to the District for fiscal year 2020-21 by approximately $72,905.82. The sequestration rate changes periodically. The District cannot predict whether or how subsequent sequestration actions may affect subsidy payments currently scheduled for receipt in future federal fiscal years. Debt service reflects sinking fund deposits on the QSCBs; $24,990,000 in principal is due at maturity on August 1, 2025. $10,240,000 of QSCB sinking fund payments are already on deposit in the County treasury. (3) Includes a final debt service payment date of June 1, 2029 on the Election of 2004, Series 2004 Bonds, a final debt service payment date of June 1, 2031 for the Election of 2004, Series 2006 Bonds, and a final debt service payment date of June 1, 2040 for the Election of 2008, Series F Bonds. (4) For more information See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 9. Source: The District.

Outstanding General Obligation Bonds

The District has bonds outstanding under three voter authorizations. On March 2, 2004, the District voters approved a measure authorizing the District to issue up to $274 million in general obligation bonds (“Proposition H”). The District issued the full authorized amount of these bonds in three series in 2004, 2006 and 2008, representing the full amount of obligations authorized under Proposition H. On November 4, 2008, the District received authorization from the voters to issue $417 million in general obligation bonds pursuant to Proposition U. Pursuant to Proposition U, the District has issued twelve series of bonds, of which five series are outstanding, and the District has $84,943,322 of remaining authorization under Proposition U, prior to the issuance of the Bonds. In addition, the District issued eight series and has outstanding six series of refunding bonds issued to pay prior outstanding bonds of Proposition H and Proposition U. On November 8, 2016, the District’s voters approved Measure BB, authorizing the District to issue up to $128 million in general obligation bonds. Under Measure BB, the District has issued six series of bonds, of which three are outstanding, and the District has no remaining authorization under Measure BB. See APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION – District Debt Structure and Long Term Obligations.” A summary of the District’s general obligation bonds issued prior to the issuance of the Bonds is presented below:

Principal Amount Outstanding as of Series Issue Date Original Principal Amount September 1, 2020(1) Proposition H (2004) Series 2004 06/17/2004 $ 60,841,197.25 $14,521,197.25 Series 2006 06/21/2006 124,999,224.95 41,454,224.95 Series 2008 08/05/2008 88,159,577.80 27,204,672.70

Proposition U (2008) Series A 04/15/2009 $60,000,000.00 - Series B 08/18/2010 80,000,000.00 - Series C 05/25/2011 15,000,000.00 Series D 05/25/2011 25,000,000.00 24,990,000.00 Series E 11/13/2013 40,000,000.00 - Series F 06/04/2015 68,746,678.20 67,000,071.45 Series G-1 03/01/2017 2,060,000.00 - Series G-2 03/01/2017 16,250,000.00 14,650,000.00 Series H-1 09/26/2017 285,000.00 - Series H-2 09/26/2017 9,715,000.00 9,560,000.00 Series I-1 11/06/2019 1,420,000.00 - Series I-2 11/06/2019 13,580,000.00 13,195,000.00

Measure BB (2016) Series A-1 03/01/2017 $ 1,710,000.00 - Series A-2 03/01/2017 41,290,000.00 37,350,000.00 Series B-1 10/24/2018 4,510,000.00 - Series B-2 10/24/2018 38,490,000.00 38,490,000.00 Series C-1 11/06/2019 4,620,000.00 - Series C-2 11/06/2019 37,380,000.00 35,980,000.00

Refunding Bonds Series 2011A 11/22/2011 $10,260,000.00 - Series 2011B 11/22/2011 10,660,000.00 - Series 2012 05/17/2012 54,515,000.00 27,865,000.00 Series 2015 12/23/2015 50,770,000.00 46,350,000.00 Series 2016 04/13/2016 51,490,000.00 43,625,000.00 Series 2016B 10/19/2016 90,435,000.00 89,305,000.00 Series 2017 09/26/2017 15,450,000.00 15,250,000.00 Series 2020 04/21/2020 45,450,000.00 45,450,000.00 ______(1) Excludes accreted value on capital appreciation bonds. (2) $10,240,000 of sinking fund payments are already on deposit in the County treasury. Source: The District.

For the combined annual debt service for all outstanding bonds of the District (assuming no additional optional redemptions prior to maturity), see “– Aggregate Annual Debt Service” above.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

General

In order to provide sufficient funds for payment of principal and interest on the Bonds when due, the Board of Supervisors of the County is empowered and obligated to levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates). Such taxes are in addition to other taxes levied upon property within the District, including the countywide tax of 1% of assessed value. When collected, the tax revenues levied to pay the Bonds will be deposited by the County Treasurer in the Interest and Sinking Fund, which is required by law to be maintained by the County and to be used solely for the payment of bonds of the District. The District requested the County levy ad valorem taxes for payment of principal and interest on the Bonds beginning in fiscal year 2020-21 pursuant to a district resolution adopted by the Governing Board of the District on June 9, 2020.

Pledge of Tax Revenues

Pursuant to the District Resolution, the District pledges all revenues from the property taxes collected from the levy by the County Board of Supervisors for the payment of the District Bonds and amounts on deposit in the Interest and Sinking Fund of the District to the payment of the principal or redemption price of and interest on the District Bonds. This pledge is valid and binding from the date of adoption of the District Resolution for the benefit of the owners of the Bonds and successors thereto. The property taxes and amounts held in the Interest and Sinking Fund of the District will be immediately subject to this pledge, and the pledge will constitute a lien and security interest which will immediately attach to the property taxes and amounts held in the Interest and Sinking Fund of the District to secure the payment of the District Bonds and will be effective, binding, and enforceable against the District, its successors, creditors and all others irrespective of whether those parties have notice of the pledge and without the need of any physical delivery, recordation, filing, or further act. “District Bonds” for purpose of this pledge means all bonds of the District heretofore or hereafter issued pursuant to voter approved measures of the District, including refunding bonds of such bonds and the Bonds, as all such District Bonds are required by State law to be paid from the Interest and Sinking Fund.

The pledge is an agreement between the District and the bondholders to provide security for the District Bonds in addition to any statutory lien that may exist, and the Bonds and each of the other District Bonds secured by the pledge are or were issued to finance or refinance one or more of the projects specified in the applicable voter- approved measure.

Statutory Lien – SB 222

California Senate Bill 222 (2015) (“SB 222”), effective January 1, 2016, provides that general obligation bonds are secured by a statutory lien on the ad valorem taxes levied and collected to pay principal and interest thereon. For more information, see “OTHER LEGAL MATTERS – Possible Limitations on Remedies; Bankruptcy – Statutory Lien.”

Property Taxation System

Article XIIIA of the California Constitution. On June 6, 1978, California voters approved Proposition 13 (“Proposition 13”), which added Article XIIIA to the California Constitution (“Article XIIIA”). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof. The 1% tax is required to be collected by the counties and apportioned to the districts within the counties. Additional ad valorem taxes above the 1% may only be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978. As a result of amendments to Article XIIIA approved by California voters, on June 3, 1986, and November 7, 2000, additional ad valorem taxes above the 1% may be levied to pay debt service on bonded indebtedness for the acquisition or improvement of real property that has been approved by two-thirds of the voters and on bonded indebtedness incurred 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, approved by 55% of the voters voting on the proposition.

Local property taxation in California is the responsibility of various county officers. For each school district located in a county, the county assessor computes the value of locally assessed taxable property. Based on the assessed value of property and the scheduled debt service on outstanding general obligation bonds in each year, the county auditor-controller computes the rate of tax necessary to pay such debt service, and presents the tax rolls (including rates of tax for all taxing jurisdictions in the county) to the county board of supervisors for approval. The county treasurer-tax collector prepares and mails tax bills to taxpayers and collects the taxes. In addition, the treasurer-tax collector, as ex officio treasurer of each school district located in the county, holds and invests school district funds, including taxes collected for payment of school general obligation bonds, and is charged with payment of principal of and interest on such bonds when due. The State Board of Equalization also assesses certain special classes of property, as described later in this Section.

Assessed Valuation of Property Within the District

Under Proposition 13, the assessed value of ad valorem property was established as the county assessor’s valuation of real property as shown on the fiscal year 1975-76 tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. Such assessed value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data for the taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction, market forces or other factors. See APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION – CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.” As a result, property that has been owned by the same taxpayer for many years can have an assessed value that is lower than the market value of the property. Similar property that has recently been acquired may have a higher assessed value reflecting the recent acquisition price. Increases in assessed value in a taxing area due to the change in ownership of property may occur even when the rate of inflation or consumer price index do not permit a full 2% increase or require a reduction in assessed valuation of property.

Proposition 13 has had the effect of stabilizing assessed valuation such that it does not fluctuate as significantly as the market value of property, but instead gradually changes as longer-owned properties are transferred and reassessed upon such transfer, and new construction and the remodeling and reconstruction of existing property occur.

Proposition 8 (“Proposition 8”), approved by the voters in November of 1978, subsequently amended Article XIIIA to permit reduction of the full cash value base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the full cash value base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways. Proposition 8 provides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a similar decline. In these instances, the market value is required to be reviewed annually until the market value exceeds the base year value. The assessed value increases to its pre-reduction level (base year value escalated by the annual inflation rate of no more than 2%) following the year(s) for which the reduction is applied. Furthermore, assessments may be appealed by taxpayers seeking a reduction as a result of economic and other factors. See “— Appeals and Adjustments of Assessed Valuation” below.

Property values could be reduced by factors beyond the District’s control, such as a depressed real estate market due to the housing industry or general economic conditions in San Diego County, the region and the State. In addition, with the outbreak of a novel strain of coronavirus (“COVID-19”), the world is currently experiencing a global pandemic. The recession caused by the pandemic may cause a general market decline in property values therefore affecting the assessed value of property in the District. For more information on the impact of the COVID-19 pandemic, see “RISK FACTORS – Risks Related to COVID-19.”

The District is located in a seismically active area. Active fault lines lie about 15 miles west of the District. Property within the District could sustain extensive damage in a major earthquake, and a major earthquake could adversely affect local economic activity. Other possible causes for a reduction in assessed values include the complete or partial destruction of taxable property caused by other natural or manmade disasters, such as flood, fire, toxic dumping, acts of terrorism, etc., or reclassification of property to a class exempt from taxation, whether by

ownership or use (such as exemptions for property owned by federal, State and local agencies and property used for qualified educational, hospital, charitable or religious purposes).

In recent years, portions of California, including the County and adjacent counties, have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures. Property damage due to wildfire could result in a significant decrease in the assessed value of property in the District.

State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, federal trusts, and charitable institutions. State law also exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling provided that the owner files for such exemption. The homeowners’ exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the value of this exemption.

For assessment and tax collection purposes, property is classified either as “secured” or “unsecured,” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and property (real or personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. All other property is “unsecured,” and is assessed on the “unsecured roll.” State law requires that the assessment roll be finalized by August 20 of each year.

The greater the assessed value of taxable property in the District, the lower the tax rate necessary to generate taxes sufficient to pay scheduled debt service on the Bonds. The following table shows a history of the District’s taxable assessed valuation. The total assessed valuation of secured and unsecured property of the District for fiscal year 2020-21 is approximately $55,148,490,644, resulting in a 5.12% increase in total valuation from the prior fiscal year. The District has been approached by a developer indicating a potential future request for the transfer of land with an assessed value of approximately $7.3 million (representing about 0.01% of the District’s total assessed value in 2020-21) to the Sweetwater Union High School District to better serve students that may reside on the property after development. The Environmental Impact Report for the development project has been certified by the County Board of Supervisors. District representatives have been in communication on this proposal with the other affected districts, including the affected elementary school district counterparts, as well as the San Diego County Office of Education staff. Ultimately the San Diego County Office of Education, sitting as San Diego County Committee on School District Organization, makes the final determination on any property transfer proposal and the District cannot predict the outcome of any such request.

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GROSSMONT UNION HIGH SCHOOL DISTRICT Summary of Taxable Assessed Valuation Fiscal Years 1990-91 to 2020-21

Fiscal Year Ending Annual % Annual Annual June 30, Total Secured(1)(2) Change Unsecured % Change Total Valuation % Change 1991 $13,896,795,763 10.82% $ 478,806,488 12.35% $14,375,602,251 -- 1992 15,113,104,989 8.75 481,232,954 0.51 15,594,337,943 8.48% 1993 15,945,529,483 5.51 479,966,511 -0.26 16,425,495,994 5.33 1994 16,294,927,140 2.19 451,582,930 -5.91 16,746,510,070 1.95 1995 16,695,760,514 2.46 497,469,924 10.16 17,193,230,438 2.67 1996 16,857,561,131 0.97 506,606,042 1.84 17,364,167,173 0.99 1997 16,820,811,898 -0.22 515,892,035 1.83 17,336,703,933 -0.16 1998 17,009,224,500 1.12 514,253,619 -0.32 17,523,478,119 1.08 1999 17,743,880,218 4.32 585,814,497 13.92 18,329,694,715 4.60 2000 19,076,534,721 7.51 617,442,232 5.40 19,693,976,953 7.44 2001 20,352,040,217 6.69 685,889,485 11.09 21,037,929,702 6.82 2002 21,741,540,162 6.83 779,359,841 13.63 22,520,900,003 7.05 2003 23,296,637,789 7.15 771,882,592 -0.96 24,068,520,381 6.87 2004 25,180,840,862 8.09 853,134,395 10.53 26,033,975,257 8.17 2005 27,585,623,242 9.55 900,711,328 5.58 28,486,334,570 9.42 2006 31,036,108,480 12.51 942,671,612 4.66 31,978,780,092 12.26 2007 34,560,613,407 11.36 1,017,858,980 7.98 35,578,472,387 11.26 2008 37,309,204,695 7.95 1,111,632,486 9.21 38,420,837,181 7.99 2009 38,261,778,383 2.55 1,159,947,074 4.35 39,421,725,457 2.61 2010 36,228,048,586 -5.32 1,151,172,293 -0.76 37,379,220,879 -5.18 2011 35,726,274,196 -1.39 1,092,460,473 -5.10 36,818,734,669 -1.50 2012 35,929,085,384 0.57 1,054,248,404 -3.50 36,983,333,788 0.45 2013 36,042,290,810 0.32 1,008,416,103 -4.35 37,050,706,913 0.18 2014 37,070,696,416 2.85 996,572,702 -1.17 38,067,269,118 2.74 2015 38,852,923,986 4.81 995,245,520 -0.13 39,848,169,506 4.68 2016 40,997,775,550 5.52 1,011,104,565 1.59 42,008,880,115 5.42 2017 43,097,562,759 5.12 1,044,534,035 3.31 44,142,096,794 5.08 2018 45,828,350,719 6.34 1,055,353,603 1.04 46,883,704,322 6.21 2019 48,524,851,707 5.88 1,118,340,630 5.97 49,643,192,337 5.89 2020 51,302,355,859 5.72 1,159,451,663 3.68 52,461,807,522 5.68 2021 53,968,816,522 5.20 1,179,674,122 1.74 55,148,490,644 5.12

Annual Compound Growth, 1990-91 4.63% 3.05% 4.58% to 2020-21 ______(1) Net assessed valuation including the valuation of homeowners’ exemptions. (2) Includes secured local utility roll but not assessed valuation from the unitary utility roll. Source: California Municipal Statistics, Inc., and San Diego County Auditor-Controller. Table prepared by Stifel, Nicolaus & Company, Incorporated.

The District, with an area of 465 square miles, includes all of the cities of El Cajon, Santee and Lemon Grove, most of the City of La Mesa, a small portion of the City of San Diego and the unincorporated communities of Alpine, Dulzura, Jamul, Lakeside and Spring Valley. The table on the following page gives a distribution of taxable property in the District by location.

GROSSMONT UNION HIGH SCHOOL DISTRICT 2020-21 Assessed Valuation by Jurisdiction

Assessed Valuation % of Assessed Valuation % of Jurisdiction Jurisdiction: in District District of Jurisdiction in District City of El Cajon $10,534,540,822 19.10% $ 10,534,540,822 100.00% City of La Mesa 8,006,613,393 14.52 8,011,032,849 99.94 City of Lemon Grove 2,462,002,677 4.46 2,462,002,677 100.00 City of San Diego 542,013,511 0.98 278,960,852,905 0.19 City of Santee 7,114,443,048 12.90 7,114,639,853 100.00 Unincorporated San Diego County 26,488,877,193 48.03 81,125,695,760 32.65 Total District $55,148,490,644 100.00%

San Diego County $55,148,490,644 100.00% $585,657,954,957 9.42% ______Source: California Municipal Statistics, Inc.

As a high school district, the District may issue bonds in an amount up to 1.25% of the assessed valuation of taxable property within its boundaries. Based on the fiscal year 2020-21 assessment roll, including $719,640,240 of apportioned unitary utility assessed value as determined by the County Auditor-Controller, the District’s gross bonding capacity is $698,351,636, and its net bonding capacity is $106,111,470, not taking into account the issuance of the Bonds. In accordance with the law which permitted the Bonds to be approved by a 55% affirmative vote, bonds approved by the District’s voters under Proposition U may not be issued unless the District projects that repayment of all outstanding bonds of the authorization will require a tax rate no greater than $30.00 per $100,000 of assessed value. Based on the assessed value of taxable property in the District at the time of issuance of the Bonds and projected increases in future assessed value in accordance with Article XIIIA of the California Constitution, the District projects that the maximum tax rate required to repay all outstanding Proposition U bonds will be within the statutory limit. In its Proposition U tax rate statement, the District estimated an annual tax rate necessary for repayment of all bonds issued under Proposition U to be $27.90 per $100,000 of assessed value. The District has structured the Proposition U bond program to maintain the estimated tax rate, which is below the statutory limit.

Appeals and Adjustments of Assessed Valuation. State law affords an appeal procedure to taxpayers who disagree with the assessed value of their taxable property. Taxpayers may request a reduction in assessment directly from the County Assessor (the “Assessor”), who may grant or refuse the request in whole or in part, and taxpayers may appeal an assessment directly to the County Board of Equalization, which rules on appealed assessments whether or not settled by the Assessor. The Assessor is also authorized to reduce the assessed value of any taxable property upon a determination that the market value has declined below the then-current assessment, whether or not appealed by the taxpayer. Despite a significant number of reductions since fiscal year 2009-10 pursuant to Proposition 8, assessed value in the District has increased each year since fiscal year 2011-12.

The District can make no predictions as to the changes in assessed values that might result from pending or future appeals by taxpayers or actions by the Assessor. Any reduction in aggregate District assessed valuation due to appeals, as with any reduction in assessed valuation due to other causes, will cause the tax rate levied to repay the Bonds to increase accordingly, so that the fixed debt service on the Bonds (and other outstanding bonds) may be paid. Any refund of paid taxes triggered by a successful assessment appeal will be debited by the County Treasurer against all taxing agencies who received tax revenues, including the District.

State-Assessed Property. Under the State Constitution, the State Board of Equalization assesses property of State-regulated transportation and communications utilities, including railways, telephone and telegraph companies, and companies transmitting or selling gas or electricity. The Board of Equalization also is required to assess pipelines, flumes, canals and aqueducts lying within two or more counties. The value of property assessed by the Board of Equalization is allocated by a formula to local jurisdictions in the county, including school districts, and taxed by the local county tax officials in the same manner as for locally assessed property. Taxes on privately owned railway cars, however, are levied and collected directly by the Board of Equalization. Property used in the generation of electricity by a company that does not also transmit or sell that electricity is taxed locally instead of by the Board of Equalization. Thus, the reorganization of regulated utilities and the transfer of electricity-generating

property to non-utility companies, as often occurred under electric power deregulation in California, affects how those assets are assessed, and which local agencies benefit from the property taxes derived. In general, the transfer of State-assessed property located in the District to non-utility companies will increase the assessed value of property in the District, since the property’s value will no longer be divided among all taxing jurisdictions in the County. The transfer of property located and taxed in the District to a State-assessed utility will have the opposite effect, generally reducing the assessed value in the District as the value is shared among the other jurisdictions in the County. The District is unable to predict future transfers of State-assessed property in the District and the County, the impact of such transfers on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets, the State’s methods of assessing utility property, or the method by which tax revenues of utility property is allocated to local taxing agencies, including the District.

Assessed Valuation by Land Use. The following table gives a distribution of taxable property located in the District by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use in 2020-21. Single-family residential properties comprise 62.81% of the assessed value of property in the District.

GROSSMONT UNION HIGH SCHOOL DISTRICT 2020-21 Assessed Valuation and Parcels by Land Use

2020-21 % of No. of % of No. of Taxable % of Non-Residential: Assessed Valuation(1) Total Parcels Total Parcels Total Agricultural/Rural $293,965,993 0.54% 1,313 0.99% 1,298 0.99% Commercial 5,094,513,211 9.44 3,269 2.47 3,244 2.49 Vacant Commercial 247,267,955 0.46 474 0.36 455 0.35 Industrial 1,915,918,524 3.55 1,341 1.01 1,336 1.02 Vacant Industrial 75,711,206 0.14 201 0.15 201 0.15 Recreational 85,021,494 0.16 92 0.07 92 0.07 Government/Social/Institutional/Other 102,806,069 0.19 1,428 1.08 508 0.39 Subtotal Non-Residential $7,815,204,452 14.48% 8,118 6.14% 7,134 5.47%

Residential: Single Family Residence $33,897,522,633 62.81% 88,325 66.81% 88,186 67.58% Condominium/Townhouse 4,287,904,566 7.95 17,441 13.19 17,423 13.35 Mobile Home 647,130,701 1.20 6,997 5.29 6,973 5.34 Mobile Home Park 451,761,286 0.84 184 0.14 184 0.14 2-4 Residential Units 1,728,072,800 3.20 4,383 3.32 4,376 3.35 5+ Residential Units/Apartments 4,693,995,345 8.70 1,431 1.08 1,408 1.08 Miscellaneous Residential Improvements 13,399,007 0.02 1,002 0.76 1,002 0.77 Vacant Residential 433,478,842 0.80 4,318 3.27 3,807 2.92 Subtotal Residential $46,153,265,180 85.52% 124,081 93.86% 123,359 94.53%

Total $53,968,469,632 100.00% 132,199 100.00% 130,493 100.00% ______(1) Local secured assessed valuation, excluding tax-exempt property. Source: California Municipal Statistics, Inc.

Assessed Valuation of Single-Family Residential Properties. The following table shows the distribution of single family residential parcels by increments of assessed value in fiscal year 2020-21. For fiscal year 2020-21, the average assessed value of single-family homes is $384,387, and the median assessed value is $367,645.

GROSSMONT UNION HIGH SCHOOL DISTRICT Per Parcel 2020-21 Assessed Valuation of Single Family Homes

No. of 2020-21 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 88,186 $33,897,522,633 $384,387 $367,645

2020-21 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $49,999 1,169 1.326% 1.326% $ 47,977,595 0.142% 0.142% $50,000 - $99,999 6,755 7.660 8.986 493,291,165 1.455 1.597 $100,000 - $149,999 4,634 5.255 14.240 584,058,228 1.723 3.320 $150,000 - $199,999 6,154 6.978 21.219 1,082,581,284 3.194 6.513 $200,000 - $249,999 7,994 9.065 30.284 1,801,272,169 5.314 11.827 $250,000 - $299,999 7,643 8.667 38.951 2,100,343,340 6.196 18.024 $300,000 - $349,999 7,161 8.120 47.071 2,323,729,709 6.855 24.879 $350,000 - $399,999 7,059 8.005 55.076 2,645,184,867 7.803 32.682 $400,000 - $449,999 7,650 8.675 63.750 3,251,633,341 9.593 42.275 $450,000 - $499,999 8,051 9.130 72.880 3,817,899,661 11.263 53.538 $500,000 - $549,999 6,462 7.328 80.208 3,383,347,432 9.981 63.519 $550,000 - $599,999 4,773 5.412 85.620 2,733,071,952 8.063 71.582 $600,000 - $649,999 3,402 3.858 89.478 2,120,248,958 6.255 77.836 $650,000 - $699,999 2,630 2.982 92.460 1,769,456,658 5.220 83.057 $700,000 - $749,999 1,841 2.088 94.548 1,329,073,769 3.921 86.977 $750,000 - $799,999 1,403 1.591 96.139 1,084,819,556 3.200 90.178 $800,000 - $849,999 954 1.082 97.221 785,081,346 2.316 92.494 $850,000 - $899,999 648 0.735 97.955 564,642,597 1.666 94.159 $900,000 - $949,999 479 0.543 98.499 441,460,430 1.302 95.462 $950,000 - $999,999 336 0.381 98.880 326,408,633 0.963 96.425 $1,000,000 and greater 988 1.120 100.000 1,211,939,943 3.575 100.000 Total 88,186 100.000% $33,897,522,633 100.000% ______(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

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Largest Taxpayers in District. The twenty taxpayers in the District with the greatest combined assessed valuation of taxable property on the fiscal year 2020-21 tax roll, and the assessed valuations thereof, are shown in the following table. In fiscal year 2020-21, no single taxpayer accounted for more than 0.46% of the total taxable property in the District.

GROSSMONT UNION HIGH SCHOOL DISTRICT Largest 2020-21 Local Secured Taxpayers

2020-21 % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. Star-West Parkway Mall LP Shopping Center $249,164,020 0.46% 2. Rancho Investors LP Apartments 170,158,333 0.32 3. Trolley 8727 Apartments California LLC Apartments 160,242,000 0.30 4. Rainbow Investment Company Shopping Center 111,321,089 0.21 5. PUR Veranda LLC Apartments 101,217,767 0.19 6. B9 MF 1250 Petree St LLC Apartments 86,670,934 0.16 7. GKN Aerospace Chem-Tronics Inc. Industrial 77,913,903 0.14 8. Wal-Mart Real Estate Business Trust Commercial 75,030,378 0.14 9. Seta Partners LP Apartments 73,807,016 0.14 10. SP Lavida Real LLC Convalescent Home 73,205,423 0.14 11. Santee Senior Retirement Communities Convalescent Home 72,915,202 0.14 12. Albertsons Stores Sub LLC Supermarkets 68,089,881 0.13 13. Kaiser Foundation Health Plan Inc. Professional Building 63,679,025 0.12 14. VSCRE Holdings LLC Convalescent Home 60,290,547 0.11 15. Essex JMS Acquisition LP Apartments 59,811,301 0.11 16. Parc One LP Apartments 59,774,662 0.11 17. FRG Corona Pointe LLC Apartments 58,230,545 0.11 18. Lysinger 1999 Trust Apartments 55,981,135 0.10 19. MMGER Apartments 55,547,441 0.10 20. Vestar Kimco Santee LP Shopping Center 52,361,662 0.10 $1,785,412,26 3.31% ______(1) 2020-21 local secured assessed valuation: $53,968,469,632. Source: California Municipal Statistics, Inc.

Tax Rates

The State Constitution permits the levy of an ad valorem tax on taxable property not to exceed 1% of the full cash value of the property (determined in accordance with the State Constitution), and State law requires the full 1% tax to be levied. The levy of special ad valorem property taxes in excess of the 1% levy is permitted as necessary to provide for debt service payments on school bonds and other voter-approved indebtedness.

The rate of tax necessary to pay fixed debt service on the Bonds in a given year depends on the assessed value of taxable property in that year. (Unsecured property is taxed at the secured property tax rate from the prior year.) Lower assessed values could necessitate a corresponding increase in the annual tax rate to be levied to pay the principal of and interest on the Bonds. Issuance of additional authorized bonds in the future might also cause the tax rate to increase.

One factor in the ability of taxpayers to pay additional taxes for general obligation bonds is the cumulative rate of tax. From information obtained from California Municipal Statistics, Inc., there are a total of 1,390 tax rate areas in the District in fiscal year 2019-20. A representative tax rate area located within the City of El Cajon, Tax Rate Area 03-001, has a fiscal year 2019-20 assessed valuation of $1,696,592,908, representing 3.2% of the District’s taxable assessed valuation. A representative tax rate area in the city of La Mesa, Tax Rate Area 05-003, has a fiscal year 2019-20 assessed valuation of $5,029,618,270, representing 9.6% of the District’s assessed valuation. A representative tax rate area located in unincorporated San Diego County, Tax Rate Area 83-171, has a

fiscal year 2019-20 assessed valuation of $831,574,614, representing 1.6% of the District’s taxable assessed valuation.

The following tables summarize the total ad valorem tax rates levied by all taxing entities in Tax Rate Areas 03-001, 05-003 and 83-171 from 2015-16 through 2019-20. These are representative of tax rates in the District; other Tax Rate Areas in the District may have higher or lower tax rates.

GROSSMONT UNION HIGH SCHOOL DISTRICT Summary of Ad Valorem Tax Rates $1 per $100 of Assessed Valuation

City of El Cajon – Tax Rate Area 03-001

TRA 03-001 – 2019-20 Assessed Valuation: $1,696,592,908

2015-16 2016-17 2017-18 2018-19 2019-20 General $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 Cajon Valley School District .08145 .07801 .08761 .08477 .07882 Grossmont Union High School District .06053 .05717 .06613 .06482 .06704 Grossmont-Cuyamaca Community College District .04539 .04005 .04671 .04225 .04038 Grossmont Healthcare .02352 .02352 .02352 .02352 .02490 Metropolitan Water District .00350 .00350 .00350 .00350 .00350 Total $1.21439 $1.20225 $1.22747 $1.22747 $1.21464

City of La Mesa – Tax Rate Area 05-003

TRA 05-003 – 2019-20 Assessed Valuation: $5,029,618,270

2015-16 2016-17 2017-18 2018-19 2019-20 General $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 La Mesa-Spring Valley School District .02363 .02289 .02247 .02194 .02155 Grossmont Union High School District .06053 .05717 .06613 .06482 .06704 Grossmont-Cuyamaca Community College District .04539 .04005 .04671 .04225 .04038 Grossmont Healthcare .02352 .02352 .02352 .02352 .02490 City of La Mesa .02300 .02300 .02300 .02200 .02000 Metropolitan Water District .00350 .00350 .00350 .00350 .00350 Total $1.17957 $1.17957 $1.18533 $1.17803 $1.17737

Unincorporated San Diego County – Tax Rate Area 83-171

TRA 83-171 – 2019-20 Assessed Valuation: $831,574,614

2015-16 2016-17 2017-18 2018-19 2019-20 General $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 La Mesa-Spring Valley School District .02363 .02289 .02247 .02194 .02155 Grossmont Union High School District .06053 .05717 .06613 .06482 .06704 Grossmont-Cuyamaca Community College District .04539 .04005 .04671 .04225 .04038 Grossmont Healthcare .02352 .02352 .02352 .02352 .02490 Metropolitan Water District .00350 .00350 .00350 .00350 .00350 Total $1.15657 $1.14713 $1.16233 $1.15603 $1.15737 ______Source: California Municipal Statistics, Inc.

Tax Collections and Delinquencies

A school district’s share of the 1% countywide tax is based on the allocation of property tax revenues to each taxing jurisdiction in the county in fiscal year 1978-79, as adjusted according to statutory modifications enacted since that time. Revenues derived from special ad valorem taxes for voter-approved indebtedness, including the Bonds, are reserved to the taxing jurisdiction that approved and issued the debt, and may only be used to repay that debt.

The county treasurer-tax collector prepares the property tax bills. Property taxes on the regular secured assessment roll are due in two equal installments. The first installment is due on November 1, and becomes delinquent after December 10. The second installment is due on February 1 and becomes delinquent after April 10. If taxes are not paid by the delinquent date, a 10% penalty attaches. If taxes remain unpaid by June 30, the tax is deemed to be in default. Penalties then begin to accrue at the rate of 1.5% per month. The property owner has the right to redeem the property by paying the taxes, accrued penalties, and costs within five years of the date the property went into default. If the property is not redeemed within five years, it is subject to sale at a public auction by the county treasurer.

Annual bills for property taxes on the unsecured roll are generally issued in July, are due in a single payment within 30 days, and become delinquent after August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue on November 1. To collect unpaid taxes, the county treasurer may obtain a judgment lien upon and cause the sale of all property owned by the taxpayer in the county, and may seize and sell personal property, improvements and possessory interests of the taxpayer. The county treasurer may also bring a civil suit against the taxpayer for payment.

The date on which taxes on supplemental assessments are due depends on when the supplemental tax bill is mailed. The following table shows a recent history of secured property tax collections and delinquencies in the District for its general obligation bond debt service levy.

Property tax delinquencies may be impacted by economic and other factors beyond the District’s control, including the ability or willingness of property owners to pay property taxes during an economic recession or depression. An economic recession or depression could be caused by many factors outside the control of the District, including high interest rates, reduced consumer confidence, reduced real wages or reduced economic activity as a result of the COVID-19 or other pandemic or natural or manmade disaster, such as earthquake, drought, flood, fire, toxic dumping. It is not possible for the District to make any representation regarding the extent to which an economic recession or depression, stemming from the effects of COVID-19 or otherwise, could impact the ability or willingness of property owners within the District to pay property taxes in the future. For more information on the impact of the COVID-19 pandemic, see “RISK FACTORS – Risks Related to COVID-19.” If delinquencies increase substantially as a result of the unprecedented events of the COVID-19 pandemic or other events outside the control of the District, the County does have the authority to increase allowances for annual reserves in the tax levy to avoid fluctuating tax levies.

The County does not anticipate an impact to the cash flow for any of the school districts within the County, including cash flow for any bond payments. The District cannot predict the extent of delinquencies and delayed tax collections, or the resulting impact on the District’s financial condition or operations. The County has adopted the Teeter Plan (defined herein), according to which the County distributes to the District the amount levied on the secured and supplemental tax rolls, instead of the amount actually collected. See “– Teeter Plan” below. There can be no assurances that the County will always maintain the Teeter Plan or will have sufficient funds available to distribute the full amount of the District’s share of property tax collections to the District. However, State law requires the County to levy ad valorem property taxes sufficient to pay the Bonds when due.

On May 6, 2020, the Governor signed Executive Order N-61-20, suspending provisions of the State Revenue and Taxation Code requiring collection of interest, penalties, and costs through May 6, 2021, for certain property taxes that are not subject to impounds and were not delinquent prior to March 4, 2020, upon satisfaction of certain conditions set forth in such order. The District is unable to predict the effect such order will have on the actual collections of property taxes in fiscal year 2020-21.

The following table shows a recent history of secured property tax collections and delinquencies in the District for its general obligation bond debt service levy. The County uses the Teeter Plan for assessment levy and distribution. This method guarantees distribution of 100% of the assessments levied to the taxing entity, with the County retaining all penalties and interest, and the County does not provide a breakdown of the delinquencies with respect to property located in the District. See “– Teeter Plan” below.

GROSSMONT UNION HIGH SCHOOL DISTRICT Secured Tax Charges and Delinquencies(1) Fiscal Years 2010-11 to 2019-20

Amount Delinquent % Delinquent Fiscal Year Secured Tax Charge(2) June 30 June 30 2010-11 $20,809,878.38 $112,946.56 0.54% 2011-12 21,651,004.01 107,038.49 0.49 2012-13 21,717,775.89 125,273.32 0.58 2013-14 22,540,307.73 39,467.00 0.18 2014-15 23,435,751.65 42,410.65 0.18 2015-16 24,499,597.59 33,849.34 0.14 2016-17 21,922,519.64 27,011.09 0.12 2017-18 29,954,703.66 26,791.72 0.09 2018-19 31,104,055.91 16,184.99 0.05 2019-20 34,072,993.84 8,391.96 0.02 ______(1) San Diego County utilizes the Teeter Plan for assessment levy and distribution. This method guarantees distribution of 100% of the assessments levied to the taxing entity, with the County retaining all penalties and interest. (2) District’s general obligation bond debt service levy. Source: California Municipal Statistics, Inc.

Teeter Plan. The Board of Supervisors of the County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, the County distributes to each participating local tax-levying agency, including school districts, the amount levied on the secured and supplemental tax rolls, instead of the amount actually collected. In return, the County receives and retains delinquent payments, penalties and interest as collected that would have been due the local agency in the absence of the Teeter Plan.

The County’s policy is that any new taxing entity that includes its levy on the County’s secured and supplemental tax rolls is qualified to be included in the Teeter Plan. The Teeter Plan is to remain in effect unless the County Board of Supervisors orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the County. The Board of Supervisors may also, after holding a public hearing on the matter, discontinue the procedures with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls in that agency. The County of San Diego applies the Teeter Plan to taxes levied on the secured roll for repayment of school district bonds.

Direct and Overlapping Debt. The following table was prepared by California Municipal Statistics Inc., and is included for general information purposes only. The District has not reviewed this table for completeness or accuracy and makes no representations in connection therewith. The first column in the table names each public agency which had outstanding debt as of September 1, 2020, and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.

The table generally includes long-term obligations sold in the public credit markets by the public agencies listed. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

GROSSMONT UNION HIGH SCHOOL DISTRICT Direct and Overlapping Bonded Debt as of September 1, 2020

2020-21 Assessed Valuation: $55,148,490,644

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 9/1/20 Metropolitan Water District 1.648% $ 531,150 Grossmont-Cuyamaca Community College District 97.176 282,180,035 Grossmont Union High School District 100.000 592,240,166(1) Alpine Union School District 100.000 2,833,771 Cajon Valley Union School District 100.000 169,617,572 Dehasa School District 100.000 4,505,016 Jamul-Dulzura Union School District 100.000 5,669,457 La Mesa-Spring Valley School District 100.000 13,884,849 Lakeside Union School District 100.000 48,733,179 Lemon Grove School District 100.000 25,659,879 Santee School District 100.000 63,361,524 City of La Mesa 99.945 18,504,817 Grossmont Healthcare District 91.151 227,857,748 City of Santee Community Facilities District No. 2017-1 100.000 8,525,000 City of La Mesa 1915 Act Bonds 100.000 1,810,000 California Statewide Communities Development Authority 1915 Act Bonds 100.000 1,955,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $1,467,869,163

DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Diego County General Fund Obligations 9.417% $ 21,786,230 San Diego County Pension Obligation Bonds 9.417 37,679,771 San Diego County Superintendent of Schools Obligations 9.417 880,490 Grossmont-Cuyacama Community College District General Fund Obligations 97.176 218,646 Grossmont Union High School District General Fund Obligations 100.000 33,185,000 Alpine Union School District Certificates of Participation 100.000 2,425,000 Cajon Valley Union School District Certificates of Participation 100.000 16,287,000 La Mesa-Spring Valley School District General Fund Obligations 100.000 10,758,639 Santee School District Certificates of Participation 100.000 28,749,849 City of La Mesa Parking Authority 99.945 2,393,683 City of San Diego General Fund Obligations 0.194 985,777 Lakeside Fire Protection District Certificates of Participation 100.000 4,375,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $159,725,085

OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): 0.391-100. % $117,936,333

COMBINED TOTAL DEBT $1,745,530,581(2)

Ratios to 2020-21 Assessed Valuation: Direct Debt ($592,240,166) ...... 1.07% Total Direct and Overlapping Tax and Assessment Debt ...... 2.66% Combined Direct Debt ($625,425,166) ...... 1.13% Combined Total Debt ...... 3.17%

Ratios to Redevelopment Incremental Valuation ($5,461,197,844): Total Overlapping Tax Increment Debt ...... 2.16%

______(1) Excludes Bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

TAX MATTERS

Tax-Exempt Bonds

In the opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel to the District (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Tax-Exempt Bonds is not a specific preference item for purposes of the federal alternative minimum tax. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX C hereto.

To the extent the issue price of any maturity of the Tax-Exempt Bonds is less than the amount to be paid at maturity of such Tax-Exempt Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Tax-Exempt Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Tax-Exempt Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Tax-Exempt Bonds is the first price at which a substantial amount of such maturity of the Tax-Exempt Bonds 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 Tax-Exempt Bonds accrues daily over the term to maturity of such Tax- Exempt Bonds 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 such Tax- Exempt Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Tax-Exempt Bonds. Beneficial Owners of the Tax-Exempt Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Tax-Exempt Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Tax-Exempt Bonds in the original offering to the public at the first price at which a substantial amount of such Tax-Exempt Bonds is sold to the public.

Tax-Exempt Bonds purchased, whether at original issuance or otherwise, for an amount higher 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 in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. 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.

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 Tax-Exempt Bonds. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Tax-Exempt Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Tax-Exempt Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Tax-Exempt Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and 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), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Tax-Exempt Bonds may adversely affect the value of, or the tax status of interest on, the Tax-Exempt Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Bond Counsel is of the opinion that interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Tax-Exempt Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences

depends 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.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Tax-Exempt Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Tax-Exempt Bonds. Prospective purchasers of the Tax-Exempt Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Tax- Exempt Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Tax-Exempt Bonds ends with the issuance of the Tax- Exempt Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Tax-Exempt Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the District and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Tax-Exempt Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Tax- Exempt Bonds, and may cause the District or the Beneficial Owners to incur significant expense.

Taxable Bonds

In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Taxable Bonds is exempt from State of California personal income taxes. Bond Counsel observes that interest on the Taxable Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Taxable Bonds. The proposed form of opinion of Bond Counsel is contained in APPENDIX C hereto.

The following discussion summarizes certain U.S. federal tax considerations generally applicable to holders of the Taxable Bonds that acquire their Taxable Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the IRS with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their Taxable Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors whose “functional currency” is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax consequences, (ii) the net investment income tax imposed under Section 1411 of the Code, or (iii) the indirect effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of the Taxable Bonds under state, local or non-U.S. tax laws. In addition, this summary generally is limited

to U.S. tax considerations applicable to investors that acquire their Taxable Bonds pursuant to this offering for the issue price that is applicable to such Taxable Bonds (i.e., the price at which a substantial amount of the Taxable Bonds are sold to the public) and who will hold their Taxable Bonds as “capital assets” within the meaning of Section 1221 of the Code.

As used herein, “U.S. Holder” means a beneficial owner of a Taxable Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, “Non-U.S. Holder” generally means a beneficial owner of a Taxable Bond (other than a partnership) that is not a U.S. Holder. If a partnership holds Taxable Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partnerships holding Taxable Bonds, and partners in such partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the Taxable Bonds (including their status as U.S. Holders or Non-U.S. Holders).

Notwithstanding the rules described below, it should be noted that certain taxpayers that are required to prepare certified financial statements or file financial statements with certain regulatory or governmental agencies may be required to recognize income, gain and loss with respect to the Taxable Bonds at the time that such income, gain or loss is recognized on such financial statements instead of under the rules described below (in the case of original issue discount, such requirements are only effective for tax years beginning after December 31, 2018).

Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the Taxable Bonds in light of their particular circumstances.

U.S. Holders

Interest. Interest on the Taxable Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.

Taxable Bonds purchased for an amount in excess of the principal amount payable at maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a Taxable Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Taxable Bond.

Sale or Other Taxable Disposition of the Taxable Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the District) or other disposition of a Taxable Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of a Taxable Bond will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Taxable Bond, which will be taxed in the manner described above) and (ii) the U.S. Holder’s adjusted U.S. federal income tax basis in the Taxable Bond (generally, the purchase price paid by the U.S. Holder for the Taxable Bond, decreased by any amortized premium). Any such gain or loss generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the Taxable Bonds, the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder’s holding period for the Taxable Bonds exceeds one year. The deductibility of capital losses is subject to limitations.

Defeasance of the Taxable Bonds. If the District defeases any Taxable Bond, the Taxable Bond may be deemed to be retired and reissued for U.S. federal income tax purposes as a result of the defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the difference between (i) the amount realized from the

deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and (ii) the holder’s adjusted tax basis in the Taxable Bond.

Information Reporting and Backup Withholding. Payments on the Taxable Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of the Taxable Bonds may be subject to backup withholding at the current rate of 24% with respect to “reportable payments,” which include interest paid on the Taxable Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Taxable Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain U.S. holders (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. A holder’s failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.

Non-U.S. Holders

Interest. Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “FATCA,” payments of principal of, and interest on, any Taxable Bond to a Non-U.S. Holder, other than (1) a controlled foreign corporation, as such term is defined in the Code, which is related to the District through stock ownership and (2) a bank which acquires such Taxable Bond in consideration of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business, will not be subject to any U.S. federal withholding tax provided that the beneficial owner of the Taxable Bond provides a certification completed in compliance with applicable statutory and regulatory requirements, which requirements are discussed below under the heading “Information Reporting and Backup Withholding,” or an exemption is otherwise established.

Disposition of the Taxable Bonds. Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “FATCA,” any gain realized by a Non-U.S. Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the District or a deemed retirement due to defeasance of the Taxable Bond) or other disposition of a Taxable Bond generally will not be subject to U.S. federal income tax, unless (i) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States; or (ii) in the case of any gain realized by an individual Non-U.S. Holder, such holder is present in the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirement (including pursuant to an offer by the District) or other disposition and certain other conditions are met.

U.S. Federal Estate Tax. A Taxable Bond that is held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a result of such individual’s death, provided that, at the time of such individual’s death, payments of interest with respect to such Taxable Bond would not have been effectively connected with the conduct by such individual of a trade or business within the United States.

Information Reporting and Backup Withholding. Subject to the discussion below under the heading “FATCA,” under current U.S. Treasury Regulations, payments of principal and interest on any Taxable Bonds to a holder that is not a United States person will not be subject to any backup withholding tax requirements if the beneficial owner of the Taxable Bond or a financial institution holding the Taxable Bond on behalf of the beneficial owner in the ordinary course of its trade or business provides an appropriate certification to the payor and the payor does not have actual knowledge that the certification is false. If a beneficial owner provides the certification, the certification must give the name and address of such owner, state that such owner is not a United States person, or, in the case of an individual, that such owner is neither a citizen nor a resident of the United States, and the owner must sign the certificate under penalties of perjury. The current backup withholding tax rate is 24%.

Foreign Account Tax Compliance Act (“FATCA”) – U.S. Holders and Non-U.S. Holders

Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial U.S. owner. Under current guidance, failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest on the Taxable Bonds. In general, withholding under FATCA currently applies to payments of U.S. source interest (including OID) and, under current guidance, will apply to certain “passthru” payments no earlier than the date that is two years after publication of final U.S. Treasury Regulations defining the term “foreign passthru payments.” Prospective investors should consult their own tax advisors regarding FATCA and its effect on them.

The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal taxation that may be relevant to a particular holder of Taxable Bonds in light of the holder’s particular circumstances and income tax situation. Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of Taxable Bonds, including the application and effect of state, local, non-U.S., and other tax laws.

OTHER LEGAL MATTERS

Possible Limitations on Remedies; Bankruptcy

General. Following is a discussion of certain considerations in the event that the District should become a debtor in a bankruptcy proceeding. It is not an exhaustive discussion of the potential application of bankruptcy law to the District.

State law contains a number of safeguards to protect the financial solvency of school districts. If the safeguards are not successful in preventing the District from becoming insolvent, the State Superintendent of Public Instruction (the “State Superintendent”), operating through an administrator appointed by the State Superintendent, may be authorized under State law to file a petition under Chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”) on behalf of the District for the adjustment of its debts, assuming that the District meets certain other requirements contained in the Bankruptcy Code necessary for filing such a petition. Under current State law, the District is not itself authorized to file a bankruptcy proceeding, and it is not subject to an involuntary bankruptcy proceeding.

Bankruptcy courts are courts of equity and as such have broad discretionary powers. If the District were to become the debtor in a proceeding under Chapter 9 of the Bankruptcy Code, the parties to the proceedings may be prohibited from taking any action to collect any amount from the District or the County (including ad valorem tax revenues) or to enforce any obligation of the District, without the bankruptcy court’s permission. In such a proceeding, as part of its plan of adjustment in bankruptcy, the District may be able to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other terms or provisions of the Bonds and other transaction documents related to the Bonds, including the obligation of the County and the District to raise taxes if necessary to pay the Bonds, if the bankruptcy court determines that the plan is fair and equitable and otherwise complies with the Bankruptcy Code. There also may be other possible effects of a bankruptcy of the District that could result in delays or reductions in payments on the Bonds. Regardless of any specific adverse determinations in any District bankruptcy proceeding, the fact of a District bankruptcy proceeding could have an adverse effect on the liquidity and market price of the Bonds.

Limitations on Plans of Adjustments. Chapter 9 of the Bankruptcy Code provides that it does not limit or impair the power of a state to control, by legislation or otherwise, a municipality of or in the state in the exercise of its political or governmental powers, including expenditures for such exercise. In addition, Chapter 9 provides that a

bankruptcy court may not interfere with the political or governmental powers of the debtor, unless the debtor consents to that action or the plan so provides. State law provides that ad valorem taxes may be levied to pay the principal of and interest on the Bonds and other voted general obligation bonds of the District in an unlimited amount, and that proceeds of such a levy must be used for the payment of principal of and interest on the District’s general obligation bonds, including the Bonds, and for no other purpose. Under State law, the District’s share of the 1% limited tax imposed by the County is the only ad valorem tax revenue that may be raised and expended to pay liabilities and expenses of the District other than its voter-approved debt, such as its general obligation bonds. If the State law restriction on the levy and expenditure of ad valorem taxes is respected in a bankruptcy case, then ad valorem tax revenue in excess of the District’s share of the 1% limited County tax could not be used by the District for any purpose under its plan other than to make payments on the Bonds and its other voted general obligation bonds. It is possible, however, that a bankruptcy court could conclude that the restriction should not be respected.

Statutory Lien. Pursuant to state law, all general obligation bonds issued by local agencies, including the Bonds, are secured by a statutory lien on all revenues received pursuant to the levy and collection of the ad valorem taxes. State law provides that the lien automatically arises, without the need for any action or authorization by the local agency or its governing board, and is valid and binding from the time the bonds are executed and delivered. As a result, the lien on debt service taxes will continue to be valid with respect to post-petition receipts of debt service taxes, should the District become the subject of bankruptcy proceedings. However, the automatic stay provisions of the Bankruptcy Code would apply, preventing bondholders from enforcing their rights to payment from such taxes, so payments that become due and owing on the Bonds during the pendency of the Chapter 9 proceeding could be delayed.

Special Revenues. If the ad valorem tax revenues that are pledged to the payment of the Bonds are determined to be “special revenues” within the meaning of the Bankruptcy Code, then the application in a manner consistent with the Bankruptcy Code of the pledged ad valorem tax revenues that are collected after the date of the bankruptcy filing should not be subject to the automatic stay. “Special revenues” are defined to include, among others, taxes specifically levied to finance one or more projects or systems of the debtor, but excluding receipts from general property, sales, or income taxes levied to finance the general purposes of the debtor. The District has specifically pledged the ad valorem taxes for payment of the Bonds. The Bonds and the District’s other general obligation bonds were approved at elections held on propositions that described the projects for which such bonds may be issued. As noted above, State law prohibits the use of the proceeds of the District’s debt service tax for any purpose other than payment of its general obligation bonds, and the bond proceeds may only be used to fund the acquisition or improvement of real property and other capital expenditures included in the proposition, so such tax revenues appear to fit the definition of special revenues. However, there is no binding judicial precedent dealing with the treatment in bankruptcy proceedings of ad valorem tax revenues collected for the payment of general obligation bonds in the State, so no assurance can be given that a bankruptcy court would not hold otherwise.

The Bankruptcy Code provides that there is no stay of application of pledged special revenues to payment of indebtedness secured by such revenues. The United States Court of Appeals for the First Circuit (the “First Circuit”), in a case arising out of the insolvency proceedings of Puerto Rico, held that this provision permitted voluntary payments of debt service by the issuer of bonds backed by special revenues, but did not permit the bondholders to compel the issuer to make payments of debt service from special revenues. The First Circuit also recently ruled that the bankruptcy court lacked the authority to compel the application of special revenues. If this decision is followed by other courts, the holders of the Bonds may be prohibited from taking any action to require the District or the County to make payments on the Bonds without the bankruptcy court’s permission. This could result in substantial delays in payments on the Bonds.

In addition, even if the ad valorem tax revenues are determined to be “special revenues,” the Bankruptcy Code provides that special revenues can be applied to necessary operating expenses of the project or system, before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents. Thus, a bankruptcy court could determine that the District is entitled to use the ad valorem tax revenues to pay necessary operating expenses of the District and its schools, before the remaining revenues are paid to the owners of the Bonds.

Bondholders may experience delays or reductions in payments on the Bonds, the Bonds may decline in value or Bondholders may experience other adverse effects should the District file for bankruptcy.

Possession of Tax Revenues; Remedies. If the District goes into bankruptcy and the District or the County has possession of tax revenues (whether collected before or after commencement of the bankruptcy), and if the District or the County, as applicable, does not voluntarily pay such tax revenues to the Owners of the Bonds, it is not entirely clear what procedures the Owners of the Bonds would have to follow to attempt to obtain possession of such tax revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful. A similar risk would exist if the County goes into bankruptcy and has possession of tax revenues (whether collected before or after commencement of the bankruptcy).

Risk of Investment Losses. Pending delivery of ad valorem tax revenues to the Paying Agent, the County Treasurer may invest the ad valorem tax revenues in the County Investment Pool or in other investments. Should any of these investments suffer any losses, there may be delays or reductions in payments on the Bonds.

Opinion of Bond Counsel Qualified by Reference to Bankruptcy, Insolvency and Other Laws Relating to or Affecting Creditor’s Rights. The proposed form of opinion of Bond Counsel, attached hereto as APPENDIX C, is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights.

Amounts Held in County Treasury Pool

The County on behalf of the District is expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bonds and may invest these funds in the County’s Treasury Pool, as described in Appendix E – “SAN DIEGO COUNTY INVESTMENT POOL.” Should those investments suffer any losses, there may be delays or reductions in payments on the Bonds.

Legal Opinion

The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel. A complete copy of the proposed form of opinion of Bond Counsel is contained in APPENDIX C hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.

Legality for Investment in California

Under provisions of the Financial Code of the State, including Section 1510(d) of the Financial Code, the Bonds are legal investments for commercial banks in the State to the extent that the Bonds, in the informed opinion of the bank, are prudent for the investment of funds of its depositors. Under provisions of the Government Code of the State, the Bonds are eligible securities for deposits of public moneys in the State.

Litigation

No litigation is pending or threatened concerning the validity of the Bonds, or the District’s ability to receive ad valorem taxes and to collect other revenues, or contesting the District’s ability to issue and retire the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the title to their offices of District officials who will sign the Bonds and other certifications relating to the Bonds, or the powers of those offices. A certificate (or certificates) to that effect will be furnished to the Underwriters at the time of the original delivery of the Bonds.

There are a few lawsuits and claims pending against the District. In the opinion of the District, the aggregate amount of the uninsured liabilities of the District under such lawsuits and claims will not materially affect the finances of the District.

MISCELLANEOUS

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 months following the end of the District’s fiscal year (currently ending June 30), commencing with the report for

fiscal year 2019-20 (which is due not later than April 1, 2021), and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the District with the Municipal Securities Rulemaking Board (“MSRB”). The notices of enumerated events will be filed by the District with the MSRB. The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is summarized in APPENDIX D – “PROPOSED 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).

During the five-year period preceding the date of this Official Statement, the District failed to timely file certain material event notices and financial operating information required by the terms of its previous undertakings relating to previous issues of lease revenue bonds.

The District entered into an undertaking in connection with the issuance by the San Diego County Educational Facilities Authority No. 1 of its 2003 Lease Revenue Refunding Bonds. The District failed to file financial operating information relating to developer fee collections and contractual agreements with employee bargaining units required to be filed by such undertaking. In May 2015, the District made corrective filings of all of the required financial operating information relating to developer fee collections and certain of the required financial operating information relating to bargaining units. In February 2016, the District made corrective filings of all of the remaining required financial operating information relating to bargaining units. In October 2016, the District failed to file notice of a rating change on the 2003 Lease Revenue Refunding Bonds. Such 2003 Lease Revenue Refunding Bonds have been paid in full and are no longer outstanding.

The District has registered with the MSRB’s Electronic Municipal Market Access (EMMA) to receive reminders of filing dates for Annual Reports.

Cybersecurity

The District relies on a large and complex technology infrastructure to conduct its operations. The District and its departments routinely face cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. The District maintains insurance to cover cybersecurity incidents. No assurances can be given that the security and operational control measures of the District will be successful in guarding against any and each cyber threat and attack. The results of any attack on the computer and information technology systems could have a material adverse impact on the operations of the District and damage the digital networks and systems. The District cannot predict the outcome of any such attack, nor the effect on the operations and finances of the District.

Risks Related to COVID-19

Neither the principal of, nor interest on, the Bonds is payable from the District’s general fund or from State revenues. The Bonds are paid by the County solely from ad valorem property taxes levied by the County – moneys over which the District exerts no control. Nevertheless, the District has presented information concerning its finances and operations and has detailed the State funding of education below and in Appendix A as supplementary information.

Background. The outbreak of the respiratory disease caused by COVID-19 has been declared a Pandemic by the World Health Organization, a National Emergency by President Trump (the “President”) and a State of Emergency by California State Governor Newsom (the “Governor”). The emergency has resulted in tremendous volatility in the financial markets in the United States and globally, and the likely onset of a U.S. and global recession. The District cannot predict the extent or duration of the outbreak or what impact it may have on the District’s financial condition or operations.

Federal Response. The President’s declaration of a National Emergency on March 13, 2020 made available more than $50 billion in federal resources to combat the spread of the virus. A multibillion-dollar Coronavirus relief package was signed into law by the President on March 18, 2020 providing for Medicaid expansion, unemployment benefits and paid emergency leave during the crisis. In an effort to calm the markets, the

Federal Reserve lowered its benchmark interest rate to nearly zero, introduced a large bond-buying program and established emergency lending programs to banks and money market mutual funds.

CARES Act. In response to COVID-19, the U.S. Congress passed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020. The CARES Act appropriates over $2 trillion to (i) provide cash payments to individuals, (ii) expand unemployment assistance and eligibility, (iii) provide emergency grants and loans for small businesses, (iv) provide loans and other assistance to corporations, including the airline industry, (v) provide funding for hospitals and community health centers, (vi) expand funding for safety net programs, including child nutrition programs and (vii) provide aid to state and local governments. The CARES Act includes $13.2 billion in direct funding for elementary and secondary school emergency relief. California will receive approximately $1.65 billion, with 10 percent set aside for emergencies designated by the California Department of Education. School district distribution is based on a district’s share of federal Title I funding which uses a formula based primarily on the number of students whose family income is below the federal poverty threshold of $26,200 for a family of four and who receive Temporary Assistance for Needy Families. The District estimates receipt of $18,179,417 of CARES Act funding.

State Response. On March 15, 2020, the Governor ordered the closing of California bars and nightclubs, the cancellation of gatherings of more than 250 and confirmed continued funding for school districts that close under certain conditions. On March 16, 2020, the State legislature passed $1.1 billion in general purpose spending authority for emergency funds to respond to the coronavirus crisis. On March 19, 2020, Governor Newsom issued Executive Order N-33-20, a blanket shelter-in-place order, ordering all California residents to stay home except for certain necessities and other essential purposes, which is in effect until further notice.

The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak, the economic impacts and actions that may be taken by governmental authorities to contain the outbreak or to treat its impacts are uncertain and cannot be predicted. Additional information with respect to events surrounding the outbreak of COVID-19 and responses thereto can be found on State and local government websites, including but not limited to: the Governor’s office (http://www.gov.ca.gov) and the California Department of Public Health (https://covid19.ca.gov/). The District has not incorporated by reference the information on such websites, and the District does not assume any responsibility for the accuracy of the information on such websites.

Impacts on State and Local Revenues. The COVID-19 public health emergency will have negative impacts on global and local economies, including the economy of the State and in the region of the District. The extent and duration of the COVID-19 emergency is currently unknown, and the reach of its impacts uncertain. The State has asserted that the State’s general fund will be materially adversely impacted by the health-related and economic impacts of the COVID-19 pandemic and that the negative impact on revenues will be immediate, affecting the current fiscal year and running into several fiscal years in the future. Delayed deadlines for the filing and payment of personal income, corporation, and sales and use taxes have further created uncertainties for the State with respect to its general fund cash flows. The State’s revenue sources are anticipated to be materially impacted by the COVID-19 pandemic, including with respect to reductions in personal income tax receipts and capital gains tax receipts. Economic uncertainty caused by the outbreak will significantly affect California’s near-term fiscal outlook, with a likely recession due to pullback in activity across wide swaths of the economy. In an attempt to mitigate the effects of the COVID-19 pandemic on State property taxpayers, on May 6, 2020, the Governor signed an executive order suspending penalties, costs or interest for the failure to pay secured or unsecured property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent.

For detail regarding the 2020-21 State Budget, see APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION – State Funding of Education; State Budget Process – 2020-21 State Budget.”

Impacts on School Districts in California. Shelter-in-place orders suspended in-person classroom instruction indefinitely throughout California schools. Most school districts (including the District) enacted distance learning efforts to provide continuing instruction to students, and are currently in the process of planning distance learning, in-person learning protocols, or a hybrid of both for fall classes. State law allows school districts to apply for a waiver to hold them harmless from the loss of State apportionment funding based on attendance and state instructional time penalties when they are forced to close schools due to emergency conditions. On March 13, 2020,

Governor Newsom signed Executive Order N-26-20 under the provisions of Section 8571 of the Government Code (the “Order”) in an effort to mitigate the effects of the COVID-19 pandemic as it relates to California local education agencies (“LEAs”), including school districts, county offices of education, and charter schools. The Order provides that if an LEA closes its schools to address COVID-19, the LEA will continue to receive State funding to support the LEA to continue delivering services including distance learning and/or independent study; provide school meals in non-congregate settings through the Summer Food Service Program and Seamless Summer Option; arrange for, to the extent practicable, supervision for students during ordinary school hours; and continue to pay its employees. The order waives any State or local law that might be interpreted to prohibit an LEA from offering distance learning or independent study. Senate Bill 117 (“SB 117”) was passed on March 17, 2020, addressing attendance issues and instructional hour requirements, among other items, and effectively holds schools harmless from incurring funding losses that could result from these issues under existing funding formulas. SB 117 provides that for schools that comply with the Executive Order, only attendance during full school months from July 1, 2019 to and including February 29, 2020, will be reported for apportionment purposes. SB 117 also holds that certain minimum instructional day and minute requirements will be deemed to have been met during the period complying school districts are closed due to COVID-19, in order to prevent a loss of funding due to the COVID-19 outbreak.

On April 22, 2020, Governor Newsom signed Executive Order N-56-20, which extends the deadline for school districts to adopt their LCAP and budget overview, from July 1, 2020 to December 15, 2020 subject to certain conditions. One of the conditions to qualify for the extended deadline is for the governing board of the school district to adopt a written report to the community, during the same meeting at which it adopts the annual budget due by July 1, 2020, that explains how the school district has responded to COVID-19, including steps taken to deliver distance learning, provide school meals in non-congregated settings, and arrange for supervision of students during ordinary school hours. The decline in revenue as a consequence of the impacts of COVID-19 has significantly impacted the State and as such, a significant decline in revenue is expected to be available for funding school districts.

Executive Orders N-26-20, N-30-20, N-45-20 have defined expectations for LEAs for service delivery during COVID-19 school closures, suspended State academic assessments for the 2019-20 school year, increased programmatic flexibility for after school programs, and required LEAs to be transparent with their communities about actions taken to ensure continuity of student learning during the COVID-19 pandemic. Additional executive orders or legislation may be enacted in response to the pandemic, but the District cannot predict the nature or content of such orders, or the effect they will have on its operations or finances. In addition, certain of these executive orders have been challenged in the courts by affected plaintiffs. The District cannot predict the outcome of any such litigation or whether any resulting change to any executive order will affect the funding of school districts in the State, including the District.

Plans to Re-open the Economy. On August 28, 2020, the Governor released a new system, Blueprint for a Safer California, which places the State’s 58 counties into four color-coded tiers – purple, red, orange and yellow, in descending order of severity – based on the number of new daily cases of COVID-19 and the percentage of positive tests. Counties must spend at least three weeks in each tier before advancing to the next one. Schools can reopen for limited in-person instruction with local health official approval in counties that have been in the red tier (a daily new case of 4 to 7 per 100,000 people and 5-8% of positive tests) or a lower tier for two weeks. Counties in the purple tier can reopen elementary schools if the local health department provides a waiver. The County is currently assigned to the red tier.

Impacts on the District. District schools closed effective March 16, 2020 and school physical facilities will remain closed until such time as public health officials declare it is safe for students to return. The formal launch of distance learning began on April 20, 2020. The District is currently receiving guidance on COVID-19 from County health officials, the San Diego County Office of Education (the “Office of Education”) and the California Department of Education (“CDE”) which is monitoring the COVID-19 situation in accordance with COVID-19 guidelines for schools published by the Centers for Disease Control and Prevention. The District currently plans to move to Level 2 of distance learning starting on September 28, 2020, with each student attending school in person one day a week and remote learning for the remaining four days of the week. Under this model, teachers will be on campus four days a week, and 25% of students will be on campus for each of those four days. The District’s current re-opening plan is subject to change depending on orders received from County health officials and the San Diego County Office of Education.

The District is unable to predict at this time whether new proposals will be enacted or in what form they may take, or whether any new requirements related to reducing the spread of COVID-19 will materially impact its finances or operations. Additional information with respect to events surrounding the outbreak of COVID-19 and responses thereto can be found on federal, State and local government websites, including but not limited to the CDC (https://www.cdc.gov), the Governor’s office (http://www.gov.ca.gov), the California Department of Public Health (http://cdph.ca.gov/) and the County (https://www.sandiegocounty.gov). The District has not incorporated by reference the information on such websites and the District does not assume any responsibility for the accuracy of the information on such websites.

As discussed herein under APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION – Allocation of State Funding to School Districts; Local Control Funding Formula,” the District receives much of its revenues from LCFF sources which are comprised of local property taxes and State moneys. As the State experiences a decline in revenue as a consequence of the impacts of COVID-19, there will be a resulting decline in revenue available for funding school districts. In addition, there may be unknown consequences of the COVID-19 emergency, which the District is unable to forecast. The District cannot predict the extent or duration of the outbreak, the overall impact it may have on the District’s financial condition, operations, nor the impact of COVID-19 on the assessed values of property within the District and the economy in general. Any financial information, including projections, forecasts and budgets presented herein may not account for the potential or wide-ranging effects of COVID-19.

The economic consequences and the declines in the U.S. and global financial markets resulting from the spread of COVID-19, and responses thereto by local, State, and the federal governments, could have a material impact on the investments in the State pension trusts, which could materially increase the unfunded actuarial accrued liability of the CalSTRS Defined Benefit Program and CalPERS Schools Pool, which, in turn, could result in material changes to the District’s required contribution rates in future fiscal years. See APPENDIX A – “INFORMATION RELATING TO THE DISTRICT – FINANCIAL AND OPERATING INFORMATION – District Expenditures.”

Ratings

The Bonds have received the rating of “AAA” by Fitch Ratings (“Fitch”) and “Aa2” by Moody’s Investors Service (“Moody’s”). A rating agency generally bases its rating on its own investigations, studies and assumptions. The District has provided certain additional information and materials to the rating agencies (some of which does not appear in this Official Statement). Such ratings reflect only the views of the rating agencies, and any explanation of the significance of such ratings may be obtained from the rating agencies furnishing such ratings, from Fitch at www.fitchratings.com and Moody’s at www.moodys.com. The information set forth on such websites is not incorporated herein by reference. There is no assurance that any rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the respective rating agency, if, in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds. The District undertakes no responsibility to oppose any such downward revision, suspension or withdrawal.

Professionals Involved in the Offering

Orrick, Herrington & Sutcliffe LLP is acting as Bond Counsel to the District and as Disclosure Counsel, and will receive compensation from the District contingent upon the sale and delivery of the Bonds. KNN Public Finance, LLC is acting as Municipal Advisor with respect to the Bonds, and will receive compensation from the District contingent upon the sale and delivery of the Bonds. Certain matters will be passed on for the Underwriters by their counsel, Stradling Yocca Carlson & Rauth, a Professional Corporation, which will receive compensation contingent upon sale and delivery of the Bonds.

Underwriting

The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated, as representative of itself and Citigroup Global Markets Inc. (collectively, the “Underwriters”), pursuant to the terms of a bond purchase contract between the District and the Underwriters, dated ______, 2020 (the “Purchase Contract”). The

Underwriters have agreed to purchase the Bonds from the District at a purchase price of $______. The Underwriters’ discount is $______. Under the terms of the contract, the Underwriters will be obligated to purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions to be satisfied by the District.

Citigroup Global Markets Inc., an underwriter of the Bonds, has entered into a retail distribution agreement with Fidelity Capital Markets, a division of National Financial Services LLC (together with its affiliates, “Fidelity”). Under this distribution agreement, Citigroup Global Markets Inc. may distribute municipal securities to retail investors at the original issue price through Fidelity. As part of this arrangement, Citigroup Global Markets Inc. will compensate Fidelity for its selling efforts.

While Stifel, Nicolaus & Company, Incorporated (“Stifel”), does not believe that the following represents a potential or actual material conflict of interest, it notes that in October 2008, Stifel made a contribution to East County Neighbors for Safe Schools on behalf of the Yes on Proposition U bond campaign.

The Underwriters may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page. The offering prices may be changed from time to time by the Underwriters.

Additional Information

Quotations from and summaries and explanations of the Bonds, the District Resolution and the Paying Agent Agreement providing for issuance and payment of the Bonds, and the constitutional provisions, statutes and other documents described herein, do not purport to be complete, and reference is hereby made to said documents, constitutional provisions and statutes for the complete provisions thereof.

______

The District has duly authorized the delivery of this Official Statement.

GROSSMONT UNION HIGH SCHOOL DISTRICT

By: Deputy Superintendent, Business Services

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APPENDIX A

INFORMATION RELATING TO THE DISTRICT

Any information in the following appendix that indicates it has been obtained from a third-party has been obtained from sources which are believed to be reliable, but the District makes no guarantee as to the accuracy or completeness thereof, and is not to be construed as a representation by the District, the Underwriters or the Municipal Advisor.

Prospective purchasers of the Bonds should be aware that the tables below, which demonstrate historical income, employment, sales and other figures, may not be accurate predictors of future trends, nor do they provide an entirely current report of economic circumstances as of the date of printing of this Official Statement. The historical data displayed in this Section is derived from a number of third-party sources from data accumulated over time, and thus cannot be presented on a real-time basis.

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PART I

THE ECONOMY OF THE DISTRICT

The District encompasses all of the cities of El Cajon, Santee and Lemon Grove, most of the city of La Mesa, a small portion of the city of San Diego, as well as adjacent unincorporated areas of the County. The following economic data for selected cities and the County are presented for information purposes only. The Bonds are not a debt or obligation of the cities or the County.

The historical data and results presented in the tables that follow may differ materially from future results as a result of economic or other factors, including as a result of the impact of COVID-19. For more information on the impact of the COVID-19 pandemic, see “MISCELLANEOUS – Risks Related to COVID-19” in the forepart of this Official Statement.

General

The District is located in eastern San Diego County, encompassing a large portion of the urbanized area of the east county as well as foothill communities of the Cuyamaca Mountains. The District is traversed by U.S. Interstate Highway 8, State Route 94, State Route 125, and State Route 67.

The District is located about 12 miles east of downtown San Diego, the County seat, and the San Diego International Airport.

The local economy is closely tied to federal spending and actions taken by the federal government to reduce local expenditures could adversely affect the County’s economy.

Population

The table below shows the recent population growth for the County and for the cities of El Cajon, La Mesa, Lemon Grove, and Santee. The population of the four cities in 2020 accounted for approximately 7.4% of the population of the County.

POPULATION GROWTH San Diego County and Cities Within Grossmont Union High School District 2000-2020

City of City of City of City of County of Year El Cajon La Mesa Santee Lemon Grove San Diego 2000 94,869 54,749 52,946 24,918 2,813,833 2001 96,054 55,224 53,138 25,136 2,849,238 2002 96,432 55,414 52,770 25,169 2,890,256 2003 96,939 55,578 52,474 25,235 2,927,216 2004 97,354 55,547 52,142 25,228 2,953,703 2005 97,364 55,354 52,110 25,078 2,966,783 2006 96,699 55,098 51,983 24,878 2,976,492 2007 97,027 55,452 51,936 24,873 2,998,477 2008 97,684 55,753 52,367 24,949 3,032,689 2009 98,363 56,148 52,963 25,037 3,064,436 2010 99,478 57,065 53,413 25,320 3,095,313 2011 100,144 58,150 54,254 25,540 3,125,264 2012 101,190 58,628 54,900 25,708 3,161,750 2013 102,635 59,155 55,735 25,763 3,201,417 2014 102,740 59,509 56,420 26,170 3,235,142 2015 102,989 59,710 56,605 26,573 3,267,992 2016 103,901 60,323 56,595 26,647 3,287,279 2017 104,855 60,499 56,991 26,959 3,309,626 2018 105,258 60,707 57,410 27,068 3,333,128 2019 105,569 60,820 58,408 27,208 3,351,786 2020 103,314 59,479 58,081 26,811 3,338,330

Note: For 2001 to 2009 and 2011 to 2019, population statistics are as of January 1. For 2000, 2010 and 2020, population statistics are as of April 1. Sources: State Department of Finance for 2001 to 2009 and 2011 to 2019; U.S. Department of Commerce, Bureau of the Census, for 2000, 2010 and 2020.

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Employment

The following table summarizes wage and salary employment in the County from 2016 to 2020. The total wage and salary employment in the County decreased by 4.8% between 2016 and 2020. Employment was highest in 2019 for this five- year period.

ANNUAL AVERAGE WAGE AND SALARY EMPLOYMENT County of San Diego 2016-2020

Employment (1) Industry 2016 2017 2018 2019 2020(2) Total Farm 8,900 8,600 9,500 10,100 9,500 Mining and Logging 300 300 400 400 400 Construction 76,300 79,300 85,900 85,600 79,900 Manufacturing 108,000 109,000 113,600 116,100 108,700 Trade, Transportation & Utilities 224,800 228,200 224,200 222,900 204,500 Information 24,100 24,400 24,200 23,700 19,900 Financial Activities 72,700 74,100 76,600 77,000 73,500 Professional & Business Services 231,200 233,500 250,200 258,500 253,100 Educational and Health Services 198,700 204,500 209,100 213,200 201,800 Leisure and Hospitality 191,100 196,400 206,800 208,900 148,100 Other Services 54,400 54,900 56,100 57,000 43,500 Government 242,200 248,100 233,200 236,100 221,600 Total 1,432,700 1,461,300 1,489,800 1,509,500 1,364,500 ______(1) Employment is reported by place of work; it does not include persons involved in labor-management disputes. Figures are rounded to the nearest hundred. Columns may not add to totals due to rounding. (2) Preliminary, as of March 2019 benchmark. Source: California Employment Development Department, based on March 2019 benchmark.

The following table summarizes civilian labor force, employment, and unemployment in the County from 2011 to 2020. The County’s civilian labor force increased by approximately 3.4% between 2011 and 2020. In the same period, the employed labor force in the County increased by approximately 1.1% and the unemployed labor force in the County increased by approximately 23.3%. The unemployment rate in the County in 2020 is 12.3%.

CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT County of San Diego Annual Averages, 2011-2020

Civilian Employed Unemployed Unemployment Year Labor Force Labor Force (1) Labor Force (2) Rate (3) 2011 1,524,600 1,367,200 157,300 10.3% 2012 1,542,800 1,402,000 140,800 9.1 2013 1,547,000 1,425,900 121,100 7.8 2014 1,549,800 1,450,300 99,500 6.4 2015 1,563,800 1,482,500 81,300 5.2 2016 1,570,400 1,497,000 73,500 4.7 2017 1,584,700 1,521,200 63,500 4.0 2018 1,592,200 1,539,500 52,700 3.3 2019 1,595,800 1,539,100 56,800 3.6 2020(4) 1,576,700 1,382,700 194,000 12.3 ______(1) Includes persons involved in labor-management trade disputes. (2) Includes all persons without jobs who are actively seeking work. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table. (4) Preliminary, as of March 2019 benchmark. Source: California Employment Development Department, based on Industry Employment & Labor Force March 2019 Benchmark.

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Major Employers

The largest employers in the City of El Cajon and in the County are as follows:

TEN LARGEST EMPLOYERS City of El Cajon

Fiscal Year 2018-19 Firm Service Employment Cajon Valley Union School District Education 1,721(1) GKN Aerospace Chem-Tronics, Inc. Manufacturer 879 Grossmont-Cuyamaca Community College District Education 670(2) Grossmont Union High School District Education 670 Taylor Guitars Manufacturing 494 City of El Cajon Local Government 393 Country Hills Health Care Inc. Health Care 385 Wal-Mart Retailer 384 Home Depot Retailer 357 University Mechanical & Engineering Mechanical & HVAC Services 277 ______(1) Includes full-time classified and certificated employees, certificated administrators, management and supervisory. (2) Includes full-time classified and certificated employees at school sites in El Cajon only and the district office. Source: City of El Cajon Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019.

TEN LARGEST EMPLOYERS County of San Diego

Fiscal Year 2018-19 Firm Service Employment University of California, San Diego Education 34,448 Naval Base San Diego Military 34,185 Sharp Health Care Health Care 18,364 County of San Diego(1) Government 17,413 Scripps Health Health Care 14,941 San Diego Unified School District Education 13,815 Qualcomm Inc. Telecommunications 11,800 City of San Diego Local Government 11,462 Kaiser Permanente San Diego Health Care 9,606 UC San Diego Health Health Care 8,932 ______(1) County of San Diego 2018 and 2019 Operational Plans. Source: Comprehensive Annual Financial Report of the County of San Diego for the Fiscal Year Ended June 30, 2019.

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Construction Activity

The level of construction activity in the cities of El Cajon and La Mesa and in the County as measured by total building valuations and number of residential units is shown in the following tables for the period from 2014 to 2019.

BUILDING PERMIT ACTIVITY City of El Cajon 2014-2019

2014 2015 2016 2017 2018 2019 Valuation ($000): Residential $ 7,261 $28,608 $27,564 $14,748 $27,915 $59,905 Non-residential 14,808 13,382 11,036 24,396 24,227 16,492 Total $22,069 $41,990 $38,600 $39,144 $52,142 $76,397

Dwelling Units: Single family 15 98 76 40 104 165 Multiple family 6 0 0 0 0 93 Total 21 98 76 40 104 258 ______Source: Construction Industry Research Board.

BUILDING PERMIT ACTIVITY City of La Mesa 2014-2019

2014 2015 2016 2017 2018 2019 Valuation ($000): Residential $41,973 $9,044 $11,934 $ 2,784 $13,799 $9,675 Non-residential 5,826 6,409 5,252 15,716 4,586 6,195 Total $47,799 $15,453 $17,186 $18,500 $18,385 $15,870

Dwelling Units: Single Family 41 15 4 4 9 14 Multi-Family 267 13 95 0 101 136 Total 308 28 99 4 110 150 ______Source: Construction Industry Research Board.

BUILDING PERMIT ACTIVITY County of San Diego 2014-2019

2014 2015 2016 2017 2018 2019 Valuation ($000): Residential $1,815,853 $2,446,575 $2,472,237 $2,632,826 $2,673,873 $2,084,655 Non-residential 1,920,627 1,856,556 1,782,421 2,371,303 1,901,843 2,359,541 Total $3,736,480 $4,303,131 $4,254,658 $5,004,129 $4,575,717 $4,444,196

Dwelling Units: Single Family 2,254 3,136 2,420 3,960 3,438 3,045 Multi-Family 4,329 6,915 7,680 6,056 6,132 4,405 Total 6,583 10,051 10,100 10,016 9,570 7,450 ______Source: Construction Industry Research Board.

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Income

Total personal income in the County increased by approximately 114.3% between 2000 and 2018, representing an average annual compound growth rate of approximately 4.3%. Per capita personal income in the County grew by approximately 81.3% during this time, representing an average annual compound growth of approximately 3.4%. The following tables summarize personal income for the County and per capita personal income for the period 2000 to 2018.

PERSONAL INCOME 2000-2018(1) (in thousands)

County of Annual Year San Diego Percent Change 2000 $ 95,753,005 – 2001 100,173,186 4.6% 2002 104,400,001 4.2 2003 109,323,606 4.7 2004 116,727,654 6.8 2005 121,544,485 4.1 2006 128,079,224 5.4 2007 132,954,811 3.8 2008 138,673,021 4.3 2009 134,139,980 (3.3) 2010 138,346,589 3.1 2011 147,960,807 6.9 2012 155,954,440 5.4 2013 160,828,662 3.1 2014 167,931,419 4.4 2015 175,858,666 5.2 2016 183,032,418 4.1 2017 193,296,405 3.8 2018 205,236,393 6.2

(1) Most recent annual data available. Source: U.S. Department of Commerce, Bureau of Economic Analysis.

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PER CAPITA PERSONAL INCOME 2000-2018(1)

County of Year San Diego California United States 2000 $33,867 $33,391 $30,602 2001 34,908 34,091 31,540 2002 35,996 34,306 31,815 2003 37,508 35,381 32,692 2004 39,839 37,244 34,316 2005 41,365 39,046 35,904 2006 43,457 41,693 38,144 2007 44,680 43,182 39,821 2008 45,886 43,786 41,082 2009 43,819 41,588 39,376 2010 44,563 42,411 40,277 2011 47,095 44,852 42,453 2012 48,990 47,614 44,266 2013 49,907 48,125 44,438 2014 51,459 49,985 46,049 2015 53,298 53,741 48,112 2016 55,168 56,374 49,246 2017 57,913 59,796 51,640 2018 61,386 63,711 54,446

(1) Most recent annual data available. Source: U.S. Department of Commerce, Bureau of Economic Analysis.

Retail Sales

Taxable sales in the cities of El Cajon and La Mesa, and in the County of San Diego, from 2015 through 2019 are shown below. Increases in taxable sales between 2015 and 2019 were 7.4% in El Cajon, 3.3% in La Mesa, and 12.8% in the County.

TAXABLE SALES, 2015-2019(1) City of El Cajon (in thousands)

Taxable Sales ($000) 2015 2016 2017 2018 2019 Apparel $105,375 $108,145 $105,113 $105,942 $105,044 General Merchandise 141,113 130,275 126,437 121,804 120,882 Food Stores 71,186 72,634 74,989 78,663 76,446 Eating and Drinking 149,843 157,780 161,012 167,193 181,644 Home Furnishings & Appliances 87,108 106,030 99,907 94,143 86,934 Building Materials and Farm Implements 153,771 157,229 184,294 198,287 197,010 Auto Dealers & Supplies 642,173 681,642 740,668 706,110 686,354 Service Stations 182,561 161,262 172,865 198,636 195,012 Other Retail Stores 111,488 114,731 111,817 118,627 118,437 Total Retail Stores $1,644,618 $1,689,726 $1,777,105 $1,789,405 $1,767,767 All Other Outlets 471,604 476,602 515,340 540,132 504,627 Total All Outlets $2,116,222 $2,166,328 $2,292,445 $2,329,537 $2,272,395

(1) Most recent annual data available. Source: California Board of Equalization.

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TAXABLE SALES, 2015-2019(1) City of La Mesa (in thousands)

Taxable Sales ($000) 2015 2016 2017 2018 2019 Apparel $ 52,396 $ 53,901 $ 52,581 $ 54,939 $ 55,432 General Merchandise 191,978 191,196 191,290 215,023 220,074 Food Stores 54,340 56,602 56,971 57,745 58,765 Eating and Drinking 147,857 154,881 167,472 173,514 177,511 Home Furnishings & Appliances 34,054 35,629 35,086 34,882 19,485 Building Materials and Farm Implements 31,109 35,939 44,578 42,782 41,490 Auto Dealers & Supplies 304,757 309,500 321,452 291,061 282,957 Service Stations 73,825 66,764 71,375 84,146 82,827 Other Retail Stores 102,872 99,148 92,626 81,738 78,100 Total Retail Stores $993,188 $1,033,561 $1,033,435 $1,035,830 $1,016,644 All Other Outlets 77,351 84,021 75,697 86,849 88,993 Total All Outlets $1,070,538 $1,087,582 $1,109,132 $1,122,679 $1,105,637

(1) Most recent annual data available. Source: California Board of Equalization.

TAXABLE SALES, 2015-2019(1) County of San Diego (in thousands)

Taxable Sales ($000) 2015 2016 2017 2018 2019 Motor Vehicle and Parts Dealers $7,294,831 $7,552,837 $7,677,235 $7,639,067 $7,659,298 Furniture and Home Furnishings Stores 2,431,314 2,555,890 2,460,470 2,466,974 2,355,514 Building Materials and Garden Equipment and Supplies 2,631,078 2,744,044 2,924,640 3,037,404 3,050,866 Food and Beverage Stores 2,306,866 2,326,584 2,398,404 2,505,938 2,545,256 Gasoline Stations 3,944,602 3,460,970 3,778,677 4,304,355 4,180,567 Clothing and Clothing Accessories Stores 3,562,794 3,573,190 3,637,217 3,818,232 3,884,502 General Merchandise Stores 4,398,638 4,305,597 4,905,302 5,101,088 5,217,632 Miscellaneous Store Retailers 4,463,781 4,682,869 4,850,794 5,014,102 5,508,223 Food Services and Drinking Places 6,955,661 7,374,383 7,738,971 7,999,661 8,346,352 Total Retail and Food Services $37,989,566 $38,576,363 $40,371,710 $41,886,821 $42,748,210 All Other Outlets 16,196,022 16,831,504 17,179,644 17,154,216 18,358,269 Total All Outlets $54,185,588 $55,507,867 $57,551,354 $59,041,037 $61,106,479

(1) Most recent annual data available. Source: California Board of Equalization.

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PART II

FINANCIAL AND OPERATING INFORMATION

The information in this Part II of this appendix concerning the operations of the District, the District’s finances, and State funding of education, is provided as supplementary information only, and 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 State revenues. The Bonds are approved by the voters of the District and are payable from the proceeds of an ad valorem tax that under the laws and State Constitutional requirements is required to be levied by the County on property within the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.”

General

The District is a high school district, providing education to students in grades 9-12 from eight feeder elementary school districts. The District currently operates nine comprehensive high schools, one continuation high school, two alternative education sites, three special education facilities, a middle college high school program, a Career Technical Education Program (“CTE”), an adult education program and a day care facility. The District is also the sponsoring local education agency for three charter schools.

Taxable property in the District has a fiscal year 2020-21 assessed value of approximately $55,148,490,644. For fiscal year 2020-21, the District has projected the employment of 827.7 full-time equivalent (“FTE”) certificated employees (teaching staff), 666.3 FTE classified employees and 98.7 FTE management, supervisory and confidential personnel. The District operates under the jurisdiction of the San Diego County Superintendent of Schools.

The District is governed by a five-member Governing Board (the “Board”), each of whom is elected to a four-year term. Elections for positions to the Board are held every two years alternating between two and three available positions. Beginning November 2016, the Board changed the District’s method of election of the Board from “at-large” voting to “by-trustee-area” voting, by which method members of the Board are elected by the voters of the trustee area in which they reside. In the election held on November 6, 2018, board member positions for Trustee Areas 3, 4 and 5 were up for election. Trustee Area 1 includes portions of Lemon Grove, La Presa and Spring Valley. Trustee Area 2 includes portions of La Mesa, Casa de Oro-Mount Helix, and Rancho San Diego. Trustee Area 3 includes portions of El Cajon. Trustee Area 4 covers portions of Santee, Winter Gardens and Eucalyptus Hills. Trustee Area 5 includes Alpine, Jamul, Crest, and Harbison Canyon. Current members of the Board, together with their offices, the dates their terms expire, and their trustee areas, are listed below:

Board Member Office Term Expires Trustee Area Robert Shield President November 2022 Area 4 Chris Fite Vice President November 2020 Area 1 Elva Salinas Clerk November 2020 Area 2 Jim Kelly Member November 2022 Area 5 Dr. Gary Woods Member November 2022 Area 3

The administrative staff of the District includes Theresa Kemper, Superintendent; Scott Patterson, Deputy Superintendent, Business Services; Dr. Terry Stanfill, Assistant Superintendent, Human Resources; Dr. Paul

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Dautremont, Interim Assistant Superintendent, Educational Services; Ken Leighton, Executive Director, Fiscal Services; and Katy Wright, Executive Director, Facilities Management.

Theresa Kemper was appointed the Superintendent of the District on July 31, 2020. Prior to that, Ms. Kemper has served the District in various roles since 1996, including: Assistant Superintendent, Educational Services for nine years; Principal of Grossmont High School for nine years; Assistant Principal of Granite Hills High School for three years; and Curriculum Specialist for three years. Prior to that, she served as an adjunct professor at Chapman University. Ms. Kemper holds a Bachelor’s degree in English Language and Literature/Letters from California State University Stanislas; a Master’s degree in English Language and Literature from San Diego State University; and an Education Specialist Degree from Point Loma Nazarene University.

Scott Patterson has served as Deputy Superintendent, Business Services of the District since June 2006. Prior to joining the District, Mr. Patterson served as Chief Financial Officer for the San Diego Unified School District.

State Funding of Education; State Budget Process

General. As is true for most school districts in California, the District’s operating income consists primarily of two components: a State portion funded from the State’s general fund in accordance with the Local Control Funding Formula (see “– Allocation of State Funding to School Districts; Local Control Funding Formula” below) and a local portion derived from the District’s share of the 1% local ad valorem tax authorized by the State Constitution (see “– Local Sources of Education Funding” below). In addition, school districts may be eligible for other special categorical funding from State and federal government programs. The District expects to receive approximately 42.1% of its general fund revenues from State funds (not including the local portion derived from the District’s share of the local ad valorem tax), projected at approximately $99.2 million in fiscal year 2020-21. Such amount includes both the State funding provided under the LCFF (defined herein) as well as other State revenues (see “− District Revenues – Allocation of State Funding to School District; Local Control Funding Formula” and “− Other District Revenues – Other State Revenues” below). As a result, decreases or deferrals in State revenues, or in State legislative appropriations made to fund education, may significantly affect the District’s revenues and operations. In addition, the District estimates that approximately $26.5 million of LCFF revenues will be transferred to charter schools in lieu of property taxes in fiscal year 2020-21.

Under Proposition 98, a constitutional and statutory amendment adopted by the State’s voters in 1988 and amended by Proposition 111 in 1990 (now found at Article XVI, Sections 8 and 8.5 of the State Constitution), a minimum level of funding is guaranteed to school districts, community college districts and other State agencies that provide direct elementary and secondary instructional programs. In the past there have been disruptions in State revenues from personal income taxes, sales and use taxes, and corporate taxes, making it difficult for the State to meet its Proposition 98 funding mandate, which normally commands almost 50% of all State general fund revenues, while providing for other fixed State costs and priority programs and services.

In connection with the State Budget Act for fiscal year 2013-14, the State and local educational agencies therein implemented a new funding formula for school finance system called the Local Control Funding Formula (the “Local Control Funding Formula” or “LCFF”). Funding from the LCFF replaced the revenue limit funding system and most categorical programs. See “– Allocation of State Funding to School Districts; Local Control Funding Formula” below for more information.

Constitutional Provisions Governing School Finance. On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). The Accountability Act changed State funding of public education below the university level, and the operation of the State’s Appropriations Limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (collectively, “K-14 districts”) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in 1986-87, which percentage is equal to 40.9%, or (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for growth in enrollment and inflation.

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On June 5, 1990, California voters approved Proposition 111 (Senate Constitutional Amendment 1), which further modified the Constitution to alter the spending limit and education funding provisions of Proposition 98. Most significantly, Proposition 111: (1) liberalized the annual adjustments to the State spending limit by measuring the “change in the cost of living” by the change in State per capita personal income rather than the Consumer Price Index, and specified that a portion of the State’s spending limit would be adjusted to reflect changes in school attendance; (2) provided that 50% of the “excess” tax revenues, determined based on a two-year cycle, would be transferred to K-14 school districts with the balance returned to taxpayers (rather than the previous 100% but only up to a cap of 4% of the districts’ minimum funding level), and that any such transfer to K-14 school districts would not be built into the school districts’ base expenditures for calculating their entitlement for State aid in the following year and would not increase the State’s appropriations limit; (3) excluded from the calculation of appropriations that are subject to the limit appropriations for certain “qualified capital outlay projects” and certain increases in gasoline taxes, sales and use taxes, and receipts from vehicle weight fees; (4) provided that the Appropriations Limit for each unit of government, including the State, would be recalculated beginning in the 1990-91 fiscal year, based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Senate Constitutional Amendment 1 had been in effect; and (5) adjusted the Proposition 98 formula that guarantees K-14 school districts a certain amount of general fund revenues, as described below.

Under the law, K-14 school districts were guaranteed the greater of (a) 40.9% of general fund revenues (the “first test”) or (b) the amount appropriated to school districts in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second test”) or a third test, which replaces the second test in any year when growth in per capita general fund revenues from the prior year was less than the annual growth in State per capita personal income. Under the third test, school districts receive the amount appropriated in the prior year adjusted for change in enrollment and per capita 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 becomes a “credit” to be paid in future years when general fund revenue growth exceeds personal income growth.

Aggregate State Education Funding. The Proposition 98 guaranteed amount for education is based on prior-year funding, as adjusted through various formulas and tests that take into account State proceeds of taxes, local property tax proceeds, school enrollment, per-capita personal income, and other factors. The State’s share of the guaranteed amount is based on State general fund tax proceeds and is not based on the general fund in total or on the State budget. The local share of the guaranteed amount is funded from local property taxes. The total guaranteed amount varies from year to year and throughout the stages of any given fiscal year’s budget, from the Governor’s initial budget proposal to actual expenditures to post-year-end revisions, as better information regarding the various factors becomes available. Over the long run, the guaranteed amount will increase as enrollment and per capita personal income grow.

If, at year-end, the guaranteed amount is calculated to be higher than the amount actually appropriated in that year, the difference becomes an additional education funding obligation, referred to as “settle-up.” If the amount appropriated is higher than the guaranteed amount in any year, that higher funding level permanently increases the base guaranteed amount in future years. The Proposition 98 guaranteed 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, in subsequent years when State general fund revenues grow faster than personal income (or sooner, as the Legislature may determine), the funding level must be restored to the guaranteed amount, the obligation to do so being referred to as “maintenance factor.”

Although the State Constitution requires the State to approve a balanced State Budget Act each fiscal year, the State’s response to fiscal difficulties in some years has had a significant impact on Proposition 98 minimum guarantee and the treatment of settle-up payments with respect to years in which the Proposition 98 minimum guarantee was suspended. The State has sought to avoid or delay paying settle-up amounts when funding has lagged the guaranteed amount. In response, teachers’ unions, the State Superintendent of Public Schools (the “State Superintendent”) and others sued the State or Governor in 1995, 2005, 2009 and 2011 to force them to fund schools in the full amount required. The settlement of the 1995 and 2005 lawsuits has so far resulted in over $4 billion in accrued State settle-up obligations. However, legislation enacted to pay down the obligations through additional education funding over time, including the Quality Education Investment Act of 2006, have also become part of

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annual budget negotiations, resulting in repeated adjustments and deferrals of the settle-up amounts. The State has now paid all settle-up obligations.

In the past, the State has also sought to preserve general fund cash while avoiding increases in the base guaranteed amount through various mechanisms: by treating any excess appropriations as advances against subsequent years’ Proposition 98 minimum funding levels rather than current year increases; by temporarily deferring apportionments of Proposition 98 funds from one fiscal year to the next; by permanently deferring apportionments of Proposition 98 funds from one fiscal year to the next; by suspending Proposition 98, as the State did in fiscal year 2004-05, fiscal year 2010-11, fiscal year 2011-12 and fiscal year 2012-13; and by proposing to amend the State Constitution’s definition of the guaranteed amount and settle-up requirement under certain circumstances.

State Budget Process. According to the State Constitution, the Governor must propose a budget to the State Legislature no later than January 10 of each year, and a final budget must be adopted no later than June 15. Historically, the budget required a two-thirds vote of each house of the State Legislature for passage. However, on November 2, 2010, the State’s voters approved Proposition 25, which amended the State Constitution to lower the vote requirement necessary for each house of the State Legislature to pass a budget bill and send it to the Governor. Specifically, the vote requirement was lowered from two–thirds to a simple majority (50% plus one) of each house of the State Legislature. The lower vote requirement would also apply to trailer bills that appropriate funds and are identified by the State Legislature as “related to the budget in the budget bill.” The budget becomes law upon the signature of the Governor, who may veto specific items of expenditure. Under Proposition 25, a two–thirds vote of the State Legislature is still required to override any veto by the Governor. School district budgets must generally be adopted by July 1, and revised by the school board within 45 days after the Governor signs the budget act to reflect any changes in budgeted revenues and expenditures made necessary by the adopted State budget. The Governor signed the fiscal year 2020-21 State budget on June 29, 2020.

When the State budget is not adopted on time, basic appropriations and the categorical funding portion of each school district’s State funding are affected differently. Under the rule of White v. Davis (also referred to as Jarvis v. Connell), a State Court of Appeal decision reached in 2002, there is no constitutional mandate for appropriations to school districts without an adopted budget or emergency appropriation, and funds for State programs cannot be disbursed by the State Controller until that time, unless the expenditure is (i) authorized by a continuing appropriation found in statute, (ii) mandated by the State Constitution (such as appropriations for salaries of elected State officers), or (iii) mandated by federal law (such as payments to State workers at no more than minimum wage). The State Controller has consistently stated that basic State funding for schools is continuously appropriated by statute, but that special and categorical funds may not be appropriated without an adopted budget. Should the State Legislature fail to pass a budget or emergency appropriation before the start of any fiscal year, the District might experience delays in receiving certain expected revenues. The District is authorized to borrow temporary funds to cover its annual cash flow deficits, and as a result of the White v. Davis decision, the District might find it necessary to increase the size or frequency of its cash flow borrowings, or to borrow earlier in the fiscal year. The District does not expect the White v. Davis decision to have any long-term effect on its operating budgets.

Rainy Day Fund; SB 858. In connection with the 2014-15 State Budget, the Governor proposed certain constitutional amendments (“Proposition 2”) to the rainy day fund (the “Rainy Day Fund”) for the November 2014 Statewide election. Senate Bill 858 (2014) (“SB 858”) amends the Education Code to, among other things, limit the amount of reserves that may be maintained by a school district subject to certain State budget matters, and Senate Bill 751 (“SB 751”), enacted on October 11, 2017, altered the reserve requirements imposed by SB 858. Upon the approval of Proposition 2, SB 858 became operational. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Proposition 2.”

AB 1469. As part of the 2014-15 State Budget, the Governor signed Assembly Bill 1469 (“AB 1469”) which implemented a new funding strategy for the California State Teachers’ Retirement System (“CalSTRS”), resulting in annual increases in the employer contribution rate for school districts, including the District. See “– District Expenditures – CalSTRS” below for more information about CalSTRS and AB 1469.

2019-20 State Budget. The Governor signed the fiscal year 2019-20 State Budget (the “2019-20 State Budget”) on June 27, 2019. In March 2020, following the outbreak of the COVID-19 pandemic, the Governor

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declared a state of emergency, and the legislature subsequently authorized an amendment to the 2019-20 State Budget providing for an appropriation of up to $1 billion from the State’s general fund to be used for any purpose related to such emergency declaration. Since the 2019-20 State Budget preceded the COVID-19 pandemic, it did not take into account the significant adverse impacts it will have on the State’s financial condition beginning in fiscal year 2019-20. The 2020-21 State Budget (as defined herein) significantly revises the projections of revenues and expenditures in the 2019-20 State Budget. Further, the 2020-21 State Budget deferred $1.9 billion of LCFF apportionments due in fiscal year 2019-20 to fiscal year 2020-21. For more information on the 2020-21 State Budget, see “– 2020-21 State Budget.” Certain limited information from the 2019-20 State Budget relating to the funding of education is provided herein as a historical baseline solely for context and reference.

The 2019-20 State Budget set forth a balanced budget for fiscal year 2019-20 that projected approximately $143.8 billion in revenues, and $91.9 billion in non-Proposition 98 expenditures and $55.9 billion in Proposition 98 expenditures. The 2019-20 State Budget included a $1.4 billion reserve in the Special Fund for Economic Uncertainties. To provide immediate and long-term relief to school districts facing rising pension costs, the 2019-20 State Budget included a $3.15 billion non-Proposition 98 General Fund payment to CalSTRS and the California Public Employees’ Retirement System (“CalPERS”) Schools Pool. Of this amount, an estimated $850 million was to be used to buy down the employer contribution rates in fiscal years 2019-20 and 2020-21. The 2019-20 State Budget included total funding of $103.4 billion ($58.8 billion General Fund and $44.6 billion other funds) for all K- 12 education programs. The 2019-20 State Budget provided $1.9 billion in new Proposition 98 funding for the LCFF, reflecting a 3.26% cost of living adjustment. The 2019-20 State Budget also included a constitutionally required deposit into the Public School System Stabilization Account (also referred to as the Proposition 98 Rainy Day Fund) in the amount of $376.5 million. Such deposit to the Public School System Stabilization Account would not initiate any school district reserve caps, as the amount in the Public School System Stabilization Account (which was equal to the fiscal year 2019-20 deposit) was not equal to or greater than 3% of the total K-12 share of the Proposition 98 guarantee (approximately $2.1 billion).

Certain budgeted adjustments for K-12 education set forth in the 2019-20 State Budget included the following:

• Special Education. The 2019-20 State Budget included $645.3 million ongoing Proposition 98 General Fund resources for special education, including $152.6 million to provide for all Special Education Local Plan Areas with at least the statewide target rate for base special education funding, and $492.7 million allocated based on the number of children ages 3 to 5 years with exceptional needs that the school district is serving.

• After School Education and Safety Program. The 2019-20 State Budget included $50 million ongoing Proposition 98 General Fund resources to provide an increase of approximately 8.3% to the per-pupil daily rate for the After School Education and Safety Program.

• Retaining and Supporting Well-Prepared Educators. The 2019-20 State Budget included $89.8 million one-time non-Proposition 98 General Fund resources to provide up to 4,487 grants of $20,000 for students enrolled in a professional teacher preparation program who commit to working in a high-need field at a priority school for at least four years. The 2019-20 State Budget also included $43.8 million one-time non-Proposition 98 General Fund resources to provide training and resources for classroom educators, including teachers and paraprofessionals, to build capacity around key state priorities. Finally, the 2019-20 State Budget included $13.8 million ongoing federal funds to establish the 21st Century California Leadership Academy, to provide professional learning opportunities for public K- 12 administrators and school leaders to acquire the knowledge, skills, and competencies necessary to successfully support the diverse student population served in California public schools.

• School Facilities Bond Funds. The 2019-20 State Budget assumed $1.5 billion Proposition 51 bond funds, an increase of $906 million over the prior year, to support school construction projects.

• Full-Day Kindergarten. The 2019-20 State Budget included $300 million one-time non-Proposition 98 General Fund resources to construct new or retrofit existing facilities to support full-day kindergarten programs, to increase participation in kindergarten by addressing barriers to access.

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• Proposition 98 Settle-Up. The 2019-20 State Budget included an increase of $686.6 million for K-12 schools and community colleges to pay the balance of past year Proposition 98 funding owed through fiscal year 2017-18.

The complete 2019-20 State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

2020-21 State Budget. The Governor signed the fiscal year 2020-21 State Budget (the “2020-21 State Budget”) on June 29, 2020. According to the State, the economic impact of the COVID-19 pandemic resulted in a $54.3 billion budget projected deficit, which the State is addressing through the following measures:

• Reserves. The 2020-21 State Budget draws down $8.8 billion in reserves, including $7.8 billion from the Rainy Day Fund, $450 million from the Safety Net Reserve, and all of the funds in the Public School System Stabilization Account.

• Trigger. The 2020-21 State Budget includes $11.1 billion in reductions and deferrals that will be restored if federal legislation providing for at least $14 billion in federal funds is passed by the United States Congress and signed by the President, and such funds are received by October 15, 2020. As of the date hereof, such federal legislation has not been adopted. If the State receives a lesser amount between $2 billion and $14 billion, the reductions and deferrals will be partially restored. The trigger includes $6.6 billion in deferred spending on schools, approximately $970 million in funding for the University of California and the California State University, $2.8 billion for state employee compensation, $150 million for courts, and funding for child support administration, teacher training, moderate-income housing, and infrastructure to support infill housing. The trigger would also fund an additional $250 million for county programs to backfill revenue losses. If the federal government does not provide funds in fiscal year 2020-21, the deferrals provided in the 2020-21 State Budget may create a larger budget shortfall in subsequent fiscal years. A larger budget shortfall in subsequent years may result in continuing deferrals until the State is able to fully fund its current year education obligations in a single budget year.

• Federal Funds. The 2020-21 State Budget relies on $10.1 billion in federal funds that provide general fund relief, including $8.1 billion already received. This includes the enhanced Federal Medical Assistance Percentage, a portion of the State’s allocation from the Coronavirus Relief Fund and funds provided for childcare programs.

• Revenues. The 2020-21 State Budget temporarily suspends the use of net operating losses for medium and large businesses and temporarily limits to $5 million the amount of business incentive credits a taxpayer can use in any given tax year. These short-term limitations will generate $4.4 billion in new revenues in fiscal year 2020-21.

• Borrowing/Transfers/Deferrals. The 2020-21 State Budget relies on $9.3 billion in special fund borrowing and transfers, as well as other deferrals for K-14 school districts.

• Cancelled Expansions, Updated Assumptions and Other Solutions. The 2020-21 State Budget includes $10.6 billion of other solutions for addressing the budget deficit, such as cancelling multiple program expansions and anticipating increased government efficiencies, higher ongoing revenues, and lower health and human services caseload costs that previously estimated.

Because of such measures described above, the 2020-21 State Budget is a balanced budget for fiscal year 2020-21 that projects approximately $137.7 billion in revenues, $88.8 billion in non-Proposition 98 expenditures and $45.1 billion in Proposition 98 expenditures. The 2020-21 State Budget sets aside $2.6 billion in the Special Fund for Economic Uncertainties, and it includes total funding of $98.8 billion ($48.1 billion general fund and $50.7 billion other funds) for all K-12 education programs. The 2020-21 State Budget estimates the Proposition 98 minimum guarantee at $78.5 billion in fiscal year 2018-19, $77.7 billion in fiscal year 2019-20, and $70.9 billion in

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fiscal year 2020-21. The reduction in Proposition 98 funding will result in per pupil spending of $10,654 in fiscal year 2020-21, a $1,339 reduction from fiscal year 2019-20.

The 2020-21 State Budget offsets such reduction in Proposition 98 funding in several ways, including the following:

• Local Control Funding Formula Deferrals. As a result of the COVID-19 pandemic, $1.9 billion in LCFF apportionments in fiscal year 2019-20 were deferred until fiscal year 2020-21, and the 2020-21 State Budget provides that apportionment deferrals in fiscal year 2020-21 will grow to $11 billion. Such deferrals allow LCFF funding to remain at fiscal year 2019-20 levels in both fiscal years. The 2020-21 State Budget suspends the statutory LCFF cost-of-living adjustment in fiscal year 2020-21. The 2020-21 State Budget provides that $5.8 billion of deferrals will be triggered off in fiscal year 2020-21 if sufficient federal funding is provided that can be used for such purpose.

• Learning Loss Mitigation. Additionally, the 2020-21 State Budget includes a one-time investment of $5.3 billion (comprised of $4.4 billion from the federal Coronavirus Relief Fund, $589.9 million in Proposition 98 general fund resources, and $355.2 from the federal Governor’s Emergency Education Relief Fund) to local education agencies to address learning loss resulting from school closures. To ensure that those local educational agencies serving students most affected by the COVID-19 pandemic receive additional funding, the 2020-21 State Budget will allocate $2.9 billion of such funds based on the LCFF supplemental and concentration grant allocation, $1.5 billion of such funds based on the number of students with exceptional needs, and $979.8 million of such funds based on the total LCFF allocation.

• Supplemental Appropriations. In fiscal years 2019-20 and 2020-21, the Proposition 98 funding level drops below the target funding level, by a total of approximately $12.4 billion. To accelerate the recovery from such funding reduction, the 2020-21 State Budget provides supplemental appropriations above the required Proposition 98 funding level, beginning in fiscal year 2021-22, and in each of the next several fiscal years, in an amount equal to 1.5% of general fund revenues, up to a total of $12.4 billion.

• Revised CalPERS and CalSTRS Contributions. To provide immediate and long-term relief to school districts facing rising pension costs, the 2020-21 State Budget redirects $2.3 billion appropriated in the 2019-20 State Budget to California State Teachers’ Retirement System (“CalSTRS”) and the California Public Employees’ Retirement System (“CalPERS”) for long-term unfunded liabilities to instead reduce employer contribution rates in fiscal years 2020-21 and 2021-22. Such reallocation will reduce the CalSTRS employer contribution rate from 18.41% to approximately 16.15% in fiscal year 2020-21 and from 17.9% to 16.02% in fiscal year 2021-22. The CalPERS Schools Pool employer contribution rate will be reduced from 22.67% to 20.7% in fiscal year 2020-21 and from 24.6% to 22.84% in fiscal year 2021-22.

• Federal Funds. In addition to the federal Coronavirus Relief Fund and Governor’s Emergency Education Relief Fund allocations described above, the 2020-21 State Budget includes $1.6 billion in federal Secondary School Emergency Relief funds. Of this amount, $1.5 billion will be allocated to local educational agencies in proportion to the amount of Title I-A funding they receive, and may be used for costs relating to the COVID-19 pandemic. Of the remaining $164.7 million, $112.2 million will be used to provide up to $0.75 per meal for local educational agencies participating in certain school meal programs and serving meals between March 2020 and August 2020 due to school closures, $45 million will be used for grants to local educational agencies to increase access to health, mental health, and social service supports for high-need students, $6 million will be used to provide educator professional development for providing high quality distance learning, and $1.5 million will be used for State Department of Education costs associated with the COVID-19 pandemic.

• Temporary Revenue Increases. As described above, the 2020-21 State Budget includes a temporary three-year suspension of net operating losses, and a limitation on business incentive tax credits to offset no more than $5 million of tax liability per year. These temporary changes, along with other tax

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changes, will generate additional general fund revenues, approximately $1.6 billion of which will benefit the Proposition 98 guarantee.

• Special Education. The 2020-21 State Budget provides for increased special education base rates of $625 per pupil pursuant to a new funding formula. The 2020-21 State Budget also includes $100 million to increase funding for students with low-incidence disabilities, $15 million in federal Individuals with Disabilities Education Act (“IDEA”) funds for the Golden State Teacher Scholarship Program to increase the special education teacher pipeline, $8.6 million in IDEA funds to assist local educational agencies to develop regional alternative dispute resolution services and statewide mediation services, and $1.1 million in IDEA funds to study the current special education governance and accountability structure.

• Average Daily Attendance and Distance Learning. The 2020-21 State Budget assumes that local educational agencies will provide in-classroom instruction during the 2020-21 school year, but recognizes that public health officials may require school closures. To ensure funding stability regardless of instructional model, the 2020-21 State Budget includes a hold-harmless provision for the purpose of calculating apportionments in fiscal year 2020-21, and it provides that average daily attendance will be based on the 2019-20 school year. The 2020-21 State Budget also includes requirements for distance learning services in the event of school closures.

• Employee Protections. The 2020-21 State Budget suspends layoffs of non-management certificated staff during fiscal year 2020-21 and classified staff who hold positions in nutrition, transportation, or custodial services during fiscal year 2020-21. The 2020-21 State Budget includes $60 million Proposition 98 general fund resources to provide a match of State funds for participating classified employees to be paid during the summer recess period. The 2020-21 State Budget also states that it is the intent of the State Legislature that school districts, community college districts, joint powers authorities, and county offices of education retain all classified employees in fiscal year 2020-21.

Other significant features of the 2020-21 State Budget affecting K-12 school districts include the following:

• Child Care. Of the $350.3 million received by California through the CARES Act for COVID-19 related child care activities, the 2020-21 State Budget applies $144.3 million for State costs associated with SB 89 expenditures, family fee waivers, and provider payment protection; $125 million for voucher provider hold harmless and stipends; and $73 million to continue care for at-risk children and essential workers.

• Learning Continuity and Attendance Plan. The annual LCAP requirement is replaced with a Learning Continuity and Attendance Plan, with public stakeholder engagement, to outline local education agencies compliance with applicable provisions, including student participation and attendance reporting, device accessibility and instruction. The 2020-21 State Budget requires the State Superintendent to develop a template of this plan for use by LEAs which will include a description of how such agencies will provide continuity of learning during the COVID-19 pandemic, expenditures related to addressing the impacts of the pandemic, and how such agencies are increasing or improving services in proportion to concentration funding that is received under the LCFF.

The complete 2020-21 State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

Future Budgets and Budgetary Actions. The District cannot predict what future actions will be taken by the State Legislature and the Governor to address 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 beyond the District’s ability to predict or control, including but not limited to the COVID-19 pandemic. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State’s ability to fund schools during the current fiscal year and in future

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fiscal years. Certain factors, like an economic recession, could result in State budget shortfalls in any fiscal year and could have a material adverse financial impact on the District. As the Bonds are payable from ad valorem property taxes, the State budget is not expected to have an impact on the payment of the Bonds.

Prohibitions on Diverting Local Revenues for State Purposes. Beginning in fiscal year 1992-93, the State satisfied a portion of its Proposition 98 obligations by shifting part of the property tax revenues otherwise belonging to cities, counties, special districts, and redevelopment agencies, to school and community college districts through a local Educational Revenue Augmentation Fund (“ERAF”) in each county. Local agencies, objecting to invasions of their local revenues by the State, sponsored a statewide ballot initiative intended to eliminate the practice. In response, the State Legislature proposed an amendment to the State Constitution, which the State’s voters approved as “Proposition 1A” at the November 2004 election. That measure was generally superseded by the passage of a new initiative constitutional amendment at the November 2010 election, known as “Proposition 22.”

The effect of Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. It prevents the State from redirecting redevelopment agency property tax increment to any other local government, including school districts, or from temporarily shifting property taxes from cities, counties and special districts to schools, as in the ERAF program. This is intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes. One effect of this amendment will be to deprive the State of fuel tax revenues to pay debt service on most State bonds for transportation projects, reducing the amount of State general fund resources available for other purposes, including education.

Prior to the passage of Proposition 22, the State invoked Proposition 1A to divert $1.935 billion in local property tax revenues in 2009-10 from cities, counties, and special districts to the State to offset State general fund spending for education and other programs, and included another diversion in the adopted 2009-10 State budget of $1.7 billion in local property tax revenues from local redevelopment agencies, which local redevelopment agencies have now been dissolved (see “− Dissolution of Redevelopment Agencies” below). Redevelopment agencies had sued the State over this latter diversion. However, the lawsuit was decided against the California Redevelopment Association on May 1, 2010. Because Proposition 22 reduces the State’s authority to use or shift certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget in some years – such as reducing State spending or increasing State taxes, and school and community college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State’s general fund.

Dissolution of Redevelopment Agencies. The adopted State budget for fiscal year 2011-12, as signed by the Governor on June 30, 2011, included as trailer bills Assembly Bill No. 26 (First Extraordinary Session) (“AB1X 26”) and Assembly Bill No. 27 (First Extraordinary Session) (“AB1X 27”), which the Governor signed on June 29, 2011. AB1X 26 suspended most redevelopment agency activities and prohibited redevelopment agencies from incurring indebtedness, making loans or grants, or entering into contracts after June 29, 2011. AB1X 26 dissolved all redevelopment agencies in existence and designated “successor agencies” and “oversight boards” to satisfy “enforceable obligations” of the former redevelopment agencies and administer dissolution and wind down of the former redevelopment agencies. Certain provisions of AB1X 26 are described further below.

In July of 2011, various parties filed an action before the Supreme Court of the State of California (the “Court”) challenging the validity of AB1X 26 and AB1X 27 on various grounds (California Redevelopment Association v. Matosantos). On December 29, 2011, the Court rendered its decision in Matosantos upholding virtually all of AB1X 26 and invalidating AB1X 27. In its decision, the Court also modified various deadlines for the implementation of AB1X 26. The deadlines for implementation of AB1X 26 described below take into account the modifications made by the Court in Matosantos.

On February 1, 2012, and pursuant to Matosantos, AB1X 26 dissolved all redevelopment agencies in existence and designated “successor agencies” and “oversight boards” to satisfy “enforceable obligations” of the former redevelopment agencies and administer dissolution and wind down of the former redevelopment agencies. With limited exceptions, all assets, properties, contracts, leases, records, buildings and equipment, including cash and cash equivalents of a former redevelopment agency, will be transferred to the control of its successor agency

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and, unless otherwise required pursuant to the terms of an enforceable obligation, distributed to various related taxing agencies pursuant to AB1X 26.

AB1X 26 requires redevelopment agencies to continue to make scheduled payments on and perform obligations required under its “enforceable obligations.” For this purpose, AB1X 26 defines “enforceable obligations” to include “bonds, including the required debt service, reserve set-asides, and any other payments required under the indenture or similar documents governing the issuance of outstanding bonds of the former redevelopment agency” and “any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy.” AB1X 26 specifies that only payments included on an “enforceable obligation payment schedule” adopted by a redevelopment agency shall be made by a redevelopment agency until its dissolution. However, until a successor agency adopts a “recognized obligation payment schedule” the only payments permitted to be made are payments on enforceable obligations included on an enforceable obligation payment schedule. A successor agency may amend the enforceable obligation payment schedule at any public meeting, subject to the approval of its oversight board.

Under AB1X 26, commencing February 1, 2012, property taxes that would have been allocated to each redevelopment agency if the agencies had not been dissolved will instead be deposited in a “redevelopment property tax trust fund” created for each former redevelopment agency by the related county auditor-controller and held and administered by the related county auditor-controller as provided in AB1X 26. AB1X 26 generally requires each county auditor-controller, on May 16, 2012 and June 1, 2012 and each January 16 and June 1 (now each January 2 and June 1 pursuant to AB 1484, as described below) thereafter, to apply amounts in a related redevelopment property tax trust fund, after deduction of the county auditor-controller’s administrative costs, in the following order of priority:

• To pay pass-through payments to affected taxing entities in the amounts that would have been owed had the former redevelopment agency not been dissolved; provided, however, that if a successor agency determines that insufficient funds will be available to make payments on the recognized obligation payment schedule and the county auditor-controller and State Controller verify such determination, pass-through payments that had previously been subordinated to debt service may be reduced;

• To the former redevelopment agency’s successor agency for payments listed on the successor agency’s recognized obligation payment schedule for the ensuing six-month period;

• To the former redevelopment agency’s successor agency for payment of administrative costs; and

• Any remaining balance to school entities and local taxing agencies.

The District received $2,578,105 in pass-through payments in fiscal year 2019-20 and projects it will receive $2,887,478 in pass-through payments in fiscal year 2020-21. The District has entered into a lease obligation and caused to be issued lease revenue bonds, the repayment of which are secured by pass-through revenues to be received by the District. See “– District Debt Structure and Long Term Obligations – Lease Revenue Bonds.”

It is possible that there will be additional legislation proposed and/or enacted to “clean up” various inconsistencies contained in AB1X 26 and there may be additional legislation proposed and/or enacted in the future affecting the current scheme of dissolution and winding up of redevelopment agencies currently contemplated by AB1X 26. For example, AB 1484 was signed by the Governor on June 27, 2012, to clarify and amend certain aspects of AB1X 26. AB 1484, among other things, attempts to clarify the role and requirements of successor agencies, provides successor agencies with more control over agency bond proceeds and properties previously owned by redevelopment agencies and adds other new and modified requirements and deadlines. AB 1484 also provides for a “tax claw back” provision, wherein the State is authorized to withhold sales and use tax revenue allocations to local successor agencies to offset payment of property taxes owed and not paid by such local successor agencies to other local taxing agencies. This “tax claw back” provision has been challenged in court by certain cities and successor agencies. The District cannot predict the outcome of such litigation and what effect, if any, it will have on the District. Additionally, no assurances can be given as to the effect of any such future proposed and/or enacted legislation on the District.

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Allocation of State Funding to School Districts; Local Control Funding Formula

Prior to the implementation of the Local Control Funding Formula in fiscal year 2013-14, under Section 42238 et seq. of the State Education Code, each school district was determined to have a target funding level: a “base revenue limit” per student multiplied by the district’s student enrollment measured in units of average daily attendance. The base revenue limit was calculated from the district’s prior-year funding level, as adjusted for a number of factors, such as inflation, special or increased instructional needs and costs, employee retirement costs, especially low enrollment, increased pupil transportation costs, etc. Generally, the amount of State funding allocated to each school district was the amount needed to reach that district’s base revenue limit after taking into account certain other revenues, in particular, locally generated property taxes. This is referred to as State “equalization aid.” To the extent local tax revenues increased due to growth in local property assessed valuation, the additional revenue was offset by a decline in the State’s contribution; ultimately, a school district whose local property tax revenues exceeded its base revenue limit was entitled to receive no State equalization aid, and received only its special categorical aid, which is deemed to include the “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the State Constitution. Such districts were known as “basic aid districts,” which are now referred to as “community funded districts.” School districts that received some equalization aid were commonly referred to as “revenue limit districts,” which are now referred to as “LCFF districts.” The District is an LCFF district.

Beginning in fiscal year 2013-14, the LCFF replaced the revenue limit funding system and most categorical programs, and distributes combined resources to school districts through a base revenue funding limit grant (“Base Grant”) per unit of average daily attendance (“A.D.A.”) with additional supplemental funding allocated to local educational agencies based on their proportion of English language learners, students from low-income families and foster youth. The LCFF originally had an eight-year implementation program to incrementally close the gap between actual funding and the target level of funding, as described below. In fiscal year 2018-19, the LCFF was fully implemented ahead of schedule. The LCFF includes the following components:

• A Base Grant for each local education agency, equivalent to $7,643 per unit of A.D.A. in fiscal year 2013-14. Such Base Grant per unit of A.D.A., adjusted by grade span variation and to be adjusted annually for cost-of-living, is as follows: $6,845 for grades K-3, $6,947 for grades 4-6, $7,154 for grades 7-8 and $8,289 for grades 9-12. This amount includes an adjustment of 10.4% to the Base Grant to support lowering class sizes in grades K-3, and an adjustment of 2.6% to reflect the cost of operating career technical education programs in grades 9-12.

• A 20% supplemental grant for the unduplicated number of English language learners, students from low-income families and foster youth to reflect increased costs associated with educating those students.

• An additional concentration grant of up to 50% of a local educational agency’s Base Grant, based on the number of English language learners, students from low-income families and foster youth served by the local educational agency that comprise more than 55% of enrollment.

• An Economic Recovery Target (the “ERT”) that is intended to ensure that almost every local educational agency receives at least their pre-recession funding level (i.e., the fiscal year 2007-08 revenue limit per unit of A.D.A.), adjusted for inflation, at full implementation of the LCFF. Upon full implementation, local educational agencies would receive the greater of the Base Grant or the ERT.

Under the new formula, for community funded districts, local property tax revenues would be used to offset up to the entire allocation under the new formula. However, community funded districts would continue to receive the same level of State aid as allocated in fiscal year 2012-13.

Local Control Accountability Plan. A feature of the LCFF is a system of support and intervention for local educational agencies. School districts, county offices of education and charter schools are required to develop, implement and annually update a three-year local control and accountability plan (“LCAP”). Each LCAP must be developed with input from teachers, parents and the community, and should describe local goals as they pertain to eight areas identified as state priorities, including student achievement, parent engagement and school climate, as

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well as detail a course of action to attain those goals. Moreover, the LCAPs must be designed to align with the district’s budget to ensure adequate funding is allocated for the planned actions.

Each school district must submit its LCAP annually on or before July 1 for approval by its county superintendent. The county superintendent then has until August 15 to seek clarification regarding the contents of the LCAP, and the school district must respond in writing. The county superintendent can submit recommendations for amending the LCAP, and such recommendations must be considered, but are not mandatory. A school district’s LCAP must be approved by its county superintendent by October 8 of each year if such superintendent finds (i) the LCAP adheres to the State template, and (ii) the district’s budgeted expenditures are sufficient to implement the strategies outlined in the LCAP.

Performance evaluations are to be conducted to assess progress toward goals and guide future actions. County superintendents are expected to review and provide support to the school districts under their jurisdiction, while the State Superintendent performs a corresponding role for county offices of education. The California Collaborative for Education Excellence (the “Collaborative”), a newly established body of educational specialists, was created to advise and assist local educational agencies in achieving the goals identified in their LCAPs. For local educational agencies that continue to struggle in meeting their goals, and when the Collaborative indicates that additional intervention is needed, the State Superintendent would have authority to make changes to a local educational agency’s LCAP.

Pursuant to the 2020-21 State Budget, the annual LCAP requirement has been replaced with a Learning Continuity and Attendance Plan for fiscal year 2020-21. See “– State Funding of Education; State Budget Process – 2020-21 State Budget.”

Attendance and Enrollment. The District’s recent A.D.A. history per the District’s Second Period Reports (P2) and total enrollment as reported to the CDE is set forth in the table below:

GROSSMONT UNION HIGH SCHOOL DISTRICT Average Daily Attendance and Total Enrollment(1) Fiscal Years 2011-12 to 2020-21

Fiscal Year Average Daily Attendance Total Enrollment 2010-11 18,368 19,530 2011-12 17,659 18,792 2012-13 17,022 18,325 2013-14 16,827 17,908 2014-15 16,435 17,565 2015-16 16,010 17,220 2016-17 15,843 17,034 2017-18 15,611 16,832 2018-19 15,563 16,760 2019-20 15,617 16,789 2020-21 15,617 16,893 ______(1) Excludes charter school attendance and enrollment, and also excludes adult education. Source: The District.

There are currently three charter schools operating within the District, but others have previously operated within the District and had their charters revoked and/or ceased operating within the District. See “– Charter Schools” below. The closure of charter schools within the District’s boundaries is expected to lead to an increase in enrollment and A.D.A. in the District.

Attendance and LCFF. The following table sets forth the District’s estimated and projected A.D.A., enrollment (including percentage of students who are English language learners, from low-income families and/or foster youth (collectively, “EL/LI Students”)), and targeted Base Grant per unit of A.D.A. for fiscal years 2015-16

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through 2020-21. The A.D.A. and enrollment numbers reflected in the following table include special education but exclude adult education and charter school attendance.

GROSSMONT UNION HIGH SCHOOL DISTRICT (San Diego County, California) Average Daily Attendance, Enrollment and Targeted Base Grant Fiscal Years 2015-16 through 2020-21

A.D.A./Base Grant Enrollment(9) Unduplicated Percent of Fiscal Total Total EL/LI Year 9-12 A.D.A. Enrollment Students 2015-16 A.D.A.(2): 16,010 16,010 17,220 58.08% Targeted Base Grant(3): $8,578 – – –

2016-17 A.D.A.(2): 15,842 15,843 17,034 58.36% Targeted Base Grant(3)(4): $8,578 – – –

2017-18 A.D.A.(2): 15,611 15,611 16,382 58.96% Targeted Base Grant(3)(5): $8,712 – – –

2018-19 A.D.A.(2): 15,563 15,563 16,760 58.80% Targeted Base Grant(3)(6): $9,034 – – –

2019-20 A.D.A.(2): 15,617 15,617 16,789 59.97% Targeted Base Grant(3)(7): $9,329 – – –

2020-21(1) A.D.A.(2): 15,617 15,617 16,893 60.00% Targeted Base Grant(3)(8): $9,329 – – – ______(1) Figures are projections. (2) A.D.A. for the second period of attendance, typically in mid-April of each school year. (3) Such amounts represent the targeted amount of Base Grant per unit of A.D.A., and do not include any grade span adjustment or supplemental and concentration grants under the LCFF. Such amounts were not fully funded in fiscal years 2015-16, 2016-17 and 2017-18. (4) Targeted fiscal year 2016-17 Base Grant amounts reflect a 0.00% cost of living adjustment from targeted fiscal year 2015-16 Base Grant amounts. (5) Targeted fiscal year 2017-18 Base Grant amounts reflect a 1.56% cost of living adjustment from targeted fiscal year 2016-17 Base Grant amounts. (6) Targeted fiscal year 2018-19 Base Grant amounts reflect a 3.70% cost of living adjustment from targeted fiscal year 2017-18 Base Grant amounts. (7) Targeted fiscal year 2019-20 Base Grant amounts reflect a 3.26% cost of living adjustment from targeted fiscal year 2018-19 Base Grant amounts. (8) Targeted fiscal year 2020-21 Base Grant amounts reflect a 0.0% cost of living adjustment from targeted fiscal year 2019-20 Base Grant amounts. (9) Reflects enrollment as of October report submitted to the CBEDS in each school year. Source: The District.

The District estimates it received approximately $175.3 million in aggregate revenues allocated under the LCFF in fiscal year 2019-20, and projects to receive approximately $176.1 million in aggregate revenues under the LCFF in fiscal year 2020-21 (or approximately 74.8% of its general fund revenues in fiscal year 2020-21). Such

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amount includes an estimated $16.8 million in supplemental grants and $4.0 million in concentration grants in fiscal year 2020-21.

Effect of Changes in Enrollment. Changes in local property tax income and student enrollment (or A.D.A.) affect community funded districts and LCFF districts, differently. In a LCFF district, increasing enrollment increases the amount allocated under LCFF and thus generally increases a district’s entitlement to State aid, while increases in property taxes do nothing to increase district revenues, but only offset the State aid funding requirement. Operating costs typically increase disproportionately slower than enrollment growth until the point where additional teachers and classroom facilities are needed. Declining enrollment has the reverse effect on LCFF districts, generally resulting in a loss of State aid, while operating costs typically decrease slowly until the district decides to lay off teachers, close schools, or initiate other cost-saving measures.

In community funded districts, the opposite is generally true: increasing enrollment does increase the amount allocated under LCFF, but since all LCFF income (and more) is already generated by local property taxes, there is typically no increase in State income. New students impose increased operating costs, but typically at a slower pace than enrollment growth, and the effect on the financial condition of a community funded district would depend on whether property tax growth keeps pace with enrollment growth. Declining enrollment typically does not reduce property tax income, and has a negligible impact on State aid, but eventually reduces operating costs, and thus can be financially beneficial to a community funded district.

For LCFF districts, any loss of local property taxes is made up by an increase in State aid. For community funded districts, the loss of tax revenues is not reimbursed by the State.

Enrollment can fluctuate due to factors such as population growth, competition from private, parochial, and public charter schools, inter-district transfers in and out, and other causes. Losses in enrollment will cause an LCFF district to lose operating revenues, without necessarily permitting the district to make contemporaneous adjustments in fixed operating costs.

The District cannot make any predictions regarding how the current economic environment or changes thereto or other factors will affect the State’s ability to meet the revenue and spending assumptions in the State’s adopted budget, and the effect of these changes on school finance. The District’s adopted budget for fiscal year 2020-21 and projected A.D.A. are used for planning purposes only, and do not represent a prediction as to the actual financial performance, attendance, or the District’s actual funding level for fiscal year 2020-21 or beyond. Certain adjustments will have to be made throughout the year based on actual State funding and actual attendance.

Local Sources of Education Funding

The principal component of local revenues is the school district’s property tax revenues, i.e., the District’s share of the local 1% property tax, received pursuant to Sections 75 et seq. and Sections 95 et seq. of the California Revenue and Taxation Code. Section 42238(h) of the Education Code itemizes the local revenues that are counted towards the amount allocated under the LCFF (and formerly, the base revenue limit) before calculating how much the State must provide in State aid. The more local property taxes a district receives, the less State aid it is entitled to. Under the LCFF, local property tax revenues are used to offset up to the entire State aid collection under the new formula for revenue limit districts, though community funded districts continue to receive the same level of State aid as allotted in fiscal year 2012-13. See “– Allocation of State Funding to School Districts; Local Control Funding Formula” above for more information about the LCFF.

For the District, local property tax revenues are projected to be approximately $94.6 million, or 40.2% of total general fund revenues in fiscal year 2020-21, accounting for approximately 53.7% of the District’s aggregate revenues allocated under the LCFF. For a discussion of legal limitations on the ability of the District to raise revenues through local property taxes, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.”

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Other District Revenues

Federal Revenues. The federal government provides funding for several District programs, including special education programs. Federal revenues, most of which are restricted, comprise approximately 7.2% (or approximately $16.8 million) of the District’s general fund projected revenues for fiscal year 2020-21.

Other State Revenues. In addition to State apportionments for Proposition 98 funding through the Local Control Funding Formula, the District receives other State revenues which comprise approximately 7.5% (or approximately $17.7 million) of the District’s general fund projected revenues for fiscal year 2020-21. A significant portion of such other State revenues are amounts the District expects to receive from State lottery funds, which may not be used for non-instructional purposes, such as the acquisition of real property, the construction of facilities, or the financing of research. School districts receive lottery funds proportional to their total A.D.A. The District’s State lottery revenue is projected at $3.4 million for fiscal year 2020-21.

Other Local Revenues. In addition to ad valorem property taxes, the District receives additional local revenues from items such as leases and rentals, interest earnings, other redevelopment funds, and other local sources must be used to offset State funding for District operations. Other local revenues in aggregate comprise approximately 10.6% (or approximately $24.9 million) of the District’s general fund projected revenues for fiscal year 2020-21.

Charter Schools

Charter schools operate as autonomous public schools, under charter from a school district, county office of education, or the State Board of Education, with minimal supervision by the local school district. Charter schools receive revenues from the State and from the District for each student enrolled, and thus effectively reduce revenues available for students enrolled in District schools. The District is required to accommodate charter school students originating in the District in facilities comparable to those provided to regular District students.

Three charter high schools have been approved by and are currently operating in the District, Helix Charter High School (serving grades 9–12), Steele Canyon Charter High School (serving grades 9–12) and the Learning Choice Academy (serving grades K-12). A fourth charter school, Liberty Charter High School, closed following the 2011-12 school year. Enrollment figures for the charter schools are presented in the table below.

GROSSMONT UNION HIGH SCHOOL DISTRICT Charter School Annual Enrollment 2011-12 to 2020-21

School Helix Charter Steele Canyon Charter The Learning Choice Year High School High School Academy 2011-12 2,469 2,186 - 2012-13 2,440 2,200 - 2013-14 2,434 2,186 - 2014-15 2,445 2,195 - 2015-16 2,445 2,192 - 2016-17 2,511 2,163 - 2017-18 2,465 2,195 - 2018-19 2,428 2,154 - 2019-20 2,449 2,147 335(2) 2020-21(1) 2,449 2,147 335 ______(1) Projected. (2) First year of operation. Source: Data Reporting Office, California Department of Education, unless otherwise noted.

In 2016, the Board denied a charter petition submitted by the Grossmont Secondary School to establish a charter school. On May 11, 2017, the Grossmont Secondary School appealed to the California State Board of Education and the petition was approved.

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In October 2018, the Board approved a charter petition to establish The Learning Choice Academy - East County (TLC-EC) to begin operation in the 2019-20 school year with a projected enrollment of 320 students.

Additionally, the District discovered that at least eight charter schools approved by other school districts are operating within the District’s boundaries without notice to or permission from the District. The District cannot determine the number of students that are attending these charter schools but estimates the number at approximately 2,000 students based on their reports. The District’s efforts to address this were furthered by a ruling by the California Court of Appeal, Third Appellate District, in October 2016 that a charter school authorized by a school district must be located and operated entirely within the geographic boundaries of the authorizing school district, unless one of the specific exceptions of the Education Code applies. On January 18, 2017, the California Supreme Court denied a petition to review the appellate court decision. On June 27, 2017, the Superior Court ruled in favor of the District, compelling Julian Union Elementary School District to revoke the charters of Diego Valley Public Charter and Julian Charter School-Alpine Academy by June 30, 2017. On May 11, 2017, the California State Board of Education granted waivers for both charter schools until June 30, 2018, to become compliant with the law. Julian Charter School-Alpine Academy is no longer operating within the District. On June 28, 2019 the California Superior Court amended judgment in favor of the District to include all parties operating the schools found to be unlawfully located, and in addition to ordering the Julian Union Elementary School District to immediately revoke the charter of Diego Valley Charter School, it also issued a permanent injunction against Diego Plus, Learn4Life, and all entities operated by those entities already subject to judgement from operating charter school facilities within the District’s boundaries, either directly or indirectly. Diego Plus has filed a notice of appeal, on which briefing is pending.

Cajon Valley Union School District, located within the District’s boundaries, has initiated preliminary steps to establish a dependent charter school within the District’s boundaries, by expanding the current Bostonia Language Academy from TK-8 to TK-12 and renaming the school Bostonia Global Charter School. The District has raised concerns about the charter school petition process undertaken by Cajon Valley Union School District. The District cannot predict the outcome of the review of the petition, nor any potential effects on enrollment and attendance at the District.

Recent Legislative Developments. Assembly Bill 1505 was recently enacted (the “AB 1505”), which aims to slow the growth of charter schools. AB 1505 will give school districts increased leverage to deny applications for new charter schools by providing school districts additional discretion when authorizing charter schools to consider the number and enrollment in proposed charter schools, academic outcomes and offerings and a statement of need for the school. The District cannot predict the impact such legislation will have on its operations and finances.

District Expenditures

The largest part of each school district’s general fund budget is used to pay salaries and benefits of certificated (credentialed teaching) and classified (non-instructional) employees. Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels, negotiated salary increases, and the overall cost of employee benefits.

The District has projected expenditures of $201.2 million in salaries and benefits, or approximately 83.3% of its general fund expenditures, in fiscal year 2020-21. This amount represents an increase of 2.3% from the $196.7 million the District expended in 2019-20.

Labor Relations. As of September 1, 2020, approximately 1,491.5 employees were represented by labor organizations, as shown in the table below. For fiscal year 2020-21, the District has budgeted the employment of 827.7 FTE certificated employees (teaching staff) and 666.3 FTE classified employees (non-instructional support staff). The District has also budgeted 98.7 FTE management, supervisory and confidential employees who are not represented by labor organizations.

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GROSSMONT UNION HIGH SCHOOL DISTRICT Labor Organizations

Labor Organization Represented Employees (FTE) Contract Expiration(1) Grossmont Education Association (GEA) 825.2 6/30/2020 California School Employees Association Chapter No. 443 (CSEA 443) 600.4 6/30/2020 Service Employees International Union, Local 221 (SEIU 221) 65.9 6/30/2021 ______(1) The District is currently engaged in negotiations with all of its labor organizations to develop memoranda of understanding regarding employment conditions for the opening of the fiscal year 2020-21 school year during the COVID-19 pandemic. Source: The District.

In 2017, the American Federation of Teachers (“AFT”) filed a petition with the Public Employment Relations Board to represent a portion of the District’s adult education teachers. At that time, the District’s adult education teachers were not represented by a labor organization. On March 23, 2018, the Public Employment Relations Board issued its Administrative Determination dismissing AFT’s representation petition because AFT sought a legally inappropriate bargaining unit. The District’s adult education teachers are now represented by the Grossmont Education Association (GEA).

CalSTRS. The CalSTRS defined benefit pension plan provides retirement benefits (generally 2% of final compensation for each year of credited service) to participating employees based on hiring date, age, final compensation and years of credited service. The CalSTRS benefit pension plan is funded through a combination of investment earnings and statutorily set contributions from participating employees, employers (including the District) and the State. Prior to fiscal year 2014-15, the statutorily set rates did not vary annually to adjust for funding shortfalls or actuarial surpluses. As a result, the combined employee, employer and State contributions to CalSTRS were not sufficient to pay actuarially determined amounts. To address the shortfall and implement a new funding strategy, Governor Brown signed into law Assembly Bill 1469 on June 24, 2014, as part of the fiscal year 2014-15 State budget (the “2014-15 State Budget”). The 2014-15 State Budget introduced phased increases to employee, employer and State contributions to CalSTRS and sets forth a plan to eliminate CalSTRS’ unfunded liability by June 30, 2046.

The 2014-15 State Budget increased employee contributions, which were previously set at 8.00% of pay, to 10.25% of pay for members hired on or before December 31, 2012 and 9.205% of pay for members hired on or after January 1, 2013 effective July 1, 2016. On July 1, 2018, the rate increased to 10.250% of pay for employees hired on or after January 1, 2013. Employer contribution rates were also increased in fiscal year 2014-15 to 8.88% of payroll, with such rate increasing by 1.85% each year thereafter, plateauing at 19.10% of payroll in July 2020. However, due to supplemental payments of approximately $850 million pursuant to the 2019-20 State Budget, employer contribution rates decreased from 18.13% to 17.10% in fiscal year 2019-20 and 19.10% to 18.40% in fiscal year 2020-21. In addition, pursuant to the 2020-21 State Budget, employer contribution rates are expected to decrease from 18.40% to 16.15% in fiscal year 2020-21 and from 17.10% to 16.02% in fiscal year 2021-22 (see table below). The State’s total contribution was increased from approximately 3% in fiscal year 2013-14 to 6.828% of payroll in fiscal year 2017-18, and to 10.828% of payroll in fiscal year 2020-21. The State’s contribution includes an annual payment of 2.5% of payroll pursuant to a supplemental inflation protection program.

Pursuant to Assembly Bill 1469, school districts’ contribution rates will increase in accordance with the following schedule:

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District CalSTRS Contribution Rates

Effective Date School District (July 1) Contribution Rate 2018 16.28% 2019(1) 17.10 2020(2) 16.15 2021(2) 16.02 ______(1) Pursuant to 2019-20 State Budget. (2) Pursuant to 2020-21 State Budget. Source: Assembly Bill 1469.

The District’s employer contribution to CalSTRS from the general fund was estimated to be approximately $25.3 million for fiscal year 2019-20 and is projected to be approximately $22.9 million in fiscal year 2020-21. The following table sets forth the District’s regular annual contributions to CalSTRS for fiscal years 2011-12 through 2018-19, its estimated contribution for fiscal year 2019-20 and its projected contribution for fiscal year 2020-21. With the implementation of AB 1469, the District anticipates that its contributions to CalSTRS will significantly increase in future fiscal years as compared to prior fiscal years. Such increases may have a significant impact on the general fund.

Annual Regular CalSTRS Contributions Fiscal Years 2011-12 through 2020-21

Fiscal Year District Contributions 2011-12 $ 6,315,027 2012-13 6,099,241 2013-14 6,160,033 2014-15 11,030,442(1) 2015-16 13,927,234 2016-17 17,191,087 2017-18 18,707,544 2018-19 26,333,081 2019-20 25,286,641(2) 2020-21 22,890,025(3) ______(1) Reflects reporting requirement pursuant to GASB Statement No. 68, effective fiscal year 2014-15, which requires local education agencies to recognize the State’s contribution to CalSTRS on behalf of agencies’ employees. (2) Estimated. (3) Projected. Source: The District.

The District’s total employer contributions to CalSTRS for fiscal years 2011-12 through 2019-20 were equal to 100% of the required contributions for each year. The District, nonetheless, is unable to predict all factors or any changes in law that could affect its required contributions to CalSTRS in future fiscal years. A decrease in investment earnings may result in increased employer contribution rates in order to timely eliminate the CalSTRS unfunded liability. As the world is currently experiencing a pandemic, the District cannot predict the impact of the outbreak of COVID-19 on investment earnings and employer contribution rates. See “RISK FACTORS – Risks Related to COVID-19.” However, under existing law, the State Teachers Retirement Board may not increase the employer contribution rate by more than 1% in any fiscal year, up to a maximum employer contribution rate of 20.25%. The State Teachers Retirement Board may also adjust the State’s contribution rate by a maximum of 0.5% from year to year, based on the funding status of the CalSTRS actuarially determined unfunded liability.

As of June 30, 2019, the actuarial valuation (the “2019 CalSTRS Actuarial Valuation”) for the entire CalSTRS defined benefit program showed an estimated unfunded actuarial liability of $105.7 billion, a decrease of

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approximately $1.5 billion from the June 30, 2018 valuation. The funded ratios of the actuarial value of valuation assets over the actuarial accrued liabilities as of June 30, 2019 and June 30, 2018, based on the actuarial assumptions, were approximately 66.0% and 64.0%, respectively. According to the 2019 CalSTRS Actuarial Valuation, the funded ratio increased by 2.0% during the past year and has decreased by approximately 12% over the past 10 years. As described in the 2019 CalSTRS Actuarial Valuation, the additional State contribution and the return on the actuarial value of assets (7.7%) that exceeded the assumed return (7%) were the primary causes of the increase in the funded ratio from the prior year valuation. Future estimates of the actuarial unfunded liability may change due to market performance, legislative actions and other experience that may differ from the actuarial assumptions used for the CalSTRS valuation. The following are certain of the actuarial assumptions set forth in the 2019 CalSTRS Actuarial Valuation: measurement of accruing costs by the “Entry Age Normal Actuarial Cost Method,” an assumed 7.00% investment rate of return for measurements subsequent to June 30, 2016, 3.00% interest on member accounts, 3.50% projected wage growth, and 2.75% projected inflation and demographic assumptions relating to mortality rates, length of service, rates of disability, rates of withdrawal, probability of refund, and merit salary increases. The 2019 CalSTRS Actuarial Valuation also assumes that all members hired on or after January 1, 2013 are subject to the provisions of PEPRA (as defined herein). See “−Governor’s Pension Reform” below for a discussion of the pension reform measure signed by the Governor in August 2012 expected to help reduce future pension obligations of public employers with respect to employees hired on or after January 1, 2013.

CalSTRS produces a comprehensive annual financial report which includes financial statements and required supplementary information. Copies of the CalSTRS comprehensive annual financial report may be obtained from CalSTRS. The information presented in these reports is not incorporated by reference in this Official Statement.

CalPERS. All qualifying classified employees of K-12 school districts in the State are members in the California Public Employees’ Retirement System (“CalPERS”), and all of such districts participate in the same plan. As such, all such districts share the same contribution rate in each year. However, unlike school districts’ participating in CalSTRS, the school districts’ contributions to CalPERS fluctuate each year and include a normal cost component and a component equal to an amortized amount of the unfunded liability. Accordingly, the District cannot provide any assurances that the District’s required contributions to CalPERS in future years will not significantly vary from any current projected levels of contributions to CalPERS.

CalPERS is funded by employee contributions and investment earnings, with the balance of the funding provided by employer contributions. School districts’ contributions decrease when investment earnings rise and increase when investment earnings decline. As a result, declines in investment earnings may result in substantial increases in school district contributions. The District cannot make any predictions as to the effect of a global pandemic, including the outbreak of COVID-19, on investment earnings and school district contributions. See “RISK FACTORS – Risks Related to COVID-19” for more information about the impact of COVID-19. Participating employees enrolled in CalPERS prior to January 1, 2013 contribute 7.00% of their respective salaries, while participating employees enrolled after January 1, 2013 contribute the higher of fifty percent of normal costs of benefits or an actuarially determined rate of 7.00% in fiscal year 2019-20. School districts are required to contribute to CalPERS at an actuarially determined rate, which was 18.062% of eligible salary expenditures for fiscal year 2018-19 and originally 20.733% and 22.68% for fiscal years 2019-20 and 2020-21, respectively. However, the employer contribution rate for fiscal year 2019-20 was reduced to 19.721% as a result of the State’s buydown of employer contribution rates in fiscal year 2019-20. Similarly, the 2020-21 State Budget allocates funding to buy down employer contribution rates in fiscal years 2020-21 and 2021-22 to an estimated 20.70% and 22.84%, respectively. See “– State Funding of Education; State Budget Process – 2020-21 State Budget.”

In February of 2014, the CalPERS Board of Administration adopted new actuarial demographic assumptions that take into account greater life expectancies of public employees. Such assumptions are expected to increase costs for the State and public agency employers (including school districts), which costs will be amortized over 20 years and phased in over three years beginning in fiscal year 2014-15 for the State and amortized over 20 years and phased in over five years beginning in fiscal year 2016-17 for the employers. CalPERS applied the assumptions beginning with the June 30, 2015 valuation for the schools pool, setting employer contribution rates for fiscal year 2016-17. CalPERS estimates that the new demographic assumptions could cost public agency employers up to 9% of payroll for safety employees and up to 5% of payroll for miscellaneous employees at the end of the five

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year phase-in period. To the extent, however, that future experiences differ from CalPERS’ current assumptions, the required employer contributions may vary. In April 2016, CalPERS approved an increase to the contribution rate for school districts from 11.847% during fiscal year 2015-16 to 13.888% during fiscal year 2016-17. In June 2019, CalPERS adopted an employer contribution rate of 19.721% for the schools pool and a member contribution rate of 7.0% for school employees subject to PEPRA for the period of July 1, 2019 to June 30, 2020.

The CalPERS Schools Pool Actuarial Valuation as of June 30, 2018 (the “2018 CalPERS Schools Pool Actuarial Valuation”) reported an actuarial accrued liability of $92.07 billion with the market value of assets at $64.85 billion, and a funded status of 70.4%. The actuarial funding method used in the 2018 CalPERS Schools Pool Actuarial Valuation is the “Entry Age Normal Cost Method.” The 2018 CalPERS Schools Pool Actuarial Valuation assumes, among other things, 2.625% inflation and payroll growth of 2.875% compounded annually. The 2018 CalPERS Schools Pool Actuarial Valuation reflects a discount rate of 7.25% compounded annually (net of administrative expenses) as of June 30, 2018 and 7.00% compounded annually (net of administrative expenses) as of June 30, 2019. The CalPERS Board adopted new demographic assumptions on December 19, 2017, including a reduction in the inflation assumption from 2.625% as of June 30, 2018 to 2.50% as of June 30, 2019. The reduction in the inflation assumption results in decreases in both the normal cost and the accrued liabilities in the future.

On June 27, 2019, CalPERS informed school employers that the employer and employee pension contribution rates approved by the CalPERS Board of Administration on April 17, 2019 were modified by Senate Bill 90 and codified at Section 20825.2 of the State Government Code. The employer contribution rate for fiscal year 2019-20 will be 19.721%, representing a reduction of 1.012% in the employer contribution rate from the 20.733% adopted by the CalPERS Board on April 17, 2019. The employer contribution rate of 19.721% for fiscal year 2019-20 will be the first fiscal year that employer contributions are impacted by the new demographic assumptions adopted by the CalPERS Board in December 2017. The 19.721% contribution rate became effective with the first payroll period beginning July 2019. In April 2019, the CalPERS Board projected that employer contributions for fiscal year 2020-21 would be 23.6%, with annual fluctuations thereafter, resulting in a projected 26.5% employer contribution rate for fiscal year 2025-26. The CalPERS Board stated that these employer contribution rates reflect not only the new demographic assumptions, but also changes in the discount rate, inflation rate and payroll growth rate, along with expected reductions in normal cost due to the continuing transition of active members from those employees hired prior to January 1, 2013, to those hired after such date.

Annual CalPERS Regular Contributions Fiscal Years 2011-12 through 2020-21

Fiscal Year District Contributions(1) 2011-12 $3,979,967 2012-13 3,990,698 2013-14 4,013,860 2014-15 4,279,693 2015-16 4,574,796 2016-17 5,434,337 2017-18 6,068,562 2018-19 9,939,388 2019-20 8,359,458(2) 2020-21 9,258,511(3) ______(1) Includes Regular Contributions and employee contributions paid by the District and “PERS Recapture.” Pursuant to State law, the State is allowed to recapture the savings corresponding to a lower CalPERS rate by reducing a school district’s revenue limit apportionment by the amount of the school district’s CalPERS savings in that year. Such recapture has occurred with respect to the District in each fiscal year since fiscal year 1982-83. (2) Estimated. (3) Projected. Sources: The District.

In the current budget year, the District’s contribution to CalPERS is projected at $9.3 million, compared to a fiscal year 2019-20 estimated general fund expense of approximately $8.4 million. With the change in actuarial assumptions described above, the District anticipates that its contributions to CalPERS will significantly increase in

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future fiscal years as the increased costs are phased in. The implementation of PEPRA (see “− California Public Employees’ Pension Reform Act of 2013” below), however, is expected to help reduce certain future pension obligations of public employers with respect to employees hired on or after January 1, 2013. The District anticipates that its contributions to CalPERS will increase by approximately $0.8 million in fiscal year 2021-22 as compared to fiscal year 2020-21.

CalPERS produces a comprehensive annual financial report and actuarial valuations that include financial statements and required supplementary information. Copies of the CalPERS comprehensive annual financial report and actuarial valuations may be obtained from CalPERS Financial Services Division. The information presented in these reports is not incorporated by reference in this Official Statement.

California Public Employees’ Pension Reform Act of 2013. The Governor signed the California Public Employee’s Pension Reform Act of 2013 (the “Reform Act” or “PEPRA”) into law on September 12, 2012. The Reform Act affects both CalSTRS and CalPERS, most substantially as they relate to new employees hired after January 1, 2013 (the “Implementation Date”). As it pertains to CalSTRS participants hired after the Implementation Date, the Reform Act changes the normal retirement age, increasing the eligibility for the 2% “age factor” (the percent of final compensation to which an employee is entitled to for each year of service) from age 60 to 62 and increasing the eligibility of the maximum age factor of 2.4% from age 63 to 65. For non-safety CalPERS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor from age 55 to 62 and also increases the eligibility requirement for the maximum age factor of 2.5% to age 67.

The Reform Act also implements certain other changes to CalPERS and CalSTRS including the following: (a) all new participants enrolled in CalPERS and CalSTRS after the Implementation Date are required to contribute at least 50% of the total annual normal cost of their pension benefit each year as determined by an actuary, (b) CalSTRS and CalPERS are both required to determine the final compensation amount for employees based upon the highest annual compensation earnable averaged over a consecutive 36-month period as the basis for calculating retirement benefits for new participants enrolled after the Implementation Date (currently 12 months for CalSTRS members who retire with 25 years of service), and (c) “pensionable compensation” is capped for new participants enrolled after the Implementation Date at 100% of the federal Social Security contribution and benefit base for members participating in Social Security or 120% for CalSTRS and CalPERS members not participating in social security.

The District is unable to predict what the amount of State pension liabilities will be in the future, or the amount of the contributions which the District may be required to make (except as already announced). CalSTRS and CalPERS liabilities are more fully described in APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 12.

Other Post-Employment Benefits (“OPEB”). The District implemented GASB Statement No. 45 (“GASB 45”), Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions, during the year ended June 30, 2008, recognizing OPEB liabilities in its audited financial reports. The Post- Employment Benefit Plan (the “OPEB Plan”) is a single-employer defined benefit healthcare plan administered by the District. The OPEB Plan provides medical and dental insurance benefits to eligible retirees and their spouses. As of June 30, 2019, membership of the OPEB Plan consists of 250 retirees and beneficiaries currently receiving benefits, and 1,860 active OPEB Plan members. The contribution requirements of OPEB Plan members and the District are established and may be amended by the District and the Grossmont Education Association (“GEA”), the local California Service Employees Association (“CSEA”), and the local Service Employees International Union (“SEIU”). The required contribution is based on projected pay-as-you-go financing requirements. In 2017, the District implemented GASB Statement No. 75 (“GASB 75”) as a replacement to GASB 45. Under GASB 75, reporting of the OPEB liability changes from the Net OPEB obligation previously reported under GASB 45 to a Total OPEB obligation. This has the effect of recognizing the full OPEB liability instead of the net OPEB liability. As of June 30, 2018, the District’s Total OPEB liability was $62,213,555. The District commenced prefunding for retiree health benefits through the California Employers’ Retiree Benefits Trust (“CERBT”) in June 2014. As of June 30, 2018, the District’s balance in CERBT was $3,518,609. The CERBT balance reduces the Total OPEB obligation to a Net OPEB liability equal to $58,694,946. See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 11.

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The District undertook an actuarial study, which was completed June 30, 2017. In the actuarial valuation, the Entry Age Normal (EAN) cost method was used. The actuarial assumptions included (a) a 6% investment rate of return, assuming the District continues to maintain its assets in the CERBT under Investment Strategy 3, (b) inflation of 2.75%, (c) salary increases of 3.0% and (d) a discount rate of 3.4%.

Accrued Vacation and other Obligations. The long-term portion of accumulated and unpaid employee vacation for the District as of June 30, 2019 was $2,462,793.

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Summary of District Revenues and Expenditures

The following table summarizes the District’s actual general fund revenues, expenditures and fund balances for fiscal years 2014-15 through 2018-19. The following table presents audited figures in a format showing expenditures by object rather than by function. See also APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019.”

GROSSMONT UNION HIGH SCHOOL DISTRICT General Fund Revenues, Expenditures and Fund Balances 2014-15 through 2018-19

2014-15 2015-16 2016-17 2017-18 2018-19 Actuals Actuals Actuals Actuals Actuals Revenue/Receipts LCFF Sources $136,098,547 $154,814,682 $158,305,393 $160,385,973 $168,214,004 State Aid 74,521,992 79,279,483 76,495,629 74,641,360 76,834,474 Local Sources 83,295,592 93,602,187 102,058,600 108,056,294 115,240,951 Transfers (21,719,037) (18,066,988) (20,248,836) (22,311,681) (23,861,421) Federal Revenue 12,501,642 11,644,756 12,852,722 12,900,774 12,148,702 Other State Revenue 12,554,583 25,231,915 21,044,009 18,240,594 28,949,753 Other Local Revenue 26,534,357 25,773,660 24,289,776 24,696,856 27,088,938 TOTAL REVENUES $187,689,129 $217,465,013 $216,491,900 $216,224,197 $236,401,397

Expenditures/Disbursements Certificated Salaries $80,884,365 $85,027,857 $88,564,228 $86,714,286 $88,744,690 Classified Salaries 36,978,528 39,293,198 40,443,579 39,786,544 40,542,767 Employee Benefits 41,750,437 45,898,585 50,735,302 52,583,372 64,854,962 Books and Supplies 8,245,676 9,371,548 8,117,540 9,134,184 8,334,754 Services/Other Operating Expenditures 23,628,908 26,603,702 25,707,451 25,996,743 27,316,741 Capital Outlay 1,304,639 3,191,768 1,670,092 3,485,952 2,686,320 Other Outgo (excluding Transfers of Indirect/Direct Support Costs) 598,178 461,622 1,095,487 - - Intergovernmental - - - 1,172,585 1,150,132 Transfers of Indirect/Direct Supports Costs (911,328) (1,074,036) (1,085,865) (1,128,139) (1,005,960) TOTAL EXPENDITURES $192,479,403 $208,774,244 $215,247,814 $217,745,527 $232,624,406

Excess of Revenues Over/(Under) (4,790,274) 8,690,769 1,244,086 (1,521,330) 3,776,991 Expenditures

Other Financing Sources/(Uses) Transfers In 48,041 587,993 63,335 14,433 931,537(4) Transfers Out (764,976)(2) - - - - Issue of debt – capital leases - - - 2,618,607(3) 756,682(5) TOTAL OTHER SOURCES/USES $(716,935) $587,993 $63,335 $2,633,040 $1,688,219

Net Change in Fund Balances $(5,507,209) $9,278,762 $1,307,421 $1,111,710 $5,465,210 Fund Balance, Beginning $18,516,768 $13,009,559 $22,288,321 $23,594,992 $24,706,702 Fund Balance, Ending $13,009,559 $22,288,321 $23,595,742 $24,706,702 $30,171,912 ______Sources: District’s audited financial statements for fiscal years ended June 30, 2015; 2016; 2017; 2018; and 2019. (1) Amounts do not agree with amounts reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances contained in the audited financial statements for the respective fiscal year because the amounts on that schedule include the financial activity of the Special Reserve Fund for Other Than Capital Outlay, in accordance with the fund type definitions promulgated by GASB Statement No. 54. (2) Transfers out in fiscal year 2014-15 reflect transfer to Fund 17 to establish a reserve for SELPA (Special Education Local Plan Area). (3) The District adopted an accounting practice of recognizing the full amount of a capital lease in the inception year as both Other Operating Expenditures and Other Financing Sources. There is no net impact to the Net Change in Fund Balance. (4) The District transferred $764,796 to Fund 17 as a Reserve for Out of Home Care Revenue subject to audit. These funds were transferred into the General Fund in fiscal year 2018-19 after the audit period expired. (5) Beginning in fiscal year 2017-18, the District changed the method for accounting for capital leases by recognizing the full lease amount as expenditures and other sources of revenue. There is no net impact resulting from this change.

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As shown in the previous table, the District’s expenditures exceeded its revenues in fiscal years 2014-15 and 2017-18. In these years when the District has run a deficit, such deficit has been filled by drawing down the District’s general fund balance.

The following table sets forth the budgeted revenues, expenditures and changes in fund balances for the District’s general fund for the fiscal years 2019-20 and 2020-21 and the unaudited actual revenues, expenditures and changes in fund balances for the District’s general fund for the fiscal year 2019-20, under the District’s adopted budgets for fiscal years 2019-20 and 2020-21. Certain adjustments may be made throughout the year based on actual State funding and actual District revenues and tax collections. The District cannot make any predictions regarding the disposition of additional pending budget legislation or its effect on the District. The District’s budget is a planning tool, and does not represent a prediction as to the actual achievement of any budgeted revenues or fund balances.

On September 10, 2020, the District Board approved the 2019-20 Unaudited Actuals. The District’s fiscal year 2019-20 estimated total general fund revenues are $237.9 million and estimated total general fund expenditures are $234.9 million, and its projected general fund ending fund balance is $33.5 million, with an increase in fund balance of $3.4 million. The State did not reduce revenues to school districts for fiscal year 2019-20 as a result of the COVID-19 pandemic, although cash deferrals from June 2020 to July 2020 did occur with manageable effect. The combination of one-time federal and State funds provided to school districts for COVID-19 pandemic relief plus a minor amount of natural cost savings (e.g., avoidance of substitute employee costs, transportation costs, etc.) will result in no deterioration in the District’s financial position upon closing the fiscal year 2019-20 school year accounts.

The District’s adopted its budget for fiscal year 2020-21 on June 15, 2020 based on revenue assumptions included in the Governor’s 2020-21 May Revision to the State Budget (the “2020-21 May Revision”). Subsequent to this, the 2020-21 State Budget was adopted with significantly modified revenues for California school districts from those in the 2020-21 May Revision. As a result, the District updated its fiscal year 2020-21 budget accordingly, and brought an updated proposal before the Board in August 2020, with final approval on such proposal on September 10, 2020. For fiscal year 2020-21, the District’s recertified budget reflects a projected general fund ending balance of $27.6 million, with a decrease in fund balance of $5.9 million. Based on the 2020-21 May Revision, the District’s multiyear projections projected general fund revenue deficits of $24.4 million and $31.0 million in fiscal years 2021-22 and 2022-23, respectively. However, such projections are subject to revision, as noted below.

The 2020-21 State Budget reflects the elimination of the statutory cost of living adjustment (“COLA”) of 2.31%. Pursuant to the 2020-21 State Budget, school districts will be “held harmless” for student attendance funding in fiscal year 2020-21 given the uncertainty of enrollment, attendance, and instructional program delivery formats. Schools will be funded on the basis of their fiscal year 2019-20 actual funding, which is known. The 2020-21 State Budget also includes a fairly substantial amount of one-time federal and State funds for California school districts generally identified as Learning Loss Mitigation funds to offset costs associated with the COVID-19 pandemic effects on the student educational programs. At this time the District expects that it may be able to access approximately $12 million of such additional COVID-19 relief funds which will supplement its 2020-21 budget provided that, in order to qualify for such funds, appropriate expenses incurred prior to January 1, 2021 are identified. Finally, the 2020-21 State Budget does include significant cash deferrals in the second half of fiscal year 2020-21 unless sufficient additional federal funds are received by the State. Should this occur, the District will implement an additional tax and revenue anticipation note borrowing to manage cash flow.

The District administration has identified and the Board has approved various funding opportunities and operational efficiency solutions to address the projected deficit, as well as savings and potential new revenue streams. Multi-year projections were presented to the Board on June 9, 2020, identifying deficits of $24.4 million and $31.0 million in fiscal years 2021-22 and 2022-23, respectively, and the District will further identify and present multi-year projections and budget solutions in connection with the 2020-21 first interim reporting period, on or before December 15, 2020. The District’s 2020-21 budget information below is subject to change as measures in the 2020-21 State Budget are implemented and as other numerous other factors affect projections. See “– State Funding of Education; State Budget Process – 2020-21 State Budget.”

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GROSSMONT UNION HIGH SCHOOL DISTRICT Budgeted General Fund Summary for Fiscal Years 2019-20 and 2020-21

2019-20 2019-20 2020-21 2020-21 Recertified Budgeted(1) Unaudited Actuals(2) Budgeted(3) Budget(2) REVENUES LCFF Sources $175,641,904 $175,318,294 $162,923,195 $176,073,717 Federal Revenue 12,057,194 13,590,860 16,841,869 16,841,869 Other State Revenue 17,451,775 21,621,621 17,674,030 17,674,030 Other Local Revenue 23,047,268 27,358,066 24,881,863 24,881,863 TOTAL $228,198,141 $237,888,840 $222,320,957 $235,471,479

EXPENDITURES Certificated Salaries $90,796,713 $91,796,208 $94,494,580 $94,494,580 Classified Salaries 40,855,246 41,547,014 42,953,606 42,953,606 Employee Benefits 60,909,181 63,362,965 63,772,064 63,772,064 Books and Supplies 7,441,758 8,200,687 11,477,204 11,477,204 Services/Other Operating Expenditures 28,470,409 26,947,878 28,182,114 28,182,114 Other Outgo 1,056,170 - 1,281,489 1,281,489 Other Outgo – Transfers of Indirect Costs (1,151,551) (995,710) (892,140) (892,140) Intergovernmental - 1,430,616 - - Capital Outlay 663,772 2,649,724 237,030 237,030 TOTAL $229,041,698 $234,939,382 $241,505,947 $241,505,947

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES $(843,557) $2,949,458 $(19,184,990) $(6,034,468)

OTHER FINANCING SOURCES (USES) Transfers In $ 10,000 $124,963 $122,850 $122,850 Transfers Out - (583,343) - - Other Sources 342,524 881,219 - - TOTAL OTHER FINANCING SOURCES (USES) $352,524 $422,839 $122,850 $122,850

NET CHANGE IN FUND BALANCE $(491,033) $3,372,297 $(19,062,140) $(5,911,618)

Fund Balance – Beginning $25,732,382(3) $30,171,912(4) $25,503,481(4) $33,544,209 Fund Balance – Ending $25,241,349 $33,544,209 $6,441,341 $27,632,591

______(1) Adopted budget as of June 17, 2019. (2) Adopted on September 10, 2020. (3) Adopted budget as of June 15, 2020. (4) The beginning balance for the adopted budget reflects the best estimate of such balance at the time of adoption. The beginning balance for the unaudited actuals reflects updates based on the data at the year-end close. Source: The District.

District Debt Structure and Long Term Obligations

Certain of the District’s outstanding indebtedness is described below. For further discussion of the District’s outstanding indebtedness, see APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 9.

General Obligation Bonds. As of September 1, 2020, the District has $592,240,166 principal amount of general obligation bonds outstanding and $84,943,322 remaining voter-approved authorization for future issuances prior to the sale of the Bonds, under Proposition U.

The principal amount outstanding does not include the accreted value on those portions of the General Obligation Bonds, Election of 2004, and the General Obligation Bonds, Election of 2008, that were issued as capital appreciation bonds. See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 9.

For information on the annual debt service for the outstanding bonds of the District (assuming no additional optional redemptions prior to maturity), see “DEBT SERVICE – Aggregate Annual Debt Service.”

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Tax and Revenue Anticipation Notes. On July 30, 2019, the District issued $18,975,000 of Tax and Revenue Anticipation Notes for fiscal year 2019-20 for cash flow purposes. The notes were paid from the general fund of the District on June 30, 2020. The District issued Tax and Revenue Anticipation Notes in August 2020 in the amount of $15,840,000 for cash flow purposes, and may choose to issue additional Tax and Revenue Anticipation Notes for fiscal year 2020-21 if State appropriation deferrals occur in the second half of the fiscal year.

Capital Leases. The District has leases for buses under agreements with options to purchase. The annual requirements on these capital leases outstanding as of June 30, 2019, are as follows:

GROSSMONT UNION HIGH SCHOOL DISTRICT Annual Lease Payments Capital Leases

Fiscal Year Ended June 30, Total 2020 $704,617 2021 704,617 2022 704,617 2023 159,512 Total minimum lease payments $2,273,363 Less amount representing interest (103,101) Present value of minimum lease payments $2,170,262 ______Source: The District.

Lease Revenue Bonds. On August 4, 2020, the District entered into a lease obligation and caused to be issued $33,185,000 of related lease revenue bonds (the “Lease Revenue Bonds”) with interest of 4.0% on each maturity of such bonds. The lease obligation was entered into to finance improvements to the District’s transportation yard and bus maintenance facilities. Interest with respect to the Lease Revenue Bonds is payable semi-annually on each January 1 and July 1, through the final maturity of the bonds on July 1, 2040. As of September 1, 2020, the principal balance outstanding was $33,185,000.

Capital Financing Plan

The District Board approved its original Long Range Facility Plan (the “Master Plan”) in October 2003, which led to the authorization of a bond issue (“Proposition H”) in 2004, and issuance, in 2004, 2006, and 2008, of an aggregate $274 million in facilities improvement bonds. Since 2004, substantial modernization work has been completed at each of the District’s campuses.

In June 2008, the District undertook an update of the Master Plan, which identified additional facilities improvement needs of approximately $1 billion to (a) modernize campus facilities and structures at its eleven comprehensive high schools, one alternative education facility and several adult education facilities not anticipated in Proposition H, (b) complete the first phase of construction of a new high school, and (c) bring all campus facilities up to a common standard parity. The District expects to finance the school modernization and construction costs (“a” and “b” above) from the proceeds of voter-approved debt and State matching funds. The Proposition U bonding authority of $417 million, combined with expected State matching funds of approximately $81.9 million, are expected to fund up to 90% of these costs over the next five years. The District has not yet identified funding sources for the parity facilities improvements (“c” above) identified in the updated Master Plan. The Master Plan was further revised in October 2009 in order to accommodate programmatic improvements in career technical education, special education, and the arts.

Since early 2015, planning efforts have been under way to address additional facility needs and the slowdown of funding under Proposition U. The 2016 updated facilities needs assessment outlines a total remaining need for the District of over $646 million to include new construction, modernization and site work/athletics. On November 8, 2016, Measure BB was approved by voters in the District, authorizing up to $128 million of general

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obligation bonds, which, along with anticipated State match funding up to $50 million, will allow the District to complete much needed remaining Proposition U projects and additional facility needs as outlined in the 2016 needs assessment.

Insurance, Risk Pooling and Joint Powers Arrangements

The District participates in joint ventures under joint powers agreements (“JPAs”) with the San Diego County School Risk Management Authority (the “Risk Pool”) and the San Diego County Educational Facilities Authority No. 1 (the “Facilities Authority”). The relationship between the District and the JPAs is such that the JPAs are not component units of the District for financial reporting purposes.

The JPAs provide property and liability insurance coverage for their member school districts. The JPAs are governed by a board consisting of a representative from each member district. The governing board controls the operations of its JPAs independent of any influence by the member districts beyond their representation on the governing board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionately to its participation in the JPAs. Financial information for the most recently audited period is available directly from the JPA.

The Facilities Authority is a JPA of the Authority and the San Diego County Office of Education that was established to provide funding for a joint use educational facility (the “Joint Use Facility”). The governing board of the Facilities Authority is comprised of two representatives from each of the two participants.

The District is not a member of any other joint powers agencies or authorities. See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019,” Note 14.

SCHOOL DISTRICT BUDGET PROCEDURES AND REQUIREMENTS

District Budget Process and County Review

State law requires school districts to adopt a balanced budget in each fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. Under current law, a school district governing board must adopt and file with the county superintendent of schools a tentative budget by July 1 in each fiscal year. The District is under the jurisdiction of the County of San Diego Superintendent of Schools.

The county superintendent must review and approve, conditionally approve or disapprove the budget no later than September 15. The county superintendent is required to 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 with the established standards. In the event that the county superintendent conditionally approves or disapproves the school district’s budget, the county superintendent will submit to the governing board of the school district no later than September 15 of such year written recommendations regarding revisions of the budget and the reasons for the recommendations, including, but not limited to, the amounts of any budget adjustments needed before the county superintendent can approve that budget.

The governing board of the school district, together with the county superintendent, must review and respond to the recommendations of the county superintendent on or before October 8 at a regular meeting of the governing board of the school district. The county superintendent will examine and approve or disapprove of the revised budget by November 8 of such year. If the county superintendent disapproves a revised budget, the county superintendent will call for the formation of a budget review committee. By December 31 of each year, every school district must have an adopted budget, or the State Superintendent may impose a budget and will report such school district to the State Legislature and the Department of Finance.

Subsequent to approval, the county superintendent will monitor each school district under its jurisdiction throughout the fiscal year pursuant to its adopted budget to determine on an ongoing basis if the school district can meet its current or subsequent year financial obligations.

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If, after taking various remedial actions, the county superintendent determines that a school district cannot meet its current or the subsequent year’s obligations, the county superintendent will notify the school district’s governing board, the State Superintendent and the president of the State board (or the president’s designee) of the determination and take at least one of the following actions, and all actions that are necessary to ensure that the school district meets its financial obligations: (a) develop and impose, after also consulting with the State Superintendent and the school district’s governing board, revisions to the budget that will enable the school district to meet its financial obligations in the current fiscal year, (b) stay or rescind any action inconsistent with the ability of the school district to meet its obligations for the current or subsequent fiscal year, (c) assist in developing, in consultation with the school district’s governing board, a financial plan that will enable the school district to meet its future obligations, (d) assist in developing, in consultation with the school district’s governing board, a budget for the subsequent fiscal year, and (e) as necessary, appoint a fiscal advisor to perform the aforementioned duties. The county superintendent will also make a report to the State Superintendent and the president of the State board or the president’s designee about the financial condition of the school district and the remedial actions proposed by the county superintendent. However, the county superintendent may not abrogate any provision of a collective bargaining agreement that was entered into prior to the date upon which the county superintendent assumed authority.

A State law adopted in 1991 (known as “A.B. 1200”) imposed additional financial reporting requirements on school districts, and established guidelines for emergency State aid apportionments. Under the provisions of A.B. 1200 and the Education Code (Section 42100 et seq.), each school district is required to file two interim certifications with the county superintendent (on December 15, for the period ended October 31, and by mid-March for the period ended January 31) as to its ability to meet its financial obligations for the remainder of the then- current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county superintendent reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that, based on then current projections, will meet its financial obligations for the current fiscal year and the subsequent two fiscal years. A negative certification is assigned to any school district that, based on then current projections, will be unable to meet its financial obligations for the remainder of the fiscal year or the subsequent fiscal year. A qualified certification is assigned to any school district that, based on then current projections, will not meet its financial obligations for the current fiscal year or the two subsequent fiscal years. A certification may be revised to a negative or qualified certification by the county superintendent, as appropriate. A school district that receives a qualified or negative certification for its second interim report must provide to the county superintendent, the State Controller and the State Superintendent no later than June 1, financial statement projections of the school district’s fund and cash balances through June 30 for the period ending April 30.

Any school district that receives a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax and revenue anticipation notes, revenue bonds or any other debt instruments that do not require the approval of the voters of the school district, unless the county superintendent determines that the school district’s repayment of indebtedness is probable. The District received a positive certification on its first interim report for fiscal year 2019-20.

For school districts under fiscal distress, the county superintendent is authorized to take a number of actions to ensure that the school district meets its financial obligations, including budget revisions. However, the county superintendent is not authorized to approve any diversion of revenue from ad valorem property taxes levied to pay debt service on district general obligation bonds. A school district that becomes insolvent may, upon the approval of a fiscal plan by the county superintendent, request an emergency appropriation from the State, in which case the county superintendent, the State Superintendent and the president of the State board or the president’s designee will appoint a trustee to serve the school district until it has adequate fiscal systems and controls in place. The acceptance by a school district of an emergency apportionment exceeding 200% of the reserve recommended for that school district constitutes an agreement that the county superintendent will assume control of the school district in order to ensure the school district’s return to fiscal solvency.

In the event the State elects to provide an emergency apportionment to a school district, such apportionment will constitute an advance payment of apportionments owed to the school district from the State School Fund and the Education Protection Account. The emergency apportionment may be accomplished in two ways. First, a school district may participate in a two-part financing in which the school district receives an interim loan from the State General Fund, with the agreement that the school district will subsequently enter into a lease

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financing with the California Infrastructure and Economic Development Bank for purposes of financing the emergency apportionment, including repaying such amounts advanced to the State General Fund. State law provides that so long as bonds from such lease financing are outstanding, the recipient school district (via its administrator) cannot file for bankruptcy. As an alternative, a school district may receive an emergency apportionment from the State General Fund that must be repaid in 20 years. Each year, the State Superintendent will withhold from the apportionments to be made to the school district from the State School Fund and the Education Protection Account an amount equal to the emergency apportionment repayment that becomes due that year. The determination as to whether the emergency apportionment will take the form of a lease financing or an emergency apportionment from the State General Fund will be based upon the availability of funds within the State General Fund.

Accounting Practices

The accounting policies of the District conform to generally accepted accounting principles in accordance with the definitions, instructions and procedures of the California School Accounting Manual, as required by the State Education Code. 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.

Christy White, Certified Public Accountants, serves as independent auditor to the District and its report for Fiscal Year Ended June 30, 2019, is attached hereto as APPENDIX B. The District considers its audited financial statements to be public information, and accordingly no consent has been sought or obtained from the auditor in connection with the inclusion of such statements in this Official Statement. The auditor has made no representation in connection with inclusion of the audit excerpts herein that there has been no material change in the financial condition of the District since the audit was concluded.

The final (unaudited) statement of receipts and expenditures for each fiscal year ending June 30 is required by State law to be approved by the District’s Governing Board by September 15, and the audit report must be filed with the San Diego County Superintendent of Schools and State officials by December 15 of each year. The District is required by law to adopt its audited financial statements following a public meeting to be conducted no later than January 31 following the close of each fiscal year.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Limitations on Revenues

On June 6, 1978 voters approved Proposition 13 (“Proposition 13”), which added Article XIIIA to the State Constitution (“Article XIIIA”). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. The tax for payment of the District’s bonds approved at the elections of 2004, 2008, and 2016 falls within the exception for bonds approved by a 55% vote. Article XIIIA defines full cash 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 when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

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County of Orange v. Orange County Assessment Appeals Board No. 3. Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate higher than 2%, depending on the assessor’s measure of the restoration of value of the damaged property. The constitutionality of this procedure was challenged in a lawsuit brought in 2001 in the Orange County Superior Court, and in similar lawsuits brought in other counties, on the basis that the decrease in assessed value creates a new “base year value” for purposes of Proposition 13 and that subsequent increases in the assessed value of a property by more than 2% in a single year violate Article XIIIA. On appeal, the California Court of Appeal upheld the recapture practice in 2004, and the State Supreme Court declined to review the ruling, leaving the recapture law in place.

Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

Beginning in the 1981-82 fiscal year, assessors in the State no longer record property values on tax rolls at the assessed value of 25% of market value which was expressed at $4 per $100 assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Split Roll Property Tax Ballot Measure. The California Schools and Local Communities Funding Act of 2020 (commonly known as the “Split Roll Measure”) has qualified for the November 3, 2020 general election ballot, and will appear as Proposition 15 thereon. Proposition 15 would amend Article XIIIA such that the “full cash value” of commercial and industrial real property that is not zoned for commercial agricultural production, for each lien date, would be equal to the fair market value of that property. If passed, Proposition 15 would not affect the “full cash value” of residential property or real property used for commercial agricultural production, which would continue to be subject to annual increases not to exceed 2%. After compensating the State general fund for resulting reductions in State personal income tax and corporate tax revenues, and compensating cities, counties and special districts for the cost of implementing Proposition 15, approximately 40% of the remaining additional tax revenues generated as a result of Proposition 15 would be deposited into a fund created pursuant to Proposition 15 called the Local School and Community College Property Tax Fund.

The District cannot predict whether Proposition 15 will be approved by a majority of voters casting a ballot. If approved, the District cannot make any assurance as to what effect the implementation of Proposition 15 will have on District revenues or the assessed valuation of real property in the District. However, if passed, implementation of the measure, which would require reassessment of commercial properties, may result in difficulties in the tax assessment, appeals and collection process.

Proposition 19. Proposition 19, which will appear on the November 2020 Statewide ballot, resulted from negotiations between the State Legislature and the California Association of Realtors (CAR). Proposition 19 would allow eligible homeowners to transfer their tax assessments anywhere within the State and allow tax assessments to be transferred to a more expensive home with an upward adjustment; require that inherited homes that are not used as principal residences, such as second homes or rentals, be reassessed at market value when transferred; and allocate additional revenue or net savings resulting from the ballot measure to wildfire agencies and counties.

Article XIIIB of the State Constitution

An initiative to amend the State Constitution entitled “Limitation of Government Appropriations” was approved on September 6, 1979, thereby adding Article XIIIB to the State Constitution (“Article XIIIB”). Under

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Article XIIIB state and local governmental entities have an annual “appropriations limit” and are not permitted to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the “appropriations limit.” Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the “appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

In fiscal year 2018-19, the District had an appropriations limit of $123,160,089 and appropriations subject to such limit of $123,160,089, and estimates an appropriations limit in 2019-20 of $128,221,507. Any proceeds of taxes received by the District in excess of the allowable limit are absorbed into the State’s allowable limit.

Article XIIIC and Article XIIID of the State Constitution

On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the “Right to Vote on Taxes Act.” Proposition 218 added to the State Constitution Articles XIIIC and XIIID (“Article XIIIC” and “Article XIIID,” respectively), 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 charges.

According to the “Title and Summary” of Proposition 218 prepared by the State Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the State Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will 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 restricted as to use and are neither pledged nor available to pay the Bonds.

The District receives a portion of the basic 1% ad valorem property tax levied and collected by the County pursuant to Article XIIIA of the California Constitution. The provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District.

Statutory Limitations

On November 4, 1986, State voters approved Proposition 62, an initiative statute limiting the imposition of new or higher taxes by local agencies. The statute: (a) requires new or higher general taxes to be approved by two-thirds of the local agency’s governing body and a majority of its voters; (b) requires the inclusion of specific information in all local ordinances or resolutions proposing new or higher general or special taxes; (c) penalizes local agencies that fail to comply with the foregoing; and (d) required local agencies to stop collecting any new or higher general tax adopted after July 31, 1985, unless a majority of the voters approved the tax by November 1, 1988.

Appellate court decisions following the approval of Proposition 62 determined that certain provisions of Proposition 62 were unconstitutional. However, the California Supreme Court upheld Proposition 62 in its decision on

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September 28, 1995 in Santa Clara County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court’s decision, such as whether the decision applies retroactively, what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities.

Proposition 98 and Proposition 111

On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). The Accountability Act changed State funding of public education below the university level, and the operation of the State’s Appropriations Limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (collectively, “K-14 districts”) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in 1986-87, which percentage is equal to 40.9%, or (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for growth in enrollment and inflation.

Since the Accountability Act is unclear in some details, there can be no assurance that the Legislature or a court might not interpret the Accountability Act to require a different percentage of general fund revenues to be allocated to K- 14 districts than the 40.9%, 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, the Governor and other fiscal observers expect the Accountability Act 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’s ability to fund such other programs by raising taxes.

The Accountability Act also changes how tax revenues in excess of the State Appropriations Limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 districts. Such transfer would be excluded from the Appropriations Limit for K-14 school districts and the K-14 school Appropriations Limits for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to schools is 4% of the minimum State spending for education mandated by the Accountability Act, as described above.

On June 5, 1990, State voters approved Proposition 111 (Senate Constitutional Amendment 1), which further modified the State Constitution to alter the spending limit and education funding provisions of Proposition 98. Most significantly, Proposition 111 (1) liberalized the annual adjustments to the spending limit by measuring the “change in the cost of living” by the change in State per capita personal income rather than the Consumer Price Index, and specified that a portion of the State’s spending limit would be adjusted to reflect changes in school attendance; (2) provided that 50% of the “excess” tax revenues, determined based on a two-year cycle, would be transferred to K-14 school districts with the balance returned to taxpayers (rather than the previous 100% but only up to a cap of 4% of the districts’ minimum funding level), and that any such transfer to K-14 school districts would not be built into the school districts’ base expenditures for calculating their entitlement for State aid in the following year and would not increase the State’s appropriations limit; (3) excluded from the calculation of appropriations that are subject to the limit appropriations for certain “qualified capital outlay projects” and certain increases in gasoline taxes, sales and use taxes, and receipts from vehicle weight fees; (4) provided that the Appropriations Limit for each unit of government, including the State, would be recalculated beginning in the 1990-91 fiscal year, based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Senate Constitutional Amendment 1 had been in effect; and (5) adjusted the Proposition 98 formula that guarantees K-14 school districts a certain amount of general fund revenues, as described below.

Under prior law, K-14 school districts were guaranteed the greater of (a) 40.9% of general fund revenues (the “first test”) or (b) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second test”). Under Proposition 111, school districts would receive the greater of (a) the first test, (b) the second test or (c) a third test, which would replace the second test in any year when growth in per capita general fund revenues from the prior year was less than the annual growth in State per capita personal income. Under the third test, school districts would receive the amount appropriated in the prior year adjusted for change in enrollment and per capita general fund revenues, plus an additional small

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adjustment factor. If the third test were used in any year, the difference between the third test and the second test would become a “credit” to be paid in future years when general fund revenue growth exceeds personal income growth.

Proposition 30 and Proposition 55

On November 6, 2012, voters approved Proposition 30, also referred to as the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment. Proposition 30 temporarily (a) increased the personal income tax on certain of the State’s income taxpayers by one to three percent for a period of seven years from January 1, 2012 through the end of 2018, and (b) increased the sales and use tax by one-quarter percent for a period of four years from January 1, 2013 through the end of 2016. The revenues generated from such tax increases are included in the calculation of the Proposition 98 minimum funding guarantee (see “– Proposition 98 and Proposition 111” above). The revenues generated from such temporary tax increases are deposited into a State account created pursuant to Proposition 30 (the “Education Protection Account”), and 89% of the amounts therein are allocated to school districts and 11% of the amounts therein are allocated to community college districts.

The Proposition 30 sales and use tax increases expired at the end of the 2016 tax year. Under Proposition 30, the personal income tax increases were set to expire at the end of the 2018 tax year. However, the California Tax Extension to Fund Education and Healthcare Initiative (“Proposition 55”), approved by voters on November 8, 2016, extends by twelve years the temporary personal income tax increases on incomes over $250,000 that was first enacted by Proposition 30; Proposition 55 did not extend the sales tax increases imposed by Proposition 30. Revenues from the tax increase will be allocated to school districts and community colleges in the State.

Applications of Constitutional and Statutory Provisions

The application of Proposition 98 and other statutory regulations has become increasingly difficult to predict accurately in recent years. For a discussion of how the provisions of Proposition 98 have been applied to school funding see “FINANCIAL AND OPERATING INFORMATION – State Funding of Education; State Budget Process.”

Proposition 2

Proposition 2, which included certain constitutional amendments to the Rainy Day Fund and, upon its approval, triggered the implementation of certain provisions which could limit the amount of reserves that may be maintained by a school district, was approved by the voters in the November 2014 election.

Rainy Day Fund. The Proposition 2 constitutional amendments related to the Rainy Day Fund (i) require deposits into the Rainy Day Fund whenever capital gains revenues rise to more than 8% of general fund tax revenues; (ii) set the maximum size of the Rainy Day Fund at 10% of general fund revenues; (iii) for the next 15 years, require half of each year’s deposit to be used for supplemental payments to pay down the budgetary debts or other long-term liabilities and, thereafter, require at least half of each year’s deposit to be saved and the remainder used for supplemental debt payments or savings; (iv) allow the withdrawal of funds only for a disaster or if spending remains at or below the highest level of spending from the past three years; (v) require the State to provide a multiyear budget forecast; and (vi) create a Proposition 98 reserve (the “Public School System Stabilization Account”) to set aside funds in good years to minimize future cuts and smooth school spending. The State may deposit amounts into such account only after it has paid all amounts owing to school districts relating to the Proposition 98 maintenance factor for fiscal years prior to fiscal year 2014-15. The State, in addition, may not transfer funds to the Public School System Stabilization Account unless the State is in a Test 1 year under Proposition 98 or in any year in which a maintenance factor is created.

SB 858. Senate Bill 858 (“SB 858”) became effective upon the passage of Proposition 2. SB 858 includes provisions which could limit the amount of reserves that may be maintained by a school district in certain circumstances. Under SB 858, in any fiscal year immediately following a fiscal year in which the State has made a transfer into the Public School System Stabilization Account, any adopted or revised budget by a school district would need to contain a combined unassigned and assigned ending fund balance that (a) for school districts with an A.D.A. of less than 400,000 students, is not more than two times the amount of the reserve for economic uncertainties mandated by the State Education Code, or (b) for school districts with an A.D.A. that is more than

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400,000 students, is not more than three times the amount of the reserve for economic uncertainties mandated by the State Education Code. In certain cases, the county superintendent of schools may grant a school district a waiver from this limitation on reserves for up to two consecutive years within a three-year period if there are certain extraordinary fiscal circumstances.

The District, which has an A.D.A. of less than 400,000 students, is required to maintain a reserve for economic uncertainty in an amount equal to 3% of its general fund expenditures and other financing uses.

SB 751. SB 751, enacted on October 11, 2017, alters the reserve requirements imposed by SB 858. Under SB 751, in a fiscal year immediately after a fiscal year in which the amount of moneys in the Public School System Stabilization Account is equal to or exceeds 3% of the combined total general fund revenues appropriated for school districts and allocated local proceeds of taxes for that fiscal year, a school district budget that is adopted or revised cannot have an assigned or unassigned ending fund balance that exceeds 10% of those funds. SB 751 excludes from the requirements of those provisions basic aid school districts (also known as community funded districts) and small school districts having fewer than 2,501 units of average daily attendance.

The Bonds are payable from ad valorem taxes to be levied within the District pursuant to the State Constitution and other State law. Accordingly, the District does not expect SB 858 or SB 751 to adversely affect its ability to pay the principal of and interest on the Bonds as and when due.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID, as well as Propositions 2, 30, 55, 62, 98, 111 and 218, were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting District revenues or the District’s ability to expend revenues.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019

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GROSSMONT UNION HIGH SCHOOL DISTRICT

AUDIT REPORT JUNE 30, 2019

GROSSMONT UNION HIGH SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2019

FINANCIAL SECTION

Independent Auditors’ Report ...... 1 Management’s Discussion and Analysis ...... 3 Basic Financial Statements Government-wide Financial Statements Statement of Net Position ...... 10 Statement of Activities ...... 11 Fund Financial Statements Governmental Funds – Balance Sheet ...... 12 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ...... 13 Governmental Funds – Statement of Revenues, Expenditures, and Changes in Fund Balances ...... 14 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ...... 15 Proprietary Funds – Statement of Net Position ...... 17 Proprietary Funds – Statement of Revenues, Expenses, and Changes in Net Position ...... 18 Proprietary Funds – Statement of Cash Flows ...... 19 Fiduciary Funds – Statement of Net Position ...... 20 Fiduciary Funds – Statement of Changes in Net Position ...... 21 Notes to Financial Statements ...... 22

REQUIRED SUPPLEMENTARY INFORMATION

General Fund – Budgetary Comparison Schedule ...... 59 Schedule of Changes in Net OPEB Liability and Related Ratios – District Plan ...... 60 Schedule of Changes in Net OPEB Liability and Related Ratios – MPP Program ...... 61 Schedule of the District’s Proportionate Share of the Net Pension Liability - CalSTRS ...... 62 Schedule of the District’s Proportionate Share of the Net Pension Liability - CalPERS ...... 63 Schedule of District Contributions - CalSTRS ...... 64 Schedule of District Contributions - CalPERS ...... 65 Notes to Required Supplementary Information ...... 66

GROSSMONT UNION HIGH SCHOOL DISTRICT TABLE OF CONTENTS (continued) JUNE 30, 2019

SUPPLEMENTARY INFORMATION

Schedule of Expenditures of Federal Awards ...... 68 Schedule of Average Daily Attendance (ADA) ...... 69 Schedule of Instructional Time ...... 70 Schedule of Financial Trends and Analysis ...... 71 Reconciliation of Annual Financial and Budget Report with Audited Financial Statements ...... 72 Schedule of Charter Schools ...... 73 Combining Statements – Non-Major Governmental Funds Combining Balance Sheet ...... 74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ...... 75 Adult Education Fund – Budgetary Comparison Schedule ...... 76 Cafeteria Fund – Budgetary Comparison Schedule ...... 77 Building Fund – Budgetary Comparison Schedule ...... 78 Capital Facilities Fund – Budgetary Comparison Schedule ...... 79 County School Facilities Fund – Budgetary Comparison Schedule ...... 80 Special Reserve for Capital Outlay Fund – Budgetary Comparison Schedule ...... 81 Bond Interest and Redemption Fund– Budgetary Comparison Schedule ...... 82 Internal Service Fund – Budgetary Comparison Schedule ...... 83 Local Education Agency Organization Structure ...... 84 Notes to Supplementary Information ...... 85

OTHER INDEPENDENT AUDITORS’ REPORTS

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...... 87 Report on Compliance For Each Major Federal Program; and Report on Internal Control Over Compliance Required by the Uniform Guidance ...... 89 Report on State Compliance ...... 91

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Summary of Auditors’ Results ...... 94 Financial Statement Findings ...... 95 Federal Award Findings and Questioned Costs ...... 96 State Award Findings and Questioned Costs ...... 97 Summary Schedule of Prior Audit Findings ...... 98 Management Letter ...... 99

FINANCIAL SECTION

Certified Public Accountants serving K-12 School Districts and Charter Schools throughout California

INDEPENDENT AUDITORS’ REPORT

Governing Board Grossmont Union High School District El Cajon, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Grossmont Union High School District, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Grossmont Union High School District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Grossmont Union High School District, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 348 Olive Street O: 619-270-8222 San Diego, CA F: 619-260-9085 92103 christywhite.com 1

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the required supplementary information, such as management’s discussion and analysis, budgetary comparison information, schedules of changes in net OPEB liability and related ratios, schedules of proportionate share of net pension liability, and schedules of District contributions for pensions be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Grossmont Union High School District’s basic financial statements. The supplementary information listed in the table of contents, including the schedule of expenditures of Federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the basic financial statements.

The supplementary information listed in the table of contents is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 4, 2019 on our consideration of Grossmont Union High School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Grossmont Union High School District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Grossmont Union High School District’s internal control over financial reporting and compliance.

San Diego, California November 4, 2019

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS

INTRODUCTION

Our discussion and analysis of Grossmont Union High School District’s (District) financial performance provides an overview of the District’s financial activities for the fiscal year ended June 30, 2019. It should be read in conjunction with the District’s financial statements, which follow this section.

FINANCIAL HIGHLIGHTS

 The District’s total net position was $49,053,251 at June 30, 2019. This was an increase of $5,831,161 from the prior year.  Overall revenues were $311,901,935 which exceeded expenses of $306,070,774.

OVERVIEW OF FINANCIAL STATEMENTS

Components of the Financials Section

Management's Required Basic Financial Discussion & Supplementary Statements Analysis Information

Government-Wide Notes to the Fund Financial Financial Financial Statements Statements Statements

Summary Detail

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS, continued FOR THE YEAR ENDED JUNE 30, 2019

This annual report consists of three parts – Management’s Discussion and Analysis (this section), the basic financial statements, and required supplementary information. The three sections together provide a comprehensive overview of the District. The basic financial statements are comprised of two kinds of statements that present financial information from different perspectives:

 Government-wide financial statements, which comprise the first two statements, provide both short-term and long-term information about the entity’s overall financial position.

 Fund financial statements focus on reporting the individual parts of District operations in more detail. The fund financial statements comprise the remaining statements.

 Governmental Funds provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District’s programs.

 Proprietary Funds report services for which the District charges customers a fee. Like the government-wide statements, they provide both long- and short-term financial information.

 Fiduciary Funds report balances for which the District is a custodian or trustee of the funds, such as Associated Student Bodies and pension funds.

The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The basic financial statements are followed by a section of required and other supplementary information that further explain and support the financial statements.

Government-Wide Statements

The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the statement of activities, regardless of when cash is received or paid.

The two government-wide statements report the District’s net position and how it has changed. Net position is one way to measure the District’s financial health. Over time, increases or decreases in the District’s net position are an indicator of whether its financial health is improving or deteriorating, respectively.

The government-wide financial statements of the District include governmental activities. All of the District’s basic services are included here, such as regular education, food service, maintenance and general administration. Local control formula funding and federal and state grants finance most of these activities.

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS, continued FOR THE YEAR ENDED JUNE 30, 2019

FINANCIAL ANALYSIS OF THE ENTITY AS A WHOLE

Net Position

The District’s net position was $49,053,251 at June 30, 2019, as reflected in the table below. Of this amount, $(308,046,188) was unrestricted. Restricted net position is reported separately to show legal constraints from debt covenants and enabling legislation that limit the Governing Board’s ability to use that net position for day-to-day operations.

Governmental Activities 2019 2018 Net Change ASSETS Current and other assets $ 221,431,747 $ 205,171,900 $ 16,259,847 Capital assets 793,200,416 743,519,962 49,680,454 Total Assets 1,014,632,163 948,691,862 65,940,301

DEFERRED OUTFLOWS OF RESOURCES 88,581,806 96,346,451 (7,764,645)

LIABILITIES Current liabilities 62,102,491 47,208,263 14,894,228 Long-term liabilities 969,411,074 934,065,314 35,345,760 Total Liabilities 1,031,513,565 981,273,577 50,239,988

DEFERRED INFLOWS OF RESOURCES 22,647,153 20,542,646 2,104,507

NET POSITION Net investment in capital assets 258,091,135 239,617,380 18,473,755 Restricted 99,008,304 79,413,937 19,594,367 Unrestricted (308,046,188) (275,809,227) (32,236,961) Total Net Position $ 49,053,251 $ 43,222,090 $ 5,831,161

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS, continued FOR THE YEAR ENDED JUNE 30, 2019

FINANCIAL ANALYSIS OF THE ENTITY AS A WHOLE (continued)

Changes in Net Position

The results of this year’s operations for the District as a whole are reported in the Statement of Activities. The table below takes the information from the Statement and rearranges it slightly, so you can see our total revenues and expenses for the year.

Governmental Activities 2019 2018 Net Change REVENUES Program revenues Charges for services $ 3,548,977 $ 2,368,167 $ 1,180,810 Operating grants and contributions 56,525,496 51,596,854 4,928,642 Capital grants and contributions 16,275,472 3,257,183 13,018,289 General revenues Property taxes 153,653,884 144,692,763 8,961,121 Unrestricted federal and state aid 62,781,903 60,728,002 2,053,901 Other 19,116,203 16,944,416 2,171,787 Total Revenues 311,901,935 279,587,385 32,314,550 EXPENSES Instruction 136,255,690 133,635,586 2,620,104 Instruction-related services 34,647,344 33,919,871 727,473 Pupil services 32,665,015 29,392,038 3,272,977 General administration 15,800,705 14,540,541 1,260,164 Plant services 24,646,971 26,123,757 (1,476,786) Ancillary and community services 2,200,560 1,983,022 217,538 Debt service 28,825,783 29,177,954 (352,171) Other outgo 1,110,995 375,913 735,082 Depreciation 28,896,932 40,709,795 (11,812,863) Enterprise activities 1,020,779 (2,177,377) 3,198,156 Total Expenses 306,070,774 307,681,100 (1,610,326) Change in net position 5,831,161 (28,093,715) 33,924,876 Net Position - Beginning 43,222,090 71,315,805 (28,093,715) Net Position - Ending $ 49,053,251 $ 43,222,090 $ 5,831,161

The cost of all our governmental activities this year was $306,070,774 (refer to the table above). The amount received through property taxes was $153,653,884.

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS, continued FOR THE YEAR ENDED JUNE 30, 2019

FINANCIAL ANALYSIS OF THE ENTITY AS A WHOLE (continued)

Changes in Net Position (continued)

In the table below, we have presented the net cost of each of the District’s functions. Net cost is the total expenses net of program revenues. Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function.

Net Cost of Services 2019 2018 Instruction $ 85,807,587 $ 103,950,522 Instruction-related services 27,680,611 26,924,373 Pupil services 19,224,489 18,172,722 General administration 13,844,337 13,048,735 Plant services 21,324,263 18,634,889 Ancillary and community services 2,176,069 1,984,361 Debt service 28,825,783 29,177,954 Transfers to other agencies 919,979 32,922 Depreciation 28,896,932 40,709,795 Enterprise activities 1,020,779 (2,177,377) Total Expenses $ 229,720,829 $ 250,458,896

FINANCIAL ANALYSIS OF THE DISTRICT’S MAJOR FUNDS

The financial performance of the District as a whole is reflected in its governmental funds as well. As the District completed this year, its governmental funds reported a combined fund balance of $179,626,046, which is more than last year’s ending fund balance of $176,372,032. The District’s General Fund had $3,777,573 more in operating revenues than expenditures for the year ended June 30, 2019. The Building Fund balance decreased $24,450,615 due to ongoing construction under Proposition U and Measure BB. The County School Facilities Fund had $15,334,152 more in operating revenues than expenditures for the year ended June 30, 2019. The Bond Interest and Redemption Fund had $3,010,329 more in operating revenues than expenditures for the year ended June 30, 2019.

CURRENT YEAR BUDGET 2018-2019

During the fiscal year, budget revisions and appropriation transfers are presented to the Board for their approval on a regular basis to reflect changes to both revenues and expenditures that become known during the year. In addition, the Governing Board approves financial projections included with the Adopted Budget, First Interim, and Second Interim financial reports. The Unaudited Actuals reflect the District’s financial projections and current budget based on State and local financial information.

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS, continued FOR THE YEAR ENDED JUNE 30, 2019

CAPITAL ASSETS AND LONG-TERM LIABILITIES

Capital Assets

By the end of 2018-2019 the District had invested $793,200,416 in capital assets, net of accumulated depreciation.

Governmental Activities 2019 2018 Net Change CAPITAL ASSETS Land $ 39,069,840 $ 39,069,840 $ - Construction in progress 128,834,776 53,049,408 75,785,368 Land improvements 153,333,101 152,927,133 405,968 Buildings & improvements 771,111,763 771,133,403 (21,640) Furniture & equipment 27,143,791 26,904,512 239,279 Accumulated depreciation (326,292,855) (299,564,334) (26,728,521) Total Capital Assets $ 793,200,416 $ 743,519,962 $ 49,680,454

Long-Term Liabilities

At year-end, the District had $969,411,074 in long-term liabilities, an increase of 3.78% from last year – as shown in the table below. (More detailed information about the District’s long-term liabilities is presented in footnotes to the financial statements.)

Governmental Activities 2019 2018 Net Change LONG-TERM LIABILITIES Total general obligation bonds $ 695,385,787 $ 655,739,214 $ 39,646,573 Capital leases 2,170,262 2,177,888 (7,626) Compensated absences 2,462,793 2,529,726 (66,933) Net OPEB liability 59,647,257 58,126,265 1,520,992 Net pension liability 232,937,245 235,168,297 (2,231,052) Less: current portion of long-term liabilities (23,192,270) (19,676,076) (3,516,194) Total Long-term Liabilities $ 969,411,074 $ 934,065,314 $ 35,345,760

GROSSMONT UNION HIGH SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS, continued FOR THE YEAR ENDED JUNE 30, 2019

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET

At the time these financial statements were prepared and audited, the District was aware of several circumstances that could affect its future financial health.

The US economy continues to grow slowly, but the State economic growth is slowing down due to low levels of available employees. However, the State is still experiencing overall economic prosperity. The State Budget for Education contained an increase of 3.26% in fiscal year 2019-20, plus $3.15 billion in non-Proposition 98 funding for school employer pension relief.

The fiscal policy for the funding of public education changes annually, based on fluctuations in State revenues. The UCLA Anderson Forecast (June 2019) noted that the risk of recession is about 50% within the next 5-8 quarters depending on the model, the biggest economic threat being from the escalating trade war with China and Mexico. If a recession were to happen, State revenues for public education would be negatively impacted.

Landmark legislation passed in Year 2013 reformed California school district finance by creating the Local Control Funding Formula (LCFF). The LCFF is designed to provide a flexible funding mechanism that links student achievement to state funding levels. The LCFF provides a per pupil base grant amount, by grade span, that is augmented by supplemental funding for targeted student groups in low income brackets, those that are English language learners and foster youth.

Factors related to LCFF that the District is monitoring include: (1) estimates of funding in the next budget year and beyond; (2) the Local Control and Accountability Plan (LCAP) that aims to link student accountability measurements to funding allocations; (3) ensuring the integrity of reporting student data through the California Longitudinal Pupil Achievement Data System (CALPADs); and, (4) meeting annual compliance and audit requirements.

The District participates in state employee pensions plans, PERS and STRS, and both are underfunded. The District’s proportionate share of the liability is reported in the Statement of Net Position as of June 30, 2019. The amount of the liability is material to the financial position of the District. To address the underfunding issues, the pension plans received a one-time funding allocation from the 2019-20 State Budget and continue to raise employer rates in future years. The projected increased pension costs to school employers remain a significant fiscal factor.

Enrollment can fluctuate due to factors such as population growth, competition from private, parochial, inter-district transfers in or out, economic conditions and housing values. Losses in enrollment will cause a school district to lose operating revenues without necessarily permitting the district to make adjustments in fixed operating costs.

All of these factors were considered in preparing the District’s budget for the 2019-20 fiscal year.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District’s finances and to show the District’s accountability for the money it receives. If you have questions about this report or need any additional financial information, contact the Business Office at (619) 644- 8000.

GROSSMONT UNION HIGH SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2019

Governmental Activities ASSETS Cash and investments $ 201,326,021 Accounts receivable 17,418,631 Inventory 356,217 Prepaid expenses 265,878 Other current assets 2,065,000 Capital assets, not depreciated 167,904,616 Capital assets, net of accumulated depreciation 625,295,800 Total Assets 1,014,632,163

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pensions 60,692,306 Deferred outflows related to OPEB 2,503,495 Deferred amount on refunding 25,386,005 Total Deferred Outflows of Resources 88,581,806

LIABILITIES Accrued liabilities 38,708,238 Unearned revenue 201,983 Long-term liabilities, current portion 23,192,270 Long-term liabilities, non-current portion 969,411,074 Total Liabilities 1,031,513,565

DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions 22,186,674 Deferred inflows related to OPEB 460,479 Total Deferred Inflows of Resources 22,647,153

NET POSITION Net investment in capital assets 258,091,135 Restricted: Capital projects 45,230,223 Debt service 44,920,609 Educational programs 6,904,556 All others 1,952,916 Unrestricted (308,046,188) Total Net Position $ 49,053,251

The accompanying notes are an integral part of these financial statements. 10

GROSSMONT UNION HIGH SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019

Net (Expenses) Revenues and Changes in Program Revenues Net Position Operating Capital Charges for Grants and Grants and Governmental Function/Programs Expenses Services Contributions Contributions Activities GOVERNMENTAL ACTIVITIES Instruction $ 136,255,690 $ 64,445 $ 34,108,186 $ 16,275,472 $ (85,807,587) Instruction-related services Instructional supervision and administration 10,821,497 17,419 2,763,660 - (8,040,418) Instructional library, media, and technology 3,238,294 - 108,849 - (3,129,445) School site administration 20,587,553 4,475 4,072,330 - (16,510,748) Pupil services Home-to-school transportation 7,880,390 584 1,836,205 - (6,043,601) Food services 7,953,963 1,827,597 5,794,697 - (331,669) All other pupil services 16,830,662 4,141 3,977,302 - (12,849,219) General administration Centralized data processing 5,128,302 - 165,575 - (4,962,727) All other general administration 10,672,403 105,419 1,685,374 - (8,881,610) Plant services 24,646,971 1,524,727 1,797,981 - (21,324,263) Ancillary services 1,693,421 - 23,565 - (1,669,856) Community services 507,139 - 926 - (506,213) Enterprise activities 1,020,779 - - - (1,020,779) Interest on long-term debt 28,825,783 - - - (28,825,783) Other outgo 1,110,995 170 190,846 - (919,979) Depreciation (unallocated) 28,896,932 - - - (28,896,932) Total Governmental Activities $ 306,070,774 $ 3,548,977 $ 56,525,496 $ 16,275,472 (229,720,829) General revenues Taxes and subventions Property taxes, levied for general purposes 116,290,883 Property taxes, levied for debt service 35,446,762 Property taxes, levied for other specific purposes 1,916,239 Federal and state aid not restricted for specific purposes 62,781,903 Interest and investment earnings 2,034,971 Interagency revenues 9,031,288 Miscellaneous 8,049,944 Subtotal, General Revenue 235,551,990 CHANGE IN NET POSITION 5,831,161 Net Position - Beginning 43,222,090 Net Position - Ending $ 49,053,251

The accompanying notes are an integral part of these financial statements. 11

GROSSMONT UNION HIGH SCHOOL DISTRICT GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2019

Non-Major Total County School Bond Interest & Governmental Governmental General Fund Building Fund Facilities Fund Redemption Fund Funds Funds ASSETS Cash and investments $ 26,713,212 $ 62,242,461 $ 34,524,904 $ 51,786,723 $ 16,144,967 $ 191,412,267 Accounts receivable 13,160,168 1,030,742 262,925 - 2,907,782 17,361,617 Due from other funds 894,408 16,368 - - 780,253 1,691,029 Stores inventory 213,209 - - - 143,008 356,217 Prepaid expenditures 12,044 - - - 180,141 192,185 Other current assets 1,800,000 - - - - 1,800,000 Total Assets $ 42,793,041 $ 63,289,571 $ 34,787,829 $ 51,786,723 $ 20,156,151 $ 212,813,315

LIABILITIES Accrued liabilities $ 11,700,009 $ 15,616,485 $ - $ - $ 3,974,959 $ 31,291,453 Due to other funds 792,034 36,611 - - 865,188 1,693,833 Unearned revenue 129,086 - - - 72,897 201,983 Total Liabilities 12,621,129 15,653,096 - - 4,913,044 33,187,269

FUND BALANCES Nonspendable 285,253 - - - 327,140 612,393 Restricted 4,383,899 47,636,475 34,787,829 51,786,723 14,915,967 153,510,893 Assigned 15,034,661 - - - - 15,034,661 Unassigned 10,468,099 - - - - 10,468,099 Total Fund Balances 30,171,912 47,636,475 34,787,829 51,786,723 15,243,107 179,626,046 Total Liabilities and Fund Balances $ 42,793,041 $ 63,289,571 $ 34,787,829 $ 51,786,723 $ 20,156,151 $ 212,813,315

The accompanying notes are an integral part of these financial statements. 12

GROSSMONT UNION HIGH SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2019

Total Fund Balance - Governmental Funds $ 179,626,046

Amounts reported for assets and liabilities for governmental activities in the statement of net position are different from amounts reported in governmental funds because:

Capital assets: In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation: Capital assets $ 1,119,493,271 Accumulated depreciation (326,292,855) 793,200,416

Deferred amount on refunding: In governmental funds, the net effect of refunding bonds is recognized when debt is issued, whereas this amount is deferred and amortized in the government-wide financial statements: 25,386,005

Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is not recognized until the period in which it matures and is paid. In the government-wide statement of activities, it is recognized in the period that it is incurred. The additional liability for unmatured interest owing at the end of the period was: (6,866,114)

Long-term liabilities: In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating to governmental activities consist of: Total general obligation bonds $ 695,385,787 Capital leases 2,170,262 Compensated absences 2,462,793 Net pension liability 232,937,245 (932,956,087)

Deferred outflows and inflows of resources relating to pensions: In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to pensions are reported. Deferred outflows of resources related to pensions $ 60,692,306 Deferred inflows of resources related to pensions (22,186,674) 38,505,632

Internal service funds: Internal service funds are used to conduct certain activities for which costs are charged to other funds on a full cost-recovery basis. Because internal service funds are presumed to operate for the benefit of governmental activities, assets, deferred outflows of resources, liabilities, and deferred inflows of resources of internal service funds are reported with governmental activities in the statement of net position. Net position for internal service funds is: (47,842,647)

Total Net Position - Governmental Activities $ 49,053,251

The accompanying notes are an integral part of these financial statements. 13

GROSSMONT UNION HIGH SCHOOL DISTRICT GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2019

Non-Major Total County School Bond Interest & Governmental Governmental General Fund Building Fund Facilities Fund Redemption Fund Funds Funds REVENUES LCFF sources $ 168,214,004 $ - $ - $ - $ - $ 168,214,004 Federal sources 12,148,702 - - 915,917 7,264,846 20,329,465 Other state sources 28,949,753 33,022 15,792,294 329,060 13,270,247 58,374,376 Other local sources 27,089,520 1,932,634 483,178 35,684,548 10,228,180 75,418,060 Total Revenues 236,401,979 1,965,656 16,275,472 36,929,525 30,763,273 322,335,905

EXPENDITURES Current Instruction 137,269,682 - - - 6,190,507 143,460,189 Instruction-related services Instructional supervision and administration 10,388,697 - - - 730,982 11,119,679 Instructional library, media, and technology 3,259,494 - - - - 3,259,494 School site administration 14,040,961 - - - 6,703,854 20,744,815 Pupil services Home-to-school transportation 8,286,184 - - - - 8,286,184 Food services 3,570 - - - 8,069,520 8,073,090 All other pupil services 17,108,994 - - - - 17,108,994 General administration Centralized data processing 4,873,373 - - - - 4,873,373 All other general administration 9,393,634 - - - 1,041,807 10,435,441 Plant services 22,413,804 1,019,707 - - 1,531,710 24,965,221 Facilities acquisition and maintenance 1,454,675 68,396,564 941,320 - 5,159,788 75,952,347 Ancillary services 1,713,500 - - - - 1,713,500 Community services 514,482 - - - - 514,482 Transfers to other agencies 357,771 - - - - 357,771 Debt service Principal 764,308 - - 16,383,162 - 17,147,470 Interest and other 781,277 - - 17,536,034 - 18,317,311 Total Expenditures 232,624,406 69,416,271 941,320 33,919,196 29,428,168 366,329,361 Excess (Deficiency) of Revenues Over Expenditures 3,777,573 (67,450,615) 15,334,152 3,010,329 1,335,105 (43,993,456) Other Financing Sources (Uses) Transfers in 35,824 - - - - 35,824 Other sources 756,682 43,000,000 - 3,490,788 - 47,247,470 Transfers out - - - - (35,824) (35,824) Net Financing Sources (Uses) 792,506 43,000,000 - 3,490,788 (35,824) 47,247,470

NET CHANGE IN FUND BALANCE 4,570,079 (24,450,615) 15,334,152 6,501,117 1,299,281 3,254,014 Fund Balance - Beginning 25,601,833 72,087,090 19,453,677 45,285,606 13,943,826 176,372,032 Fund Balance - Ending $ 30,171,912 $ 47,636,475 $ 34,787,829 $ 51,786,723 $ 15,243,107 $ 179,626,046

The accompanying notes are an integral part of these financial statements. 14

GROSSMONT UNION HIGH SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019

Net Change in Fund Balances - Governmental Funds $ 3,254,014

Amounts reported for governmental activities in the statement of activities are different from amounts reported in governmental funds because:

Capital outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are acquired. In the statement of activities, costs of capital assets are allocated over their estimated useful lives as depreciation expense. The difference between capital outlay expenditures and depreciation expense for the period is: Expenditures for capital outlay: $ 78,606,500 Depreciation expense: (28,896,932) 49,709,568

Debt service: In governmental funds, repayments of long-term debt are reported as expenditures. In the government-wide statements, repayments of long-term debt are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long- term debt were: 17,194,308

Debt proceeds: In governmental funds, proceeds from debt are recognized as Other Financing Sources. In the government-wide statements, proceeds from debt are reported as increases to liabilities. Amounts recognized in governmental funds as proceeds from debt, net of issue premium or discount, were: (47,247,470)

Deferred amounts on refunding: In governmental funds, deferred amounts on refunding are recognized in the period they are incurred. In the government-wide statements, the deferred amounts on refunding are amortized over the life of the debt. The net effect of the deferred amounts on refunding during the period was: (1,838,095)

Gain or loss from the disposal of capital assets: In governmental funds, the entire proceeds from disposal of capital assets are reported as revenue. In the statement of activities, only the resulting gain or loss is reported. The difference between the proceeds from disposal of capital assets and the resulting gain or loss is: (29,114)

Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period it is incurred. Unmatured interest owing at the end of the period, less matured interest paid during the period but owing from the prior period, was: 115,346

(Continued on the following page)

The accompanying notes are an integral part of these financial statements. 15

GROSSMONT UNION HIGH SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES, continued FOR THE YEAR ENDED JUNE 30, 2019

Accreted interest on long-term debt: In governmental funds, accreted interest on capital appreciation bonds is not recorded as an expenditure from current sources. In the government-wide statement of activities, however, this is recorded as interest expense for the period. (11,899,472)

Compensated absences: In governmental funds, compensated absences are measured by the amounts paid during the period. In the statement of activities, compensated absences are measured by the amount earned. The difference between compensated absences paid and compensated absences earned, was: 66,933

Pensions: In governmental funds, pension costs are recognized when employer contributions are made, in the government-wide statement of activities, pension costs are recognized on the accrual basis. This year, the difference between accrual-basis pension costs and employer contributions was: (4,787,765)

Amortization of debt issuance premium or discount: In governmental funds, if debt is issued at a premium or at a discount, the premium or discount is recognized as an Other Financing Source or an Other Financing Use in the period it is incurred. In the government-wide statements, the premium or discount is amortized over the life of the debt. Amortization of premium or discount for the period is: 2,313,687

Internal Service Funds: Internal service funds are used to conduct certain activities for which costs are charged to other funds on a full cost-recovery basis. Because internal service funds are presumed to benefit governmental activities, internal service activities are reported as governmental in the statement of activities. The net increase or decrease in internal service funds was: (1,020,779)

Change in Net Position of Governmental Activities $ 5,831,161

The accompanying notes are an integral part of these financial statements. 16

GROSSMONT UNION HIGH SCHOOL DISTRICT PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2019

Governmental Activities Internal Service Fund ASSETS Current assets Cash and investments $ 9,913,754 Accounts receivable 57,014 Due from other funds 2,804 Prepaid expenses 73,693 Other assets 265,000 Total current assets 10,312,265 Total Assets 10,312,265

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to OPEB 2,503,495 Total Deferred Outflows 2,503,495

LIABILITIES Current liabilities Accrued liabilities 550,671 Total current liabilities 550,671 Non-current liabilities Net OPEB liability 59,647,257 Total non-current liabilities 59,647,257 Total Liabilities 60,197,928

DEFERRED INFLOWS OF RESOURCES Deferred inflows related to OPEB 460,479 Total Deferred Inflows 460,479

NET POSITION Restricted (47,842,647) Total Net Position $ (47,842,647)

The accompanying notes are an integral part of these financial statements. 17

GROSSMONT UNION HIGH SCHOOL DISTRICT PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2019

Governmental Activities Internal Service Fund OPERATING REVENUE Charges for services $ 4,677,590 Other local revenues 614,371 Total operating revenues 5,291,961

OPERATING EXPENSE Professional services 6,815,251 Total operating expenses 6,815,251 Operating income/(loss) (1,523,290)

NON-OPERATING REVENUES Interest income 502,511 Total non-operating revenues/(expenses) 502,511

CHANGE IN NET POSITION (1,020,779) Net Position - Beginning (46,821,868) Net Position - Ending $ (47,842,647)

The accompanying notes are an integral part of these financial statements. 18

GROSSMONT UNION HIGH SCHOOL DISTRICT PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2019

Governmental Activities Internal Service Fund Cash flows from operating activities Cash received from user charges $ 5,835,292 Cash payments for payroll, insurance, and operating costs (4,868,112) Net cash provided by (used for) operating activities 967,180 Cash flows from investing activities Interest received 502,511 Net cash provided by (used for) investing activities 502,511 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,469,691

CASH AND CASH EQUIVALENTS Beginning of year 8,444,063 End of year $ 9,913,754

Reconciliation of operating income (loss) to cash provided by (used for) operating activities Operating income/(loss) $ (1,523,290) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Changes in assets and liabilities: (Increase) decrease in accounts receivables (13,955) (Increase) decrease in prepaid expenses (10,598) (Increase) decrease in due from other funds (2,804) (Increase) decrease in deferred outflows of resources 570,688 Increase (decrease) in accounts payable (15,239) Increase (decrease) in due to other funds (166) Increase (decrease) in deferred inflows of resources 441,552 Increase (decrease) in net OPEB liability 1,520,992 Net cash provided by (used for) operating activities $ 967,180

The accompanying notes are an integral part of these financial statements. 19

GROSSMONT UNION HIGH SCHOOL DISTRICT FIDUCIARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2019

Trust Funds Agency Funds Private-Purpose Student Body Trust Fund Fund ASSETS Cash and investments $ 578,674 $ 2,942,840 Accounts receivable 3,157 19,228 Total Assets 581,831 $ 2,962,068

LIABILITIES Accrued liabilities 12,500 $ - Due to student groups - 2,962,068 Total Liabilities 12,500 $ 2,962,068

NET POSITION Restricted 569,331 Total Net Position $ 569,331

The accompanying notes are an integral part of these financial statements. 20

GROSSMONT UNION HIGH SCHOOL DISTRICT FIDUCIARY FUNDS STATEMENT OF CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2019

Trust Funds Private-Purpose Trust Fund ADDITIONS Investment earnings $ 12,578 Other 10,000 Total Additions 22,578

DEDUCTIONS Other trust activities 39,327 Total Deductions 39,327

CHANGE IN NET POSITION (16,749) Net Position - Beginning 586,080 Net Position - Ending $ 569,331

The accompanying notes are an integral part of these financial statements. 21

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Financial Reporting Entity

The Grossmont Union High School District (the “District”) accounts for its financial transactions in accordance with the policies and procedures of the Department of Education's California School Accounting Manual. The accounting policies of the District conform to generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA).

The District operates under a locally elected Board form of government and provides educational services to grades 9-12 as mandated by the state. A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments and agencies that are not legally separate from the District. For the District, this includes general operations, food service, and student-related activities.

B. Component Units

Component units are legally separate organizations for which the District is financially accountable. Component units may also include organizations that are fiscally dependent on the District in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization’s relationship with the District is such that exclusion would cause the District’s financial statements to be misleading or incomplete. The District has no such component units.

C. Basis of Presentation

Government-Wide Statements. The statement of net position and the statement of activities display information about the primary government (the District). These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenue, and other non-exchange transactions.

The statement of activities presents a comparison between direct expenses and program revenue for each function of the District’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expense allocations that have been made in the funds have been reserved for the statement of activities. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting of operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the District.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

C. Basis of Presentation (continued)

Fund Financial Statements. The fund financial statements provide information about the District’s funds, including its proprietary and fiduciary funds. Separate statements for each fund category – governmental, proprietary and fiduciary – are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as non-major funds.

Governmental funds are used to account for activities that are governmental in nature. Governmental activities are typically tax-supported and include education of pupils, operation of food service and child development programs, construction and maintenance of school facilities, and repayment of long-term debt.

Proprietary funds are used to account for activities that are more business-like than government-like in nature. Business-type activities include those for which a fee is charged to external users or to other organizational units of the District, normally on a full cost-recovery basis. Proprietary funds are generally intended to be self- supporting.

Fiduciary funds are used to account for assets held by the District in a trustee or agency capacity for others that cannot be used to support the District's own programs.

Major Governmental Funds

General Fund: The General Fund is the main operating fund of the District. It is used to account for all activities except those that are required to be accounted for in another fund. In keeping with the minimum number of funds principle, all of the District's activities are reported in the General Fund unless there is a compelling reason to account for an activity in another fund. A District may have only one General Fund.

Building Fund: This fund exists primarily to account separately for proceeds from the sale of bonds (Education Code Section 15146) and may not be used for any purposes other than those for which the bonds were issued. Other authorized revenues to the Building Fund are proceeds from the sale or lease-with-option-to-purchase of real property (Education Code Section 17462) and revenue from rentals and leases of real property specifically authorized for deposit into the fund by the governing board (Education Code Section 41003).

County School Facilities Fund: This fund is established pursuant to Education Code Section 17070.43 to receive apportionments from the 1998 State School Facilities Fund (Proposition 1A), the 2002 State School Facilities Fund (Proposition 47), or the 2004 State School Facilities Fund (Proposition 55) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section 17070 et seq.).

Bond Interest and Redemption Fund: This fund is used for the repayment of bonds issued for the District (Education Code Sections 15125–15262). The board of supervisors of the county issues the bonds. The proceeds from the sale of the bonds are deposited in the county treasury to the Building Fund of the District. Any premiums or accrued interest received from the sale of the bonds must be deposited in the Bond Interest and Redemption Fund of the District. The county auditor maintains control over the District's Bond Interest and Redemption Fund. The principal and interest on the bonds must be paid by the county treasurer from taxes levied by the county auditor-controller.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

C. Basis of Presentation (continued)

Non-Major Governmental Funds

Special Revenue Funds: Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service or capital projects. The District maintains the following special revenue funds:

Adult Education Fund: This fund is used to account separately for federal, state, and local revenues for adult education programs. Money in this fund shall be expended for adult education purposes only. Moneys received for programs other than adult education shall not be expended for adult education (Education Code Sections 52616[b] and 52501.5[a]).

Cafeteria Fund: This fund is used to account separately for federal, state, and local resources to operate the food service program (Education Code Sections 38090–38093). The Cafeteria Fund shall be used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections 38091 and 38100).

Capital Project Funds: Capital project funds are established to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds).

Capital Facilities Fund: This fund is used primarily to account separately for moneys received from fees levied on developers or other agencies as a condition of approving a development (Education Code Sections 17620–17626). The authority for these levies may be county/city ordinances (Government Code Sections 65970–65981) or private agreements between the District and the developer. Interest earned in the Capital Facilities Fund is restricted to that fund (Government Code Section 66006).

Special Reserve Fund for Capital Outlay Projects: This fund exists primarily to provide for the accumulation of General Fund moneys for capital outlay purposes (Education Code Section 42840).

Proprietary Funds

Internal Service Funds: Internal service funds are created principally to render services to other organizational units of the District on a cost-reimbursement basis. These funds are designed to be self-supporting with the intent of full recovery of costs, including some measure of the cost of capital assets, through user fees and charges.

Self-Insurance Fund: Self-insurance funds are used to separate moneys received for self-insurance activities from other operating funds of the District. Separate funds may be established for each type of self- insurance activity, such as workers' compensation, health and welfare, and deductible property loss (Education Code Section 17566).

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

C. Basis of Presentation (continued)

Fiduciary Funds

Trust and Agency Funds: Trust and agency funds are used to account for assets held in a trustee or agent capacity for others that cannot be used to support the District's own programs. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held.

Private-Purpose Trust Fund: This fund is used to account separately for gifts or bequests per Education Code Section 41031 that benefit individuals, private organizations, or other governments and under which neither principal nor income may be used for purposes that support the District's own programs.

Student Body Fund: The Student Body Fund is an agency fund and, therefore, consists only of accounts such as cash and balancing liability accounts, such as due to student groups. The student body itself maintains its own general fund, which accounts for the transactions of that entity in raising and expending money to promote the general welfare, morale, and educational experiences of the student body (Education Code Sections 48930–48938).

D. Basis of Accounting – Measurement Focus

Government-Wide, Proprietary, and Fiduciary Financial Statements The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus. The government-wide, proprietary, and fiduciary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Net Position equals assets and deferred outflows of resources minus liabilities and deferred inflows of resources. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. The net position should be reported as restricted when constraints placed on its use are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The net position restricted for other activities results from special revenue funds and the restrictions on their use.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the internal service fund are charges to other funds for self-insurance costs. Operating expenses for internal service funds include the costs of insurance premiums and claims related to self-insurance.

Governmental Funds Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Governmental funds use the modified accrual basis of accounting.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

D. Basis of Accounting – Measurement Focus (continued)

Revenues – Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. “Available” means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. Generally, “available” means collectible within the current period or within 60 days after year-end. However, to achieve comparability of reporting among California school districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to State-aid apportionments, the California Department of Education has defined available for school districts as collectible within one year.

Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from the grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied.

Eligibility requirements include timing requirements, which specify the year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

Unearned Revenue Unearned revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the balance sheet and revenue is recognized.

Certain grants received that have not met eligibility requirements are recorded as unearned revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as unearned revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Fund Balance and Net Position

Cash and Cash Equivalents The District’s cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Cash equivalents also include cash with county treasury balances for purposes of the statement of cash flows.

Investments Investments with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in county and State investment pools are determined by the program sponsor.

Inventories Inventories are recorded using the purchases method in that the cost is recorded as an expenditure at the time the individual inventory items are requisitioned. Inventories are valued at historical cost and consist of expendable supplies held for consumption.

Capital Assets The accounting and reporting treatment applied to the capital assets associated with a fund is determined by its measurement focus. Capital assets are reported in the governmental activities column of the government-wide statement of net position but are not reported in the fund financial statements.

Capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their acquisition value as of the date received. The District maintains a capitalization threshold of $5,000. The District does not own any infrastructure as defined in GASB Statement No. 34. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are not capitalized. All reported capital assets, except for land and construction in progress, are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following estimated useful lives:

Asset Class Estimated Useful Life Buildings and Improvements 5-50 years Furniture and Equipment 2-15 years Vehicles 8 years

Interfund Balances On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as "Due from other funds/Due to other funds.” These amounts are eliminated in the governmental activities columns of the statement of net position.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Fund Balance and Net Position (continued)

Compensated Absences Accumulated unpaid employee vacation benefits are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide financial statements. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year-end that have not yet been paid with expendable available financial resource. These amounts are recorded in the fund from which the employees who have accumulated leave are paid.

Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken because such benefits do not vest, nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires.

Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the government-wide and proprietary fund financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the funds.

Postemployment Benefits Other Than Pensions (OPEB) For purposes of measuring the net OPEB liability, deferred outflows of resources related to OPEB and deferred inflows of resources related to OPEB, and OPEB expense have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms.

Generally accepted accounting principles require the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2017 Measurement Date June 30, 2018 Measurement Period June 30, 2017 - June 30, 2018

Gains and losses related to changes in net OPEB liability are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the source of gain or loss. The difference between projected and actual earnings is amortized on a straight-line basis over five years. All other amounts are amortized on a straight-line basis over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) at the beginning of the measurement period.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Fund Balance and Net Position (continued)

Premiums and Discounts In the government-wide and proprietary fund financial statements, long-term obligations are reported as liabilities in the applicable governmental activities or proprietary fund statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method.

Deferred Outflows/Deferred Inflows of Resources In addition to assets, the District will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the District will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time.

Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the defined benefit pension plans (the Plans) of the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by the Plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Fund Balance and Net Position (continued)

Fund Balance Fund balance is divided into five classifications based primarily on the extent to which the District is bound to observe constraints imposed upon the use of the resources in the governmental funds. The classifications are as follows:

Nonspendable - The nonspendable fund balance classification reflects amounts that are not in spendable form. Examples include inventory, prepaid items, the long-term portion of loans receivable, and nonfinancial assets held for resale. This classification also reflects amounts that are in spendable form but that are legally or contractually required to remain intact, such as the principal of a permanent endowment.

Restricted - The restricted fund balance classification reflects amounts subject to externally imposed and legally enforceable constraints. Such constraints may be imposed by creditors, grantors, contributors, or laws or regulations of other governments, or may be imposed by law through constitutional provisions or enabling legislation.

Committed - The committed fund balance classification reflects amounts subject to internal constraints self- imposed by formal action of the Governing Board. The constraints giving rise to committed fund balance must be imposed no later than the end of the reporting period. The actual amounts may be determined subsequent to that date but prior to the issuance of the financial statements. In contrast to restricted fund balance, committed fund balance may be redirected by the government to other purposes as long as the original constraints are removed or modified in the same manner in which they were imposed, that is, by the same formal action of the Governing Board.

Assigned - The assigned fund balance classification reflects amounts that the government intends to be used for specific purposes. Assignments may be established either by the Governing Board or by a designee of the governing body and are subject to neither the restricted nor committed levels of constraint. In contrast to the constraints giving rise to committed fund balance, constraints giving rise to assigned fund balance are not required to be imposed, modified, or removed by formal action of the Governing Board. The action does not require the same level of formality and may be delegated to another body or official. Additionally, the assignment need not be made before the end of the reporting period, but rather may be made any time prior to the issuance of the financial statements.

Unassigned - In the General Fund only, the unassigned fund balance classification reflects the residual balance that has not been assigned to other funds and that is not restricted, committed, or assigned to specific purposes. However, deficits in any fund, including the General Fund that cannot be eliminated by reducing or eliminating amounts assigned to other purposes are reported as negative unassigned fund balance.

The District applies restricted resources first when expenditures are incurred for purposes for which either restricted or unrestricted (committed, assigned and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

F. Interfund Activity

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after non-operating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented in the financial statements. Interfund transfers are eliminated in the governmental activities columns of the statement of activities.

G. Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

H. Budgetary Data

The budgetary process is prescribed by provisions of the California Education Code and requires the governing board to hold a public hearing and adopt an operating budget no later than July 1 of each year. The District governing board satisfied these requirements. The adopted budget is subject to amendment throughout the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption with the legal restriction that expenditures cannot exceed appropriations by major object account.

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts after all budget amendments have been accounted for. For purposes of the budget, on-behalf payments have not been included as revenue and expenditures as required under generally accepted accounting principles.

I. Property Tax

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The County Auditor-Controller bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

J. New Accounting Pronouncements

GASB Statement No. 84 – In January 2017, GASB issued Statement No. 84, Fiduciary Activities. This standard’s primary objective is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The statement is effective for periods beginning after December 15, 2018. The District has not yet determined the impact on the financial statements.

GASB Statement No. 87 – In June 2017, GASB issued Statement No. 87, Leases. This standard’s primary objective is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. The statement is effective for periods beginning after December 15, 2019. The District has not determined the impact on the financial statements.

GASB Statement No. 88 – In April 2018, GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. This standard’s primary objective is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. The statement is effective for periods beginning after June 15, 2018. The District has implemented GASB Statement No. 88 for the year ended June 30, 2019.

NOTE 2 – CASH AND INVESTMENTS

A. Summary of Cash and Investments

Governmental Internal Service Governmental Fiduciary Funds Funds Activities Funds Investment in county treasury $ 189,041,802 $ 3,742,946 $ 192,784,748 $ 270,571 Cash on hand and in banks 2,306,474 222,926 2,529,400 3,250,943 Cash with fiscal agent - 5,947,882 5,947,882 - Cash in revolving fund 63,991 - 63,991 - Total cash and investments $ 191,412,267 $ 9,913,754 $ 201,326,021 $ 3,521,514

B. Policies and Practices

The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the state; U.S. Treasury instruments; registered state warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; collateralized mortgage obligations; and the County Investment Pool.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 2 – CASH AND INVESTMENTS (continued)

B. Policies and Practices (continued)

Investment in County Treasury – The District maintains substantially all of its cash in the County Treasury in accordance with Education Code Section 41001. The San Diego County Treasurer’s pooled investments are managed by the County Treasurer who reports on a monthly basis to the board of supervisors. In addition, the function of the County Treasury Oversight Committee is to review and monitor the County’s investment policy. The committee membership includes the Treasurer and Tax Collector, the Auditor-Controller, Chief Administrative Officer, Superintendent of Schools Representative, and a public member. The fair value of the District's investment in the pool is based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis.

C. General Authorizations

Except for investments by trustees of debt proceeds, the authority to invest District funds deposited with the county treasury is delegated to the County Treasurer and Tax Collector. Additional information about the investment policy of the County Treasurer and Tax Collector may be obtained from its website. The table below identifies the investment types permitted by California Government Code.

Maximum Maximum Maximum Remaining Percentage of Investment in Authorized Investment Type Maturity Portfolio One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U. S. Treasury Obligations 5 years None None U. S. Agency Securities 5 years None None Banker’s Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None

D. Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the County Treasury. The District maintains a pooled investment with the County Treasury with a fair value of approximately $193,518,880 and an amortized book value of $193,055,880. The average weighted maturity for this pool is 528 days.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 2 – CASH AND INVESTMENTS (continued)

E. Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The investments in the County Treasury are not required to be rated. As of June 30, 2019, the pooled investments in the County Treasury were rated at least A.

F. Custodial Credit Risk – Deposits

This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2019, the District's bank balance was exposed to custodial credit risk amounting to $5,594,334 because it was uninsured and collateralized with securities held by the pledging financial institution's trust department or agency, but not in the name of the District.

G. Fair Value

The District categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy is based on the valuation inputs used to measure an asset's fair value. The following provides a summary of the hierarchy used to measure fair value:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, or other inputs that are observable, either directly or indirectly.

Level 3 - Unobservable inputs should be developed using the best information available under the circumstances, which might include the District's own data. The District should adjust that data if reasonable available information indicates that other market participants would use different data or certain circumstances specific to the District are not available to other market participants.

Uncategorized - Investments in the San Diego County Treasury Investment Pool are not measured using the input levels above because the District's transactions are based on a stable net asset value per share. All contributions and redemptions are transacted at $1.00 net asset value per share.

The District's fair value measurements at June 30, 2019 were as follows:

Uncategorized Investment in county treasury $ 193,518,880

Total fair market value of investments $ 193,518,880

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2019 consisted of the following:

Non-Major County School Governmental Internal Service Governmental General Fund Building Fund Facilities Fund Funds Funds Activities Fiducary Funds Federal Government Categorical aid $ 4,651,263 $ - $ - $ 1,605,533 $ - $ 6,256,796 $ - State Government Apportionment 3,849,431 - - 230,364 - 4,079,795 - Lottery 821,786 - - - - 821,786 - Local Government Other local sources 3,837,688 1,030,742 262,925 1,071,885 57,014 6,260,254 22,385 Total $ 13,160,168 $ 1,030,742 $ 262,925 $ 2,907,782 $ 57,014 $ 17,418,631 $ 22,385

NOTE 4 – CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2019 was as follows:

Balance Balance July 01, 2018 Additions Deletions June 30, 2019 Governmental Activities Capital assets not being depreciated Land $ 39,069,840 $ - $ - $ 39,069,840 Construction in progress 53,049,408 75,785,368 - 128,834,776 Total Capital Assets not Being Depreciated 92,119,248 75,785,368 - 167,904,616 Capital assets being depreciated Land improvements 152,927,133 405,968 - 153,333,101 Buildings & improvements 771,133,403 318,798 340,438 771,111,763 Furniture & equipment 26,904,512 2,096,366 1,857,087 27,143,791 Total Capital Assets Being Depreciated 950,965,048 2,821,132 2,197,525 951,588,655 Less Accumulated Depreciation Land improvements 82,812,224 7,102,839 - 89,915,063 Buildings & improvements 199,352,454 20,144,731 323,320 219,173,865 Furniture & equipment 17,399,656 1,649,362 1,845,091 17,203,927 Total Accumulated Depreciation 299,564,334 28,896,932 2,168,411 326,292,855 Governmental Activities Capital Assets, net $ 743,519,962 $ 49,709,568 $ 29,114 $ 793,200,416

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 5 – INTERFUND TRANSACTIONS

A. Interfund Receivables/Payables (Due From/Due To)

Individual interfund receivable and payable balances at June 30, 2019 were as follows:

Due From Other Funds Non-Major Governmental Internal Service Due To Other Funds General Fund Building Fund Funds Funds Total General Fund $ - $ 16,367 $ 772,863 $ 2,804 $ 792,034 Building Fund 29,221 - 7,390 - 36,611 Non-Major Governmental Funds 865,187 1 - - 865,188 Total Due From Other Funds $ 894,408 $ 16,368 $ 780,253 $ 2,804 $ 1,693,833

Due from the General Fund to the Adult Education Fund for program revenue. $ 711,544 Due from the Adult Education Fund to the General Fund for indirect costs, payroll and other expenditures. 642,767 Due from the Cafeteria Special Revenue Fund to the General Fund for indirect costs, payroll and other expenditures. 176,339 Due from the General Fund to the Cafeteria Special Revenue Fund for catering, salary adjustments, and negative student balance write-offs. 61,019 Due from the Building Fund to the General Fund for expenditures. 29,221 Due from the Capital Facilities Fund to the General Fund for expenditures. 24,231 Due from the Special Reserve Fund for Capital Outlay Projects to the General Fund for expenditures. 21,850 Due from the General Fund to the Building Fund for construction expenditures. 16,367 Due from the Building Fund to the Special Reserve Fund for Capital Outlay Projects for construction expenditures. 7,390 Due from the General Fund to the Internal Service Fund for medical insurance. 2,804 Due from the General Fund to the Special Reserve Fund for Capital Outlay Projects for expenditures. 300 Due from the Capital Facilities Fund to the Building Fund to balance construction project. 1 Total $ 1,693,833

B. Operating Transfers

Interfund transfers for the year ended June 30, 2019 consisted of a $35,824 transfer to the General Fund from the Special Reserve Fund for Capital Outlay Projects for moving costs.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 6 – ACCRUED LIABILITIES

Accrued liabilities at June 30, 2019 consisted of the following:

Non-Major Governmental Internal Service Governmental General Fund Building Fund Funds Funds District-Wide Activities Fiduciary Funds Payroll $ 4,168,196 $ 7,320 $ 490,921 $ 357,361 $ - $ 5,023,798 $ - Construction - 15,609,165 - - - 15,609,165 - Vendors payable 6,942,021 - 3,484,038 193,310 - 10,619,369 12,500 Unmatured interest - - - - 6,866,114 6,866,114 - Due to grantor government 589,792 - - - - 589,792 - Total $ 11,700,009 $ 15,616,485 $ 3,974,959 $ 550,671 $ 6,866,114 $ 38,708,238 $ 12,500

NOTE 7 – UNEARNED REVENUE

Unearned revenue at June 30, 2019 consisted of the following:

Non-Major Governmental Governmental General Fund Funds Activities Federal sources $ - $ 31,373 $ 31,373 State categorical sources 38,986 - 38,986 Local sources 90,100 41,524 131,624 Total $ 129,086 $ 72,897 $ 201,983

NOTE 8 – TAX AND REVENUE ANTICIPATION NOTES (TRANS)

On August 28, 2018, the District issued $21,000,000 of Tax and Revenue Anticipation Notes bearing interest at 4.0% percent. The notes were issued to supplement cash flows. Interest and principal were due and payable on June 28, 2019. The District has repaid the notes in full.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 9 – LONG-TERM LIABILITIES

A schedule of changes in long-term liabilities for the year ended June 30, 2019 consisted of the following:

Balance Balance Balance Due July 01, 2018 Additions Deductions June 30, 2019 In One Year Governmental Activities General obligation bonds $ 550,714,538 $ 43,000,000 $ 16,383,162 $ 577,331,376 $ 20,083,461 Unamortized premium 27,453,022 3,490,788 2,313,687 28,630,123 2,359,686 Accreted interest 77,571,654 11,899,472 46,838 89,424,288 91,539 Total general obligation bonds 655,739,214 58,390,260 18,743,687 695,385,787 22,534,686 Capital leases 2,177,888 756,682 764,308 2,170,262 657,584 Compensated absences 2,529,726 - 66,933 2,462,793 - Net OPEB liability 58,126,265 1,520,992 - 59,647,257 - Net pension liability 235,168,297 - 2,231,052 232,937,245 - Total $ 953,741,390 $ 60,667,934 $ 21,805,980 $ 992,603,344 $ 23,192,270

• Payments for general obligation bonds are made in the Bond Interest and Redemption Fund. • Payments for capital lease obligations are made in the General Fund. • Payments for compensated absences are typically liquidated in the General Fund and the Non-Major Governmental Funds.

A. General Obligation Bonds

Bonds Bonds Issue Maturity Interest Original Outstanding Outstanding Series Date Date Rate Issue July 01, 2018 Additions Deductions June 30, 2019 Measure H (2004) Series 2004 6/17/2004 8/1/2029 3.0%-5.375%$ 60,841,197 $ 14,521,197 $ - $ - $ 14,521,197 Series 2006 6/21/2006 6/1/2031 4.0%-5.0% 124,999,225 41,454,224 - - 41,454,224 Series 2008 8/5/2008 8/1/2033 2.0%-5.0% 88,159,578 31,869,674 - 2,165,000 29,704,674 Series 2011A 11/22/2011 8/1/2020 4.0%-5.0% 10,260,000 10,260,000 - 3,075,000 7,185,000 Measure U (2008) Series A 4/15/2009 8/1/2033 0.095%-5.5% 60,000,000 1,090,000 - 440,000 650,000 Series D 5/25/2011 8/1/2025 5.48% 25,000,000 24,990,000 - - 24,990,000 Series E 11/13/2013 8/1/2043 2.0%-5.0% 40,000,000 38,205,000 - - 38,205,000 Series F 6/4/2015 6/1/2040 3.82%-6.00% 68,746,678 67,829,443 - 228,162 67,601,281 Series G-2 3/1/2017 8/1/2034 2.0%-5.0% 16,250,000 16,250,000 - 490,000 15,760,000 Series H-1 9/26/2017 8/1/2018 1.40% 285,000 285,000 - 285,000 - Series H-2 9/26/2017 8/1/2040 3.0%-5.0% 9,715,000 9,715,000 - - 9,715,000 Measure BB (2016) Series A-2 3/1/2017 8/1/2042 2.0%-5.0% 41,290,000 41,290,000 - 3,060,000 38,230,000 Series B-1 10/24/2018 8/1/2019 2.62% 4,510,000 - 4,510,000 - 4,510,000 Series B-2 10/24/2018 8/1/2043 5.00% 38,490,000 - 38,490,000 - 38,490,000 Refunding Bonds Series 2012 5/17/2012 8/1/2023 2.0%-5.0% 54,515,000 48,220,000 - 6,060,000 42,160,000 Series 2015 12/23/2015 8/1/2033 1.3%-5.0% 50,770,000 49,520,000 - 100,000 49,420,000 Series 2016 4/13/2016 8/1/2033 1.0%-5.0% 51,490,000 50,460,000 - 340,000 50,120,000 Series 2016B 10/19/2016 8/1/2045 2.0%-4.0% 90,435,000 89,305,000 - - 89,305,000 Series 2017 9/26/2017 8/1/2036 3.0%-5.0% 15,450,000 15,450,000 - 140,000 15,310,000 $ 550,714,538 $ 43,000,000 $ 16,383,162 $ 577,331,376

Accreted Interest 2004, Series 2004 $ 17,073,212 $ 1,850,628 $ - $ 18,923,840 2004, Series 2006 32,195,926 3,720,362 - 35,916,288 2004, Series 2008 19,077,118 2,667,892 - 21,745,010 2008, Series F 9,225,398 3,660,590 46,838 12,839,150 $ 77,571,654 $ 11,899,472 $ 46,838 $ 89,424,288 38

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 9 – LONG-TERM LIABILITIES (continued)

A. General Obligation Bonds (continued)

Election 2004 ‐ Proposition H On March 3, 2004, the voters of the District approved Proposition H authorizing the District to issue up to $274 million general obligation bonds to repair aging high schools, improve student safety, and qualify for state matching funds.

Election 2011 ‐ Proposition U On November 4, 2008, the voters of the District approved Proposition U by authorizing the District to issue up to $417 million general obligation bonds for upgrading educational technology, constructing science labs, replacing deteriorating portables, rehabilitating aging classrooms, and improving safety/energy efficiency. The bonds represent an obligation of the District payable solely from ad valorem property taxes levied and collected by the County of San Diego.

On September 26, 2017, the District issued $285,000 of General Obligation Bonds, Series H‐1 (Federally Taxable) and $9,715,000 of General Obligation Bonds, Series H‐2. The Series H‐1 bonds bear a fixed interest rate of 1.4% and matured on August 1, 2018. The Series H‐2 bonds bear fixed interest rates ranging between 3.0% and 5.0% with annual maturities from August 1, 2019 through August 1, 2040. The Series H Bonds are the ninth and tenth series of bonds issued under Proposition U, after which $99,943,322 of the bonding authority will remain.

Election 2016 – Measure BB On November 8, 2016, the voters of the District approved Measure BB authorizing the District to issue up to $128 million general obligation bonds to upgrade East County high school classrooms, labs and facilities, repair aging roofs, plumbing and electrical systems, modernize technology infrastructure, improve student safety and security, replace deteriorated portables, construct new school facilities to accommodate growth, and renovate career‐ training facilities for instruction in science, technology, engineering, math and skilled trades.

March 1, 2017, the District issued $1,710,000 of General Obligation Bonds, Series A‐1 (Federally Taxable) and $41,290,000 of General Obligation Bonds, Series A‐2. The Series A‐1 bonds bear a fixed interest rate of 1.0% and matured on August 1, 2017. The Series A‐2 bonds bear fixed interest rates ranging between 2.0% and 5.0 with annual maturities from August 1, 2018 through August 1, 2042.

October 24, 2018, the District issued $4,510,000 of General Obligation Bonds, Series B‐1 (Federally Taxable) and $38,490,000 of General Obligation Bonds, Series B‐2. The Series B‐1 bonds bear a fixed interest rate of 2.62% and mature on August 1, 2019. The Series B‐2 bonds bear fixed interest rates ranging between 3.0% and 5.0 with annual maturities from August 1, 2023 through August 1, 2043. The Series B Bonds are the second series of bonds issued under Proposition BB, after which $42,000,000 of the bonding authority will remain.

2017 General Obligation Refunding Bonds On September 26, 2017, the District issued $15,450,000 of General Obligation Refunding Bonds, Series 2017. The bonds bear fixed interest rates ranging between 3.0% and 5.0% with annual maturities from August 1, 2018, through August 1, 2036. The net proceeds of $17,084,504 (after premiums and issuance costs) were used to advance refund the District’s outstanding Election of 2008 Series C General Obligation Bonds.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 9 – LONG-TERM LIABILITIES (continued)

A. General Obligation Bonds (continued)

The annual requirements to amortize general obligation bonds outstanding at June 30, 2019, is as follows:

Year Ended June 30, Principal Interest Total 2020 $ 20,083,461 $ 17,414,935 $ 37,498,396 2021 16,417,749 17,118,552 33,536,301 2022 16,075,725 19,203,221 35,278,946 2023 18,040,852 17,002,238 35,043,090 2024 20,314,744 16,814,971 37,129,715 2025 - 2029 109,546,598 143,093,092 252,639,690 2030 - 2034 142,641,939 152,768,523 295,410,462 2035 - 2039 79,646,858 87,670,689 167,317,547 2040 - 2044 130,753,450 46,636,028 177,389,478 2045 - 2046 23,810,000 728,550 24,538,550 Accretion 89,424,288 (89,424,288) - Total $ 666,755,664 $ 429,026,511 $ 1,095,782,175

B. Capital Leases

The District has leases for buses under agreements with options to purchase. The annual requirements on these capital leases outstanding as of June 30, 2019, are as follows:

Year Ended June 30, Lease Payment 2020 $ 704,617 2021 704,617 2022 704,617 2023 159,512 Total minimum lease payments 2,273,363 Less amount representing interest (103,101) Present value of minimum lease payments $ 2,170,262

C. Compensated Absences

Total unpaid employee compensated absences as of June 30, 2019 amounted to $2,462,793. This amount is included as part of long-term liabilities in the government-wide financial statements.

D. Other Postemployment Benefits

The District’s beginning net OPEB liability was $58,126,265 and increased by $1,520,992 during the year ended June 30, 2019. The ending net OPEB liability at June 30, 2019 was $59,647,257. See Note 11 for additional information regarding the net/total OPEB liability.

E. Net Pension Liability

The District’s beginning net pension liability was $235,168,297 and decreased by $2,231,052 during the year ended June 30, 2019. The ending net pension liability at June 30, 2019 was $232,937,245. See Note 12 for additional information regarding the net pension liability.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 10 – FUND BALANCES

Fund balances were composed of the following elements at June 30, 2019:

Non-Major Total County School Bond Interest & Governmental Governmental General Fund Building Fund Facilities Fund Redemption Fund Funds Funds Non-spendable Revolving cash $ 60,000 $ - $ - $ - $ 3,991 $ 63,991 Stores inventory 213,209 - - - 143,008 356,217 Prepaid expenditures 12,044 - - - 180,141 192,185 Total non-spendable 285,253 - - - 327,140 612,393 Restricted Educational programs 4,383,899 - - - 2,520,657 6,904,556 Capital projects - 47,636,475 34,787,829 - 10,442,394 92,866,698 Debt service - - - 51,786,723 - 51,786,723 All others - - - - 1,952,916 1,952,916 Total restricted 4,383,899 47,636,475 34,787,829 51,786,723 14,915,967 153,510,893 Assigned School Site Carryovers 1,226,491 - - - - 1,226,491 Department Carryovers 981,893 - - - - 981,893 NOC Refresh Reserve 1,600,000 - - - - 1,600,000 2019/20 CTE Potential State Revenue 1,990,837 - - - - 1,990,837 Special Education Growth Reserve 1,300,000 - - - - 1,300,000 Budget Reduction Mitigation Reserve 7,935,440 - - - - 7,935,440 Total assigned 15,034,661 - - - - 15,034,661 Unassigned Reserve for economic uncertainties 10,468,099 - - - - 10,468,099 Total unassigned 10,468,099 - - - - 10,468,099 Total $ 30,171,912 $ 47,636,475 $ 34,787,829 $ 51,786,723 $ 15,243,107 $ 179,626,046

The District is committed to maintaining a prudent level of financial resources to protect against the need to reduce service levels because of temporary revenue shortfalls or unpredicted expenditures. The District’s Minimum Fund Balance Policy requires a Reserve for Economic Uncertainties, consisting of unassigned amounts, equal to no less than 4.5 percent of General Fund expenditures and other financing uses.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)

A. Plan Description

The Grossmont Union High School District’s defined benefit OPEB plan (“The Plan”), Grossmont Union High School District Retiree Benefit Plan (the Plan) is described below. The Plan is a single-employer defined benefit plan administered by the District. The District is a participant in the California Employer’s Retiree Benefit Trust (CERBT), an agent multiple-employer defined benefit post-employment healthcare plan administered by CalPERS.”

Medicare Premium Payment (MPP) Program The Medicare Premium Payment Program is a cost‐sharing multiple‐employer other postemployment benefit plan established pursuant to Chapter 1032, Statutes of 2000 (SB 1435). CalSTRS administers the MPP Program, through the Teachers’ Health Benefit Fund. The MPP Program pays Medicare Part A premiums and Medicare Parts A and B late enrollment surcharges for eligible members of the Defined Benefit Program who were retired or began receiving a disability allowance prior to July 1, 2012, and were not eligible for premium free Medicare Part A. The payments are made directly to the Centers for Medicare and Medicaid Services on a monthly basis.

B. OPEB Plan Fiduciary Net Position

Detailed information about the Plan’s fiduciary net position is available in the separately-issued Plan Annual Financial Report that includes financial statements and required supplementary information. That report may be obtained by contacting the District.

C. Benefits Provided

The eligibility requirements and benefits provided by the Plan are described below.

The District provides health coverage for the retiree and any eligible dependent until the retiree reaches age 65 or Medicare eligibility. To be eligible to receive retiree health coverage, the employee must retire on or after age 54 (prior valuation was 55 for Management, Confidential, and Supervisory employees) and have at least 10 years of District eligible service at retirement. District paid benefits cease upon reaching age 65 (Medicare eligibility) or at the death of the retiree, if earlier. Spouse coverage ceases upon the earlier of the death of the retiree, the death of the spouse or when the retiree reaches age 65.

Covered benefits include a choice between the Kaiser HMO Plan, the Anthem Select HMO, the Anthem Select Plus HMO and the Anthem Full Network HMO Plan (in 2018, the Kaiser HMO Plan, the United Healthcare (UHC) Network 1, 2 and 3 HMO Plans and the Alliance HMO Plan) for medical coverage, the Delta PPO Plan for dental coverage and the Vision Service Plan for vision coverage. In 2017, the District funded 100% of the cost of coverage for the retiree only coverage for any of the medical plans selected by the retiree except for the Anthem Full Network HMO Plan (the employee pays the difference between the Anthem Full Network Plan and the Anthem Select Network HMO). For employees electing dependent coverage, the District paid 80% of the costs for the Kaiser HMO Plan and the Anthem Select HMO Plan. For employees electing dependent coverage in the Anthem Full Network HMO and the Anthem Select Plus HMO, the employee paid the difference between the cost of the plan and the Anthem Select Network HMO Plan. In 2018, the District funds 100% of the cost of coverage for the retiree only coverage for the Kaiser, UHC Network 1 and Alliance HMO plans and 80% of the cost for employees electing dependent coverage. For all other plans costing more the District’s cost is limited to the UHC Network 1 HMO plan. Out‐of‐state employees receive an annual dollar amount equal to the lowest price plan. The District also funds 100% of the cost of dental coverage. Grandfathered retirees electing to waive medical coverage receive an annual dollar amount equal to $1,200.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (continued)

D. Contributions

The District funds the plan on a pay‐as‐you‐go basis and maintains reserves with the Classified Employees Retiree Benefits Trust (CERBT) administered by CalPERS. The CERBT was established by Chapter 331 of the 1988 California Statutes, and employers elect to participate in the CERBT to pre‐fund health, dental, and other non‐ pension postemployment benefits for their retirees and survivors. The CERBT has pooled administrative and investment functions, while separate employer accounts are maintained to prefund and pay for health care or other postemployment benefits in accordance with the terms of the participating employers’ plans.

The contribution requirements of Plan members and the Grossmont Union High School District are established and may be amended by the Grossmont Union High School District and its applicable bargaining units. For fiscal year 2018-19, the District contributed $3,074,183 to the Plan, all of which was used for current premiums.

E. Plan Membership

Membership of the Plan consisted of the following:

Number of participants Inactive employees receiving benefits 250 Inactive employees entitled to but not receiving benefits* - Participating active employees 1,860 Total number of participants** 2,110

*Information not provided **As of the June 30, 2017 valuation date

F. Net OPEB Liability

The components of the net OPEB liability of the District at June 30, 2019, were as follows:

Total OPEB liability $ 62,213,555 Plan fiduciary net position 3,518,609 District's Plan net OPEB liability $ 58,694,946 District's Proportionate Share of the Net MPP OPEB Liability $ 952,311

District's total recorded net OPEB liability $ 59,647,257

Plan fiduciary net position as a percentage of total OPEB liability 5.66%

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (continued)

G. Actuarial Assumptions and Other Inputs

The District’s proportionate share of the net MPP Program OPEB liability was measured as of June 30, 2018 and was determined by an actuarial valuation as of June 30, 2017.

The net OPEB liability as of June 30, 2019 was determined by an actuarial valuation as of June 30, 2017 using the following actuarial assumptions and other inputs, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2018:

District Plan Economic assumptions: Inflation 2.75% Salary increases 3.00% Discount rate 3.50% Investment rate of return 6.00%

Non-economic assumptions: Mortality Rates Mortality rates are based on the most recent rates used by CalPERS and CalSTRS for the pension valuations.

The discount rate is a blended rate, rounded to 5 basis points, between the rate of return at 6.00% and 3.50%, the resulting rate using the average of 3 20-year municipal bond rate indices: S&P Municipal Bond 20 Year High Grade Rate Index, Bond Buyer 20-Bond GO index, Fidelity GO AA 20 Year Bond Index.

MPP Program Economic assumptions: Inflation 2.75% Investment Yield 7.00% Discount rate 3.58%

Non-economic assumptions: Mortality Rates CalSTRS changed the mortality assumptions based on the July 1, 2010, through June 30, 2015, experience study adopted by the board in February 2017. CalSTRS uses a generational mortality assumption, which involves the use of a base mortality table and projection scales to reflect expected annual reductions in mortality rates at each age, resulting in increases in life expectancies each year into the future. The base mortality tables are CalSTRS custom tables derived to best fi t the patterns of mortality among our members. The projection scale was set equal to 110 percent of the ultimate improvement factor from the Mortality Improvement Scale (MP‐2016) table, issued by the Society of Actuaries.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (continued)

H. Changes in Net OPEB Liability

June 30, 2019 Total OPEB Liability Service Cost $ 3,266,643 Interest on total OPEB liability 2,112,126 Changes of assumptions (482,832) Benefits payments (3,074,183) Net change in total OPEB liability 1,821,754 Total OPEB liability - beginning 60,391,801 Total OPEB liability - ending (a) $ 62,213,555

Plan fiduciary net position Contributions - employer $ 3,074,183 Net investment income 158,159 Benefit payments (3,074,183) Administrative expenses (6,203) Net change in plan fiduciary net position 151,956 Plan fiduciary net position - beginning 3,366,653 Plan fiduciary net position - ending (b) $ 3,518,609

District's Plan net OPEB liability - ending (a) - (b) $ 58,694,946

District's Proportionate Share of the Net MPP OPEB Liability (c) $ 952,311

District's total recorded net OPEB liability - ending (a) - (b) + (c) $ 59,647,257

Plan fiduciary net position as a percentage of the Plan's total OPEB liability 5.7%

Covered-employee payroll $ 138,484,996

District's Plan net OPEB liability as a percentage of covered- employee payroll 42.38%

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (continued)

I. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

The following presents the net OPEB liability of the District, as well as what the District’s net OPEB liability would be if it were calculated using a discount rate that is one percentage‐point lower or one percentage‐point higher than the current discount rate:

1% Decrease Discount Rate 1% Increase (2.5%) (3.5%) (4.5%) Net OPEB liability - District Plan $ 63,695,904 $ 58,694,946 $ 54,079,206

1% Decrease Discount Rate 1% Increase (2.87%) (3.87%) (4.87%) Net OPEB liability - MPP Program $ 1,054,171 $ 952,311 $ 861,831

J. Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rate

The following presents the net OPEB liability of the District, as well as what the District’s net OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage‐point lower or one percentage‐ point higher than the current healthcare cost trend rates:

Healthcare Cost 1% Decrease Trend Rate 1% Increase (5.50%HMO/5.50%PPO (6.50%HMO/6.50%PPO (7.50%HMO/7.50%PPO decreasing to decreasing to decreasing to 4.00%HMO/4.00%PPO) 5.00%HMO/5.00%PPO) 6.00%HMO/6.00%PPO) Net OPEB liability - District Plan $ 52,159,305 $ 58,694,946 $ 66,324,618

Medicare Costs 1% Decrease Trend Rate 1% Increase (2.7% Part A and (3.7% Part A and (4.7% Part A and 3.1% Part B) 4.1% Part B) 5.1% Part B) Net OPEB liability - MPP Program $ 869,127 $ 952,311 $ 1,043,402

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (continued)

K. OPEB Expense and Deferred Outflows and Deferred Inflows of Resources Related to OPEB

For the year ended June 30, 2019, the Grossmont Union High School District recognized OPEB expense of $5,118,182. At June 30, 2019, the Grossmont Union High School District reported deferred outflows of resources related to OPEB and deferred inflows of resources related to OPEB from the following sources:

District Plan MPP Program Deferred Outflows Deferred Inflows Deferred Inflows of Resources of Resources of Resources Differences between projected and actual earnings on plan investments $ 20,728 $ - $ - Differences between expected and actual experience - - - Changes in assumptions - 413,856 - Changes in proportion and differences between District contributions and proportionate share of contributions - - 46,623 District contributions subsequent to the measurement date 2,482,767 - - $ 2,503,495 $ 413,856 $ 46,623

The $2,482,767 reported as deferred outflows of resources related to OPEB resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

District Plan MPP Program Deferred Outflows Deferred Inflows Deferred Inflows Year Ended June 30, of Resources of Resources of Resources 2020 $ 3,999 $ 68,976 $ 7,771 2021 3,999 68,976 7,771 2022 3,999 68,976 7,771 2023 8,731 68,976 7,771 2024 - 68,976 7,771 2025 - 68,976 7,768 $ 20,728 $ 413,856 $ 46,623

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS

Qualified employees are covered under multiple-employer contributory retirement plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS), and classified employees are members of the California Public Employees' Retirement System (CalPERS). The District reported its proportionate share of the net pension liabilities, pension expense, deferred outflow of resources, and deferred inflow of resources for each of the above plans as follows:

Deferred Deferred inflows Net pension outflows related related to liability to pensions pensions Pension expense STRS Pension $ 145,407,559 $ 37,395,375 $ 18,021,631 $ 14,916,811 PERS Pension 87,529,686 23,296,931 4,165,043 12,328,173 Total $ 232,937,245 $ 60,692,306 $ 22,186,674 $ 27,244,984

A. California State Teachers’ Retirement System (CalSTRS)

Plan Description The District contributes to the California State Teachers' Retirement System (CalSTRS); a cost-sharing multiple employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the State Teachers' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7919 Folsom Blvd., Sacramento, CA 95826.

Benefits Provided The CalSTRS defined benefit plan has two benefit formulas:

1. CalSTRS 2% at 60: Members first hired on or before December 31, 2012, to perform service that could be creditable to CalSTRS. CalSTRS 2% at 60 members are eligible for normal retirement at age 60, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. Early retirement options are available at age 55 with five years of credited service or as early as age 50 with 30 years of credited service. The age factor for retirements after age 60 increases with each quarter year of age to 2.4 percent at age 63 or older. Members who have 30 years or more of credited service receive an additional increase of up to 0.2 percent to the age factor, known as the career factor. The maximum benefit with the career factor is 2.4 percent of final compensation.

2. CalSTRS 2% at 62: Members first hired on or after January 1, 2013, to perform service that could be creditable to CalSTRS. CalSTRS 2% at 62 members are eligible for normal retirement at age 62, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. An early retirement option is available at age 55. The age factor for retirement after age 62 increases with each quarter year of age to 2.4 percent at age 65 or older.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

A. California State Teachers’ Retirement System (CalSTRS) (continued)

Contributions Active plan CalSTRS 2% at 60 and 2% at 62 members are required to contribute 10.25% and 10.205% of their salary for fiscal year 2019, respectively, and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year 2019 was 16.28% of annual payroll. The contribution requirements of the plan members are established by state statute. Contributions to the plan from the District were $14,355,807 for the year ended June 30, 2019.

On-Behalf Payments The District was the recipient of on-behalf payments made by the State of California to CalSTRS for K-12 education. These payments consist of state general fund contributions of approximately $13,272,873 to CalSTRS, which included a supplemental contribution for fiscal year 2019 due to California Senate Bill No. 90.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2019, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follows:

District's proportionate share of the net pension liability $ 145,407,559 State's proportionate share of the net pension liability associated with the District 83,253,035 Total $ 228,660,594

The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by applying update procedures to an actuarial valuation as of June 30, 2017 and rolling forward the total pension liability to June 30, 2018. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. At June 30, 2018, the District’s proportion was 0.158 percent, which was a decrease of 0.006 percent from its proportion measured as of June 30, 2017.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

A. California State Teachers’ Retirement System (CalSTRS) (continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (continued) For the year ended June 30, 2019, the District recognized pension expense of $14,916,811. In addition, the District recognized pension expense and revenue of $2,838,903 for support provided by the State. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources

Differences between projected and actual earnings on plan investments $ - $ 5,599,109 Differences between expected and actual experience 450,903 2,112,126 Changes in assumptions 22,588,665 Changes in proportion and differences between District contributions and proportionate share of contributions - 10,310,396 District contributions subsequent to the measurement date 14,355,807 - $ 37,395,375 $ 18,021,631

The $14,355,807 reported as deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Deferred Outflows Deferred Inflows Year Ended June 30, of Resources of Resources 2020 $ 4,607,914 $ 1,544,044 2021 4,607,914 3,645,964 2022 4,607,914 7,465,388 2023 4,607,914 3,669,799 2024 4,607,912 1,020,305 2025 - 676,131 $ 23,039,568 $ 18,021,631

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

A. California State Teachers’ Retirement System (CalSTRS) (continued)

Actuarial Assumptions The total pension liability was determined by applying update procedures to an actuarial valuation as of June 30, 2017, and rolling forward the total pension liability to June 30, 2018 using the following actuarial assumptions, applied to all periods included in the measurement:

Consumer Price Inflation 2.75% Investment Rate of Return* 7.10% Wage Inflation 3.50%

* Net of investment expenses, but gross of administrative expenses.

CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are based on MP-2016 series tables adjusted to fit CalSTRS experience.

The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2010−June 30, 2015.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best-estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant (Pension Consulting Alliance–PCA) as an input to the process. The actuarial investment rate of return assumption was adopted by the board in February 2017 in conjunction with the most recent experience study. For each future valuation, CalSTRS consulting actuary (Milliman) reviews the return assumption for reasonableness based on the most current capital market assumptions. Best estimates of 20-year geometrically-linked real rates of return and the assumed asset allocation for each major asset class for the year ended June 30, 2018, are summarized in the following table:

Assumed Asset Long-Term Expected Asset Class Allocation Real Rate of Return* Global Equity 47% 6.30% Fixed Income 12% 0.30% Real Estate 13% 5.20% Private Equity 13% 9.30% Risk Mitigating Strategies 9% 2.90% Inflation Sensitive 4% 3.80% Cash/Liquidity 2% -1.00% 100% *20-year geometric average

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

A. California State Teachers’ Retirement System (CalSTRS) (continued)

Discount Rate The discount rate used to measure the total pension liability was 7.10 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increases per AB 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.10 percent) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the District’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the District’s proportionate share of the net pension liability calculated using the discount rate of 7.10 percent, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.10 percent) or 1-percentage-point higher (8.10 percent) than the current rate:

1% Current 1% Decrease Discount Rate Increase (6.10%) (7.10%) (8.10%) District's proportionate share of the net pension liability $ 213,005,058 $ 145,407,559 $ 89,362,672

Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalSTRS financial report.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

B. California Public Employees’ Retirement System (CalPERS)

Plan Description The District contributes to the School Employer Pool under the California Public Employees' Retirement System (CalPERS); a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Laws. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, CA 95811.

Benefits Provided The benefits for the defined benefit plan are based on members’ years of service, age, final compensation, and benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. Members become fully vested in their retirement benefits earned to date after five years of credited service.

Contributions Active plan members who entered into the plan prior to January 1, 2013, are required to contribute 7.0% of their salary. The California Public Employees’ Pension Reform Act (PEPRA) specifies that new members entering into the plan on or after January 1, 2013, shall pay the higher of fifty percent of normal costs or 7.0% of their salary. Additionally, for new members entering the plan on or after January 1, 2013, the employer is prohibited from paying any of the employee contribution to CalPERS unless the employer payment of the member’s contribution is specified in an employment agreement or collective bargaining agreement that expires after January 1, 2013.

The District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2019 was 18.062% of annual payroll. Contributions to the plan from the District were $8,101,412 for the year ended June 30, 2019.

On-Behalf Payments The District was the recipient of on-behalf payments made by the State of California to CalPERS for K-12 education. These payments consisted of state general fund contributions of approximately $2,967,653 to CalPERS for fiscal year 2019 due to California Senate Bill No. 90.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2019, the District reported a liability of $87,529,686 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by applying update procedures to an actuarial valuation as of June 30, 2017 and rolling forward the total pension liability to June 30, 2018. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. At June 30, 2018, the District’s proportion was 0.328 percent, which was a decrease of 0.020 percent from its proportion measured as of June 30, 2017.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

B. California Public Employees’ Retirement System (CalPERS) (continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (continued) For the year ended June 30, 2019, the District recognized pension expense of $12,328,173. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources

Differences between projected and actual earnings on plan investments $ 717,940 $ - Differences between expected and actual experience 5,738,126 - Changes in assumptions 8,739,453 - Changes in proportion and differences between District contributions and proportionate share of contributions - 4,165,043 District contributions subsequent to the measurement date 8,101,412 - $ 23,296,931 $ 4,165,043

The $8,101,412 reported as deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Deferred Outflows Deferred Inflows Year Ended June 30, of Resources of Resources 2020 $ 9,056,626 $ 2,397,801 2021 6,766,687 930,127 2022 (111,156) 837,115 2023 (516,638) - $ 15,195,519 $ 4,165,043

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

B. California Public Employees’ Retirement System (CalPERS) (continued)

Inflation 2.50% Discount Rate 7.15% Salary Increases Varies by Entry Age and Service

CalPERS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are derived using CalPERS’ membership data for all funds. The table includes 15 years of mortality improvements using the Society of Actuaries Scale 90% of scale MP 2016.

The actuarial assumptions used in the June 30, 2017, valuation were based on the results of an actuarial experience study for the period from 1997 to 2015.

The long-term expected rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, both short-term and long-term market return expectations as well as the expected pension fund cash flows were taken into account. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short- term (first 10 years) and the long-term (11-60 years) using a building block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

B. California Public Employees’ Retirement System (CalPERS) (continued)

Actuarial Assumptions (continued) The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.

Assumed Asset Real Return Real Asset Class Allocation Years 1 – 10* Return Years 11+** Global Equity 50.0% 4.80% 5.98% Fixed Income 28.0% 1.00% 2.62% Inflation Assets 0.0% 0.77% 1.81% Private Equity 8.0% 6.30% 7.23% Real Estate 13.0% 3.75% 4.93% Liquidity 1.0% 0.0% -0.92% 100.0%

*An expected inflation of 2.00% used for this period. **An expected inflation of 2.92% used for this period.

Discount Rate The discount rate used to measure the total pension liability was 7.15 percent. A projection of the expected benefit payments and contributions was performed to determine if assets would run out. The test revealed the assets would not run out. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability for the Schools Pool. The results of the crossover testing for the Schools Pool are presented in a detailed report that can be obtained at CalPERS’ website.

Sensitivity of the District’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the District’s proportionate share of the net pension liability calculated using the discount rate of 7.15 percent, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.15 percent) or 1-percentage-point higher (8.15 percent) than the current rate:

1% Current 1% Decrease Discount Rate Increase (6.15%) (7.15%) (8.15%) District's proportionate share of the net pension liability $ 127,439,038 $ 87,529,686 $ 54,419,166

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 12 – PENSION PLANS (continued)

B. California Public Employees’ Retirement System (CalPERS) (continued)

Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial report.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

A. Grants

The District received financial assistance from federal and state agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, 2019.

B. Litigation

The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, 2019.

C. Construction Commitments

As of June 30, 2019, the District had commitments with respect to unfinished capital projects of $55,034,270.

NOTE 14 – PARTICIPATION IN JOINT POWERS AUTHORITIES

The District participates in two joint ventures under joint powers authorities (JPAs), the San Diego County School Risk Management JPA and the San Diego County Office of Education. The relationships between the District and the JPAs are such that the JPAs are not component units of the District for financial reporting purposes.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS, continued JUNE 30, 2019

NOTE 15 – DEFERRED OUTFLOWS/INFLOWS OF RESOURCES

A. Refunded Debt

Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognized deferred outflows or inflows of resources in the District-wide financial statements. The deferred outflow of resources pertains to the difference in the carrying value of the refunded debt and its reacquisition price (deferred amount on refunding). Previous financial reporting standards require this to be presented as part of the District’s long-term debt. This deferred outflow of resources is recognized as a component of interest expense in a systematic and rational manner over the remaining life of the old debt or the new debt, whichever is shorter. At June 30, 2019, the deferred amount on refunding was $25,386,005

B. Pension Plans

Pursuant to GASB Statement No. 68, Accounting and Financial Reporting for Pensions, the District recognized deferred outflows of resources related to pensions and deferred inflows of resources related to pensions in the District-wide financial statements. Further information regarding the deferred outflows of resources and deferred inflows of resources can be found at Note 12. At June 30, 2019, total deferred outflows related to pensions was $60,692,306 and total deferred inflows related to pensions was $22,186,674.

C. Other Postemployment Benefits

Pursuant to GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, the District recognized deferred outflows of resources related to other postemployment benefits and deferred inflows of resources related to other postemployment benefits in the District-wide financial statements. Further information regarding the deferred outflows of resources and deferred inflows of resources can be found at Note 11. At June 30, 2019, total deferred outflows related to other postemployment benefits was $2,517,690 and total deferred inflows related to other postemployment benefits was $474,674.

NOTE 16 – SUBSEQUENT EVENTS

A. Tax and Revenue Anticipation Notes (TRANS)

On August 28, 2018, the District issued $18,975,000 in Tax and Revenue Anticipation Notes through the County of San Diego and San Diego County School Districts Tax and Revenue Anticipation Notes Program bearing interest at 4.0%. The notes were issued to finance cash shortfalls occurring in 2019-20. Interest and principal are due and payable on June 28, 2019. The District will be required to make two deposits of pledged revenues into a repayment fund in January and April of 2020.

B. General Obligation Bonds

On October 23, 2019, the District issued $42,000,000 of General Obligation Bonds, Election of 2016, Series C. and $15,000,000 of General Obligation Bonds, Election of 2008, Series I.

REQUIRED SUPPLEMENTARY INFORMATION

GROSSMONT UNION HIGH SCHOOL DISTRICT GENERAL FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual* Variances - Original Final (Budgetary Basis) Final to Actual REVENUES LCFF sources $ 166,268,164 $ 168,412,087 $ 168,214,004 $ (198,083) Federal sources 12,064,737 12,837,253 12,148,702 (688,551) Other state sources 18,585,363 19,798,931 28,949,753 9,150,822 Other local sources 22,900,126 24,948,264 27,088,938 2,140,674 Total Revenues 219,818,390 225,996,535 236,401,397 10,404,862

EXPENDITURES Certificated salaries 90,717,187 89,677,331 88,744,690 932,641 Classified salaries 40,877,610 41,096,097 40,542,767 553,330 Employee benefits 57,448,158 57,242,293 64,854,962 (7,612,669) Books and supplies 6,798,156 7,969,557 8,334,754 (365,197) Services and other operating expenditures 26,469,112 28,687,249 27,316,741 1,370,508 Capital outlay 293,030 1,872,148 2,686,320 (814,172) Other outgo Excluding transfers of indirect costs 1,157,319 1,157,319 1,150,132 7,187 Transfers of indirect costs (1,224,382) (1,126,274) (1,005,960) (120,314) Total Expenditures 222,536,190 226,575,720 232,624,406 (6,048,686) Excess (Deficiency) of Revenues Over Expenditures (2,717,800) (579,185) 3,776,991 4,356,176 Other Financing Sources (Uses) Transfers in 25,000 930,729 931,537 808 Other sources - 756,682 756,682 - Net Financing Sources (Uses) 25,000 1,687,411 1,688,219 808

NET CHANGE IN FUND BALANCE (2,692,800) 1,108,226 5,465,210 4,356,984 Fund Balance - Beginning 20,132,613 24,706,702 24,706,702 - Fund Balance - Ending $ 17,439,813 $ 25,814,928 $ 30,171,912 $ 4,356,984

* The actual amounts reported on this schedule do not agree with the amounts reported on the Statement of Revenues, Expenditures, and Changes in Fund Balance for the following reasons:

• Actual amounts reported in this schedule are for the General Fund only, and do not agree with the amounts reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances because the amounts on that schedule include the financial activity of the Special Reserve Fund for Other Than Capital Outlay Projects, in accordance with the fund type definitions promulgated by GASB Statement No. 54.

See accompanying note to required supplementary information. 59

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS – DISTRICT PLAN FOR THE YEAR ENDED JUNE 30, 2019

June 30, 2019 June 30, 2018 Total OPEB Liability Service Cost $ 3,266,643 $ 3,159,229 Interest on total OPEB liability 2,112,126 2,039,395 Changes of assumptions (482,832) - Benefits payments (3,074,183) (3,259,615) Net change in total OPEB liability 1,821,754 1,939,009 Total OPEB liability - beginning 60,391,801 58,452,792 Total OPEB liability - ending (a) $ 62,213,555 $ 60,391,801

Plan fiduciary net position Contributions - employer $ 3,074,183 $ 3,259,615 Net investment income 158,159 133,611 Benefit payments (3,074,183) (3,259,615) Administrative expenses (6,203) (1,679) Net change in plan fiduciary net position 151,956 131,932 Plan fiduciary net position - beginning 3,366,653 3,234,721 Plan fiduciary net position - ending (b) $ 3,518,609 $ 3,366,653

District's net OPEB liability - ending (a) - (b) $ 58,694,946 $ 57,025,148

Plan fiduciary net position as a percentage of the total OPEB liability 5.66% 5.57%

Covered-employee payroll $ 138,484,996 $ 128,923,000

District's Plan net OPEB liability as a percentage of covered-employee payroll 42.38% 44.23%

See accompanying note to required supplementary information. 60

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS – MPP PROGRAM FOR THE YEAR ENDED JUNE 30, 2019

(Dollars in Thousands, except for District's proportionate share)

June 30, 2019 June 30, 2018 Total OPEB Liability Interest on total OPEB liability $ 14,567 $ 12,928 Difference between expected and actual experience (15,759) (41) Changes of assumptions (10,293) (31,240) Benefits payments (28,036) (28,929) Net change in total OPEB liability (39,521) (47,282) Total OPEB liability - beginning 420,749 468,031 Total OPEB liability - ending 381,228 420,749

Plan fiduciary net position Contributions - employer $ 28,218 $ 29,117 Net investment income 18 11 Benefit payments (28,036) (28,929) Administrative expenses (578) (168) Net change in plan fiduciary net position (378) 31 Plan fiduciary net position - beginning 41 10 Adjustment for application of new GASB statement (1,205) - Plan fiduciary net position - ending $ (1,542) $ 41

MPP Program Net OPEB liability $ 382,770 $ 420,708

District's proportionate share of net OPEB liability $ 952,311 $ 1,107,117

Plan fiduciary net position as a percentage of the total OPEB liability -0.40% 0.01%

Covered-employee payroll* * *

District's net OPEB liability (asset) as a percentage of covered-employee payroll * *

*As of June 30, 2012, active members are no longer eligible for future enrollment in the MPP Program; therefore, the covered payroll disclosure is not applicable.

See accompanying note to required supplementary information. 61

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF THE DISTRICT’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY - CALSTRS FOR THE YEAR ENDED JUNE 30, 2019

June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015

District's proportion of the net pension liability 0.158% 0.164% 0.168% 0.177% 0.176%

District's proportionate share of the net pension liability $ 145,407,559 $ 152,078,945 $ 135,880,080 $ 119,163,480 $ 102,849,120

State's proportionate share of the net pension liability associated with the District 83,253,035 35,516,307 77,365,494 63,024,176 62,105,363 Total $ 228,660,594 $ 187,595,252 $ 213,245,574 $ 182,187,656 $ 164,954,483

District's covered payroll $ 86,433,389 $ 88,481,463 $ 85,504,958 $ 81,779,313 $ 79,314,812

District's proportionate share of the net pension liability as a percentage of its covered payroll 168.2% 171.9% 158.9% 145.7% 129.7%

Plan fiduciary net position as a percentage of the total pension liability 71.0% 69.5% 70.0% 74.0% 76.5%

The amounts presented for each fiscal year were determined as of the year-end that occurred one year prior.

See accompanying note to required supplementary information. 62

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF THE DISTRICT’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY - CALPERS FOR THE YEAR ENDED JUNE 30, 2019

June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015

District's proportion of the net pension liability 0.328% 0.348% 0.364% 0.372% 0.378%

District's proportionate share of the net pension liability $ 87,529,686 $ 83,089,352 $ 71,890,225 $ 54,788,946 $ 42,878,146

District's covered payroll $ 44,114,661 $ 44,354,443 $ 43,585,667 $ 41,247,524 $ 39,731,834

District's proportionate share of the net pension liability as a percentage of its covered payroll 198.4% 187.3% 164.9% 132.8% 107.9%

Plan fiduciary net position as a percentage of the total pension liability 70.8% 71.9% 73.9% 79.4% 83.4%

The amounts presented for each fiscal year were determined as of the year-end that occurred one year prior.

See accompanying note to required supplementary information. 63

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF DISTRICT CONTRIBUTIONS - CALSTRS FOR THE YEAR ENDED JUNE 30, 2019

June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015

Contractually required contribution $ 14,355,807 $ 12,472,338 $ 11,130,968 $ 9,174,682 $ 7,262,003

Contributions in relation to the contractually required contribution* (14,355,807) (12,472,338) (11,130,968) (9,174,682) (7,262,003)

Contribution deficiency (excess) $ - $ - $ - $ - $ -

District's covered payroll $ 87,201,153 $ 86,433,389 $ 88,481,463 $ 85,504,958 $ 81,779,313

Contributions as a percentage of covered payroll 16.46% 14.43% 12.58% 10.73% 8.88%

*Amounts do not include on-behalf contributions

See accompanying note to required supplementary information. 64

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF DISTRICT CONTRIBUTIONS - CALPERS FOR THE YEAR ENDED JUNE 30, 2019

June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015

Contractually required contribution $ 8,101,412 $ 6,851,448 $ 6,159,945 $ 5,163,594 $ 4,855,246

Contributions in relation to the contractually required contribution (8,101,412) (6,851,448) (6,159,945) (5,163,594) (4,855,246)

Contribution deficiency (excess) $ - $ - $ - $ - $ -

District's covered payroll $ 44,812,570 $ 44,114,661 $ 44,354,443 $ 43,585,667 $ 41,247,524

Contributions as a percentage of covered payroll 18.08% 15.53% 13.89% 11.85% 11.77%

See accompanying note to required supplementary information. 65

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2019

NOTE 1 – PURPOSE OF SCHEDULES

Budgetary Comparison Schedule This schedule is required by GASB Statement No. 34 as required supplementary information (RSI) for the General Fund and for each major special revenue fund that has a legally adopted annual budget. The budgetary comparison schedule presents both (a) the original and (b) the final appropriated budgets for the reporting period as well as (c) actual inflows, outflows, and balances, stated on the District’s budgetary basis. A separate column to report the variance between the final budget and actual amounts is also presented, although not required.

Schedule of Changes in Net OPEB Liability and Related Ratios – District Plan This 10-year schedule is required by GASB Statement No. 75 for all sole and agent employers that provide other postemployment benefits (OPEB). Until a full 10-year trend is compiled, the schedule will only show those years under which GASB Statement No. 75 was applicable. The schedule presents the sources of change in the net OPEB liability, and the components of the net OPEB liability and related ratios, including the OPEB plan’s fiduciary net position as a percentage of the total OPEB liability, and the net OPEB liability as a percentage of covered-employee payroll.

Changes in Benefit Terms There were no changes in benefit terms since the previous valuations.

Changes in Assumptions The discount rate has changed since the prior measurement date from 3.40% to 3.50%.

Schedule of Changes in Net OPEB Liability and Related Ratios – MPP Program This 10-year schedule is required by GASB Statement No. 75 for all sole and agent employers that provide other postemployment benefits (OPEB). Until a full 10-year trend is compiled, the schedule will only show those years under which GASB Statement No. 75 was applicable. The schedule presents the sources of change in the net OPEB liability, and the components of the net OPEB liability and related ratios, including the OPEB plan’s fiduciary net position as a percentage of the total OPEB liability.

Changes in Benefit Terms There were no changes in benefit terms since the previous valuations.

Changes in Assumptions On February 1, 2017, the board lowered the discount rate from 7.50 percent to 7.00 percent using a phased in approach. The June 30, 2016, actuarial valuation used a discount rate of 7.25 percent. For the June 30, 2017 actuarial valuation the discount rate was reduced to 7.00 percent. The discount rate used for 2018 financial reporting was 3.87 percent, an increase of 0.29 percent from 3.58 percent used for 2017 financial reporting.

Schedule of the District’s Proportionate Share of the Net Pension Liability This 10-year schedule is required by GASB Statement No. 68 for each cost-sharing pension plan. Until a full 10-year trend is compiled, the schedule will only show those years under which GASB Statement No. 68 was applicable. The schedule presents the District’s proportion (percentage) of the collective net pension liability, the District’s proportionate share (amount) of the collective net pension liability, the District’s covered payroll, the District’s proportionate share (amount) of the collective net pension liability as a percentage of the employer’s covered payroll, and the pension plan’s fiduciary net position as a percentage of the total pension liability.

Changes in Benefit Terms There were no changes in benefit terms since the previous valuations for CalSTRS and CalPERS.

Changes in Assumptions There were no changes in economic assumptions since the previous valuations for CalSTRS and CalPERS.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION, continued JUNE 30, 2019

NOTE 1 – PURPOSE OF SCHEDULES (continued)

Schedule of District Contributions This 10-year schedule is required by GASB Statement No. 68 for each cost-sharing pension plan. Until a full 10-year trend is compiled, the schedule will only show those years under which GASB Statement No. 68 was applicable. The schedule presents the District’s statutorily or contractually required employer contribution, the amount of contributions recognized by the pension plan in relation to the statutorily or contractually required employer contribution, the difference between the statutorily or contractually required employer contribution and the amount of contributions recognized by the pension plan in relation to the statutorily or contractually required employer contribution, the District’s covered payroll, and the amount of contributions recognized by the pension plan in relation to the statutorily or contractually required employer contribution as a percentage of the District’s covered payroll.

NOTE 2 – EXCESS OF EXPENDITURES OVER APPROPRIATIONS

For the year ended June 30, 2019, the District incurred an excess of expenditures over appropriations in individual major funds presented in the Budgetary Comparison Schedule by major object code as follows:

Expenditures and Other Uses Budget Actual Excess General Fund Employee benefits $ 57,242,293 $ 64,854,962 $ 7,612,669 Books and supplies $ 7,969,557 $ 8,334,754 $ 365,197 Capital outlay $ 1,872,148 $ 2,686,320 $ 814,172

SUPPLEMENTARY INFORMATION

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2019

CFDA Pass-Through Entity Federal Federal Grantor/Pass-Through Grantor/Program or Cluster Number Identifying Number Expenditures U. S. DEPARTMENT OF EDUCATION: Passed through California Department of Education: Title I, Part A Title I, Part A, Basic Grants Low-Income and Neglected 84.010 14329 $ 4,476,380 ESSA School Improvement (CSI) Funding for LEAs 84.010 15438 51,570 Subtotal Title I, Part A 4,527,950 Adult Education Adult Education: Adult Basic Education & ESL 84.002A 14508 429,650 Adult Education: Adult Secondary Education 84.002 13978 248,600 Adult Education: English Literacy and Civics Education 84.002A 14109 84,322 Adult Education: Institutionalized Adults (Section 225) 84.002 13971 104,853 Subtotal Adult Education 867,425 Title II, Part A, Supporting Effective Instruction Local Grants 84.367 14341 686,589 Title III Title III, English Learner Student Program 84.365 14346 212,358 Title III, Immigrant Education Program 84.365 15146 68,550 Subtotal Title III 280,908 Title IV, Part A, Student Support and Academic Enrichment Grants 84.424 15396 318,477 Department of Rehabilitation: Workability II, Transitions Partnership Program 84.126 10006 356,833 Special Education Cluster IDEA Basic Local Assistance Entitlement, Part B, Sec 611 84.027 13379 3,053,115 IDEA Mental Health Average Daily‐ Attendance (ADA) Allocation, Part B, Sec 611 84.027A 15197 605,231 Subtotal Special Education Cluster 3,658,346 Career and Techincal Education Basic Grants to States Cluster: Carl D. Perkins Career and Technical Education:‐ Secondary, Section 131 84.048 14894 551,830 Carl D. Perkins Career and Technical Education: Adult, Section 132 84.048 14893 167,084 Subtotal Career and Technical‐ Education Basic Grants to States Cluster 718,914 Title IV, Part B ‐ Title IV, Part B, 21st CCLC High School ASSETs 84.287 14535 715,055 Title IV, Part B, 21st CCLC ASSETs Equitable Access 84.287 14603 57,928 Subtotal Title IV, Part B 772,983 Total U. S. Department of Education 12,188,425

U. S. DEPARTMENT OF AGRICULTURE: Passed through California Department of Education: Child Nutrition Cluster [1] School Breakfast Program - Needy 10.553 13526 1,388,812 National School Lunch Program 10.555 13391 3,120,399 USDA Commodities [2] 10.555 * 373,086 Summer Food Service Program for Children 10.559 13004 416,183 Subtotal Child Nutrition Cluster 5,298,480 CACFP Claims - Centers and Family Day Care [1] 10.558 13393 883,857 Total U. S. Department of Agriculture 6,182,337

U. S. DEPARTMENT OF LABOR: Passed through California Department of Education: Workforce Innovation and Opportunity Act (WIOA) - Youth Program 17.259 10055 48,000 Total U. S. Department of Labor 48,000

U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES: Passed through California Department of Health Services: Medicaid Medi-Cal Billing Option 93.778 10013 157,082 Medi-Cal Administrative Activities 93.778 10060 62,808 Subtotal Medicaid 219,890 Total U. S. Department of Health & Human Services 219,890 Total Federal Expenditures $ 18,638,652

[1] - Major Program [2] - In-Kind Contribution * - Pass-Through Entity Identifying Number not available or not applicable

See accompanying note to supplementary information. 68

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE (ADA) FOR THE YEAR ENDED JUNE 30, 2019

Second Period Annual Report Report Certificate No. Certificate No. 5748B080 9CC6E03A SCHOOL DISTRICT Ninth through Twelfth Regular ADA 15,437.56 15,287.37 Extended Year Special Education 54.38 54.38 Special Education - Nonpublic Schools 64.64 64.89 Extended Year Special Education - Nonpublic Schools 6.18 6.18 Total Ninth through Twelfth 15,562.76 15,412.82 TOTAL SCHOOL DISTRICT 15,562.76 15,412.82

See accompanying note to supplementary information. 69

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME FOR THE YEAR ENDED JUNE 30, 2019

2018-19 Minutes Actual Number Grade Level Requirement Minutes of Days Status Grade 9 64,800 65,314 180 Complied Grade 10 64,800 65,314 180 Complied Grade 11 64,800 65,314 180 Complied Grade 12 64,800 65,314 180 Complied

See accompanying note to supplementary information. 70

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2019

2020 (Budget) 2019 2018 2017 General Fund - Budgetary Basis** Revenues And Other Financing Sources $ 228,540,665 $ 238,089,617 $ 218,857,237 $ 216,555,235 Expenditures And Other Financing Uses 229,041,698 232,624,406 217,745,527 215,247,814 Net change in Fund Balance $ (501,033) $ 5,465,211 $ 1,111,710 $ 1,307,421

Ending Fund Balance $ 29,680,879 $ 30,171,913 $ 24,706,702 $ 23,595,742

Available Reserves* $ 10,306,877 $ 10,468,099 $ 9,798,548 $ 9,686,186 Available Reserves As A Percentage Of Outgo 4.50% 4.50% 4.50% 4.50%

Long-term Liabilities $ 969,411,074 $ 992,603,344 $ 953,741,390 $ 883,304,592 Average Daily Attendance At P-2 15,602 15,563 15,610 15,842

The General Fund ending fund balance has increased by $6,576,171 over the past two years. The fiscal year 2019- 20 budget projects a decrease of $501,033. For a District this size, the State recommends available reserves of at least 3% of General Fund expenditures, transfers out, and other uses (total outgo). However, The District’s Minimum Fund Balance Policy requires a Reserve for Economic Uncertainties, consisting of unassigned amounts, equal to no less than 4.5 percent of General Fund expenditures and other financing uses.

The District has incurred operating surpluses in each of the past three years but anticipates incurring an operating deficit during the 2019-20 fiscal year. Total long-term obligations have increased by $109,298,752 over the past two years.

Average daily attendance has decreased by 279 ADA over the past two years. However, ADA is anticipated to increase by 39 during the 2019-20 fiscal year.

*Available reserves consist of all unassigned fund balance within the General Fund.

**The actual amounts reported in this schedule are for the General Fund only, and do not agree with the amounts reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances because the amounts on that schedule include the financial activity of the Special Reserve Fund for Other Than Capital Outlay Projects, in accordance with the fund type definitions promulgated by GASB Statement No. 54.

See accompanying note to supplementary information. 71

GROSSMONT UNION HIGH SCHOOL DISTRICT RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2019

Internal Service Fund June 30, 2019, annual financial and budget report fund balance $ (49,885,662) Adjustments and reclassifications: Increase (decrease) in total fund balances: Deferred Outflows and Inflows related to OPEB 2,043,015 Net adjustments and reclassifications 2,043,015 June 30, 2019, audited financial statement fund balance $ (47,842,647)

See accompanying note to supplementary information. 72

GROSSMONT UNION HIGH SCHOOL DISTRICT SCHEDULE OF CHARTER SCHOOLS FOR THE YEAR ENDED JUNE 30, 2019

Included in Charter # Charter School Status Audit Report 0150 Helix Charter High School Active No 0893 Steele Canyon Charter High School Active No 2039 The Learning Choice Academy - East County* Active No

*The year ended June 30, 2020 will be the first year of operation for this charter school.

See accompanying note to supplementary information. 73

GROSSMONT UNION HIGH SCHOOL DISTRICT COMBINING BALANCE SHEET JUNE 30, 2019

Special Reserve Non-Major Adult Education Capital Facilities Fund for Capital Governmental Fund Cafeteria Fund Fund Outlay Projects Funds ASSETS Cash and investments $ 2,623,890 $ 1,658,167 $ 2,938,453 $ 8,924,457 $ 16,144,967 Accounts receivable 1,641,817 1,001,891 168,214 95,860 2,907,782 Due from other funds 711,544 61,019 - 7,690 780,253 Stores inventory - 143,008 - - 143,008 Prepaid expenditures 127,478 52,663 - - 180,141 Total Assets $ 5,104,729 $ 2,916,748 $ 3,106,667 $ 9,028,007 $ 20,156,151

LIABILITIES Accrued liabilities $ 1,771,303 $ 557,458 $ 1,366,875 $ 279,323 $ 3,974,959 Due to other funds 642,767 176,339 24,232 21,850 865,188 Unearned revenue 41,524 31,373 - - 72,897 Total Liabilities 2,455,594 765,170 1,391,107 301,173 4,913,044

FUND BALANCES Non-spendable 128,478 198,662 - - 327,140 Restricted 2,520,657 1,952,916 1,715,560 8,726,834 14,915,967 Total Fund Balances 2,649,135 2,151,578 1,715,560 8,726,834 15,243,107 Total Liabilities and Fund Balance $ 5,104,729 $ 2,916,748 $ 3,106,667 $ 9,028,007 $ 20,156,151

See accompanying note to supplementary information. 74

GROSSMONT UNION HIGH SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2019

Special Reserve Non-Major Adult Education Capital Facilities Fund for Capital Governmental Fund Cafeteria Fund Fund Outlay Projects Funds REVENUES Federal sources $ 1,082,509 $ 6,182,337 $ - $ - $ 7,264,846 Other state sources 12,710,914 554,700 1,556 3,077 13,270,247 Other local sources 2,726,278 2,091,491 1,143,082 4,267,329 10,228,180 Total Revenues 16,519,701 8,828,528 1,144,638 4,270,406 30,763,273 EXPENDITURES Current Instruction 6,190,507 - - - 6,190,507 Instruction-related services Instructional supervision and administration 730,982 - - - 730,982 School site administration 6,703,854 - - - 6,703,854 Pupil services Food services - 8,069,520 - - 8,069,520 General administration All other general administration 590,758 415,202 35,847 - 1,041,807 Plant services 829,666 447,008 - 255,036 1,531,710 Facilities acquisition and maintenance 63,457 360,052 3,431,821 1,304,458 5,159,788 Total Expenditures 15,109,224 9,291,782 3,467,668 1,559,494 29,428,168 Excess (Deficiency) of Revenues Over Expenditures 1,410,477 (463,254) (2,323,030) 2,710,912 1,335,105 Other Financing Sources (Uses) Transfers out - - - (35,824) (35,824) Net Financing Sources (Uses) - - - (35,824) (35,824) NET CHANGE IN FUND BALANCE 1,410,477 (463,254) (2,323,030) 2,675,088 1,299,281 Fund Balance - Beginning 1,238,658 2,614,832 4,038,590 6,051,746 13,943,826 Fund Balance - Ending $ 2,649,135 $ 2,151,578 $ 1,715,560 $ 8,726,834 $ 15,243,107

See accompanying note to supplementary information. 75

GROSSMONT UNION HIGH SCHOOL DISTRICT ADULT EDUCATION FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Federal sources $ 1,041,514 $ 1,188,856 $ 1,082,509 $ (106,347) Other state sources 10,876,169 12,913,249 12,710,914 (202,335) Other local sources 3,149,934 3,161,234 2,726,278 (434,956) Total Revenues 15,067,617 17,263,339 16,519,701 (743,638)

EXPENDITURES Certificated salaries 5,793,660 6,192,450 5,415,628 776,822 Classified salaries 1,873,475 1,831,344 1,802,271 29,073 Employee benefits 3,432,839 3,305,389 3,249,176 56,213 Books and supplies 638,454 1,052,572 618,824 433,748 Services and other operating expenditures 2,516,508 4,242,100 3,311,471 930,629 Capital outlay 9,000 338,102 121,096 217,006 Other outgo Transfers of indirect costs 803,681 685,298 590,758 94,540 Total Expenditures 15,067,617 17,647,255 15,109,224 2,538,031 NET CHANGE IN FUND BALANCE - (383,916) 1,410,477 1,794,393 Fund Balance - Beginning 1,238,658 1,238,658 1,238,658 - Fund Balance - Ending $ 1,238,658 $ 854,742 $ 2,649,135 $ 1,794,393

See accompanying note to supplementary information. 76

GROSSMONT UNION HIGH SCHOOL DISTRICT CAFETERIA FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Federal sources $ 5,694,605 $ 5,737,605 $ 6,182,337 $ 444,732 Other state sources 405,208 403,508 554,700 151,192 Other local sources 2,024,181 2,071,198 2,091,491 20,293 Total Revenues 8,123,994 8,212,311 8,828,528 616,217

EXPENDITURES Classified salaries 3,369,330 3,407,925 3,182,217 225,708 Employee benefits 1,352,292 1,370,455 1,368,089 2,366 Books and supplies 2,626,511 2,950,624 3,263,991 (313,367) Services and other operating expenditures 419,392 424,952 387,134 37,818 Capital outlay 1,000,000 260,262 675,149 (414,887) Other outgo Transfers of indirect costs 420,701 440,976 415,202 25,774 Total Expenditures 9,188,226 8,855,194 9,291,782 (436,588) NET CHANGE IN FUND BALANCE (1,064,232) (642,883) (463,254) 179,629 Fund Balance - Beginning 2,391,891 2,614,832 2,614,832 - Fund Balance - Ending $ 1,327,659 $ 1,971,949 $ 2,151,578 $ 179,629

See accompanying note to supplementary information. 77

GROSSMONT UNION HIGH SCHOOL DISTRICT BUILDING FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Other state sources $ - $ - $ 33,022 $ 33,022 Other local sources 550,000 1,879,368 1,932,634 53,266 Total Revenues 550,000 1,879,368 1,965,656 86,288

EXPENDITURES Classified salaries 571,818 571,818 480,918 90,900 Employee benefits 238,469 238,469 234,590 3,879 Books and supplies 172,569 675,625 1,004,551 (328,926) Services and other operating expenditures 13,940 239,895 333,725 (93,830) Capital outlay 69,388,466 57,730,262 67,362,487 (9,632,225) Total Expenditures 70,385,262 59,456,069 69,416,271 (9,960,202) Excess (Deficiency) of Revenues Over Expenditures (69,835,262) (57,576,701) (67,450,615) (9,873,914) Other Financing Sources (Uses): Other sources - 43,000,000 43,000,000 - Net Financing Sources (Uses) - 43,000,000 43,000,000 - NET CHANGE IN FUND BALANCE (69,835,262) (14,576,701) (24,450,615) (9,873,914) Fund Balance - Beginning 76,091,716 72,087,090 72,087,090 - Fund Balance - Ending $ 6,256,454 $ 57,510,389 $ 47,636,475 $ (9,873,914)

See accompanying note to supplementary information. 78

GROSSMONT UNION HIGH SCHOOL DISTRICT CAPITAL FACILITIES FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Other state sources $ - $ - $ 1,556 $ 1,556 Other local sources 751,000 856,000 1,143,082 287,082 Total Revenues 751,000 856,000 1,144,638 288,638

EXPENDITURES Classified salaries 9,156 9,156 23,513 (14,357) Employee benefits 4,166 4,166 12,334 (8,168) Books and supplies - - 199,594 (199,594) Services and other operating expenditures - - 7,801 (7,801) Capital outlay 3,698,329 3,775,477 3,224,426 551,051 Total Expenditures 3,711,651 3,788,799 3,467,668 321,131 NET CHANGE IN FUND BALANCE (2,960,651) (2,932,799) (2,323,030) 609,769 Fund Balance - Beginning 3,426,041 4,038,590 4,038,590 - Fund Balance - Ending $ 465,390 $ 1,105,791 $ 1,715,560 $ 609,769

See accompanying note to supplementary information. 79

GROSSMONT UNION HIGH SCHOOL DISTRICT COUNTY SCHOOL FACILITIES FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Other state sources $ - $ 15,792,294 $ 15,792,294 $ - Other local sources 270,000 457,000 483,178 26,178 Total Revenues 270,000 16,249,294 16,275,472 26,178

EXPENDITURES Services and other operating expenditures 351 - - - Capital outlay 15,216,090 945,000 941,320 3,680 Total Expenditures 15,216,441 945,000 941,320 3,680 NET CHANGE IN FUND BALANCE (14,946,441) 15,304,294 15,334,152 29,858 Fund Balance - Beginning 19,428,890 19,453,677 19,453,677 - Fund Balance - Ending $ 4,482,449 $ 34,757,971 $ 34,787,829 $ 29,858

See accompanying note to supplementary information. 80

GROSSMONT UNION HIGH SCHOOL DISTRICT SPECIAL RESERVE FOR CAPITAL OUTLAY FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Other state sources $ - $ - $ 3,077 3,077 Other local sources 1,943,689 3,464,565 4,267,329 802,764 Total Revenues 1,943,689 3,464,565 4,270,406 805,841

EXPENDITURES Classified salaries 3,121 3,121 70,728 (67,607) Employee benefits 879 879 34,661 (33,782) Books and supplies - 7,889 97,759 (89,870) Services and other operating expenditures 177,800 257,063 144,218 112,845 Capital outlay 1,611,866 2,067,574 1,212,128 855,446 Total Expenditures 1,793,666 2,336,526 1,559,494 777,032 Excess (Deficiency) of Revenues Over Expenditures 150,023 1,128,039 2,710,912 1,582,873 Other Financing Sources (Uses): Transfers out (25,000) (35,016) (35,824) (808) Net Financing Sources (Uses) (25,000) (35,016) (35,824) (808) NET CHANGE IN FUND BALANCE 125,023 1,093,023 2,675,088 1,582,065 Fund Balance - Beginning 5,839,557 6,051,746 6,051,746 - Fund Balance - Ending $ 5,964,580 $ 7,144,769 $ 8,726,834 $ 1,582,065

See accompanying note to supplementary information. 81

GROSSMONT UNION HIGH SCHOOL DISTRICT BOND INTEREST AND REDEMPTION FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Federal sources $ 1,172,149 $ 1,172,149 $ 915,917 $ (256,232) Other state sources - - 329,060 329,060 Other local sources 31,846,191 31,846,191 35,684,548 3,838,357 Total Revenues 33,018,340 33,018,340 36,929,525 3,911,185

EXPENDITURES Other outgo Excluding transfers of indirect costs 33,493,950 33,493,950 33,919,196 (425,246) Total Expenditures 33,493,950 33,493,950 33,919,196 (425,246) Excess (Deficiency) of Revenues Over Expenditures (475,610) (475,610) 3,010,329 3,485,939 Other Financing Sources (Uses): Other sources - - 3,490,788 3,490,788 Net Financing Sources (Uses) - - 3,490,788 3,490,788 NET CHANGE IN FUND BALANCE (475,610) (475,610) 6,501,117 6,976,727 Fund Balance - Beginning 40,423,006 45,285,606 45,285,606 - Fund Balance - Ending $ 39,947,396 $ 44,809,996 $ 51,786,723 $ 6,976,727

See accompanying note to supplementary information. 82

GROSSMONT UNION HIGH SCHOOL DISTRICT INTERNAL SERVICE FUND – BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Budgeted Amounts Actual* Variances - Original Final (Budgetary Basis) Final to Actual REVENUES Other local sources $ 4,762,405 $ 4,810,357 $ 5,794,472 $ 984,115 Total Revenues 4,762,405 4,810,357 5,794,472 984,115

EXPENDITURES Services and other operating expenditures 7,500,363 6,469,155 6,815,251 (346,096) Total Expenditures 7,500,363 6,469,155 6,815,251 (346,096) NET CHANGE IN FUND BALANCE (2,737,958) (1,658,798) (1,020,779) 638,019 Fund Balance - Beginning (20,178,255) (49,877,124) (49,877,124) - Fund Balance - Ending $ (22,916,213) $ (51,535,922) $ (50,897,903) $ 638,019

*The beginning and ending fund balances reported in this schedule do not agree with the amounts reported in the proprietary funds statement of revenues, expenses and changes in net position due adjustments made to deferred outflows and deferred inflows of resources.

See accompanying note to supplementary information. 83

GROSSMONT UNION HIGH SCHOOL DISTRICT LOCAL EDUCATION AGENCY ORGANIZATION STRUCTURE JUNE 30, 2019

The District is located in the eastern portion of San Diego County and encompasses a territory of about 465 square miles, including all of the Cities of El Cajon, Santee, and Lemon Grove, nearly all of the city of La Mesa, a very small portion of the city of San Diego, and the unincorporated communities of Alpine, Dulzura, Lakeside, Jamul and Spring Valley. The District is a high school district providing public education for students in grades 9‐12. The District was formed in 1920. The District is currently operating nine high schools, one continuation school, two alternative education sites, four special education facilities, a middle college high school program, a Career Technical Education (CTE) program, and an adult education program. Two charter schools also operate under the sponsorship of the District.

GOVERNING BOARD Member Office Term Expires

Robert Shield President 2022

Chris Fite Vice-President 2020

Elva Salinas Clerk 2020

Dr. Gary Woods Member 2022

Jim Kelly Member 2022

DISTRICT ADMINISTRATORS

Dr. Timothy Glover Superintendent

Scott H. Patterson Deputy Superintendent, Business Services

Theresa Kemper Assistant Superintendent, Educational Services

Ernest Anastos Assistant Superintendent, Human Resources*

*Julie Mottershaw was Assistant Superintendent, Human Resources, until her death on February 27, 2019. Ernest Anastos was hired as Interim Assistant Superintendent March 13, 2019 – June 14, 2019. Dr. Terry Stanfill was hired to fill the Assistant Superintendent, Human Resources position on July 1, 2019.

See accompanying note to supplementary information. 84

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION JUNE 30, 2019

NOTE 1 – PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements.

The following schedule provides reconciliation between revenues reported on the Statement of Revenue, Expenditures, and Changes in Fund Balance, and the related expenditures reported on the Schedule of Expenditures of Federal Awards. The reconciling amounts represent Federal funds that have been recorded as revenues in a prior year that have been expended by June 30, 2019 or Federal funds that have been recorded as revenues in the current year and were not expended by June 30, 2019.

CFDA Number Amount Total Federal Revenues reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance $ 20,329,465 Federal Interest Subsidies * (915,917) Medi-Cal Billing Option 93.778 (176,010) Medi-Cal Administrative Activities 93.778 (598,886) Total Expenditures reported in the Schedule of Expenditures of Federal Awards $18,638,652

The District has not elected to use the 10 percent de minimis indirect cost rate.

Schedule of Average Daily Attendance (ADA) Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs.

Schedule of Instructional Time This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections 46200 through 46208. During the year ended June 30, 2019, the District participated in the Longer Day incentive funding program. As of June 30, 2019, the District had met its target funding.

Schedule of Financial Trends and Analysis This schedule discloses the District's financial trends by displaying past years' data along with current year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time.

GROSSMONT UNION HIGH SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION, continued JUNE 30, 2019

NOTE 1 – PURPOSE OF SCHEDULES (continued)

Reconciliation of Annual Financial and Budget Report with Audited Financial Statements This schedule provides the information necessary to reconcile the fund balance of all funds reported on the Annual Financial and Budget Report Unaudited Actuals to the audited financial statements.

Schedule of Charter Schools This schedule lists all Charter Schools chartered by the District and displays information for each Charter School on whether or not the Charter School is included in the District audit.

Combining Statements – Non-Major Funds These statements provide information on the District’s non‐major funds.

Budgetary Comparison Schedules The budgetary comparison schedules present both the original and final appropriated budgets for the reporting period as well as actual inflows, outflows, and balances, stated on the District’s budgetary basis.

Local Education Agency Organization Structure This schedule provides information about the District's boundaries and schools operated, members of the governing board, and members of the administration.

OTHER INDEPENDENT AUDITORS’ REPORTS

Certified Public Accountants serving K-12 School Districts and Charter Schools throughout California

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Independent Auditors’ Report

Governing Board Grossmont Union High School District El Cajon, California

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Grossmont Union High School District, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Grossmont Union High School District’s basic financial statements, and have issued our report thereon dated November 4, 2019.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered Grossmont Union High School District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Grossmont Union High School District’s internal control. Accordingly, we do not express an opinion on the effectiveness of Grossmont Union High School District’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether Grossmont Union High School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

San Diego, California November 4, 2019

88 Certified Public Accountants serving K-12 School Districts and Charter Schools throughout California

REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

Independent Auditors’ Report

Governing Board Grossmont Union High School District El Cajon, California

Report on Compliance for Each Major Federal Program

We have audited Grossmont Union High School District’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Grossmont Union High School District’s major federal programs for the year ended June 30, 2019. Grossmont Union High School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Grossmont Union High School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Grossmont Union High School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Grossmont Union High School District's compliance.

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Opinion on Each Major Federal Program

In our opinion, Grossmont Union High School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2019.

Report on Internal Control Over Compliance

Management of Grossmont Union High School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Grossmont Union High School District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Grossmont Union High School District’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

San Diego, California November 4, 2019

90 Certified Public Accountants serving K-12 School Districts and Charter Schools throughout California

REPORT ON STATE COMPLIANCE

Independent Auditors’ Report

Governing Board Grossmont Union High School District El Cajon, California

Report on State Compliance

We have audited Grossmont Union High School District’s compliance with the types of compliance requirements described in the 2018-2019 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, issued by the California Education Audit Appeals Panel that could have a direct and material effect on each of Grossmont Union High School District’s state programs for the fiscal year ended June 30, 2019, as identified below.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Grossmont Union High School District's state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the 2018-2019 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the state programs noted below occurred. An audit includes examining, on a test basis, evidence about Grossmont Union High School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance with the requirements referred to above. However, our audit does not provide a legal determination of Grossmont Union High School District's compliance with those requirements.

Opinion on State Compliance

In our opinion, Grossmont Union High School District complied, in all material respects, with the types of compliance requirements referred to above that are applicable to the state programs noted in the table below for the year ended June 30, 2019.

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In connection with the audit referred to above, we selected and tested transactions and records to determine Grossmont Union High School District's compliance with the state laws and regulations applicable to the following items:

PROCEDURES PROGRAM NAME PERFORMED Attendance Yes Teacher Certification and Misassignments Yes Kindergarten Continuance Not Applicable Independent Study Yes Continuation Education No Instructional Time Yes Instructional Materials Yes Ratios of Administrative Employees to Teachers Yes Classroom Teacher Salaries Yes Early Retirement Incentive Not Applicable Gann Limit Calculation Yes School Accountability Report Card Yes Juvenile Court Schools Not Applicable Middle or Early College High Schools No K-3 Grade Span Adjustment Not Applicable Transportation Maintenance of Effort Yes Apprenticeship: Related and Supplemental Instruction Yes Comprehensive School Safety Plan Yes District of Choice Not Applicable California Clean Energy Jobs Act Yes

92 Procedures Performed (continued)

PROCEDURES PROGRAM NAME PERFORMED After/Before School Education and Safety Program Not Applicable Proper Expenditure of Education Protection Account Funds Yes Unduplicated Local Control Funding Formula Pupil Counts Yes Local Control and Accountability Plan Yes Independent Study-Course Based Not Applicable Attendance; for charter schools Not Applicable Mode of Instruction; for charter schools Not Applicable Nonclassroom-Based Instruction/Independent Study; for charter schools Not Applicable Determination of Funding for Nonclassroom-Based Instruction; for charter schools Not Applicable Annual Instructional Minutes – Classroom Based; for charter schools Not Applicable Charter School Facility Grant Program Not Applicable

We did not perform testing for continuation education because the ADA was under the level that requires testing.

We did not perform testing for middle or early college high schools because the ADA was under the level that requires testing.

San Diego, California November 4, 2019

93 SCHEDULE OF FINDINGS AND QUESTIONED COSTS GROSSMONT UNION HIGH SCHOOL DISTRICT SUMMARY OF AUDITORS’ RESULTS FOR THE YEAR ENDED JUNE 30, 2019

FINANCIAL STATEMENTS Type of auditors' report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? No Significant deficiency(ies) identified? None Reported Non-compliance material to financial statements noted? No

FEDERAL AWARDS Internal control over major program: Material weakness(es) identified? No Significant deficiency(ies) identified? None Reported Type of auditors' report issued: Unmodified Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance 2 CFR 200.516(a)? No Identification of major programs:

CFDA Number(s) Name of Federal Program or Cluster 10.553, 10.555, 10.559 Child Nutrition Cluster 10.558 CACFP Claims - Centers and Family Day Care Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? Yes

STATE AWARDS Internal control over state programs: Material weaknesses identified? No Significant deficiency(ies) identified? None Reported Type of auditors' report issued on compliance for state programs: Unmodified

94 GROSSMONT UNION HIGH SCHOOL DISTRICT FINANCIAL STATEMENT FINDINGS FOR THE YEAR ENDED JUNE 30, 2019

FIVE DIGIT CODE AB 3627 FINDING TYPE 20000 Inventory of Equipment 30000 Internal Control

There were no financial statement findings for the year ended June 30, 2019.

95 GROSSMONT UNION HIGH SCHOOL DISTRICT FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

FIVE DIGIT CODE AB 3627 FINDING TYPE 50000 Federal Compliance

There were no federal award findings or questioned costs for the year ended June 30, 2019.

96 GROSSMONT UNION HIGH SCHOOL DISTRICT STATE AWARD FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

FIVE DIGIT CODE AB 3627 FINDING TYPE 10000 Attendance 40000 State Compliance 42000 Charter School Facilities Programs 43000 Apprenticeship: Related and Supplemental Instruction 60000 Miscellaneous 61000 Classroom Teacher Salaries 62000 Local Control Accountability Plan 70000 Instructional Materials 71000 Teacher Misassignments 72000 School Accountability Report Card

There were no state award findings or questioned costs for the year ended June 30, 2019.

97 GROSSMONT UNION HIGH SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2019

There were no prior year findings or questioned costs.

98 Certified Public Accountants serving K-12 School Districts and Charter Schools throughout California

MANAGEMENT LETTER

Governing Board Grossmont Union High School District El Cajon, California

In planning and performing our audit of the basic financial statements of Grossmont Union High School District for the year ended June 30, 2019, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide assurance on the internal control structure.

However, during our audit we noted matters that are an opportunity for strengthening internal controls and operating efficiency. The following items represent conditions noted by our audit that we consider important enough to bring to your attention. This letter does not affect our report dated November 4, 2019, on the financial statements of Grossmont Union High School District.

Associated Student Body (ASB) Funds

Observation: During our cash receipts testing at El Capitan High School and Grossmont High School we noted that deposits were lacking sufficient supporting documentation for fundraising and other event proceeds such as sales activity reports, sales receipts and control sheets. Additionally, it was noted that event proceeds are not required to be counted by two individuals prior to submission to the ASB office at Grossmont High School.

Recommendation: We recommend that appropriate supporting documentation be prepared for all major fund‐raising activities.

We will review the status of the comment above during our next audit engagement.

San Diego, California November 4, 2019

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APPENDIX C

PROPOSED FORM OF OPINION OF BOND COUNSEL

[Dated Date]

Governing Board Grossmont Union High School District El Cajon, California

Grossmont Union High School District Grossmont Union High School District 2020 General Obligation Bonds 2020 General Obligation Bonds (Election of 2008, Series J-1) (Election of 2008, Series J-2) (Federally Taxable) (Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the Grossmont Union High School District (the “District”), which is located in the County of San Diego, California (the “County”), in connection with the issuance by the District of $______aggregate principal amount of bonds designated as “Grossmont Union High School District 2020 General Obligation Bonds (Election of 2008, Series J-1) (Federally Taxable)” (the “Series J-1 Bonds”) and $______aggregate principal amount of bonds designated as “Grossmont Union High School District 2020 General Obligation Bonds (Election of 2008, Series J-2)” (the “Series J-2 Bonds” and together with the Series J-1 Bonds, the “Bonds”). The Bonds are issued under and pursuant to a resolution of the Governing Board of the District, adopted on September 10, 2020 (the “Resolution”) and a Paying Agent Agreement, dated as of October 1, 2020 (the “Paying Agent Agreement”), by and between the District and the County of San Diego, California, Office of the Treasurer-Tax Collector, as paying agent (the “Paying Agent”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Resolution or the Paying Agent Agreement.

In such connection, we have reviewed the Paying Agent Agreement, the Resolution, the resolution of the County adopted on September 29, 2020 (the “County Resolution”), the tax certificate for the Bonds of the District, dated the date hereof (the “Tax Certificate”), certificates of the District, the Paying Agent, the County and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after original delivery of the Bonds on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after original delivery of the Bonds on the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used 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. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the District. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Paying Agent Agreement, the Resolution, the County Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Series J-2 Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Paying Agent Agreement, the Resolution, the County Resolution and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations

C-1

on legal remedies against school districts and counties in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute or having the effect of a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Resolution, or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute the valid and binding obligations of the District.

2. The Resolution has been duly and legally adopted and constitutes the valid and binding obligation of the District.

3. The Board of Supervisors of the County has power and is obligated to levy ad valorem taxes without limitation as to rate or amount upon all property within the District’s boundaries subject to taxation by the District (except certain personal property which is taxable at limited rates) for the payment of the Bonds and the interest thereon.

4. Interest on the Series J-2 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Series J-2 Bonds is not a specific preference item for purposes of the federal alternative minimum tax. We observe that interest on the Series J-1 Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code. Interest on the Bonds is exempt from State of California personal income taxes. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

per

C-2

APPENDIX D

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”), dated ______, 2020, is executed and delivered by the Grossmont Union High School District (the “District”) in connection with the issuance of the above-named bonds (the “Bonds”). The Bonds are being issued pursuant to a resolution (the “Resolution”), adopted by the Governing Board of the District on September 10, 2020, and in accordance with the terms of a Paying Agent Agreement, dated as of October 1, 2020 (the “Paying Agent Agreement”), by and between the District and the County of San Diego, California, Office of the Treasurer-Tax Collection (the “Paying Agent”). The District covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission (“S.E.C.”) Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Paying Agent Agreement, 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 District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person who has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).

“Dissemination Agent” shall mean the District, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“Financial Obligation” shall mean, for purposes of the Listed Events set out in Section 5(a)(10) and 5(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule.

“Holder” shall mean the person in whose name any Bond shall be registered.

“Listed Events” shall mean any of the events listed in Section 5(a) or (b) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the S.E.C., filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

“Official Statement” shall mean the final official statement dated ______, 2020 relating to the Bonds.

“Participating Underwriter” shall mean the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

D-1

“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.

SECTION 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District’s fiscal year (currently ending June 30), commencing with the report for the fiscal year of the District ending June 30, 2020 (which is due not later than April 1, 2021), provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB, and may cross- reference other information as provided in Section 4 of this Disclosure Certificate; provided, that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5.

(b) Not later than 15 business days prior to said date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If the District is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the District shall send a notice to the MSRB in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall (if the Dissemination Agent is other than the District), file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to the MSRB.

SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:

* Audited financial statements of the District for the preceding fiscal year, prepared in accordance with the laws of the State of California and including all statements and information prescribed for inclusion therein by the Controller of the State of California. If the District’s audited financial statements are not available by the time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be provided to the MSRB in the same manner as the Annual Report when they become available.

To the extent not included in the audited financial statements of the District, the Annual Report shall also include the following:

* The District’s approved annual budget for the then-current fiscal year;

* Assessed value of taxable property in the District as shown on the most recent equalized assessment role;

* District outstanding debt;

* If the County no longer includes the tax levy for payment of the Bonds in its Teeter Plan, the property tax levies, collections, and delinquencies for the District for the most recently completed fiscal year; and

* Top twenty property owners in the District for the then-current fiscal year, as measured by secured assessed valuation, the amount of their respective taxable value, and their percentage of total secured assessed value, if material.

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Any or all of the items listed above may be set forth in one or a set of documents or may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB website. If the document included by reference is a final official statement, it must be available from the MSRB. The District shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds not later than ten business days after the occurrence of 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. Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

6. Tender offers;

7. Defeasances;

8. Rating changes;

9. Bankruptcy, insolvency, receivership or similar event of the District; or

10. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties.

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 the District 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 District, 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 District.

(b) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, not later than ten business days after the occurrence of the event:

1. Unless described in Section 5(a)(5), 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. Modifications to rights of Bond holders;

3. Optional, unscheduled or contingent Bond calls;

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4. Release, substitution, or sale of property securing repayment of the Bonds;

5. Non-payment related defaults;

6. The consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, 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;

7. Appointment of a successor or additional paying agent or the change of name of a paying agent; or

8. Incurrence of a Financial Obligation of the District, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders.

(c) The District shall give, or cause to be given, in a timely manner, notice of a failure to provide the annual financial information on or before the date specified in Section 3, as provided in Section 3(b).

(d) Whenever the District obtains knowledge of the occurrence of a Listed Event described in Section 5(b), the District shall determine if such event would be material under applicable federal securities laws.

(e) Upon the occurrence of a Listed Event described in Section 5(a) or Section 5(b) (if material), the District shall within ten business days of occurrence file a notice of such occurrence with the MSRB in electronic format, accompanied by such identifying information as is prescribed by the MSRB. Notwithstanding the foregoing, notice of the Listed Event described in Section 5(b)(3) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution.

(f) The District intends to comply with the Listed Events described in Section 5(a)(10) and Section 5(b)(8), and the definition of “Financial Obligation” in Section 1, with reference to the Rule, any other applicable federal securities laws and the guidance provided by the Commission in its Release No. 34-83885 dated August 20, 2018 (the “2018 Release”), and any further amendments or written guidance provided by the Commission or its staff with respect to the amendments to the Rule effected by the 2018 Release.

SECTION 6. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(e).

SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be the District.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5(a) or 5(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the District with respect to the Bonds, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the

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Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(e), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District 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 District 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 District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate any Holder or Beneficial 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 District to comply with its obligations under this Disclosure Certificate; provided, that any such action may be instituted only in Superior Court of the State of California in and for the County of San Diego or in U.S. District Court in or nearest to the County. The sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

IN WITNESS WHEREOF, the undersigned has executed and delivered this Continuing Disclosure Certificate on the date as first written above.

GROSSMONT UNION HIGH SCHOOL DISTRICT

By: Scott H. Patterson Deputy Superintendent, Business Services

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EXHIBIT A

FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT

Name of District: GROSSMONT UNION HIGH SCHOOL DISTRICT

Name of Bond Issue: GROSSMONT UNION HIGH SCHOOL DISTRICT 2020 GENERAL OBLIGATION BONDS (ELECTION OF 2008, SERIES J-1) (FEDERALLY TAXABLE)

GROSSMONT UNION HIGH SCHOOL DISTRICT 2020 GENERAL OBLIGATION BONDS (ELECTION OF 2008, SERIES J-2)

Date of Issuance: ______, 2020

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by Section 4 of the Continuing Disclosure Certificate of the District, dated the Date of Issuance. [The District anticipates that the Annual Report will be filed by ______.]

Dated:______

GROSSMONT UNION HIGH SCHOOL DISTRICT

By [to be signed only if filed]

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APPENDIX E

SAN DIEGO COUNTY INVESTMENT POOL

The following information concerning the Treasury Pool of San Diego County (the “Treasury Pool”) has been provided by the Treasurer and has not been confirmed or verified by the District or the Underwriters. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained or incorporated hereby by reference is correct as of any time subsequent to its date.

In accordance with Section 53600 et seq. of the Government Code of the State of California (the “Government Code”), the Treasurer manages funds deposited with it by the District. The County is required to invest such funds in accordance with Section 53635 et seq. of the Government Code. In addition, counties are required to establish their own investment policies which may impose limitations beyond those required by the Government Code.

All investments in the Treasurer’s investment portfolio conform to the statutory requirements of Section 53635 et seq. of the Government Code, authorities delegated by the County Board of Supervisors and the Treasurer’s investment policy.

General

Pursuant to a resolution adopted July 8, 1958, the Board of Supervisors delegated to the County Treasurer the authority to invest and reinvest funds of the County. Applicable law limits this delegation of authority to a one- year period and must be renewed annually by action of the Board of Supervisors. In addition to funds of the County, funds of certain local agencies within the County, including school districts in the County, are required under state law to be deposited into County Treasury (“Involuntary Depositors”). In addition, certain agencies, such as cities and special districts, invest certain of their funds in the County Treasury on a voluntary basis (“Voluntary Depositors” and together with the Involuntary Depositors, the “Depositors”). Deposits made by the County and the various local agencies are commingled in a pooled investment fund (the “Treasury Pool” or the “Pool”). No particular deposits are segregated for separate investment.

Under State law, Depositors in the Pool are permitted to withdraw funds which they have deposited on 30 days notice. The County does not expect that the Pool will encounter liquidity shortfalls based on its current portfolio and investment guidelines or realize any losses that may be required to be allocated among all Depositors in the Pool.

The County has established an Oversight Committee pursuant to State law. The members of the Oversight Committee include the County Treasurer, the County Auditor–Controller, the County Superintendent of Schools or designee, a representative from special districts, a representative from school districts and community college districts in the County, and members of the public. The role of the Oversight Committee is to review and approve the Investment Policy that is prepared by the County Treasurer.

The Treasury Pool’s Portfolio

As of August 31, 2020, the securities in the Treasury Pool had a market value of $9,796,617,573 and a book value of $9,668,974,706, for a net unrealized gain of $815,969,059 of the book value of the Treasury Pool.

The effective duration for the Treasury Pool was 1.18 years as of August 31, 2020. “Duration” is a measure of the price volatility of the portfolio and reflects an estimate of the projected increase or decrease in the value of the portfolio based upon a decrease or increase in interest rates. A duration of 1.18 means that for every one percent increase in interest rates the market value of the portfolio would decrease by 1.18%.

As of August 31, 2020, approximately 8.63% of the total funds in the Pool were deposited by Voluntary Depositors, such as cities and fire districts, 7.16% by community colleges, 32.94% by the County, 1.09% by the Non-County and 50.18% by K-12 school districts.

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Fitch Ratings maintains ratings of “AAAf” (highest underlying credit quality) and “S-1” (very low sensitivity to market risk) on the Pool. The ratings reflect only the view of the rating agency and any explanation of the significance of such ratings may be obtained from such rating agency as follows: Fitch Ratings, Inc., 33 Whitehall Street, New York, New York 10004.

Investments of the Treasury Pool

Authorized Investments: Investments of the Pool are placed in those securities authorized by various sections of the Government Code, which include obligations of the United States Treasury, Agencies of the United States Government, local and State bond issues, bankers acceptances, commercial paper of prime quality, certificates of deposit (both collateralized and negotiable), repurchase and reverse repurchase agreements, medium term corporate notes, shares of beneficial interest in diversified management companies (mutual funds), asset backed (including mortgage related), pass-through securities, and specific Supranational debt securities.

Legislation which would modify the currently authorized investments and place restrictions on the ability of municipalities to invest in various securities is considered from time to time by the California State Legislature. At all times, the Pool’s investments will comply with Government Code and the County’s Investment Policy (the “Investment Policy”).

The Investment Policy currently states the primary goals of the County Treasurer when investing public funds to be as follows: the primary objective is to safeguard the principal of the funds under the County Treasurer's control, the secondary objective is to meet the liquidity needs of the Pool Participants, and the third objective is to achieve an investment return on the funds under the control of the County Treasurer within the parameters of prudent risk management. The Investment Policy contains a requirement that at least 35% of the Pool should be invested in securities maturing in one year or less, with the remainder of the portfolio being invested in debt securities with maturities spread over more than one year to five years. Furthermore, at least 15% of the securities must mature within 90 days. The maximum effective duration for the Pool shall be 2.0 years.

Certain Information Relating to Pool

The following table reflects information with respect to the Pool as of the close of business on August 31, 2020. As described above, a wide range of investments is authorized by state law. Therefore, there can be no assurances that the investments in the Pool will not vary significantly from the investments described below. In addition, the value of the various investments in the Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Therefore, there can be no assurance that the values of the various investments in the Pool will not vary significantly from the values described below. In addition, the values specified in the following table were based upon estimates of market values provided to the County by a third party. Accordingly, there can be no assurance that if these securities had been sold on August 31, 2020, the Pool necessarily would have received the values specified.

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TREASURER-TAX COLLECTOR SUMMARY OF SAN DIEGO COUNTY PORTFOLIO STATISTICS AS OF AUGUST 31, 2020

E-3 AUG 2020 TABLE OF CONTENTS

03 Summary Portfolio Statistics 04 Cash Flow Analysis 05 Participant Cash Balances 06 Investment Fund Participants 07 Asset Allocation 07 Asset Credit Quality 08 Appendix 09 - Investment Policy Compliance Report 10 - Investment Inventory Report 19 - Investment Transaction Report

Note: The Information provided, including all charts, tables, graphs and numerical representations, are provided to readers solely as a general overview of the economic and market conditions which the Treasurer utilizes in making investment decisions. SUMMARY PORTFOLIO STATISTICS County of San Diego Pooled Money Fund As of August 31, 2020

WAM Accrued Unrealized Investment Type Par Value Book Value Market Value % of Portfolio Market Price Days YTM Interest Gain/Loss Asset Backed Securities 757,483,068 760,222,382 769,905,396 7 .86 101.640 1022 2.08 9 19,311 9 ,683,014 Commercial Paper 1,155,000,000 1,154,458,246 1,154,657,850 1 1.94 99.970 56 0.48 - 1 99,604 Federal Agency Securities 2,389,038,000 2,394,205,730 2,439,046,440 2 4.76 102.093 1144 1.38 8 ,727,072 4 4,840,710 Medium-Term Notes 876,871,000 878,920,638 897,864,959 9 .09 102.394 575 2.25 4 ,543,717 1 8,944,321 Municipal Bonds 161,790,000 162,241,932 164,856,404 1 .68 101.895 1204 1.19 3 36,914 2 ,614,473 Negotiable CDs 2,100,000,000 2,100,000,000 2,101,598,150 2 1.72 100.076 95 1.28 4 ,850,757 1 ,598,150 Supranational Securities 982,415,000 989,466,037 1,022,915,260 1 0.23 104.123 1085 2.01 6 ,008,920 3 3,449,223 U.S. Treasuries 500,000,000 502,716,156 519,029,530 5 .20 103.830 987 1.50 1 ,294,868 1 6,313,374 Money Market Funds 725,739,410 725,739,410 725,739,410 7 .51 100.000 1 0.12 5 9,497 - Bank Deposit 258,519 258,519 258,519 0 .00 0.000 1 0.00 - - Sweep Fund 745,656 745,656 745,656 0 .01 100.000 1 0.01 4 - Totals for August 2020 9,649,340,653 9,668,974,706 9,796,617,573 1 00.00 101.535 641 1.20 2 6,741,060 1 27,642,868

Totals for July 2020 8,827,688,548 8,844,128,104 8,980,648,514 1 00.00 101.745 630 1.46 3 1,505,900 1 36,520,410

Change from Prior Month 821 ,652,105 824 ,846,602 815 ,969,059 ( 0.210) 11 -0.26 ( 4,764,841) ( 8,877,542)

Portfolio Effective Duration 1.18 years

Fiscal Year To Calendar Year Return Information Monthly Return Annualized Date Return Annualized To Date Return Annualized Book Value 0.130% 1.532% 0.258% 0.220% 1.195% 1.787%

Notes Yield to maturity (YTM) is the estimated rate of return on a bond given its purchase price, assuming all coupon payments are made on a timely basis and reinvested at this same rate of return to the maturity date. Weighted Average Maturity (WAM) is average time it takes for securities in a portfolio to mature, weighted in proportion to the dollar amount that is invested in the portfolio. Yields for the portfolio are aggregated based on the book value of each security. Monthly Investment Returns are reported gross of fees. Administration fees since fiscal year 17-18 have averaged approximately 7 basis points per annum.

**All Investments held during the month of August 2020 were in compliance with the Investment Policy dated January 1, 2020. 3 PROJECTED LIQUIDITY County of San Diego Pooled Money Fund As of August 31, 2020 ($000) Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Beginning Pool Book Balance 9,668,975 9,920,789 9,898,864 9,981,454 11,499,182 10,681,286

Inflows Investment Inflows 1,253,685 456,738 565,000 342,100 391,710 372,000 Projected Credits 1,429,525 1,213,125 1,310,675 3,228,460 882,935 827,385 2,683,210 1,669,863 1,875,675 3,570,560 1,274,645 1,199,385

Outflows Investment Purchases 1,356,090 - - - - - Projected Debits 1,177,711 1,235,050 1,228,085 1,710,732 1,700,831 1,353,580 2,533,801 1,235,050 1,228,085 1,710,732 1,700,831 1,353,580

Net Cash Flows 251,814 (21,925) 82,590 1,517,728 (817,896) (526,195)

MONTH END POOL BALANCE 9,920,789 9,898,864 9,981,454 11,499,182 10,681,286 10,155,091

PROJECTED MONTH END LIQUIDITY $ 873,267 $ 1,308,080 $ 1,955,670 $ 3,815,498 $ 3,389,312 $ 3,235,117

Note: The above is not meant to be a complete Cash Flow Statement. The data represents a subset of the main cash flow items and does not include accrued interest or other adjustment items.

The projected cash flows indicate sufficient liquidity to meet all scheduled expenditures for the next 6 months.

4 PARTICIPANT CASH BALANCES County of San Diego Pooled Money Fund As of August 31, 2020 ($000) FMV FMV FMV % of FMV FMV FMV % of PARTICIPANT 06/30/20 07/31/20 08/31/20 Total PARTICIPANT 06/30/20 07/31/20 08/31/20 Total COUNTY $ 1,012,375 $ 1,066,857 $ 1,102,846 11.26% Lake Cuyamaca Rec & Park District 39 207 202 0.00% COUNTY - SPECIAL TRUST FUNDS 3,082,718 2,206,322 2,123,939 21.68% Lakeside FPD 11,356 8,411 7,288 0.07% NON-COUNTY INVESTMENT FUNDS 120,957 125,894 106,748 1.09% Leucadia Wastewater District 3,990 4,003 6,022 0.06% SCHOOLS - (K THRU 12) 4,393,500 3,962,419 4,915,918 50.18% Lower Sweetwater FPD 793 671 676 0.01% Metropolitan Transit System 39,348 27,304 41,307 0.42% COMMUNITY COLLEGES Mission Resource Conservation District 120 100 101 0.00% San Diego 180,682 167,629 112,564 1.16% North County Transit District 20,261 20,291 20,230 0.21% Grossmont-Cuyamaca 149,558 145,427 123,063 1.26% North County Cemetery District 6,713 6,786 6,859 0.07% MiraCosta 116,985 108,379 81,584 0.83% North County Dispatch 4,926 4,348 4,241 0.04% Palomar 239,406 230,133 216,106 2.21% North County FPD 4,268 3,382 2,793 0.03% Southwestern 139,831 133,162 168,198 1.72% Otay Water District 5,155 10,641 15,664 0.16% Total Community Colleges 826,463 784,730 701,515 7.16% Pomerado Cemetery District 2,113 2,080 1,991 0.02% Public Agencies Self-Insurance System 3,636 3,546 3,543 0.04% FIRST 5 COMMISSION 46,374 45,397 38,911 0.40% Ramona Cemetery District 948 1,075 1,050 0.01% SANCAL 3,919 3,932 3,929 0.04% Rancho Santa Fe FPD 12,672 9,692 8,640 0.09% SDCERA 7,774 2,183 2,176 0.02% Rincon del Diablo Municipal Water District 5,842 6,874 6,863 0.07% SANDAG 189,134 187,729 186,351 1.90% CITIES SD County Regional Airport Authority 294,027 266,872 268,472 2.74% Chula Vista 35,889 29,438 34,481 0.35% San Diego Housing Commission 22,200 22,272 22,251 0.23% Coronado 41,386 36,414 32,305 0.33% San Diego Geographic Information Source 707 624 933 0.01% Del Mar 2,778 2,787 2,784 0.03% San Diego Law Library 3,997 3,928 3,956 0.04% El Cajon 5,198 5,215 5,210 0.05% San Diego Local Agency Formation Comm 1,356 1,889 2,379 0.02% Encinitas 4,212 4,226 4,222 0.04% San Diego Regional Training Center 1,040 948 977 0.01% National City 36,442 36,562 36,526 0.37% San Dieguito River Park 575 807 1,394 0.01% Oceanside 0 0 0 0.00% San Marcos FPD 1 1 1 0.00% San Miguel Consolidated FPD 16,429 15,279 13,453 0.14% INDEPENDENT AGENCIES Santa Fe Irrigation District 4,520 4,534 4,530 0.05% Alpine FPD 2,413 1,547 1,317 0.01% Serra Cooperative Library System 2 2 0 0.00% Bonita-Sunnyside FPD 6,620 6,035 5,620 0.06% Upper San Luis Rey Resource Conserv Dist 71 71 71 0.00% Borrego Springs FPD 1,648 1,445 1,305 0.01% Vallecitos Water District 5,551 5,570 5,564 0.06% Canebrake County Water District 55 55 55 0.00% Valley Center FPD 2,383 2,187 1,768 0.02% Deer Springs FPD 11,961 12,164 12,242 0.12% Valley Center Cemetery District 491 493 493 0.01% Fallbrook Public Utility District 0 0 0 0.00% Valley Center Water District 22,311 20,184 20,405 0.21% Grossmont Healthcare District 2 2 2 0.00% Vista FPD 3,227 3,702 3,582 0.04% Julian-Cuyamaca FPD 514 517 517 0.01% Total Voluntary Participants 897,390 834,421 845,651 8.63%

Pooled Money Fund Total $ 10,333,403 $ 8,980,644 $ 9,796,617 100.00%

5 INVESTMENT FUND PARTICIPANTS

San Diego Pooled Money Fund As of August 31, 2020 Non County Funds 1.09%

Voluntary County Funds Depositors 32.94% 8.63%

Community Colleges 7.16%

Schools 50.18%

*Totals may not add to 100% due to rounding

6 INVESTMENT FUND OVERVIEW As of August 31, 2020

Asset Allocation Credit Quality U.S. Sweep Fund Treasuries 0.01% 5.20%

Municipal Bonds Supranational 1.68% Securities Negotiable 10.23% CD's 21.72%

AAA Commercial F1+ 56.31% Paper 24.08% 11.94%

Medium- Term Notes 9.09% Federal Agency Money Securities Market Funds F1 Bank Deposit 24.76% 7.51% 9.67% 0.00% Asset AA+ AA- A- Backed 2.60% 3.71% 0.50% Securities AA A+ 7.86% 0.33% 2.80%

*Totals may not add to 100% due to rounding

7 8 INVESTMENT POLICY COMPLIANCE REPORT County of San Diego Pooled Money Fund As of August 31, 2020 Category Standard Comment Treasury Issues No Limit Complies - 5.2% Agency Issues 35% per issuer Complies - 24.8% Local Agency Obligations SP-1/"A" by S&P or MIG1/"A" by Moody's or F-1/"A" by Fitch minimum rating by 1 of 3 NRSROs; (ST ratings for 1 year Complies - 1.7% or less; LT ratings for over 1 year) ; 30% maximum; 10% per issuer Banker's Acceptance A-1 by S&P or P-1 by Moody's or F-1 by Fitch minimum rating by 1 of 3 NRSROs; 40% maximum; 5% per issuer; 180 Complies days max maturity Commercial Paper A-1/"A" by S&P or P-1/"A" by Moody's or F-1/"A" by Fitch minimum rating by 1 of 3 NRSROs; 40% maximum; 10% per Complies - 11.9% issuer; 270 days max maturity Medium Term Notes A-1/"A" by S&P or P-1/"A" by Moody's or F-1/"A" by Fitch minimum rating by 1 of 3 NRSROs; (ST ratings for 1 year or Complies - 9.1% less; LT ratings for over 1 year); 30% maximum; 5% per issuer Negotiable Certificates of Deposit A-1/"A" by S&P or P-1/"A" by Moody's or F-1/"A" by Fitch minimum rating by 1 of 3 NRSROs; (ST ratings for 1 year or less; LT ratings for over 1 year); 30% maximum; 10% per issuer; 5 years maximum maturity for NCDs; 13 months Complies - 21.7% max maturity for FDIC insured Repurchase Agreements 40% maximum; 10% per issuer if avg weighted maturity >5 days; 15% per issuer if avg weighted maturity <5 days; 1- Complies year maximum maturity; Reverse Repurchase Agreements 20% maximum combined with Securities Lending; 10% per issuer; 92-day maximum maturity N/A Collateralized Certificates of Deposit A-1 by S&P or P-1 by Moody's, or F-1 by Fitch minimum rating; 5% maximum; 5% per issuer; 13 months maximum Complies maturity; 110% collateral required FDIC & NCUA Insured Deposit 5% maximum; 5% per issuer; 13 months maximum maturity; No minimum credit requirement for FDIC or NCUA Complies - 0.0% insured deposit accounts Covered Call Option/ Put Option 10% maximum; 90-day maximum maturity N/A Money Market Mutual Funds AAAm by S&P, or Aaa-mf by Moody's, or AAAmmf by Fitch minimum rating by 1 of 3 NRSROs; 20% maximum; 10% per Complies - 7.5% fund Investment Trust of California - CalTRUST 2.5% maximum Complies - 0.0% Supranationals A-1/"AA" by S&P or P-1/"Aa" by Moody's, or F-1/"AA" by Fitch minimum rating by 1 of 3 NRSROs; 30% maximum; Complies - 10.2% 10% per issuer; USD denominated senior unsecured unsubordinated obligations issued by IBRD, IFC, and IADB Pass-Through Securities Non-mortgaged backed; "A" minimum rated issuer by 1 of 3 NRSROs; "AA" minimum rated by 1 of 3 NRSROs; 20% Complies - 7.9% maximum; 5% per issuer Maximum Maturity 5 years Complies Illiquidity Limitations 10% maximum for combined categories for Collateralized CDs and FDIC Insured Deposit Accounts Complies Maximum Issuer Exposure 10% per any single CP and CD issuer, and 5% per any single issuer for the other categories listed above (does not Complies include US Government, repurchase agreements, supranationals, money market fund) Maturity Policy - Portfolio Structure Minimum 15% ≤ 90 days; and minimum 35% ≤1 year; maximum effective duration for portfolio 2 years Complies Prohibited Securities Inverse floaters; Ranges notes, Interest-only strips from mortgaged backed securities; Zero interest accrual securities Complies Credit Rating Policy - monitoring ratings Overall credit rating of AAAf/S1, by Fitch; Investments rated below A-1 (short term) or below the "A" category (long Complies term), at the time of purchase, are prohibited in this policy Securities Lending 92-day maximum maturity; 10% per counterparty; 20% maximum combined with Reverse Repurchase Agreements N/A *Complied at time of purchase 9 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Asset Backed Securities Nissan Auto Receivables Owner 04/29/2020 1,833,361.38 1,833,361.38 1,834,151.19 0.98 0.98 04/15/2021 403.64 789.81 GM Financial Securitized Term 04/22/2020 831,888.76 831,888.76 832,239.07 1.26 1.26 04/16/2021 (483.44) 350.31 Ford Credit Auto Owner Trust 05/12/2020 1,190,299.82 1,190,299.82 1,190,288.51 0.27 0.27 05/17/2021 12.31 (11.31) Hyundai Auto Receivables Trust 04/29/2020 2,034,766.13 2,034,766.13 2,036,821.04 1.20 1.20 05/17/2021 676.04 2,054.91 Toyota Auto Receivables 04/29/2020 2,477,451.54 2,477,451.54 2,479,103.26 1.14 1.14 05/17/2021 681.25 1,651.72 Toyota Auto Receivables 03/12/2019 333,957.73 331,961.81 334,102.67 1.76 2.66 07/15/2021 13,163.37 2,140.86 Toyota Auto Receivables 11/07/2018 1,470,800.32 1,470,671.62 1,472,736.04 2.98 3.01 08/15/2021 5,015.64 2,064.42 Honda Auto Rec Owner Trust 02/27/2019 3,767,046.23 3,766,803.63 3,779,271.43 3.10 3.12 09/20/2021 71,058.03 12,467.80 Toyota Auto Receivables 02/13/2019 1,687,330.92 1,687,177.71 1,692,806.65 2.83 2.85 10/15/2021 2,122.30 5,628.94 John Deere Owner Trust 03/13/2019 2,554,786.38 2,554,669.88 2,562,279.31 2.85 2.87 12/15/2021 3,236.11 7,609.43 Toyota Auto Receivables 11/30/2018 1,740,453.56 1,711,355.35 1,748,372.10 1.93 2.97 01/18/2022 1,492.90 37,016.75 Ford Credit Auto Owner Trust 06/21/2019 4,191,673.63 4,191,542.01 4,209,333.15 2.35 2.36 02/15/2022 4,377.94 17,791.14 Honda Auto Rec Owner Trust 08/27/2019 15,384,182.95 15,383,106.06 15,479,132.59 1.90 1.91 04/15/2022 12,991.08 96,026.53 Toyota Auto Receivables 08/14/2019 6,051,380.97 6,051,099.58 6,084,636.94 2.00 2.01 04/15/2022 4,823.44 33,537.36 Harley-Davidson Motorcycle Tru 06/26/2019 2,182,528.03 2,182,500.75 2,189,604.00 2.37 2.38 05/15/2022 2,298.94 7,103.25 John Deere Owner Trust 07/24/2019 5,622,993.56 5,622,972.19 5,651,760.23 2.28 2.29 05/16/2022 5,697.99 28,788.04 BMW Vehicle Owner Trust 09/18/2019 4,318,901.48 4,318,810.35 4,341,367.11 2.05 2.06 05/25/2022 1,475.68 22,556.76 GM Financial Securitized Term 03/27/2020 1,862,744.05 1,856,195.35 1,866,255.32 2.66 2.92 06/16/2022 2,064.42 10,059.97 Hyundai Auto Receivables Trust 11/06/2019 3,884,479.26 3,884,238.81 3,907,701.84 1.93 1.94 07/15/2022 3,332.03 23,463.03 Toyota Auto Receivables 11/13/2019 16,632,994.40 16,631,765.22 16,757,452.44 1.92 1.93 07/15/2022 14,193.47 125,687.22 GM Financial Securitized Term 07/24/2019 6,400,839.88 6,400,593.45 6,428,929.33 2.23 2.24 08/16/2022 5,946.89 28,335.88 Honda Auto Rec Owner Trust 05/03/2019 13,464,273.67 13,559,996.24 13,653,804.86 2.95 2.48 08/22/2022 11,033.34 93,808.62 Nissan Auto Receivables Owner 06/30/2020 20,000,000.00 19,999,404.00 20,022,454.00 0.47 0.47 10/17/2022 4,177.79 23,050.00 Honda Auto Rec Owner Trust 02/26/2020 14,000,000.00 13,998,581.80 14,125,995.80 1.63 1.64 10/21/2022 6,338.94 127,414.00 Honda Auto Rec Owner Trust 05/27/2020 5,000,000.00 4,999,626.00 5,015,190.00 0.74 0.75 11/15/2022 1,644.42 15,564.00 Toyota Auto Receivables 02/12/2020 30,000,000.00 29,999,631.00 30,231,636.00 1.67 1.68 11/15/2022 22,266.63 232,005.00 GM Financial Securitized Term 03/25/2020 14,045,439.27 13,889,073.97 14,116,544.31 1.84 3.76 11/16/2022 10,767.92 227,470.34 Toyota Auto Receivables 05/03/2019 19,940,000.00 20,138,621.08 20,268,790.66 3.02 2.50 12/15/2022 26,763.75 130,169.58 Toyota Auto Receivables 08/01/2019 24,540,000.00 24,907,141.41 24,944,640.06 3.02 2.05 12/15/2022 32,938.01 37,498.65 Harley-Davidson Motorcycle Tru 01/29/2020 5,171,494.14 5,171,233.50 5,200,301.43 1.83 1.84 01/17/2023 4,206.15 29,067.93 Citibank Credit Card Issuance 04/16/2019 28,310,000.00 28,274,219.60 28,555,374.09 2.49 2.55 01/20/2023 80,282.44 281,154.49 Ford Credit Auto Owner Trust 06/19/2020 23,000,000.00 22,998,988.00 23,042,823.70 0.50 0.50 02/15/2023 5,111.11 43,835.70 BMW Vehicle Owner Trust 07/15/2020 7,250,000.00 7,249,485.25 7,254,586.35 0.39 0.40 02/27/2023 471.26 5,101.10 Hyundai Auto Receivables Trust 07/22/2020 6,000,000.00 5,999,419.20 6,006,451.80 0.38 0.39 03/15/2023 1,013.33 7,032.60 John Deere Owner Trust 07/22/2020 3,000,000.00 2,999,853.90 3,000,812.40 0.41 0.41 03/15/2023 1,332.50 958.50 Toyota Auto Receivables 11/07/2018 15,000,000.00 14,996,755.50 15,320,221.50 3.18 3.21 03/15/2023 21,199.99 323,466.00 Honda Auto Rec Owner Trust 02/27/2019 9,750,000.00 9,749,738.70 9,976,098.60 3.11 3.13 03/20/2023 51,899.81 226,359.90 American Express Credit Accoun 04/02/2019 11,738,000.00 11,656,842.76 11,763,870.55 2.04 1.23 05/15/2023 10,642.45 107,027.79 Citibank Credit Card Issuance 03/18/2019 7,000,000.00 6,994,621.23 7,129,285.80 2.68 2.71 06/07/2023 43,773.33 134,664.57 Nissan Auto Receivables Owner 12/06/2019 9,006,000.00 9,194,914.92 9,223,576.85 3.22 1.91 06/15/2023 12,888.59 28,661.93 Honda Auto Rec Owner Trust 05/29/2019 28,500,000.00 28,498,936.95 29,243,046.30 2.52 2.54 06/21/2023 19,950.00 744,109.35 Bank of America Corp 03/20/2019 22,790,000.00 22,772,195.31 23,042,415.20 2.70 2.73 07/17/2023 27,348.00 270,219.89 Toyota Auto Receivables 02/13/2019 20,000,000.00 19,996,356.00 20,493,172.00 2.91 2.94 07/17/2023 25,866.66 496,816.00

10 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Honda Auto Rec Owner Trust 08/27/2019 24,000,000.00 23,999,800.80 24,463,624.80 1.78 1.79 08/15/2023 18,986.78 463,824.00 Nissan Auto Receivables Owner 05/28/2019 28,000,000.00 27,993,669.20 28,738,301.20 2.50 2.52 11/15/2023 33,362.68 744,632.00 American Express Credit Accoun 12/17/2018 38,000,000.00 37,881,250.00 38,731,332.80 2.99 3.14 12/15/2023 50,497.38 850,082.80 Discover Card Execution Note T 03/27/2019 30,000,000.00 30,460,546.88 30,747,471.00 3.11 2.43 01/16/2024 41,466.50 286,924.12 Toyota Auto Receivables 11/13/2019 13,500,000.00 13,499,025.30 13,829,206.95 1.92 1.93 01/16/2024 11,520.00 330,181.65 Honda Auto Rec Owner Trust 11/26/2019 22,500,000.00 22,495,990.50 23,054,033.25 1.83 1.85 01/18/2024 14,868.76 558,042.75 BMW Vehicle Owner Trust 09/18/2019 10,500,000.00 10,498,588.80 10,733,685.90 1.92 1.93 01/25/2024 3,360.00 235,097.10 American Express Credit Accoun 03/27/2019 40,253,000.00 40,825,347.34 41,235,346.29 3.06 2.42 02/15/2024 54,744.08 409,998.95 Hyundai Auto Receivables Trust 11/06/2019 8,500,000.00 8,499,608.15 8,695,447.30 1.94 1.95 02/15/2024 7,328.89 195,839.15 Discover Card Execution Note T 07/11/2019 8,750,000.00 8,959,179.69 9,031,237.25 3.32 2.20 03/15/2024 12,910.97 72,057.56 American Express Credit Accoun 06/13/2019 22,120,000.00 22,584,865.63 22,787,198.92 3.18 2.23 04/15/2024 31,262.93 202,333.29 GM Financial Securitized Term 07/10/2020 27,900,000.00 28,574,613.28 28,537,886.07 2.18 0.81 04/16/2024 25,342.36 (36,727.21) Honda Auto Rec Owner Trust 02/26/2020 16,500,000.00 16,496,766.00 16,886,953.05 1.61 1.62 04/22/2024 7,379.12 390,187.05 Nissan Auto Receivables Owner 10/23/2019 12,000,000.00 11,999,366.40 12,334,045.20 1.93 1.94 07/15/2024 10,293.33 334,678.80 John Deere Owner Trust 03/11/2020 12,000,000.00 11,999,266.80 12,163,423.20 1.10 1.11 08/15/2024 5,866.67 164,156.40 GM Financial Securitized Term 01/15/2020 13,000,000.00 12,996,938.50 13,304,804.50 1.84 1.86 09/16/2024 8,637.77 307,866.00 Harley-Davidson Motorcycle Tru 01/29/2020 6,000,000.00 5,998,691.40 6,121,962.00 1.87 1.89 10/15/2024 4,986.67 123,270.60 Asset Backed Securities Subtotal: 757,483,068.06 760,222,382.39 769,905,396.16 2.26 2.08 919,311.34 9,683,013.77

Bank Deposit Wells Fargo Bank NA 07/01/2020 258,518.65 258,518.65 258,518.65 0.00 0.00 0.00 0.00 Bank Deposit Subtotal: 258,518.65 258,518.65 258,518.65 0.00 0.00 0.00 0.00

Commercial Paper Cooperatieve Rabo 04/13/2020 75,000,000.00 75,000,000.00 74,999,250.00 1.10 1.10 09/01/2020 0.00 (750.00) Cooperatieve Rabo 04/13/2020 50,000,000.00 49,998,472.22 49,999,500.00 1.10 1.10 09/02/2020 0.00 1,027.78 Credit Agricole CIB 08/27/2020 200,000,000.00 199,999,111.11 199,998,000.00 0.08 0.08 09/03/2020 0.00 (1,111.11) Cooperatieve Rabo 04/13/2020 25,000,000.00 24,998,472.22 24,999,750.00 1.10 1.10 09/03/2020 0.00 1,277.78 ING (US) Funding LLC 12/24/2019 60,000,000.00 59,977,600.00 59,997,600.00 1.92 1.98 09/08/2020 0.00 20,000.00 BNP Paribas NY 06/01/2020 25,000,000.00 24,998,833.33 24,999,500.00 0.21 0.21 09/09/2020 0.00 666.67 BNP Paribas NY 06/15/2020 25,000,000.00 24,998,263.89 24,999,250.00 0.25 0.25 09/11/2020 0.00 986.11 BNP Paribas NY 06/01/2020 25,000,000.00 24,997,666.67 24,999,000.00 0.21 0.21 09/17/2020 0.00 1,333.33 Cooperatieve Rabo 04/13/2020 50,000,000.00 49,955,694.44 49,996,500.00 1.10 1.11 09/30/2020 0.00 40,805.56 JP Morgan 04/28/2020 70,000,000.00 69,942,638.89 69,986,000.00 0.50 0.51 10/30/2020 0.00 43,361.11 JP Morgan 06/03/2020 100,000,000.00 99,960,666.67 99,980,000.00 0.24 0.24 10/30/2020 0.00 19,333.33 Toyota Motor Credit Corp 07/02/2020 25,000,000.00 24,988,937.50 24,993,750.00 0.27 0.27 10/30/2020 0.00 4,812.50 BNP Paribas NY 08/06/2020 50,000,000.00 49,985,361.11 49,989,500.00 0.17 0.17 11/02/2020 0.00 4,138.89 JP Morgan 05/06/2020 50,000,000.00 49,969,861.11 49,989,500.00 0.35 0.35 11/02/2020 0.00 19,638.89 Cooperatieve Rabo 06/03/2020 50,000,000.00 49,975,208.33 49,976,500.00 0.21 0.21 11/25/2020 0.00 1,291.67 Toyota Motor Credit Corp 06/29/2020 50,000,000.00 49,965,763.89 49,977,500.00 0.29 0.29 11/25/2020 0.00 11,736.11 Toyota Motor Credit Corp 07/22/2020 25,000,000.00 24,977,500.00 24,982,750.00 0.30 0.30 12/18/2020 0.00 5,250.00 Toyota Motor Credit Corp 07/08/2020 25,000,000.00 24,973,958.33 24,978,250.00 0.30 0.30 01/04/2021 0.00 4,291.67 Toyota Motor Credit Corp 07/07/2020 50,000,000.00 49,945,000.00 49,954,000.00 0.30 0.31 01/11/2021 0.00 9,000.00 Toyota Motor Credit Corp 07/27/2020 25,000,000.00 24,970,833.33 24,975,250.00 0.30 0.30 01/19/2021 0.00 4,416.67

11 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Toyota Motor Credit Corp 07/01/2020 25,000,000.00 24,967,111.11 24,973,500.00 0.32 0.33 01/27/2021 0.00 6,388.89 Cooperatieve Rabo 08/25/2020 50,000,000.00 49,953,291.66 49,951,000.00 0.19 0.19 02/25/2021 0.00 (2,291.66) Canadian Imperial Holding 08/14/2020 25,000,000.00 24,958,000.00 24,962,000.00 0.24 0.24 05/11/2021 0.00 4,000.00 Commercial Paper Subtotal: 1,155,000,000.00 1,154,458,245.81 1,154,657,850.00 0.47 0.48 0.00 199,604.19

Federal Agency Federal National Mtg Assn 11/03/2017 25,000,000.00 25,000,000.00 25,071,000.00 1.85 1.85 10/30/2020 155,451.39 71,000.00 Federal Home Loan Mtg Corp 11/27/2017 15,000,000.00 15,000,000.00 15,062,700.00 1.88 1.88 11/27/2020 73,437.50 62,700.00 Federal Home Loan Mtg Corp 11/27/2017 25,000,000.00 25,000,000.00 25,104,500.00 1.88 1.88 11/27/2020 122,395.83 104,500.00 Federal Home Loan Mtg Corp 12/18/2017 15,000,000.00 15,000,000.00 15,084,000.00 2.00 2.00 12/18/2020 60,833.33 84,000.00 Federal Home Loan Bank 09/21/2016 25,000,000.00 25,012,698.63 25,142,000.00 1.38 1.26 02/18/2021 12,413.19 129,301.37 Federal Home Loan Bank 02/14/2017 25,000,000.00 24,954,635.91 25,142,000.00 1.38 1.78 02/18/2021 12,413.19 187,364.09 Federal Home Loan Bank 02/17/2017 25,000,000.00 25,000,000.00 25,237,250.00 1.82 1.82 03/17/2021 207,277.78 237,250.00 Federal National Mtg Assn 06/17/2016 15,000,000.00 15,001,316.23 15,113,250.00 1.25 1.24 05/06/2021 59,895.83 111,933.77 Federal National Mtg Assn 09/21/2016 25,000,000.00 24,989,773.27 25,188,750.00 1.25 1.31 05/06/2021 99,826.39 198,976.73 Federal Home Loan Bank 07/14/2016 15,000,000.00 15,075,094.05 15,208,650.00 1.88 1.21 06/11/2021 62,500.00 133,555.95 Federal Home Loan Bank 08/04/2016 35,000,000.00 34,974,028.03 35,298,200.00 1.13 1.21 07/14/2021 51,406.25 324,171.97 Federal Home Loan Mtg Corp 10/05/2016 20,000,000.00 19,954,520.32 20,186,000.00 1.13 1.37 08/12/2021 11,875.00 231,479.68 Federal National Mtg Assn 09/21/2016 35,000,000.00 34,965,302.04 35,374,850.00 1.25 1.36 08/17/2021 17,013.89 409,547.96 Federal National Mtg Assn 11/08/2016 35,000,000.00 34,974,379.76 35,467,950.00 1.38 1.44 10/07/2021 192,500.00 493,570.24 Federal Home Loan Bank 03/27/2017 25,000,000.00 25,082,469.17 25,790,250.00 2.25 2.02 03/11/2022 265,625.00 707,780.83 Federal Home Loan Bank 04/05/2019 18,290,000.00 18,331,724.06 18,941,306.90 2.50 2.34 03/11/2022 215,923.61 609,582.84 Federal National Mtg Assn 04/12/2019 50,000,000.00 49,911,774.07 51,716,000.00 2.25 2.36 04/12/2022 434,375.00 1,804,225.93 Federal Farm Credit Bank 09/26/2019 29,425,000.00 29,391,267.06 30,130,611.50 1.55 1.62 06/01/2022 114,021.88 739,344.44 Federal Farm Credit Bank 09/26/2019 25,000,000.00 24,981,556.99 25,599,500.00 1.55 1.59 06/01/2022 96,875.00 617,943.01 Federal Home Loan Bank 04/08/2019 10,000,000.00 10,005,539.49 10,393,500.00 2.38 2.34 06/10/2022 53,437.50 387,960.51 Federal Farm Credit Bank 12/16/2019 40,000,000.00 39,998,567.30 41,035,600.00 1.63 1.63 06/15/2022 137,644.44 1,037,032.70 Federal Home Loan Bank 10/24/2019 25,000,000.00 25,184,549.76 25,945,500.00 2.00 1.62 09/09/2022 238,888.89 760,950.24 Federal Farm Credit Bank 09/23/2019 25,000,000.00 25,000,000.00 25,027,500.00 2.00 2.00 09/23/2022 219,444.44 27,500.00 Federal Farm Credit Bank 10/11/2019 10,000,000.00 9,992,048.15 10,246,600.00 1.38 1.41 10/11/2022 53,472.22 254,551.85 Federal Farm Credit Bank 07/01/2019 50,000,000.00 49,997,976.74 51,980,500.00 1.85 1.85 02/01/2023 77,083.33 1,982,523.26 Federal Farm Credit Bank 07/03/2019 20,000,000.00 20,012,698.76 20,792,200.00 1.85 1.82 02/01/2023 30,833.33 779,501.24 Federal Home Loan Bank 04/04/2019 29,195,000.00 29,488,307.69 31,064,647.80 2.75 2.33 03/10/2023 381,359.69 1,576,340.11 Federal Home Loan Bank 04/04/2019 10,000,000.00 10,100,465.04 10,640,400.00 2.75 2.33 03/10/2023 130,625.00 539,934.96 Federal Home Loan Bank 06/28/2019 48,500,000.00 48,885,929.62 51,000,175.00 2.13 1.83 06/09/2023 234,753.47 2,114,245.38 Federal Farm Credit Bank 07/03/2019 11,008,000.00 11,214,662.12 11,707,888.64 2.52 1.82 06/15/2023 58,562.56 493,226.52 Federal Farm Credit Bank 06/26/2019 32,250,000.00 32,208,855.49 33,640,620.00 1.77 1.82 06/26/2023 103,065.63 1,431,764.51 Federal Farm Credit Bank 07/03/2019 3,425,000.00 3,419,274.78 3,572,686.00 1.77 1.83 06/26/2023 10,945.73 153,411.22 Federal Home Loan Mtg Corp 08/27/2020 50,000,000.00 49,964,639.35 49,998,500.00 0.25 0.28 06/26/2023 1,388.88 33,860.65 Federal Home Loan Mtg Corp 08/27/2020 50,000,000.00 49,946,211.97 49,998,500.00 0.25 0.29 06/26/2023 1,388.88 52,288.03 Federal Home Loan Mtg Corp 04/26/2019 25,000,000.00 25,000,000.00 25,344,750.00 2.49 2.49 07/26/2023 216,145.83 344,750.00 Federal Home Loan Mtg Corp 08/21/2020 40,000,000.00 39,959,576.73 39,992,000.00 0.25 0.28 08/24/2023 2,777.78 32,423.27 Federal Home Loan Mtg Corp 08/27/2020 50,000,000.00 49,950,185.70 49,990,000.00 0.25 0.28 08/24/2023 1,388.89 39,814.30 Federal National Mtg Assn 08/27/2020 24,465,000.00 24,465,000.00 24,469,159.05 0.34 0.34 08/25/2023 924.23 4,159.05

12 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Federal Home Loan Mtg Corp 12/11/2019 11,385,000.00 11,385,000.00 11,389,781.70 1.85 1.85 09/11/2023 99,460.63 4,781.70 Federal National Mtg Assn 04/18/2019 10,000,000.00 10,123,632.89 10,800,300.00 2.88 2.44 09/12/2023 134,965.28 676,667.11 Federal National Mtg Assn 06/27/2019 25,000,000.00 25,758,118.98 27,000,750.00 2.88 1.83 09/12/2023 337,413.19 1,242,631.02 Federal Farm Credit Bank 07/03/2019 50,000,000.00 50,004,756.10 52,538,500.00 1.88 1.88 11/01/2023 313,333.33 2,533,743.90 Federal Home Loan Mtg Corp 12/04/2019 12,590,000.00 12,590,000.00 12,636,960.70 1.80 1.80 12/04/2023 54,766.50 46,960.70 Federal Home Loan Mtg Corp 12/18/2019 25,000,000.00 25,000,000.00 25,111,750.00 1.85 1.85 12/18/2023 93,784.72 111,750.00 Federal Home Loan Mtg Corp 03/29/2019 25,000,000.00 25,000,000.00 25,060,250.00 2.73 2.73 01/09/2024 269,208.33 60,250.00 Federal Home Loan Bank 02/15/2019 15,000,000.00 14,963,320.24 16,165,200.00 2.50 2.58 02/13/2024 18,750.00 1,201,879.76 Federal Home Loan Bank 02/22/2019 23,175,000.00 23,175,000.00 23,414,166.00 2.80 2.80 02/22/2024 16,222.50 239,166.00 Federal Farm Credit Bank 07/08/2019 50,000,000.00 50,473,353.75 53,347,000.00 2.23 1.94 02/23/2024 24,777.78 2,873,646.25 Federal National Mtg Assn 08/27/2020 15,455,000.00 15,455,000.00 15,461,954.75 0.38 0.37 02/26/2024 643.96 6,954.75 Federal Home Loan Mtg Corp 03/22/2019 20,000,000.00 20,000,000.00 20,252,800.00 2.75 2.75 03/22/2024 242,916.67 252,800.00 Federal Home Loan Bank 03/25/2020 12,300,000.00 12,300,000.00 12,311,193.00 1.62 1.62 03/25/2024 86,346.00 11,193.00 Federal Farm Credit Bank 06/13/2019 15,000,000.00 14,959,367.00 15,916,650.00 1.95 2.03 06/13/2024 63,375.00 957,283.00 Federal Farm Credit Bank 06/26/2019 105,350,000.00 105,637,053.69 111,787,938.50 1.95 1.87 06/13/2024 445,103.75 6,150,884.81 Federal Home Loan Mtg Corp 06/17/2020 25,000,000.00 25,000,000.00 25,027,500.00 0.63 0.63 06/17/2024 32,375.00 27,500.00 Federal Farm Credit Bank 06/17/2020 25,000,000.00 25,000,000.00 25,015,000.00 0.68 0.68 06/17/2024 34,944.44 15,000.00 Federal Farm Credit Bank 06/17/2020 50,000,000.00 50,000,000.00 50,030,000.00 0.68 0.68 06/17/2024 69,888.89 30,000.00 Federal Farm Credit Bank 07/23/2019 54,000,000.00 54,000,000.00 54,424,980.00 2.04 2.04 07/19/2024 128,520.00 424,980.00 Federal National Mtg Assn 08/12/2020 50,000,000.00 49,975,329.86 50,008,000.00 0.41 0.42 08/12/2024 10,819.44 32,670.14 Federal Home Loan Mtg Corp 08/19/2020 25,000,000.00 25,000,000.00 24,986,500.00 0.50 0.50 08/19/2024 4,166.67 (13,500.00) Federal Home Loan Mtg Corp 08/19/2020 25,000,000.00 25,000,000.00 24,986,500.00 0.50 0.50 08/19/2024 4,166.67 (13,500.00) Federal Home Loan Bank 10/16/2019 21,555,000.00 22,567,265.25 23,816,550.60 2.88 1.66 09/13/2024 289,196.25 1,249,285.35 Federal Home Loan Bank 11/06/2019 25,000,000.00 26,073,831.71 27,623,000.00 2.88 1.76 09/13/2024 335,416.67 1,549,168.29 Federal Home Loan Bank 11/26/2019 20,000,000.00 20,918,955.41 22,098,400.00 2.88 1.68 09/13/2024 268,333.33 1,179,444.59 Federal Farm Credit Bank 09/17/2019 14,000,000.00 13,958,099.56 14,702,800.00 1.60 1.68 09/17/2024 102,044.44 744,700.44 Federal Farm Credit Bank 09/17/2019 11,000,000.00 10,966,366.40 11,552,200.00 1.60 1.68 09/17/2024 80,177.78 585,833.60 Federal Home Loan Mtg Corp 11/12/2019 25,000,000.00 25,000,000.00 25,076,500.00 2.03 2.03 11/12/2024 153,659.72 76,500.00 Federal Home Loan Mtg Corp 11/12/2019 25,000,000.00 25,000,000.00 25,076,500.00 2.03 2.03 11/12/2024 153,659.72 76,500.00 Federal National Mtg Assn 01/10/2020 50,000,000.00 49,861,003.34 52,812,500.00 1.63 1.69 01/07/2025 121,875.00 2,951,496.66 Federal Home Loan Bank 02/27/2020 25,405,000.00 25,405,000.00 25,540,916.75 1.80 1.80 02/19/2025 15,243.00 135,916.75 Federal Home Loan Mtg Corp 02/27/2020 11,000,000.00 11,000,000.00 11,055,880.00 1.75 1.75 02/24/2025 3,743.06 55,880.00 Federal Home Loan Mtg Corp 05/19/2020 25,000,000.00 25,000,000.00 25,008,250.00 0.75 0.75 05/19/2025 53,125.00 8,250.00 Federal Home Loan Mtg Corp 05/27/2020 25,000,000.00 25,000,000.00 25,004,000.00 0.83 0.83 05/27/2025 54,180.56 4,000.00 Federal Home Loan Mtg Corp 05/29/2020 50,000,000.00 50,000,000.00 50,022,000.00 0.75 0.75 05/28/2025 95,833.33 22,000.00 Federal Home Loan Mtg Corp 06/02/2020 25,000,000.00 24,995,247.77 25,011,000.00 0.75 0.75 05/28/2025 46,354.17 15,752.23 Federal National Mtg Assn 06/11/2020 25,000,000.00 25,000,000.00 25,031,500.00 0.80 0.80 06/11/2025 44,444.44 31,500.00 Federal National Mtg Assn 06/16/2020 50,000,000.00 50,000,000.00 50,055,500.00 0.75 0.75 06/16/2025 78,125.00 55,500.00 Federal Home Loan Mtg Corp 07/15/2020 5,265,000.00 5,265,000.00 5,255,523.00 0.75 0.75 07/08/2025 5,045.63 (9,477.00) Federal Home Loan Mtg Corp 07/15/2020 25,000,000.00 25,000,000.00 25,009,250.00 0.77 0.77 07/15/2025 24,597.22 9,250.00 Federal National Mtg Assn 07/15/2020 30,000,000.00 30,000,000.00 30,003,900.00 0.73 0.73 07/15/2025 27,983.33 3,900.00 Federal National Mtg Assn 07/28/2020 20,000,000.00 20,000,000.00 20,003,600.00 0.67 0.67 07/28/2025 12,283.33 3,600.00 Federal National Mtg Assn 07/29/2020 25,000,000.00 25,000,000.00 24,957,750.00 0.60 0.60 07/29/2025 13,333.33 (42,250.00) Federal National Mtg Assn 07/29/2020 25,000,000.00 25,000,000.00 24,957,750.00 0.60 0.60 07/29/2025 13,333.33 (42,250.00)

13 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Federal National Mtg Assn 08/04/2020 25,000,000.00 25,000,000.00 25,003,000.00 0.70 0.70 08/04/2025 13,125.00 3,000.00 Federal National Mtg Assn 08/12/2020 25,000,000.00 25,000,000.00 24,985,000.00 0.57 0.57 08/12/2025 7,520.83 (15,000.00) Federal National Mtg Assn 08/19/2020 25,000,000.00 25,000,000.00 25,000,500.00 0.55 0.55 08/19/2025 4,583.33 500.00 Federal National Mtg Assn 08/26/2020 25,000,000.00 25,000,000.00 25,004,750.00 0.55 0.55 08/26/2025 1,909.72 4,750.00 Federal National Mtg Assn 08/27/2020 25,000,000.00 25,000,000.00 25,004,750.00 0.65 0.65 08/27/2025 1,805.56 4,750.00 Federal Agency Subtotal: 2,389,038,000.00 2,394,205,730.23 2,439,046,439.89 1.45 1.38 8,727,071.61 44,840,709.66

Medium-Term Notes American Honda Finance 03/04/2019 8,710,000.00 8,718,862.69 8,795,009.60 3.15 2.85 01/08/2021 40,392.63 76,146.91 Toyota Motor Credit Corp 01/08/2019 20,000,000.00 19,997,883.33 20,191,200.00 3.05 3.08 01/08/2021 89,805.56 193,316.67 US Bank NA Cincinnati 04/01/2019 12,000,000.00 12,021,516.92 12,110,880.00 3.00 2.54 02/04/2021 27,000.00 89,363.08 Apple Inc 05/06/2019 10,000,000.00 9,985,804.02 10,079,400.00 2.25 2.55 02/23/2021 5,000.00 93,595.98 Apple Inc 05/03/2019 8,137,000.00 8,156,439.33 8,288,755.05 2.85 2.49 05/06/2021 74,080.60 132,315.72 JP Morgan 10/22/2019 50,000,000.00 50,000,000.00 49,145,000.00 0.60 1.14 06/01/2021 78,893.40 (855,000.00) JP Morgan 10/21/2019 10,570,000.00 10,598,625.58 10,726,436.00 2.40 2.04 06/07/2021 59,192.00 127,810.42 American Honda Finance 04/05/2019 14,338,000.00 14,216,670.51 14,493,280.54 1.65 2.67 07/12/2021 32,200.76 276,610.03 American Honda Finance 09/09/2019 25,000,000.00 24,929,211.11 25,336,000.00 1.70 1.98 09/09/2021 203,055.56 406,788.89 Procter & Gamble 07/02/2019 5,000,000.00 4,984,244.00 5,083,400.00 1.70 1.98 11/03/2021 27,861.11 99,156.00 JP Morgan 01/22/2020 10,554,000.00 10,922,885.83 11,163,387.96 4.50 1.94 01/24/2022 48,812.25 240,502.13 JP Morgan 08/31/2020 5,406,000.00 5,716,574.70 5,718,142.44 4.50 0.37 01/24/2022 0.00 1,567.74 US BANKCORP 04/04/2019 25,000,000.00 24,998,754.95 25,780,750.00 2.63 2.63 01/24/2022 67,447.92 781,995.05 US BANKCORP 04/05/2019 5,000,000.00 4,999,327.01 5,156,150.00 2.63 2.63 01/24/2022 13,489.58 156,822.99 Microsoft Corp 04/05/2019 50,000,000.00 49,935,788.93 51,427,500.00 2.40 2.49 02/06/2022 83,333.33 1,491,711.07 Procter & Gamble 07/02/2019 16,857,000.00 16,936,284.75 17,345,178.72 2.30 1.96 02/06/2022 26,924.38 408,893.97 Apple Inc 04/12/2019 25,000,000.00 24,981,154.38 25,769,250.00 2.50 2.55 02/09/2022 38,194.44 788,095.62 Apple Inc 04/22/2019 20,000,000.00 19,870,782.92 20,549,000.00 2.15 2.62 02/09/2022 26,277.78 678,217.08 Apple Inc 04/25/2019 8,355,000.00 8,349,654.80 8,612,083.35 2.50 2.55 02/09/2022 12,764.58 262,428.55 Apple Inc 04/29/2019 4,950,000.00 4,946,871.80 5,102,311.50 2.50 2.55 02/09/2022 7,562.50 155,439.70 Apple Inc 06/07/2019 15,100,000.00 15,165,290.08 15,564,627.00 2.50 2.18 02/09/2022 23,069.44 399,336.92 Apple Inc 06/13/2019 13,876,000.00 13,922,615.23 14,302,964.52 2.50 2.25 02/09/2022 21,199.44 380,349.29 Toyota Motor Credit Corp 03/18/2019 50,000,000.00 50,000,000.00 50,656,500.00 2.85 2.85 02/18/2022 645,208.33 656,500.00 Toyota Motor Credit Corp 04/12/2019 25,000,000.00 24,991,527.08 25,928,750.00 2.65 2.67 04/12/2022 255,798.61 937,222.92 Toyota Motor Credit Corp 04/29/2019 50,000,000.00 50,000,000.00 50,749,500.00 2.70 2.70 04/29/2022 457,500.00 749,500.00 JP Morgan 04/30/2019 50,000,000.00 50,000,000.00 50,625,000.00 2.75 2.75 04/30/2022 462,152.78 625,000.00 Apple Inc 09/04/2019 10,157,000.00 10,245,355.40 10,488,219.77 2.30 1.77 05/11/2022 71,381.14 242,864.37 US Bank NA OH 05/23/2019 35,000,000.00 34,978,633.15 36,367,100.00 2.65 2.69 05/23/2022 252,486.11 1,388,466.85 Toyota Motor Credit Corp 02/27/2019 25,000,000.00 24,951,092.11 26,157,250.00 2.80 2.52 07/13/2022 93,333.33 1,206,157.89 Procter & Gamble 07/16/2019 20,000,000.00 20,021,285.07 20,746,400.00 2.15 2.09 08/11/2022 23,888.89 725,114.93 Procter & Gamble 08/21/2019 10,000,000.00 10,080,598.13 10,373,200.00 2.15 1.72 08/11/2022 11,944.44 292,601.87 Procter & Gamble 08/21/2019 20,000,000.00 20,161,196.26 20,746,400.00 2.15 1.72 08/11/2022 23,888.89 585,203.74 Exxon Mobil 08/16/2019 5,000,000.00 5,000,000.00 5,166,800.00 1.90 1.90 08/16/2022 3,962.50 166,800.00 Toyota Motor Credit Corp 01/15/2020 32,538,000.00 32,753,452.77 33,690,170.58 2.15 1.81 09/08/2022 336,180.81 936,717.81 Apple Inc 09/11/2019 20,000,000.00 19,997,701.85 20,596,400.00 1.70 1.71 09/11/2022 160,555.56 598,698.15 Apple Inc 07/12/2019 10,475,000.00 10,475,000.00 10,869,069.50 2.10 2.10 09/12/2022 103,266.04 394,069.50

14 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Toyota Motor Credit Corp 09/23/2019 25,000,000.00 25,000,000.00 25,414,750.00 2.10 2.10 09/23/2022 230,416.67 414,750.00 JP Morgan 01/24/2020 25,000,000.00 25,000,000.00 25,261,750.00 2.00 2.00 10/24/2022 51,388.89 261,750.00 JP Morgan 01/24/2020 25,000,000.00 25,000,000.00 25,261,750.00 2.00 2.00 10/24/2022 51,388.89 261,750.00 US Bank NA Cincinnati 12/09/2019 35,000,000.00 34,977,539.46 36,232,350.00 1.95 1.98 01/09/2023 98,583.33 1,254,810.54 Toyota Motor Credit Corp 01/21/2020 13,000,000.00 13,232,200.31 13,649,480.00 2.63 1.84 01/10/2023 48,343.75 417,279.69 JP Morgan 03/17/2020 10,000,000.00 10,140,012.38 10,343,500.00 2.97 2.36 01/15/2023 37,975.56 203,487.62 JP Morgan 05/28/2020 16,848,000.00 17,559,801.07 17,799,912.00 2.70 1.11 05/18/2023 117,514.80 240,110.93 Medium-Term Notes Subtotal: 876,871,000.00 878,920,637.91 897,864,958.53 2.35 2.25 4,543,716.58 18,944,320.62

Money Market Accounts BlackRock CalTrust 02/07/2019 50,000,000.00 50,000,000.00 50,000,000.00 0.01 0.01 2,123.35 0.00 BlackRock FedFund 07/06/2018 1,000,000.00 1,000,000.00 1,000,000.00 0.01 0.01 42.47 0.00 CAMP 01/24/2020 200,439,410.07 200,439,410.07 200,439,410.07 0.30 0.30 50,866.63 0.00 Fidelity Government Fund 07/01/2017 472,500,000.00 472,500,000.00 472,500,000.00 0.05 0.05 6,396.24 0.00 Federated Government Fund 07/01/2017 800,000.00 800,000.00 800,000.00 0.05 0.05 51.06 0.00 Morgan Stanley Govnt Fund 07/01/2017 1,000,000.00 1,000,000.00 1,000,000.00 0.02 0.02 17.62 0.00 Money Market Accounts Subtotal: 725,739,410.07 725,739,410.07 725,739,410.07 0.12 0.12 59,497.37 0.00

Municipal Bonds New York State 10/30/2019 20,000,000.00 20,000,000.00 20,134,000.00 1.84 1.84 02/15/2021 16,355.56 134,000.00 New York State 10/30/2019 10,000,000.00 10,000,000.00 10,358,500.00 1.95 1.95 02/15/2023 8,666.67 358,500.00 State oif Maryland 08/05/2020 15,000,000.00 15,000,000.00 15,008,550.00 0.41 0.41 08/01/2023 4,441.67 8,550.00 State of California 10/24/2019 26,535,000.00 26,974,833.07 28,136,387.25 2.40 1.84 10/01/2023 265,350.02 1,161,554.18 New York State 10/30/2019 20,000,000.00 20,000,000.00 20,933,800.00 2.01 2.01 02/15/2024 17,866.67 933,800.00 State oif Maryland 08/05/2020 25,000,000.00 25,000,000.00 25,017,000.00 0.51 0.51 08/01/2024 9,208.33 17,000.00 State of Minnesota 08/25/2020 15,000,000.00 15,012,098.52 14,998,500.00 0.50 0.48 08/01/2024 1,250.00 (13,598.52) State of Hawaii 08/12/2020 5,255,000.00 5,255,000.00 5,249,166.95 0.67 0.67 08/01/2025 1,858.23 (5,833.05) State oif Maryland 08/05/2020 25,000,000.00 25,000,000.00 25,020,500.00 0.66 0.66 08/01/2025 11,916.67 20,500.00 Municipal Bonds Subtotal: 161,790,000.00 162,241,931.59 164,856,404.20 1.28 1.19 336,913.82 2,614,472.61

Negotiable CDs Toronto Dominion NY 11/12/2019 75,000,000.00 75,000,000.00 75,014,250.00 1.85 1.85 09/04/2020 1,133,125.00 14,250.00 Bank of Montreal 09/06/2018 15,000,000.00 15,000,000.00 15,009,600.00 3.13 3.16 09/08/2020 466,891.60 9,600.00 Credit Agricole CIB 04/30/2020 25,000,000.00 25,000,000.00 25,001,750.00 0.29 0.29 09/14/2020 24,972.22 1,750.00 Canadian Imp Bk Comm NY 08/28/2020 25,000,000.00 25,000,000.00 25,000,000.00 0.12 0.12 09/18/2020 333.33 0.00 Credit Agricole CIB 04/29/2020 25,000,000.00 25,000,000.00 25,002,500.00 0.32 0.32 09/18/2020 27,777.78 2,500.00 Canadian Imp Bk Comm NY 08/28/2020 25,000,000.00 25,000,000.00 25,000,000.00 0.12 0.12 09/23/2020 333.33 0.00 Canadian Imp Bk Comm NY 08/28/2020 25,000,000.00 25,000,000.00 25,000,000.00 0.13 0.13 09/25/2020 361.11 0.00 Bank of Montreal 04/09/2020 80,000,000.00 80,000,000.00 80,072,800.00 1.20 1.20 09/30/2020 386,666.67 72,800.00 Canadian Imp Bk Comm NY 04/16/2020 50,000,000.00 50,000,000.00 50,032,000.00 0.91 0.91 09/30/2020 174,416.66 32,000.00 Svenska Handelsbanken NY 04/14/2020 50,000,000.00 50,000,000.00 50,041,500.00 1.09 1.09 09/30/2020 211,944.44 41,500.00 Canadian Imp Bk Comm NY 03/12/2020 50,000,000.00 50,000,000.00 50,048,000.00 1.25 1.25 10/01/2020 300,347.23 48,000.00 Credit Agricole CIB 06/02/2020 25,000,000.00 25,000,000.00 25,002,000.00 0.20 0.20 10/02/2020 12,638.89 2,000.00 Credit Agricole CIB 06/02/2020 25,000,000.00 25,000,000.00 25,002,000.00 0.20 0.20 10/05/2020 12,638.89 2,000.00

15 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Credit Agricole CIB 06/02/2020 25,000,000.00 25,000,000.00 25,002,000.00 0.20 0.20 10/06/2020 12,638.89 2,000.00 Canadian Imp Bk Comm NY 03/12/2020 50,000,000.00 50,000,000.00 50,058,500.00 1.25 1.25 10/08/2020 300,347.22 58,500.00 UBS AG Stamford 04/15/2020 25,000,000.00 25,000,000.00 25,046,000.00 1.20 1.20 11/04/2020 115,833.34 46,000.00 UBS AG Stamford 04/15/2020 25,000,000.00 25,000,000.00 25,049,250.00 1.20 1.20 11/09/2020 115,833.33 49,250.00 Bank of Montreal 08/27/2020 50,000,000.00 50,000,000.00 49,999,500.00 0.15 0.15 11/18/2020 1,041.67 (500.00) Bank of Montreal 08/27/2020 50,000,000.00 50,000,000.00 50,000,500.00 0.16 0.16 11/25/2020 1,111.11 500.00 Credit Agricole CIB 06/09/2020 25,000,000.00 25,000,000.00 25,004,750.00 0.23 0.23 11/25/2020 13,416.67 4,750.00 Credit Agricole CIB 05/28/2020 100,000,000.00 100,000,000.00 100,025,000.00 0.25 0.25 12/01/2020 66,666.67 25,000.00 Credit Agricole CIB 05/29/2020 50,000,000.00 50,000,000.00 50,012,500.00 0.25 0.25 12/01/2020 32,986.11 12,500.00 Credit Agricole CIB 06/02/2020 50,000,000.00 50,000,000.00 50,014,000.00 0.26 0.26 12/01/2020 32,861.11 14,000.00 Royal Bk of Canada/Dain Rausch 03/16/2020 80,000,000.00 80,000,000.00 80,349,600.00 1.29 1.29 01/15/2021 484,466.66 349,600.00 Canadian Imp Bk Comm NY 06/24/2020 25,000,000.00 25,000,000.00 25,008,000.00 0.27 0.27 01/19/2021 12,937.50 8,000.00 Toronto Dominion NY 07/20/2020 25,000,000.00 25,000,000.00 25,005,250.00 0.24 0.24 01/19/2021 7,166.67 5,250.00 Credit Agricole CIB 07/29/2020 25,000,000.00 25,000,000.00 25,003,250.00 0.21 0.21 01/22/2021 4,958.33 3,250.00 Toronto Dominion NY 08/05/2020 50,000,000.00 50,000,000.00 50,001,000.00 0.20 0.20 01/29/2021 7,312.50 1,000.00 Toronto Dominion NY 08/06/2020 50,000,000.00 50,000,000.00 50,000,000.00 0.19 0.19 02/01/2021 6,861.11 0.00 UBS AG Stamford 02/18/2020 80,000,000.00 80,000,000.00 80,500,000.00 1.62 1.62 02/11/2021 705,600.00 500,000.00 Canadian Imp Bk Comm NY 06/25/2020 35,000,000.00 35,000,000.00 35,049,700.00 0.39 0.39 05/28/2021 25,783.33 49,700.00 Toronto Dominion NY 06/01/2020 25,000,000.00 25,000,000.00 25,031,750.00 0.39 0.39 05/28/2021 24,916.67 31,750.00 Toronto Dominion NY 06/08/2020 25,000,000.00 25,000,000.00 25,034,750.00 0.40 0.40 06/08/2021 23,611.11 34,750.00 Toronto Dominion NY 06/10/2020 25,000,000.00 25,000,000.00 25,040,750.00 0.43 0.43 06/08/2021 24,784.72 40,750.00 Bank of Montreal 08/26/2020 50,000,000.00 50,000,000.00 49,994,000.00 0.23 0.23 06/30/2021 1,916.67 (6,000.00) Toronto Dominion NY 06/26/2020 50,000,000.00 50,000,000.00 50,074,500.00 0.40 0.40 06/30/2021 37,222.22 74,500.00 Bank of Montreal 08/26/2020 50,000,000.00 50,000,000.00 49,993,500.00 0.23 0.23 07/01/2021 1,916.67 (6,500.00) Bank of Montreal 08/25/2020 50,000,000.00 50,000,000.00 50,000,000.00 0.23 0.23 07/02/2021 2,236.11 0.00 Bank of Montreal 08/31/2020 200,000,000.00 200,000,000.00 200,000,000.00 0.20 0.20 07/02/2021 1,111.11 0.00 Toronto Dominion NY 08/27/2020 100,000,000.00 100,000,000.00 99,989,000.00 0.21 0.21 07/02/2021 2,916.67 (11,000.00) Canadian Imp Bk Comm NY 08/10/2020 100,000,000.00 100,000,000.00 100,037,000.00 0.26 0.26 08/02/2021 15,888.89 37,000.00 Canadian Imp Bk Comm NY 08/13/2020 60,000,000.00 60,000,000.00 60,028,200.00 0.27 0.27 08/06/2021 8,550.00 28,200.00 Canadian Imp Bk Comm NY 08/17/2020 50,000,000.00 50,000,000.00 50,019,500.00 0.26 0.26 08/20/2021 5,416.67 19,500.00 Negotiable CDs Subtotal: 2,100,000,000.00 2,100,000,000.00 2,101,598,150.00 0.55 0.55 4,850,756.88 1,598,150.00

Supranationals Inter-American Development Bk 04/19/2018 100,000,000.00 99,953,555.56 101,491,000.00 2.63 2.70 04/19/2021 962,500.00 1,537,444.44 International Finance Corp 07/20/2016 25,000,000.00 24,977,714.31 25,200,750.00 1.13 1.23 07/20/2021 30,577.50 223,035.69 International Finance Corp 10/07/2016 12,500,000.00 12,474,866.95 12,600,375.00 1.13 1.36 07/20/2021 15,969.38 125,508.05 Inter-American Development Bk 08/27/2020 50,000,000.00 51,539,598.37 51,538,000.00 1.75 0.23 09/14/2022 9,722.22 (1,598.37) Inter-American Development Bk 04/04/2019 15,000,000.00 15,057,960.59 15,803,550.00 2.50 2.33 01/18/2023 44,791.67 745,589.41 Inter-American Development Bk 04/04/2019 10,000,000.00 10,039,205.87 10,535,700.00 2.50 2.33 01/18/2023 29,861.11 496,494.13 Inter-American Development Bk 10/30/2019 54,650,000.00 55,593,576.61 57,577,600.50 2.50 1.75 01/18/2023 163,190.97 1,984,023.89 Inter-American Development Bk 12/16/2019 15,050,000.00 15,311,552.62 15,856,228.50 2.50 1.75 01/18/2023 44,940.97 544,675.88 Intl Bank For Recon and Dev 12/20/2019 14,750,000.00 14,810,700.17 15,413,602.50 1.88 1.72 06/19/2023 55,238.75 602,902.33 Inter-American Development Bk 04/16/2019 50,000,000.00 50,000,000.00 50,938,000.00 2.53 2.53 07/06/2023 193,375.00 938,000.00 Inter-American Development Bk 04/16/2019 25,000,000.00 25,000,000.00 25,469,000.00 2.53 2.53 07/06/2023 96,687.50 469,000.00

16 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss Inter-American Development Bk 09/27/2019 25,000,000.00 25,000,000.00 25,370,750.00 1.95 1.95 09/27/2023 94,791.67 370,750.00 Intl Bank For Recon and Dev 04/22/2019 10,000,000.00 10,156,781.57 10,842,500.00 3.00 2.46 09/27/2023 128,333.33 685,718.43 Intl Bank For Recon and Dev 04/25/2019 6,000,000.00 6,099,706.73 6,505,500.00 3.00 2.43 09/27/2023 77,000.00 405,793.27 Intl Bank For Recon and Dev 11/26/2019 25,000,000.00 25,998,483.35 27,106,250.00 3.00 1.65 09/27/2023 320,833.33 1,107,766.65 Intl Bank For Recon and Dev 12/10/2019 22,846,000.00 23,734,342.73 24,770,775.50 3.00 1.69 09/27/2023 293,190.33 1,036,432.77 Inter-American Development Bk 03/21/2019 25,000,000.00 25,327,152.48 27,105,500.00 3.00 2.55 10/04/2023 306,250.00 1,778,347.52 Inter-American Development Bk 10/31/2019 7,883,000.00 8,182,910.49 8,546,906.26 3.00 1.72 10/04/2023 96,566.75 363,995.77 Inter-American Development Bk 10/31/2019 17,117,000.00 17,766,871.80 18,558,593.74 3.00 1.72 10/04/2023 209,683.25 791,721.94 Inter-American Development Bk 04/25/2019 25,000,000.00 25,143,035.71 26,974,500.00 2.63 2.44 01/16/2024 82,031.25 1,831,464.29 Inter-American Development Bk 04/29/2019 25,000,000.00 25,178,097.38 26,974,500.00 2.63 2.40 01/16/2024 82,031.25 1,796,402.62 Inter-American Development Bk 05/06/2019 34,750,000.00 34,969,850.30 37,494,555.00 2.63 2.45 01/16/2024 114,023.44 2,524,704.70 Inter-American Development Bk 04/02/2019 50,000,000.00 50,000,000.00 53,033,000.00 2.29 2.29 01/31/2024 98,583.33 3,033,000.00 Inter-American Development Bk 10/31/2019 11,869,000.00 12,362,137.81 12,974,122.59 3.00 1.75 02/21/2024 9,890.83 611,984.78 Inter-American Development Bk 04/08/2019 50,000,000.00 50,000,000.00 53,133,500.00 2.33 2.33 02/29/2024 586,242.94 3,133,500.00 Intl Bank For Recon and Dev 03/11/2019 25,000,000.00 25,000,000.00 25,299,750.00 2.89 2.89 03/11/2024 340,340.28 299,750.00 Intl Bank For Recon and Dev 03/19/2019 25,000,000.00 24,971,067.50 26,910,000.00 2.50 2.53 03/19/2024 281,250.00 1,938,932.50 Intl Bank For Recon and Dev 03/26/2019 25,000,000.00 25,000,000.00 27,187,750.00 2.77 2.77 03/26/2024 298,159.72 2,187,750.00 International Finance Corp 10/16/2019 25,000,000.00 24,939,568.75 26,063,000.00 1.38 1.44 10/16/2024 128,781.25 1,123,431.25 Intl Bank For Recon and Dev 11/13/2019 50,000,000.00 50,000,000.00 50,143,000.00 2.05 2.05 11/13/2024 307,500.00 143,000.00 Intl Bank For Recon and Dev 12/12/2019 50,000,000.00 50,000,000.00 50,215,000.00 2.00 2.00 12/12/2024 219,444.44 215,000.00 Intl Bank For Recon and Dev 03/03/2020 25,000,000.00 25,000,000.00 25,027,750.00 1.80 1.80 03/03/2025 222,554.35 27,750.00 Intl Bank For Recon and Dev 04/22/2020 25,000,000.00 24,910,183.75 25,271,000.00 0.63 0.70 04/22/2025 55,989.58 360,816.25 Intl Bank For Recon and Dev 07/28/2020 25,000,000.00 24,967,115.19 24,983,250.00 0.38 0.40 07/25/2025 8,593.75 16,134.81 Supranationals Subtotal: 982,415,000.00 989,466,036.59 1,022,915,259.59 2.28 2.01 6,008,920.14 33,449,223.00

Sweep Fund JP Morgan 12/11/2018 745,656.32 745,656.32 745,656.32 0.01 0.01 3.87 0.00 Sweep Fund Subtotal: 745,656.32 745,656.32 745,656.32 0.01 0.01 3.87 0.00

Treasury Coupon Securities U.S. Treasury 01/06/2017 20,000,000.00 19,969,952.89 20,098,400.00 1.38 1.75 01/31/2021 23,913.04 128,447.11 U.S. Treasury 02/01/2019 13,000,000.00 13,000,740.16 13,124,930.00 2.50 2.49 01/31/2021 28,260.87 124,189.84 U.S. Treasury 06/17/2016 35,000,000.00 35,074,004.98 35,318,500.00 1.38 1.08 05/31/2021 122,284.84 244,495.02 U.S. Treasury 09/07/2016 5,000,000.00 4,999,462.86 5,040,250.00 1.13 1.14 06/30/2021 9,629.76 40,787.14 U.S. Treasury 09/07/2016 5,000,000.00 5,048,488.29 5,093,750.00 2.25 1.15 07/31/2021 9,782.61 45,261.71 U.S. Treasury 10/06/2016 25,000,000.00 24,966,597.27 25,259,750.00 1.13 1.25 09/30/2021 118,340.16 293,152.73 U.S. Treasury 12/09/2016 15,000,000.00 14,986,061.01 15,295,350.00 1.75 1.83 11/30/2021 66,700.82 309,288.99 U.S. Treasury 11/21/2019 20,000,000.00 20,066,119.44 20,598,400.00 1.75 1.57 07/15/2022 45,652.17 532,280.56 U.S. Treasury 09/11/2019 10,000,000.00 10,008,398.62 10,297,300.00 1.63 1.58 08/31/2022 448.90 288,901.38 U.S. Treasury 04/30/2019 50,000,000.00 49,403,599.31 51,949,000.00 1.75 2.27 01/31/2023 76,086.96 2,545,400.69 U.S. Treasury 01/07/2020 15,000,000.00 15,065,061.04 15,584,700.00 1.75 1.57 01/31/2023 22,826.09 519,638.96 U.S. Treasury 09/16/2019 12,000,000.00 11,923,866.95 12,420,000.00 1.50 1.75 03/31/2023 75,737.70 496,133.05 U.S. Treasury 12/17/2019 15,000,000.00 14,871,193.60 15,517,950.00 1.38 1.69 06/30/2023 35,309.10 646,756.40 U.S. Treasury 02/05/2020 5,000,000.00 4,993,503.22 5,172,650.00 1.38 1.42 06/30/2023 11,769.70 179,146.78

17 INVESTMENT INVENTORY - MARKET VALUE County of San Diego Pooled Money Fund As of August 31, 2020 Purchase Maturity Unrealized Accrued Interest Issuer Date Par Value Book Value Market Value Coupon YTM Date Gain/Loss U.S. Treasury 09/06/2019 10,000,000.00 9,943,430.15 10,319,100.00 1.25 1.45 07/31/2023 10,869.57 375,669.85 U.S. Treasury 10/10/2019 10,000,000.00 9,936,968.02 10,319,100.00 1.25 1.47 07/31/2023 10,869.57 382,131.98 U.S. Treasury 10/11/2019 5,000,000.00 5,164,120.69 5,378,150.00 2.75 1.58 07/31/2023 11,956.52 214,029.31 U.S. Treasury 05/31/2019 40,000,000.00 39,328,577.75 41,464,000.00 1.38 1.96 08/31/2023 1,519.34 2,135,422.25 U.S. Treasury 09/03/2019 15,000,000.00 15,129,203.27 15,695,550.00 1.63 1.34 10/31/2023 82,133.15 566,346.73 U.S. Treasury 09/05/2019 10,000,000.00 10,049,072.75 10,463,700.00 1.63 1.46 10/31/2023 54,755.43 414,627.25 U.S. Treasury 02/01/2019 10,000,000.00 10,011,210.19 10,791,400.00 2.50 2.46 01/31/2024 21,739.13 780,189.81 U.S. Treasury 04/02/2019 15,000,000.00 14,937,895.12 16,039,500.00 2.13 2.25 03/31/2024 134,118.85 1,101,604.88 U.S. Treasury 06/11/2019 15,000,000.00 15,313,354.17 16,280,850.00 2.50 1.91 05/15/2024 111,073.37 967,495.83 U.S. Treasury 07/15/2019 25,000,000.00 25,126,578.02 26,716,750.00 2.00 1.86 06/30/2024 85,597.83 1,590,171.98 U.S. Treasury 05/04/2020 10,000,000.00 10,548,833.68 10,602,700.00 1.75 0.34 07/31/2024 15,217.39 53,866.32 U.S. Treasury 08/29/2019 10,000,000.00 10,375,523.14 10,854,300.00 2.38 1.39 08/15/2024 10,971.47 478,776.86 U.S. Treasury 03/10/2020 15,000,000.00 15,516,960.08 15,753,000.00 1.38 0.58 01/31/2025 17,934.78 236,039.92 U.S. Treasury 03/13/2020 15,000,000.00 15,432,583.05 15,753,000.00 1.38 0.71 01/31/2025 17,934.78 320,416.95 U.S. Treasury 04/28/2020 20,000,000.00 21,435,753.99 21,562,600.00 2.00 0.37 02/15/2025 18,478.26 126,846.01 U.S. Treasury 04/13/2020 15,000,000.00 15,054,577.19 15,177,000.00 0.50 0.42 03/31/2025 28,893.45 122,422.81 U.S. Treasury 06/01/2020 15,000,000.00 15,034,465.15 15,087,900.00 0.38 0.33 04/30/2025 14,062.50 53,434.85 Treasury Coupon Securities Subtotal: 500,000,000.00 502,716,156.05 519,029,530.00 1.61 1.50 1,294,868.11 16,313,373.95

Grand Total 9,649,340,653.10 9,668,974,705.61 9,796,617,573.41 1.27 1.20 26,741,059.72 127,642,867.80

18 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 3608 Money Market Funds Fidelity Government 0.07 Redemption 98,000,000.00 08/03/20 4393 Bank Deposit Wells Fargo Bank NA 0.00 Purchase -2,114.58 08/03/20 5309 Sweep Fund JP Morgan 0.00 Purchase -2,720,232.72 08/03/20 5983 Negotiable CD Toronto Dominion NY 2.02 Redemption 20,000,000.00 08/03/20 6024 Negotiable CD Bank of Nova Scotia 1.90 Redemption 40,000,000.00 08/03/20 6041 Negotiable CD Bank of Nova Scotia 1.90 Redemption 125,000,000.00 08/03/20 6106 Negotiable CD Royal Bk of Canada/D 1.91 Redemption 100,000,000.00 08/03/20 6176 Commercial Paper Credit Agricole CIB 1.66 Redemption 85,000,000.00 08/03/20 6179 Money Market Funds CAMP 0.37 Purchase -63,016.07 08/03/20 6204 Commercial Paper BNP Paribas NY 1.64 Redemption 20,000,000.00 08/03/20 6287 Commercial Paper Cooperatieve Rabo 1.14 Redemption 65,000,000.00 08/03/20 6383 Commercial Paper Cooperatieve Rabo 0.09 Purchase -59,999,850.00 08/03/20 6384 Commercial Paper Prudential Funding L 0.10 Purchase -99,999,722.22 08/03/20 3608 Money Market Funds Fidelity Government 0.07 Redemption 14,000,000.00 08/04/20 5309 Sweep Fund JP Morgan 0.00 Redemption 1,944,188.66 08/04/20 6383 Commercial Paper Cooperatieve Rabo 0.09 Redemption 60,000,000.00 08/04/20 6384 Commercial Paper Prudential Funding L 0.10 Redemption 100,000,000.00 08/04/20 6385 Commercial Paper Cooperatieve Rabo 0.09 Purchase -199,999,500.00 08/04/20 6386 Federal Agencies Federal National Mtg 0.70 Purchase -25,000,000.00 08/04/20 3608 Money Market Funds Fidelity Government 0.07 Redemption 56,000,000.00 08/05/20 4393 Bank Deposit Wells Fargo Bank NA 0.00 Purchase -4,561.12 08/05/20 5309 Sweep Fund JP Morgan 0.00 Redemption 366,099.55 08/05/20 6382 Negotiable CD Bank of Montreal 0.12 Redemption 50,000,000.00 08/05/20 6385 Commercial Paper Cooperatieve Rabo 0.09 Redemption 200,000,000.00 08/05/20 6387 Negotiable CD Bank of Montreal 0.12 Purchase -50,000,000.00 08/05/20 6388 Commercial Paper Cooperatieve Rabo 0.09 Purchase -89,999,775.00 08/05/20 6389 Commercial Paper Natixis US Finance C 0.08 Purchase -89,999,800.00 08/05/20 6390 Negotiable CD Toronto Dominion NY 0.20 Purchase -50,000,000.00 08/05/20 6391 Municipal Bonds State oif Maryland 0.41 Purchase -15,000,000.00 08/05/20 6392 Municipal Bonds State oif Maryland 0.51 Purchase -25,000,000.00 08/05/20 6393 Municipal Bonds State oif Maryland 0.66 Purchase -25,000,000.00 08/05/20 3608 Money Market Funds Fidelity Government 0.07 Redemption 42,000,000.00 08/06/20 4393 Bank Deposit Wells Fargo Bank NA 0.00 Purchase -2,530.14 08/06/20 5309 Sweep Fund JP Morgan 0.00 Redemption 23,240.20 08/06/20

19 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 6324 Federal Agencies Federal Home Loan Mt 0.90 Redemption 24,996,250.00 08/06/20 6388 Commercial Paper Cooperatieve Rabo 0.09 Redemption 90,000,000.00 08/06/20 6389 Commercial Paper Natixis US Finance C 0.08 Redemption 90,000,000.00 08/06/20 6394 Commercial Paper Natixis US Finance C 0.08 Purchase -249,999,444.44 08/06/20 6395 Commercial Paper BNP Paribas NY 0.17 Purchase -49,979,222.22 08/06/20 6396 Negotiable CD Toronto Dominion NY 0.19 Purchase -50,000,000.00 08/06/20 6397 Commercial Paper Cooperatieve Rabo 0.09 Purchase -89,999,775.00 08/06/20 6398 Negotiable CD Bank of Montreal 0.12 Purchase -50,000,000.00 08/06/20 3608 Money Market Funds Fidelity Government 0.07 Redemption 10,000,000.00 08/07/20 4393 Bank Deposit Wells Fargo Bank NA 0.00 Purchase -5,901.56 08/07/20 5309 Sweep Fund JP Morgan 0.00 Purchase -6,539,911.71 08/07/20 5912 Federal Agencies Federal Home Loan Mt 2.19 Redemption 25,000,000.00 08/07/20 6042 Negotiable CD Bank of Nova Scotia 1.90 Redemption 50,000,000.00 08/07/20 6292 Commercial Paper Cooperatieve Rabo 1.10 Redemption 25,000,000.00 08/07/20 6394 Commercial Paper Natixis US Finance C 0.08 Redemption 250,000,000.00 08/07/20 6397 Commercial Paper Cooperatieve Rabo 0.09 Redemption 90,000,000.00 08/07/20 6399 Commercial Paper Natixis US Finance C 0.08 Purchase -409,997,266.67 08/07/20 3608 Money Market Funds Fidelity Government 0.07 Redemption 21,500,000.00 08/10/20 4393 Bank Deposit Wells Fargo Bank NA 0.00 Purchase -30,606.63 08/10/20 5309 Sweep Fund JP Morgan 0.00 Redemption 6,683,722.80 08/10/20 6048 Negotiable CD Bank of Nova Scotia 1.88 Redemption 50,000,000.00 08/10/20 6278 Commercial Paper Cooperatieve Rabo 1.19 Redemption 130,000,000.00 08/10/20 6399 Commercial Paper Natixis US Finance C 0.08 Redemption 410,000,000.00 08/10/20 6400 Negotiable CD Canadian Imp Bk Comm 0.26 Purchase -100,000,000.00 08/10/20 6401 Negotiable CD Bank of Montreal 0.11 Purchase -100,000,000.00 08/10/20 6402 Commercial Paper Natixis US Finance C 0.08 Purchase -114,999,744.44 08/10/20 6403 Commercial Paper Cooperatieve Rabo 0.09 Purchase -234,999,412.50 08/10/20 4393 Bank Deposit Wells Fargo Bank NA 0.00 Redemption 1,802.07 08/11/20 5309 Sweep Fund JP Morgan 0.00 Purchase -721,021.78 08/11/20 6402 Commercial Paper Natixis US Finance C 0.08 Redemption 115,000,000.00 08/11/20 6403 Commercial Paper Cooperatieve Rabo 0.09 Redemption 235,000,000.00 08/11/20 6404 Commercial Paper Natixis US Finance C 0.08 Purchase -99,999,777.78 08/11/20 6405 Commercial Paper Cooperatieve Rabo 0.09 Purchase -233,999,415.00 08/11/20 5309 Sweep Fund JP Morgan 0.00 Purchase -7,470,627.83 08/12/20

20 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 6387 Negotiable CD Bank of Montreal 0.12 Redemption 50,000,000.00 08/12/20 6404 Commercial Paper Natixis US Finance C 0.08 Redemption 100,000,000.00 08/12/20 6405 Commercial Paper Cooperatieve Rabo 0.09 Redemption 234,000,000.00 08/12/20 6406 Commercial Paper Natixis US Finance C 0.08 Purchase -229,999,488.89 08/12/20 6407 Commercial Paper Canadian Imp Bk Comm 0.09 Purchase -49,999,875.00 08/12/20 6408 Municipal Bonds State of Hawaii 0.67 Purchase -5,255,000.00 08/12/20 6409 Federal Agencies Federal National Mtg 0.41 Purchase -49,975,000.00 08/12/20 6410 Federal Agencies Federal National Mtg 0.57 Purchase -25,000,000.00 08/12/20 5309 Sweep Fund JP Morgan 0.00 Redemption 4,285,181.32 08/13/20 6398 Negotiable CD Bank of Montreal 0.12 Redemption 50,000,000.00 08/13/20 6406 Commercial Paper Natixis US Finance C 0.08 Redemption 230,000,000.00 08/13/20 6407 Commercial Paper Canadian Imp Bk Comm 0.09 Redemption 50,000,000.00 08/13/20 6411 Negotiable CD Canadian Imp Bk Comm 0.27 Purchase -60,000,000.00 08/13/20 6412 Commercial Paper Canadian Imperial Ho 0.09 Purchase -14,999,962.50 08/13/20 6413 Commercial Paper Cooperatieve Rabo 0.09 Purchase -229,999,425.00 08/13/20 3608 Money Market Funds Fidelity Government 0.07 Redemption 1,500,000.00 08/14/20 5309 Sweep Fund JP Morgan 0.00 Redemption 4,206,963.43 08/14/20 6412 Commercial Paper Canadian Imperial Ho 0.09 Redemption 15,000,000.00 08/14/20 6413 Commercial Paper Cooperatieve Rabo 0.09 Redemption 230,000,000.00 08/14/20 6414 Commercial Paper Canadian Imperial Ho 0.24 Purchase -24,955,000.00 08/14/20 6415 Commercial Paper Canadian Imperial Ho 0.09 Purchase -29,999,775.00 08/14/20 6416 Commercial Paper Cooperatieve Rabo 0.09 Purchase -229,998,275.00 08/14/20 5440 Corporate Notes JP Morgan 2.30 Redemption 14,524,010.40 08/15/20 5577 Corporate Notes JP Morgan 2.30 Redemption 8,720,610.88 08/15/20 3608 Money Market Funds Fidelity Government 0.06 Purchase -35,000,000.00 08/17/20 5143 Asset Backed Securities Toyota Auto Receivab 2.98 Redemption 1,264,245.82 08/17/20 5209 Asset Backed Securities Toyota Auto Receivab 1.93 Redemption 309,421.05 08/17/20 5246 Asset Backed Securities Bank of America Corp 1.84 Redemption 63,738,000.00 08/17/20 5309 Sweep Fund JP Morgan 0.00 Purchase -5,731,334.77 08/17/20 5374 Asset Backed Securities Toyota Auto Receivab 2.83 Redemption 649,809.17 08/17/20 5449 Asset Backed Securities Toyota Auto Receivab 1.76 Redemption 310,970.39 08/17/20 5465 Asset Backed Securities John Deere Owner Tru 2.85 Redemption 1,103,737.14 08/17/20 5758 Asset Backed Securities Ford Credit Auto Own 2.35 Redemption 929,519.36 08/17/20

21 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 5769 Asset Backed Securities Harley-Davidson Moto 2.37 Redemption 608,255.82 08/17/20 5829 Asset Backed Securities GM Financial Securit 2.23 Redemption 1,169,611.14 08/17/20 5833 Asset Backed Securities John Deere Owner Tru 2.28 Redemption 940,809.85 08/17/20 5920 Asset Backed Securities Toyota Auto Receivab 2.00 Redemption 829,776.50 08/17/20 5939 Asset Backed Securities Honda Auto Rec Owner 1.90 Redemption 1,903,091.50 08/17/20 6063 Asset Backed Securities Hyundai Auto Receiva 1.93 Redemption 471,083.18 08/17/20 6071 Asset Backed Securities Toyota Auto Receivab 1.92 Redemption 1,668,251.10 08/17/20 6188 Asset Backed Securities Harley-Davidson Moto 1.83 Redemption 610,983.22 08/17/20 6262 Asset Backed Securities GM Financial Securit 1.84 Redemption 1,860,771.40 08/17/20 6272 Asset Backed Securities GM Financial Securit 2.66 Redemption 1,020,484.56 08/17/20 6308 Asset Backed Securities GM Financial Securit 1.26 Redemption 1,911,165.26 08/17/20 6317 Asset Backed Securities Nissan Auto Receivab 0.98 Redemption 1,203,003.31 08/17/20 6318 Asset Backed Securities Hyundai Auto Receiva 1.20 Redemption 699,257.93 08/17/20 6319 Asset Backed Securities Toyota Auto Receivab 1.14 Redemption 1,366,782.96 08/17/20 6325 Asset Backed Securities Ford Credit Auto Own 0.27 Redemption 1,771,828.20 08/17/20 6354 Commercial Paper Prudential Funding L 0.20 Redemption 10,000,000.00 08/17/20 6401 Negotiable CD Bank of Montreal 0.11 Redemption 100,000,000.00 08/17/20 6415 Commercial Paper Canadian Imperial Ho 0.09 Redemption 30,000,000.00 08/17/20 6416 Commercial Paper Cooperatieve Rabo 0.09 Redemption 230,000,000.00 08/17/20 6417 Negotiable CD Canadian Imp Bk Comm 0.26 Purchase -50,000,000.00 08/17/20 6418 Commercial Paper Natixis US Finance C 0.08 Purchase -43,999,902.22 08/17/20 6419 Negotiable CD Bank of Montreal 0.11 Purchase -50,000,000.00 08/17/20 6420 Commercial Paper Canadian Imperial Ho 0.09 Purchase -74,999,625.00 08/17/20 6421 Commercial Paper Cooperatieve Rabo 0.09 Purchase -249,999,375.00 08/17/20 3608 Money Market Funds Fidelity Government 0.06 Redemption 13,000,000.00 08/18/20 5309 Sweep Fund JP Morgan 0.01 Redemption 6,056,361.63 08/18/20 5409 Asset Backed Securities Honda Auto Rec Owner 3.10 Redemption 1,300,993.57 08/18/20 6418 Commercial Paper Natixis US Finance C 0.08 Redemption 44,000,000.00 08/18/20 6421 Commercial Paper Cooperatieve Rabo 0.09 Redemption 250,000,000.00 08/18/20 6422 Commercial Paper Natixis US Finance C 0.08 Purchase -39,999,911.11 08/18/20 6423 Commercial Paper Cooperatieve Rabo 0.09 Purchase -249,999,375.00 08/18/20 3608 Money Market Funds Fidelity Government 0.05 Redemption 23,800,000.00 08/19/20 5309 Sweep Fund JP Morgan 0.01 Purchase -3,690,448.15 08/19/20

22 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 6420 Commercial Paper Canadian Imperial Ho 0.09 Redemption 75,000,000.00 08/19/20 6422 Commercial Paper Natixis US Finance C 0.08 Redemption 40,000,000.00 08/19/20 6423 Commercial Paper Cooperatieve Rabo 0.09 Redemption 250,000,000.00 08/19/20 6424 Federal Agencies Federal National Mtg 0.55 Purchase -25,000,000.00 08/19/20 6425 Federal Agencies Federal Home Loan Mt 0.50 Purchase -25,000,000.00 08/19/20 6426 Federal Agencies Federal Home Loan Mt 0.50 Purchase -25,000,000.00 08/19/20 6427 Commercial Paper Canadian Imperial Ho 0.09 Purchase -49,999,875.00 08/19/20 6428 Commercial Paper Cooperatieve Rabo 0.09 Purchase -249,999,375.00 08/19/20 5309 Sweep Fund JP Morgan 0.01 Redemption 3,292,003.42 08/20/20 6427 Commercial Paper Canadian Imperial Ho 0.09 Redemption 50,000,000.00 08/20/20 6428 Commercial Paper Cooperatieve Rabo 0.09 Redemption 250,000,000.00 08/20/20 6429 Commercial Paper Prudential Funding L 0.07 Purchase -44,999,912.50 08/20/20 6430 Commercial Paper Cooperatieve Rabo 0.08 Purchase -249,999,444.44 08/20/20 3608 Money Market Funds Fidelity Government 0.05 Redemption 2,500,000.00 08/21/20 5309 Sweep Fund JP Morgan 0.01 Purchase -452,321.45 08/21/20 5671 Asset Backed Securities Honda Auto Rec Owner 2.95 Redemption 1,256,762.32 08/21/20 6286 Commercial Paper Cooperatieve Rabo 1.14 Redemption 35,000,000.00 08/21/20 6429 Commercial Paper Prudential Funding L 0.07 Redemption 45,000,000.00 08/21/20 6430 Commercial Paper Cooperatieve Rabo 0.08 Redemption 250,000,000.00 08/21/20 6431 Federal Agencies Federal Home Loan Mt 0.25 Purchase -39,959,200.00 08/21/20 6432 Commercial Paper BNP Paribas NY 0.07 Purchase -10,999,935.83 08/21/20 6433 Commercial Paper BNP Paribas NY 0.07 Purchase -11,999,930.00 08/21/20 6434 Commercial Paper Cooperatieve Rabo 0.08 Purchase -249,998,333.33 08/21/20 5309 Sweep Fund JP Morgan 0.01 Purchase -8,606,844.06 08/24/20 6419 Negotiable CD Bank of Montreal 0.11 Redemption 50,000,000.00 08/24/20 6432 Commercial Paper BNP Paribas NY 0.07 Redemption 11,000,000.00 08/24/20 6433 Commercial Paper BNP Paribas NY 0.07 Redemption 12,000,000.00 08/24/20 6434 Commercial Paper Cooperatieve Rabo 0.08 Redemption 250,000,000.00 08/24/20 6435 Commercial Paper BNP Paribas NY 0.07 Purchase -64,999,873.61 08/24/20 6436 Commercial Paper Cooperatieve Rabo 0.08 Purchase -249,999,444.44 08/24/20 3608 Money Market Funds Fidelity Government 0.05 Purchase -85,000,000.00 08/25/20 5309 Sweep Fund JP Morgan 0.01 Redemption 8,918,211.09 08/25/20 5981 Asset Backed Securities BMW Vehicle Owner Tr 2.05 Redemption 721,407.15 08/25/20

23 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 6435 Commercial Paper BNP Paribas NY 0.07 Redemption 65,000,000.00 08/25/20 6436 Commercial Paper Cooperatieve Rabo 0.08 Redemption 250,000,000.00 08/25/20 6437 Commercial Paper Cooperatieve Rabo 0.19 Purchase -49,951,444.44 08/25/20 6438 Commercial Paper Cooperatieve Rabo 0.08 Purchase -199,999,555.56 08/25/20 6439 Municipal Bonds State of Minnesota 0.50 Purchase -15,012,150.00 08/25/20 6440 Negotiable CD Bank of Montreal 0.23 Purchase -50,000,000.00 08/25/20 3608 Money Market Funds Fidelity Government 0.05 Redemption 90,500,000.00 08/26/20 5309 Sweep Fund JP Morgan 0.01 Redemption 258,472.98 08/26/20 5935 Corporate Notes Bank of America Corp 2.20 Redemption 10,000,000.00 08/26/20 5936 Corporate Notes Bank of America Corp 2.20 Redemption 25,000,000.00 08/26/20 6438 Commercial Paper Cooperatieve Rabo 0.08 Redemption 200,000,000.00 08/26/20 6441 Negotiable CD Bank of Montreal 0.23 Purchase -50,000,000.00 08/26/20 6442 Negotiable CD Bank of Montreal 0.23 Purchase -50,000,000.00 08/26/20 6443 Commercial Paper Cooperatieve Rabo 0.08 Purchase -199,999,555.56 08/26/20 6444 Federal Agencies Federal National Mtg 0.55 Purchase -25,000,000.00 08/26/20 3608 Money Market Funds Fidelity Government 0.05 Purchase -39,400,000.00 08/27/20 6443 Commercial Paper Cooperatieve Rabo 0.08 Redemption 200,000,000.00 08/27/20 6445 Federal Agencies Federal National Mtg 0.65 Purchase -25,000,000.00 08/27/20 6446 Commercial Paper Natixis US Finance C 0.07 Purchase -349,999,319.44 08/27/20 6447 Federal Agencies Federal National Mtg 0.38 Purchase -15,455,160.99 08/27/20 6448 Federal Agencies Federal National Mtg 0.34 Purchase -24,465,462.12 08/27/20 6449 Negotiable CD Toronto Dominion NY 0.21 Purchase -100,000,000.00 08/27/20 6450 Negotiable CD Bank of Montreal 0.15 Purchase -50,000,000.00 08/27/20 6451 Negotiable CD Bank of Montreal 0.16 Purchase -50,000,000.00 08/27/20 6452 Federal Agencies Federal Home Loan Mt 0.25 Purchase -49,985,680.56 08/27/20 6453 Commercial Paper Cooperatieve Rabo 0.08 Purchase -99,999,777.78 08/27/20 6454 Commercial Paper Cooperatieve Rabo 0.08 Purchase -199,999,555.56 08/27/20 6455 Commercial Paper Credit Agricole CIB 0.08 Purchase -199,996,888.88 08/27/20 6456 Federal Agencies Federal Home Loan Mt 0.25 Purchase -49,952,083.33 08/27/20 6457 Supranational Inter-American Devel 1.75 Purchase -51,944,180.56 08/27/20 6458 Federal Agencies Federal Home Loan Mt 0.25 Purchase -49,967,180.56 08/27/20 3608 Money Market Funds Fidelity Government 0.05 Redemption 26,000,000.00 08/28/20 5309 Sweep Fund JP Morgan 0.01 Purchase -5,423,714.08 08/28/20

24 TRANSACTION ACTIVITY REPORT Investment # Instrument Type Issuer Coupon Transaction Type Total Cash Transaction Date 6446 Commercial Paper Natixis US Finance C 0.07 Redemption 350,000,000.00 08/28/20 6453 Commercial Paper Cooperatieve Rabo 0.08 Redemption 100,000,000.00 08/28/20 6454 Commercial Paper Cooperatieve Rabo 0.08 Redemption 200,000,000.00 08/28/20 6459 Negotiable CD Canadian Imp Bk Comm 0.13 Purchase -25,000,000.00 08/28/20 6460 Negotiable CD Canadian Imp Bk Comm 0.12 Purchase -25,000,000.00 08/28/20 6461 Negotiable CD Canadian Imp Bk Comm 0.12 Purchase -25,000,000.00 08/28/20 6462 Commercial Paper Natixis US Finance C 0.07 Purchase -299,998,250.00 08/28/20 6463 Commercial Paper Rabobank Nederland 0.08 Purchase -124,999,166.67 08/28/20 6464 Commercial Paper Rabobank Nederland 0.08 Purchase -199,998,666.67 08/28/20 5309 Sweep Fund JP Morgan 0.01 Redemption 5,423,227.37 08/29/20 3608 Money Market Funds Fidelity Government 0.05 Purchase -393,400,000.00 08/31/20 5309 Sweep Fund JP Morgan 0.01 Purchase -281,415.05 08/31/20 6003 Negotiable CD Bank of Nova Scotia 2.02 Redemption 25,000,000.00 08/31/20 6277 Negotiable CD Toronto Dominion NY 1.21 Redemption 100,000,000.00 08/31/20 6291 Commercial Paper ING (US) Funding LLC 1.11 Redemption 60,000,000.00 08/31/20 6462 Commercial Paper Natixis US Finance C 0.07 Redemption 300,000,000.00 08/31/20 6463 Commercial Paper Rabobank Nederland 0.08 Redemption 125,000,000.00 08/31/20 6464 Commercial Paper Rabobank Nederland 0.08 Redemption 200,000,000.00 08/31/20 6465 Negotiable CD Bank of Montreal 0.20 Purchase -200,000,000.00 08/31/20 6466 Corporate Notes JP Morgan 4.50 Purchase -5,741,577.45 08/31/20 Grand Total -806,854,433.33

25 26

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APPENDIX F

BOOK-ENTRY ONLY SYSTEM

The information in this APPENDIX F has been provided by DTC for use in securities offering documents, and the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the beneficial owners either (a) payments of interest, principal or premium, if any, with respect to the Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in 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 Official Statement. 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. As used in this appendix, “Securities” means the Bonds, “Issuer” means the District, and “Agent” means the Paying Agent.

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 series and maturity of the Securities, each in the aggregate principal amount of such series and maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any series and maturity 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 series and maturity.

2. DTC, the world’s largest 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 post-trade 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 and www.dtc.org.

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 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.

F-1

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.

6. Redemption notices will be sent to DTC. If less than all of the Securities within a series and maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such series and 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 issuer 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 issuer 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 issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the issuer 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. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the issuer 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.

10. The issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

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GROSSMONT UNION HIGH SCHOOL DISTRICT (San Diego County, California) • 2020 General Obligation Bonds (Election of 2008, Series J-1) (Federally Taxable) and (Election of 2008, Series J-2)