PRELIMINARY OFFICIAL STATEMENT DATED APRIL 9, 2018
NEW ISSUE – BOOK-ENTRY-ONLY RATINGS: See “RATINGS” herein.
In the opinion of Gust Rosenfeld P.L.C., Phoenix, Arizona, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, and assuming continuing compliance with certain restrictions, conditions and requirements by the District, as mentioned under “TAX EXEMPTION” herein, interest income on the Bonds is excluded from gross income for federal income tax purposes. Interest income on the Bonds is not an item of tax preference to be included in computing the alternative minimum tax of individuals or corporations; however, such interest income may need to be taken into account for federal income tax purposes as an adjustment to alternative minimum taxable income for certain corporations for taxable years beginning before January 1, 2018, which income is subject to the federal alternative minimum tax. In the opinion of Bond Counsel, interest income on the Bonds is exempt from Arizona income taxes. See “TAX EXEMPTION,” “ORIGINAL ISSUE DISCOUNT” and “BOND PREMIUM” herein.
$148,855,000* PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 rcumstances shall this Preliminary Official OF MARICOPA COUNTY, ARIZONA SCHOOL IMPROVEMENT BONDS, PROJECTS OF 2011 AND 2017, SERIES 2018 risdiction which in offer, such solicitation saleor Dated: Date of Initial Authentication and Delivery Due: July 1, as shown on the inside front cover page
The School Improvement Bonds, Projects of 2011 and 2017, Series 2018 (the “Bonds”) of Phoenix Union High School District No. 210 of Maricopa County, Arizona (the “District”), will be issued in the form of fully-registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Beneficial ownership interests in the Bonds may be purchased in amounts of $5,000 of principal due on a specific maturity date or integral multiples thereof. The Bonds will mature on the dates and in the principal amounts and will bear interest from their dated date to their maturity or prior redemption as set
forth on the inside front cover page. Interest on the Bonds will accrue from the date of delivery and will be payable semiannually on January 1 and July 1 of each year commencing on January 1, 2019*, until maturity or prior redemption.
SEE MATURITY SCHEDULE ON INSIDE FRONT COVER PAGE
The District will initially utilize DTC’s “book-entry-only system,” although the District and DTC each reserve the right to discontinue the book-entry-only system at any time. Utilization of the book-entry-only system will affect the method and timing of payment of principal of and interest on the Bonds and the method of transfer of the Bonds. So long as the book-entry-only system is in effect, a single fully-registered Bond, for each maturity of the Bonds, will be registered in the name of Cede & Co., as nominee of DTC, on the registration books maintained by BOK Financial, the initial bond registrar and paying agent for the Bonds. DTC will be responsible for distributing the principal and interest payments to its direct and indirect participants who will, in turn, be responsible for distribution to the beneficial owners of the Bonds (the “Beneficial Owners”). So long as the book-entry-only system is in effect and Cede & Co. is the registered owner of the Bonds, all references herein (except under the headings “TAX EXEMPTION,” “ORIGINAL ISSUE DISCOUNT” and “BOND PREMIUM”) to owners of the Bonds will refer to Cede & Co. and not the Beneficial Owners. See APPENDIX H - “BOOK-ENTRY-ONLY SYSTEM” herein.
Certain of the Bonds will be subject to optional redemption prior to their stated maturity dates as described under “THE BONDS – Redemption Provisions” herein*.
Principal of and interest on the Bonds will be direct general obligations of the District payable from a continuing, direct, annual, ad valorem tax levied against all of the taxable property located within the boundaries of the District as more fully described herein. The Bonds will be payable from such tax without limit as to rate or amount. See “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS” herein.
The Bonds will be offered when, as and if issued by the District and received by the underwriters identified below (the “Underwriters”), subject to the legal opinion of Gust Rosenfeld P.L.C., Phoenix, Arizona, Bond Counsel, as to validity and tax exemption. Certain legal matters will be passed on for the Underwriters by Greenberg Traurig, LLP. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about May 8, 2018*.
This cover page and inside front cover page contain certain information with respect to the Bonds for convenience of reference only. It is not a summary of the issue of which the Bonds are a part. Investors must read this entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the Bonds.
Citigroup
Piper Jaffray & Co. RBC Capital Markets, LLC Hilltop Securities, Inc. constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any ju in securities these of any be sale there shall nor buy, to an offer of or solicitation the sell to an offer constitute
* Subject to change. would be unlawful prior to registration or qualification the under securities laws of any such jurisdiction. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no ci Statement $148,855,000* PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA SCHOOL IMPROVEMENT BONDS, PROJECTS OF 2011 AND 2017, SERIES 2018
MATURITY SCHEDULE* Base CUSIP®(1) No. 567505
Maturity Date Principal Interest Price or CUSIP®(1) (July 1) Amount Rate Yield No.
2019 $11,250,000 %% %% 2020 6,000,000 2021 6,000,000 2022 6,500,000 2023 5,520,000 2024 5,795,000 2025 6,085,000 2026 6,390,000 2027 6,710,000 2028 7,045,000 2029 7,395,000 2030 7,765,000 2031 8,155,000 2032 8,565,000 2033 8,990,000 2034 9,440,000 2035 9,910,000 2036 10,410,000 2037 10,930,000
* Subject to change.
(1) 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 Global Market Intelligence. Copyright© 2018 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 Financial Advisor, the Underwriters or their agents or counsel, assume responsibility for the accuracy of such numbers. PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA
DISTRICT GOVERNING BOARD
Ian Danley, President Stanford Prescott, Clerk Linda Abril, Member Lela Alston, Member Stephanie Parra, Member Laura Pastor, Member Randy D. Schiller, Member
DISTRICT ADMINISTRATION
Dr. Chad E. Gestson, Superintendent Dr. Althe Allen, Chief Academic Officer Sherry Celaya, Chief Financial Officer Michelle Gayles, Chief Strategy Officer
FINANCIAL ADVISOR
Stifel, Nicolaus & Company, Incorporated Phoenix, Arizona
BOND COUNSEL
Gust Rosenfeld P.L.C. Phoenix, Arizona
BOND REGISTRAR AND PAYING AGENT
BOK Financial Phoenix, Arizona
(i) REGARDING THIS OFFICIAL STATEMENT
No dealer, broker, salesperson or other person has been authorized by Phoenix Union High School District No. 210 of Maricopa County, Arizona (the “District”), Stifel, Nicolaus & Company, Incorporated (the “Financial Advisor”) or Citigroup Global Markets Inc., Piper Jaffray & Co., RBC Capital Markets, LLC and Hilltop Securities Inc. (together, the “Underwriters”) to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.
The information set forth in this Official Statement, which includes the cover page, inside front cover page and appendices hereto, has been obtained from the District, the Arizona Department of Revenue, the Assessor, Finance Department and Treasurer of Maricopa County, Arizona, and other sources that are considered to be accurate and reliable and customarily relied upon in the preparation of similar official statements, but such information has not been independently confirmed or verified by the District, the Financial Advisor or the Underwriters, is not guaranteed as to accuracy or completeness, and is not to be construed as the promise or guarantee of the District, the Financial Advisor or the Underwriters.
The Underwriters have provided the following sentence for inclusion in this Official Statement: “The Underwriters have reviewed the information in this Official Statement pursuant to their responsibilities to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information.”
None of the District, the Underwriters, the Financial Advisor, counsel to the Underwriters or Bond Counsel (as defined herein) are actuaries. None of them have performed any actuarial or other analysis of the District’s share of the unfunded liabilities of the Arizona State Retirement System.
The presentation of information, including tables of receipts from taxes and other sources, shows recent historical information and is not intended to indicate future or continuing trends in the financial position or other affairs of the District. All information, estimates and assumptions contained herein are based on past experience and on the latest information available and are believed to be reliable, but no representations are made that such information, estimates and assumptions are correct, will continue, will be realized or will be repeated in the future. To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, they are made as such and not as representations of fact or certainty, and no representation is made that any of these statements have been or will be realized. All forecasts, projections, opinions, assumptions or estimates are “forward looking statements” that must be read with an abundance of caution and that may not be realized or may not occur in the future. Information other than that obtained from official records of the District has been identified by source and has not been independently confirmed or verified by the District, the Financial Advisor or the Underwriters and its accuracy cannot be guaranteed. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made pursuant hereto will, under any circumstances, create any implication that there has been no change in the affairs of the District or any of the other parties or matters described herein since the date hereof.
The Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities law, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state or other governmental entity or agency will have passed upon the accuracy or adequacy of this Official Statement or approved the Bonds for sale.
References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such web sites and the information nor links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of Rule 15c2-12 of the Securities and Exchange Commission.
The District will undertake to provide continuing disclosure as described in this Official Statement under the heading “CONTINUING DISCLOSURE” and in APPENDIX G – “FORM OF CONTINUING DISCLOSURE CERTIFICATE,” all pursuant to Rule 15c2-12 of the Securities and Exchange Commission.
(ii) IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ALLOW CONCESSIONS OR DISCOUNTS FROM THE INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS, AND THE UNDERWRITERS MAY OVERALLOT OR ENGAGE IN TRANSACTIONS INTENDED TO STABILIZE THE PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET IN ORDER TO FACILITATE THEIR DISTRIBUTION. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
A wide variety of information, including financial information, concerning the District is available from publications and websites of the District and others. Any such information that is inconsistent with the information set forth in this Official Statement should be disregarded. No such information is a part of, or incorporated into, this Official Statement, except as expressly noted herein.
(iii) TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENT ...... 1 THE BONDS...... 1 Authorization and Purpose ...... 1 Terms of the Bonds – Generally...... 2 Bond Registrar and Paying Agent ...... 2 Redemption Provisions...... 2 Registration and Transfer When Book-Entry-Only System Has Been Discontinued...... 3 SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS...... 3 General ...... 3 Defeasance...... 3 Investment of Debt Service Funds...... 4 SOURCES AND USES OF FUNDS...... 4 ESTIMATED DEBT SERVICE REQUIREMENTS...... 5 LITIGATION ...... 6 RATINGS...... 6 LEGAL MATTERS ...... 6 TAX EXEMPTION...... 7 ORIGINAL ISSUE DISCOUNT...... 8 BOND PREMIUM ...... 8 UNDERWRITING ...... 9 RELATIONSHIP AMONG PARTIES ...... 9 CONTINUING DISCLOSURE...... 10 FINANCIAL ADVISOR...... 10 GENERAL PURPOSE FINANCIAL STATEMENTS...... 11 CONCLUDING STATEMENT ...... 11
APPENDIX A: THE DISTRICT – DISTRICT INFORMATION APPENDIX B: THE DISTRICT – FINANCIAL INFORMATION APPENDIX C: THE DISTRICT – AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 APPENDIX D: CITY OF PHOENIX, ARIZONA APPENDIX E: MARICOPA COUNTY, ARIZONA APPENDIX F: FORM OF APPROVING LEGAL OPINION APPENDIX G: FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX H: BOOK-ENTRY-ONLY SYSTEM
(iv) OFFICIAL STATEMENT
$148,855,000* PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA SCHOOL IMPROVEMENT BONDS, PROJECTS OF 2011 AND 2017, SERIES 2018
INTRODUCTORY STATEMENT
This Official Statement, which includes the cover page, inside front cover page and appendices hereto, has been prepared at the direction of Phoenix Union High School District No. 210 of Maricopa County, Arizona (the “District”), in connection with the issuance of $148,855,000* principal amount of bonds designated School Improvement Bonds, Projects of 2011 and 2017, Series 2018 (the “Bonds”). Certain information concerning the authorization, purpose, terms, conditions of sale and sources of payment of and security for the Bonds is stated in this Official Statement.
Reference to provisions of State of Arizona (the “State” or “Arizona”) law, whether codified in the Arizona Revised Statutes, or uncodified, or of the State Constitution, are references to those current provisions. Those provisions may be amended, repealed or supplemented.
Neither this Official Statement nor any statement that may have been made orally or in writing in connection herewith is to be considered as, or as part of, a contract with the original purchasers or subsequent owners or beneficial owners of the Bonds.
THE BONDS
Authorization and Purpose
The Bonds will be issued pursuant to the Constitution and the laws of the State, including particularly Title 15, Chapter 9, Article 7, Arizona Revised Statutes, a vote of the qualified electors of the District at the election held on November 8, 2011 (the “2011 Election”) and November 7, 2017 (the “2017 Election” and together, the “Elections”), and a resolution adopted by the Governing Board of the District on April 5, 2018 (the “Bond Resolution”).
The Bonds represent the final installment of an aggregate voted principal amount of $230,000,000 of school improvement bonds approved at the 2011 Election and the first installment of an aggregate voted principal amount of $269,000,000 approved at the 2017 Election. Proceeds from the sale of the Bonds will be used to (i) make school and facility improvements; (ii) acquire real property and construct new school buildings; (iii) make safety and security upgrades; (iv) purchase furniture, equipment and technology for school facilities; (v) purchase pupil transportation vehicles; (vi) make improvements to land and buildings used for district support services; (vii) purchase furniture, equipment and technology for district support services and (viii) pay the costs of issuing the Bonds. After the issuance of the Bonds, the District will not have any remaining authorized but unissued bonds from the 2011 Election and will have $149,000,000* remaining authorized but unissued bonds from the 2017 Election. Additional bonds payable from the same source as the Bonds may be issued in the future, pursuant to authority approved at the 2017 Election or any subsequent election for the District.
* Subject to change. See footnote (b) to TABLE 14 for a description of the treatment of certain proceeds of the Bonds for purposes of calculating the remaining authorized but unissued bonds from the Election.
1 Terms of the Bonds – Generally
The Bonds will be dated the date of delivery and will be registered only in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), under the book-entry-only system described herein (the “Book-Entry-Only System”). See APPENDIX H – “BOOK-ENTRY-ONLY SYSTEM.” The Bonds will mature on the dates and in the principal amounts and will bear interest from their date at the rates set forth on the inside front cover page of this Official Statement. Beneficial ownership interests in the Bonds may be purchased in amounts of $5,000 of principal due on a specific maturity date or integral multiples thereof. Interest on the Bonds will be payable semiannually on each January 1 and July 1, commencing January 1, 2019* (each an “Interest Payment Date”), until maturity or prior redemption.
See “TAX EXEMPTION,” “ORIGINAL ISSUE DISCOUNT” and “BOND PREMIUM” herein for a discussion of the treatment of interest on the Bonds for federal and State income tax purposes.
Bond Registrar and Paying Agent
BOK Financial will serve as the initial bond registrar, transfer agent and paying agent (the “Bond Registrar and Paying Agent”) for the Bonds. The District may change the Bond Registrar and Paying Agent without notice to or consent of the owners of the Bonds.
Redemption Provisions*
Optional Redemption. The Bonds maturing on or before July 1, 20__ are not subject to redemption prior to their stated maturity dates. The Bonds maturing on or after July 1, 20__ are subject to redemption prior to their stated maturity dates, at the option of the District, in whole or in part from maturities selected by the District on July 1, 20__, or on any date thereafter, by the payment of a redemption price equal to the principal amount of each Bond called for redemption, plus interest accrued to the date fixed for redemption but without a premium.
Notice of Redemption. So long as the Bonds are held under the Book-Entry-Only System, notices of redemption will be sent to DTC in the manner required by DTC. See APPENDIX H – “BOOK-ENTRY-ONLY SYSTEM.” If the Book-Entry-Only System is discontinued, notice of redemption of any Bond will be mailed to the registered owner of the Bond or Bonds being redeemed at the address shown on the bond register maintained by the Bond Registrar and Paying Agent not more than sixty (60) nor less than thirty (30) days prior to the date set for redemption. Notice of redemption may be sent to any securities depository by mail, facsimile transmission, wire transmission or any other means of transmission of the notice generally accepted by the respective securities depository. Neither the failure of any registered owner of Bonds to receive a notice of redemption nor any defect therein will affect the validity of the proceedings for redemption of Bonds as to which proper notice of redemption was given.
Notice of any redemption will also be provided as set forth in APPENDIX G – “FORM OF CONTINUING DISCLOSURE CERTIFICATE,” but no defect in said further notice or record nor any failure to give all or a portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as prescribed above.
If monies for the payment of the redemption price and accrued interest are not held in separate accounts by the District, the Maricopa County, Arizona (the “County”) Treasurer or the Bond Registrar and Paying Agent prior to sending the notice of redemption, such redemption shall be conditional on such monies being so held on the date set for redemption and if not so held by such date, the redemption shall be cancelled and be of no force and effect.
Effect of Redemption. On the date designated for redemption, the Bonds or portions thereof to be redeemed will become and be due and payable at the redemption price for such Bonds or portions thereof, and, if monies for payment of the redemption price are held in a separate account by the Bond Registrar and Paying Agent, interest on
* Subject to change.
2 such Bonds or portions thereof to be redeemed will cease to accrue, such Bonds or portions thereof will cease to be entitled to any benefit or security under the Bond Resolution, the owners of such Bonds or portions thereof will have no rights in respect thereof except to receive payment of the redemption price thereof and such Bonds or portions thereof will be deemed paid and no longer outstanding. DTC’s practice is to determine by lot the amount of each Direct Participant’s (as defined in APPENDIX H – “BOOK-ENTRY-ONLY SYSTEM”) proportionate share that is to be redeemed.
Redemption of Less than All of a Bond. The District may redeem any amount which is included in a Bond that is subject to prior redemption in a denomination equal to or in excess of, but divisible by, $5,000. In the event of a partial redemption, the Bond will be redeemed in accordance with DTC’s procedures. In the event of a partial redemption after the Book-Entry-Only System is discontinued, the registered owner will submit the Bond for partial redemption and the Bond Registrar and Paying Agent will make such partial payment and will cause to be issued a new Bond in a principal amount which reflects the redemption so made, to be authenticated and delivered to the registered owner thereof.
Registration and Transfer When Book-Entry-Only System Has Been Discontinued
If the Book-Entry-Only System is discontinued, the Bonds will be transferred only upon the bond register maintained by the Bond Registrar and Paying Agent and one or more new Bonds, registered in the name of the transferee, of the same principal amount, maturity and rate of interest as the surrendered Bond or Bonds will be authenticated, upon surrender to the Bond Registrar and Paying Agent of the Bond or Bonds to be transferred, together with an appropriate instrument of transfer executed by the transferor if the Bond Registrar and Paying Agent’s requirements for transfer are met. The District has chosen the fifteenth day of the month preceding an Interest Payment Date as the “Record Date” for the Bonds. The Bond Registrar and Paying Agent may, but is not required to, transfer or exchange any Bonds during the period from the Record Date to and including the respective Interest Payment Date.
The transferor will be responsible for all transfer fees, taxes, fees and any other costs relating to the transfer of ownership of individual Bonds.
SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS
General
For the purpose of paying the principal of and interest on the Bonds and costs of administration of the Bonds, the District will be required by law to cause to be levied on all the taxable property in the District a continuing, direct, annual, ad valorem property tax sufficient to pay all principal, interest, and costs of administration for the Bonds as the same become due. The Bonds will be payable from such tax without limit as to rate or amount. The taxes will be levied, assessed and collected at the same time and in the same manner as other similar taxes are levied, assessed and collected. For information concerning the ad valorem property tax levy and collection procedures, see APPENDIX B – “THE DISTRICT – FINANCIAL INFORMATION – PROPERTY TAXES.”
Defeasance
Pursuant to the Bond Resolution, payment of all or any part of the Bonds may be provided for by the irrevocable deposit, in trust, of moneys or obligations issued or guaranteed by the United States of America (“Defeasance Obligations”) or both, which, with the maturing principal of and interest on such Defeasance Obligations, if any, will be sufficient, as evidenced by a certificate or report of an accountant, to pay when due the principal or redemption price of and interest on such Bonds. Any Bonds so provided for will no longer be outstanding under the Bond Resolution or payable from ad valorem taxes on taxable property in the District, and the owners of such Bonds shall thereafter be entitled to payment only from the moneys and Defeasance Obligations deposited in trust.
3 Investment of Debt Service Funds
Following collection and deposit of the proceeds of the taxes into a debt service fund of the District held by the Treasurer of the County (the “Debt Service Fund”), the District will instruct the Treasurer of the County, as ex officio Treasurer of the District, to invest the monies credited to the Debt Service Fund in accordance with Title 15, Chapter 9, Article 7 of the Arizona Revised Statutes. The District is statutorily permitted to invest monies in the Debt Service Fund only in the investments set forth in Arizona Revised Statutes 15-1025, which include, with certain restrictions, bonds issued or guaranteed by the United States of America (the “United States”) or any of its agencies or instrumentalities when such obligations are guaranteed as to principal and interest by the United States or by any agency or instrumentality thereof, bonds of the State or any Arizona county, city, town, or school district, certain bonds of any Arizona county, municipality or municipal district utility, certain bonds of any Arizona municipal improvement district, federally insured savings accounts or certificates of deposit, and bonds issued by federal land banks, federal intermediate credit banks, or banks for cooperatives. All earnings derived from such investments are credited to the Debt Service Fund. The statutes governing investment of monies in the Debt Service Fund are subject to change. The District does not monitor the manner in which the Treasurer of the County invests monies in the Debt Service Fund.
Except to the extent any bond proceeds are deposited to the Debt Service Fund and except as otherwise described above, neither the proceeds of the sale of the Bonds nor any school property of the District (including that financed with the proceeds of the sale of the Bonds) are security for, or a source of payment of, principal of or interest, on the Bonds.
SOURCES AND USES OF FUNDS
Sources of Funds
Principal Amount $148,855,000.00* [Net] Original Issue Premium/Discount (a)
Total Sources of Funds $
Uses of Funds
Deposit to Bond Building Fund $ Payment of Costs of Issuance (b) Deposit to the Debt Service Fund
Total Uses of Funds $
* Subject to change.
(a) Net original issue premium consists of original issue premium on the Bonds, less original issue discount on the Bonds.
(b) Will include compensation and costs of the Underwriters (as defined herein) with respect to the Bonds.
4 ESTIMATED DEBT SERVICE REQUIREMENTS
The following table illustrates the (i) annual debt service on the outstanding bonds of the District, (ii) estimated annual debt service on the Bonds and (iii) total estimated annual debt service on all bonds of the District outstanding after issuance of the Bonds.
TABLE 1
Schedule of Estimated Annual Debt Service Requirements (a) Phoenix Union High School District No. 210
Total Estimated Bonds Outstanding The Bonds* Annual Fiscal Estimated Debt Service Year Principal Interest Principal Interest (b) Requirements*
2017/18 $ 27,265,000 $10,912,673 $ 38,177,673 2018/19 28,585,000 9,217,463 $11,250,000$ 8,538,488(c) 57,590,951 2019/20 29,110,000 8,113,100 6,000,000 6,880,250 50,103,350 2020/21 29,635,000 6,930,050 6,000,000 6,580,250 49,145,300 2021/22 30,655,000 5,906,850 6,500,000 6,280,250 49,342,100 2022/23 25,350,000 4,633,675 5,520,000 5,955,250 41,458,925 2023/24 22,705,000 3,751,675 5,795,000 5,679,250 37,930,925 2024/25 23,555,000 2,842,725 6,085,000 5,389,500 37,872,225 2025/26 11,740,000 1,872,125 6,390,000 5,085,250 25,087,375 2026/27 12,195,000 1,430,500 6,710,000 4,765,750 25,101,250 2027/28 10,085,000 976,175 7,045,000 4,430,250 22,536,425 2028/29 2,190,000 568,050 7,395,000 4,078,000 14,231,050 2029/30 2,260,000 491,250 7,765,000 3,708,250 14,224,500 2030/31 1,155,000 392,750 8,155,000 3,320,000 13,022,750 2031/32 1,210,000 335,000 8,565,000 2,912,250 13,022,250 2032/33 1,275,000 274,500 8,990,000 2,484,000 13,023,500 2033/34 1,335,000 210,750 9,440,000 2,034,500 13,020,250 2034/35 1,405,000 144,000 9,910,000 1,562,500 13,021,500 2035/36 1,475,000 73,750 10,410,000 1,067,000 13,025,750 2036/37 10,930,000 546,500 11,476,500 $ 263,185,000 $ 148,855,000
* Subject to change.
(a) Prepared by Stifel, Nicolaus & Company, Incorporated (the “Financial Advisor”).
(b) Interest on the Bonds is estimated at 5.0%.
(c) The first interest payment on the Bonds will be due on January 1, 2019*. Thereafter, interest payments will be made semiannually on July 1 and January 1 until maturity or prior redemption.
5 LITIGATION
No litigation or administrative action or proceeding is pending to restrain or enjoin, or seeking to restrain or enjoin, the issuance and delivery of the Bonds, the levy and collection of taxes to pay the debt service on the Bonds, to contest or question the proceedings and authority under which the Bonds have been authorized and are to be issued, sold, executed or delivered, or the validity of the Bonds. Representatives of the District will deliver a certificate to the same effect at the time of the initial delivery of the Bonds.
RATINGS
Standard & Poor’s Financial Services LLC (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) and Fitch Ratings (“Fitch”) have assigned ratings of “AA,” “Aa2” and “AAA,” respectively, to the Bonds. Such ratings reflect only the views of S&P, Moody’s and Fitch. An explanation of the significance of a rating assigned by S&P may be obtained at One California Street, 31st Floor, San Francisco, California 94111. An explanation of the significance of a rating assigned by Moody’s may be obtained at One Front Street, Suite 1900, San Francisco, California 94111. An explanation of the significance of a rating assigned by Fitch may be obtained at One State Street Plaza, New York, New York 10041. Such ratings may be revised or withdrawn entirely at any time by S&P, Moody’s or Fitch if, in their judgment, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price or marketability of the Bonds. The District has covenanted in its continuing disclosure certificate that it will file notice of any formal change in any rating relating to the Bonds. See “CONTINUING DISCLOSURE” and APPENDIX G – “FORM OF CONTINUING DISCLOSURE CERTIFICATE” herein.
LEGAL MATTERS
The Bonds are to be sold with the understanding that the District will furnish the Underwriters with the approving opinion of Gust Rosenfeld P.L.C., Phoenix, Arizona, Bond Counsel (“Bond Counsel”) addressing legal matters relating to the validity of the Bonds under Arizona law, and with regard to the tax-exempt status of the interest income thereon (see “TAX EXEMPTION”). The signed legal opinion of Bond Counsel is dated and premised on the law in effect only as of the date of original delivery of the Bonds and will be delivered to the District at the time of original issuance. The fees of Bond Counsel and counsel to the Underwriters are expected to be paid from the proceeds of the sale of the Bonds and are contingent upon delivery of the Bonds.
The proposed text of the legal opinion is set forth as APPENDIX F – “FORM OF APPROVING LEGAL OPINION.” The legal opinion to be delivered may vary from the text of APPENDIX F – “FORM OF APPROVING LEGAL OPINION” if necessary to reflect the facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution, by recirculation of this Official Statement or otherwise, should not be construed as a representation that Bond Counsel has reviewed or expressed any opinion concerning any matters relating to the Bonds subsequent to the original delivery of the Bonds.
Bond Counsel has reviewed the information in the tax caption on the front cover page as well as the information under the headings “THE BONDS,” “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS,” “TAX EXEMPTION,” “ORIGINAL ISSUE DISCOUNT,” “BOND PREMIUM,” “RELATIONSHIP AMONG PARTIES” (but only as it applies to Bond Counsel) and “CONTINUING DISCLOSURE” (except as it relates to the District’s compliance with prior continuing disclosure undertakings) and in APPENDICES F – “FORM OF APPROVING LEGAL OPINION” and G – “FORM OF CONTINUING DISCLOSURE CERTIFICATE” but otherwise has not participated in the preparation of this Official Statement and will not pass upon its accuracy, completeness or sufficiency. Bond Counsel has neither examined nor attempted to examine nor verify any of the financial or statistical statements or data contained in this Official Statement and will express no opinion with respect thereto.
Certain legal matters will be passed upon for the Underwriters by Greenberg Traurig, LLP, counsel to the Underwriters.
6 Currently and from time to time, there are legislative proposals (and interpretations of such proposals by courts of law and other entities and individuals) which, if enacted, could alter or amend the property tax system of the State and numerous matters, both financial and non-financial, impacting the operations of school districts which could have a material impact on the District and could adversely affect the secondary market value and marketability (liquidity) of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to obligations (such as the Bonds) issued prior to enactment.
The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. The rendering of an opinion also does not guarantee the outcome of any legal dispute that may arise out of the transaction.
TAX EXEMPTION
In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, and assuming continuing compliance with certain restrictions, conditions and requirements by the District as described below, interest income on the Bonds is excluded from gross income for federal income tax purposes. In the opinion of Bond Counsel, interest income on the Bonds is exempt from State income taxes. The opinion of Bond Counsel will be dated as of the date of initial delivery of the Bonds. The form of such opinion is included as APPENDIX F – “FORM OF APPROVING LEGAL OPINION” attached hereto.
The Internal Revenue Code of 1986, as amended, (the “Code”) imposes various restrictions, conditions and requirements relating to the continued exclusion of interest income on the Bonds from gross income for federal income tax purposes, including a requirement that the District rebate to the federal government certain of its investment earnings with respect to the Bonds. The District has covenanted to comply with the provisions of the Code relating to such matters. Failure to comply with such restrictions, conditions and requirements could result in the interest income on the Bonds being included as gross income for federal income tax purposes, under certain circumstances, from the date of initial issuance. The Bonds do not provide for an adjustment in the interest rate or yield in the event of taxability and an event of taxability does not cause an acceleration of the principal on the Bonds. The opinion of Bond Counsel assumes continuing compliance with such covenants.
The Code also imposes an “alternative minimum tax” upon certain individuals. A taxpayer’s “alternative minimum taxable income” (“AMTI”) is its taxable income with certain adjustments. Interest income on the Bonds is not an item of tax preference to be included in the AMTI of individuals.
Federal legislation passed in December 2017 eliminates the alternative minimum tax paid by corporations for taxable years beginning on or after January 1, 2018. However, interest income on the Bonds may be required to be taken into account for federal income tax purposes as an adjustment to alternative minimum taxable income for certain corporations for taxable years beginning before January 1, 2018.
Although Bond Counsel will render an opinion that, as of the delivery date of the Bonds, interest income on the Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Bonds may otherwise affect a Beneficial Owner’s (as defined in APPENDIX H – “BOOK-ENTRY-ONLY SYSTEM”) federal tax liability. Certain taxpayers may experience other tax consequences. Taxpayers who become Beneficial Owners of the Bonds, including without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain subchapter S corporations, individuals who receive Social Security or Railroad Retirement benefits and taxpayers who have or are deemed to have incurred indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the applicability of such tax consequences to the respective Beneficial Owner. The nature and extent of these other tax consequences will depend upon the Beneficial Owner’s particular tax status and the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.
The Bonds are not “private activity bonds” within the meaning of Section 141 of the Code.
7 Currently and from time to time, there are legislative proposals in Congress, which, if enacted or made effective, could alter or amend the federal tax matters referred to above or adversely affect the market value and marketability (liquidity) of the Bonds. Any such change that occurs before initial delivery of the Bonds could cause Bond Counsel to deliver an opinion substantially different from the opinion shown in APPENDIX F – “FORM OF APPROVING LEGAL OPINION.” The extent of change in Bond Counsel’s opinion cannot be determined at this time. It cannot be predicted whether, when or in what form any such proposal or proposals might be enacted or whether, if enacted, such proposal or proposals would apply to obligations (such as the Bonds) issued prior to the enactment or effective date. Prospective purchasers should consult with their own tax advisors regarding any other pending or proposed federal income tax legislation.
ORIGINAL ISSUE DISCOUNT
The initial public offering prices of the Bonds maturing on July 1, 20___ through and including July 1, 20___ (collectively, the “Discount Bonds”) are less than the respective amounts payable at maturity. As a result, the Discount Bonds will be considered to be issued with original issue discount. The difference between the initial public offering price (assuming it is the first price at which a substantial amount of that maturity of Discount Bonds was sold, the “OID Issue Price”) of the Discount Bonds and the amount payable at maturity of the Discount Bonds will be treated as “original issue discount.” With respect to a Beneficial Owner who purchases a Discount Bond in the initial public offering at the OID Issue Price and who holds the Discount Bond to maturity, the full amount of original issue discount will constitute interest income which is not includible in the gross income of the Beneficial Owner of the Discount Bond for federal income tax purposes and Arizona income tax purposes and that Beneficial Owner will not, under present federal income tax law and present Arizona income tax law, realize a taxable capital gain upon payment of the Discount Bond at maturity.
The original issue discount on each of the Discount Bonds is treated for federal income tax purposes and Arizona income tax purposes as accreting daily over the term of such Discount Bond on the basis of a constant interest rate compounded at the end of each six-month period (or shorter period from the date of original issue) ending on January 1 and July 1 (with straight-line interpolation between compounding dates).
The amount of original issue discount accreting each period will be added to the Beneficial Owner’s tax basis for the Discount Bond. The adjusted tax basis will be used to determine taxable gain or loss upon disposition of the Discount Bond. An initial Beneficial Owner of a Discount Bond who disposes of the Discount Bond prior to maturity should consult his or her tax advisor as to the amount of the original issue discount accrued over the period held and the amount of taxable gain or loss upon the sale or disposition of the Discount Bond prior to maturity.
The Code contains certain provisions relating to the accretion of original issue discount in the case of subsequent Beneficial Owners of the Discount Bonds. Beneficial Owners who do not purchase the Discount Bonds in the initial offering at the OID Issue Price should consult their own tax advisors with respect to the tax consequences of the ownership of Discount Bonds.
A portion of the original issue discount that accretes in each year to a Beneficial Owner of a Discount Bond may result in certain collateral federal income tax consequences as described in “TAX EXEMPTION” herein.
Beneficial Owners of Discount Bonds in states other than Arizona should consult their own tax advisors with respect to the state and local taxes.
BOND PREMIUM
The initial public offering prices of the Bonds maturing on July 1, 20___ through and including July 1, 20__ (collectively, the “Premium Bonds”) are greater than the amount payable on such Premium Bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial Beneficial Owner of such Premium Bonds. The basis for
8 federal income tax purposes of a Premium Bond in the hands of such initial Beneficial Owner must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial Beneficial Owner is determined by using such Beneficial Owner’s yield to maturity. Beneficial Owners of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium with respect to the Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning Premium Bonds.
UNDERWRITING
The Bonds will be purchased by Citigroup Global Markets Inc., Piper Jaffray & Co., RBC Capital Markets, LLC and Hilltop Securities Inc. (the “Underwriters”) at an aggregate purchase price of $______, pursuant to a bond purchase agreement (the “Bond Purchase Agreement”) entered into by and among the District and the Underwriters. If the Bonds are sold to produce the yields shown on the inside front cover page hereof, the Underwriters’ compensation will be $______. The Bond Purchase Agreement provides that the Underwriters will purchase all of the Bonds so offered if any are purchased. The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into unit investment trusts) and others at prices higher or yields lower than the public offering prices or yields stated on the inside front cover page hereof. The initial offering yields set forth on the inside front cover page may be changed, from time to time, by the Underwriters.
RBC Capital Markets, LLC (“RBC”) has provided the following information for inclusion in this Official Statement: RBC and its respective affiliates are full-service financial institutions engaged in various activities, that may include securities trading, commercial and investment banking, municipal advisory, brokerage, and asset management. In the ordinary course of business, RBC and its respective affiliates may actively trade debt and, if applicable, equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). RBC and its respective affiliates may engage in transactions for their own accounts involving the securities and instruments made the subject of this securities offering or other offering of the District. RBC and its respective affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of this securities offering or other offerings of the District. RBC and its respective affiliates may make a market in credit default swaps with respect to municipal securities in the future.
Piper Jaffray & Co. (“Piper”) has entered into a distribution agreement (“Distribution Agreement”) with Charles Schwab & Co., Inc. (“CS&Co”) for the retail distribution of certain securities offerings, including the Bonds, at the original issue prices. Pursuant to the Distribution Agreement, CS&Co will purchase the Bonds from Piper at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co sells.
RELATIONSHIP AMONG PARTIES
Bond Counsel has previously represented, and is currently representing, the Underwriters and the Financial Advisor with respect to other financings and has acted or is acting as bond counsel with respect to other bonds underwritten by the Underwriters and the Financial Advisor and may do so in the future. Bond Counsel also serves and has served as bond counsel for one or more of the political subdivisions that the District territorially overlaps. Counsel to the Underwriters has previously acted as bond counsel with respect to other bonds underwritten by the Underwriters and the Financial Advisor and may continue to do so in the future if requested.
9 CONTINUING DISCLOSURE
The District will covenant for the benefit of certain owners of the Bonds to provide certain financial information and operating data relating to the District by not later than February 1 in each year commencing February 1, 2019 (the “Annual Reports”), and to provide notices of the occurrence of certain enumerated events (the “Notices of Listed Events”). The Annual Reports, the Notices of Listed Events and any other document or information required to be filed by the District as such will be filed with the Municipal Securities Rulemaking Board (the “MSRB”) through the MSRB’s Electronic Municipal Market Access system, each as described in APPENDIX G – “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” The specific nature of the information to be contained in the Annual Reports and the Notices of Listed Events is also set forth in APPENDIX G – “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants will be made in order to assist the Underwriters in complying with the Securities and Exchange Commission’s Rule 15c2-12(b)(5) (the “Rule”). A failure by the District to comply with these covenants must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Pursuant to Arizona Law, the ability of the District to comply with such covenants will be subject to annual appropriation of funds sufficient to provide for the costs of compliance with such covenants. Should the District not comply with such covenants due to a failure to appropriate for such purpose, the District has covenanted to provide notice of such fact to the MSRB. Absence of continuing disclosure, due to non-appropriation or otherwise, could adversely affect the Bonds, specifically their market price and transferability.
The District previously entered into continuing disclosure undertakings (the “Prior Undertakings”) with respect to certain previously issued school improvement bonds and refunding bonds, which require the filing of, among other things, notices of the occurrence of certain events by the District. During the prior five years, the District was late in filing notices of certain bond insurance rating changes as required by the Prior Undertakings. The District has since filed all such notices.
The District reviewed its filing requirements pursuant to the Prior Undertakings and has implemented procedures to facilitate compliance with the Prior Undertakings, the continuing disclosure undertaking of the Bonds and future similar undertakings.
FINANCIAL ADVISOR
The Financial Advisor’s fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. The Financial Advisor has not verified, and does not assume any responsibility for, the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies.
The Financial Advisor has provided the following sentence for inclusion in this Official Statement: “The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the District and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information.”
10 GENERAL PURPOSE FINANCIAL STATEMENTS
The comprehensive annual financial report of the District for the fiscal year ended June 30, 2017, a copy of which is included in APPENDIX C – “THE DISTRICT – AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2017” of this Official Statement, includes the District’s financial statements for the fiscal year ended June 30, 2017 that were audited by CliftonLarsonAllen LLP, a certified public accounting firm, to the extent indicated in its report thereon. The District has not requested the consent of CliftonLarsonAllen LLP to include its report and CliftonLarsonAllen LLP has performed no procedures subsequent to rendering its report on the financial statements.
CONCLUDING STATEMENT
To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, they are made as such and not as representations of fact or certainty, and no representation is made that any of these statements have been or will be realized. All financial and other information in this Official Statement has been derived by the District from official records and other sources and is believed by the District to be accurate and reliable. Information other than that obtained from official records of the District has been identified by source and has not been independently confirmed or verified by the District and its accuracy is not guaranteed. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial position or other affairs of the District. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue or be repeated in the future.
PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA
By: President of the Governing Board
11 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A
THE DISTRICT – DISTRICT INFORMATION
General Information
The District provides a program of public education to high school students from the 9th through 12th grades. Elementary education is provided by the overlapping districts as shown in TABLE 16 of APPENDIX B – “THE DISTRICT – FINANCIAL INFORMATION.” The District was organized on April 8, 1895 and comprises an area of approximately 220 square miles, over 79% of which lies within the city limits of the City of Phoenix, Arizona (the “City”), the State capital and largest city. See APPENDIX D – “CITY OF PHOENIX, ARIZONA” for certain information about the City and APPENDIX E – “MARICOPA COUNTY, ARIZONA” for certain information about the County. The District is one of 55 public school districts currently operating in the metropolitan area. The estimated population for the District is 725,370.
Enrollment
The following chart illustrates the current and historical average daily membership (“A.D.M.”) of the District’s student population.
TABLE 2
AVERAGE DAILY MEMBERSHIP Phoenix Union High School District No. 210
Fiscal Year A.D.M.
2017/18 27,006 2016/17 27,000 2015/16 26,657 2014/15 26,602 2013/14 26,323
Source: The Arizona Department of Education and the District.
A-1 The District operates the following schools:
TABLE 3
SCHOOL FACILITIES Phoenix Union High School District No. 210
Grade Facility Type Range
Alhambra High School Comprehensive high school 9 – 12 Betty H. Fairfax High School Comprehensive high school 9 – 12 Bioscience High School Specialty school 9 – 12 Bostrom High School Alternative education school 9 – 12 Camelback High School Comprehensive high school 9 – 12 Carl Hayden Community High School Comprehensive high school 9 – 12 Central High School Comprehensive high school 9 – 12 Cesar Chavez High School Comprehensive high school 9 – 12 Desiderata Program Special education school 9 – 12 Franklin Police and Fire High School Specialty school 9 – 12 Linda Abril Educational Academy Alternative education school 10 – 12 Maryvale High School Comprehensive high school 9 – 12 Metro Tech High School Comprehensive high school with 9–12 career & technical education programs North High School Comprehensive high school 9 – 12 Phoenix Coding Academy Specialty school 9 – 12 PHUSD/Wilson College Prep Academy Specialty school 9 – 12 South Mountain High School Comprehensive high school 9 – 12 Trevor G. Browne High School Comprehensive high school 9 – 12
Administration and Governance
The District has 123 principals and administrators, 1,662 certified teachers and 1,101 classified support personnel. This provides the District with a student-teacher ratio of approximately 18:1.
The District is governed by a seven-member Governing Board and administered by one Superintendent. The members of the Governing Board of the District are elected at large from the District for four-year terms. The present members of the Governing Board of the District are:
TABLE 4
GOVERNING BOARD Phoenix Union High School District No. 210
Ian Danley, President Stanford Prescott, Clerk Linda Abril, Member Lela Alston, Member Stephanie Parra, Member Laura Pastor, Member Randy D. Schiller, Member
A-2 Dr. Chad E. Gestson was named Superintendent in February 2016 by the Governing Board of the District. Dr. Gestson had been serving as the District's Interim Superintendent since August 2015. Prior to being named Interim Superintendent, Dr. Gestson served as the Director of School Leadership. In that role, Dr. Gestson supervised and supported principals as well as developed future principals and assistant principals through an Aspiring Leaders program that he developed in 2014. He had previously spent five years as the principal of Camelback High School, where he established the first Montessori high school in Arizona, a comprehensive advisory system, a virtual academy, and an engineering program.
Before joining the District in 2009, Dr. Gestson served the Isaac School District for five years as an administrator, first as an elementary school assistant principal, and later as a middle school principal. A product of Teach For America, he began his teaching career in the Roosevelt School District in 2001. Prior to his public education career, Dr. Gestson was a commercial construction superintendent in Seattle, Washington.
Dr. Gestson holds a Bachelor of Arts in English from the University of Washington, a Master of Education in Curriculum and Instruction from Arizona State University, and a Master of Education in Educational Leadership from Northern Arizona University. In 2009, he completed his Doctor of Education in Educational Leadership from Northern Arizona University where he was named the Outstanding Doctoral Student of the Year by the Arizona Association of School Administrators. Dr. Gestson is also proficient in Spanish.
Dr. Gestson, the 2013 PUHSD District Administrator of the Year, was a 2013-2014 Rodel Exemplary Principal, one of only seven in the state that year and the first ever high school principal in the County. In that role, he mentored aspiring leaders, particularly those who aspire to lead schools of low-income students. In 2011, Dr. Gestson won the Lead and Inspire Award, Urban High School Division, presented by Arizona State University’s Office of Education Partnerships. He also won the award as a middle school principal at Carl T. Smith Middle School in 2008.
Dr. Gestson serves on numerous local boards and councils, including Expect More Arizona, ABEC (Arizona Business and Education Coalition), and Support My Club. He is the Co-Chair of Thriving Together, a collective impact organization in partnership with the United Way, Helios Foundation, and other educational and business partners. He also serves as the president of his church’s board of directors. He and his wife, Megan, currently a principal in the Roosevelt School District, founded and run Sponsors For Scholars (@SFStoCollege), a non-profit organization that supports under-resourced and under-represented high school and college students. They have two children, Olivia and Andrew, ages 11 and 8, respectively, and reside in the City.
Sherry Celaya became the Assistant Superintendent for Business and Finance in July, 2015 and Chief Financial Officer in July, 2016. She oversees budgeting, payroll, purchasing, real estate and legislative matters, elections, and sale of District bonds. Ms. Celaya brings over 30 years of school finance experience to the District, coming from Cartwright Elementary where she was the director of business services for three years. She was also the chief financial officer for Scottsdale Unified and Roosevelt School District, and business manager at Casa Grande Union High School District and Picacho Elementary District. Ms. Celaya holds a Bachelor of Science degree in Business Administration, specializing in Accounting. She holds certification from the Association of School Business Officials International as a Certified Administrator of School Finance and Operations. A member of Arizona Association of School Business Officials (AASBO) she has completed its courses in advanced purchasing, budget and finance, business management and accounting. Ms. Celaya resides in the City. Ms. Celaya also serves as a Board Member for Take Charge America, a nonprofit financial education institution.
Desegregation Order and Funding
In August of 1995, the United States Federal Court in the District of Arizona (the “U.S. District Court”), requested a review of the District’s original Desegregation Federal Court Order (the “Order”). Subsequently, the District built two new high schools in compliance with the Order and took other remedial actions. In May 2005, the U.S. District Court found that the District had complied with its obligation, declared the District unitary and ended its oversight of the District upon completion of the second high school in August 2007. State statutes authorize the District to continue to budget for and receive desegregation funds from local property taxes for programs and activities undertaken before the May 2005 ruling that the District is unitary.
A-3 The U.S. District Court will retain jurisdiction to grant relief to the parties if the Arizona legislature takes any action at any time that would have the effect of decreasing, terminating or otherwise interfering with funding for existing and ongoing desegregation programs and activities pursuant to Arizona Revised Statutes Section 15-910(G), as currently written or as it may be amended or renumbered in the future.
A-4 APPENDIX B
THE DISTRICT – FINANCIAL INFORMATION
PROPERTY TAXES
As described under the heading “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS,” for the purpose of paying the principal of and interest on the Bonds and costs of administration of the Bonds, the District will be required by law to cause to be levied on all the taxable property in the District a continuing, direct, annual, ad valorem property tax sufficient to pay all principal, interest, and costs of administration for the Bonds as the same become due, as described under such heading.
Taxes levied for the maintenance and operation of counties, cities, towns, school districts, community college districts and the State are “primary taxes.” Taxes levied for payment of bonds like the Bonds, voter-approved budget overrides and the maintenance and operation of special service districts such as sanitary, fire, road improvement and joint technological education districts are “secondary taxes.” See “Primary Taxes” and “Secondary Taxes” below. The State’s ad valorem property tax levy and collection procedures are summarized under this heading “PROPERTY TAXES.”
Taxable Property
Real property and improvements and personal property are either valued by the Assessor of the County or the Arizona Department of Revenue (the “Department of Revenue”). Property valued by the Assessor of the County are referred to as “locally assessed” property and generally encompasses residential, agricultural and traditional commercial and industrial property. Property valued by the Department of Revenue is referred to as “centrally valued” property and generally includes large mine and utility entities.
Locally assessed property is assigned two values: Full Cash Value and Limited Property Value (both as defined herein). Centrally valued property is assigned one value: Full Cash Value which is used for both Jurisdictional Full Cash Value and Jurisdictional Limited Property Value (both as defined herein).
Full Cash Value
In the context of a specific property parcel, full cash value (“Full Cash Value”) is statutorily defined to mean “that value determined as prescribed by statute” or if no statutory method is prescribed it is “synonymous with market value which means that estimate of value that is derived annually by using standard appraisal methods and techniques,” which generally include the market approach, the cost approach and the income approach. In valuing locally assessed property, the Assessor of the County generally use a cost approach to value commercial/industrial property and a market approach to value residential property. In valuing centrally valued property, the Department of Revenue begins generally with information provided by taxpayers and then applies procedures provided by State law. State law allows taxpayers to appeal such Full Cash Values by providing evidence of a lower value, which may be based upon another valuation approach. Full Cash Value is used as the ceiling for determining Limited Property Value. Unlike Limited Property Value, increases in Full Cash Value are not limited.
Limited Property Value
In the context of a specific property parcel, limited property value (“Limited Property Value”) is a property value determined pursuant to the Arizona Constitution and the Arizona Revised Statutes. For locally assessed property in existence in the prior year that did not undergo modification through construction, destruction, split or change in use, including that for mobile homes, Limited Property Value is limited to the lesser of Full Cash Value or an amount 5% greater than Limited Property Value determined for the prior year for such specific property parcel. Prior to 2015, Limited Property Value for a specific property parcel in existence in the prior year that did not
B-1 undergo modification through construction, destruction, split or change in use, including that for mobile homes, increased by the greater of either 10% of the prior year’s Limited Property Value or 25% of the difference between the prior year’s Limited Property Value and the current year’s Full Cash Value. A separate Limited Property Value was not and is not provided for centrally valued property.
Full Cash Value and Limited Property Value for Taxing Jurisdictions
The Full Cash Value in the context of a taxing jurisdiction is the sum of the Full Cash Value associated with each parcel of property in the jurisdiction. Full Cash Value of the jurisdiction is the basis for determining constitutional and statutory debt limits for certain political subdivisions in Arizona, including the District.
The Limited Property Value in the context of a taxing jurisdiction is the sum of the Limited Property Value associated with each parcel of locally assessed property within the jurisdiction plus the sum of the Full Cash Value associated with each parcel of centrally valued property within the jurisdiction. Limited Property Value of the jurisdiction is used as the basis for levying both primary and secondary taxes.
Prior to tax year 2015, Jurisdictional Limited Property Value was used as the basis for levying primary property taxes while Jurisdictional Full Cash Value was used as the basis for levying secondary property taxes.
Property Classification and Assessment Ratios
All property, both real and personal, is assigned a classification (defined by property use) and related assessment ratio that is multiplied by the Limited Property Value or Full Cash Value of the property, as applicable, to obtain the “Limited Assessed Property Value” and the “Full Cash Assessed Value,” respectively.
The assessment ratios for each property classification are set forth by tax year in the following table.
TABLE 5
Property Tax Assessment Ratios (Tax Year)
Property Classification (a) 2014 2015 2016 2017 2018
Mining, utilities, commercial and industrial 19% 18.5% 18% 18% 18% Agricultural and vacant land 16 16 15 15 15 Owner occupied residential 10 10 10 10 10 Leased or rented residential 10 10 10 10 10 Railroad, private car company and airline flight property (b) 16 15 14 15 14
(a) Additional classes of property exist, but seldom amount to a significant portion of a municipal body’s total valuation.
(b) This percentage is determined annually pursuant to Section 42-15005, Arizona Revised Statutes.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue.
Primary Taxes
Primary taxes are levied against Net Limited Assessed Property Value (as defined herein). “Net Limited Assessed Property Value” is determined by excluding the value of property exempt from taxation from Limited Assessed Property Value of locally assessed property and from Full Cash Assessed Value of centrally valued property and combining the resulting two amounts.
B-2 The primary taxes levied by each county, city, town and community college district are constitutionally limited to a maximum increase of 2% over the maximum allowable prior year’s levy limit plus any taxes on property not subject to taxation in the preceding year (e.g., new construction and property brought into the jurisdiction because of annexation). The 2% limitation does not apply to primary taxes levied on behalf of school districts.
Primary taxes on residential property only are constitutionally limited to 1% of the Limited Property Value of such property. This constitutional limitation on residential primary tax levies is implemented by reducing the school district’s taxes. To offset the effects of reduced school district property taxes, the State compensates the school district by providing additional State aid.
Secondary Taxes
Like primary taxes, secondary taxes are also levied against Net Limited Assessed Property Value. (Prior to tax year 2015, secondary taxes were levied against “Net Full Cash Assessed Value” which is determined by excluding the value of property exempt from taxation from Full Cash Assessed Value of both locally assessed and centrally valued property and combining the resulting two amounts.) There is no constitutional or statutory limitation on annual levies for voter-approved bond indebtedness and overrides and certain special district assessments. As Net Full Cash Assessed Value was used as the basis for levying taxes for payment of bonds like the Bonds in fiscal years prior to fiscal year 2015/16, this Official Statement compares Net Limited Assessed Property Value with Net Full Cash Assessed Value in applicable years under the heading “ASSESSED VALUATIONS AND TAX RATES” herein.
Tax Procedures
The State tax year has been defined as the calendar year, notwithstanding the fact that tax procedures begin prior to January 1 of the tax year and continue through May of the succeeding calendar year.
On or before the third Monday in August each year the Board of Supervisors of the County prepares the tax roll setting forth certain valuations by taxing district of all property in the County subject to taxation. The Assessor of the County is required to complete the assessment roll by December 15th of the year prior to the levy. This tax roll also shows the valuation and classification of each parcel of land located within the County for the tax year. The tax roll is then forwarded to the Treasurer of the County.
With the various budgetary procedures having been completed by the governmental entities, the appropriate tax rate for each jurisdiction is then applied to the parcel of property in order to determine the total tax owed by each property owner. Any subsequent decrease in the value of the tax roll as it existed on the date of the tax levy due to appeals or other reasons would reduce the amount of taxes received by each jurisdiction.
The property tax lien on real property attaches on January 1 of the year the tax is levied. Such lien is prior and superior to all other liens and encumbrances on the property subject to such tax except liens or encumbrances held by the State or liens for taxes accruing in any other years. Set forth below is a record of property taxes levied and collected in the District for a portion of the current fiscal year and all of the previous five fiscal years.
B-3 TABLE 6
Real and Secured Property Taxes Levied and Collected (a) Phoenix Union High School District No. 210
Combined Adjusted Collected to June 30th Adjusted Cumulative Collections Primary and Adopted District of Initial Fiscal Year District Tax to February 28, 2018 Fiscal Secondary District Tax Levy as % of Levy as of % of Year Tax Rate Tax Levy of June 30th Amount Levy 2/28/2018 Amount Levy
2017/18$ 5.0332 $ 234,574,217 $234,574,217 (b) (b) $ 233,670,619 $ 140,676,166 59.97 % 2016/17 5.0684 221,825,939 220,680,352$ 213,022,676 96.03% 220,485,271 220,276,396 99.30 2015/16 4.9571 209,925,205 208,867,812 204,225,152 97.28 208,221,298 207,821,906 99.00 2014/15 4.6196 194,557,375 193,438,230 186,517,422 95.87 192,514,917 187,148,594 96.19 2013/14 4.8162 196,403,951 195,013,631 187,502,539 95.47 193,784,388 195,025,019 99.30 2012/13 4.2702 194,874,474 192,159,322 184,158,751 94.50 191,078,268 187,841,900 96.39
(a) Taxes are collected by the Treasurer of the County. Taxes in support of debt service are levied by the Board of Supervisors of the County as required by Arizona Revised Statutes. Delinquent taxes are subject to an interest and penalty charge of 16% per annum, which is prorated at a monthly rate of 1.33%. Interest and penalty collections for delinquent taxes are not included in the collection figures above, but are deposited in the County’s General Fund. Interest and penalties with respect to the first half tax collections (delinquent November 1) are waived if the full year’s taxes are paid by December 31.
In November 2017, voters in the District authorized the District to continue to exceed its statutorily prescribed maintenance and operations budget limit by an amount not to exceed 15% of the prescribed limit. The authorization, which will begin in fiscal year 2018/19, extends for seven years, although in the sixth (fiscal year 2023/24) and seventh (fiscal year 2024/25) years, the amount by which the prescribed budget limit may be exceeded is limited to 10% and 5% respectively. Tax rates for corresponding years include amounts available for this override. If voters do not authorize the District to continue to exceed its prescribed budget by fiscal year 2022/23, the District will have to decrease its budgeted expenditures in fiscal years that follow.
In November 2015, voters in the District authorized the District to exceed its statutorily prescribed capital outlay budget limit by an amount not to exceed $15,300,600 per year. The authorization extends for seven years, took effect in fiscal year 2016/17 and expires in fiscal year 2022/23. If voters do not authorize the District to continue to exceed its statutorily prescribed capital outlay budget limit by fiscal year 2022/23, the District will have to decrease its budgeted capital outlay expenditures in fiscal years following 2022/23.
(b) 2017/18 taxes in course of collection: First installment due 10-01-17, delinquent 11-01-17; Second installment due 03-01-18, delinquent 05-01-18.
Source: Office of the Treasurer of the County.
SPECIAL NOTE: The Full Cash Assessed Value of property owned by the Salt River Project Agricultural Improvement and Power District (“SRP”) is not included in the assessed value of the District or in any valuation information set forth in this Official Statement. Because of SRP’s quasi-governmental nature, property owned by SRP is exempt from property taxation.
However, SRP may elect each year to make voluntary contributions in lieu of property taxes with respect to certain of its electrical facilities (the “SRP Electric Plant”). If SRP elects to make the in lieu contribution for the year, the Full Cash Assessed Value of the portion of the SRP Electric Plant located within the District and the in lieu contribution amount is determined in the same manner as the Full Cash Assessed Value and property taxes owed is determined for similar non-governmental public utility property, with certain special deductions. SRP in-lieu is taken into account when setting the District’s tax rate.
B-4 If SRP elected not to make such contributions, the District would be required to contribute funds from other sources or levy an increased tax rate on all other taxable property to provide sufficient amounts to pay debt service on the Bonds. If after electing to make the in lieu contribution, SRP then failed to make the in lieu contribution when due, the Treasurer of the County and the District have no recourse against the property of SRP and there may be a delay in the payment of that portion of the debt service on the Bonds that would have been paid by SRP’s in lieu contribution.
Since 1964, when the in lieu contribution was originally authorized by the Arizona Revised Statutes, SRP has always elected to make the in lieu contribution. The fiscal year 2017/18 Net Limited Assessed Property Value equivalent of SRP within the District is $58,214,019 which represents approximately 1.23% of the fiscal year 2017/18 Net Limited Assessed Property Value in the District. The estimated fiscal year 2018/19 Net Limited Assessed Property Value equivalent of SRP within the District is $57,956,000 which represents approximately 1.15% of the combined estimated fiscal year 2018/19 Net Limited Assessed Property Value in the District.
Delinquent Tax Procedures
The property taxes due the District are billed, along with State and other taxes, each September and are due and payable in two installments on October 1 and March 1 and become delinquent on November 1 and May 1, respectively. Delinquent taxes are subject to an interest penalty of 16% per annum prorated monthly as of the first day of the month. (Delinquent interest is waived if a taxpayer, delinquent as to the November 1 payment, pays the entire year’s tax bill by December 31.) After the close of the tax collection period, the Treasurer of the County prepares a delinquent property tax list and the property so listed is subject to a tax lien sale in February of the succeeding year. In the event that there is no purchaser for the tax lien at the sale, the tax lien is assigned to the State, and the property is reoffered for sale from time to time until such time as it is sold, subject to redemption, for an amount sufficient to cover all delinquent taxes.
After three years from the sale of the tax lien, the tax lien certificate holder may bring an action in a court of competent jurisdiction to foreclose the right of redemption and, if the delinquent taxes plus accrued interest are not paid by the owner of record or any entity having a right to redeem, a judgment is entered ordering the Treasurer of the County to deliver a treasurer’s deed to the certificate holder as prescribed by law.
In the event of bankruptcy of a taxpayer pursuant to the United States Bankruptcy Code (the “Bankruptcy Code”), the law is currently unsettled as to whether a lien can attach against the taxpayer’s property for property taxes levied during the pendency of bankruptcy. Such taxes might constitute an unsecured and possibly non-interest bearing administrative expense payable only to the extent that the secured creditors of a taxpayer are oversecured, and then possibly only on the prorated basis with other allowed administrative claims. It cannot be determined, therefore, what adverse impact bankruptcy might have on the ability to collect ad valorem taxes on property of a taxpayer within the District. Proceeds to pay such taxes come only from the taxpayer or from a sale of the tax lien on delinquent property.
When a debtor files or is forced into bankruptcy, any act to obtain possession of the debtor’s estate, any act to create or perfect any lien against the property of the debtor or any act to collect, assess or recover a claim against the debtor that arose before the commencement of the bankruptcy is stayed pursuant to the Bankruptcy Code. While the automatic stay of a bankruptcy court may not prevent the sale of tax liens against the real property of a bankrupt taxpayer, the judicial or administrative foreclosure of a tax lien against the real property of a debtor would be subject to the stay of bankruptcy court. It is reasonable to conclude that “tax sale investors” may be reluctant to purchase tax liens under such circumstances, and, therefore, the timeliness of the payment of post-bankruptcy petition tax collections becomes uncertain.
B-5 It cannot be determined what impact any deterioration of the financial conditions of any taxpayer, whether or not protection under the Bankruptcy Code is sought, may have on payment of or the secondary market for the Bonds. None of the District, the Underwriters or their respective agents or consultants has undertaken any independent investigation of the operations and financial condition of any taxpayer, nor have they assumed responsibility for the same.
In the event the County is expressly enjoined or prohibited by law from collecting taxes due from any taxpayer, such as may result from the bankruptcy of a taxpayer, any resulting deficiency could be collected in subsequent tax years by adjusting the District’s tax rate charged to non-bankrupt taxpayers during such subsequent tax years.
B-6 ASSESSED VALUATIONS AND TAX RATES
TABLE 7
Direct and Overlapping Net Limited Assessed Property Values and Tax Rates (a) Per $100 Assessed Valuation
2017/18 Combined Primary 2017/18 and Secondary Tax Net Limited Rates Per $100 Assessed Net Limited Assessed Overlapping Jurisdiction Property Value Property Value
State of Arizona $59,406,279,473 None
Maricopa County 38,251,891,249 $1.8884 (b) Maricopa County Community College District 38,251,891,249 1.4096 Maricopa County Fire District Assistance Tax 38,251,891,249 0.0102 Maricopa County Special Health Care District (MIHS) 38,251,891,249 0.2851 Maricopa County Library District 38,251,891,249 0.0556 Maricopa County Flood Control District (c) 34,709,158,781 0.1792 Central Arizona Water Conservation District (d) 38,251,891,249 0.1400
Estrella Dells County Improvement District N/A 1.0000 Phoenix Downtown Enhancement District N/A 1.0000 Rancho Solano County Improvement District 5,169,416 1.3542
Laveen Fire District 41,497,877 2.7246
City of Phoenix 11,721,385,399 2.1600 City of Scottsdale 5,698,737,970 1.0845 Town of Paradise Valley 822,421,083 0.0000
Phoenix Elementary School District No. 1 663,934,898 6.9979 Riverside Elementary School District No. 2 354,004,867 3.8285 Isaac Elementary School District No. 5 126,493,589 10.3922 Wilson Elementary School District No. 7 107,813,644 5.6887 Osborn Elementary School District No. 8 398,647,763 3.8310 Creighton Elementary School District No. 14 402,277,458 5.8835 Murphy Elementary School District No. 21 96,861,893 5.0483 Balsz Elementary School District No. 31 293,353,066 4.0366 Madison Elementary School District No. 38 930,449,054 4.4782 Laveen Elementary School District No. 59 205,407,475 8.0437 Roosevelt Elementary School District No. 66 553,168,665 7.5256 Alhambra Elementary School District No. 68 320,888,592 7.1825 Cartwright Elementary School District No. 83 217,885,146 11.0462
Western Maricopa Education Center (West-MEC) 13,863,084,518 0.1780
Phoenix Union High School District No. 210 4,671,186,110 5.0332
B-7 (a) The following overlapping jurisdictions are taxed as follows:
Overlapping Jurisdiction Levy/Tax Rate
Cuatro Palmas Irrigation and Water Delivery District #26 $130.21/acre East Morningside Irrigation and Water Delivery District #8 414.84/acre Hoffman Terrace Irrigation and Water Delivery District #3 254.07/acre Lamar Irrigation and Water Delivery District #30 6.06/acre Los Olivos Irrigation and Water Delivery District #1 389.01/acre Madison Park Irrigation and Water Delivery District #22 202.46/acre McDowell Homes Irrigation and Water Delivery District #7 235.76/acre Myrtle Park Irrigation and Water Delivery District #10 85.82/acre Olivewood Estates Irrigation and Water Delivery District #29 1,108.28/acre Pomelo Irrigation and Water Delivery District 185.74/acre Rancho Del Monte Irrigation and Water Delivery District 252.05/acre Rose Lane #28 Irrigation and Water Delivery District 0.00/acre Roosevelt Water Conservation Delivery District 145.85/acre Sun View Estates I Irrigation and Water Delivery District #55 500.44/acre Sun View Estates II Irrigation and Water Delivery District #54 377.24/acre Tres Palmas Irrigation and Water Delivery District #6 253.78/acre Turney Tract Irrigation and Water Delivery District #15 354.51/acre Whitcomb’s Roundup Ranchos Irrigation and Water Delivery District #42 1,382.61/acre Windsor Square Irrigation and Water Delivery District #27 337.74/acre Woodlea Irrigation and Water Delivery District #2 671.75/acre Yaple Park Irrigation and Water Delivery District #56 360.13/acre
(b) Includes the “State Equalization Assistance Property Tax” which is levied by the County and has been set at $0.4875 per $100 Net Limited Assessed Property Value for fiscal year 2017/18. Such amount is adjusted annually pursuant to Section 41-1276, Arizona Revised Statutes.
(c) The assessed value of the Maricopa County Flood Control District does not include the personal property assessed valuation of the County.
(d) Value shown for the Central Arizona Water Conservation District covers only the County portion of such district. (See footnote (b) following TABLE 16.)
Source: Property Tax Rates and Assessed Values, Arizona Tax Research Association.
Total Tax Rates Per $100 Net Limited Assessed Property Value
The total overlapping property tax rate for property owners within the District (exclusive of those described in footnote (a) to TABLE 7) ranges from $12.8298 to $22.3855 per $100 Net Limited Assessed Property Value, depending upon the specific jurisdictions which overlap the property.
Source: Property Tax Rates and Assessed Values, Arizona Tax Research Association and Assessor and Finance Department of the County.
B-8 TABLE 8A
Net Limited Assessed Property Value by Property Classification (a) Phoenix Union High School District No. 210
2017/18 2016/17 2015/16
Commercial, industrial, utilities and mines$ 2,647,217,693 $ 2,496,892,220 $ 2,472,519,471 Agricultural and vacant 143,531,692 114,259,017 122,299,087 Residential (owner occupied) 1,141,229,736 1,047,676,049 1,001,242,479 Residential (rental) 686,277,568 619,525,092 560,758,747 Railroad 13,404,807 12,945,652 14,080,493 Historical property 39,065,474 36,807,018 35,270,684 Certain Government property improvements 459,140 462,283 336,930 Totals (b) $ 4,671,186,110 $ 4,328,567,331 $ 4,206,507,891
(a) Determined by Net Limited Assessed Property Value. See “PROPERTY TAXES – Limited Property Value” and – “Secondary Taxes” herein for a discussion of the use of Net Limited Assessed Property Value for fiscal years 2015/16 and thereafter.
(b) Totals may not add up due to rounding.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue.
TABLE 8B
Net Full Cash Assessed Value by Property Classification (a) Phoenix Union High School District No. 210
2014/15 2013/14
Commercial, industrial, utilities and mines$ 2,545,646,329 $ 2,522,664,418 Agricultural and vacant 128,393,312 140,926,775 Residential (owner occupied) 1,053,311,949 933,997,283 Residential (rental) 588,428,276 442,023,929 Railroad 15,217,775 13,816,999 Historical property 40,746,275 34,529,521 Certain Government property improvements 318,210 106,352 Totals (b) $ 4,372,062,126 $ 4,088,065,277
(a) Determined by Net Full Cash Assessed Value. See “PROPERTY TAXES – Limited Property Value” and – “Secondary Taxes” herein for a discussion of the use of Net Full Cash Assessed Value for fiscal years prior to 2015/16.
(b) Totals may not add up due to rounding.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue.
B-9 TABLE 9
2017/18 Net Limited Assessed Property Value of Major Taxpayers Phoenix Union High School District No. 210
As % of 2017/18 2017/18 Net Limited Net Limited Assessed Assessed Major Taxpayer (a) Property Value Property Value
Arizona Public Service Company $ 177,609,899 3.80 % Southwest Gas Corporation (T&D) 62,664,408 1.34 Grand Canyon Education Inc 52,526,885 1.12 CenturyLink (b) 34,256,280 0.73 Esplanade Owner LP 28,109,513 0.60 Phoenix Plaza Pt LLC 23,009,533 0.49 Apollo Group Inc (Lease) 22,564,091 0.48 AT&T Mobility LLC 21,570,003 0.46 AGP Arizona Center Owner LLC 20,039,922 0.43 Verizon Wireless 17,929,408 0.38 $460,279,942 9.85 %
(a) Some of such taxpayers or their parent corporations are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith file reports, proxy statements and other information with the Securities and Exchange Commission (the “Commission”). Such reports, proxy statements and other information (collectively, the “Filings”) may be inspected, copied and obtained at prescribed rates at the Commission’s public reference facilities at 100 F Street, N.E., Washington, D.C. 20549-2736. In addition, the Filings may also be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. The Filings may also be obtained through the Internet on the Commission’s EDGAR data base at http://www.sec.gov. No representative of the District, the Financial Advisor, the Underwriters, Bond Counsel or counsel to the Underwriters has examined the information set forth in the Filings for accuracy or completeness, nor does any such representative assume responsibility for the same.
(b) Formerly known as Qwest Corporation.
Source: The Assessor of the County.
B-10 TABLE 10A
Comparative Net Limited Assessed Property Values (a)
Phoenix Union High Fiscal School District City of Maricopa State of Year No. 210 Phoenix County Arizona
2017/18$ 4,671,186,110 $ 11,721,385,399 $ 38,251,891,249 $ 59,406,279,473 2016/17 4,328,567,331 10,982,150,871 36,135,494,474 56,589,592,481 2015/16 4,206,507,891 10,577,031,724 34,623,670,323 54,838,548,829
(a) Determined by Net Limited Assessed Property Value. See “PROPERTY TAXES – Limited Property Value” and – “Secondary Taxes” herein for a discussion of the use of Net Limited Assessed Property Value for fiscal years 2015/16 and thereafter.
Source: Property Tax Rates Assessed Values, Arizona Tax Research Association.
TABLE 10B
Comparative Net Full Cash Assessed Values (a)
Phoenix Union High Fiscal School District City of Maricopa State of Year No. 210 Phoenix County Arizona
2014/15$ 4,372,062,126 $ 10,818,634,186 $ 35,079,646,593 $ 55,352,051,074 2013/14 4,088,065,277 9,974,713,171 32,229,006,810 52,594,377,492
(a) Determined by Net Full Cash Assessed Value. See “PROPERTY TAXES – Limited Property Value” and – “Secondary Taxes” herein for a discussion of the use of Net Full Cash Assessed Value for fiscal years prior to 2015/16.
Source: Property Tax Rates and Assessed Values, Arizona Tax Research Association.
B-11 TABLE 11
Estimated Net Full Cash Value History Phoenix Union High School District No. 210
Estimated Fiscal Net Full Cash Year Valuation (a)
2017/18 $ 46,993,900,817 2016/17 41,628,583,145 2015/16 36,303,450,948 2014/15 30,096,255,546 2013/14 27,186,196,141
(a) Estimated Net Full Cash Value is the total market value of the property within the District less the estimated Full Cash Value of property exempt from taxation within the District.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue.
DIRECT AND OVERLAPPING BONDED INDEBTEDNESS
TABLE 12
Current Year Statistics (For Fiscal Year 2017/18) Phoenix Union High School District No. 210
Total General Obligation Bonds Outstanding and to be Outstanding $ 412,040,000 *(a) Net Limited Assessed Property Value 4,671,186,110 Net Full Cash Assessed Value 6,357,545,024 Estimated Net Full Cash Value 46,993,900,817
The District’s preliminary fiscal year 2018/19 Net Full Cash Assessed Value is estimated at $7,001,735,312, a change of approximately 10.13% from the fiscal year 2017/18 Net Full Cash Assessed Value. The District’s preliminary fiscal year 2018/19 Net Limited Assessed Property Value is estimated at $4,965,898,777, a change of approximately 6.31% from the fiscal year 2017/18 Net Limited Assessed Property Value. The District’s preliminary fiscal year 2018/19 Estimated Net Full Cash Value is estimated at $52,162,902,091, a change of approximately 11.00% from the fiscal year 2017/18 Estimated Net Full Cash Value. The values are subject to positive or negative adjustments until approved by the Board of Supervisors of the County on or before August 20, 2018.
* Subject to change.
(a) Includes the Bonds. See footnote (b) to TABLE 14 for a description of the treatment of certain proceeds of the Bonds for State voter authorization and debt limit purposes.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue, Property Tax Rates and Assessed Values, Arizona Tax Research Association and the Assessor of the County.
B-12 TABLE 13
Direct General Obligation Bonded Debt Outstanding and to be Outstanding Phoenix Union High School District No. 210
Final Balance Maturity Outstanding Issue Original Date and to be Series Amount Purpose (July 1) Outstanding*
2007 52,105,000$ Refunding 2020$ 26,345,000 (a) 2012A 38,000,000 School improvements 2027 38,000,000 (a) 2014C 75,000,000 School improvements 2028 68,500,000 (a) 2014 70,445,000 Refunding 2025 54,035,000 (a) 2015D 10,000,000 School improvements 2030 10,000,000 (a) 2017E 39,425,000 School improvements 2036 39,425,000 (a) 2017 26,880,000 Refunding 2025 26,880,000 (a)
Total General Obligation Bonded Debt Outstanding $ 263,185,000 Plus: The Bonds 148,855,000* (a) Total General Obligation Bonded Debt Outstanding and to be Outstanding$ 412,040,000* (b)
* Subject to change.
(a) Designated as “Class B” as described in the following paragraph.
(b) See footnote (b) to TABLE 14 for a description of the treatment of certain proceeds of the Bonds for state authorization and debt limit purposes.
Constitutional / Statutory Debt Limit / Unused Borrowing Capacity after Bond Issuance Phoenix Union High School District No. 210
Arizona school district general obligation bonds are subject to two limits: the constitutional debt limit on all general obligation bonds and the statutory debt limit on Class B bonds. Net Full Cash Assessed Value is used as the basis for determining the debt limits of the District. “Class B” designates, for the purpose of this statutory limit, those bonds authorized at elections held after December 31, 1998. The security and source of payment for Class B bonds is the same as Class A bonds (those authorized at elections held prior to December 31, 1998 or bonds issued to refund those bonds). TABLE 14 shows the unused constitutional capacity and TABLE 15 shows the unused Class B statutory capacity after issuance of the Bonds.
B-13 TABLE 14
2017/18 Arizona Constitutional Debt Limitation (15% of Net Full Cash Assessed Value) $953,631,753) Less: Class B Bonds Outstanding and to be Outstanding (a) (412,040,000)* Less: Original Issue Premium (b) (29,810,000) Unused Constitutional Borrowing Capacity $511,781,753)*
* Subject to change.
(a) Includes the Bonds.
(b) This amount represents premium on the District’s School Improvement Bonds, Project of 2015, Series E (2017) (the “Project Bonds”), Refunding Bonds, Series 2017 (the “Refunding Bonds”), and the Bonds, which has been or will be deposited into the Bond Building Fund of the District in the case of the Project Bonds and the Bonds for project cost use or which was deposited in escrow for the redemption of other bonds of the District in the case of the Refunding Bonds and such amount reduces in equal amount the borrowing capacity of the District under State statutes and the Arizona Constitution and, to the extent of such premium associated with the Project Bonds and the Bonds, the principal amount of school improvement bonds authorized at the Elections (as described under the heading “THE BONDS – Authorization and Purpose”). Such capacity (but not authorization) will be recaptured as premium is amortized.
TABLE 15
2017/18 Statutory Limitation on Bonds [Greater of 10% of the Net Full Cash Assessed Value ($635,754,502) or $1,500 per student ($40,500,000)] $635,754,502) Less: Class B Bonds Outstanding and to be Outstanding (a) (412,040,000) * Less: Original Issue Premium (b) (29,810,000) Unused Statutory Borrowing Capacity $193,904,502) *
* Subject to change.
(a) Includes the Bonds.
(b) See footnote (b) to TABLE 14 for a description of the treatment of certain proceeds of the Bonds for debt limit purposes.
B-14 TABLE 16
Direct and Overlapping General Obligation Bonded Debt Phoenix Union High School District No. 210
General Proportion Applicable Obligation to the District (a) Bonded Approximate Net Debt Overlapping Jurisdiction Debt (b) Percent Amount
State of Arizona None 7.86% None
Maricopa County None 12.21 None Maricopa County Community College District $ 445,570,000 12.21$ 54,404,097 Maricopa County Special Health Care District 112,000,000 12.21 13,675,200
City of Phoenix 1,201,405,000 38.35 460,738,818 City of Scottsdale 572,795,000 0.31 1,775,665 Town of Paradise Valley None 6.83 None
Phoenix Elementary School District No. 1 54,095,000 100.00 54,095,000 Riverside Elementary School District No. 2 42,465,000 100.00 42,465,000 Isaac Elementary School District No. 5 None 100.00 None Wilson Elementary School District No. 7 4,875,000 100.00 4,875,000 Osborn Elementary School District No. 8 43,175,000 (c) 100.00 43,175,000 Creighton Elementary School District No. 14 38,105,000 100.00 38,105,000 Murphy Elementary School District No. 21 8,995,000 100.00 8,995,000 Balsz Elementary School District No. 31 11,850,000 100.00 11,850,000 Madison Elementary School District No. 38 94,345,000 100.00 94,345,000 Laveen Elementary School District No. 59 20,430,000 100.00 20,430,000 Roosevelt Elementary School District No. 66 62,010,000*(d) 100.00 62,010,000 Alhambra Elementary School District No. 68 15,000,000*(e) 100.00 15,000,000 Cartwright Elementary School District No. 83 22,980,000 100.00 22,980,000
Western Maricopa Education Center (West-MEC) 138,655,000 1.57 2,176,884
Phoenix Union High School District No. 210 (f) 412,040,000**100.00 412,040,000
Net Direct and Overlapping General Obligation Bonded Debt $1,363,135,663*
* Subject to change.
(a) Proportion applicable to the District is computed on the ratio of Net Limited Assessed Property Value for 2017/18.
(b) Includes total stated principal amount of general obligation bonds outstanding. Does not include outstanding principal amount of certificates of participation, revenue obligations or loan obligations outstanding for the jurisdictions listed above. Does not include outstanding principal amounts of various County and City improvement districts, as the bonds of these districts are presently being paid from special assessments against property within the various improvement districts.
B-15 (c) Osborn Elementary School District No. 8 intends to issue general obligation bonds in an aggregate principal amount of up to $25 million in April 2018.
(d) Roosevelt Elementary School District No. 66 intends to issue general obligation bonds in an aggregate principal amount of up to $20 million in May 2018.
(e) Alhambra Elementary School District No. 68 intends to issue general obligation bonds in an aggregate principal amount of up to $15 million in May 2018.
Does not include presently authorized but unissued general obligation bonds of such jurisdictions which may be issued in the future as indicated in the following table. Additional bonds may also be authorized by voters within overlapping jurisdictions pursuant to future elections.
General Obligation Bonds Overlapping Jurisdiction Authorized but Unissued
Maricopa Community College District $ 3,000 Maricopa Special Health Care District 754,000,000 City of Glendale 335,540,054 City of Phoenix 152,355,000 City of Scottsdale 265,774,516 Phoenix Elementary School District No. 1 24,500,000 Riverside Elementary School District No. 2 22,904,036 Osborn Elementary School District No. 8 (c) 25,000,000 Creighton Elementary School District No. 14 60,0000,000 Murphy Elementary School District No. 21 2,015,000 Madison Elementary School District No. 38 25,460,623 Laveen Elementary School District No. 59 34,520,000 Roosevelt Elementary School District No. 66 (d) 15,000,000* Alhambra Elementary School District No. 68 (e) 15,000,000* Western Maricopa Education Center 61,000,000 Phoenix Union High School District No. 210 (f) 149,000,000*
* Subject to change.
Also does not include the obligation of the Central Arizona Water Conservation District (“CAWCD”) to the United States Department of the Interior (the “Department of the Interior”), for repayment of certain capital costs for construction of the Central Arizona Project (“CAP”), a major reclamation project that has been substantially completed by the Department of the Interior. The obligation is evidenced by a master contract between CAWCD and the Department of the Interior. In April 2003, the United States and CAWCD agreed to settle litigation over the amount of the construction cost repayment obligation, the amount of the respective obligations for payment of the operation, maintenance and replacement costs and the application of certain revenues and credits against such obligations and costs. Under the agreement, CAWCD’s obligation for substantially all of the CAP features that have been constructed so far will be set at $1.646 billion, which amount assumes (but does not mandate) that the United States will acquire a total of 667,724 acre feet of CAP water for federal purposes. The United States will complete unfinished CAP construction work related to the water supply system and regulatory storage stages of CAP at no additional cost to CAWCD. Of the $1.646 billion repayment obligation, 73% will be interest bearing and the remaining 27% will be non-interest bearing. These percentages will be fixed for the entire 50-year repayment period, which commenced October 1, 1993. CAWCD is a multi-county water conservation district having boundaries coterminous with the exterior boundaries of Arizona’s Maricopa, Pima and Pinal Counties. It was formed for the express purpose of paying administrative costs and expenses of the CAP and to assist in the repayment to the United States of the CAP capital costs. Repayment will be made from a combination of power revenues, subcontract revenues (i.e., agreements with municipal, industrial and agricultural water users for delivery of CAP water) and a tax levy against all taxable property within CAWCD’s boundaries. At the date of this Official Statement, the tax
B-16 levy is limited to 14 cents per $100 of Net Limited Assessed Property Value, of which 14 cents is being levied. (See Sections 48-3715 and 48-3715.02, Arizona Revised Statutes.) There can be no assurance that such levy limit will not be increased or removed at any time during the life of the contract.
(f) Includes the Bonds.
Source: The various entities, Property Tax Rates and Assessed Values, Arizona Tax Research Association, State and County Abstract of the Assessment Roll, Arizona Department of Revenue and the Finance Department and Assessor of the County.
* Subject to change. TABLE 17
Direct and Overlapping General Obligation Bonded Debt Ratios Phoenix Union High School District No. 210
As % of As % of Per Capita District’s District’s Bonded Debt 2017/18 2017/18 Population Net Limited Estimated Estimated Assessed Net Full @ 725,370 Property Value Cash Value
Net Direct General Obligation Bonded Debt (a)* $ 568.04 8.82% 0.88% Net Direct and Overlapping General Obligation Debt (a)* 1,879.23 29.18 2.90
* Subject to change.
(a) Includes the Bonds.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue, Property Tax Rates and Assessed Values, Arizona Tax Research Association and the District.
Other Obligations Phoenix Union High School District No. 210
The District is obligated to pay certain rental payments pursuant to a Taxable QSCB Equipment Lease/Purchase Agreement (the “2014 Energy Equipment Lease/Purchase Agreement”), dated July 16, 2014, by and between the District, as lessee, and JPMorgan Chase Bank N.A., as lessor. In accordance with the 2014 Energy Equipment Lease/Purchase Agreement, the District will lease and acquire certain energy efficiency improvements for various District facilities. The initial acquisition value of the energy efficiency improvements is $8,930,000. The rental payments owed by the District under the 2014 Energy Equipment Lease/Purchase Agreement are subject to annual appropriation by the District from funds budgeted during the District’s then current fiscal year. The District’s rental payments are scheduled to be paid through June 1, 2024, but may be prepaid according to a prepayment schedule in the 2014 Energy Equipment Lease/Purchase Agreement starting June 1, 2017.
The District is also obligated to pay certain rental payments pursuant to a Taxable QSCB and Tax-Exempt Equipment Lease/Purchase Agreement (the “2015 Energy Equipment Lease/Purchase Agreement”), dated April 30, 2015, by and between the District, as lessee, and JPMorgan Chase Bank N.A., as lessor. In accordance with the 2015 Energy Equipment Lease/Purchase Agreement, the District will lease and acquire certain energy efficiency improvements for various District facilities. The initial acquisition value of the energy efficiency improvements is $4,100,000. The rental payments owed by the District under the 2015 Energy Equipment Lease/Purchase Agreement are subject to annual appropriation by the District from funds budgeted during the District’s then current
B-17 fiscal year. The District’s rental payments are scheduled to be paid through June 1, 2024, but may be prepaid according to a prepayment schedule in the 2015 Energy Equipment Lease/Purchase Agreement starting June 1, 2018.
DISTRICT EMPLOYEE RETIREMENT SYSTEM
Retirement Plan
The District’s employees are covered by the Arizona State Retirement System (the “System”), a cost-sharing, multiple-employer defined benefit plan. The annual contribution rates are determined by the System’s actuary, with minimum employer and employee rate requirements of not less than 2.00%. For fiscal year 2018/19, the District’s and its employees’ annual contribution is 11.80% (11.64% Retirement Pension and Health Insurance Benefit, 0.16% Long Term Disability Income Plan) of payroll amounts. For fiscal year 2017/18, the District’s and its employees’ respective annual contribution is estimated to be 11.50% (11.34% Retirement Pension and Health Insurance Benefit, 0.16% Long Term Disability Income Plan) of payroll amounts. See Note 4 in APPENDIX C – “THE DISTRICT – AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2017” for further discussion of the District and its employees’ obligations to the System as of June 30, 2017.
The System’s actuarially assumed rate of return is 8%. The most recent actuarial valuations for the System may be accessed at: https://www.azasrs.gov/content/annual-reports.
The Governmental Accounting Standards Board adopted Governmental Accounting Standards Board Statement Number 68, Accounting and Financial Reporting for Pensions (“GASB 68”), which, beginning with fiscal years starting after June 15, 2014, requires cost-sharing employers to report their “proportionate share” of the plan’s net pension liability in their government-wide financial statements. GASB 68 will also require that the cost-sharing employer’s pension expense component include its proportionate share of the System’s pension expense, the net effect of annual changes in the employer’s proportionate share and the annual differences between the employer’s actual contributions and its proportionate share. Both the District and each covered employee contribute to the System. As of June 30, 2017, the District reported a liability of $276,111,256 for its proportionate share of the net pension liability under the System. The pension liability was measured as of June 30, 2016. See Note 4 in APPENDIX C – “THE DISTRICT – AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2017” for further discussion of the District and its pension liability as of June 30, 2017.
Other Post-Employment Benefits
Pursuant to Governmental Accounting Standards Board Statement Number 45, Accounting by Employers for Post- Employment Benefits Other than Pensions (“GASB 45”), the District is required to report the actuarially accrued cost of post-employment benefits, other than pension benefits (“OPEB”), such as health and life insurance for current and future retirees. GASB 45 requires that such benefits be recognized as current costs over the working lifetime of employees and, to the extent such costs are not pre-funded, will require the reporting of such costs as a financial statement liability.
The District currently provides OPEBs (health and life) to qualifying retirees and their dependents in accordance with the District’s Early Retirement Program (the “Program”). The Program is a single-employer defined benefit plan administered by the District and was discontinued for employees hired after July 2009.
B-18 Prior to July 1, 2011, to be eligible, a retiree must have served at least 10 consecutive years before entering the Program and must have reached the age of 50. For each eligible retiree, the District makes yearly contributions until the end of the school year in which the retiree reaches the age of 65. For the fiscal year ended June 30, 2017, the District contributed $2,471,616 to the Program. As of June 30, 2017, the District had the following number of participants:
Participants
Active employees 1,641 Retirees receiving benefits 413 Total 2,054
The District currently pays for OPEBs on a pay-as-you-go basis. Additionally, as allowed by Arizona Revised Statutes Section 15-1225, the District established an OPEB fund and deposited $3,000,000 for the accumulated liability of retiree benefits. The monies in this fund have been designated by the Governing Board of the District and will be used for future benefit payments.
As of June 30, 2017, the effective date of the biannual OPEB valuation, the annual required contribution of the District was as follows:
Annual required contribution $ 6,305,169 Interest on net OPEB obligation 1,072,760 Adjustment to annual required contribution (1,778,411) Annual OPEB cost/(expense) 5,599,518 Contributions made (2,471,616) Increase in net OPEB obligation 3,127,902 Net OPEB obligation – beginning of year 23,839,110 Net OPEB obligation – end of year $ 26,967,012
As of July 1, 2011, the Program was amended as follows: employees who retire after June 30, 2011 with less than 15 years or more of District employment at June 30, 2010 will be responsible for 25% of the lowest cost monthly plan of the System. The District will only subsidize 75% of such costs.
For the fiscal year ended June 30, 2017, the District contributed 47% to the annual OPEB cost.
Source: Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017 of the District.
REVENUES AND EXPENDITURES
The following information of the District was derived from the annual expenditure budget of the District for fiscal year 2017/18, and the audited financial statements of the District for fiscal years 2012/13 through and including 2016/17. (State law does not require school districts to file revenue budgets.) Budgeted figures for fiscal year 2017/18 are on a cash basis and are presented in the format required by State law. Budgeted figures for fiscal year 2017/18 are “forward looking” statements that may not be realized during the course of the fiscal year as presented herein and thus must be viewed with an abundance of caution. Audited figures for fiscal years 2012/13 through and including 2016/17 are on a modified accrual basis. The presentation which follows has not been independently subject to any audit procedures.
Such audited financial statements are the most recent available for the District, are not current and therefore must be considered with an abundance of caution. The District has not requested the consent of CliftonLarsonAllen LLP to include its report and CliftonLarsonAllen LLP has performed no procedures subsequent to rendering its report on the financial statements.
B-19 TABLE 18
General Fund Phoenix Union High School District No. 210
Budgeted Audited 2017/18 2016/17 2015/16 2014/15 2013/14 2012/13
FUND BALANCE AT BEGINNING OF YEAR $ 73,703,004 $ 36,460,514 $ 38,820,384 $ 34,804,772 $ 37,413,549 REVENUES Property taxes $ 177,472,082 $ 158,560,328 $ 149,566,303 $ 152,867,016 $ 149,373,728 Intergovernmental 71,784,585 - - - - Tuition 196,353 - - - - Charges for services 499,479 - - - - Contributions and donations 367,219 - - - - Investment earnings 414,525 - - - - State aid and grants - 63,454,913 57,258,279 53,361,302 45,067,876 Fedral aid, grants and reimbursements - 1,224,280 1,193,360 518,262 548,178 Other 2,988,310 8,687,437 8,510,823 7,754,659 7,694,561 TOTAL REVENUES $ 253,722,553 $ 231,926,958 $ 216,528,765 $ 214,501,239 $ 202,684,343
ADJUSTMENTS Transfers in $ 1,695,974 $ 2,080,166 $ 2,801,208 $ 1,671,841 $ 1,711,075 Transfers out (1,645,907) - (2,000,000) (5,885,901) - Increase/(decrease) in reserve for inventory (170,517) (122,532) 70,480 17,891 (10,219) Increase/(decrease) in reserve for prepaid items - (1,469,357) (1,478,189) 617,620 (2,972,846) Fund reclassification (a) - 34,490,880 - - - TOTAL FUNDS AVAILABLE FOR EXPENDITURES $ 327,305,107 $ 303,366,629 $ 254,742,648 $ 245,727,462 $ 238,825,902
EXPENDITURES Current Instruction $ 107,316,009 $ 136,581,658 $ 123,216,772 $ 119,132,373 $ 112,461,884 $ 112,060,492 Support services: Students and instructional staff 23,413,258 35,201,547 33,062,596 31,330,064 30,114,946 29,814,846 General and school administration 11,058,798 18,196,913 23,901,711 19,900,587 17,465,932 16,753,800 Business and central 5,993,769 9,432,842 - - - - Operation & maintenance of plant services 29,921,621 42,756,621 35,099,462 35,441,408 33,969,687 33,204,407 Student transportation 9,228,451 10,961,231 11,984,383 10,856,414 11,508,781 10,196,090 Operation of noninstructional services 1,206,809 1,941,989 1,794,280 1,554,171 1,349,336 1,199,401 Capital outlay - - 604,421 67,117 36,512 792,094 School sponsored cocurricular 994,183 - - - - - School sponsored athletics 3,990,529 - - - - - Dropout prevention programs 2,249,000 - - - - - Desegregation 55,800,892 - - - - - Facilities acquisition - 104,852 - - - - Other - 189,456 - - - - TOTAL EXPENDITURES $ 251,173,319 $ 255,367,109 $ 229,663,625 $ 218,282,134 $ 206,907,078 $ 204,021,130
FUND BALANCE AT END OF YEAR $ 71,937,998 $73,703,004 $ 36,460,514 $ 38,820,384 $ 34,804,772
(a) See Note 3.E. of the District’s Comprehensive Report for the Fiscal Year Ended June 30, 2017.
B-20 TABLE 19
Other Governmental Funds Phoenix Union High School District No. 210
Budgeted Audited 2017/18 2016/17 2015/16 2014/15 2013/14 2012/13
FUND BALANCE AT BEGINNING OF YEAR $ 41,003,528 $ 113,479,068 $ 139,032,885 $ 89,779,700 $ 55,851,685 REVENUES Property taxes $ 131,090 $ 5,832,590 $ 6,234,584 $ 1,723,046 $ 141,678 Intergovernmental 48,494,060 49,608,343 47,907,922 47,634,033 49,866,163 Food service sales 765,758 - - - - Charges for services 1,007,525 - - - - Contributions and donations 381,234 - - - - Investment earnings 88,114 - - - - Other local 332,156 4,302,889 3,859,276 3,600,372 3,947,433 TOTAL REVENUES $ 51,199,937 $ 59,743,822 $ 58,001,782 $ 52,957,451 $ 53,955,274
ADJUSTMENTS Transfers in $ 1,645,907 $ - $ 2,000,000 $ 5,885,901 $ - Transfers out (1,695,974) (2,384,618) (3,585,212) (5,061,567) (3,661,893) Capital lease agreements - - 13,030,000 - - Issuance of school improvement bonds 39,425,000 - 10,000,000 75,000,000 50,000,000 Premium on sale of bonds 5,747,743 - 499,395 3,448,451 1,937,530 Increase (decrease) in reserve for inventory (63,361) (69,828) 127,342 (96,135) 40,481 Fund reclassification (a) - (38,251,434) - - - TOTAL FUNDS AVAILABLE FOR EXPENDITURES $ 137,262,780 $ 132,517,010 $ 219,106,192 $ 221,913,801 $ 158,123,077
EXPENDITURES Current Instruction $ 85,470,080 $ 30,662,018 $ 25,040,699 $ 24,537,486 $ 23,614,745 $ 23,200,166 Support services: Students and instructional staff 1,279,062 11,327,908 10,380,329 9,336,778 9,387,424 9,079,268 General and school administration 6,464,084 188,981 507,387 483,128 623,449 554,458 Business and central - 1,280,480 Operation & maintenance of plant services 3,482,323 745,109 405,711 379,041 1,002,118 693,749 Student transportation 245,000 1,603,352 203,978 215,735 243,511 191,001 Operation of non-instructional services - 11,636,736 9,949,492 9,458,089 8,891,162 8,894,830 Food service 15,000,000 - - - - - Auxiliary operations 1,845,569 - - - - - Other 38,393,724 - - - - - Facilities, acquisition & construction - 20,220,638 - - - - Capital outlay 3,000,000 - 43,659,430 60,768,764 38,759,602 25,425,982 Debt service: Interest and fiscal charges - 678,537 441,308 271,919 - - Principal retirement - 1,428,036 925,148 - - - Bond issuance costs - 293,493 - 176,184 358,905 303,923 TOTAL EXPENDITURES $ 155,179,842 $ 80,065,288 $ 91,513,482 $ 105,627,124 $ 82,880,916 $ 68,343,377
FUND BALANCE AT END OF YEAR $ 57,197,492 $ 41,003,528 $ 113,479,068 $ 139,032,885 $ 89,779,700
(a) See Note 3.E. of the District’s Comprehensive Report for the Fiscal Year Ended June 30, 2017.
B-21 TABLE 20
Debt Service Fund Phoenix Union High School District No. 210
Budgeted Audited 2017/18 2016/17 2015/16 2014/15 2013/14 2012/13
FUND BALANCE AT BEGINNING OF YEAR $ 1,802,583 2,322,212$ 7,151,636$ $ 3,485,145 2,238,861$ REVENUES Property taxes $ 34,308,118 $ 35,869,526 32,000,711$ $ 34,118,788 $ 35,288,573 Investment Earnings 335,066 -- - - Other - 14,971 25,636 14,278 34,593 TOTAL REVENUES $ 34,643,184 $ 35,884,497 32,026,347$ $ 34,133,066 $ 35,323,166
ADJUSTMENTS Transfers in $ - $ 304,452 784,004$ $ 3,389,726 1,950,818$ Issuance of long-term debt 26,880,000 -- - - Premium on issuance of long-term debt 3,907,197 - - - - Issuance of refunding bonds - - - 70,445,000 - Premium on sale of bonds - - - 6,233,323 - Payment to refunded bond escrow agent (30,544,660) - - (75,823,554) - EXPENDITURES $ 36,688,304 $ 38,511,161 39,961,987$ $ 41,862,706 $ 39,512,845
EXPENDITURES Debt service: $35,560,169 Principal retirement $ 28,635,000 $ 26,565,000 26,710,000$ $ 25,965,000 $ 25,110,000 Interest, premium and fiscal charges 5,484,048 10,143,578 10,929,775 8,432,813 10,917,700 Bond issuance costs 248,862 - - 313,257 - TOTAL EXPENDITURES $ 35,560,169 $ 34,367,910 $ 36,708,578 $37,639,775 $ 34,711,070 $ 36,027,700
FUND BALANCE AT END OF YEAR $ 2,320,394 $21,802,583 $7,322,212$ ,151,636$ 3,485,145
Pending Litigation Against State Regarding Distribution of Proposition 123 Funds
In 1910, Congress enacted an Enabling Act (the “Arizona Enabling Act”) in connection with Arizona’s statehood pursuant to which a state land trust (the “Trust”) was established for the benefit of schools and other education institutions. Investments for amounts in the Trust and the formulae for the distribution of funds from the Trust are governed by the Arizona Enabling Act, the Arizona Constitution and related laws. In May 2016, Arizona voters approved a State constitutional amendment (generally referred to as “Proposition 123”), which provided for certain increased fixed annual payments to Arizona school districts from the Trust during fiscal years 2015/16 through 2024/25. After voter approval of Proposition 123, a lawsuit was filed in federal district court against the State, seeking to enjoin the spending of money from the Trust in the manner provided by Proposition 123, alleging it is in violation of the Arizona Enabling Act. On March 26, 2018, the court generally upheld the Plaintiff’s position on such increased distributions, but narrowed the Plaintiff’s claims to Proposition 123 payments made from the Trust during 2016 and 2017, acknowledging that March 23, 2018 federal legislation validated such distributions after that date. The court’s order raises the question as to whether “excess” distributions from the State K-12 permanent fund (which is funded by the Trust) during 2016 and 2017, prior to congressional consent to the amendments to the State constitution effected by Proposition 123, are validated as an allowable State revenue source. The District is not a party to the litigation and cannot predict what the ultimate outcome may be or whether a portion of amounts received by the District from Proposition 123 distributions would be required to be repaid by the District or by the State or whether any future distributions might be withheld. The District does not believe the outcome will have a material adverse impact on the District’s operations or the ability to pay debt service on its bonds, including the Bonds.
B-22 APPENDIX C
THE DISTRICT
AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2017
The following audited financial statements are for the fiscal year ended June 30, 2017. These are the most recent audited financial statements available to the District. THESE FINANCIAL STATEMENTS ARE NOT CURRENT AND MAY NOT REPRESENT THE CURRENT FINANCIAL CONDITION OF THE DISTRICT.
Such audited financial statements are the most recent available for the District, are not current and therefore must be considered with an abundance of caution. The District has not requested the consent of CliftonLarsonAllen LLP to include its report and CliftonLarsonAllen LLP has performed no procedures subsequent to rendering its report on the financial statements. [THIS PAGE INTENTIONALLY LEFT BLANK] CliftonLarsonAllen LLP CLAconnect.com
INDEPENDENT AUDITORS’ REPORT
Governing Board Phoenix Union High School District No. 210 Phoenix, Arizona
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 Phoenix Union High School District No. 210 (District), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the 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.
Auditors’ 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 auditors’ 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 District’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 District’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.
(12) Governing Board Phoenix Union High School District No. 210
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 Phoenix Union High School District No. 210 as of June 30, 2017, 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.
Emphasis of a Matter During the year ended June 30, 2017, fund balance was restated in the General Fund and Nonmajor Governmental Funds, and net position in the Governmental Activities and Internal Service Fund for corrections of errors (see Note 3.E.). Our auditors’ opinion was not modified with respect to the restatement.
Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, other postemployment benefit information, pension schedules and budgetary comparison information for the General Fund, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a 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 an 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 and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The combining and individual nonmajor fund financial statements and schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate 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 combining and individual nonmajor fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
(13) Governing Board Phoenix Union High School District No. 210
The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 29, 2018, on our consideration of the 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 result of that testing, and not to provide an opinion on the effectiveness of the 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 the District’s internal control over financial reporting and compliance. !
CliftonLarsonAllen LLP
Phoenix, Arizona January 29, 2018
(14) THIS PAGE INTENTIONALLY LEFT BLANK PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
As management of the Phoenix Union High School District No. 210 (District), we offer the readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2017. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report.
Financial Highlights ! The assets and deferred outflows of resources of the District exceeded the liabilities and deferred inflows of resources at the close of the fiscal year by $82.5 million. ! The District’s total net position increased by $2.3 million. This was largely due to an increase in property tax revenue and operating grants. ! As of the close of the current fiscal year, the District’s governmental funds reported combined ending fund balances of $131.5 million, an increase of $14.9 million in comparison with the prior year. ! At the end of the fiscal year, unassigned fund balance for the General Fund was $71.0 million. ! The District’s bonded debt increased by a net $17.9 million (6.2%) during the current fiscal year. The increase was due to the issuance of $39.4 million of school improvement bonds and $26.9 million in refunding bonds, at a total premium of $9.7 million. The increase was offset by regularly scheduled principal payments and refunded debt.
Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances, in a manner similar to a private-sector business.
The statement of net position presents information on all of the District’s assets, deferred outflows of resources, liabilities, and deferred inflow of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as useful indicators of whether the financial position of the District is improving or deteriorating.
The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
(15) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
The government-wide financial statements present functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the District include instruction, support services, operation, and maintenance of plant services, student transportation services, operation of noninstructional services, and interest on long- term debt.
The government-wide financial statements can be found immediately following this MD&A.
Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The District maintains ten individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, Bond Building Fund, and Debt Service Fund, all of which are considered to be major funds. Data from the other seven governmental funds are combined into a single, aggregated presentation.
An operating budget for expenditures is prepared and adopted by the District each fiscal year for the General, Special Revenue, Debt Service, and Capital Projects Funds. Budgetary control is ultimately exercised at the fund level. Budgetary control is maintained through the use of periodic reports that compare actual expenditures against budgeted amounts. The expenditure budget can be revised annually, per Arizona Revised Statutes. The District does not adopt a revenue budget; therefore, a deficit budgeted fund balance exists in all budgeted funds. The District also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbered amounts lapse at year-end.
As demonstrated by the statements and schedules included in the financial section of this report, the District continues to meet its responsibility for sound financial management.
The basic governmental fund financial statements can be found on pages 26 - 29 of this report.
(16) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
Proprietary Fund. The District maintains one type of proprietary fund (internal service fund). The internal service fund is an accounting device used to accumulate and allocate costs among the District’s various funds. The District uses the internal service fund to account for the accumulation of resources to fund the other postemployment benefits and to fund the health care related costs of the District’s employee benefit self-insured claims. The activity is included in the government-wide financial statements and interfund activity is eliminated. The proprietary fund financial statements can be found on pages 30-32. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the District. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District’s own programs. The fiduciary funds are custodial in nature and do not present results of operations or a measurement focus. The basic fiduciary fund financial statement can be found on page 33 of this report. Notes to the basic financial statements. The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government- wide and fund financial statements. The notes to the basic financial statements can be found on pages 34 - 58 of this report. Required Supplementary Information Other Than the MD&A. The required supplementary information other than the MD&A found immediately following the notes to the financial statements include the schedule of funding progress for the other postemployment benefit plan, pension schedules, and the schedule of revenues, expenditures, and changes in fund balance – budget and actual for the General Fund. Notes to the required supplementary information follow the budgetary comparison schedules. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information other than the MD&A. Combining and individual fund statements and schedules can be found on pages 64 - 81 of this report. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis. The statistical section can be found on pages 82 - 107 of this report. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the District, assets and deferred outflows of resources were greater than liabilities and deferred inflows by $82.5 million as of June 30, 2017. By far the largest portion of the District’s net position ($224.5 million) reflects its net investment in capital assets (e.g., land, buildings, furniture, equipment, and vehicles) less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to students; consequently, these assets are not available for future spending. Although the District’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the District’s net position ($17.2 million) represents resources that are subject to external restrictions on how they may be used. The District reported a negative unrestricted net position in the current year of $159.2 million.
(17) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
A summary of changes in the District’s Statement of Net Position for the fiscal years ended June 30, 2017 and 2016 is as follows:
Governmental Activities
(Restated) Percent 2017 2016 Change Current and Other Assets $ 225,682,299 $ 187,850,824 20.1 % Capital Assets 506,475,284 504,619,869 0.4 Total Assets 732,157,583 692,470,693 5.7
Deferred Outflows of Resources 61,239,650 36,015,802 70.0
Current Liabilities 35,101,258 20,078,836 74.8 Noncurrent Liabilities 642,224,011 606,198,646 5.9 Total Liabilities 677,325,269 626,277,482 8.2
Deferred Inflows of Resources 33,602,927 22,062,942 52.3
Net Position: Net Investment in Capital Assets 224,479,170 232,892,896 (3.6) Restricted 17,202,470 20,021,602 (14.1) Unrestricted (159,212,603) (172,768,427) 7.8 Total Net Position $ 82,469,037 $ 80,146,071 2.9
At the end of the current fiscal year, the District was able to report positive balances in the net investment in capital assets and restricted net position categories. Net investment in capital assets decreased 3.6%. The decrease was the net effect of an increase in capital asset acquisitions and a related increase in outstanding debt related to the issuance of school improvement bonds and refunding bonds. Capital asset additions are discussed later in this MD&A. Restricted net position decreased 14.1% largely due to the use of restricted net position for classroom site and food service operations. Unrestricted net position increased 7.8% largely due to an increase in general revenues discussed on the following pages.
(18) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
Overall, net position of the District increased $2.9 million. Key elements of this increase are presented in the following Condensed Statement of Changes in Net Position for the fiscal years ended June 30, 2017 and 2016:
Governmental Activities (Restated) Percent 2017 2016 Change REVENUES Program Revenues: Charges for Services $ 3,348,739 $ 6,154,044 (45.6)% Operating Grants and Contributions 50,880,825 45,428,197 12.0 Capital Grants and Contributions - 3,512,819 (100.0) General Revenues: Property Taxes 215,535,973 198,647,880 8.5 Grants and Contributions Not Restricted to Specific Programs: State Equalization and Additional State Aid 69,793,162 70,333,250 (0.8) Federal Grants and Aid - 1,224,280 (100.0) Investment Earnings 888,520 781,796 13.7 Other 2,440,842 - N/A Total Revenues 342,888,061 326,082,266 5.2
EXPENSES Instruction 182,535,535 175,773,794 3.8 Support Services: Students and Instructional Staff 48,171,395 47,191,094 2.1 Administration 28,547,413 24,141,775 18.2 Operation and Maintenance of Plant 44,613,408 40,206,065 11.0 Student Transportation 13,474,897 14,379,599 (6.3) Operation of Noninstructional Services 13,797,097 12,906,454 6.9 Interest on Long-Term Debt 9,425,350 10,094,382 (6.6) Total Expenses 340,565,095 324,693,163 4.9
Change in Net Position 2,322,966 1,389,103 67.2 Net Position - Beginning of Year, as Restated 80,146,071 78,756,968 1.8 Net Position - End of Year $ 82,469,037 $ 80,146,071 2.9
Program revenues, which consist of charges for services and operating grants decreased from the prior year by $0.9 million. The decrease was due mainly to a decrease in charges for services.
General revenues increased $17.7 million from the prior year, mainly due to an increase in the current year tax levy. The tax levy increased approximately $15.1 million for a voter-approved override.
(19) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
District expenses increased over the prior year by $15.8 million (4.9%). The District issued raises averaging about 2% per employee and gave a one-time 3% bonus. The raise and bonus accounted for a $10 million increase in expenses when compared to the prior year.
Financial Analysis of the District’s Funds As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements.
Governmental funds. The focus of the District’s governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the District’s governmental funds reported combined ending fund balances of $131.5 million, an increase of $14.9 million in comparison with the prior year. Approximately 54.0% of this total amount ($71.0 million) constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remaining fund balance is either in nonspendable form or restricted to indicate that it is not available for new spending.
At fiscal year ended June 30, 2017 fund balances were as follows:
Increase (Decrease) Fund Balance From 2015-16
General Fund $ 71,937,998 $ (1,765,006) Bond Building Fund 43,143,197 18,227,334 Debt Service Fund 2,320,394 517,811 Nonmajor Governmental Funds 14,054,295 (2,033,370)
The General Fund fund balance decrease was mainly due to the increase in wage expense from the raises and one-time bonus. Offsetting the increase in payroll expense was an increase in property tax revenue of about $18.9 million.
The Bond Building Fund balance increase was due to the District issuing $39.4 million in School Improvement Bonds. A portion of proceeds from the bonds were used to purchase technology, vehicles, and building improvements.
The Debt Service Fund fund balance decreased $517,811 due to the net effect of the issuance of refunding bonds in the current year and the payment of principal and interest due on the bonds.
(20) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
The Nonmajor Governmental Funds decreased $2.0 million. The decrease was the net effect of decreases in the Classroom Site and Food Service Funds and increases in other Nonmajor funds. The Classroom site decrease of $1.7 million was due to the increase in wage expense related to the raises. The decrease in the Food Service Fund was due to the program not bringing in enough income to cover expenses, however, the decrease of $964,298 was roughly only half of the decrease in the prior year. The other Nonmajor funds had slight increases in fund balance that combined to offset the losses in Classroom Site Fund and Food Service Fund.
General Fund Budgetary Highlights
Over the course of the year, the District revised the expenditure budget of the General Fund. The difference between the original budget and the final amended budget was an increase of $1.6 million, or 0.6%. The increase can be briefly summarized as follows:
! A budget balance carryforward adjustment.
The District fell below the General Fund expenditure budget for June 30, 2017 by $7.8 million. Significant budget variances included regular education instruction falling below the budget by $13.3 million and special education instruction falling below budget by $1.2 million. These budget variances were the result of turnover in staffing and not being fully staffed for the entire year.
Capital Asset and Debt Administration
The District’s investment in capital assets for its governmental activities as of June 30, 2017, amounts to $506.5 million (net of accumulated depreciation). This investment in capital assets includes construction in progress, land, land improvements, buildings and improvements, and furniture, equipment and vehicles. The amount represents a net increase of 0.4% from the previous year. Total depreciation expense for the year was $22.8 million.
(21) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
Major capital asset events during the current fiscal year included the following:
! Expansion of technology infrastructure and computer replacements ! Purchase and implementation of new financial management and human resource management software. ! Continued replacement of campus fire alarm systems and security systems ! Continued renovation of school roofing ! Gym floors ! Culinary Arts remodels ! HVAC/EMS Systems ! Parking Lot and Restroom renovations
Capital Assets (Net) June 30, 2017 and 2016 Governmental Activities
2017 2016
Land $ 10,838,185 $ 10,753,970 Construction in Progress 7,910,544 40,293,748 Land Improvements 11,323,286 11,290,008 Buildings and Building Improvements 456,076,847 422,289,584 Furniture, Equipment, and Vehicles 20,326,422 19,992,559 Total Capital Assets, Net $ 506,475,284 $ 504,619,869
Additional information on the District’s capital assets can be found in Note 3.A.3. of this report. Long-term debt. At the end of the current fiscal year, the District had total bonded debt outstanding of $306.9 million. All this debt is backed by the full faith and credit of the District. The following is a summary the District’s June 30, 2017 and 2016 outstanding bonded indebtedness.
Outstanding Bonded Indebtedness June 30, 2017 and 2016 Governmental Activities
2017 2016
General Obligation Bonds $ 288,730,000 $ 278,960,000 Premiums on Bonds 18,200,351 10,053,585 Total Outstanding Debt $ 306,930,351 $ 289,013,585
The District’s bonded debt increased by a net amount of $17.9 million (6.2%) during the current fiscal year. The increase was due the issuance of $39.4 million in school improvement bonds and $26.9 million in refunding bonds. These increases were offset by the current year and regularly scheduled principal payments and debt balances refunded from the issuance of refunding bonds.
(22) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2017
State statutes limit the amount of bonded debt a school district may issue to 15% of its net assessed value for Class A and Class B bonded debt combined and the greater of 10% of its net assessed value or $1,500 per student count for Class B bonded debt. The current debt limitation for the District can be found on page 100. The District’s current outstanding debt was less than the legal debt limit for all bonds.
Additional information on the District’s long-term debt can be found in Note 3.D. of this report.
Economic Factors and Next Year’s Budgets and Rates
Many factors were considered by the District’s administration during the process of developing the fiscal year 2017-2018 budget. Among them:
∀ Inflation funding and Average Daily Membership. ∀ Additional funding from Proposition 123 for salaries, benefits, and one-time payments to staff. ∀ Employee salaries and employee retention. ∀ Arizona State Retirement and health insurance benefit costs. ∀ Curriculum and Instruction resource needs. ∀ Impact of current year funding.
Requests for Information
This financial report is designed to provide a general overview of the District’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Business and Finance Department, Phoenix Union High School District No. 210, 4502 North Central Avenue, Phoenix, Arizona 85012.
(23) THIS PAGE INTENTIONALLY LEFT BLANK Basic Financial Statements PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF NET POSITION JUNE 30, 2017
Governmental Activities ASSETS Cash and Investments $ 132,764,897 Restricted Cash and Investments 51,636,148 Receivables, Net: Property Taxes 16,819,090 Accounts Receivable 335,911 Intergovernmental 23,179,227 Inventory 947,026 Capital Assets: Nondepreciable 18,748,729 Depreciable, Net 487,726,555 Total Assets 732,157,583 DEFERRED OUTFLOWS OF RESOURCES Deferred Amount on Refunding 3,911,677 Deferred Outflow Related to Pensions 57,327,973 Total Deferred Outflow of Resources 61,239,650 LIABILITIES Accounts Payable 21,923,103 Accrued Wages and Benefits 9,128,880 Accrued Interest 3,999,694 Intergovernmental Payable 49,581 Noncurrent Liabilities: Due Within One Year 32,848,908 Due in More Than One Year 609,375,103 Total Liabilities 677,325,269 DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pensions 33,602,927 NET POSITION Net Investment in Capital Assets 224,479,170 Restricted for: Classroom Site 6,833,937 Instructional Improvement 379,778 Federal and State Grants 555,454 Food Services 1,678,636 Capital Projects 2,823,126 Debt Service 3,144,785 Noninstructional Services 696,398 Extracurricular Activities 938,059 Other 152,297 Unrestricted (159,212,603) Total Net Position $ 82,469,037
See accompanying Notes to the Basic Financial Statements. (24) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2017
Net (Expense) Revenue and Changes Program Revenues in Net Position
Capital Grants Charges for Operating Grants and Governmental Functions/Programs Expenses Services and Contributions Contributions Activities Primary Government: Governmental Activities: Instruction $ 182,535,535 $ 1,669,137 $ 39,116,766 $ - $ (141,749,632) Support Services: Students 30,997,054 - 3,763,135 - (27,233,919) Instructional Staff 17,174,341 - 7,013,147 - (10,161,194) General Administration 5,192,446 - 88,545 - (5,103,901) School Administration 14,246,300 - 78,910 - (14,167,390) Business and Other Support Services 9,108,667 - 486,283 - (8,622,384) Operation and Maintenance of Plant 44,613,408 - 295,256 - (44,318,152) Student Transportation 13,474,897 - 38,783 - (13,436,114) Operation of Noninstructional Services 13,797,097 1,679,602 - - (12,117,495) Interest on Long-Term Debt 9,425,350 - - - (9,425,350) Total $ 340,565,095 $ 3,348,739 $ 50,880,825 $ - (286,335,531)
General Revenues: Property Taxes 215,535,973 Grants and Contributions Not Restricted to Specific Programs State and County Equalization and Additional State Aid 69,793,162 Investment Earnings 888,520 Other 2,440,842 Total General Revenues 288,658,497 Change in Net Position 2,322,966 Net Position - Beginning of Year, As Restated 80,146,071 Net Position - End of Year $ 82,469,037
See accompanying Notes to the Basic Financial Statements. (25) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2017
General Bond Debt Fund Building Service Nonmajor Totals Assets Cash and Investments $ 62,245,171 $ - $ 31,658,352 $ 18,804,589 $ 112,708,112 Restricted Cash and Investments - 51,636,148 - - 51,636,148 Receivables: Accounts Receivable 309,647 - - 26,264 335,911 Property Taxes 15,783,893 - 1,031,127 4,070 16,819,090 Intergovernmental 21,620,944 - - 1,558,283 23,179,227 Inventories 888,155 - - 58,871 947,026
Total Assets $ 100,847,810 $ 51,636,148 $ 32,689,479 $ 20,452,077 $ 205,625,514
Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts Payable $ 9,732,079 $ 8,492,951 $ - $ 875,679 $ 19,100,709 Accrued Wages and Benefits 3,659,748 - - 5,469,132 9,128,880 Accrued Interest - - 3,999,694 - 3,999,694 Intergovernmental Payable - - - 49,581 49,581 Bonds Payable - - 25,545,000 - 25,545,000 Total Liabilities 13,391,827 8,492,951 29,544,694 6,394,392 57,823,864
Deferred Inflows of Resources: Unavailable Revenue 15,517,985 - 824,391 3,390 16,345,766
Fund Balances: Nonspendable 888,155 - - 58,871 947,026 Restricted - 43,143,197 2,320,394 13,995,424 59,459,015 Unassigned 71,049,843 - - - 71,049,843 Total Fund Balances 71,937,998 43,143,197 2,320,394 14,054,295 131,455,884
Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 100,847,810 $ 51,636,148 $ 32,689,479 $ 20,452,077 $ 205,625,514
See accompanying Notes to the Basic Financial Statements. (26) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2017
Total Fund Balances for Governmental Funds $ 131,455,884 Total net position reported for governmental activities in the statement of net position is different because: Property taxes not collected within 60 days subsequent to fiscal year-end are reported as deferred inflows of resources in the governmental funds. 15,582,293 Grant revenues and other miscellaneous revenues not collected within 60 days subsequent to fiscal year-end are reported as deferred inflows of resources in the governmental funds. 763,473 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Those assets consist of:
Governmental Capital Assets $ 854,949,863 Less: Accumulated Depreciation (348,474,579) 506,475,284
Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the funds:
Deferred Outflows of Resources Related to Pensions 57,327,973 Deferred Inflows of Resources Related to Pensions (33,602,927) 23,725,046
Long-term liabilities that pertain to governmental funds, including bonds payable and capital leases are not due and payable in the current period and, therefore, are not reported as fund liabilities. All liabilities - both current and long-term - are reported in the statement of net position.
General Obligation Bonds (263,185,000) Unamortized Premiums (18,200,351) Unamortized Deferred Amount on Refunding 3,911,677 Capital Leases (10,676,816) Net Pension Liability (276,111,253) Compensated Absences Payable (21,538,579) (585,800,322)
Internal service funds are used by management to charge the costs of insurance services and other postemployment benefits to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position (9,732,621)
Total Net Position of Governmental Activities $ 82,469,037
See accompanying Notes to the Basic Financial Statements. (27) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS FISCAL YEAR ENDED JUNE 30, 2017
General Bond Debt Fund Building Service Nonmajor Totals REVENUES Property Taxes $ 177,472,082 $ - $ 34,308,118 $ 131,090 $ 211,911,290 Intergovernmental 71,784,585 - - 48,494,060 120,278,645 Tuition 196,353 - - - 196,353 Food Service Sales - - - 765,758 765,758 Charges for Services 499,479 - - 1,007,525 1,507,004 Contributions and Donations 367,219 - - 381,234 748,453 Investment Earnings 414,525 - 335,066 88,114 837,705 Other 2,988,310 - - 332,156 3,320,466 Total Revenues 253,722,553 - 34,643,184 51,199,937 339,565,674
EXPENDITURES Current: Instruction 136,581,658 3,395,791 - 27,266,227 167,243,676 Support Services: Students 26,145,032 - - 3,892,050 30,037,082 Instructional Staff 9,056,515 530,530 - 6,905,328 16,492,373 General Administration 5,024,407 - - 86,708 5,111,115 School Administration 13,172,506 - - 102,273 13,274,779 Business and Other Support Services 9,432,842 800,925 - 479,555 10,713,322 Operations and Maintenance of Plant 42,756,621 306,417 - 438,692 43,501,730 Student Transportation 10,961,231 1,397,615 - 205,737 12,564,583 Other 189,456 - - - 189,456 Operation of Noninstructional Services 1,941,989 - - 11,636,736 13,578,725 Debt Service: Principal Retirement - - 28,635,000 1,428,036 30,063,036 Interest on Long-Term Debt - - 5,484,048 678,537 6,162,585 Issuance Costs - 293,493 248,862 - 542,355 Facilities Acquisition 104,852 20,220,638 - - 20,325,490 Total Expenditures 255,367,109 26,945,409 34,367,910 53,119,879 369,800,307
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,644,556) (26,945,409) 275,274 (1,919,942) (30,234,633)
OTHER FINANCING SOURCES (USES) Transfers In 1,695,974 - - 1,645,907 3,341,881 Transfers Out (1,645,907) - - (1,695,974) (3,341,881) Issuance of Long-Term Debt - 39,425,000 26,880,000 - 66,305,000 Premium on Issuance of Long-Term Debt - 5,747,743 3,907,197 - 9,654,940 Payment to Escrow Agent - - (30,544,660) - (30,544,660) Total Other Financing Sources (Uses) 50,067 45,172,743 242,537 (50,067) 45,415,280
NET CHANGE IN FUND BALANCES (1,594,489) 18,227,334 517,811 (1,970,009) 15,180,647
Fund Balances - Beginning of Year, as Restated 73,703,004 24,915,863 1,802,583 16,087,665 116,509,115 Increase (Decrease) in Nonspendable for Inventories (170,517) - - (63,361) (233,878) FUND BALANCES - END OF YEAR $ 71,937,998 $ 43,143,197 $ 2,320,394 $ 14,054,295 $ 131,455,884
See accompanying Notes to the Basic Financial Statements. (28) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2017
Net Change in Fund Balances - Total Governmental Funds $ 15,180,647 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Expenditure for Capital Assets $ 24,859,315 Loss on Disposal of Assets (235,361) Depreciation Expense (22,768,539) 1,855,415 The governmental funds report the issuance of bonds as financing sources, while repayment of bond principal is reported as an expenditure. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. Interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, however, interest expense is recognized as it accrues, regardless of when it is due. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Principal Payments on Long-Term Debt 55,515,000 Principal Payments on Capital Leases 1,428,036 Issuance of Long-Term Debt (66,305,000) Premium on Issuance of Bonds (9,654,940) Amortization of Premium 1,508,174 Amortization of Deferred Amount on Refunding (563,924) (18,072,654) Delinquent property taxes and grants and other receivables that will be collected subsequent to year-end, but are not available soon enough to pay for the current period’s expenditures are reported as deferred inflows of resources in the governmental funds. Property Taxes 3,624,683 Grants and Other Miscellaneous Revenues (353,111) 3,271,572 Governmental funds report pension contributions as expenditures when made. However, in the statement of activities, pension expense is the cost of benefits earned, adjusted for member contributions, the recognition of changes in deferred outflows and inflows or resources related to pensions, and the investment experience. Pension Contributions 18,325,275 Pension Expense (18,930,508) (605,233) The Internal Service Fund is used by management to charge the cost of insurance and post employment benefits to the individual funds. The changes in net position of the Internal Service Fund are reported with governmental activities in the statement of activities. 2,482,810 Some expenses reported in the statement of activities do not require the use of current financial resources and; therefore, are not reported as expenditures in the governmental funds. Change in Compensated Absences (1,555,713) Change in Inventory Balances (233,878) Change in Net Position of Governmental Activities $ 2,322,966
See accompanying Notes to the Basic Financial Statements. (29) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2017
Governmental Activities: Internal Service Funds ASSETS Current: Cash and Cash Equivalents $ 20,056,785
LIABILITIES Current: Claims Payable 2,822,394
Noncurrent: OPEB Liability 26,967,012 Total Liabilities 29,789,406
NET POSITION Unrestricted $ (9,732,621)
See accompanying Notes to the Basic Financial Statements. (30) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FISCAL YEAR ENDED JUNE 30, 2017
Governmental Activities: Internal Service Funds OPERATING REVENUES Contributions $ 25,094,760
OPERATING EXPENSES Other Postemployment Benefits 5,599,839 Insurance Claims 15,548,866 Administrative Charges 1,514,060 Total Operating Expenses 22,662,765
OPERATING INCOME 2,431,995
NONOPERATING REVENUES Investment Income 50,815
CHANGE IN NET POSITION 2,482,810
Total Net Position (Deficit) - Beginning of Year (Restated) (12,215,431)
TOTAL NET POSITION (DEFICIT) - END OF YEAR $ (9,732,621)
See accompanying Notes to the Basic Financial Statements. (31) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FISCAL YEAR ENDED JUNE 30, 2017
Governmental Activities: Internal Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Contributions $ 25,094,760 Cash Payments for OPEB (2,471,937) Cash Payments for Claims and Administrative Fees (14,240,532) Net Cash Provided by Operating Activities 8,382,291
CASH FLOWS FROM INVESTING ACTIVITIES Investment Income 50,815
NET CHANGE IN CASH AND CASH EQUIVALENTS 8,433,106
Cash and Cash Equivalents - Beginning of Year 11,623,679
CASH AND CASH EQUIVALENTS - END OF YEAR $ 20,056,785
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income $ 2,431,995 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Increase in OPEB Liability 3,127,902 Increase in Claims Payable 2,822,394 Total Adjustments 5,950,296
Net Cash Provided by Operating Activities $ 8,382,291
See accompanying Notes to the Basic Financial Statements. (32) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUNDS JUNE 30, 2017
Agency Fund ASSETS Current: Cash and Investments $ 1,636,717
LIABILITIES Current: Due to Student Groups $ 1,636,717
See accompanying Notes to the Basic Financial Statements. (33) THIS PAGE INTENTIONALLY LEFT BLANK PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Phoenix Union High School District No. 210 (District) have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A summary of the District’s more significant accounting policies follows.
A. Reporting Entity
The District is a special purpose government that is governed by a separately elected governing body. It is legally separate from and fiscally independent of other state and local governments. In evaluating how to define the District for financial reporting purposes, management has identified the Employee Benefit Trust as a blended component unit as discussed below. The decision to include the blended component unit in the reporting entity has been made by applying criteria set forth in accounting principles generally accepted in the United States of America. The Employee Benefit Trust is a legally separate organization for which the elected officials of the primary government (i.e., the District) are financially accountable. The primary government is financially accountable for the blended component unit as it appoints a voting majority of the blended component unit’s governing body and maintains the accounting records of the blended component unit. The blended component unit is described below:
Blended Component Unit – Blended component units, although legally separate entities, are, in substance, part of the District's operations. The Phoenix Union High School District No. 210 Employee Benefit Trust is responsible for providing health insurance for the District's employees. The District's Governing Board appoints the Trust's Board of Directors. The Phoenix Union High School District No. 210 Employee Benefit Trust provides services entirely to the District and therefore has been included as an Internal Service Fund in accordance with the criteria established by GASB. The component unit issues separate financial statements that can be obtained at the District office at 4502 North Central Avenue, Phoenix, Arizona 85012.
B. Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. As a general rule, the effect of interfund activity has been removed from these statements. Governmental activities, which are normally supported by taxes and intergovernmental revenues are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The District had no business-type activities during the fiscal year.
(34) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Government-Wide and Fund Financial Statements (Continued)
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide, proprietary funds, and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, however, the District only reports agency funds in its fiduciary fund types, which do not present results of operations or a measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting, except expenditures related to compensated absences and claims and judgments, which are recorded only when payment is due. However, since debt service resources are provided during the current year for payment of long-term principal and interest due early in the following year (within one month), the expenditures and related liabilities have been recognized in the Debt Service Fund.
Property taxes, intergovernmental grants and aid, tuition, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government.
(35) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
The District reports the following major governmental funds:
The General Fund is the District’s primary operating fund. It accounts for all resources used to finance District maintenance and operation except those required to be accounted for in other funds. It is described as the Maintenance and Operation Fund by Arizona Revised Statutes (A.R.S.) and is budgeted within five subsections titled regular education, special education, desegregation, pupil transportation, and dropout prevention.
The Bond Building Fund, a Capital Projects Fund, accounts for monies received from District bond issues that are used to acquire sites, construct school buildings, supply school buildings with furniture and apparatus, improve school grounds, and purchase pupil transportation vehicles.
The Debt Service Fund accounts for the accumulation of resources for, and the payment of long-term principal, interest, and related costs.
Additionally, the District reports the following fund types:
The Proprietary Fund is an Internal Service Fund that accounts for activities related to the District's employee benefits insurance trust program and other postemployment benefits.
The proprietary fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting and are presented in a single column. Proprietary funds distinguish operating revenues and expenses from nonoperating 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 District's internal service funds are charges for health and welfare benefits and other postemployment benefits and charges to District departments for goods and services. Operating expenses for internal service funds include the cost of goods and services and administrative expenses. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
The Agency Fund is custodial in nature and does not present results of operations or a measurement focus and is described as follows:
The Student Activities Fund accounts for monies raised by students to finance student clubs and organizations but held by the District as an agent.
(36) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements.
Amounts reported as program revenues include 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.
When both restricted and unrestricted resources are available for use, for governmental activities it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed.
D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity
1. Deposits and Investments The District’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the State and County Treasurer, and highly liquid investments with maturities of three months or less from the date of acquisition.
A.R.S. requires the District to deposit certain cash with the County Treasurer. That cash is pooled for investment purposes, except for cash in the Bond Building and Debt Service Funds, which is invested separately. As required by statute, interest earned by the Bond Building and Debt Service Fund is recorded in the Debt Service Fund.
A.R.S. authorize the District to invest public monies in the State and County Treasurer’s investment pools; U.S. Treasury obligations; specified state and local government bonds; and interest-earning investment contracts such as savings accounts, certificates of deposit, and repurchase agreements in eligible depositories.
The State Board of Deposit provides oversight for the State Treasurer’s pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. No comparable oversight is provided for the County Treasurer’s investment pool, and that pool’s structure does not provide for shares.
(37) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued)
2. Restricted Cash and Investments Bond proceeds that were not spent at the end of the fiscal year are restricted as to use and are reported as restricted cash and investments.
3. Property Taxes Receivables All property taxes receivables are shown net of an allowance for uncollectibles.
The Maricopa County Treasurer is responsible for collecting property taxes for all governmental entities within the County. The County levies real and personal property taxes on or before the third Monday in August that become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May. However, a lien against real and personal property assessed attaches on the first day of January preceding assessment and levy thereof.
4. Intergovernmental Receivable Intergovernmental receivables are comprised of federal grants and aid ($2,368,117) and state and county equalization and additional state aid ($20,811,110).
5. Inventories Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories are recorded as expenses when consumed rather than when purchased in the government-wide statements and are recorded as an expenditure when purchased in the fund financial statements.
6. Capital Assets Capital assets, which include land and improvements, buildings and improvements, construction in progress, furniture, equipment, and vehicles, are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year.
(38) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued)
6. Capital Assets (Continued) Capital assets purchased or acquired are carried at historical cost or estimated historical cost. Contributed assets are recorded at acquisition value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred.
Depreciation on all assets is provided on a straight-line basis over the following estimated useful lives:
Buildings 7-75 Years Improvements Other Than Buildings 5-20 Years Furniture, Equipment, and Vehicles 5-20 Years
7. Deferred Outflows of Resources The deferred outflows of resources reported in the government-wide financial statements, represent the reacquisition costs related to the refunding of bonded debt. The reacquisition costs are amortized and expensed over the lesser of the maturity of the refunded bonds or the refunding bonds. Reported amounts are also related to the requirements of accounting and financial reporting for pensions under GASB 68.
8. Intergovernmental Payables The District reported an intergovernmental payable for overfunding of a grant by $49,581. This amount is due back to the Arizona Department of Education at fiscal year-end.
9. Compensated Absences The liability for compensated absences reported in the government-wide financial statements consists of unpaid, accumulated leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included.
(39) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued)
10. Long-Term Obligations In the government-wide and proprietary fund financial statements long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Bond premiums and discounts are amortized over the term of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as an other financing source while discounts on debt issuances are reported as an other financing use. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
11. Pensions Plans 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 Arizona State Retirement System (ASRS) and additions to/deductions from ASRS's fiduciary net position have been determined on the same basis as they are reported by ASRS. 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.
12. Deferred Inflows of Resources The deferred inflows of resources reported in the governmental fund financial statements represent resources that are not available to the District as of June 30, 2017 or within 60 days of fiscal year-end. The deferred inflows of resources represent a reconciling item between the governmental fund and the government- wide financial statements.
The District also recognizes the acquisition of net position that is applicable to a future reporting period as deferred inflows of resources. Reported amounts are related to the requirements of accounting and financial reporting for pensions under GASB 68.
(40) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued)
13. Net Position In the government-wide financial statements, net position is reported in three categories: net investment in capital assets; restricted net position; and unrestricted net position. Net investment in capital assets is separately reported because the District reports all District assets which make up a significant portion of total net position. Restricted net position accounts for the portion of net position restricted by parties outside the District. Unrestricted net position is the remaining net position not included in the previous two categories.
14. Fund Balances Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, committed, assigned, and unassigned fund balance classifications.
The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form, such as inventories, or are legally or contractually required to be maintained intact.
Restricted fund balances are those that have externally imposed restrictions on the usage by creditors (such as through debt covenants), grantors, contributors, or laws and regulations.
The committed fund balances are self-imposed limitations approved by the Governing Board, which is the highest level of decision-making authority within the District. Only the Governing Board can remove or change the constraints placed on committed fund balances. The governing board must commit fund balances before the end of the fiscal year through formal board action.
Assigned fund balances are resources constrained by the District’s intent to be used for specific purposes, but are neither restricted nor committed. The Governing Board has not authorized an individual to make assignments of resources for specific purposes.
(41) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Equity (Continued) 14. Fund Balances (Continued) The unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not reported in the other classifications. Also, deficits in fund balances of the other governmental funds are reported as unassigned. It is the District’s policy to utilize restricted fund balances first, then committed, assigned and unassigned fund balances when resources are available for the same purpose. The District has classified its fund balances as follows:
Bond Debt Nonmajor Total General Building Service Governmental Governmental Fund Fund Fund Funds Funds Fund Balances:
Nonspendable: Inventory $ 888,155 $ - $ - $ 58,871 $ 947,026 Restricted: Classroom Site - - - 6,833,937 6,833,937 Instructional Improvement - - - 379,778 379,778 Federal and State Grants - - - 555,454 555,454 Food Service - - - 1,619,765 1,619,765 Civic Center - - - 606,496 606,496 Community School - - - 89,902 89,902 Extracurricular Tax Credit - - - 938,059 938,059 Other Special Revenues - - - 152,297 152,297 Capital Projects - 43,143,197 - 2,819,736 45,962,933 Debt Service - - 2,320,394 - 2,320,394 Total Restricted - 43,143,197 2,320,394 13,995,424 59,459,015
Unassigned 71,049,843 - - - 71,049,843 Total Fund Balance $ 71,937,998 $ 43,143,197 $ 2,320,394 $ 14,054,295 $ 131,455,884
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Deficit Net Position At June 30, 2017, the District reported a deficit net position in the Internal Service Fund of $9,732,621. The Deficit arose because the District pays for other postemployment benefits on a pay-as-you-go basis.
(42) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS
A. Assets
1. Deposits and Investments Deposits and investments at June 30, 2017 consist of the following:
Deposits: Cash on Hand $ 1,750 Cash in Bank 15,400,266 Investments: Cash on Deposit with County Treasurer 168,355,019 State Treasurer's Investment Pool 2,280,727 Total Deposits and Investments 186,037,762 Less: Restricted Cash and Investments (51,636,148) Less: Fiduciary Funds (1,636,717) Total Cash and Investments $ 132,764,897
Deposits – The carrying amount of the District’s deposits at June 30, 2017 was $15,400,266 and the bank balance was $16,493,611. Of the bank balance, $250,000 was fully covered by federal depository insurance and $26,243,611 was uninsured and collateralized through the Arizona State Treasurer Pooled Collateral Program.
Investments – At June 30, 2017, the District’s investments were reported at fair value. The District’s investment in the County Treasurer’s investment pool represents a proportionate interest in those pools’ portfolios; however, the District’s portion is not identified with a specific investment and is not subject to custodial credit risk.
The State Treasurer’s pools are external investment pools, the Local Government Investment Pool (Pool 5) with no regulatory oversight. The pools are not required to register (and are not registered) with the Securities and Exchange Commission. The activity and performance of the pools are reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pools approximates the value of the participant’s shares in the pool and the participants’ shares are not identified with specific investments. The Local Government Investment Pool (LGIP) is reported at fair value.
Interest rate risk. In accordance with its investment policy, the District manages its exposure to declines in fair values by limiting the average maturity of its investments to one year or less.
(43) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)
A. Assets (Continued)
1. Deposits and Investments (Continued) Credit risk. In accordance with the District’s investment policy, the District only invests in the State or County Treasurer investment pools, U.S. government securities or state or local bonds. The District’s cash on deposit with the County Treasurer and state LGIP did not receive a credit quality rating from a national credit rating agency.
Concentration of credit risk. The District does not have a formal investment policy that addresses concentration of credit risk; all investments are recorded with the County Treasurer or the state LGIP.
2. Receivables Property taxes are recognized as revenues in the fiscal year they are levied in the government-wide financial statements and represent a reconciling item between the government-wide and fund financial statements. In the fund financial statements, property taxes are recognized as revenues in the fiscal year they are collected and within 60 days subsequent to fiscal year-end. Property taxes not collected within 60 days subsequent to fiscal year-end or collected in advance of the fiscal year for which they are levied are reported as deferred inflows of resources.
Governmental funds report other deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also report unearned revenue in connection with resources that have been received, but not yet earned.
At the end of the current fiscal year, the various components of deferred inflows of resources are as follows:
Unavailable Delinquent Property Taxes Receivable: General Fund $ 14,754,512 Debt Service Fund 824,391 Nonmajor Governmental Funds 3,390 E-Rate Revenues: General Fund 763,473 Total $ 16,345,766
(44) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)
A. Assets (Continued)
3. Capital Assets Capital asset activity for the year ended June 30, 2017 was as follows:
Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land $ 10,753,970 $ 84,215 $ - $ 10,838,185 Construction in Progress 40,293,748 12,852,017 (45,235,221) 7,910,544 Total Capital Assets, Not Being Depreciated 51,047,718 12,936,232 (45,235,221) 18,748,729
Capital Assets, Being Depreciated: Land Improvements 32,285,797 1,180,492 - 33,466,289 Buildings and Improvements 708,690,768 52,020,774 - 760,711,542 Furniture, Equipment, and Vehicles 39,440,292 3,957,038 (1,374,027) 42,023,303 Total Capital Assets, Being Depreciated 780,416,857 57,158,304 (1,374,027) 836,201,134
Accumulated Depreciation for: Land Improvements (20,995,789) (1,147,214) - (22,143,003) Buildings and Improvements (286,401,184) (18,233,511) - (304,634,695) Furniture, Equipment, and Vehicles (19,447,733) (3,387,814) 1,138,666 (21,696,881) Total Accumulated Depreciation (326,844,706) (22,768,539) 1,138,666 (348,474,579)
Total Capital Assets, Being Depreciated, Net 453,572,151 34,389,765 (235,361) 487,726,555
Governmental Activities Capital Assets, Net$ 504,619,869 $ 47,325,997 $ (45,470,582) $ 506,475,284
Depreciation expense was charged to functions as follows:
Governmental Activities: Instruction $ 15,613,475 Support Services: Students 986,479 Instructional Staff 884,957 General Administration 72,944 School Administration 1,126,038 Business and Other Support Services 431,403 Operations and Maintenance of Plant 1,335,379 Student Transportation 1,436,292 Operation of Noninstructional Services 881,572 Total $ 22,768,539
(45) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)
A. Assets (Continued)
4. Construction Commitments The District has active construction projects at June 30, 2017 and the commitments with contractors were as follows:
Governmental Activities Estimated Project Spent-to-Date Remaining Classroom Building Additions and Renovations and Various Site Improvements District Wide $ 7,910,544 $ 8,384,292
B. Interfund Receivables, Payables, and Transfers
Interfund transfers for the year ended June 30, 2017 consisted of the following:
Transfer Out Nonmajor General Governmental Transfer In Fund Funds Total
General Fund $ - $ 1,695,974 $ 1,695,974 Nonmajor Governmental Funds 1,645,907 - 1,645,907 Total $ 1,645,907 $ 1,695,974 $ 3,341,881
The transfer from the General Fund to the Nonmajor Governmental Funds in the amount of $1,645,907 was made for future capital lease payments for energy upgrades. The transfers from the Nonmajor Governmental Funds to the General Fund in the amount of $1,695,974 were made to record the District’s indirect costs on grants passed through the Arizona Department of Education. The District did not exceed the approved indirect cost rate on any grants. C. Obligations Under Capital Leases
The District acquired energy upgrades under the provisions of long-term lease agreements classified as capital leases. The lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. Revenues from the Energy and Water Savings Fund, a nonmajor governmental fund, are used to pay the capital lease obligations. In addition, revenues from the General Fund are transferred to the Energy and Water Savings Fund to pay the capital lease obligations when due. The District receives a federal interest subsidy to fund the interest payments for the District- wide energy project.
(46) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)
C. Obligations Under Capital Leases (Continued)
Amortization of assets recorded under capital leases is included with depreciation expense.
The future minimum lease payments under the capital leases, together with the present value of the net minimum lease payments as of June 30, 2017, were as follows:
Governmental Year Ending June 30, Activities 2018 $ 1,803,292 2019 1,779,393 2020 1,755,097 2021 1,730,397 2022 1,705,286 2023-2024 3,333,561 Total Minimum Lease Payments 12,107,027 Less: Amount Representing Interest (1,430,211) Present Value of Minimum Lease Amounts $ 10,676,816
D. Long-Term Obligations
The District has long-term bonds payable issued to provide funds for the acquisition and construction of major capital facilities. The District has also issued debt to refund earlier obligations with higher interest rates. Compensated absences, other postemployment benefits obligation, and the pension obligation are paid by the applicable fund where each employee is regularly paid, primarily the General Fund.
General obligation bonds currently outstanding are as follows:
Original Amount Interest Maturity Amount Purpose Issued Rates (%) Dates Outstanding
Governmental Activities: General Obligation Bonds Payable: Refunding Bonds, 2003 $ 57,800,000 5.0-5.125% 7/1/17 $ 6,325,000 Refunding Bonds, 2007 52,105,000 3.0-5.25% 7/1/17-24 29,290,000 Refunding Bonds, 2009 26,085,000 3.5-3.75% 7/1/17 1,565,000 School Improvement Bonds, Project of 2011, Series A 38,000,000 2.25-4.0% 7/1/18-27 38,000,000 School Improvement Bonds, Project of 2011, Series B 12,000,000 0.93% 7/1/17 5,070,000 School Improvement Bonds, Project of 2011, Series C 75,000,000 2.0-4.0% 7/1/17-28 69,000,000 School Improvement Bonds, Project of 2011, Series D 10,000,000 3.0-4.0% 7/1/21-30 10,000,000 School Improvement Bonds, Project of 2011, Series E 39,425,000 1.75-5% 7/1/19-36 39,425,000 Refunding Bonds, 2014 70,445,000 3.0-5.0% 7/1/17-25 63,175,000 Refunding Bonds, 2017 26,880,000 3.0-5.0% 7/1/21-25 26,880,000 Total General Obligation Bonds Payable $ 288,730,000
(47) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)
D. Long-Term Obligations (Continued)
Changes in long-term obligations for the year ended June 30, 2017 are as follows:
Beginning End of Due within of Year Increases Decreases Year One Year Governmental Activities: Bonds Payable: General Obligation Bonds $ 278,960,000 $ 66,305,000 $ (56,535,000) $ 288,730,000 $ 25,545,000 Premium 10,053,585 9,654,940 (1,508,174) 18,200,351 1,727,002 Total Bonds Payable 289,013,585 75,959,940 (58,043,174) 306,930,351 27,272,002
Other Liabilities: Capital Leases 12,104,852 - (1,428,036) 10,676,816 1,451,543 Compensated Absences 19,982,866 5,383,104 (3,827,391) 21,538,579 4,125,363 Other Postemployment Benefits 23,839,110 5,599,518 (2,471,616) 26,967,012 - Net Pension Liability 261,258,233 14,853,020 - 276,111,253 - Total Other Liabilities 317,185,061 25,835,642 (7,727,043) 335,293,660 5,576,906
Total Debt $ 606,198,646 $ 101,795,582 $ (65,770,217) $ 642,224,011 $ 32,848,908
Debt service requirements on bonds payable at June 30, 2017 are as follows:
Years Principal Interest Totals 2018 $ 25,545,000 $ 9,835,149 $ 35,380,149 2019 27,265,000 9,685,950 36,950,950 2020 28,585,000 8,665,281 37,250,281 2021 29,110,000 7,521,575 36,631,575 2022 29,635,000 6,418,450 36,053,450 2023-27 114,005,000 16,768,875 130,773,875 2028-32 27,885,000 3,310,975 31,195,975 2033-37 6,700,000 833,625 7,533,625 Totals $ 288,730,000 $ 63,039,880 $ 351,769,880
During the fiscal year, the District issued $26.9 million in refunding bonds with a premium of $3.9 million in order to refund $29.9 million in School Improvement Bonds and Refunding Bonds. The gross proceeds of $30.8 million were used to refund the bonds and pay issuance costs of $242,536. The District refunded the bonds to obtain a lower interest rate, resulting in a decrease in debt service payments over the next 8 years of $3,558,128, and resulted in an economic gain (i.e. difference between the present values of the debt service payments on the old and new debt) of $3,235,118. Additionally, the District issued $39.4 million in School Improvement Bonds, Series 2011, with a premium of $5.7 million. The Bonds carry interest rates between 1.75% and 5% and will be fully paid in July 2036. The gross proceeds of $45.2 million were used to make renovations and improvements to all existing school sites including renovations, parking lot improvements, roof repairs, pupil transportation, and technology upgrades, and to pay issuance costs of $289,393.
(48) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)
E. Prior Period Adjustment and Fund Balance Restatement
During the fiscal year ended June 30, 2017, a restatement of beginning net position and beginning fund balance was required to correct errors in the previously issued financial statements. The following is a summary of the restatement:
Classroom Site Fund Nonmajor Governmental Fund performance pay was earned by teachers as of June 30, 2016, but paid subsequent to June 30, 2016. The District did not accrue the related expenditures in the amount of $3,760,554 in the previous fiscal year.
The E-Rate Nonmajor Special Revenue Fund reported an ending fund balance of $3,144,443. The E-Rate fund is a reimbursable grant. In prior years, the expenditures eligible for reimbursement were not moved to the E-Rate Fund to offset the reimbursement received.
Contributions to the employee benefit internal service fund were recorded as expenditures in the fund level financial statements as of June 30, 2016 and were recorded as unearned revenues in the internal service fund in the previous fiscal year. The contributions had met the earnings process and should have been recognized as revenue in the year contributed.
Additionally, certain funds were reported as capital projects and special revenue funds in the previous fiscal year. The fund balances of the Unrestricted Capital Outlay Fund, the Insurance Proceeds Fund, the Litigation Recovery Fund, the School Plant Fund, the Advertisement Fund, and the Intergovernmental Agreement Fund reported a restricted fund balance as of June 30, 2016. However, none of these funds had restricted funding sources. Therefore, the General Fund was restated to include these funds in the current fiscal year to more appropriately reflect the unrestricted nature of these activities.
Net Position as Correction of Reclassification Net Position Previously Stated an Error of Funds As Restated Governmental Activities $ 80,906,125 $ (760,054) $ - $ 80,146,071
Governmental Funds Fund Balance as Correction of Reclassification Fund Balance as Previously Stated an Error of Funds Restated
General Fund $ 39,212,124 $ 3,144,443 $ 31,346,437 $ 73,703,004 Debt Service 1,802,583 - - 1,802,583 Bond Building 24,915,863 - - 24,915,863 Nonmajor Governmental Funds 54,339,099 (6,904,997) (31,346,437) 16,087,665 Total Governmental Funds$ 120,269,669 $ (3,760,554) $ - $ 116,509,115
Proprietary Funds Net Position as Correction of Reclassification Fund Balance as Previously Stated an Error of Funds Restated Internal Service Fund $ (15,215,931) $ 3,000,500 $ - $ (12,215,431)
(49) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION
A. Risk Management
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters.
The District was unable to obtain general property and liability insurance at a cost it considered to be economically justifiable. Therefore, the District joined the Arizona School Risk Retention Trust, Inc. (ASRRT). ASRRT is a public entity risk pool currently operating as a common risk management and insurance program for school districts and community colleges in the State. The District pays an annual premium to ASRRT for its general insurance coverage. The agreement provides that ASRRT will be self- sustaining through member premiums and will reinsure through commercial companies for claims in excess of specified amounts.
The District joined the Arizona School Alliance for Workers’ Compensation, Inc. (Alliance) together with other school districts in the state for risks of loss related to workers’ compensation claims. The Alliance is a public entity risk pool currently operating as a common risk management and insurance program for school districts in the State. The District pays quarterly premiums to the Alliance for its employee workers’ compensation coverage. The agreement provides that the Alliance will be self- sustaining through members’ premiums and will reinsure through commercial companies for claims in excess of specified amounts for each insured event.
The District established an Employee Benefit Trust (an Internal Service Fund) to account for and finance its uninsured risks of loss related to employee health claims beginning in fiscal year 2017. Under this program, the Fund provides coverage for up to a maximum of $200,000 for each claim. The fund purchases commercial insurance for claims in excess of this coverage. Settled claims did not exceed this coverage in the past fiscal year.
The claims liability amount recorded in the financial statements is based on reported pending claims and an estimated amount for claims incurred, but not yet reported. At June 30, 2017 the total claims payable of $2,822,394 included an estimated amount of claims incurred but not yet reported of $1,285,000.
As of June 30, 2017, unpaid claims were as follows:
Beginning Unpaid Claims $ - Claims Incurred and Changes in Estimate 15,548,866 Claims Paid (12,726,472) Ending Unpaid Claims $ 2,822,394
(50) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
B. Contingent Liabilities
Compliance – Amounts received or due from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability. The amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be determined at this time, although the District expects such amounts, if any, to be immaterial. Arbitrage – Under the tax Reform Act of 1986, interest earned on the debt proceeds in the excess of interest expense or expenditure prior to the disbursement of the proceeds must be repaid to the Internal Revenue Service. Management believes there is no tax arbitrage rebate liability at year-end. Lawsuits – The District is a defendant in various lawsuits and is vigorously defending those claims. In the opinion of the District’s attorney, neither the outcome of these lawsuits or the estimated liability to the District in the event of an unfavorable decision for the District is presently determinable. C. Retirement Plans
Cost-Sharing Pension Plans At June 30, 2017, the District reported the following related to pensions to which it contributes:
Governmental Statement of Net Position and Statement of Activities Activities Net Pension Liability $ 276,111,253 Deferred Outflows of Resources 57,327,973 Deferred Inflows of Resources 33,602,927 Pension Expense 18,930,508
The District’s accrued payroll and employee benefits included $515,523 of outstanding pension contributions amounts payable to ASRS for the year ended June 30, 2017. Arizona State Retirement System Plan Description – District employees participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing, multiple-employer defined benefit pension plan; a cost-sharing, multiple-employer defined benefit health insurance premium benefit (OPEB); and a cost-sharing multiple-employer defined benefit long- term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on its Web site at www.azasrs.gov.
(51) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
C. Retirement Plans (Continued)
Arizona State Retirement System (Continued) Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows:
Before On or After July 1, 2011 July 1, 2011 Years of service Sum of years and age equals 80 30 years age 55 and age required 10 years age 62 25 years age 60 to receive benefit 5 year age 50* 10 years age 62 any years age 65 5 years age 50* any years age 65 Final average Highest 36 consecutive months Highest 60 consecutive months salary is based on of last 120 months of last 120 months Benefit percentage per year of service 2.1% to 2.3 % 2.1% to 2.3 %
* With actuarially reduced benefits
Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned.
Contributions – In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2017, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.48% (11.34% for retirement and 0.14% for long-term disability) of the members’ annual covered payroll, and the District was required by statute to contribute at the actuarially determined rate of 11.48% (10.78% for retirement, 0.56% for the health insurance premium benefit, and 0.14% for long-term disability) of the active members’ annual covered payroll.
(52) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
C. Retirement Plans (Continued)
Arizona State Retirement System (Continued) In addition, the District was required by statute to contribute at the actuarially determined rate of 9.47% (9.17% for retirement, 0.21% for health insurance, and 0.09% for long-term disability) of annual covered payroll of retired members who worked for the District in positions that would typically be filled by an employee who contributes to the ASRS.
The District’s contributions to the pension plan for the year ended June 30, 2017 were $18,325,275.
The District’s contributions for the current and two preceding years for OPEB, all of which were equal to the required contributions, were as follows:
Health Benefit Long-Term Year Ended June 30, Supplement Fund Disability Fund 2017 $ 940,127 $ 236,700 2016 797,356 191,366 2015 915,569 186,217
During the fiscal year ended June 30, 2017, the District paid for ASRS pension and OPEB contributions as follows: 85% from the General Fund and 15% from other funds.
Pension Liability – At June 30, 2017, the District reported a liability of $276,111,253 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2015, to the measurement date of June 30, 2016.
The District’s reported liability at June 30, 2017, increased by $14,853,020 from the District’s prior year liability of $261,258,233 because of changes in the ASRS’ net pension liability and the District’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability.
The District’s proportion of the net pension liability was based on the District’s fiscal year 2016 contributions. The District’s proportion measured as of June 30, 2016 was 1.71062%, which was an increase of 0.03335 from its proportion measured as of June 30, 2015.
(53) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
C. Retirement Plans (Continued)
Arizona State Retirement System (Continued) Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2017, the District recognized pension expense for ASRS of $18,930,508. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred Outflows Inflows of Resources of Resources Differences Between Expected and Actual Experience $ 1,677,910 $ 18,994,436 Changes of Assumptions or Other Inputs - 14,608,491 Net Difference Between Projected and Actual Earnings on Pension Plan Investments 29,921,269 - Changes in Proportion and Differences Between District's Contributions and Proportionate Share of Contributions 7,403,519 - Contributions Subsequent to the Measurement Date 18,325,275 - Total $ 57,327,973 $ 33,602,927
The $18,325,275 reported as deferred outflows of resources related to ASRS 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, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows:
Year Ending June 30, Amount 2018 $ (8,222,308) 2019 (7,302,621) 2020 12,534,863 2021 8,389,837
Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows:
Actuarial Valuation Date June 30, 2015 Actuarial Roll Forward Date June 30, 2016 Actuarial Cost Method Entry Age Normal Discount Rate 8% Projected Salary Increases 3 - 6.75% Inflation 3% Permanent Benefit Increase Included Mortality Rates 1994 GAM Scale BB
(54) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
C. Retirement Plans (Continued)
Arizona State Retirement System (Continued) Actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2012.
The long-term expected rate of return on ASRS pension plan investments was determined to be 8.75% 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. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Long Term Real Expected Target Return Portfolio Real Asset Class Allocation Arithmetic Basis Rate of Return Equity 58 % 6.73% 3.90 % Fixed Income 25 3.70% 0.93 Real Estate 10 4.25% 0.42 Multi-Asset Class 5 3.41% 0.17 Commodities 2 3.84% 0.08 Total 100 % 5.50 Inflation 3.25 Expected Arithmetic Nominal Return 8.75 %
Discount Rate – The discount rate used to measure the ASRS total pension liability was 8%, which is less than the long-term expected rate of return of 8.75%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statutes. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. 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.
(55) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
C. Retirement Plans (Continued)
Arizona State Retirement System (Continued) Sensitivity of the District’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate – The following table presents the District’s proportionate share of the net pension liability calculated using the discount rate of 8%, 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 (7%) or 1 percentage point higher (9%) than the current rate.
Current Discount 1% Decrease Rate 1% Increase (7%) (8%) (9%) District's Proportionate Share of the Net Pension Liability $ 352,062,814 $ 276,111,253 $ 215,214,703
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report.
D. Other Postemployment Benefits
Plan Description – Under authority of the Governing Board, the District provides postretirement insurance (health and life) benefits in accordance with the District’s Early Retirement Program, to all eligible retirees. The plan is a single-employer defined benefit plan administered by the District. Generally, resources from the General Fund are used to pay for other postemployment benefits. The plan was discontinued for employees hired after July 2009. An employee is eligible if he/she has served 10 consecutive years on or before entering the program and has reached the age of 50. Employers with less than 15 years of service as of July 1, 2011 must pay 25% of the retiree health insurance cost. For each eligible retiree, the District makes yearly contributions until the age of 65. For the year ended June 30, 2017, the District contributed $2,471,616 for these benefits. The District’s regular insurance providers underwrite the retiree policies. Retirees may not convert the benefit into an in-lieu payment to secure coverage under independent plans. A separate financial report is not issued for the plan. The number of participants as of year-end, the effective date of the biannual OPEB valuation, follows:
Retirees Receiving Benefits 413 Active Employees 1,641 Total 2,054
(56) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
D. Other Postemployment Benefits (Continued)
Funding Policy – The District currently pays for postemployment benefits on a pay-as- you-go basis. Additionally, as allowed by Arizona Revised Statutes §15-1225, the District established an OPEB Fund to account for its postemployment benefit activity. The monies in this fund have been designated by the board and will be used for future benefit payments. Although the District is studying the establishment of a trust that would be used to accumulate and invest assets necessary to pay for the accumulated liability, these financial statements assume that pay-as-you-go funding will continue.
Annual OPEB Costs and Net OPEB Obligation – The District’s annual other postemployment benefit (OPEB) cost for each plan is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The amortization method is closed. The District’s annual OPEB cost for the current year and the related information for the plan is as follows at June 30, 2017:
Annual Required Contribution $ 6,305,169 Interest on Net OPEB Obligation 1,072,760 Adjustments to Annual Required Contributions (1,778,411) Annual OPEB cost 5,599,518 Contributions Made (2,471,616) Increase in Net OPEB Obligation 3,127,902 Net OPEB Obligation - Beginning of Year 23,839,110 Net OPEB Obligation - End of Year $ 26,967,012
The District has underfunded the OPEB obligation and reports the underfunded amount as a liability in the proprietary fund internal service fund and government-wide financial statements. The District’s annual OPEB costs, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the current and prior years are as follows:
Fiscal Year Annual Employer Percent Net OPEB Ended June 30, OPEB Cost Contributions Contributed Obligation 2015 $ 5,364,851 $ 2,499,953 47%$ 20,302,844 2016 5,745,914 2,209,648 38% 23,839,110 2017 5,599,518 2,471,616 44% 26,967,012
Funded Status and Funding Progress – The funded status of the plan as of July 1, 2015 (the most recent actuarial valuation date) was an actuarially accrued liability of $58,154,134, actuarial value of assets of $-0- for an unfunded actuarially accrued liability of $58,154,134. Total covered payroll was $90,739,880 or 64% of the unfunded actuarially accrued liability.
(57) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017
NOTE 4 OTHER INFORMATION (CONTINUED)
D. Other Postemployment Benefits (Continued)
Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the status of the plan and the annual required contributions for the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future.
The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
Actuarial Methods and Assumptions – Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the District and plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions used for the current valuation are as follows:
Actuarial Valuation Date July 1, 2015 Actuarial Roll Forward Date June 30, 2017 Actuarial Cost Method Entry Age, Level Dollar Amortization Method 30-year declining, single layer, level dollar Remaining Amortization Period 22 Years as of July 1, 2015 Asset Valuation Method No Assets Held in an Irrevocable Trust Actuarial Assumptions: Investment Rate of Return 4.5% Healthcare Trend Rate 7% Increase
(58) THIS PAGE INTENTIONALLY LEFT BLANK Required Supplementary Information Other Than MD&A THIS PAGE INTENTIONALLY LEFT BLANK PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE DISTRICT’S PROPORTIONATE SHARE OF NET PENSION LIABILITY AND CONTRIBUTIONS COST-SHARING PENSION PLANS FISCAL YEAR ENDED JUNE 30, 2017 AND TWO PREVIOUS FISCAL YEARS
Schedule of the District’s Proportionate Share of Net Pension Liability Reporting Year (Measurement Date) 2017 2016 2015 (2016) (2015) (2014)
District's Proportion of the Net Pension Liability 1.71062% 1.67727% 1.60962%
District's Proportionate Share of the Net Pension Liability $ 276,111,253 $ 261,258,233 $ 239,978,989
District's Covered-Employee Payroll $ 159,471,281 $ 155,181,120 $ 145,414,925
District's Proportionate Share of the Net Pension Liability as a Percentage of its Covered-Employee Payroll 173.14% 168.36% 165.03%
Plan Fiduciary Net Positon as a Percentage of the Total Pension Liability 67.06% 68.35% 69.49%
Schedule of the District’s Contributions 2017 2016 2015
Contractually Required Contribution $ 18,325,275 $ 17,302,634 $ 16,899,224
Contributions in Relation to the Contractually Required Contribution 18,325,275 17,302,634 16,899,224
Contribution Deficiency (Excess) $ - $ - $ -
District's Covered-Employee Payroll $ 170,655,999 $ 159,471,281 $ 155,181,120
Contributions as a Percentage of Covered-Employee Payroll 10.74% 10.85% 10.89%
See Notes to Required Supplementary Information. (59) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) SCHEDULE OF FUNDING PROGRESS OTHER POSTEMPLOYMENT BENEFIT PLAN CURRENT AND TWO PRECEDING VALUATIONS
Schedule of Funding Progress
Projected Unit Cost Underfunded Actuarial Under Annual AAL as a Valuation Date Actuarial Value Accrued Percent (Over) Funded Covered Percentage of June 30, of Assets Liability (AAL) Funded AAL Payroll Covered Payroll 2011 $ - $ 50,761,797 -% $ 50,761,797 $ 101,568,400 50% 2013 - 51,446,904 -% 51,446,904 101,568,400 51% 2015 - 58,154,134 -% 58,154,134 90,739,880 64%
See Notes to Required Supplementary Information. (60) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL GENERAL FUND – BUDGETARY BASIS FISCAL YEAR ENDED JUNE 30, 2017
Budgeted Amounts Variance from Original Final Actual Final Budget REVENUES Property Taxes $ - $ - $ 162,383,368 $ 162,383,368 Intergovernmental - - 69,793,162 69,793,162 Tuition - - 196,353 196,353 Investment Earnings (Loss) - - 126,775 126,775 Other - - 1,837,411 1,837,411 Total Revenues - - 234,337,069 234,337,069 EXPENDITURES Regular Education: Instruction 76,991,248 78,192,642 64,910,884 13,281,758 Support Services - Students 11,561,097 11,561,097 10,919,718 641,379 Support Services - Instructional Staff 5,503,968 5,503,968 6,242,306 (738,338) Support Services - General Administration 1,853,152 1,853,152 5,339,231 (3,486,079) Support Services - School Administration 7,895,973 7,895,973 8,803,700 (907,727) Support Services - Business 5,972,369 5,972,369 6,479,644 (507,275) Support Services - Other - - 8,163 (8,163) Operations and Maintenance of Plant 28,189,427 28,189,427 32,792,610 (4,603,183) Operation of Noninstructional Services 1,050,899 1,050,899 1,839,777 (788,878) Total Regular Education 139,018,133 140,219,527 137,336,033 2,883,494 Special Education: Instruction 27,331,125 27,331,125 26,095,590 1,235,535 Support Services - Students 8,754,554 8,754,554 8,940,982 (186,428) Support Services - Instructional Staff 595,267 595,267 652,045 (56,778) Support Services - School Administration 1,108,185 1,108,185 1,121,978 (13,793) Support Services - Business 10,221 10,221 17,005 (6,784) Operations and Maintenance of Plant 2,338,114 2,338,114 2,218,067 120,047 Operation of Noninstructional Services 355,140 355,140 - 355,140 Total Special Education 40,492,606 40,492,606 39,045,667 1,091,799 Desegregation: Instruction 31,493,088 31,873,454 34,435,283 (2,561,829) Support Services - Students 4,740,573 4,740,573 4,540,764 199,809 Support Services - Instructional Staff 1,514,876 1,514,876 905,640 609,236 Support Services - Central Services 330,170 330,170 6,967 323,203 Support Services - School Administration 3,120,321 3,120,321 3,127,440 (7,119) Support Services - Business 60,800 60,800 - 60,800 Support Services - Operations and Maintenance of Plant 9,201,056 9,201,056 8,362,443 838,613 Operation of Noninstructional Services 282,201 282,201 - 282,201 Total Desegregation 50,743,085 51,123,451 51,378,537 (537,287) Pupil Transportation: Student Transportation Services 13,214,777 13,214,777 10,932,002 2,282,775
Dropout Prevention Program 2,249,000 2,249,000 2,249,044.00 (44) Total Expenditures 245,717,601 247,299,361 240,941,283 5,720,737 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (245,717,601) (247,299,361) (6,604,214) 240,695,147 OTHER FINANCING USES Transfers Out - - (1,645,907) (1,645,907) NET CHANGE IN FUND BALANCE (245,717,601) (247,299,361) (8,250,121) 239,049,240 Fund Balance - Beginning of Year - - 25,690,154 25,690,154 Increase in Nonspendable for Inventories - - (170,517) (170,517) FUND BALANCE - END OF YEAR $ (245,717,601) $ (247,299,361) $ 17,269,516 $ 264,568,877
See Notes to Required Supplementary Information. (61) THIS PAGE INTENTIONALLY LEFT BLANK PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN THE MD&A FISCAL YEAR ENDED JUNE 30, 2017
NOTE 1 COST SHARING PENSION PLAN
Information prior to the measurement date (June 30, 2014) was not available. Additional years’ information will be displayed as it becomes available.
NOTE 2 PENSION PLAN SCHEDULES
Actuarial Assumptions for Valuations Performed – The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated, which is the most recent actuarial valuation. The actuarial assumptions used are disclosed in the notes to the financial statements.
Factors that Affect Trends – The actuarial assumptions used in the June 30, 2015, valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2015, actuarial valuation. The study did not include an analysis of the assumed investment rate of return.
NOTE 3 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
The District adopts an annual operating budget for expenditures for all governmental fund types on essentially the same modified accrual basis of accounting used to record actual expenditures (See Note 4 to required supplementary information for exception). The Governing Board presents a proposed budget to the Superintendent of Public Instruction and County School Superintendent on or by July 5. The Governing Board legally adopts the final budget by July 15, after a public hearing has been held. Once adopted the budget can be increased or decreased only for specific reasons set forth in the A.R.S. All appropriations lapse at year-end.
Budgetary control over expenditures is exercised at the fund level. However, the General Fund is budgeted within three subsections (see the notes to the financial statements for a description of General Fund), any of which may be over-expended with the prior approval of the Governing Board at a public meeting, providing the expenditures for all subsections do not exceed the General Fund’s total budget.
Although it is not adopted or published, a budget of revenue from all sources for the fiscal year is prepared by the District; however, the budget is not revised during the fiscal year.
No supplementary budgetary appropriations were necessary during the year.
(62) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN THE MD&A FISCAL YEAR ENDED JUNE 30, 2017
NOTE 4 BASIS OF ACCOUNTING
The District’s adopted budget is prepared on a basis consistent with accounting principles generally accepted in the United States of America, with the following exceptions: prepaid insurance payments were charged against the budget in the year in which the payment was made. In addition, the General Fund as reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances includes the District’s Maintenance and Operation Fund in addition to several other District funds as required by GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. However, for budgetary purposes, the District prepares a separate Maintenance and Operation Fund budget. Therefore, the following adjustments are necessary to present actual revenues, expenditures, other financing sources and uses, beginning fund balance and ending fund balance on a budgetary basis in order to present only the activity of the District’s Maintenance and Operation Fund for budgetary purposes.
Other (Restated) Financing Fund Balance Total Total Sources Beginning of Fund Balance Revenues Expenditures and Uses Year End of Year
Statement of Revenues, Expenditures, and Changes in Fund Balance $ 253,722,553 $ 255,367,109 $ 50,067 $ 73,703,004 $ 71,937,998
Nonmaintenance and Operation Activity Included in General Fund (19,385,484) (16,542,062) (1,695,974) (48,012,850) (52,552,246)
Fiscal Year 2017-18 insurance Payments Budgeted in 16-17 - 2,116,236 - - (2,116,236)
Budgetary Comparison Schedule - General Fund $ 234,337,069 $ 240,941,283 $ (1,645,907) $ 25,690,154 $ 17,269,516
(63) Combining and Individual Fund Statements and Schedules THIS PAGE INTENTIONALLY LEFT BLANK NONMAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Classroom Site Fund – accounts for the revenues and expenditures of State apportioned educational sales tax monies.
Instructional Improvement Fund – accounts for revenues and expenditures for State apportioned Indian Gaming monies.
Special Projects – accounts for the revenues and expenditures of state and federally funded projects.
Food Service Fund – accounts for the financial operations of preparing and serving regular and incidental meals and snacks in connection with school functions.
Other Special Revenue Fund – accounts for the revenues and expenditures of the following activities or objectives: civic center, community school, extracurricular activity fee tax credit, career and technology and vocational education program, and textbooks.
CAPITAL PROJECTS FUNDS
Adjacent Ways Fund – accounts for monies received to finance such improvements as public streets or alleys adjacent to school property.
Energy and Water Savings – to account for capital investment monies, energy related rebate, or grant monies, and monies from other funding sources to fund energy or water savings projects in school facilities in accordance with A.R.S. §15-910.02. PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2017
Special Revenue
Classroom Instructional Special Food Other Special Site Improvement Projects Service Revenue ASSETS
Cash and Investments $ 11,260,328 $ 382,597 $ 1,045,851 $ 1,500,717 $ 1,805,167 Receivables: Accounts Receivable - - - - 17,137 Property Taxes - - - - - Intergovernmental - - 1,374,931 183,352 - Inventories - - - 58,871 -
Total Assets $ 11,260,328 $ 382,597 $ 2,420,782 $ 1,742,940 $ 1,822,304
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES
Liabilities: Accounts Payable $ - $ 654 $ 824,928 $ 14,547 $ 35,550 Accrued Wages and Benefits 4,426,391 2,165 990,819 49,757 - Intergovernmental Payable - - 49,581 - - Total Liabilities 4,426,391 2,819 1,865,328 64,304 35,550
Deferred Inflows of Resources: Unavailable Revenue - - - - -
Fund Balances: Nonspendable - - - 58,871 - Restricted 6,833,937 379,778 555,454 1,619,765 1,786,754 Total Fund Balances 6,833,937 379,778 555,454 1,678,636 1,786,754
Total Liabilities. Deferred Inflows of Resources and Fund Balances $ 11,260,328 $ 382,597 $ 2,420,782 $ 1,742,940 $ 1,822,304
(64) Capital Projects Total Nonmajor Total Special Energy and Total Capital Governmental Revenue Funds Adjacent Ways Water Savings Projects Funds Funds
$ 15,994,660 $ 808,000 $ 2,001,929 $ 2,809,929 $ 18,804,589
17,137 - 9,127 9,127 26,264 - 4,070 - 4,070 4,070 1,558,283 - - - 1,558,283 58,871 - - - 58,871
$ 17,628,951 $ 812,070 $ 2,011,056 $ 2,823,126 $ 20,452,077
$ 875,679 $ - $ - $ - $ 875,679 5,469,132 - - - 5,469,132 49,581 - - - 49,581 6,394,392 - - - 6,394,392
- 3,390 - 3,390 3,390
58,871 - - - 58,871 11,175,688 808,680 2,011,056 2,819,736 13,995,424 11,234,559 808,680 2,011,056 2,819,736 14,054,295
$ 17,628,951 $ 812,070 $ 2,011,056 $ 2,823,126 $ 20,452,077
(65) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FISCAL YEAR ENDED JUNE 30, 2017
Special Revenue
Classroom Instructional Special Food Other Special Site Improvement Projects Service Revenue
REVENUES Property Taxes $ - $ - $ - $ - $ - Intergovernmental 11,181,705 1,084,839 24,821,320 11,225,304 - Food Service Sales - - - 765,758 - Charges for Services - - - - 1,007,525 Contributions and Donations - - - - 381,234 Investment Earnings 62,823 316 2,170 6,534 4,709 Other - - 14,731 - - Total Revenues 11,244,528 1,085,155 24,838,221 11,997,596 1,393,468
EXPENDITURES Current: Instruction 12,965,022 676,660 12,786,403 - 838,142 Support Services Students - 100,283 3,685,073 100,938 5,756 Instructional Staff - 37,428 6,867,667 - 233 General Administration - - 86,708 - - School Administration - 25,000 77,273 - - Business and Other Support Services - 3,293 476,196 - 66 Operations and Maintenance of Plant - 23,855 289,131 - 125,706 Student Transportation - 147,884 37,978 - 19,875 Operation of Noninstructional Services - 1,830 - 11,523,191 111,715 Debt Service: Principal Retirement - - - - - Interest on Long-Term Debt - - - - - Total Expenditures 12,965,022 1,016,233 24,306,429 11,624,129 1,101,493
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,720,494) 68,922 531,792 373,467 291,975
OTHER FINANCING SOURCES (USES) Transfers In - - - - - Transfers Out - - (358,209) (1,337,765) - Total Other Financing Sources (Uses) - - (358,209) (1,337,765) -
NET CHANGE IN FUND BALANCES (1,720,494) 68,922 173,583 (964,298) 291,975
Fund Balances - Beginning of Year 8,554,431 310,856 381,871 2,706,295 1,494,779 Decrease Nonspendable for Inventories - - - (63,361) - FUND BALANCES - END OF YEAR $ 6,833,937 $ 379,778 $ 555,454 $ 1,678,636 $ 1,786,754
(66) Capital Projects Total Nonmajor Total Special Adjacent Energy and Total Capital Governmental Revenue Funds Ways Water Savings Projects Funds Funds
$ - $ 131,090 $ - $ 131,090 $ 131,090 48,313,168 - 180,892 180,892 48,494,060 765,758 - - - 765,758 1,007,525 - - - 1,007,525 381,234 - - - 381,234 76,552 4,404 7,158 11,562 88,114 14,731 - 317,425 317,425 332,156 50,558,968 135,494 505,475 640,969 51,199,937
27,266,227 - - - 27,266,227
3,892,050 - - - 3,892,050 6,905,328 - - - 6,905,328 86,708 - - - 86,708 102,273 - - - 102,273 479,555 - - - 479,555 438,692 - - - 438,692 205,737 - - - 205,737 11,636,736 - - - 11,636,736
- - 1,428,036 1,428,036 1,428,036 - - 678,537 678,537 678,537 51,013,306 - 2,106,573 2,106,573 53,119,879
(454,338) 135,494 (1,601,098) (1,465,604) (1,919,942)
- - 1,645,907 1,645,907 1,645,907 (1,695,974) - - - (1,695,974)
(1,695,974) - 1,645,907 1,645,907 (50,067)
(2,150,312) 135,494 44,809 180,303 (1,970,009)
13,448,232 673,186 1,966,247 2,639,433 16,087,665 (63,361) - - - (63,361) $ 11,234,559 $ 808,680 $ 2,011,056 $ 2,819,736 $ 14,054,295
(67) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 BOND BUILDING FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Budgeted Amounts Variance with Original Final Actual Final Budget EXPENDITURES Current: Instruction $ 14,022,959 $ 8,916,784 $ 3,395,791 $ 10,627,168 Support Services: Instructional Staff 2,190,830 1,393,084 530,530 1,660,300 Business and Other Support Services 3,307,429 2,103,096 800,925 2,506,504 Operations and Maintenance of Plant 1,265,353 804,600 306,417 958,936 Student Transportation 5,771,468 3,669,905 1,397,615 4,373,853 Debt Service: Issuance Costs 1,211,983 770,664 293,493 477,171 Facilities Acquisition 83,501,364 53,096,043 20,220,638 63,280,726 Total Expenditures 111,271,385 70,754,177 26,945,409 83,884,657
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (111,271,385) (70,754,177) (26,945,409) 84,325,976
OTHER FINANCING SOURCES Proceeds of Issuance of Long-Term Debt - - 39,425,000 39,425,000 Premium on Issuance of Long-Term Debt - - 5,747,743 5,747,743 Total Other Financing Sources - - 45,172,743 45,172,743
NET CHANGE IN FUND BALANCE (111,271,385) (70,754,177) 18,227,334 129,498,719
Fund Balance - Beginning of Year - - 24,915,863 24,915,863
FUND BALANCE - END OF YEAR $ (111,271,385) $ (70,754,177) $ 43,143,197 $ 154,414,582
(68) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Budgeted Amounts Variance from Original Final Actual Final Budget REVENUES Property Taxes $ - $ - $ 34,308,118 $ 34,308,118 Investment Earnings - - 335,066 335,066 Total Revenues - - 34,643,184 34,643,184
EXPENDITURES Debt Service: Principal Retirement 56,980,417 25,362,624 28,635,000 (3,272,376) Interest on Long-Term Debt 9,148,708 9,148,708 5,484,048 3,664,660 Issuance Costs 248,862 248,862 248,862 - Total Expenditures 66,377,987 34,760,194 34,367,910 392,284
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (66,377,987) (34,760,194) 275,274 35,035,468
OTHER FINANCING SOURCES Issuance of Long-Term Debt - - 26,880,000 26,880,000 Premium on Issuance of Long-Term Debt - - 3,907,197 3,907,197 Payment to Escrow Agent - - (30,544,660) (30,544,660) Total Other Financing Sources - - 242,537 242,537
NET CHANGE IN FUND BALANCE (66,377,987) (34,760,194) 517,811 35,278,005
Fund Balance - Beginning of Year - - 1,802,583 1,802,583
FUND BALANCE - END OF YEAR $ (66,377,987) $ (34,760,194) $ 2,320,394 $ 37,080,588
(69) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 CLASSROOM SITE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Intergovernmental $ - $ - $ 11,181,705 $ 11,181,705 Investment Earnings - - 62,823 62,823 Total Revenues - - 11,244,528 11,244,528
EXPENDITURES Current: Instruction 21,983,666 23,935,681 12,965,022 10,970,659
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (21,983,666) (23,935,681) (1,720,494) 22,215,187
Fund Balance - Beginning of Year, as Restated - - 8,554,431 8,554,431
FUND BALANCE - END OF YEAR $ (21,983,666) $ (23,935,681) $ 6,833,937 $ 30,769,618
(70) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 INSTRUCTIONAL IMPROVEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Original and Variance with Final Budget Actual Final Budget REVENUES Intergovernmental $ - $ 1,084,839 $ 1,084,839 Investment Earnings - 316 316 Total Revenues - 1,085,155 1,085,155
EXPENDITURES Current: Instruction 732,436 676,660 55,776 Support Services: Students 108,549 100,283 8,266 Instructional Staff 40,513 37,428 3,085 School Administration 27,061 25,000 2,061 Business and Other Support Services 3,564 3,293 3,690 Operations and Maintenance of Plant 25,821 23,855 1,966 Student Transportation 160,074 147,884 147,884 Operation of Noninstructional Services 1,981 1,830 1,830 Total Expenditures 1,100,000 1,016,233 224,559
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,100,000) 68,922 1,168,922
Fund Balance - Beginning of Year - 310,856 310,856
FUND BALANCE - END OF YEAR $ (1,100,000) $ 379,778 $ 1,479,778
(71) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 SPECIAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Original and Variance with Final Budget Actual Final Budget REVENUES Intergovernmental $ - $ 24,821,320 $ 24,821,320 Investment Earnings - 2,170 2,170 Other - 14,731 14,731 Total Revenues - 24,838,221 24,838,221
EXPENDITURES Current: Instruction 16,175,123 12,786,403 3,388,720 Support Services: Students 4,661,711 3,685,073 976,638 Instructional Staff 8,687,773 6,867,667 1,820,106 General Administration 109,688 86,708 22,980 School Administration 97,752 77,273 20,479 Business and Other Support Services 602,400 476,196 126,204 Operations and Maintenance of Plant 365,758 289,131 76,627 Student Transportation 48,043 37,978 10,065 Total Expenditures 30,748,248 24,306,429 6,441,819
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (30,748,248) 531,792 31,280,040
OTHER FINANCING USES Transfers Out - (358,209) (358,209)
NET CHANGE IN FUND BALANCE (30,748,248) 173,583 30,921,831
Fund Balance - Beginning of Year - 381,871 381,871
FUND BALANCE - END OF YEAR $ (30,748,248) $ 555,454 $ 31,303,702
(72) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 FOOD SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Original and Variance with Final Budget Actual Final Budget REVENUES Intergovernmental $ - $ 11,225,304 $ 11,225,304 Food Service Sales - 765,758 765,758 Investment Earnings - 6,534 6,534 Total Revenues - 11,997,596 11,997,596
EXPENDITURES Current: Support Services Students 130,252 100,938 29,314 Operation of Noninstructional Services 14,869,748 11,523,191 3,346,557 Total Expenditures 15,000,000 11,624,129 3,375,871
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (15,000,000) 373,467 15,373,467
OTHER FINANCING USES Transfers Out - (1,337,765) (1,337,765)
NET CHANGE IN FUND BALANCE (15,000,000) (964,298) 14,035,702
Fund Balance - Beginning of Year - 2,706,295 2,706,295
Decrease in Nonspendable for Inventories - (63,361) (63,361)
FUND BALANCE - END OF YEAR $ (15,000,000) $ 1,678,636 $ 16,678,636
(73) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OTHER SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Original and Variance with Final Budget Actual Final Budget REVENUES Charges for Services $ - $ 1,007,525 $ 1,007,525 Contributions and Donations - 381,234 381,234 Investment Earnings - 4,709 4,709 Total Revenues - 1,393,468 1,393,468
EXPENDITURES Current: Instruction 1,248,343 838,142 410,201 Support Services: Students 8,573 5,756 2,817 Instructional Staff 347 233 114 Business and Other Support Services 98 66 32 Operations and Maintenance of Plant 187,229 125,706 61,523 Student Transportation 29,602 19,875 9,727 Operation of Noninstructional Services 166,390 111,715 54,675 Total Expenditures 1,640,582 1,101,493 539,089
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,640,582) 291,975 1,932,557
Fund Balance - Beginning of Year - 1,494,779 1,494,779
FUND BALANCE - END OF YEAR $ (1,640,582) $ 1,786,754 $ 3,427,336
(74) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 ADJACENT WAYS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Original and Variance with Final Budget Actual Final Budget
REVENUES Property Taxes $ - $ 131,090 $ 131,090 Investment Earnings - 4,404 4,404 Total Revenues - 135,494 135,494
EXPENDITURES Facilities Acquisition 750,000 - 750,000
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (750,000) 135,494 885,494
Fund Balance - Beginning of Year - 673,186 673,186
FUND BALANCE - END OF YEAR $ (750,000) $ 808,680 $ 1,558,680
(75) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 ENERGY AND WATER SAVINGS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2017
Original and Over (Under) Final Budget Actual Final Budget
REVENUES Intergovernmental $ - $ 180,892 $ 180,892 Investment Earnings - 7,158 7,158 Other - 317,425 317,425 Total Revenues - 505,475 505,475
EXPENDITURES Current: Debt Service: Principal Retirement 1,016,843 1,428,036 (411,193) Interest on Long-term Debt 483,157 678,537 (195,380) Total Expenditures 1,500,000 2,106,573 (606,573)
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,500,000) (1,601,098) (101,098)
OTHER FINANCING SOURCES Transfers In - 1,645,907 1,645,907
NET CHANGE IN FUND BALANCE (1,500,000) 44,809 1,544,809
Fund Balance - Beginning of Year - 1,966,247 1,966,247
FUND BALANCE - END OF YEAR $ (1,500,000) $ 2,011,056 $ 3,511,056
(76) INTERNAL SERVICE FUNDS
Other Postemployment Benefits - accounts for the financial activity associated with the District’s other postemployment benefit program.
Employee Benefit Trust - accounts for the financial activity associated with the District’s self-insurance program for employee health benefits. PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING BALANCE SHEET INTERNAL SERVICE FUNDS JUNE 30, 2017
Other Postemployment Employee Benefits Benefit Trust Totals ASSETS Current: Cash and Investments $ 8,673,673 $ 11,383,112 $ 20,056,785
LIABILITIES Current: Claims Payable - 2,822,394 2,822,394 Noncurrent: Other Postemployment Benefits Payable 26,967,012 - 26,967,012 Total Liabilities 26,967,012 2,822,394 29,789,406
NET POSITION Unrestricted $ (18,293,339) $ 8,560,718 $ (9,732,621)
(77) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS FISCAL YEAR ENDED JUNE 30, 2017
Other Postemployment Employee Benefits Benefit Trust Totals OPERATING REVENUES Contributions $ 2,471,616 $ 22,623,144 $ 25,094,760
OPERATING EXPENSES Post Employment Benefits 5,599,839 - 5,599,839 Claims Expense - 15,548,866 15,548,866 Administrative Expense - 1,514,060 1,514,060 Total Expenditures 5,599,839 17,062,926 22,662,765
OPERATING INCOME (LOSS) (3,128,223) 5,560,218 2,431,995
NONOPERATING REVENUES Investment Income 50,815 - 50,815
CHANGE IN NET POSITION (3,077,408) 5,560,218 2,482,810
Net Position - Beginning of Year, as Restated (15,215,931) 3,000,500 (12,215,431)
NET POSITION - END OF YEAR $ (18,293,339) $ 8,560,718 $ (9,732,621)
(78) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FISCAL YEAR ENDED JUNE 30, 2017
Other Postemployment Employee Benefits Benefit Trust Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Contributions $ 2,471,616 $ 22,623,144 $ 25,094,760 Cash Payments for OPEB (2,471,937) - (2,471,937)
Cash Payments for Claims and Administrative Fees - (14,240,532) (14,240,532) Net Cash Provided (Used) by Operating Activities (321) 8,382,612 8,382,291
CASH FLOWS FROM INVESTING ACTIVITIES Investment Income 50,815 - 50,815
NET CHANGE IN CASH AND CASH EQUIVALENTS 50,494 8,382,612 8,433,106
Cash and Cash Equivalents - Beginning of Year 8,623,179 3,000,500 11,623,679
CASH AND CASH EQUIVALENTS - END OF YEAR $ 8,673,673 $ 11,383,112 $ 20,056,785
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) $ (3,128,223) $ 5,560,218 $ 2,431,995 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Increase in OPEB Liability 3,127,902 - 3,127,902 Increase in Claims Payable - 2,822,394 2,822,394 Total Adjustments 3,127,902 2,822,394 5,950,296 Net Cash Provided (Used) by Operating Activities $ (321) $ 8,382,612 $ 8,382,291
(79) AGENCY FUND
Student Activities Fund - accounts for monies raised by students to finance student clubs and organizations but held by the District as an agency. PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUNDS JUNE 30, 2017
Student Activities Account ASSETS Current Assets: Cash and Investments $ 1,636,717
LIABILITIES Due to Student Groups $ 1,636,717
(80) PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FISCAL YEAR ENDED JUNE 30, 2017
Balance Balance July 1, 2016 Additions Deletions June 30, 2017 STUDENT ACTIVITIES FUND
ASSETS Cash and Investments $ 1,534,505 $ 2,384,417 $ (2,282,205) $ 1,636,717
LIABILITIES Due to Student Groups $ 1,534,505 $ 2,384,417 $ (2,282,205) $ 1,636,717
(81) [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX D
CITY OF PHOENIX, ARIZONA
The following information concerning the City is provided for background information only. No attempt has been made to determine what part, if any, of the data presented is applicable to the District; consequently, no representation is made as to the relevance of the data to the District or the Bonds. THE BONDS WILL NOT BE OBLIGATIONS OF THE CITY. The Bonds will be direct obligations of the District, payable solely from ad valorem taxes levied against all taxable property in the District as described under the heading “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS.”
General
The City is the fifth largest city in the United States by population and encompasses an area of approximately 520 square miles. The City is the population center for the State and serves as the State’s capitol.
The following table illustrates respective population statistics for the City.
POPULATION STATISTICS
City of Phoenix
2017 Estimate (a) 1,579,253 2010 Census 1,445,632 2000 Census 1,321,045 1990 Census 983,392 1980 Census 789,704 1970 Census 584,303
(a) Estimate as of July 2017, (data released in December 2017).
Source: Arizona Department of Commerce, Population Statistics Unit and the U.S. Census Bureau.
Municipal Government and Organization
The City was founded in 1870 and incorporated in 1881. The City operates under a Council-Manager form of government as provided in its Charter. The Phoenix City Council consists of the Mayor and eight Council members elected on a non-partisan ballot. The Mayor is elected at large and Council members are elected by voters in each of eight separate districts they represent. The Phoenix City Council appoints advisory boards, commissions, committees, municipal court judges and the city manager. The Phoenix City Manager is responsible for executing Council policies and managing the day-to-day operations of the City.
The City’s government provides numerous services including police and fire protection, city courts, parks, recreation facilities, libraries, sanitation, sewer, water, transportation (including streets and public transit), airports, neighborhood improvement and housing, community and economic development and convention and cultural services.
D-1 Employment
Principal economic activities for the metropolitan Phoenix area include manufacturing, service industries, construction, commerce and tourism. The following table is a partial list of major employers within the Greater Phoenix metropolitan area which includes the City, the cities of Mesa, Glendale, Scottsdale, Chandler, Tempe, Peoria, Surprise, Avondale, Goodyear, Litchfield Park, Buckeye and Tolleson; and the towns of Carefree, Cave Creek, Gilbert, Guadalupe, Fountain Hills, Paradise Valley, Queen Creek, Wickenburg and Youngtown.
MAJOR EMPLOYERS Greater Phoenix Metropolitan Area
Approximate Number of Employer Description Employees
State of Arizona Government 42,690 Banner Health Healthcare 34,780 Wal-Mart Stores Inc. Retail 34,090 Wells Fargo Bank, N.A. Financial services 14,820 City of Phoenix Government 13,775 Maricopa County Government 12,940 Arizona State University Education 12,715 HonorHealth Healthcare 11,295 DignityHealth Healthcare 11,180 Intel Corp Semiconductors 11,000
Source: The City of Phoenix, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017.
The table below illustrates the unemployment rate averages for the City.
UNEMPLOYMENT RATE AVERAGES
Calendar City of Year Phoenix (a)
2018 (b) 4.0% 2017 4.3 2016 4.8 2015 5.4 2014 6.1 2013 6.9
(a) Each year, historical estimates from the Local Area Unemployment Statistics (LAUS) program are revised to reflect new population controls from the Census Bureau, updated input data, and re-estimation. The data for model-based areas also incorporate new seasonal adjustment, and the unadjusted estimates are controlled to new census division and U.S. totals. Sub-state area data subsequently are revised to incorporate updated inputs, re-estimation, and controlling to new statewide totals.
(b) Data through January 2018.
Source: Arizona Office of Unemployment and Population Statistics, in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics.
D-2 Commerce
The table below illustrates the past five years of sales tax collections for Phoenix.
PRIVILEGE (SALES) TAX REVENUE City of Phoenix, Arizona ($000s omitted)
Fiscal Year Amount
2016/17 $799,625 2015/16 756,724 2014/15 727,497 2013/14 719,399 2012/13 697,943
Source: City of Phoenix, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017.
D-3 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E
MARICOPA COUNTY, ARIZONA
The following information regarding the County is provided for background information only. No attempt has been made to determine what part, if any, of the data presented is applicable to the District; consequently no representation is made as to the relevance of the data to the District or the Bonds. THE BONDS WILL NOT BE OBLIGATIONS OF THE COUNTY. The Bonds will be direct obligations of the District, payable solely from ad valorem taxes levied against all taxable property in the District as described under the heading “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS.”
General
The County was named after the Maricopa Indian tribe and was formed as the fifth county of Arizona in 1871. The principal geographic features of the County consist of the expansive river valleys of the Salt and Gila Rivers and a number of rugged mountain ranges scattered throughout the County.
The County encompasses approximately 9,222 square miles, 98 square miles of which is water.
LAND OWNERSHIP Maricopa County, Arizona
Percent of Control/Ownership Land in County
U.S. Forest Service and Bureau of Land Management 39% State of Arizona 11 Indian Reservation 5 Individual or Corporation 29 Other Public Lands 16 Total 100%
Source: Arizona County Profiles, Arizona Department of Commerce.
Municipal Government and Organization
The governmental and administrative affairs of the County are carried out by a Board of Supervisors (the “Board”) comprised of five members who each serve four-year terms. The Board appoints a Chief Administrative Officer who is responsible for carrying out Board policies and administering County operations.
Located within the County are the cities of Avondale, Chandler, Glendale, Goodyear, Litchfield Park, Mesa, Peoria, Phoenix, Scottsdale, Surprise, Tempe and Tolleson; the towns of Carefree, Cave Creek, Fountain Hills, Guadalupe, Gilbert, Paradise Valley, Wickenburg and Youngtown and the unincorporated retirement communities of Sun City and Sun City West, along with several smaller communities.
E-1 The following table illustrates respective population statistics for the principal communities of the County, the County and the State.
POPULATION STATISTICS
City of City of City of City of City of City of Maricopa State of Year Phoenix Mesa Chandler Glendale Scottsdale Tempe County Arizona
2017 Estimate (a) 1,579,253 481,275 257,948 239,858 242,540 179,794 4,221,684 6,965,897 2010 Census 1,445,632 439,041 236,123 226,721 217,385 161,719 3,817,117 6,392,017 2000 Census 1,321,045 396,375 176,581 218,812 202,705 158,625 3,072,149 5,130,632 1990 Census 983,392 288,104 89,862 147,864 130,075 141,993 2,122,101 3,665,339 1980 Census 789,704 152,404 29,673 97,172 88,622 106,920 1,509,175 2,716,546 1970 Census 584,303 63,049 13,763 36,228 67,823 63,550 971,228 1,775,399
(a) Estimate as of July 2017, (data released in December 2017).
Source: Arizona Department of Commerce, Population Statistics Unit and the U.S. Census Bureau.
Economy
The County’s economy is based on high technology manufacturing, light manufacturing and commercial activities (including construction and trade), tourism, government and agriculture. The table below illustrates the employment structure of the County.
NON-AGRICULTURAL EMPLOYMENT STRUCTURE Maricopa County, Arizona
Percent of Total (a)
Mining and construction 5.8% Manufacturing 6.2 Trade, transportation and utilities 19.3 Information 1.8 Financial activities 9.4 Professional and business services 16.9 Educational and health services 15.5 Leisure and hospitality 10.9 Services and miscellaneous 3.2 Government 11.0
Total 100.0%
(a) Data through February 2018.
Source: Arizona Department of Commerce, Research Administration and the U.S. Department of Labor, Bureau of Labor Statistics.
E-2 LABOR FORCE AND NONFARM EMPLOYMENT Maricopa County, Arizona
2018 (a) 2017 2016 2015 2014 2013
Mining and construction 116,700 108,900 104,600 99,200 95,800 93,800 Manufacturing 123,150 119,100 116,500 116,200 114,900 113,800 Trade, transportation, and utilities 386,200 378,400 375,100 366,700 355,600 347,200 Information 35,100 34,200 35,500 35,200 34,300 32,600 Financial activities 186,900 179,700 173,000 165,100 160,200 156,800 Professional and business services 337,850 338,200 331,800 317,500 303,600 296,400 Educational and health services 309,300 294,700 285,300 275,800 263,300 255,200 Leisure and hospitality 217,450 220,000 209,100 202,600 194,200 186,600 Other Services 63,250 59,300 61,600 61,200 61,700 61,200 Government 222,850 218,600 213,300 211,900 213,000 211,800 1,998,750 1,951,100 1,905,800 1,851,400 1,796,600 1,755,400
(a) Data through February 2018.
Source: Arizona Department of Commerce, Research Administration and the U.S. Department of Labor, Bureau of Labor Statistics.
The following table illustrates the unemployment rate averages for the County, the State and the United States of America.
UNEMPLOYMENT RATE AVERAGES
Calendar Maricopa State of United States Year County (a) Arizona (a) of America
2018(a) 4.4% 5.1% 4.5% 2017 4.2 4.9 4.4 2016 4.6 5.4 4.9 2015 5.1 6.1 5.3 2014 5.9 6.4 6.2 2013 6.6 7.9 7.4
(a) Each year, historical estimates from the Local Area Unemployment Statistics (LAUS) program are revised to reflect new population controls from the Census Bureau, updated input data, and re-estimation. The data for model-based areas also incorporate new seasonal adjustment, and the unadjusted estimates are controlled to new census division and U.S. totals. Substate area data subsequently are revised to incorporate updated inputs, re-estimation, and controlling to new statewide totals. (b) Data through January 2018.
Source: Arizona Office of Unemployment and Population Statistics, in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics.
E-3 Retail Sales
The following table illustrates retail sales for the County.
TAXABLE RETAIL SALES Maricopa County, Arizona ($000s omitted)
Taxable Calendar Retail Year Sales (a)
2018 (b) $8,640,859 2017 45,551,808 2016 43,659,386 2015 42,117,666 2014 38,918,760 2013 36,395,127
(a) The statutory definition of “Retail Sales” is the business of selling tangible personal property at retail. Therefore, this class does not include services or hotels, restaurants or food sales.
(b) Data through February 2018.
Source: Arizona Department of Revenue, Office of Economic Research and Analysis.
Bank Deposits
The following table illustrates bank deposits for the County.
BANK DEPOSITS Maricopa County, Arizona ($ in millions)
Fiscal Year Amount
2017 $92,568 2016 84,103 2015 76,889 2014 70,254 2013 65,486
Source: Federal Deposit Insurance Corporation.
E-4 APPENDIX F
FORM OF APPROVING LEGAL OPINION
[Closing Date]
GOVERNING BOARD PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA
We have examined the transcript of proceedings relating to the issuance by Phoenix Union High School District No. 210 (the "District") of Maricopa County, Arizona (the "County"), of the District's $148,855,000* aggregate principal amount of School Improvement Bonds, Projects of 2011 and 2017, Series 2018 (the "Bonds"). The Bonds are dated [Closing Date], and bear interest payable January 1 and July 1 of each year to maturity, commencing January 1, 2019*.
As to questions of fact material to our opinion we have relied upon, and assumed due and continuing compliance with the provisions of, the proceedings and other documents, and have relied upon certifications, covenants and representations furnished to us without undertaking to verify the same by independent investigation, including, without limitation, those with respect to causing interest on the Bonds to be and remain excluded from gross income for federal income tax purposes.
Based upon the foregoing, we are of the opinion, as of this date, which is the date of initial delivery of the Bonds against payment therefor, that:
1. The Bonds are valid and binding general obligations of the District.
2. All of the taxable property within the District is subject to the levy of a direct, annual, ad valorem tax to pay the principal of and interest on the Bonds without limit as to rate or amount. It is required by law that the Board of Supervisors of the County levy, at the time of making the levy of taxes for County purposes, an annual tax upon the taxable property in the District sufficient to pay the principal of and interest on the Bonds when due.
3. Under existing laws, regulations, rulings and judicial decisions, the interest income on the Bonds is excludable from gross income for the purpose of calculating federal income taxes and is exempt from Arizona income taxes. Interest income on the Bonds is not an item of tax preference to be included in computing the alternative minimum tax of individuals or corporations; however, such interest income may need to be taken into account for federal income tax purposes as an adjustment to alternative minimum taxable income for certain corporations which income is subject to federal alternative minimum tax for taxable years beginning before January 1, 2018. The Bonds are not private activity bonds within the meaning of Section 141 of the Internal Revenue Code of 1986, as amended (the "Code"). We express no opinion regarding other federal tax consequences arising with respect to the Bonds.
The Code imposes various restrictions, conditions and requirements relating to the continued exclusion of interest income on the Bonds from gross income for federal income tax purposes, including a requirement that the District rebate to the federal government certain investment earnings with respect to the Bonds. Failure to comply with such restrictions, conditions and requirements could result in the interest income on the Bonds being included as gross income for federal income tax purposes from their date of issuance. The District has
* Subject to change.
F-1 covenanted to comply with the restrictions, conditions and requirements of the Code necessary to preserve the tax- exempt status of the Bonds. For purposes of this opinion we have assumed continuing compliance by the District with such restrictions, conditions and requirements.
The rights of the owners of the Bonds and the enforceability of those rights may be subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and the enforcement of those rights may be subject to the exercise of judicial discretion in accordance with general principles of equity.
GUST ROSENFELD P.L.C.
By
James T. Giel
F-2 APPENDIX G
FORM OF CONTINUING DISCLOSURE CERTIFICATE
$148,855,000* PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA, SCHOOL IMPROVEMENT BONDS, PROJECTS OF 2011 AND 2017, SERIES 2018
CONTINUING DISCLOSURE CERTIFICATE (CUSIP Base No. 567505)
This Continuing Disclosure Certificate (this “Disclosure Certificate”) is undertaken by Phoenix Union High School District No. 210 of Maricopa County, Arizona (the “District”) in connection with the issuance of its $148,855,000* School Improvement Bonds, Projects of 2011 and 2017, Series 2018 (the “Bonds”). In consideration of the initial sale and delivery of the Bonds, the District covenants as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is for the benefit of the Bondholders (as defined herein) and in order to assist the Participating Underwriter (as defined herein) in complying with the Rule (as defined herein).
Section 2. Definitions. Any capitalized term used herein shall have the following meanings, unless otherwise defined herein:
“Annual Report” shall mean the annual report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Audited Financial Statements” shall mean the District’s annual financial statements, which are currently prepared in accordance with generally accepted accounting principles (GAAP) for governmental units as prescribed by the Governmental Accounting Standards Board (GASB) and which the District intends to continue to prepare in substantially the same form.
“Bondholder” shall mean any registered owner or beneficial owner of the Bonds.
“Bond Counsel” shall mean Gust Rosenfeld P.L.C. or such other nationally recognized bond counsel as may be selected by the District.
“Dissemination Agent” shall mean the District, or any person designated in writing by the District as the Dissemination Agent.
“EMMA” shall mean the Electronic Municipal Market Access system of MSRB, or any successor thereto approved by the United States Securities and Exchange Commission, as a repository for municipal continuing disclosure information pursuant to the Rule.
“Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Certificate.
“MSRB” shall mean the Municipal Securities Rulemaking Board, or any successor thereto.
“Official Statement” shall mean the final official statement dated ______, 2018 relating to the Bonds.
* Subject to change.
G-1 “Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 3. Provision of Annual Reports.
(a) Commencing February 1, 2019, and by no later than February 1 of each year thereafter (the “Filing Date”), the District shall, either directly or by directing the Dissemination Agent to do so, provide an Annual Report to MSRB. The Annual Report shall be provided electronically and in a format prescribed by the MSRB. The Annual Report shall be consistent with the requirements of Section 4 of this Disclosure Certificate and shall include information from the fiscal year ending on the preceding June 30. All documents provided to MSRB shall be accompanied by identifying information prescribed by MSRB. Currently, filings are required to be made with EMMA. Not later than fifteen (15) business days prior to such Filing Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District).
(b) If the District is unable or for any reason fails to provide electronically to EMMA an Annual Report or any part thereof by the Filing Date required in subsection (a) above, the District shall, in a timely manner, send a notice to EMMA in substantially the form attached as Exhibit A not later than the Filing Date.
(c) If the District's Audited Financial Statements are not submitted with the Annual Report and the District fails to provide to EMMA a copy of its Audited Financial Statements within thirty (30) days of receipt thereof by the District, then the District shall, in a timely manner, send a notice to EMMA in substantially the form attached as Exhibit B.
(d) The Dissemination Agent shall:
(i) Determine the proper electronic filing address of EMMA each year prior to the date(s) for providing the Annual Report and Audited Financial Statements; and
(ii) If the Dissemination Agent is other than the District, file a report or reports with the District certifying that the Annual Report and Audited Financial Statements, if applicable, have been provided pursuant to this Disclosure Certificate, stating the date such information was provided and listing where it was provided.
Section 4. Content of Annual Reports.
(a) The Annual Report may be submitted as a single document or as separate documents comprising an electronic package, and may incorporate by reference other information as provided in this Section, including the Audited Financial Statements of the District; provided, however, that if the Audited Financial Statements of the District are not available at the time of the filing of the Annual Report, the District shall file unaudited financial statements of the District with the Annual Report and, when the Audited Financial Statements of the District are available, the same shall be submitted to EMMA within 30 days of receipt by the District.
(b) The District's Annual Report shall contain or incorporate by reference the following:
(i) Type of Financial and Operating Data to be Provided:
(A) Subject to the provisions of Sections 3 and 4(a) hereof, Audited Financial Statements for the District.
G-2 (B) Annually updated financial information and operating data of the type contained in the following tables of the Official Statement:
Table 2 – Average Daily Membership; Table 6 – Real and Secured Property Taxes Levied and Collected; and Table 13 – Direct General Obligation Bonded Debt Outstanding and to be Outstanding.
(C) In the event of an amendment pursuant to Section 8 hereof not previously described in an Annual Report, an explanation, in narrative form, of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided and, if the amendment is made to the accounting principles to be followed, a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles, including a qualitative discussion of the differences, and the impact on the presentation and, to the extent feasible, a quantitative comparison.
(ii) Accounting Principles Pursuant to Which Audited Financial Statements Shall Be Prepared: The Audited Financial Statements shall be prepared in accordance with generally accepted accounting principles and state law requirements as are in effect from time to time. A more complete description of the accounting principles currently followed in the preparation of the District's Audited Financial Statements is contained in Note 1 of the Audited Financial Statements included within the Official Statement.
(c) Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from EMMA. The District shall clearly identify each such other document so incorporated by reference.
Section 5. Reporting of Listed Events.
This Section 5 shall govern the giving of notices by the District of the occurrence of any of the following events with respect to the Bonds. The District shall in a timely manner, not in excess of ten (10) business days after the occurrence of the event, provide notice of the following events with EMMA:
(1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service (the “IRS”) of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) Modifications to rights of Bondholders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the District; (13) 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, if material; and (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
“Materiality” will be determined in accordance with the applicable federal securities laws.
G-3 Note to Section 5(12): For the purposes of the event identified in Section 5(12), 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 governing 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.
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. Such termination shall not terminate the obligation of the District to give notice of such defeasance or prior redemption.
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.
Section 8. Amendment. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate if:
(a) The amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in identity, nature or status of the District, or the type of business conducted;
(b) This Disclosure Certificate, as amended, would, in the opinion of Bond Counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) The amendment does not materially impair the interests of Bondholders, as determined by Bond Counsel.
Notice of amendment to the accounting principles shall be sent within thirty (30) days to EMMA.
Section 9. Filing with EMMA. The District shall, or shall cause the Dissemination Agent to, electronically file all items required to be filed with EMMA.
Section 10. Additional Information. The District may, at the District's election, 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. If the District chooses to include such information, 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 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Bondholder may seek specific performance by court order to cause the District to comply with its obligations under this Disclosure Certificate. 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 and such failure shall not constitute a default under the Bonds or the resolution authorizing the Bonds.
Section 12. Compliance by District. The District hereby covenants to comply with the terms of this Disclosure Certificate. The District expressly acknowledges and agrees that compliance with the undertaking contained in this Disclosure Certificate is its sole responsibility and the responsibility of the Dissemination Agent, if any, and that such compliance, or monitoring thereof, is not the responsibility of, and no duty is present with respect thereto for, the Participating Underwriter or Bond Counsel.
Section 13. Subject to Appropriation. Pursuant to Arizona law, the District's undertaking to provide information under this Disclosure Certificate is subject to appropriation to cover the costs of preparing and sending the Annual Report and notices of Listed Events to EMMA. Should funds that would enable the District to provide the
G-4 information required to be disclosed hereunder not be appropriated, then notice of such fact will be made in a timely manner to EMMA in the form of Exhibit C attached hereto.
Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and the Bondholders, and shall create no rights in any other person or entity.
Section 15. Governing Law and Interpretation of Terms. This Disclosure Certificate shall be governed by the law of the State of Arizona and any action to enforce this Disclosure Certificate must be brought in an Arizona state court. The terms and provisions of this Disclosure Certificate shall be interpreted in a manner consistent with the interpretation of such terms and provisions under the Rule and the federal securities law.
Date: [Closing Date]
PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA
By ______Its ______
G-5 EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Phoenix Union High School District No. 210 of Maricopa County, Arizona Name of Bond Issue: $148,855,000* School Improvement Bonds, Projects of 2011 and 2017, Series 2018 Dated date of Bonds: [Closing Date] CUSIP: 567505
NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by Section 3(a) of the Continuing Disclosure Certificate dated [Closing Date]. The District anticipates that the Annual Report for fiscal year ended June 30, _____ will be filed by ______.
Dated: ______Phoenix Union High School District No. 210 of Maricopa County, Arizona By______Its ______------EXHIBIT B
NOTICE OF FAILURE TO FILE AUDITED FINANCIAL STATEMENTS
Name of Issuer: Phoenix Union High School District No. 210 of Maricopa County, Arizona Name of Bond Issue: $148,855,000* School Improvement Bonds, Projects of 2011 and 2017, Series 2018 Dated date of Bonds: [Closing Date] CUSIP: 567505
NOTICE IS HEREBY GIVEN that the District failed to provide its Audited Financial Statements with its Annual Report or, if not then available, within 30 days of receipt as required by Section 4(a) of the Continuing Disclosure Certificate dated [Closing Date], with respect to the above-named Bonds. The District anticipates that the Audited Financial Statements for the fiscal year ended June 30, ____ will be filed by ______.
Dated: ______Phoenix Union High School District No. 210 of Maricopa County, Arizona By______Its ______------EXHIBIT C
NOTICE OF FAILURE TO APPROPRIATE FUNDS
Name of Issuer: Phoenix Union High School District No. 210 of Maricopa County, Arizona Name of Bond Issue: $148,855,000* School Improvement Bonds, Projects of 2011 and 2017, Series 2018 Dated date of Bonds: [Closing Date] CUSIP: 567505
NOTICE IS HEREBY GIVEN that the District failed to appropriate funds necessary to perform the undertaking required by the Continuing Disclosure Certificate dated [Closing Date].
Dated: ______Phoenix Union High School District No. 210 of Maricopa County, Arizona By______Its ______
* Subject to change.
G-6 APPENDIX H
BOOK-ENTRY-ONLY SYSTEM
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds 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 Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the 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 Securities 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” and together with the Direct Participants, the “Participants”). DTC has 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.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“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 Bonds 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds 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 Bonds 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 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds 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.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the
H-1 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Registrar and Paying Agent and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Payment of principal of and interest on the Bonds and the redemption price of any Bond will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Bond Registrar and 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 Bond Registrar and Paying Agent or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of and interest on the Bonds and the redemption price of any Bonds will be made to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or Bond Registrar and 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.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Bond Registrar and Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.
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PHOENIX UNION HIGH SCHOOL DISTRICT NO. 210 OF MARICOPA COUNTY, ARIZONA • SCHOOL IMPROVEMENT BONDS, PROJECTS OF 2011 AND 2017, SERIES 2018