2016-1025 and 2016-1048
NEW ISSUE - FULL BOOK-ENTRY INSURED RATINGS (2014A Bonds Only): S&P: “AA” Kroll: “AA+” UNDERLYING RATING (2012C & 2014A Bonds): S&P: “A+” See “RATINGS” herein. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MATTERS." $4,860,000 2016-1025 $30,000,000 2016-1048 JEFFERSON UNION HIGH SCHOOL DISTRICT JEFFERSON UNION HIGH SCHOOL DISTRICT (San Mateo County, California) (San Mateo County, California) General Obligation Bonds General Obligation Bonds 2012 Election, Series C 2014 Election, Series A (GO Reauthorization Bonds®) Dated: Date of Delivery Due: August 1, as shown on inside cover Cover Page. This cover page contains information for quick reference only. It is not a summary of all the provisions of the Bonds. Investors must read the entire official statement to obtain information essential in making an informed investment decision. Authority and Purpose. The captioned General Obligation Bonds (the “2012C Bonds” and the “2014A Bonds,” together referred to herein as the “Bonds”) are being issued by the Jefferson Union High School District (the “District”) pursuant to certain provisions of the California Government Code and resolutions of the Board of Trustees of the District adopted on April 19, 2016 (together referred to herein as the “Bond Resolution”). The Bonds were authorized at elections of the registered voters of the District held on November 6, 2012 and November 4, 2014, respectively, which authorized and reauthorized the issuance of general obligation bonds for the purpose of financing school facility projects. The 2012C Bonds are the third series of bonds to be issued pursuant to the authority of the November 6, 2012 election, and the 2014A Bonds are the first series issued pursuant to the authority of the November 4, 2014 election. See “THE BONDS – Authority for Issuance” and “THE FINANCING PLAN” herein. Security. The Bonds are general obligations of the District. The Board of Supervisors of San Mateo County has the power and is obligated to annually levy ad valorem taxes upon all property subject to taxation by the District without limitation of rate or amount (except certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Bonds. The District has other outstanding issues of general obligation bonds and refunding general obligation bonds which are similarly payable from ad valorem taxes levied on parcels in the District and will be payable on a pro rata basis with the Bonds. See “SECURITY FOR THE BONDS.” Payments. Interest on the Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2017, by check, draft or wire mailed to the person in whose name the Bond is registered. Payments of principal and interest on the Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., agent for the San Mateo County Treasurer-Tax Collector, as paying agent for the Bonds (the “Paying Agent”), to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. See “THE BONDS – Description of the Bonds.” Redemption. The 2014A Bonds are subject to optional redemption prior to maturity as described herein. The 2012C Bonds are not subject to optional redemption. See discussion of redemption under the heading “THE BONDS.” Book-Entry Only. The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). Purchasers will not receive physical certificates representing their interests in the Bonds. See “APPENDIX F – Book-Entry-Only System.” Bond Insurance. The scheduled payment of principal of and interest on the 2014A Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the 2014A Bonds by ASSURED GUARANTY MUNICIPAL CORP. See “BOND INSURANCE FOR 2014A BONDS” herein.
MATURITY SCHEDULE (See inside front cover) The Bonds were sold and awarded pursuant to a competitive bidding process held on Tuesday, May 3, 2016, as set forth in two separate Official Notices of Sale with respect to the 2012C Bonds and the 2014A Bonds, respectively. The Bonds are offered when, as and if issued, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters also will be passed upon for the District by Jones Hall, A Professional Law Corporation, San Francisco, California, as Disclosure Counsel. It is anticipated that the Bonds in definitive form will be available for delivery to Cede & Co., as nominee of The Depository Trust Company, on or about May 17, 2016, in New York, New York. The date of this Official Statement is May 3, 2016. . MATURITY SCHEDULES BASE CUSIP(†):472466 $4,860,000 JEFFERSON UNION HIGH SCHOOL DISTRICT (San Mateo County, California) General Obligation Bonds 2012 Election, Series C (GO Reauthorization Bonds®) Maturity Date Principal (August 1) Amount Interest Rate Yield Price CUSIP† 2017 $950,000 5.000% 0.600% 105.276% M65 2018 1,140,000 5.000 0.700 109.393 M73 2019 1,300,000 5.000 0.900 112.924 M81 2020 1,470,000 2.000 1.000 104.107 M99
$30,000,000 JEFFERSON UNION HIGH SCHOOL DISTRICT (San Mateo County, California) General Obligation Bonds 2014 Election, Series A Maturity Date Principal (August 1) Amount Interest Rate Yield Price CUSIP† 2017 $3,455,000 4.000% 0.600% 104.077% J51 2018 315,000 4.000 0.700 107.209 J69 2019 355,000 4.000 0.830 110.006 J77 2020 410,000 4.000 0.960 112.499 J85 2021 460,000 4.000 1.100 114.631 J93 2022 510,000 4.000 1.270 116.239 K26 2023 565,000 5.000 1.410 124.513 K34 2024 625,000 5.000 1.520 126.748 K42 2025 690,000 5.000 1.660 128.401 K59 2026 755,000 5.000 1.790 129.817 K67 2027 825,000 5.000 1.930 128.312C K75 2028 905,000 5.000 2.040 127.143C K83 2029 985,000 5.000 2.130 126.197C K91 2030 1,070,000 5.000 2.180 125.674C L25 2031 1,160,000 5.000 2.240 125.051C L33 2032 1,255,000 3.000 3.000 100.000 L41 2033 1,355,000 3.000 3.020 99.730 L58 2034 1,445,000 3.000 3.040 99.441 L66 2035 1,545,000 3.000 3.060 99.130 L74 2036 1,645,000 3.000 3.080 98.800 L82 2037 1,735,000 3.000 3.100 98.451 L90 2038 1,830,000 3.000 3.110 98.242 M24 2039 1,930,000 3.000 3.130 97.864 M32 2040 2,035,000 3.000 3.150 97.469 M40 2041 2,140,000 3.000 3.170 97.061 M57
† Copyright 2016, American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. The District does not assume any responsibility for the accuracy of these CUSIP data. C Priced to first optional par call on August 1, 2026. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any bond owner and the District or the Purchasers. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the District or the Purchasers 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 representation must not be relied upon as having been authorized by the District or the Purchasers. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Information in Official Statement. The information set forth in this Official Statement has been furnished by the District and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the District in any press release and in any oral statement made with the approval of an authorized officer of the District or any other entity described or referenced herein, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward- looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. 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 hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the District or any other entity described or referenced herein since the date hereof. Involvement of Purchasers. The following statement has been included in this Official Statement on behalf of the Purchasers of the Bonds: The Purchasers have reviewed the information in this Official Statement in accordance with, and as a part of, their responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Purchasers do not guarantee the accuracy or completeness of such information. Insurer’s Disclaimer. Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the 2014A Bonds or the advisability of investing in the 2014A Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “Bond Insurance” and “Appendix H- Specimen Municipal Bond Insurance Policy”. Stabilization of and Changes to Offering Prices. The Purchasers may overallot or take other steps that stabilize or maintain the market prices of the Bonds at levels above that which might otherwise prevail in the open market. If commenced, the Purchasers may discontinue such market stabilization at any time. The Purchasers may offer and sell the Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Purchasers. Document Summaries. All summaries of the Bond Resolution or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions. No Securities Laws Registration. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Bonds have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the District, the County, the other parties described in this Official Statement, or the condition of the property within the District since the date of this Official Statement. Website. The District maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. JEFFERSON UNION HIGH SCHOOL DISTRICT
BOARD OF TRUSTEES
Rosie U. Tejada, President Nick Occhipinti, Vice President Kalimah Y. Salahuddin, Clerk Andrew Lie, Trustee Jeanne L. Matysiak, Trustee
DISTRICT ADMINISTRATION
Thomas Minshew, Superintendent* Steven Fuentes, Associate Superintendent, Business Services
PROFESSIONAL SERVICES
FINANCIAL ADVISOR
Dale Scott & Company Inc. San Francisco, California
BOND AND DISCLOSURE COUNSEL
Jones Hall, A Professional Law Corporation San Francisco, California
BOND REGISTRAR, TRANSFER AGENT AND PAYING AGENT
San Mateo County Treasurer-Tax Collector through its agent The Bank of New York Mellon Trust Company, N.A. Los Angeles, California
*Superintendent Minshew is retiring on or about June 30, 2016. The District Board is in the process of identifying and selecting a successor. TABLE OF CONTENTS Page INTRODUCTION ...... 1 The District ...... 1 Sources of Payment for the Bonds ...... 1 Purpose of Issues ...... 1 Authority for Issuance ...... 2 Description of the Bonds ...... 2 Legal Matters ...... 2 Tax Matters ...... 3 Offering and Delivery of the Bonds ...... 3 Continuing Disclosure ...... 3 Other Information ...... 3 THE FINANCING PLAN ...... 4 Purpose of 2012C Bonds ...... 4 Purpose of 2014A Bonds ...... 4 SOURCES AND USES OF FUNDS ...... 5 THE BONDS ...... 5 Authority for Issuance ...... 5 Purpose of Issues ...... 5 Paying Agent ...... 5 Description of the Refunding Bonds ...... 6 No Optional Redemption of Series 2012C Bonds ...... 6 Optional Redemption of 2014A Bonds ...... 6 Selection of Refunding Bonds for Redemption ...... 7 Notice of Redemption ...... 7 Partial Redemption of Refunding Bonds ...... 7 Right to Rescind Notice of Redemption ...... 7 Registration, Transfer and Exchange of Refunding Bonds ...... 8 Defeasance ...... 8 Book-Entry-Only System ...... 9 APPLICATION OF PROCEEDS OF THE BONDS ...... 10 Building Fund for 2014A Bonds ...... 10 Application of 2012C Bond Proceeds ...... 10 Debt Service Funds ...... 10 Investment of Proceeds of Bonds ...... 11 SECURITY FOR THE REFUNDING BONDS ...... 12 Ad Valorem Taxes ...... 12 Debt Service Funds ...... 13 Not a County Obligation ...... 13 DEBT SERVICE SCHEDULE ...... 14 PROPERTY TAXATION ...... 16 Property Tax Collection Procedures ...... 16 Taxation of State-Assessed Utility Property ...... 17 Historic Assessed Valuations ...... 17 Per Parcel Assessed Valuation of Single-Family Homes ...... 20 Reassessments and Appeals of Assessed Values ...... 20 Teeter Plan; Property Tax Collections ...... 21 Tax Rates ...... 22 Top Twenty Property Taxpayers ...... 23 Direct and Overlapping Debt Obligations ...... 24 SAN MATEO COUNTY INVESTMENT POOL ...... 25 BOND INSURANCE FOR 2014A BONDS ...... 25 Bond Insurance Policy ...... 25 Assured Guaranty Municipal Corp...... 25 CONTINUING DISCLOSURE ...... 27 CERTAIN LEGAL MATTERS ...... 28 Absence of Material Litigation ...... 28 Legal Opinion ...... 28 TAX MATTERS ...... 28 RATINGS ...... 30 COMPETITIVE SALE OF BONDS ...... 30 COMPENSATION OF PROFESSIONALS ...... 31 ADDITIONAL INFORMATION ...... 31
APPENDIX A - Audited Financial Statements of the District For Fiscal Year Ending June 30, 2015 ...... A-1 APPENDIX B - General and Financial Information About the District ...... B-1 APPENDIX C - Demographic Information About the City of Daly City and San Mateo County ...... C-1 APPENDIX D - Form of Opinions of Bond Counsel ...... D-1 APPENDIX E - Form of Continuing Disclosure Certificate ...... E-1 APPENDIX F - Book-Entry Only System ...... F-1 APPENDIX G - San Mateo County Investment Policy and Investment Report ...... G-1 APPENDIX H - Specimen Municipal Bond Insurance Policy for 2014A Bonds ...... H-1
-i- $4,860,000 $30,000,000 JEFFERSON UNION HIGH SCHOOL DISTRICT JEFFERSON UNION HIGH SCHOOL DISTRICT (San Mateo County, California) (San Mateo County, California) General Obligation Bonds General Obligation Bonds 2012 Election, Series C 2014 Election, Series A (GO Reauthorization Bonds®) INTRODUCTION
This Official Statement, which includes the cover page and appendices hereto, provides information in connection with the sale and delivery of the general obligation bonds captioned above (the “2012C Bonds” and the “2014A Bonds,” and together, the “Bonds”).
This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.
The District
The District, located south of San Francisco in San Mateo County (the “County”), is comprised of approximately 35 square miles located in the cities of Daly City, Colma, Brisbane and Pacifica. Currently, the District operates five high schools, as follows: Jefferson High School, Terra Nova High School, Thornton High School, Westmoor High School and Oceana High School. In addition, the District maintains one adult education facility. Enrollment for fiscal year 2015-16 is approximately 4,700 students. For more information regarding the District and its finances, see Appendix A and Appendix B attached hereto. See also Appendix C hereto for demographic and other information regarding the City of Daly City and the County.
Sources of Payment for the Bonds
The Bonds are general obligation bonds of the District payable from ad valorem taxes. The Board of Supervisors of the County has the power and is obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the District subject to taxation without limitation of rate or amount (except certain personal property which is taxable at limited rates). See “SECURITY FOR THE BONDS” and “PROPERTY TAXATION.”
Purpose of Issues
The net proceeds of the 2012C Bonds will be used to pay at maturity on June 1, 2016 the issue of 2011 Taxable Bond Anticipation Note (Direct-Pay Qualified School Construction Bonds) which were issued by the District on June 16, 2011 in the aggregate principal amount of $4,860,000 (the “2011 Notes”). The 2011 Notes were issued to provide interim financing for the construction and improvement to District facilities as approved by the voters at an election held in the District on November 7, 2006, which were reauthorized at an election held in the District on November 6, 2012 (the “2012 Election”). The 2011 Notes are payable upon its maturity from a series of bonds issued pursuant to the 2012 Election. The net proceeds of the 2014A Bonds will be used to finance construction and improvements to District facilities as approved by voters at an election held in the District on November 4, 2014 (the “2014 Election”). See “THE FINANCING PLAN” and “APPLICATION OF PROCEEDS OF THE BONDS” herein.
Authority for Issuance
The Bonds will be issued pursuant to the authority of the 2012 Election and the 2014 Election, respectively, certain provisions of the Government Code of the State, commencing with Section 53506 thereof (the “Bond Law”), and pursuant to resolutions adopted by the Board of Trustees of the District on April 19, 2016 (each, a “Bond Resolution” and together, referred to herein as the “Bond Resolutions”). See “THE BONDS - Authority for Issuance” herein.
Description of the Bonds
Generally. The Bonds are issued as current interest bonds and mature in the years and in the amounts as set forth on the inside cover page hereof. The Bonds will be issued in book- entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for DTC. Purchasers will not receive physical certificates representing their interest in the Bonds. See “THE BONDS – Description of the Bonds,” “– Book-Entry Only System” and “APPENDIX F – Book-Entry Only System.”
Redemption. The 2014A Bonds are subject to optional redemption prior to maturity as described herein. The 2012C Bonds are not subject to optional redemption prior to maturity. The Bonds may be subject to mandatory sinking fund redemption at the option of the bidders. See discussion of redemption features under the heading “THE BONDS” herein.
Bond Insurance
The scheduled payment of principal of and interest on the 2014A Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the 2014A Bonds by Assured Guaranty Municipal Corp. See “BOND INSURANCE.” The 2012C Bonds are not insured by said policy.
Legal Matters
Issuance of the Bonds is subject to the approving opinions of Jones Hall, A Professional Law Corporation, San Francisco, California, as bond counsel (“Bond Counsel”), to be delivered in substantially the respective forms attached hereto as Appendix D. Jones Hall, A Professional Law Corporation, San Francisco, California, will also serve as disclosure counsel to the District (“Disclosure Counsel”). See “APPENDIX D – Forms of Opinions of Bond Counsel.”
-2- Tax Matters
Assuming compliance with certain covenants and provisions of the Internal Revenue Code of 1986, as amended (the “Tax Code”), in the opinion of Bond Counsel, interest on the Bonds will not be includable in gross income for federal income tax purposes although it may be includable in the calculation for certain taxes. Also, in the opinion of Bond Counsel, interest on the Bonds will be exempt from State of California (the “State”) personal income taxes. See “TAX MATTERS” herein.
Offering and Delivery of the Bonds
The Bonds are offered when, as and if issued and received by the purchasers, subject to approval as to the legality by Bond Counsel. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about May 17, 2016. The District has applied for municipal bond insurance for the Bonds, and obtaining an insurance policy, if any, will be at bidder's option.
Continuing Disclosure
The District has covenanted and agreed that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. The form of the Continuing Disclosure Certificate is included in Appendix E hereto. See also “CONTINUING DISCLOSURE” herein.
Other Information
This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change. Copies of documents referred to in this Official Statement and information concerning the Bonds are available from the District from the Superintendent’s Office at 699 Serramonte Boulevard, Suite 100, Daly City, California, telephone 650-550-7900. The District may impose a charge for copying, mailing and handling.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each of such documents, statutes and constitutional provisions.
The information set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.
END OF INTRODUCTION
-3- THE FINANCING PLAN
The Bonds will be issued pursuant to the authority of the 2012 Election and the 2014 Election, respectively, the Bond Law and the Bond Resolutions.
Purpose of 2012C Bonds
The abbreviated form of the ballot measure presented to voters at the 2012 Election is as follows:
“To continue renovating, equipping and constructing classrooms /school facilities including Jefferson, Oceana, Terra Nova, Thornton and Westmoor High Schools and reduce overall borrowing costs, shall $41,900,000 of Jefferson Union High School District bonds, previously approved by voters in November 2006, be reauthorized through issuance of new bonds, with no increase in total authorized District debt, interest rates below legal limits, independent citizen oversight, no money for administrator salaries, and funds spent locally and not taken by the State?”
The District has previously issued two series of bonds pursuant to the authority of the 2012 Election, in addition to the 2011 Notes which financed voter-approved projects and which are payable at maturity from the proceeds of bonds issued pursuant to the 2012 Election. The 2012C Bonds described here will be the third and final series of bonds issued pursuant to the authority of the 2012 Election, and the proceeds will be applied to the payment of the 2011 Notes at maturity on June 1, 2016 and related issuance costs.
Purpose of 2014A Bonds
The abbreviated form of the ballot measure presented to voters at the 2014 Election is as follows:
“To repair and replace leaky roofs, gutters and drains; upgrade classrooms with up-to-date computers and technology; and repair and construct classrooms, libraries and educational facilities at Jefferson, Oceana, Terra Nova, Thornton, Westmoor and Adult-Ed High Schools; shall Jefferson Union High School District be authorized to issue $133,000,000 of bonds with interest rates below legal limits, independent citizen oversight, no money for administrator salaries, all funds spent locally and no funds taken by the State?”
The 2014A Bonds described herein are the first series of bonds to be issued pursuant to the authority of the 2014 Election, and the proceeds will be applied to the payment of projects approved by District voters at the 2014 Election and related issuance costs.
-4- SOURCES AND USES OF FUNDS
The estimated sources and uses of funds with respect to the Bonds are as follows:
Sources of Funds 2012C Bonds 2014A Bonds Principal Amount of Bonds $4,860,000.00 $30,000,000.00 Net Original Issue Premium 385,587.10 2,170,188.75 Total Sources 5,245,587.10 32,170,188.75
Uses of Funds Deposit to Building Fund -- $30,000,000.00 Deposit to 2011 Note Repayment Fund $4,860,000.00 -- Debt Service Fund 256,564.44 1,299,381.75 Costs of Issuance(1) 129,022.66 870,807.00 Total Uses $5,245,587.10 $32,170,188.75
(1) All estimated costs of issuance including, but not limited to, Purchasers’ discount, printing costs, and fees of Bond Counsel, Disclosure Counsel, Financial Advisor, bond insurance premium for the 2014A Bonds, Paying Agent, and the rating agencies.
See also “APPLICATION OF PROCEEDS OF THE BONDS” herein.
THE BONDS
Authority for Issuance
The Bonds will be issued pursuant to the authority of the 2012 Election and the 2014 Election, respectively, the Bond Law and the Bond Resolutions.
Purpose of Issues
The Bonds are being issued by the District to provide funds to finance the school projects summarized herein under the heading “THE FINANCING PLAN,” including to pay when due interim financing provided for such projects.
Paying Agent
The Bank of New York Mellon Trust Company, N.A., agent for the San Mateo County Treasurer-Tax Collector, as paying agent, will act as the registrar, transfer agent, and paying agent for the Bonds (the “Paying Agent”). As long as DTC is the registered owner of the Bonds and DTC's book-entry method is used for the Bonds, the Paying Agent will send any notice of prepayment or other notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the prepayment of the Bonds called for prepayment or of any other action premised on such notice.
The Paying Agent, the District and the County have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for
-5- maintaining, supervising or reviewing any records relating to beneficial ownership of interests in the Bonds.
Description of the Bonds
The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for The Depository Trust Company (“DTC”). Purchasers will not receive physical certificates representing their interest in the Bonds. See "Book-Entry Only System" below and “APPENDIX F – Book-Entry Only System.”
Interest on the Bonds accrues from the date of original delivery (the “Dated Date”) and is payable semiannually on February 1 and August 1 of each year (each, an “Interest Payment Date”) commencing February 1, 2017. Each Bond will bear interest from the Interest Payment Date next preceding the date of registration and authentication thereof unless (i) it is registered and authenticated as of an Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is registered and authenticated prior to an Interest Payment Date and after the close of business on the 15th day of the month preceding such Interest Payment Date (each, a “Record Date”), in which event it shall bear interest from such Interest Payment Date, or (iii) it is registered and authenticated prior to January 15, 2017, in which event it will bear interest from the date of original delivery; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
Interest on the Bonds, including the final interest payment upon maturity, is payable by check, draft or wire of the Paying Agent mailed on the Interest Payment Date by first-class mail to the Owner thereof at such Owner’s address as it appears on the bond register maintained by the Paying Agent at the close of business on the preceding Record Date, or at such other address as the Owner may have filed with the Paying Agent for that purpose, or upon written request filed with the Paying Agent as of the Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer.
The Bonds will be issued in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds mature on August 1 in the years and amounts set forth on the inside cover page hereof.
No Optional Redemption of 2012C Bonds
The 2012C Bonds are not subject to optional redemption prior to their respective stated maturities.
Optional Redemption of 2014A Bonds
The 2014A Bonds maturing on or before August 1, 2026, are not subject to redemption prior to their respective stated maturities. The 2014A Bonds maturing on or after August 1, 2027, are subject to redemption prior to maturity, at the option of the District, in whole or in part among maturities on such basis as shall be designated by the District and by lot within a maturity, from any available source of funds, on August 1, 2026, and on any date thereafter, at a redemption price equal to 100% of the principal amount of 2014A Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption, without premium.
-6- Selection of Bonds for Redemption
Whenever provision is made for the redemption of Bonds and less than all Outstanding Bonds are to be redeemed, the Paying Agent, upon written instruction from the District received at least 30 days prior to the specified redemption date (unless a shorter notice is consented to by the Paying Agent), shall select Bonds for redemption by lot within a maturity. Redemption by lot shall be in such a manner as the Paying Agent may determine; provided, however, that the portion of any Bond to be redeemed in part will be in the principal amount of $5,000 or any integral multiple thereof.
Notice of Redemption
The Paying Agent is required to give notice of the redemption of the Bonds, at the expense of the District, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the respective owners of any Bonds designated for redemption, at their addresses appearing on the Registration Books maintained by the Paying Agent. Notice of any redemption of Bonds shall specify: (a) the Bonds or designated portions thereof (in the case of redemption of the Bonds in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, (d) the redemption price, (e) the CUSIP numbers (if any) assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the principal amount of such Bond to be redeemed, and (g) the original issue date, interest rate and stated maturity date of each Bond to be redeemed in whole or in part. Such notice shall further state that on the specified date there shall become due and payable upon each Bond or portion thereof being redeemed the redemption price thereof, and that from and after such date, interest with respect thereto shall cease to accrete in value.
Neither failure to receive or failure to send any notice of redemption nor any defect in any such redemption notice so given shall affect the sufficiency of the proceedings for the redemption of the affected Bonds.
Partial Redemption of Bonds
Upon the surrender of any Bond redeemed in part only, the Paying Agent shall execute and deliver to the Owner thereof a new Bond or Bonds of the same series, tenor and maturity and of authorized denominations equal in transfer amounts to the unredeemed portion of the Bond surrendered. Such partial redemption shall be valid upon payment of the amount required to be paid to such Owner, and the County and the District shall be released and discharged thereupon from all liability to the extent of such payment.
Right to Rescind Notice of Redemption
The District has the right to rescind any notice of the optional redemption of Bonds by written notice to the Paying Agent on or prior to the date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption. The District and the Paying Agent have no liability to the Bond owners or any other party related to or arising from such rescission of redemption. The Paying Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Bond Resolution.
-7- Registration, Transfer and Exchange of Bonds
If the book entry system is discontinued, the District shall cause the Paying Agent to maintain and keep at its principal corporate trust office all books and records necessary for the registration, exchange and transfer of the Bonds.
If the book entry system is discontinued, the person in whose name a Bond is registered on the Bond Register shall be regarded as the absolute owner of that Bond. Payment of the principal of and interest on any Bond shall be made only to or upon the order of that person; neither the District, the County nor the Paying Agent shall be affected by any notice to the contrary, but the registration may be changed as provided in the Bond Resolution.
Bonds may be exchanged for Bonds of the same series, tenor, maturity and principal amount upon presentation and surrender at the principal corporate trust office of the Paying Agent in San Francisco, California. Any Bond may, in accordance with its terms, but only if (i) the District determines to no longer maintain the book entry only status of the Bonds, (ii) DTC determines to discontinue providing such services and no successor securities depository is named or (iii) DTC requests the District to deliver Bond certificates to particular DTC Participants, be transferred, upon the books required to be kept pursuant to the provisions of the Bond Resolution, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed.
No exchanges of Bonds shall be required to be made (a) fifteen days prior to an Interest Payment Date or the date established by the Paying Agent for selection of Bonds for redemption or (b) with respect to a Bond after such Bond has been selected for redemption.
Defeasance
The Bonds may be paid by the District, in whole or in part, in any one or more of the following ways:
(a) by paying or causing to be paid the principal or redemption price of and interest on such Bonds, as and when the same become due and payable;
(b) by irrevocably depositing, in trust, at or before maturity, money or securities in the necessary amount (as provided in the Bond Resolution) to pay or redeem such Bonds; or
(c) by delivering such Bonds to the Paying Agent for cancellation by it.
Whenever in a Bond Resolution it is provided or permitted that there be deposited with or held in trust by the Paying Agent money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may be held by the Paying Agent or by any other fiduciary. Such money or securities may include money or securities held by the Paying Agent in the funds and accounts established under such Bond Resolution and will be:
-8- (i) lawful money of the United States of America in an amount equal to the Principal Amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption is given as provided in such Bond Resolution or provision satisfactory to the Paying Agent is made for the giving of such notice, the amount to be deposited or held will be the Principal Amount or redemption price of such Bonds and all unpaid interest thereon to the redemption date; or
(ii) Federal Securities (not callable by the issuer thereof prior to maturity) the principal of and interest on which when due, in the opinion of a certified public accountant delivered to the District, will provide money sufficient to pay the principal or redemption price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or redemption price and interest become due, provided that, in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption is given as provided in such Bond Resolution or provision satisfactory to the Paying Agent is made for the giving of such notice.
Upon the deposit, in trust, at or before maturity, of money or securities in the necessary amount (as described above) to pay or redeem any outstanding Bond (whether upon or prior to its maturity or the redemption date of such Bond), then all liability of the County and the District in respect of such Bond will cease and be completely discharged, except only that thereafter the owner thereof will be entitled only to payment of the principal of and interest on such Bond by the District, and the District will remain liable for such payment, but only out of such money or securities deposited with the Paying Agent for such payment.
As defined in the respective Bond Resolutions, the term “Federal Securities” means United States Treasury notes, bonds, bills or certificates of indebtedness, or any other obligations the timely payment of which is directly or indirectly guaranteed by the full faith and credit of the United States of America.
Book-Entry-Only System
The Bonds will be issued in fully registered form only and, when initially issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the Bonds. Purchasers of the Bonds will not receive physical certificates representing their beneficial ownership interests in the Bonds purchased. Payments of principal and interest on the Bonds will be paid by the Trustee to DTC, which is obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the Bonds. See “APPENDIX F – Book-Entry Only System” herein.
-9- APPLICATION OF PROCEEDS OF THE BONDS
Building Fund for 2014A Bonds
Pursuant to the Bond Resolution authorizing the 2014A Bonds, the net proceeds from the sale of the 2014A Bonds will be paid and credited to a fund established and held by the San Mateo County Treasurer (the “County Treasurer”) and designated as the “Jefferson Union High School District, 2014 Election, Series A Building Fund.”
Amounts credited to the Building Fund for the 2014A Bonds will be expended by the District for the purpose of financing any of the projects for which the 2014A Bond proceeds are authorized to be expended under the ballot measure which was approved at the 2014 Election, including all incidental expenses and related costs of issuance. All interest and other gain arising from the investment of proceeds of the 2014A Bonds will be retained in the Building Fund and used for the purposes thereof. All moneys held in the Building Fund will be invested in accordance with the investment policies of the County, as such policies exist at the time of investment. Pursuant to the Bond Resolution authorizing the 2014A Bonds and applicable provisions of the Education Code, a portion of the proceeds of the 2014A Bonds may be deposited with a fiscal agent for the purpose of paying costs of issuance. See also “APPENDIX G - SAN MATEO COUNTY INVESTMENT POLICY AND INVESTMENT REPORT” herein.
Application of 2012C Bond Proceeds
Pursuant to the Bond Resolution authorizing the 2012C Bonds, the net proceeds from the sale of the 2012C Bonds will be paid to the paying agent for the 2011 Notes upon the issuance of the 2012C Bonds. Such proceeds will be deposited into the Note Repayment Fund which has been established for the 2011 Notes, and will be applied to pay the principal coming due and payable on the 2011 Notes at the maturity thereof on June 1, 2016. See THE FINANCING PLAN” herein.
Debt Service Funds
Pursuant to the Bond Resolutions, premium, if any, received by the County from the sale of the Bonds, will be deposited and kept separate and apart in the respective funds established and held by the County Treasurer and designated as the “Jefferson Union High School District 2012 Election, Series C General Obligation Bonds Debt Service Fund” and the “Jefferson Union High School District 2014 Election, Series A General Obligation Bonds Debt Service Fund,” respectively (together, the “Debt Service Funds”), which are pledged for the payment of the principal of and interest on the applicable series of Bonds when and as the same become due. All taxes levied by the County for the payment of the principal of and interest and premium (if any) on the respective series of Bonds will be deposited in the applicable Debt Service Fund by the County promptly upon apportionment of said levy.
Any moneys remaining in the Debt Service Funds after such series of Bonds and the interest thereon have been paid, shall be transferred to any other interest and sinking fund or account for general obligation bond indebtedness of the District, including refunding bonds, and in the event there is no such debt outstanding, shall be transferred to the District’s general fund upon the order of the County Auditor, as provided in Section 15234 of the Education Code.
-10- Investment of Proceeds of Bonds
All moneys held in any of the funds or accounts established with the County under the Bond Resolutions will be invested in Authorized Investments (as defined in the Bond Resolution) in accordance with the investment policies of the County, as such policies exist at the time of investment. Obligations purchased as an investment of moneys in any fund or account will be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established under the respective Bond Resolutions will be deposited in the fund or account from which such investment was made, and will be expended for the purposes thereof.
In accordance with Government Code Section 53600 et seq., the County Treasurer manages funds deposited with it by the District. The County is required to invest such funds in accordance with California Government Code Sections 53601 et seq. In addition, counties are required to establish their own investment policies which may impose limitations beyond those required by the Government Code. See “APPENDIX G - SAN MATEO COUNTY INVESTMENT POLICY AND INVESTMENT REPORT.”
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-11- SECURITY FOR THE BONDS
Ad Valorem Taxes
Bonds Payable from Ad Valorem Property Taxes. The Bonds are general obligations of the District, payable solely from ad valorem property taxes levied and collected by the County. The County is empowered and is obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the District subject to taxation by the District, without limitation of rate or amount (except certain personal property which is taxable at limited rates). In no event is the District obligated to pay principal of and interest and redemption premium, if any, on the Bonds out of any funds or properties of the District other than ad valorem taxes levied upon all taxable property in the District; provided, however, nothing in the Bond Resolution prevents the District from making advances of its own moneys howsoever derived to any of the uses or purposes permitted by law.
Other Bonds Payable from Ad Valorem Property Taxes. The District has previously issued other general obligation bonds, which are payable from ad valorem taxes on a parity basis. In addition to the general obligation bonds issued by the District, there is other debt issued by entities with jurisdiction in the District, which is payable from ad valorem taxes levied on parcels in the District. See “PROPERTY TAXATION – Direct and Overlapping Debt” below.
Levy and Collection. The County will levy and collect such ad valorem taxes in such amounts and at such times as is necessary to ensure the timely payment of debt service. Such taxes, when collected, will be deposited into a debt service fund for the Bonds, which is maintained by the County and which is irrevocably pledged for the payment of principal of and interest on the Bonds when due.
District property taxes are assessed and collected by the County in the same manner and at the same time, and in the same installments as other ad valorem taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts, and bear the same proportionate penalties and interest after delinquency, as do the other ad valorem taxes on real property. See “-Teeter Plan; Property Tax Collections” below.
Statutory Lien on Ad Valorem Tax Revenues. Pursuant to Senate Bill 222 effective January 1, 2016, voter approved general obligation bonds which are secured by ad valorem tax collections, including the Bonds, are secured by a statutory lien on all revenues received pursuant to the levy and collection of the property tax imposed to service those bonds. Said lien attaches automatically and is valid and binding from the time the bonds are executed and delivered. The lien is enforceable against the school district or community college district, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any further act.
Annual Tax Rates. The amount of the annual ad valorem tax levied by the County to repay the Bonds will be determined by the relationship between the assessed valuation of taxable property in the District and the amount of debt service due on the Bonds. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the District may cause the annual tax rate to fluctuate.
Economic and other factors beyond the District’s control, such as economic recession, deflation of land values, a relocation out of the District or financial difficulty or bankruptcy by one
-12- or more major property taxpayers, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood, fire or other natural disaster, could cause a reduction in the assessed value within the District and necessitate a corresponding increase in the annual tax rate.
Debt Service Funds
The County will establish Debt Service Funds which are pledged for the payment of the principal of and interest and premium (if any) on the Bonds when and as the same become due. The District will transfer amounts in the Debt Service Funds to the Paying Agent to the extent necessary to pay debt service on the Bonds as it becomes due and payable.
If, after payment in full of the 2012C Bonds or the 2014A Bonds, any amounts remaining on deposit in the related Debt Service Fund will be transferred to the District for deposit into its General Fund, to be applied solely in a manner which is consistent with the requirements of applicable state and federal tax law.
Not a County Obligation
The Bonds are payable solely from the proceeds of an ad valorem tax levied and collected by the County, for the payment of principal of and interest on the Bonds. Although the County is obligated to collect the ad valorem tax for the payment of the Bonds, the Bonds are not a debt of the County.
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-13- DEBT SERVICE SCHEDULE
Debt Service for the Bonds. The following table shows the debt service schedules with respect to the Bonds, assuming no optional redemptions.
JEFFERSON UNION HIGH SCHOOL DISTRICT Bonds Debt Service Schedule
Bond Year Ending Series 2012C Series 2012C Series 2014A Series 2014A Total August 1 Principal Interest Principal Interest Debt Service 2017 $950,000.00 $239,785.00 $3,455,000.00 $1,334,128.06 $5,978,913.06 2018 1,140,000.00 151,400.00 315,000.00 968,450.00 2,574,850.00 2019 1,300,000.00 94,400.00 355,000.00 955,850.00 2,705,250.00 2020 1,470,000.00 29,400.00 410,000.00 941,650.00 2,851,050.00 2021 -- -- 460,000.00 925,250.00 1,385,250.00 2022 -- -- 510,000.00 906,850.00 1,416,850.00 2023 -- -- 565,000.00 886,450.00 1,451,450.00 2024 -- -- 625,000.00 858,200.00 1,483,200.00 2025 -- -- 690,000.00 826,950.00 1,516,950.00 2026 -- -- 755,000.00 792,450.00 1,547,450.00 2027 -- -- 825,000.00 754,700.00 1,579,700.00 2028 -- -- 905,000.00 713,450.00 1,618,450.00 2029 -- -- 985,000.00 668,200.00 1,653,200.00 2030 -- -- 1,070,000.00 618,950.00 1,688,950.00 2031 -- -- 1,160,000.00 565,450.00 1,725,450.00 2032 -- -- 1,255,000.00 507,450.00 1,762,450.00 2033 -- -- 1,355,000.00 469,800.00 1,824,800.00 2034 -- -- 1,445,000.00 429,150.00 1,874,150.00 2035 -- -- 1,545,000.00 385,800.00 1,930,800.00 2036 -- -- 1,645,000.00 339,450.00 1,984,450.00 2037 -- -- 1,735,000.00 290,100.00 2,025,100.00 2038 -- -- 1,830,000.00 238,050.00 2,068,050.00 2039 -- -- 1,930,000.00 183,150.00 2,113,150.00 2040 -- -- 2,035,000.00 125,250.00 2,160,250.00 2041 -- -- 2,140,000.00 64,200.00 2,204,200.00 Total $4,860,000.00 $514,985.00 $30,000,000.00 $15,749,378.06 $51,124,363.06
-14- Combined Debt Service Schedule. In addition to the Bonds described herein, the District has issued other series of general obligation bonds and refunding bonds which are currently outstanding. The following table shows the combined debt service schedule for outstanding general obligation bonds and refunding bonds of the District, assuming no optional redemptions. See also Appendix A under the heading “DISTRICT FINANCIAL INFORMATION – Long-Term Debt” for additional information.
JEFFERSON UNION HIGH SCHOOL DISTRICT Combined General Obligation Bond Debt Service Schedule
2014B Year Series 2000 A Series Series 2014A Refunding 2015 2016 Aggregate Ending Refunding Series 2006B 2006C Series 2012A 2012B Refunding Bonds Refunding Refunding Annual Debt (Aug. 1) Bonds Bonds Bonds Bonds Bonds Bonds (Taxable) Bonds Bonds 2012C Bonds 2014A Bonds Service 2016 $557,776.25 $585,446.88 $832,675.00 $1,527,106.25 $507,650.00 $413,421.88 $6,237.50 $2,631,306.25 - - - $7,061,620.01 2017 1,671,802.50 847,968.76 1,105,100.00 2,173,612.50 - 826,843.76 362,475.00 3,586,462.50 - $1,189,785.00 $4,789,128.06 16,553,178.08 2018 1,679,458.75 1,049,468.76 1,156,100.00 2,181,212.50 - 826,843.76 377,400.00 3,600,062.50 - 1,291,400.00 1,283,450.00 13,445,396.27 2019 1,678,365.00 1,235,531.26 1,292,850.00 2,192,012.50 - 1,111,843.76 - 3,625,262.50 - 1,394,400.00 1,310,850.00 13,841,115.02 2020 1,678,833.75 1,445,931.26 1,420,850.00 2,200,812.50 - 1,140,443.76 - 3,651,762.50 - 1,499,400.00 1,351,650.00 14,389,683.77 2021 1,679,521.25 1,665,981.26 1,565,100.00 2,207,612.50 - 1,177,443.76 - 3,677,012.50 - - 1,385,250.00 13,357,921.27 2022 1,684,538.75 1,905,668.76 1,727,500.00 2,234,362.50 - 1,212,443.76 - 3,680,762.50 - - 1,416,850.00 13,862,126.27 2023 1,684,880.00 2,164,818.76 1,906,300.00 2,246,962.50 - 1,250,443.76 - 3,683,762.50 - - 1,451,450.00 14,388,617.52 2024 1,685,222.50 3,738,575.00 795,500.00 2,257,162.50 - 1,286,443.76 - 3,675,762.50 - - 1,483,200.00 14,921,866.26 2025 1,685,243.75 4,686,868.76 319,000.00 2,256,912.50 - 1,324,443.76 - 3,692,012.50 - - 1,516,950.00 15,481,431.27 2026 1,679,782.50 5,039,181.26 304,500.00 2,253,412.50 - 1,364,193.76 - 3,711,012.50 - - 1,547,450.00 15,899,532.52 2027 1,391,256.25 5,355,981.26 - 2,251,662.50 - 1,405,443.76 - 3,727,262.50 - - 1,579,700.00 15,711,306.27 2028 959,661.25 5,687,525.00 - 2,279,631.26 - 1,447,943.76 - 3,746,212.50 - - 1,618,450.00 15,739,423.77 2029 488,060.00 6,058,556.26 - 2,308,281.26 - 1,492,193.76 - 3,759,000.00 - - 1,653,200.00 15,759,291.28 2030 - 3,364,075.00 - 2,334,331.26 - 1,537,193.76 - 3,791,000.00 $430,000.00 - 1,688,950.00 13,145,550.02 2031 - 233,862.50 - 2,360,606.26 - 1,580,018.76 - 3,428,250.00 3,880,000.00 - 1,725,450.00 13,208,187.52 2032 - 233,112.50 - 2,386,731.26 - 1,629,075.00 - - 7,260,000.00 - 1,762,450.00 13,271,368.76 2033 - 231,825.00 - 2,414,706.26 - 1,678,825.00 - - 7,210,000.00 - 1,824,800.00 13,360,156.26 2034 - - - 2,439,356.26 - 1,730,425.00 - - 2,990,000.00 - 1,874,150.00 9,033,931.26 2035 - - - 2,468,050.00 - 1,778,675.00 - - - - 1,930,800.00 6,177,525.00 2036 - - - 2,492,937.50 - 1,834,300.00 - - - - 1,984,450.00 6,311,687.50 2037 - - - 2,521,125.00 - 1,890,800.00 - - - - 2,025,100.00 6,437,025.00 2038 - - - - - 1,943,800.00 - - - - 2,068,050.00 4,011,850.00 2039 - - - - - 2,002,000.00 - - - - 2,113,150.00 4,115,150.00 2040 ------2,160,250.00 2,160,250.00 2041 ------2,204,200.00 2,204,200.00 TOTAL $20,204,402.50 $45,530,378.24 $12,425,475.00 $49,988,600.07 $507,650.00 $33,885,503.28 $746,112.50 $57,666,906.25 $21,770,000.00 $5,374,985.00 $45,749,378.06 $293,849,390.90
-15- PROPERTY TAXATION
Property Tax Collection Procedures
In California, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The “secured roll” is that part of the assessment roll containing (1) state assessed public utilities’ property and (2) property the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1-1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County.
Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB813 (Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Thus, this legislation eliminated delays in the realization of increased property taxes from new assessments. As amended, SB813 provided increased revenue to taxing jurisdictions to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date and result in increased assessed value.
Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent, if unpaid on the following August 31. A 10% penalty is also attached to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1-1/2% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes for the amount of taxes which are delinquent.
-16- Taxation of State-Assessed Utility Property
The State Constitution provides that most classes of property owned or used by regulated utilities be assessed by the State Board of Equalization (“SBE”) and taxed locally. Property valued by the SBE as an operating unit in a primary function of the utility taxpayer is known as “unitary property”, a concept designed to permit assessment of the utility as a going concern rather than assessment of each individual element of real and personal property owned by the utility taxpayer. State-assessed unitary and “operating nonunitary” property (which excludes nonunitary property of regulated railways) is allocated to the counties based on the situs of the various components of the unitary property. Except for unitary property of regulated railways and certain other excepted property, all unitary and operating nonunitary property is taxed at special county-wide rates and tax proceeds are distributed to taxing jurisdictions according to statutory formulae generally based on the distribution of taxes in the prior year.
Historic Assessed Valuations
The assessed valuation of property in the District is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization, as described above. Assessed valuations are reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California Constitution. For a discussion of how properties currently are assessed, see Appendix B under the heading “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.”
Certain classes of property, such as churches, colleges, not-for-profit hospitals, and charitable institutions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions.
The following table sets forth recent history of the assessed value in the District.
JEFFERSON UNION HIGH SCHOOL DISTRICT Assessed Valuations of All Taxable Property Fiscal Years 2009-10 to 2015-16
Fiscal Total Year Local Secured Utility Unsecured Valuation 2009-10 $13,994,061,136 $2,218,398 $573,870,112 $14,570,149,646 2010-11 13,987,731,210 2,218,398 583,246,364 14,573,195,972 2011-12 14,107,131,524 2,601,347 540,576,187 14,650,309,058 2012-13 14,289,557,122 2,601,347 524,983,539 14,817,142,008 2013-14 15,067,886,840 2,601,347 488,536,702 15,559,024,889 2014-15 15,902,962,580 2,601,347 491,565,157 16,397,171,084 2015-16 16,845,899,758 2,578,309 530,988,245 17,379,466,312
Source: California Municipal Statistics, Inc.
As indicated in the previous table, assessed valuations are subject to change in each year. Increases or decreases in assessed valuation may result from a variety of factors including but not limited to general economic conditions, supply and demand for real property in the area, government regulations such as zoning, and natural disasters such as earthquakes, fires, floods and droughts. With respect to droughts specifically, the State of California is currently facing water shortfalls, and on January 17, 2014, the Governor declared a state of drought emergency, calling on Californians to conserve water. As part of his declaration, the Governor directed State officials to assist agricultural producers and communities that may be
-17- economically impacted by dry conditions. Thereafter, the California State Water Resources Control Board (the “Water Board”) issued a statewide notice of water shortages and potential future curtailment of water right diversions. On April 1, 2015, the Governor issued an executive order mandating certain conservation measures including a requirement that the Water Board impose restrictions to achieve a statewide 25% reduction in urban water usage through February 28, 2016. On February 2, 2016, based on the Governor’s executive order, the Water Board approved an updated and expanded emergency regulation that will continue mandatory reductions through October 2016. The District cannot predict or make any representations regarding the effects that the current drought has had, or, if it should continue, may have on the value of taxable property within the District, or to what extent the drought could cause disruptions to economic activity within the boundaries of the District.
Assessed Valuation by Jurisdiction. The following table describes the percentage and value of the total assessed value of the District that resides in the cities and unincorporated portions of the County for fiscal year 2015-16, as shown below.
JEFFERSON UNION HIGH SCHOOL DISTRICT 2015-16 Assessed Valuation by Jurisdiction(1)
Assessed Valuation % of Assessed Valuation % of Jurisdiction Jurisdiction: in School District School District of Jurisdiction (1) in School District City of Brisbane $ 1,808,762,404 10.41% $1,808,762,404 100.00% Town of Colma 567,997,645 3.27 $622,543,166 91.24% City of Daly City 8,828,988,525 50.80 $10,318,622,318 85.56% City of Pacifica 5,269,467,552 30.32 $5,269,467,552 100.00% City of South San Francisco 282,731,411 1.63 $15,481,636,953 1.83% Unincorporated San Mateo County 621,518,775 3.58 $17,762,610,880 3.50% Total District $17,379,466,312 100.00%
San Mateo County $17,379,466,312 100.00% $178,356,774,210 9.74% ______(1) Before deduction of redevelopment incremental valuation. Source: California Municipal Statistics, Inc.
-18- Assessed Valuation by Land Use. The following table gives a distribution of taxable property located in the District on the fiscal year 2015-16 tax roll by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use.
JEFFERSON UNION HIGH SCHOOL DISTRICT 2015-16 Assessed Valuation and Parcels by Land Use
2015-16 % of No. of % of Non-Residential: Assessed Valuation (1) Total Parcels Total Commercial/Office $1,842,531,593 10.94% 915 2.48% Industrial 596,158,126 3.54 291 0.79 Recreational 105,705,379 0.63 31 0.08 Government/Social/Institutional 12,464,307 0.07 186 0.50 Miscellaneous 37,931,324 0.23 233 0.63 Subtotal Non-Residential $2,594,790,729 15.40% 1,656 4.48%
Residential: Single Family Residence $11,164,798,401 66.28% 29,367 79.46% Condominium/Townhouse 1,227,606,805 7.29 2,369 6.41 2-4 Residential Units 592,741,744 3.52 1,312 3.55 5+ Residential Units/Apartments 976,286,412 5.80 452 1.22 Miscellaneous Residential 3,536,501 0.02 33 0.09 Subtotal Residential $13,964,969,863 82.90% 33,533 90.73%
Vacant Parcels $286,139,166 1.70% 1,769 4.79%
Total $16,845,899,758 100.00% 36,958 100.00% ______(1) Local secured assessed valuation, excluding tax-exempt property. Source: California Municipal Statistics, Inc.
-19- Per Parcel Assessed Valuation of Single-Family Homes
The following table shows the assessed valuation of single-family homes in the District for fiscal year 2015-16.
JEFFERSON UNION HIGH SCHOOL DISTRICT 2015-16 Per Parcel Assessed Valuation of Single Family Homes
No. of 2015-16 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 29,367 $11,164,798,401 $380,182 $352,667
2015-16 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $49,999 239 0.814% 0.814% $ 10,397,990 0.093% 0.093% $50,000 - $99,999 4,686 15.957 16.771 352,407,633 3.156 3.250 $100,000 - $149,999 1,936 6.592 23.363 239,224,987 2.143 5.392 $150,000 - $199,999 1,682 5.728 29.090 293,825,419 2.632 8.024 $200,000 - $249,999 1,801 6.133 35.223 405,342,030 3.631 11.654 $250,000 - $299,999 1,890 6.436 41.659 521,657,307 4.672 16.327 $300,000 - $349,999 2,318 7.893 49.552 752,518,864 6.740 23.067 $350,000 - $399,999 2,024 6.892 56.444 756,728,371 6.778 29.845 $400,000 - $449,999 1,658 5.646 62.090 704,159,975 6.307 36.152 $450,000 - $499,999 1,708 5.816 67.906 809,892,189 7.254 43.406 $500,000 - $549,999 1,706 5.809 73.715 895,222,462 8.018 51.424 $550,000 - $599,999 1,543 5.254 78.970 885,105,194 7.928 59.352 $600,000 - $649,999 1,646 5.605 84.575 1,024,191,097 9.173 68.525 $650,000 - $699,999 1,446 4.924 89.498 972,298,939 8.709 77.234 $700,000 - $749,999 1,079 3.674 93.173 778,470,948 6.973 84.206 $750,000 - $799,999 712 2.424 95.597 549,033,551 4.918 89.124 $800,000 - $849,999 474 1.614 97.211 389,277,413 3.487 92.610 $850,000 - $899,999 260 0.885 98.097 226,434,937 2.028 94.638 $900,000 - $949,999 152 0.518 98.614 140,132,399 1.255 95.894 $950,000 - $999,999 118 0.402 99.016 114,828,474 1.028 96.922 $1,000,000 and greater 289 0.984 100.000 343,648,222 3.078 100.000 Total 29,367 100.000% $11,164,798,401 100.000% ______(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.
Reassessments and Appeals of Assessed Values
There are general means by which assessed values can be reassessed or appealed that could adversely impact property tax revenues within the District.
Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Article XIIIA of the California Constitution” in Appendix B.
Under California law, property owners may apply for a Proposition 8 reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the County board of equalization or assessment appeals board. In most
-20- cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value.
Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values, adjusted for inflation, when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.
A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.
Proposition 8 reductions may also be unilaterally applied by the County Assessor. The District cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers or by reductions initiated by the County Assessor. Any reduction in aggregate District assessed valuation due to appeals, as with any reduction in assessed valuation due to other causes, will cause the tax rate levied to repay the Refunding Bonds to increase accordingly, so that the fixed debt service on the Refunding Bonds (and other outstanding general obligation bonds, if any) may be paid.
Teeter Plan; Property Tax Collections
The Board of Supervisors of the County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, each entity levying property taxes in the County may draw on the amount of uncollected secured taxes credited to its fund, in the same manner as if the amount credited had been collected. The District participates in the Teeter Plan, and thus receives 100% of secured property taxes levied in exchange for foregoing any interest and penalties collected on delinquent taxes. Currently, the County includes general obligation bond debt service in its Teeter Plan, including debt service levies for the Bonds.
So long as the Teeter Plan remains in effect, the District’s receipt of revenues with respect to the levy of ad valorem property taxes will not be dependent upon actual collections of the ad valorem property taxes by the County. However, under the statute creating the Teeter Plan, the Board of Supervisors can under certain circumstances terminate the Teeter Plan in part or in its entirety with respect to the entire County and, in addition, the Board of Supervisors can terminate the Teeter Plan with respect to the District if the delinquency rate for all ad valorem property taxes levied within the District in any year exceeds 3%. In the event that the Teeter Plan were terminated, the amount of the levy of ad valorem property taxes in the District would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the District.
-21- Tax Rates
The table below summarizes the total ad valorem tax rates levied by all taxing entities in Tax Rate Area 5-001 (a typical tax rate area in the District) for fiscal years 2011-12 through 2015-16. The 2015-16 assessed valuation in Tax Rate Area 5-001 is approximately 16.99% of the total 2015-16 District assessed valuation.
JEFFERSON UNION HIGH SCHOOL DISTRICT Typical Total Tax Rate per $100 of Assessed Valuation (TRA 5-001) Fiscal Years 2011-12 Through 2015-16
2011-12 2012-13 2013-14 2014-15 2015-16 General Tax Rate 1.0000% 1.0000% 1.0000% 1.0000% 1.0000% Jefferson School District Bonds 0.0407 0.0316 0.0713 0.0662 0.0674 Jefferson High School District Bonds 0.0422 0.0430 0.0574 0.0530 0.0583 San Mateo Community College District 0.0199 0.0194 0.0194 0.0190 0.0250 Bonds Total Tax Rate 1.1028% 1.0940% 1.1481% 1.1382% 1.1507% ______Source: California Municipal Statistics, Inc.
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-22- Top Twenty Property Taxpayers
The top twenty taxpayers in the District with the greatest combined assessed valuation of taxable property on the fiscal year 2015-16 tax roll, and the assessed valuations thereof, are shown below.
The more property (by assessed value) which is owned by a single taxpayer in the District, the greater amount of tax collections are exposed to weaknesses in the taxpayer’s financial situation and ability or willingness to pay property taxes. Each taxpayer listed below is a unique name listed on the tax rolls. The District cannot determine from County assessment records whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the table below.
JEFFERSON UNION HIGH SCHOOL DISTRICT Largest 2015-16 Local Secured Taxpayers 2015-16 % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. Daly City Serramonte Center LLC Shopping Center $ 194,416,490 1.15% 2. Kimco Westlake LP Shopping Center 159,985,161 0.95 3. Myers Peninsula Venture LLC Office Building 156,297,085 0.93 4. Westlake Associates, Lessee Apartments 127,154,638 0.75 5. Oyster Point Properties Inc. Undeveloped 107,009,946 0.64 6. 280 Metro LP Shopping Center 101,195,405 0.60 7. DB Real Estate Pacific Plaza Partnership Office Building 88,193,115 0.52 8. DCT Valley Drive CA LP Industrial 68,619,088 0.41 9. Century Theaters Inc., Lessee Movie Theater 61,358,410 0.36 10. IAC San Francisco LLC Industrial 59,625,672 0.35 11. WASL Daly City Investors V Mixed Use 54,000,000 0.32 12. FPA BAF Lands End Associates LP Apartments 48,740,693 0.29 13. BRE Piper MF Skyline Heights CA LLC Apartments 47,875,872 0.28 14. 2000 Sierra Point Parkway LLC Office Building 44,011,671 0.26 15. Slough Brisbane LLC Undeveloped 43,498,059 0.26 16. Claire A. Spencer., Tr. Industrial 41,441,870 0.25 17. EQR Hillside LP Apartments 41,357,610 0.25 18. Cole HD Colma CA LP Commercial 39,387,839 0.23 19. Summit Hospitality 114 LLC Hotel 38,589,870 0.23 20. EQR-La Terrazza Colma St. LP, Lessee Apartments 35,841,594 0.21 $1,558,600,088 9.25% ______(1) 2015-16 local secured assessed valuation: $16,845,899,758. Source: California Municipal Statistics, Inc.
-23- Direct and Overlapping Debt Obligations
Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. dated April 1, 2016 with respect to debt issued as of April 1, 2016. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.
JEFFERSON UNION HIGH SCHOOL DISTRICT Statement of Direct and Overlapping Bonded Debt Dated As of April 1, 2016*
2015-16 Assessed Valuation: $17,379,466,312
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1/16 San Mateo Community College District 9.744% $ 62,788,780 Jefferson Union High School District 100. 146,895,943 (1) Bayshore School District 100. 5,790,000 Brisbane School District 100. 6,255,437 Jefferson School District 100. 90,150,000 Laguna Salada Union School District 100. 13,289,287 City 1915 Act Bonds 100. 2,505,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $327,674,447 DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Mateo County Certificates of Participation 9.744% $ 42,129,140 San Mateo County Board of Education Certificates of Participation 9.744 1,016,299 San Mateo County Flood Control District Certificates of Participation 22.982 4,303,380 Jefferson Union High School District Certificates of Participation 100. 1,580,000 City of Brisbane Certificates of Participation and Pension Obligation Bonds 100. 9,966,000 City of Colma Certificates of Participation 91.238 4,835,614 City of Daly City Pension Obligation Bonds 85.564 22,892,648 City of Pacifica Certificates of Participation and Pension Obligation Bonds 100. 30,555,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $117,278,081
OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): Brisbane Community Redevelopment Agency Project Areas 1 and 2 100. % $14,891,626 Pacifica Redevelopment Agency Rockaway Beach Project Area 100. 1,310,000 TOTAL OVERLAPPING TAX INCREMENT DEBT $16,201,626 COMBINED TOTAL DEBT $461,154,154 (2) (1) Excludes 2016 Refunding Bonds and Bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Ratios to 2015-16 Assessed Valuation: Direct Debt ($146,895,943) ...... 0.85% Total Direct and Overlapping Tax and Assessment Debt ...... 1.89% Combined Direct Debt ($148,475,943) ...... 0.85% Combined Total Debt ...... 2.65% Ratios to Redevelopment Incremental Valuation ($1,218,268,428): Total Overlapping Tax Increment Debt ...... 1.33%
______*Does not include 2016 Refunding Bonds issued in April, 2016 and the Bonds described herein. Source: California Municipal Statistics, Inc.
-24- SAN MATEO COUNTY INVESTMENT POOL
Under the California Education Code, the District is required to pay all monies received from any source into the San Mateo County Treasury to be held on behalf of the District. Therefore, the District’s funds, including monies on deposit in the District’s building funds and debt service funds, are held by the County Treasurer. The County’s current investment policy and investment report for the quarter ending March 30, 2016 are shown in Appendix G.
BOND INSURANCE FOR 2014A BONDS
Bond Insurance Policy
Concurrently with the issuance of the 2014A Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the 2014A Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the 2014A Bonds when due as set forth in the form of the Policy included as Appendix H to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.
Assured Guaranty Municipal Corp.
AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.
AGM’s financial strength is rated “AA” (stable outlook) by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”), “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.
-25- Current Financial Strength Ratings
On June 29, 2015, S&P issued a credit rating report in which it affirmed AGM’s financial strength rating of “AA” (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take.
On December 8, 2015, Moody’s published a credit opinion maintaining its existing insurance financial strength rating of “A2” (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody’s may take.
On December 10, 2015, KBRA issued a financial guaranty surveillance report in which it affirmed AGM’s insurance financial strength rating of “AA+” (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take.
For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Capitalization of AGM
At December 31, 2015, AGM’s policyholders’ surplus and contingency reserve were approximately $3,798 million and its net unearned premium reserve was approximately $1,597 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM’s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM’s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles.
Incorporation of Certain Documents by Reference
Portions of the following document filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (filed by AGL with the SEC on February 26, 2016).
All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the 2014A Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.
Any information regarding AGM included herein under the caption “BOND INSURANCE – Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that
-26- any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.
Miscellaneous Matters
AGM makes no representation regarding the 2014A Bonds or the advisability of investing in the 2014A Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “BOND INSURANCE.”
CONTINUING DISCLOSURE
The District will execute a Continuing Disclosure Certificate in connection with the issuance of the Bonds in the form attached hereto as Appendix E. The District has covenanted therein, for the benefit of holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District (an “Annual Report”) to the Municipal Securities Rulemaking Board not later than nine months after the end of the District’s fiscal year (which currently would be March 31), commencing March 31, 2017 with the report for the 2015- 16 Fiscal Year, and to provide notices of the occurrence of certain enumerated events. Such notices will be filed by the District with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in an Annual Report or the notices of enumerated events is set forth in “APPENDIX E – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Purchasers of the Bonds in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”).
The District has existing disclosure undertakings that have been made pursuant to the Rule in connection with the issuance of general obligation bonds and refunding general obligation bonds. See Appendix B under the heading “FINANCIAL INFORMATION – Existing Debt Obligations.” Instances of non-compliance with prior undertakings in the previous five years are that the District’s fiscal year 2009-10 financial statements were timely filed but were not linked properly on the Electronic Municipal Market Access to the District’s outstanding Series 2006B Bonds, the District did not timely file rating change notices relating to insured rating changes with respect to a number of its outstanding bond issues, including on behalf of the Golden West Schools Financing Authority with respect to the 2005 Refunding Bonds described in Appendix B, and the District failed to include the amount and date received of the last Federal Subsidy Payment received in the annual reports for fiscal years 2010-11 and 2011- 12 in connection with the District’s Series 2011 Bond Anticipation Notes which were issued as direct-pay qualified school construction bonds. These instances of non-compliance have subsequently been remedied. These instances of noncompliance are not to be construed as a representation that such noncompliance has been deemed to be material under the Rule.
In order to assist it in complying with its disclosure undertakings the District has engaged Dale Scott & Company, Inc., its Financial Advisor, to serve as its dissemination agent with respect to its each of its disclosure undertakings, including the Continuing Disclosure Certificate to be executed in connection with the Refunding Bonds.
-27- Neither the County nor any other entity other than the District shall have any obligation or incur any liability whatsoever with respect to the performance of the District’s duties regarding continuing disclosure.
CERTAIN LEGAL MATTERS
Absence of Material Litigation
No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect, executed by an authorized officer of the District, will be furnished to purchasers at the time of the original delivery of the Bonds. The District is not aware of any litigation pending or threatened that (i) questions the political existence of the District, (ii) contests the District's ability to receive ad valorem taxes or to collect other revenues or (iii) contests the District's ability to issue and retire the Bonds.
The District is routinely subject to lawsuits and claims. In the opinion of the District, the aggregate amount of the uninsured liabilities of the District under these lawsuits and claims will not materially affect the financial position or operations of the District.
Legal Opinions
The proceedings in connection with the issuance of the Bonds are subject to the approval as to their legality by Bond Counsel. The opinions of Bond Counsel with respect to the Bonds will be delivered in substantially the respective forms attached hereto as Appendix D. Certain legal matters will also be passed upon for the District by Disclosure Counsel. The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance and delivery of the Bonds.
TAX MATTERS
Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings.
The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the Bonds. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount
-28- payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded.
Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight- line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds.
California Tax Status. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes.
Other Tax Considerations. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above, including any opinion regarding federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
In addition, future legislation, if enacted into law, or clarification of the Tax Code may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the
-29- Tax Code may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion.
Form of Opinions. A copy of the proposed form of the opinions of Bond Counsel is attached hereto as Appendix D.
RATINGS
Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”) and Kroll Bond Rating Agency, Inc. (“KBRA”) are expected to assign ratings of “AA” and “AA+” respectively to the 2014A Bonds, with the understanding that AGM will issue the Policy with respect to the 2014A Bonds at closing.
In addition, S&P has assigned a rating of “A+” to both the 2012C Bonds and the 2014A Bonds. The District has provided certain additional information and materials to such rating agencies (some of which does not appear in this Official Statement). Such ratings reflect only the views of S&P and an explanation of the significance of such ratings and outlook may be obtained only from S&P. There is no assurance that any credit ratings given to the Bonds will be maintained for any period of time or that the ratings may not be lowered or withdrawn entirely by the rating agencies if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds.
COMPETITIVE SALE OF BONDS
The Bonds were sold following two separate competitive bidding processes, and were awarded to the separate purchasers identified in the following paragraphs, whose proposals represented the lowest true interest cost for the applicable Bonds as determined in accordance with the Official Notices of Sale. The following are the purchase prices for the 2012C Bonds and the 2014A Bonds, respectively:
Series 2012C Bonds. Morgan Stanley & Co. LLC, the 2012C Bond Purchaser, has agreed to purchase the 2012C Bonds at a price of $5,241,564.44, which is equal to the initial principal amount of the Series 2012C Bonds of $4,860,000.00 plus a net original issue premium of $385,587.10, less a Purchaser’s discount of $4,022.66.
Morgan Stanley, parent company of Morgan Stanley & Co. LLC., an underwriter of the Bonds, has entered into a retail distribution arrangement with Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.
Series 2014A Bonds. Mesirow Financial, Inc., the 2014A Bond Purchaser, has agreed to purchase the 2014A Bonds at a price of $31,642,281.75, which is equal to the initial principal amount of the 2014A Bonds of $30,000,000.00 plus a
-30- net original issue premium of $2,170,188.75, less a Purchaser’s discount of $527,907.00.
The Bond Purchasers intend to offer the Bonds to the public at the respective offering prices set forth on the inside cover page of this Official Statement. The Bond Purchasers may offer and sell to certain dealers and others at a price lower than the offering prices stated on the inside cover page hereof. The offering price may be changed from time to time by the Bond Purchasers.
COMPENSATION OF PROFESSIONALS
Payment of the fees and expenses of Bond Counsel, Disclosure Counsel and Dale Scott & Co., Inc., as financial advisor to the District, is contingent upon issuance of the Bonds.
ADDITIONAL INFORMATION
The discussions herein about the Bond Resolutions and the Continuing Disclosure Certificate are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and for full and complete statements of such provisions reference is made to such documents. Copies of these documents mentioned are available from the District and following delivery of the Bonds will be on file at the offices of the Paying Agent in San Francisco, California.
References are also made herein to certain documents and reports relating to the District; such references are brief summaries and do not purport to be complete or definitive. Copies of such documents are available upon written request to the District.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Bonds.
The execution and delivery of this Official Statement have been duly authorized by the District.
JEFFERSON UNION HIGH SCHOOL DISTRICT
By: /s/ Steven Fuentes Associate Superintendent Business Services
-31-
APPENDIX A
AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR FISCAL YEAR ENDING JUNE 30, 2015
A-1
Board of Trustees Jefferson Union High School District Andrew Lie ADMINISTRATIVE OFFICES – SERRAMONTE DEL REY Jeanne L. Matysiak
Nick Occhipinti 699 Serramonte Boulevard, Suite 100 Kalimah Y. Salahuddin Daly City, CA 94015-4132 Rosie U. Tejada 650-550-7900 FAX 650-550-7888
Thomas H. Minshew Superintendent
TO: Board of Trustees ☒ A c t i o n
☐ C o n s e n t FROM: Thomas H. Minshew, Superintendent Information ☐ DATE: January 11, 2016
RE: Acceptance of 2014/2015 Financial Audit Report
______
The 2014/2015 Financial Audit Report, sent under separate cover, is for the district wide financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the district.
We are requesting that this item be placed on the January 19th agenda with the recommendation that the Board accept the financial audit report.
Fiscal Impact None
Recommendation
It would be the recommendation of the administration that the Board accept the financial audit report for 2014/2015. JEFFERSON UNION HIGH SCHOOL DISTRICT COUNTY OF SAN MATEO DALY CITY, CALIFORNIA
SINGLE AUDIT REPORT
YEAR ENDED JUNE 30, 2015
Vargas and Company JEFFERSON UNION HIGH SCHOOL DISTRICT June 30, 2015
Table of Contents
Page(s) FINANCIAL SECTION
Independent Auditors’ Report 1 – 3
Management’s Discussion and Analysis (Required Supplementary Information) 4 – 15
Basic Financial Statements Government-wide Financial Statements Statement of Net Position 16 Statement of Activities 17 Fund Financial Statements Governmental Funds Balance Sheet 18 Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position – Governmental Activities 19 Statement of Revenues, Expenditures, and Changes in Fund Balances 20 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities – Governmental Activities 21 Fiduciary Funds Statement of Net Position 22
Notes to the Basic Financial Statements 23 – 60
Required Supplementary Information (other than MD&A) Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - General Fund 61 Schedule of District’s Proportionate Share of the Net Pension Liability - CalPERS 62 Schedule of District’s Contributions - CalPERS 63 Schedule of District’s Proportionate Share of the Net Pension Liability - CalSTRS 64 Schedule of District’s Contributions - CalSTRS 65 Schedule of Funding Progress 66
Combining Fund Statements General Funds Combining Balance Sheet 67 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 68 Nonmajor Governmental Funds Combining Balance Sheet 69 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) 70 Nonmajor Special Revenue Funds Combining Balance Sheet 71 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) 72 JEFFERSON UNION HIGH SCHOOL DISTRICT June 30, 2015
Table of Contents
Page(s)
Nonmajor Capital Projects Funds Combining Balance Sheet 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) 74
SUPPLEMENTARY INFORMATION SECTION
Organization 75 Schedule of Average Daily Attendance 76 Schedule of Instructional Time 77 Schedule of Charter Schools 78 Schedule of Financial Trends and Analysis 79 Schedule of Expenditures of Federal Awards 80 Reconciliation of Annual Financial and Budget Report (SACS) with Audited Basic Financial Statements 81 Notes to Supplementary Information 82
OTHER INDEPENDENT AUDITORS’ REPORT SECTION
Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 83 – 84
Independent Auditors’ Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 85 – 86
Independent Auditors’ Report on State Compliance 87 – 88
FINDINGS AND RECOMMENDATIONS SECTION
Schedule of Audit Findings and Questioned Costs 89 – 90
Summary Schedule of Prior Audit Findings 91
Financial Section Vargas and Company ..;E?rtif1ed pubilc accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Jefferson Union High School District Daly City, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Jefferson Union High School District (the "District"), as of and for the year ended June 30, 2015, 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.
Auditor's Responsibility
Our responsibility is to express opm10ns on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
601 North First Street / San Jose, California 95112 / (408) 298-1700 / Fax (408) 293-9598 I 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 the Jefferson Union High School District, as of June 30, 2015, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis; schedule of revenues, expenditures, and changes in fund balances - budget and actual - general fund; schedules of district’s proportionate share of the net pension liability; schedule of district’s contributions; and schedule of funding progress on pages 4-15 and 61-66 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.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Jefferson Union High School District’s basic financial statements. The combining fund statements and supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements.
The combining fund statements, supplementary information, and the schedule of expenditures of federal awards 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 fund statements, supplementary information, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.
2 Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 23, 2015, on our consideration of the Jefferson Union High School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 Jefferson Union High School District's internal control over financial reporting and compliance. v(o.:t! ct i m~ San Jose, California October 23, 2015
3
Management’s Discussion and Analysis (MD&A) - Required Supplementary Information
JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
An overview of the Jefferson Union High School District’s (the “District”) financial activities for the fiscal year ended June 30, 2015 is provided in this discussion and analysis of the District’s financial performance.
This Management Discussion and Analysis (MD&A) should be read in conjunction with the District’s financial statements (including notes and supplementary information).
USING THIS ANNUAL REPORT
This annual report consists of a series of financial statements. The Statements of Net Position and the Statement of Activities provide information about the activities of the District as a whole and present a longer-term of the District’s finances. Fund financial statements, for governmental activities, tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report he District’s operations in more detail than the government-wide statements by providing information about the District’s most significant funds. The remaining statements provide financial information about activities for which the District acts solely as trustee or agent for the benefit of those outside of the District.
Reporting the District as a Whole
One of the most important questions asked about the District’s finances is, “Is the District as a whole better off or worse as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities in a way that helps answer these questions. These statements include all assets, deferred outflow, liabilities, and deferred inflow using the accrual basis of accounting, which is similar to the accounting used by most private- sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid.
FINANCIAL HIGHLIGHTS
The District’s financial status has declined during the fiscal year. Over the course of the year, there was a 56.5% decrease (excluding prior period adjustment) in total net position or $6,626,443. Last year, the change in net position is a decrease of $7,801,574. This decrease is mostly attributable to completion of bond projects and expenditure of carryover balances.
Expenses were $68,690,291. Revenues were $62,063,848.
Enrollment in the District increased by 2.9%. This caused a minor increase in state funding.
The District’s net position at the close of the 2014-2015 fiscal year is negative $35,764,406. Of this amount, negative $40,434,920 (unrestricted net position) reflects the inclusion of GASB 68 and does not affect the District’s ability to meet ongoing obligations to citizens and creditors, $32,135,800 is legally restricted (restricted net position), and negative $27,465,286 is net investment in capital assets.
4 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
As of June 30, 2015 the District’s governmental funds reported combined ending fund balances of $40,019,738, a decrease of $12,500,492 in comparison with the prior year. Approximately 80% of the combined fund balances, $32,135,800 is restricted; 11% or $4,460,597 is assigned; 8% or $3,126,966 is unassigned; and 1% or $296,375 is nonspendable.
At the end of the fiscal year, unassigned fund balance for the general funds was $3,126,966 or 6% of the general funds total expenditures.
The District’s total long-term debt increased by $43,432,600 in comparison with the prior year. The increase resulted primarily from the GASB 68 net pension liability recognition and issuance of refunding bonds.
Due to the implementation of GASB 68 the District recognized a Net Pension Liability of $35 million.
OVERVIEW OF THE FINANCIAL STATEMENTS
The full annual financial report is a product of three separate parts: the basic financial statements, supplementary information, and this section, Management Discussion and Analysis. The three sections together provide a comprehensive overview of the District. The basic financials are comprised of two kinds of statements that present financial information from different perspectives, government-wide and funds.
Government-wide financial statements, which comprise the first two statements, the statement of net position and the statement of activities, provide both short term and long-term information about the District’s overall financial position.
Individual parts of the District, which are reported as fund financial statements, focus on reporting the District’s operations in more detail. These fund financial statements comprise the remaining statements.
o Basic services funding (i.e., regular and special education) is described in the governmental funds statements. These statements include short-term financing and balance remaining for future spending.
o Normally, short and long-term financial information about the activities of the District that operate like businesses (such as food service or self-insurance funds) are provided in the proprietary funds statements. The District has no proprietary funds.
o Financial relationships, for which the District acts solely as an agent or trustee, for the benefit of others to whom the resources belong, are presented in the fiduciary fund statements.
Notes to the financials, which are included in the financial statements, provide more detailed data and explain some of the information in the statements. The required supplementary information section provides further explanations and provides additional support for the financial statements. A comparison
5 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
of the District’s general fund budget for the year is included. The combining fund statements are presented to show the individual fund data for each nonmajor governmental.
Management’s Basic Required Discussion and Financial Statements Supplementary Analysis Information
Government-wide Fund Notes to the Basic Financial Statements Financial Statements Financial Statements
Government-wide Financial Statements
The District as a whole is reported in the government-wide statements and uses accounting methods similar to those used by companies in the private sector. All of the District’s assets, deferred outflow, liabilities, and deferred inflow are included in the Statement of Net Position. The Statement of Activities reports all of the current year’s revenues and expenses regardless of when cash is received or paid.
The District’s financial health or position (net position) can be measured by the difference between the District’s assets and liabilities.
Increases or decreases in the net position of the District over time are indicators of whether its financial position is improving or deteriorating, respectively.
Additional non-financial factors such as condition of school buildings and other facilities, and changes in the property tax base of the District, need to be considered in assessing the overall health of the District.
The Statement of Net Position and the Statement of Activities are normally divided into two kinds of activities:
Governmental activities:
The basic services provided by the District, such as regular and special education, administration, and transportation are included here. Property taxes, funding received from the State of California through the revenue limit, along with categorical and special funding received from the federal and state government finance most of these activities.
Business-type activities:
Business-type activities would charge fees to help cover the costs of certain services it provides. There are no business-type activities for the District.
6 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
Fund Financial Statements
More detailed information about the District’s most significant funds – not the District as a whole – is provided in the fund financial statements. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs:
Some funds are required by bond covenants and by state law.
Other funds are established by the District to control and manage money for particular purposes (such as repaying its long-term debts). Other funds may also show proper usage of certain revenues (such as federal grants).
There are three kinds of funds: governmental, proprietary and fiduciary funds. The District maintains two kinds of funds, the governmental and fiduciary funds:
Governmental funds:
Most of the District’s basic services are included in governmental funds, which generally focus on:
1. How cash and other financial assets can readily be converted to cash flow (in and out).
2. The balances left at year-end that are available for spending.
A detailed short-term view is provided by the governmental fund statements. These help determine whether there are more or fewer financial resources that can be spent in the near future for financing the District’s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided at the bottom of the governmental fund statements that explain the differences (or relationships) between them.
The District maintains several individual governmental funds organized according to their type (general, special revenue, capital projects, and debt service). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general, building, and bond interest and redemption funds, which are considered to be the major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.
The District adopts an annual appropriated budget. The budget is a compilation of operating budgets from individual functional units within the general, special revenue, debt service, and capital projects fund. Budgets are adopted for all funds. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with the budget.
Proprietary funds:
The District has no proprietary funds.
7 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
Fiduciary funds:
For assets that belong to others, such as the student body funds, the District acts as the trustee, or fiduciary. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. A separate statement of fiduciary net position and a statement of changes in fiduciary net position reports the District’s fiduciary activities. These activities are excluded from the government-wide financial statements, as the assets cannot be used by the District to finance its operations.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net Position
Table 1: Net Position Governmental Activities Percentage 2015 2014 Change Current and other assets Cash $ 41,304,405 $ 55,485,849 (25.6%) Receivables 2,013,215 3,284,586 (38.7%) Other current assets 291,900 272,477 7.1% Subtotal of current and other assets 43,609,520 59,042,912 (26.1%) Capital assets, net 131,486,553 126,118,177 4.3% Total assets 175,096,073 185,161,089 (5.4%)
Deferred Outflows of Resources Deferred amount on refunding 9,400,603 - . na Pension plan 2,743,546 - . na Total Deferred Outflows of Resources 12,144,149 - . na
Long-term debt outstanding 208,140,315 164,707,715 26.4% Other liabilities 5,549,013 8,719,617 (36.4%) Total liabilities 213,689,328 173,427,332 23.2%
Deferred Inflows of Resources Pension plan 9,315,300 - . na
Net position Net investment in capital assets ( 27,465,286) (34,808,666) 21.1% Restricted 32,135,800 44,359,083 (27.6%) Unrestricted ( 40,434,920) 2,183,340 (1952.0%)
Total net position ($35,764,406) $11,733,757 (404.8%)
8 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
The District’s net position was negative $35,764,406 for the fiscal year ended June 30, 2015. Of this amount, negative $40,434,920 was unrestricted. Restricted net position of $32,135,800 is reported separately to show external restrictions on how they may be used. Net investment in capital assets is negative $27,465,286.
The District’s net position decreased by $47,498,163 or 404.8% less on June 30, 2015, than they were the year before. Many factors contributed to the growth in financial position. However, certain events of the current year stand out beyond others:
Decrease in cash was due to ongoing completion of bond projects.
Decrease in receivables was due to change in LCFF funding status.
Increase in capital assets was due to completion of bond projects.
Increase in deferred outflow of resources was due to GASB 68 and the issuance of refunding bonds.
Decrease in other liabilities was due to change in LCFF funding status.
Increase in long-term liabilities was due to the recognition of net pension liability as required by GASB 68, the issuance of refunding bonds, and additional net OPEB obligation.
Increase in deferred inflow of resources was due to GASB 68.
Changes in Net Position
The District’s total revenues are $62,063,848, an increase of $3,969,426 or 6.8% from the prior year (see Table 2). This increase is mainly due to increased LCFF gap funding and one time state funds..
The total cost of all programs and services increased 4.2% to $68,690,291. The District’s expenses are predominantly related to educating and caring for students $40,737,220 or 59.3% (see Table 4). The purely administrative activities of the District accounted for just 4.9% of the total costs. The most significant contributor to the change came in two areas. The first area is in instruction, which increased as a result of one time state funding. The second area of significant change was in general administration which was the result of one time funding.
9 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
Table 2: Changes in Net Position Governmental Activities Percentage 2015 2014 Change Revenues Program revenues Charges for services $ 342,528 $ 201,381 70.1% Operating grants and contributions 4,967,132 5,965,977 (16.7%) General revenues Taxes 49,640,659 45,735,569 8.5% Federal & state aid 3,609,382 2,901,694 24.4% Other 3,504,147 3,289,801 6.5% Total revenues 62,063,848 58,094,422 6.8% Expenses Instruction 28,909,634 27,438,770 5.4% Instruction-related 5,276,859 5,223,899 1.0% Pupil services 6,550,727 5,881,965 11.4% General administration 3,333,950 2,799,896 19.1% Plant services 8,400,593 7,876,368 6.7% Ancillary services 613,555 626,970 (2.1%) Other 2,207,681 2,203,609 0.2% Interest and fiscal charges 7,714,754 8,242,239 (6.4%) Depreciation 5,682,538 5,602,280 1.4% Total expenses 68,690,291 65,895,996 4.2%
Change in net position ( 6,626,443) ( 7,801,574) 15.1%
Net position, beginning 11,733,757 19,535,331 (39.9%) Prior period adjustment ( 40,871,720) - . na
Net position, ending ($35,764,406) $11,733,757 (404.8%)
Governmental Activities
Revenues for the District’s governmental activities increased 6.8% while total expenses increased 4.2%. Excluding prior period adjustment, the change in net position increased $1,175,131 or 15.1% compared to prior year.
The recent changes of the District’s finances can be credited to:
Operating grants and contributions decreased $998,845 or 16.7% due to decreased in local grants.
Taxes increased $3,905,090 or 8.5% due to one-time RDA payments.
Federal and state aid increased $707,688 or 24.4% due to one-time state funding.
Other revenues increased $214,346 or 6.5% due to carryover balances.
10 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
Instruction expenses increased $1,470,864 or 5.4% due to one-time state funding and carryover balances.
Pupil services increased $668,762 or 11.4% due to one-time state funding.
General administration increased $534,054 or 19.1% due to one-time state funding.
Plant services increased $524,225 or 6.7% due to completion of maintenance projects.
Interest and fiscal charges decreased $527,485 or 6.4% due to bond funds.
Table 3: Summary of Revenues for Governmental Functions
FYE 2015 Percent Increase (Decrease) Percent Increase Amount of Total from FYE 2014 (Decrease) Revenues Program revenues Charges for services $ 342,528 0.6% $ 141,147 70.1% Operating grants and contributions 4,967,132 8.0% (998,845) (16.7%) General revenues Taxes 49,640,659 80.0% 3,905,090 8.5% Federal & state aid 3,609,382 5.8% 707,688 24.4% Other 3,504,147 5.6% 214,346 6.5%
Total revenues $62,063,848 100.0% $3,969,426 6.8%
Table 4: Summary of Expenses
FYE 2015 Percent Increase (Decrease) Percent Increase Amount of Total from FYE 2014 (Decrease) Expenses Instruction $28,909,634 42.1% $1,470,864 5.4% Instruction-related 5,276,859 7.7% 52,960 1.0% Pupil services 6,550,727 9.5% 668,762 11.4% General administration 3,333,950 4.9% 534,054 19.1% Plant services 8,400,593 12.2% 524,225 6.7% Ancillary services 613,555 0.9% (13,415) (2.1%) Other 2,207,681 3.2% 4,072 0.2% Interest and fiscal charges 7,714,754 11.2% (527,485) (6.4%) Depreciation 5,682,538 8.3% 80,258 1.4%
Total expenses $68,690,291 100.0% $2,794,295 4.2%
11 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
Table 5: Governmental Activities
Percentage Percentage Total Cost of Services Change Net Cost of Services Change 2015 2014 2014-2015 2015 2014 2014-2015
Instruction $28,909,634 $27,438,770 5.4% ($26,534,058) ($24,205,920) (9.6%) Instruction-related 5,276,859 5,223,899 1.0% ( 5,159,287) ( 5,007,774) (3.0%) Pupil services 6,550,727 5,881,965 11.4% ( 5,097,972) ( 4,450,181) (14.6%) General administration 3,333,950 2,799,896 19.1% ( 3,262,478) ( 2,717,623) (20.0%) Plant services 8,400,593 7,876,368 6.7% ( 8,370,177) ( 7,809,312) (7.2%) Ancillary services 613,555 626,970 (2.1%) ( 610,030) ( 626,970) 2.7% Other 2,207,681 2,203,609 0.2% ( 949,337) ( 1,066,339) 11.0% Interest and fiscal charges 7,714,754 8,242,239 (6.4%) ( 7,714,754) ( 8,242,239) 6.4% Depreciation 5,682,538 5,602,280 1.4% ( 5,682,538) ( 5,602,280) (1.4%)
Total $68,690,291 $65,895,996 4.2% ($63,380,631) ($59,728,638) (6.1%)
FINANCIAL ANALYSIS OF THE DISTRICT’S FUNDS
General Governmental Functions
The District’s governmental funds reported a combined fund balance of $40,019,738, which is less than last year’s total of $52,520,230. Below is an analysis of the District’s fund balances and the total change in fund balance from the prior year.
Table 6: District’s Fund Balances
Percent Fund Balance Increase 2015 2014 (Decrease) Major funds: General funds: General fund (fund01) $ 6,615,323 $ 8,306,324 (20.4%) Special Reserve for other than capital outlay projects (fund17) 763,392 756,899 0.9% General funds 7,378,715 9,063,223 (18.6%) Capital Project – Building 21,452,860 32,884,119 (34.8%) Debt Service – Bond Interest & Redemption 9,777,598 9,563,212 2.2% Nonmajor funds: Special Revenue: Adult Education 1,637 20,287 (91.9%) Cafeteria 11,425 133,917 (91.5%) Capital Project: Capital Facilities 1,373,261 831,563 65.1% County School Facilities 24,242 23,909 1.4%
Total $40,019,738 $52,520,230 (23.8%)
12 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
The change in fund balance in the General funds is primarily due to expenditure of carryover balances.
The change in the fund balance for the Building fund is primarily due to continuing bond projects.
The change in fund balance in the Bond Interest & Redemption fund is primarily due to refinancing.
The change in the fund balance for the Adult Education fund is primarily due to continuing operations.
The change in the fund balance for the Cafeteria fund is primarily due to continuing operations.
The change in the fund balance for the Capital Facilities fund is primarily due to increased collections.
Four of the District’s funds [General (fund01), Building, Adult Education, and Cafeteria funds] had more expenditures than revenues during the fiscal year.
GENERAL FUND (FUND 01) BUDGETARY HIGHLIGHTS
The District amended its revenue estimates to reflect a $3,234,179 increase mostly in LCFF sources of $2,343,821 due to carryover balances and one time funding.
The expenditure estimates were amended to reflect a $7,449,952 increase mostly in books and supplies of $3,176,516 due to carryover balances.
During the year, actual revenues were more than budgetary estimates by $1,223,647. Majority of this positive variance amount is in LCFF sources of $1,012,273 due to increased LCFF funding.
Actual expenditures were less than budgetary estimates by $3,814,887. This positive variance is mainly in books and supplies of $3,056,896 due to non-expended carryover balances.
The net effect of over-realization of revenues and under-utilization of expenditures in a favorable variance of $5,038,534 thus eliminating the need to draw upon existing fund balance.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The District’s investment in capital assets amounts to $131,486,553 (net of accumulated depreciation). This investment includes mainly land, improvements, buildings, equipment, and work in progress.
13 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
The District’s cost of capital assets increased $10,912,572 or 5.7% over the prior year. Major capital asset events during the current fiscal year included the following:
Building modernization
Purchases of equipment
For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures.
Capital assets for the governmental activities are presented below to illustrate changes from the prior year:
Table 7: Capital Assets Governmental Activities Percent Change 2015 2014 2014-2015
Land $ 1,536,578 $ 1,536,578 - % Improvements 1,774,120 1,774,120 - % Buildings 184,275,756 184,063,890 0.1% Equipment 3,566,851 3,568,132 (0.0%) Work in progress 11,100,542 398,555 2685.2%
Total at cost $202,253,847 $191,341,275 5.7%
Long-Term Debt
The District has increased its long-term debt mainly due to accreted interest on bonds.
Table 8: Outstanding Long-term Debt District Total Percent Change 2015 2014 2014-2015
Bonds payable (including premium) $168,352,442 $160,926,843 4.6% Compensated absences 382,982 385,153 (0.6%) Net OPEB Obligation 4,843,669 3,395,719 42.6% Net Pension Liability 34,561,222 - . na
Total $208,140,315 $164,707,715 26.4%
14 JEFFERSON UNION HIGH SCHOOL DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2015
FACTORS BEARING ON THE DISTRICT’S FUTURE
In 2013/14, the State adopted a new funding mechanism for school districts. The Local Control Funding Formula (LCFF) promises to increase state funding to school districts over a 10 year period. The LCFF allows local governing boards to control expenditure decisions while still meeting the needs of all students.
The district also continues to expect ongoing declines in enrollment in the next two years. This decrease will be balanced out by anticipated growth in LCFF funding in the future.
In June 2012, the district passed parcel tax Measure Y. The parcel tax generated over $1.6 million dollars in funding in the 2012/13 fiscal year. The measure will continue to provide funding through the 2015/16 fiscal year.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a general overview of the District’s finances and to show the District’s accountability for the money it receives. If you have questions regarding this report or need additional financial information, contact the District’s Business Office at (650) 550-7954 or 699 Serramonte Blvd. Daly City, CA 94015.
15
Basic Financial Statements - Government-wide Financial Statements JEFFERSON UNION HIGH SCHOOL DISTRICT Statement of Net Position June 30, 2015
Governmental Activities Assets Cash in county treasury $ 41,259,147 Cash on hand and in bank 25,000 Cash in revolving fund 4,475 Cash with fiscal agent 15,783 Accounts receivable 515,255 Due from grantor government 1,497,960 Prepaid expenses 291,900 Land 1,536,578 Improvements 1,774,120 Buildings 184,275,756 Equipment 3,566,851 Work in progress 11,100,542 Less accumulated depreciation (70,767,294)
Total Assets 175,096,073
Deferred Outflows of Resources Deferred amount on refunding 9,400,603 Pension plan 2,743,546
Total Deferred Outflows of Resources 12,144,149
Liabilities Accounts payable and accrued liabilities 4,845,382 Due to grantor government 352,690 Unearned revenue 350,941 Long-term debt Due within one year Bonds payable 10,777,373 Total due within one year 10,777,373 Due beyond one year Bonds payable 157,575,069 Compensated absences 382,982 Net OPEB Obligation 4,843,669 Net Pension Liability 34,561,222 Total due beyond one year 197,362,942
Total Liabilities 213,689,328
Deferred Inflows of Resources Pension plan 9,315,300
Total Deferred Inflows of Resources 9,315,300
Net Position Net investment in capital assets (27,465,286) Restricted Legally restricted 32,135,800 Unrestricted (40,434,920)
Total Net Position $ (35,764,406)
The notes to the basic financial statements are an integral part of this statement.
16 JEFFERSON UNION HIGH SCHOOL DISTRICT Statement of Activities Year Ended June 30, 2015
Net (Expenses) Revenues and Changes in Program Revenues Net Position Operating Charges for Grants and Governmental Expenses Services Contributions Activities Functions/Programs Governmental Activities Instruction $ 28,909,634 $ 58,705 $ 2,316,871 $ (26,534,058) Instruction-related services 5,276,859 398 117,174 (5,159,287) Pupil services 6,550,727 238,397 1,214,358 (5,097,972) General administration 3,333,950 476 70,996 (3,262,478) Plant services 8,400,593 458 29,958 (8,370,177) Ancillary services 613,555 53 3,472 (610,030) Other outgo 2,207,681 44,041 1,214,303 (949,337) Interest and fiscal charges 7,714,754 - - (7,714,754) Depreciation - unallocated 5,682,538 - - (5,682,538)
Total Governmental Activities $ 68,690,291 $ 342,528 $ 4,967,132 (63,380,631)
General Revenues Taxes and subventions Taxes levied for general purposes 38,320,959 Taxes levied for debt service 9,161,468 Taxes levied for other specific purposes 2,158,232 Federal and state aid not restricted for specific purposes 3,609,382 Interest and investment earnings 333,732 Miscellaneous 3,170,415
Total General Revenues 56,754,188
Change in Net Position (6,626,443)
Net Position, Beginning 11,733,757
Prior Period Adjustment (40,871,720)
Net Position, Ending $ (35,764,406)
The notes to the basic financial statements are an integral part of this statement.
17
Basic Financial Statements - Fund Financial Statements JEFFERSON UNION HIGH SCHOOL DISTRICT Balance Sheet Governmental Funds June 30, 2015
Bond Interest and Nonmajor General Building Redemption Governmental Funds Fund Fund Funds Total Assets Cash in county treasury $ 7,373,881 $ 22,528,811 $ 9,762,755 $ 1,593,700 $ 41,259,147 Cash on hand and in bank 25,000 - - - 25,000 Cash in revolving fund 4,000 - - 475 4,475 Cash with fiscal agent 15,783 - - - 15,783 Accounts receivable 446,084 40,968 14,843 13,360 515,255 Due from grantor government 1,241,591 - - 256,369 1,497,960 Due from other funds 550,147 - - 187,096 737,243 Prepaid expenses 291,900 - - - 291,900
Total Assets $ 9,948,386 $ 22,569,779 $ 9,777,598 $ 2,051,000 $ 44,346,763
Liabilities and Fund Balances Liabilities Accounts payable and accrued liabilities $ 1,678,944 $ 1,092,947 $ - $ 114,260 $ 2,886,151 Due to grantor government 352,690 - - - 352,690 Due to other funds 187,096 23,972 - 526,175 737,243 Unearned revenue 350,941 - - - 350,941
Total Liabilities 2,569,671 1,116,919 - 640,435 4,327,025
Fund Balances Nonspendable Revolving Cash 4,000 - - 475 4,475 Prepaid Expenditures 291,900 - - - 291,900 Restricted Legally Restricted Balance 869,675 21,452,860 9,777,598 35,667 32,135,800 Assigned Other Assignments 3,086,174 - - 1,374,423 4,460,597 Unassigned Unassigned 3,126,966 - - - 3,126,966
Total Fund Balances 7,378,715 21,452,860 9,777,598 1,410,565 40,019,738
Total Liabilities and Fund Balances $ 9,948,386 $ 22,569,779 $ 9,777,598 $ 2,051,000 $ 44,346,763
The notes to the basic financial statements are an integral part of this statement.
18 JEFFERSON UNION HIGH SCHOOL DISTRICT Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position - Governmental Activities June 30, 2015
Total fund balances - governmental funds $ 40,019,738
Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. Cost $ 202,253,847 Accumulated depreciation (70,767,294) 131,486,553
To recognize accrued interest at year end. (1,959,231)
In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to pensions are reported. Deferred outflows of resources relating to pensions 2,743,546 Deferred inflows of resources relating to pensions (9,315,300)
Deferred amount on refunding debt is regognized and amortized over the life of the bond for purposes of the statement of net position. 9,400,603
Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities, including premium/discount, at year-end consist of: Bonds payable 168,352,442 Compensated absences 382,982 Net OPEB Obligation 4,843,669 Net Pension Liability 34,561,222 (208,140,315)
Total net position - governmental activities $ (35,764,406)
The notes to the basic financial statements are an integral part of this statement.
19 JEFFERSON UNION HIGH SCHOOL DISTRICT Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2015
Bond Interest and Nonmajor General Building Redemption Governmental Funds Fund Fund Funds Total Revenues LCFF sources: State apportionments $ 3,868,720 $ - $ - $ - $ 3,868,720 Local sources 35,460,455 - - - 35,460,455 LCFF transfers 1,358,297 - - - 1,358,297 Total LCFF sources 40,687,472 - - - 40,687,472 Federal 1,465,640 - 757 878,255 2,344,652 Other state 1,685,673 - 82,743 53,165 1,821,581 Other local 6,079,194 249,245 10,058,348 823,356 17,210,143
Total Revenues 49,917,979 249,245 10,141,848 1,754,776 62,063,848
Expenditures Instruction 26,895,090 - - 925,845 27,820,935 Instruction-related services 4,605,498 - - 465,765 5,071,263 Pupil services 5,221,880 - - 1,085,007 6,306,887 Ancillary services 591,477 - - - 591,477 General administration 3,208,100 - - 8,803 3,216,903 Plant services 7,722,761 11,680,504 - 18,467 19,421,732 Other outgo 2,207,681 - - - 2,207,681 Debt service: Principal - - 4,318,543 - 4,318,543 Interest - - 5,608,919 - 5,608,919
Total Expenditures 50,452,487 11,680,504 9,927,462 2,503,887 74,564,340
Excess (Deficiency) of Revenues Over (Under) Expenditures (534,508) (11,431,259) 214,386 (749,111) (12,500,492)
Other Financing Sources (Uses) Operating transfers in - - 1,527,726 1,150,000 2,677,726 Operating transfers out (1,150,000) - (1,527,726) - (2,677,726)
Total Other Financing Sources (Uses) (1,150,000) - - 1,150,000 -
Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Uses (1,684,508) (11,431,259) 214,386 400,889 (12,500,492)
Fund Balances, Beginning 9,063,223 32,884,119 9,563,212 1,009,676 52,520,230
Fund Balances, Ending $ 7,378,715 $ 21,452,860 $ 9,777,598 $ 1,410,565 $ 40,019,738
The notes to the basic financial statements are an integral part of this statement.
20 JEFFERSON UNION HIGH SCHOOL DISTRICT Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities - Governmental Activities Year Ended June 30, 2015
Total net change in fund balances - governmental funds $ (12,500,492)
Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which additions to capital outlay exceeds depreciation expense in the period: Capital outlay $ 11,050,914 Depreciation expense (5,682,538) 5,368,376
The governmental funds report bond proceeds as an other financing source, while repayment of bond principal is reported as an expenditure. Also, governmental funds report the effect of premium when bond is first issued, whereas, this amounts are and amortized in the statement of activities. Issue costs are expensed the year the debt is issued. Interest is recognized as an expenditures in the governmental funds when it is due. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Repayment of bond principal 4,318,543 Cost of issuing new debt (1,035,929) Amortization of bond premium (discount) 164,135 Amortization of deferred amount on refunding (269,641) Accretion of Capital Appreciation Bonds (1,202,104) 1,975,004
In the statement of activities, compensated absences are measured by the amounts earned during the year. In governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially the amounts paid). This year vacation earned exceeded the amounts used by: 2,171
In the statement of activities, change in net OPEB obligation are measured by the amounts earned during the year. In governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially the amounts paid). This year net OPEB obligation earned exceeded the amounts used by: (1,447,950)
In government funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. This year, the difference between accrual-basis pension costs and actual employer contributions was: (261,256)
Interest in long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. 237,704
Total change in net position - governmental activities $ (6,626,443)
The notes to the basic financial statements are an integral part of this statement.
21 JEFFERSON UNION HIGH SCHOOL DISTRICT Statement of Net Position Fiduciary Funds June 30, 2015
Student Body Funds Assets Cash and investments $ 600,535
Total assets $ 600,535
Liabilities Due to student group $ 600,535
Total Liabilities $ 600,535
The notes to the basic financial statements are an integral part of this statement.
22
Basic Financial Statements - Notes to the Basic Financial Statements JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
A. Accounting Policies
The Jefferson Union High School District (the “District”) accounts for its financial transactions in accordance with the policies and procedures of the California Department of Education’s (CDE) California School Accounting Manual (CSAM). The accounting policies of the District conform to generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA).
B. Reporting Entity
The District includes all funds that are controlled by the District’s governing board for financial reporting purposes. The District has considered all potential component units in determining how to define the reporting entity using criteria set forth in generally accepted accounting principles. Based upon those criteria, the District has determined that there are no potential component units that should be included in the District financial reporting entity.
C. Basis of Presentation
Government-wide Financial Statements:
The government-wide financial statements (i.e. statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the District.
The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, includes a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds.
23 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District’s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District.
Fund Financial Statements:
Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all nonmajor funds are aggregated into one column. Fiduciary funds are reported by fund type.
The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets.
All proprietary fund types are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets, deferred outflow/inflow of resources, and liabilities associated with the operation of these funds are included on the proprietary fund’s statement of net position. The statement of revenues, expenses, and changes in net position for proprietary funds presents increases (i.e., revenues) and decreases (i.e., expenditures) in net total assets. The statement of cash flows provides information about how the district finances and meets the cash flow needs of its proprietary activities. 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 District has no proprietary funds.
Fiduciary funds are reported using the economic resources measurement focus.
24 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
D. Basis of Accounting
Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use modified accrual basis of accounting. Proprietary and fiduciary funds use the accrual basis of accounting.
Revenues – exchange and non-exchange transactions:
Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. “Available” means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, “available” means collectible within the current period or within 60 days after the year- end.
Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditures requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.
Unearned revenue:
Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. On governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have also been recorded as unearned revenue.
25 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Expenses/expenditures:
On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service requirements, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed.
E. Fund Accounting
The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity or retained earnings, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District’s accounts are organized into major, nonmajor, and fiduciary funds as follows:
Major Governmental Funds:
The General Funds are mainly the general operating fund of the District. It is used to account for all financial resources except for those required to be accounted for in another fund. This fund combines Fund 01-General Fund and, starting FY10/11, Fund 17-Special Reserve Fund for Other than Capital Outlay Projects.
The Building Fund is used to account for the acquisition of major governmental capital facilities and buildings from the sale of bond proceeds.
The Bond Interest and Redemption Fund is maintained by the County Treasurer and is used to account for the accumulation of resources from ad valorem tax levies and the repayment of District bonds, interest, and related costs.
26 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Nonmajor Governmental Funds:
Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The District maintains following nonmajor special revenue funds:
The Adult Education Fund is used to account for resources committed to adult education programs maintained by the District. Under the flexibility provisions of current statute that allow formerly restricted revenues to be used for any educational purpose, such as this fund, do not currently meet the definition of special revenue funds as they are no longer primarily composed of restricted or committed revenue sources. However, since the programs associated with these funds may be reinstated at the end of the five-year flexibility period, the CDE has elected not to close these funds at this time. Additionally, substantial portion of the inflows were federal revenues.
The Cafeteria Fund is used to account separately for revenues received and expenditures made to operate the District’s food service operations.
Capital Projects Funds are used to account for the acquisition and/or construction of all major governmental general fixed assets. The District maintains the following nonmajor capital projects funds:
The Capital Facilities Fund is used to account for resources received from developer impact fees assessed under provisions of the California Environmental Quality Act (CEQA).
The County School Facilities Fund is used to account for state apportionments provided for modernization of school facilities under SB50.
27 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Fiduciary Fund:
Agency Funds account for assets of others for which the District acts as agent. The District maintains agency funds for the student body accounts, which are used to account for the raising and expending of money to promote the general welfare, morale, and educational experience of the student body. The amounts reported for student body funds represent the combined totals of all schools in the District.
F. Budgets and Budgetary Accounting
Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds. By state law, the District’s governing body must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District’s governing board satisfied these requirements.
These budgets are revised by the District’s governing board and District superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the General Fund in the financial statements.
Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriations accounts. Expenditures cannot legally exceed appropriations by major object account.
G. Accounting Estimates
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflow/inflow of resources, and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimated.
H. Encumbrances
Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated as of June 30.
28 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
I. Subsequent Events
Management has evaluated subsequent events through October 23, 2015.
J. Assets, Liabilities, and Equity
1. Deposits and Investments
Cash balances held in banks and in revolving funds are insured up to $250,000 by the Federal Depository Insurance Corporation.
In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the San Mateo County Treasury. The county pools these funds with those of other districts in the county and invests the cash. These pooled funds are carried at cost, which approximates market value. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool.
The county is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et seq. The funds maintained by the county are either secured by federal depository insurance or are collateralized.
2. Inventories and prepaid expenditures
Inventories are recorded using the purchases method in that the cost is recorded as an expenditure at the time individual inventory items are purchased. Inventories are valued at average cost and consist of expendable supplies held for consumption. Reported inventories are equally offset by a fund balance reserve, which indicates that these amounts are not “available for appropriation and expenditure” even though they are a component of net current assets.
The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditure when incurred.
3. Capital Assets
The accounting and reporting treatment applied to the capital assets associated with a find is determined by its measurement focus. Capital assets are reported in the governmental activities column of the government-wide statement of net position, but are not reported in the fund financial statements.
29 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated capital assets are recorded at their fair market values as of the date received. The District maintains a capitalization threshold of $5,000. The District does not own any infrastructure as defined in GASB No. 34. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are not capitalized.
All reported capital assets, except for land and work in progress, are depreciated. Improvements are depreciated over the remaining life of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives:
Description Estimated Lives
Buildings and improvements 20-50 years Furniture and equipment 15-20 years Vehicles 8 years
4. Unearned revenue
Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Unearned revenue is recorded to the extent cash received on specific projects and programs exceeds qualified expenditures.
5. Compensated Absences
All vacation pay plus related payroll taxes is accrued when incurred in the government- wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements.
Accumulated sick leave benefits are not recognized as liabilities of the District. The District’s policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires.
30 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Long-Term Debt
In the government-wide financial statements, long-term debt and other long-term obligation are reported as liabilities in the Statement of Net Position. Bonds premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method over the remaining life of the debt. Bonds payable are reported net of applicable bond premium or discount.
In the fund financial statements, governmental fund recognized bond premiums and discounts as well as bond issuance costs, during the current period. The face amount of the debt issued, premiums, or discounts are reported as other financing sources/uses.
7. Pension
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 Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the CalPERS and CalSTRS Financial Offices. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. CalPERS and CalSTRS audited financial statements are publicly available reports that can be obtained at CalPERS’ and CalSTRS’ website.
GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.
Valuation Date (VD) June 30, 2013 Measurement Date (MD) June 30, 2014 Measurement Period (MP) July 1, 2013 to June 30, 2014
8. Fund Balance
Governmental funds report fund balances in classifications based primarily on the extent to which the District is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. Fund balance for governmental funds can consist of the following:
Nonspendable Fund Balance – includes amounts that are (a) not in spendable form–such as inventory, prepaid amounts or long-term notes receivable, or (b) legally or contractually required to be maintained intact–such as a trust that must be retained in perpetuity. The “not in spendable form” criterion includes items that are expected to be converted to cash.
31 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Restricted Fund Balance – constraints placed on the use of resources are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. Restriction may effectively be changed or lifted only with the consent of resource providers.
Committed Fund Balance – amounts that can be used only be used for the specific purposes determined by a formal action of the District’s highest level of decision-making authority, the Board. Commitments may be changed or lifted by the District taking the same formal action that imposed the constraint originally.
Assigned Fund Balance – comprises amounts intended to be used by the District for specific purposes that are neither restricted nor committed. Intent is expressed by (a) the District’s Board or (b) the Superintendent or designee whom the District’s Board has delegated the authority to assign, modify, rescind amounts to be used for specific purposes. With the exception of the General Fund, this is the residual fund balance classification for all governmental funds with positive balances.
Unassigned Fund Balance – the residual classification for the General Fund. It is also used to report negative fund balance in other governmental funds.
In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned.
The District is committed to maintaining a prudent level of financial resources to protect against the need to reduce service levels because of temporary revenue shortfalls or unpredicted expenditures. The District’s Minimum Fund Balance Policy requires a Reserve for Economic Uncertainties, consisting of unassigned amounts, equal to no less than 3% of General Fund expenditures and other financing uses.
9. Net Position
Net position represents the difference between assets and deferred outflow with liabilities and deferred inflow. Net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvements of those assets. Net position is reported as restricted when there are limitations imposed on their use through external restrictions imposed by donors, grantors, or laws or regulations of other governments.
32 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued
10. Revenue Limit/Property Tax
The District’s revenue limit is received from a combination of local property taxes, state apportionments, and other local sources.
The county is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the county. The levy is based on the assessed values as of the preceding March 1, which is also the lien date. Property taxes on the secured roll are due on November 1 and February 1, and taxes become delinquent after December 10 and April 10, respectively. Property taxes on the unsecured roll are due on the lien date (March 1), and become delinquent if unpaid by August 31.
Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The county apportions secured property tax revenue in accordance with the alternate method of distribution prescribed Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll – approximately October 1 of each year.
The County Auditor reports the amount of the District’s allocated property tax revenue to the California Department of Education. Property taxes are recorded as local revenue limit sources by the District.
The California Department of Education reduces the District’s entitlement by the District’s local property tax revenue. The balance is paid from the state General Fund, and is known as the State Apportionment.
The District’s base revenue limit is the amount general purpose tax revenue, per average daily attendance (ADA), that the District is entitled to by law. This amount is multiplied by the second period ADA to derive the District’s total entitlement.
33 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 2. CASH AND INVESTMENTS
A. Cash in County Treasury
In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the San Mateo County Treasury as part of the common investment pool. The fair market value factor of this pooled cash as of June 30, 2015 as provided by the pool sponsor, was .99990. The District is considered to be an involuntary participant in the external investment pool. Interest is deposited into participation funds, which is credited to the General Fund. The county is restricted by Government Code Section 53635 pursuant to Section 53601 to invest in time deposits, U.S. government securities, state registered warrants, notes or Bonds, State Treasurer’s investment pool, bankers’ acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements.
A summary of deposits as of June 30, 2015 are as follows:
Carrying Fair Amount Value Deposits: Cash in County Treasury $41,259,147 $41,255,021 Cash in bank 25,000 25,000 Cash in revolving fund 4,475 4,475 Cash with fiscal agent 15,783 15,781
Total Governmental Activities $41,304,405 $41,300,277
Cash in Student Body Funds $600,535 $600,535
B. Cash on Hand, in Banks, and in Revolving Fund
As of June 30, 2015, cash in revolving fund is $4,475 and cash in bank is $25,000 for the Plan 125. Cash in banks are insured up to $250,000 by the Federal Depository Insurance Corporation. These accounts are held within various financial institutions.
34 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 3. RECEIVABLES
Receivables (accounts and due from grantor government) as of June 30, 2015, consists of the following:
Bond All Other Interest and Govern- General Building Redemption mental Funds Fund Fund Funds Total
Federal sources: Categorical aid program $ 493,602 $ - . $ - . $255,728 $ 749,330 State sources: Lottery 458,340 - . - . - . 458,340 Categorical aid program 3,222 - . - . - . 3,222 Local sources: Other 91,963 - . - . 9,150 101,113 Interest 36,456 40,968 14,843 2,844 95,111 Special Ed 346,589 - . 346,589 Miscellaneous 257,503 - . - . 2,007 259,510
Total Receivables $1,687,675 $40,968 $14,843 $269,729 $2,013,215
NOTE 4. INTERFUND TRANSACTIONS
Interfund transactions are reported as either loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements.
35 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 4. INTERFUND TRANSACTIONS - Continued
A. Interfund Receivables/Payables (Due From/Due To)
As of June 30, 2015, interfund receivables and payables were as follows:
Interfund Interfund Fund Receivable Payable
General funds $550,147 $187,096 Building fund - . 23,972 Nonmajor Governmental funds: Special Revenue funds: Adult Education fund 136,726 360,858 Cafeteria fund 50,370 141,834 Capital Project funds: Capital Facilities fund - . 23,483
Total $737,243 $737,243
B. Interfund Transfers
Interfund transfers consist of operating transfers from funds receiving revenue to funds through which the resources are to be expended. Interfund transfers for fiscal year 2014- 2015 were as follows:
Fund Transfers In Transfers Out
General fund $ - . $1,150,000 Bond Interest & Redemption fund 1,527,726 1,527,726 Nonmajor Governmental fund: Special Revenue fund: Adult Education fund 1,100,000 - . Cafeteria fund 50,000 - .
Total $2,677,726 $2,677,726
Transfer from the General fund to the Adult Education fund was for adult education apportionments made flexible by the state and used for adult education expenditures.
Transfer from the General fund to the Cafeteria fund was for general support of the program.
36 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 5. CAPITAL ASSETS AND DEPRECIATION
Capital asset activity for the year ended June 30, 2015, is shown below:
Balance Additions/ Deletions/ Balance July 1, 2014 Adjustments Adjustments June 30, 2015 Capital assets, not being depreciated: Land $ 1,536,578 $ - . $ - . $ 1,536,578 Work in progress 398,555 10,781,637 79,650 11,100,542 Total capital assets, not being depreciated 1,935,133 10,781,637 79,650 12,637,120
Capital assets, being depreciated: Improvements 1,774,120 - . - . 1,774,120 Buildings 184,063,890 211,866 - . 184,275,756 Equipment 3,568,132 150,152 151,433 3,566,851 Total capital assets, being depreciated 189,406,142 362,018 151,433 189,616,727
Less accumulated depreciation for: Improvements 1,513,747 41,369 - . 1,555,116 Buildings 61,651,490 5,466,464 - . 67,117,954 Equipment 2,057,861 174,705 138,342 2,094,224 Total accumulated depreciation 65,223,098 5,682,538 138,342 70,767,294
Total capital assets, being depreciated, net 124,183,044 (5,320,520) 13,091 118,849,433
Governmental activities capital assets, net $126,118,177 $5,461,117 $92,741 $131,486,553
The unallocated depreciation expense charged to governmental activities for the fiscal year is $5,682,538.
37 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT
The outstanding long-term debt of the District as of June 30, 2015, is as follows:
Year of Interest Maturity Amount of Outstanding Outstanding Issue Rate Date Original Issue July 1, 2014 June 30, 2015
2000 5.75%-6.45% 8/1/2029 $ 22,060,000 $ 15,300,000 $ 14,600,000 2005 3%-4.5% 8/1/2030 5,045,000 4,375,000 200,000 2006 4%-5% 8/1/2031 50,000,000 43,730,000 1,585,000 Premium 588,865 420,054 - . 2009 2.5%-12% 8/1/2033 17,998,937 17,581,770 17,418,227 Accreted Interest 27,221,063 5,072,703 6,274,807 Premium 591,513 470,337 445,691 2010 3%-5% 8/1/2026 12,000,000 11,075,000 10,560,000 Premium 545,284 405,467 371,911 2011 8.26%-12% 8/1/2041 14,999,737 14,999,737 4,736,419 Accreted Interest 111,725,263 4,297,985 2,021,925 2011 4.844% 6/1/2016 4,860,000 4,860,000 4,860,000 2013 2%-5% 8/1/2037 35,540,000 35,540,000 34,730,000 Premium 1,364,433 1,298,790 1,242,525 2013 1.53% 8/1/2016 1,500,000 1,500,000 1,000,000 2014 3%-5% 8/1/39 20,360,000 - . 20,360,000 Premium 775,324 - . 752,064 2014 1.45%-2% 8/1/18 720,000 - . 720,000 2015 2%-5% 8/1/31 41,430,000 - . 41,430,000 Premium 5,070,281 - . 5,043,873
Totals $374,395,700 $160,926,843 $168,352,442
In March 2000 the District issued the 2000 General Obligation Refunding Bonds, Series A, for $22,060,000 to refund in advance certain bonds which were previously issued for the purpose of financing the acquisition and construction of new facilities and improving and repairing existing schools. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ 755,000 $ 929,459 $ 1,684,459 2017 805,000 881,959 1,686,959 2018 860,000 831,334 1,691,334 2019 920,000 777,115 1,697,115 2020 975,000 719,303 1,694,303 2021-2025 5,955,000 2,566,289 8,521,289 2026-2030 4,330,000 583,402 4,913,402
Totals $14,600,000 $7,288,861 $21,888,861
38 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT – Continued
In August 2005, the District entered into an agreement with Golden West Schools Financing Authority (the “Authority”) where the 2005 General Obligation Revenue Bonds (Jefferson Union High School District Refunding) (the “Bonds”) are being issued by the Authority for $5,660,000 to provide funds to redeem $4,850,000 of the General Obligation Bonds, Election 1995, Series E (the “2000 Bonds”). Concurrently, the District will issue the 2005 General Obligation Refunding Bonds (the “District Refunding Bonds”) for $5,045,000 in exchange for the 2000 Bonds. The Bonds are payable from revenues consisting primarily of payments of principal and interest and redemption premium, if any, on the District Refunding Bonds. This was refunded by the 2015 General Obligation Refunding Bonds. The annual requirements to amortize the District Refunding Bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $200,000 $3,875 $203,875
Totals $200,000 $3,875 $203,875
In April 2007 the District issued the 2006 General Obligation Bonds, Series A, for $50,000,000 to finance the construction of new school facilities, and the repair and refurbishment of existing facilities. This was refunded by the 2015 General Obligation Refunding Bonds. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $1,585,000 $ - . $1,585,000
Totals $1,585,000 $ - . $1,585,000
39 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT – Continued
In July 2009 the District issued the 2006 General Obligation Bonds, Series B, for $17,998,937 to finance the construction of new school facilities, and the repair and refurbishment of existing facilities. The bonds consisted of current interest and capital appreciation in the amounts of $3,000,000 and $14,998,937, respectively. The capital appreciation bonds of $14,998,937 will mature at $42,220,000 ranging from the fiscal years 2011 to 2031. As of June 30, 2015, the accumulated accretion on the capital appreciation bonds and the annual requirements to amortize the bonds outstanding are as follows:
Accreted Year Ended June 30 Principal Interest Interest Total
2016 $ 233,704 $ 151,296 $ 132,169 $ 517,169 2017 279,695 240,305 129,431 649,431 2018 343,424 376,576 126,219 846,219 2019 482,028 442,972 122,500 1,047,500 2020 700,670 414,330 118,231 1,233,231 2021-2025 5,013,529 5,381,470 511,444 10,906,444 2026-2030 8,794,728 17,680,272 331,716 26,806,716 2031-2034 1,570,449 2,379,551 90,837 4,040,837
Totals 17,418,227 27,066,772 $1,562,547 $46,047,547
Bond Premium as of June 30, 2015 445,691 - .
Unaccreted Interest - . (20,791,965)
Accreted Interest as of June 30, 2015 6,274,807 $6,274,807
Book Balance $24,138,725
40 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT – Continued
In April 2010 the District issued the 2006 General Obligation Bonds, Series C, for $12,000,000 to finance the construction of new school facilities, and the repair and refurbishment of existing facilities. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ 530,000 $ 463,300 $ 993,300 2017 605,000 440,225 1,045,225 2018 680,000 408,100 1,088,100 2019 765,000 371,975 1,136,975 2020 940,000 329,350 1,269,350 2021-2025 6,460,000 816,825 7,276,825 2026-2027 580,000 29,000 609,000
Totals 10,560,000 $2,858,775 $13,418,775
Bond Premium as of June 30, 2015 371,911
Book Balance $10,931,911
In January 2011 the District issued the 2006 General Obligation Bonds, Series D, for $14,999,736.85 to finance the construction of new school facilities, and the repair and refurbishment of existing facilities. The bonds are issued as capital appreciation bonds. This was partially refunded by the 2014 General Obligation Refunding Bonds Series A and Series B. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Accreted Year Ended June 30 Principal Interest Total
2028-2030 $ 268,277 $ 1,821,723 $ 2,090,000 2031-2035 4,468,142 25,126,858 29,595,000
Totals 4,736,419 26,948,581 $31,685,000
Unaccreted Interest - . (24,926,656)
Accreted Interest as of June 30, 2015 2,021,925 $2,021,925
Book Balance $6,758,344
41 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT - Continued
In June 2011, the District issued the 2011 Taxable Bond Anticipation Notes (Direct-Pay Qualified School Construction Bonds) for $4,860,000 for the purpose of financing the acquisition and construction of educational facilities and projects. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $4,860,000 $235,418 $5,095,418
Totals $4,860,000 $235,418 $5,095,418
On May 9, 2013, the District issued the 2012 General Obligation Bonds, Series A, for $35,540,000 for constructing and renovating school facilities. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ 850,000 $ 1,286,963 $ 2,136,963 2017 890,000 1,256,413 2,146,413 2018 935,000 1,219,913 2,154,913 2019 980,000 1,181,613 2,161,613 2020 1,030,000 1,141,413 2,171,413 2021-2025 5,945,000 5,084,962 11,029,962 2026-2030 7,550,000 3,653,609 11,203,609 2031-2035 9,595,000 2,172,590 11,767,590 2036-2038 6,955,000 398,087 7,353,087
Totals 34,730,000 $17,395,563 $52,125,563
Bond Premium as of June 30, 2015 1,242,525
Book Balance $35,972,525
On June 27, 2013, the District issued the 2012 General Obligation Ed-Tech Bonds, Series B, for $1,500,000 for the purpose of financing technology projects. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ 500,000 $11,475 $ 511,475 2017 500,000 3,825 503,825
Totals $1,000,000 $15,300 $1,015,300
42 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT - Continued
On October 2, 2014, the District issued the 2014 General Obligation Refunding Bonds, Series 2014A, for $20,360,000 and Series 2014B for $720,000, to refund the 2006 General Obligation Bonds Series D.
The annual requirements to amortize the Series 2014A bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ - . $ 826,844 $ 826,844 2017 - . 826,844 826,844 2018 - . 826,844 826,844 2019 - . 826,844 826,844 2020 285,000 821,144 1,106,144 2021-2025 2,145,000 3,874,218 6,019,218 2026-2030 3,745,000 3,203,094 6,948,094 2031-2035 5,780,000 2,266,278 8,046,278 2036-2039 8,405,000 880,237 9,285,237
Totals 20,360,000 $14,352,347 $34,712,347
Bond Premium as of June 30, 2015 752,064
Book Balance $21,112,064
The annual requirements to amortize the Series 2014B bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ - . $12,475 $ 12,475 2017 - . 12,475 12,475 2018 350,000 9,938 359,938 2019 370,000 3,700 373,700
Totals $720,000 $38,588 $758,588
43 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 6. LONG-TERM DEBT - Continued
On May 28, 2015, the District issued the 2015 General Obligation Refunding Bonds, for $41,430,000, to refund the 2005 General Obligation Refunding Bonds and 2006 General Obligation Bonds Series A. The annual requirements to amortize the bonds outstanding as of June 30, 2015, are as follows:
Year Ended June 30 Principal Interest Total
2016 $ 650,000 $ 1,252,788 $ 1,902,788 2017 1,705,000 1,827,038 3,532,038 2018 1,785,000 1,765,763 3,550,763 2019 1,870,000 1,692,663 3,562,663 2020 1,970,000 1,606,013 3,576,013 2021-2025 11,695,000 6,381,687 18,076,687 2026-2030 15,035,000 3,282,493 18,317,493 2031-2032 6,720,000 331,250 7,051,250
Totals 41,430,000 $18,139,695 $59,569,695
Bond Premium as of June 30, 2015 5,043,873
Book Balance $46,473,873
44 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 7. LONG-TERM DEBT - SCHEDULE OF CHANGES
A schedule of changes in long-term debt for the year ended June 30, 2015, is shown below:
Balance Balance Due within Due beyond July 1, 2014 Additions Deductions June 30, 2015 one year one year General obligation refunding bonds, Series A $ 15,300,000 $ - . $ 700,000 $ 14,600,000 $ 755,000 $ 13,845,000 2005 general obligation bonds revenue/refunding bonds 4,375,000 30,000 4,205,000 200,000 200,000 - . 2006 general obligation bonds, Series A 43,730,000 - . 42,145,000 1,585,000 1,585,000 - . Bond premium 420,054 - . 420,054 - . - . - . 2006 general obligation bonds, Series B 17,581,770 - . 163,543 17,418,227 233,704 17,184,523 Accreted interest 5,072,703 1,202,104 - . 6,274,807 151,296 6,123,511 Bond premium 470,337 - . 24,646 445,691 24,646 421,045 2006 general obligation bonds, Series C 11,075,000 - . 515,000 10,560,000 530,000 10,030,000 Bond premium 405,467 - . 33,556 371,911 33,556 338,355 2006 general obligation bonds, Series D 14,999,737 - . 10,263,318 4,736,419 - . 4,736,419 Accreted interest 4,297,985 - . 2,276,060 2,021,925 - . 2,021,925 2011 taxable bond anticipation notes 4,860,000 - . - . 4,860,000 4,860,000 - . 2012 general obligation bonds, Series A 35,540,000 - . 810,000 34,730,000 850,000 33,880,000 Bond premium 1,298,790 - . 56,265 1,242,525 56,265 1,186,260 2012 general obligation Ed- Tech bonds, Series B 1,500,000 - . 500,000 1,000,000 500,000 500,000 2014 general obligation refunding bonds, Series 2014A - . 20,360,000 - . 20,360,000 - . 20,360,000 Bond premium - . 775,324 23,260 752,064 31,013 721,051 2014 general obligation refunding bonds, Series 2014B - . 720,000 - . 720,000 - . 720,000 2015 general obligation refunding bonds - . 41,430,000 - . 41,430,000 650,000 40,780,000 Bond premium - . 5,070,281 26,408 5,043,873 316,893 4,726,980 Compensated absences 385,153 - . 2,171 382,982 - . 382,982 Net OPEB Obligation 3,395,719 1,447,950 - . 4,843,669 - . 4,843,669 Net Pension Liability - . 34,561,222 - . 34,561,222 - . 34,561,222
Totals $164,707,715 $105,596,881 $62,164,281 $208,140,315 $10,777,373 $197,362,942
45 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 8. JOINT VENTURES (Joint Powers Agreements)
The Jefferson Union High School District participates in one joint venture under a Joint Powers Agreements (JPAs) with the San Mateo County Schools Insurance Group. The relationship between the District and the JPA is such that the JPA is not a component unit of the District for financial reporting purposes.
The San Mateo County Schools Insurance Group (SMCSIG) arranges for and provides property, workers compensation, medical, and liability insurance for its member school districts. The SMCSIG is governed by a board consisting of a representative from each member district. The board controls the operations of the SMCSIG, including selection of management and approval of operating budgets, independent of any influence by the member districts beyond their representation on the board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionate to their participation in the SMCSIG. Audited financial statements are available from the entity.
NOTE 9. COMMITMENTS AND CONTINGENCIES
A. State and Federal Allowances, Awards, and Grants
The District has received state and federal funds for specific purposes that are subject to review and audit by the grantor agencies. If the review or audit discloses exceptions, the District may incur a liability to grantor agencies.
B. Litigation
There are no material pending or threatened litigations involving the District. However, management of the District believes, based upon consultation with legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the District’s financial position or results of operations.
C. Construction Commitments
As of June 30, 2015, the District had various commitments with respect to unfinished capital projects.
46 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS
Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Classified employees are members of the California Public Employees’ Retirement System (CalPERS), and certificated employees are members of the State Teachers’ Retirement System (STRS).
CalPERS
Plan description. The District contributes to the School Employer Pool under the California Public Employees’ Retirement System (CalPERS), a cost-sharing multiple- employer public employee retirement system defined benefit pension plan administered by CalPERS. A full description of the pension plan regarding benefit provisions, assumptions (for funding, but not accounting purposes), and membership information is listed in the June 30, 2013 annual actuarial valuation report. Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. The GASB 68 accounting valuation report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under Forms and Publications.
Benefits provided. The plan provides retirement and disability benefits, annual cost-of- living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by the state statutes, as legislatively amended, within the Public Employees’ Retirement Law.
Contributions. Active plan members are required to contribute 7% (classic members) or 6% (new members) of their monthly salary over $133.33 if the member participates in Social Security, and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2014-2015 was 11.771% of annual payroll. The contribution requirements of the plan members are established by state statute. The District’s contribution to CalPERS for the fiscal year ending June 30, 2015 was $932,155 and equal to 100% of the required contributions for the year.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
The following table shows the District’s proportionate share of the Pool’s changes in the aggregate net pension liability over the measurement period.
47 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
Increase (Decrease) Total Pension Fiduciary Net Net Pension Liability Position Liability/(Asset) (a) (b) (c) = (a) - (b) Balance at: 6/30/2013 (VD) $47,346,307 $36,100,651 $11,245,656 Balance at: 6/30/2014 (MD) $49,717,157 $41,452,585 $8,264,572 Net Changes during 2013-14 $2,370,850 $5,351,934 $(2,981,084)
At June 30, 2015, the District reported a liability of $8,264,572 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. At June 30, 2014, the District’s proportion was 0.0728%, which was an increase of 0.0009% from its proportion measured as of June 30, 2013.
For the year ended June 30, 2015, the District recognized pension expense of $734,552. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of Resources Resources Differences between expected and actual experience $0 $ 0 Changes of assumptions 0 0 Difference in actual and proportionated contributions 0 0 Net difference between projected and actual earnings on pension plan investments 0 (2,839,800) Total $0 $(2,839,800)
48 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:
Measurement Period Deferred Outflows/ Ended June 30: (Inflows) of Resources 2015 $(709,950) 2016 (709,950) 2017 (709,950) 2018 (709,950) 2019 0 Thereafter 0
The amounts above are net of inflows and outflows recognized in the 2013-14 measurement period expense.
For the year ended June 30, 2014, the actual contribution is $905,694 while the proportionate share was $875,836 resulting in a difference of $29,858. While this difference should have been recorded as Deferred Outflow and recognized as Pension Expense over a period of 3.9 years, for an annual amount of $7,656, we have deemed this as immaterial.
Recognition of Gains and Losses
Under GASB 68, gains and losses (investment, experience or assumption changes) related to pensions are recognized in pension expense systematically over time.
The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows to be recognized in future pension expense.
The amortization period differs depending on the source of the gain or loss:
Difference between projected and actual 5-year straight-line amortization earnings All other amounts Straight-line amortization over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retirees) as of the beginning of the measurement period
49 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retirees).
The EARSL for the Plan for the 2013-14 measurement period is 3.9 years, which was obtained by dividing the total service years of 2,664,636 (the sum of remaining service lifetimes of the active employees) by 674,831 (the total number of participants: active, inactive, and retirees). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also, note that total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund.
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
For the measurement period ended June 30, 2014 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and the June 30, 2014 total pension liabilities were based on the following actuarial methods and assumptions:
Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68 Actuarial Assumptions Discount Rate 7.50% Inflation 2.75% Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative Expenses; includes Inflation Mortality Rate Table1 Derived using CalPERS’ Membership Data for all Funds Post Retirement Benefit Contract COLA up to 2.75% until Purchasing Power Increase Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter
1The mortality table used was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 Experience Study Report.
All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the fiscal years 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website.
50 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
Discount Rate
The discount rate used to measure the total pension liability was 7.50 percent. A projection of the expected benefit payments and contributions was performed to determine if assets would run out. The test revealed the assets would not run out. Therefore the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability for the Schools Pool. The results of the crossover testing for the Schools Pool are presented in a detailed report that can be obtained at CalPERS’ website.
According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. For the Schools Pool, this difference was deemed immaterial. However, employers may determine the impact for their own financial reporting purposes based on their own proportionate share. Refer to page 8 of this report, which provides information on the sensitivity of the net pension liability to changes in the discount rate.
CalPERS is scheduled to review all actuarial assumptions as part of its regular asset liability management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as we have changed our methodology.
The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
51 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
In determining the long-term expected rate of return, staff took into account both short- term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.
The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.
New Strategic Real Return Real Return Asset Class Allocation Years 1 - 101 Years 11+2 Global Equity 47.0% 5.25% 5.71% Global Fixed Income 19.0 0.99 2.43 Inflation Sensitive 6.0 0.45 3.36 Private Equity 12.0 6.83 6.95 Real Estate 11.0 4.50 5.13 Infrastructure and Forestland 3.0 4.50 5.09 Liquidity 2.0 (0.55) (1.05)
1An expected inflation of 2.5% used for this period 2An expected inflation of 3.0% used for this period
Sensitivity of the Aggregate Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the Plan as of the Measurement Date, calculated using the discount rate of 7.50 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.50 percent) or 1 percentage-point higher (8.50 percent) than the current rate:
Discount Rate Current Discount Discount Rate - 1% (6.50%) Rate (7.50%) + 1% (8.50%) District’s proportionate share of the net pension liability $14,497,947 $8,264,572 $3,055,960
52 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial report.
STRS
Plan description. The District contributes to the California State Teachers’ Retirement System (CalSTRS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. CalSTRS issues publicly available financial reports that can be obtained at the CalSTRS website.
Benefits provided. The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions are established state statutes, as legislatively amended, within the State Teachers’ Retirement Law.
Contributions. Active plan members are required to contribute 8% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalSTRS Teachers’ Retirement Board. The required employer contribution rate for fiscal year 2014-2015 was 8.88% of annual payroll. The contribution requirements of the plan members are established by state statute. The District’s contribution to CalSTRS for the fiscal year ending June 30, 2015 was $1,811,391 and equal to 100% of the required contributions for the year.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
The following table shows the District’s proportionate share of the Pool’s components of net pension liability over the measurement period.
Increase (Decrease) Total Pension Fiduciary Net Net Pension Liability Position Liability/(Asset) (a) (b) (c) = (a) - (b) Balance at: 6/30/2013 (VD) $107,003,700 $74,856,600 $32,147,100 Balance at: 6/30/2014 (MD) 112,009,950 85,713,300 $26,296,650
53 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
At June 30, 2015, the District reported a liability of $26,296,650 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. At June 30, 2014, the District’s proportion was 0.045%.
For the year ended June 30, 2015, the District recognized pension expense of $2,270,250. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of Resources Resources Differences between expected and actual experience $0 $ 0 Changes of assumptions 0 0 Difference in actual and proportionated contributions 0 0 Net difference between projected and actual earnings on pension plan investments 0 (6,475,500) Total $0 $(6,475,500)
Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:
Measurement Period Deferred Outflows/ Ended June 30: (Inflows) of Resources 2015 $(1,618,875) 2016 (1,618,875) 2017 (1,618,875) 2018 (1,618,875) 2019 0 Thereafter 0
The amounts above are net of inflows and outflows recognized in the 2013-14 measurement period expense.
54 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
For the year ended June 30, 2014, the actual contribution is $1,643,008 while the proportionate share was $1,645,200 resulting in a difference of $2,192. While this difference should have been recorded as Deferred Outflow and recognized as Pension Expense over a period of 5 years, for an annual amount of $438, we have deemed this as immaterial.
Actuarial methods and assumptions
The total pension liability for the State Teachers’ Retirement Plan (STRP), a plan administered by the California State Teachers’ Retirement System (CalSTRS), was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2013, and rolling forward the total pension liability to June 30, 2014. The financial reporting actuarial valuation as of June 30, 2013, used the following actuarial methods and assumptions, applied to all prior periods included in the measurement:
Valuation Date June 30, 2013 Experience Study July 1, 2006, through June 30, 2010 Actuarial Cost Method Entry age normal Investment Rate of Return1 7.60% Consumer Price Inflation 3.00% Wage Growth 3.75% Post-retirement Benefit Increases 2.00% simple for DB Not applicable for DBS/CBB
1Net of investment expenses, but gross of administrative expenses. CalSTRS uses a 7.5 percent assumed investment rate of return for funding purposes, which is net of administrative expenses.
CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are based on RP2000 series tables adjusted to fit CalSTRS experience. RP2000 series tables are an industry standard set of mortality rates published by the Society of Actuaries. See CalSTRS July 1, 2006 – June 30, 2010 Experience Analysis for more information.
55 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best-estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant (Pension Consulting Alliance - PCA) as an input to the process. Based on the model from CalSTRS consulting actuary’s (Milliman) investment practice, a best estimate range was determined by assuming the portfolio is re-balanced annually and that annual returns are lognormally distributed and independent from year to year to develop expected percentiles for the long-term distribution of annualized returns. The assumed asset allocation by PCA is based on board policy for target asset allocation in effect on February 2, 2012, the date the current experience study was approved by the board. Best estimates of 10-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table:
Long-Term* Assumed Asset Expected Real Asset Class Allocation Rate of Return Global Equity 47% 4.50% Private Equity 12 6.20 Real Estate 15 4.35 Inflation Sensitive 5 3.20 Fixed Income 20 0.20 Cash / Liquidity 1 0.00
* 10-year geometric average
Discount rate
The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increase per Assembly Bill 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the STRP’s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability.
56 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
The schedule includes only certain categories of deferred outflows of resources and deferred inflows of resources. These include differences between expected and actual experience, changes of assumptions and differences between projected and actual earnings on plan investments. The schedule does not include deferred outflows/inflows of resources for changes in the employer’s proportionate share of contributions or employer contributions made subsequent to the measurement date. Differences between expected and actual experience and changes in assumptions are amortized over a closed period equal to the average remaining service life of plan members, which is 7 years as of June 30, 2014. The STRP net pension liability as of June 30, 2013 and the STRP net pension liability as of June 30, 2014 are based on the June 30, 2013 actuarial valuation for the first year of implementation. As a result there are no differences between expected and actual experience or changes in assumptions subject to amortization. Deferred outflows and inflows related to differences between projected and actual earrings on plan investments are netted and amortized over a closed 5-year period. Deferred inflows of $14,390 million (Pool’s) are the unamortized portion of the actual net increase in STRP net position that exceeded the increase projected based on the 7.60% assumed investment rate of return.
Presented below is the net pension liability of employers and the state using the current discount rate of 7.60 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is one to three percent lower or one to three percent higher than the current rate:
District’s proportionate share of the Net Discount Rate Pension Liability 3% Decrease (4.60%) $80,336,250 2% Decrease (5.60%) 58,757,850 1% Decrease (6.60%) 40,989,600 Current Discount Rate (7.60%) 26,296,650 1% Increase (8.60%) 14,045,400 2% Increase (9.60%) 3,751,200 3% Increase (10.60%) (476,550)
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalSTRS financial report.
57 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 10. EMPLOYEE RETIREMENT SYSTEMS - Continued
Cash Benefit Program Offered by CalSTRS
In September 2, 2005, the District adopted the Cash Balance Benefit Program (CB) offered by STRS for employees whose basis of employment is less than 50 percent of the full-time equivalent for the position. By offering the CB to the part-time employees, teachers who are currently contributing to the STRS Defined Benefit Program (DB) may choose to participate in the CB program in lieu of the DB program or Social Security.
For each CB program member, the District will realize a contribution savings of 4.25% over the DB program contribution of 8.88%. The District will also save 2.2% in Social Security contributions for each teacher that voluntarily changes to the CB program. The District had 20 employees enrolled in the CB program which resulted in $2,545 savings for the fiscal year ended June 30, 2015.
NOTE 11. NET OPEB OBLIGATION
The District provides post-employment health care benefits, in accordance with District employment contracts, to all qualified employees who retire from the District on or after attaining age 55 (age 50 for school teachers with 30 or more years of service) with at least 10 years of service. Currently, 108 employees meet those eligibility requirements. Retirees receive benefits for lesser of 7 years or age 70 if not Medicare eligible, or the lesser of 10 years or age 75 if Medicare eligible. Expenditures for post-employment benefits are recognized on a pay-as-you-go basis, as premiums are paid.
58 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 11. NET OPEB OBLIGATION – Continued
The actuarial valuation of the postretirement welfare benefits is available directly from the District. Based on the latest actuarial valuation as of November 1, 2014 (valuation date), the District’s post-employment benefits other than pension program is as follows:
Actuarial cost method Entry age normal Amortization methods Level percent, closed 30 year for initial UAAL and open 25 year for any residual UAAL Inflation 2.75% Investment return/discount rate 4.5% Trend 4% Payroll increase 2.75% Actuarially required contributions beginning November 1, 2014: Normal cost $1,505,593 Initial unfunded AAL (UAAL) amortization $1,044,984 Residual UAAL amortization $138,478 Annual required contribution $2,689,055 as of November 1, 2014: Actuarial accrued liability (AAL) $23,365,522 Unamortized balance of the initial unfunded AAL $20,565,325
Annual Percentage of Net Fiscal Year Required Contributions Annual OPEB OPEB Ending Contribution during the year Cost Contributed Obligation
6/30/13 $2,163,865 $1,942,156 90% $2,604,058 6/30/14 2,163,865 1,372,204 63% 3,395,719 6/30/15 2,689,055 1,241,105 46% 4,843,669
NOTE 12. LEASE OF FORMER SCHOOL SITE
In April 1985, the District leased for 99 years, until March 31, 2084, two lots (Lot 2B and Lot 4) that comprise a former school site to a commercial real estate developer, Southwest Diversified. Under the terms of the leases, the District annually receives a fixed amount, plus increases that take into account the annual change in the consumer price index. In the fiscal year 2014-2015, the District received a total of $1,114,908 in lease revenues from Southwest Diversified.
59 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2015
NOTE 13. EARLY RETIREMENT INCENTIVE
The District does not have early retirement incentive for its employees for the fiscal year ended June 30, 2015.
NOTE 14. SUBSEQUENT EVENTS
The District, pooled with other California school districts, issued Tax Revenue Anticipation Notes (TRAN) dated July 16, 2015 in the amount of $4,940,000. The notes mature on June 30, 2016, and bear an interest rate of 2%. The TRANS are a general obligation of the District, and are payable from revenues and cash receipts to be generated by the District. There are no contractual obligations related to the issuance other than the TRANS agreement. The funds were used to supplement the District’s cash flow.
NOTE 15. PRIOR PERIOD ADJUSTMENT
The prior period adjustment of $40,871,720, in the government-wide statements, is related to the implementation of Government Accounting Standards Board Statement No. 68, Accounting and Reporting for Pensions. GASB 68 made significant changes in the financial presentation and footnote disclosure for pensions. In particular, government entities are now required to report the net pension liability on the Statement of Net Position.
60
Required Supplementary Information (other than MD&A) JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund (Fund 01) Year Ended June 30, 2015
Variance with Final Budget Budgeted Amounts Positive - Original Final Actual (Negative) Revenues LCFF sources: State apportionments $ 35,212,978 $ 3,668,652 $ 3,868,720 $ 200,068 Local sources - 35,323,320 35,460,455 137,135 LCFF transfers 2,118,400 683,227 1,358,297 675,070 Total LCFF sources 37,331,378 39,675,199 40,687,472 1,012,273 Federal 1,279,312 1,377,186 1,465,640 88,454 Other state 1,345,417 1,445,983 1,685,673 239,690 Other local 5,497,553 6,189,471 6,072,701 (116,770)
Total Revenues 45,453,660 48,687,839 49,911,486 1,223,647
Expenditures Certificated salaries 19,729,147 20,619,077 20,383,328 235,749 Classified salaries 7,206,655 8,001,641 7,997,513 4,128 Employee benefits 10,121,889 10,398,784 10,067,838 330,946 Books and supplies 2,367,114 5,543,630 2,486,734 3,056,896 Services and other operating expenditures 5,991,718 7,245,568 7,244,490 1,078 Capital outlay 8,000 254,193 95,869 158,324 Other outgo 1,399,202 2,210,784 2,185,518 25,266 Debt service (6,303) (6,303) (8,803) 2,500
Total Expenditures 46,817,422 54,267,374 50,452,487 3,814,887
Excess (Deficiency) of Revenues Over (Under) Expenditures (1,363,762) (5,579,535) (541,001) 5,038,534
Other Financing Sources (Uses) Operating transfers out (940,000) (1,150,000) (1,150,000) -
Total Other Financing Sources (Uses) (940,000) (1,150,000) (1,150,000) -
Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Uses (2,303,762) (6,729,535) (1,691,001) 5,038,534
Fund Balances, Beginning 8,306,324 8,306,324 8,306,324 -
Fund Balances, Ending $ 6,002,562 $ 1,576,789 $ 6,615,323 $ 5,038,534
61 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of the District's Proportionate Share of the Net Pension Liability CalPERS Plan Last Ten Fiscal Years*
Mesurement date 6/30/14 District's Proportion of the Net Pension Liability/(Asset) 0.07280% District's Proportionate Share of the Net Pension Liability/(Asset) $ 8,264,572 District's Covered-Employee Payroll $ 7,815,529 District's Proportionate Share of the Net Pension Liability/(Asset) as a Percentage of its Covered-Employee Payroll 105.75% Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 83.38%
* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the District will present information for those years for which information is available.
62 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of District's Contributions CalPERS Plan Last Ten Fiscal Years*
Fiscal Year 2013-14 2014-15 Actuarially Determined Contribution1 $ 905,694 $ 932,155 Contributions in Relation to the Actuarially Determined Contribution (905,694) (932,155) Contribution Deficiency (Excess) $ - $ - Covered-Employee Payroll $ 7,731,134 $ 7,815,529 Contributions as a Percentage of Covered-Employee Payroll 11.71% 11.93%
1 The actual amount of the FY13/14 contribution is $905,694 (per the District's books). The amount used in the GASB68 entries is the proportionate contribution of $875,836 (per CalPERS' GASB68 Accountig Valuation Report - Measurement date of 6/30/14: Contributions from the Employer of $1,203,070,999 multiplied by the District's proportionate share of 0.0728%). Since the difference between the actual and proportionate amount of $29,858 is deemed immaterial, for the additional Deferred Outflow and Pension Expense amortization, we shall use the CalPERS' proportionate share amount.
* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the District will present information for those years for which information is available.
Notes to Schedule: Change in Benefit Terms : There were no changes to benefit terms that applied to all members of the Schools Pool. Change in Assumptions : None
63 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of the District's Proportionate Share of the Net Pension Liability CalSTRS Plan Last Ten Fiscal Years*
Mesurement date 6/30/14 District's Proportion of the Net Pension Liability/(Asset) 0.045% District's Proportionate Share of the Net Pension Liability/(Asset) $ 26,296,650 District's Covered-Employee Payroll $ 20,526,642 District's Proportionate Share of the Net Pension Liability/(Asset) as a Percentage of its Covered-Employee Payroll 128.11% Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 76.52%
* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the District will present information for those years for which information is available.
64 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of District's Contributions CalSTRS Plan Last Ten Fiscal Years*
Fiscal Year 2013-14 2014-15 Actuarially Determined Contribution1 $ 1,643,008 $ 1,811,391 Contributions in Relation to the Actuarially Determined Contribution (1,643,008) (1,811,391) Contribution Deficiency (Excess) $ - $ - Covered-Employee Payroll $ 19,920,275 $ 20,526,642 Contributions as a Percentage of Covered-Employee Payroll 8.25% 8.82%
1 The actual amount of the FY13/14 contribution is $1,643,008 (per the District's books). The amount used in the GASB68 entries is the proportionate contribution of $1,645,200 (per STRS' 6/30/14 CAFR: Total Employer and state contributions from Schedule IX of $3,656 million, multiplied by the District's proportionate share of 0.045%). Since the difference between the actual and proportionate amount of $2,192 is deemed immaterial, for the additional Deferred Outflow and Pension Expense amortization, we shall use the STRS' proportionate share amount.
* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, the District will present information for those years for which information is available.
Notes to Schedule: Change in Benefit Terms : There were no plan changes Change in Assumptions : None
65 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Funding Progress June 30, 2015
(a) (b) (a)-(b) (b) / (a) (c) [(a)-(b)]/(c) Unfunded Actuarial Actuarial Actuarial Actuarial Accrued Value of Accrued Annual Valuation Liability Assets Liability Funded Covered UAAL as a Date (AAL) (AVA) (UAAL) Ratios Payroll % of Payroll
Other Postemployment Benefits:
11/1/2010 $19,963,252 $ - $19,963,252 0% $26,062,548 77% 11/1/2012 $19,919,856 $ - $19,919,856 0% $29,302,763 68% 11/1/2014 $23,365,522 $ - $23,365,522 0% $29,946,699 78%
66
Combining Fund Statements JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Balance Sheet Governmental Funds - General Funds June 30, 2015
Special Reserve Fund for Other than General Capital Outlay Fund Projects Total Assets Cash in county treasury $ 6,611,788 $ 762,093 $ 7,373,881 Cash on hand and in bank 25,000 - 25,000 Cash in revolving fund 4,000 - 4,000 Cash with fiscal agent 15,783 - 15,783 Accounts receivable 444,785 1,299 446,084 Due from grantor government 1,241,591 - 1,241,591 Due from other funds 550,147 - 550,147 Prepaid expenses 291,900 - 291,900
Total Assets $ 9,184,994 $ 763,392 $ 9,948,386
Liabilities and Fund Balances Liabilities Accounts payable and accrued liabilities $ 1,678,944 $ - $ 1,678,944 Due to grantor government 352,690 - 352,690 Due to other funds 187,096 - 187,096 Unearned revenue 350,941 - 350,941
Total Liabilities 2,569,671 - 2,569,671
Fund Balances Nonspendable Revolving Cash 4,000 - 4,000 Prepaid Expenditures 291,900 - 291,900 Restricted Legally Restricted Balance 869,675 - 869,675 Assigned Other Assignments 2,322,782 763,392 3,086,174 Unassigned Unassigned 3,126,966 - 3,126,966
Total Fund Balances 6,615,323 763,392 7,378,715
Total Liabilities and Fund Balances $ 9,184,994 $ 763,392 $ 9,948,386
67 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds - General Funds Year Ended June 30, 2015
Special Reserve Fund for Other than General Capital Outlay Fund Projects Total Revenues LCFF sources: State apportionments $ 3,868,720 $ - $ 3,868,720 Local sources 35,460,455 - 35,460,455 LCFF transfers 1,358,297 - 1,358,297 Total LCFF sources 40,687,472 - 40,687,472 Federal 1,465,640 - 1,465,640 Other state 1,685,673 - 1,685,673 Other local 6,072,701 6,493 6,079,194
Total Revenues 49,911,486 6,493 49,917,979
Expenditures Instruction 26,895,090 - 26,895,090 Instruction-related services 4,605,498 - 4,605,498 Pupil services 5,221,880 - 5,221,880 Ancillary services 591,477 - 591,477 General administration 3,208,100 - 3,208,100 Plant services 7,722,761 - 7,722,761 Other outgo 2,207,681 - 2,207,681
Total Expenditures 50,452,487 - 50,452,487
Excess (Deficiency) of Revenues Over (Under) Expenditures (541,001) 6,493 (534,508)
Other Financing Sources (Uses) Operating transfers out (1,150,000) - (1,150,000)
Total Other Financing Sources (Uses) (1,150,000) - (1,150,000)
Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Uses (1,691,001) 6,493 (1,684,508)
Fund Balances, Beginning 8,306,324 756,899 9,063,223
Fund Balances, Ending $ 6,615,323 $ 763,392 $ 7,378,715
68 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Balance Sheet Nonmajor Governmental Funds June 30, 2015
Special Capital Revenue Projects Total Assets Cash in county treasury $ 141,912 $ 1,451,788 $ 1,593,700 Cash in revolving fund 475 - 475 Accounts receivable 3,625 9,735 13,360 Due from grantor government 256,328 41 256,369 Due from other funds 187,096 - 187,096
Total Assets $ 589,436 $ 1,461,564 $ 2,051,000
Liabilities and Fund Balances Liabilities Accounts payable and accrued liabilities $ 73,682 $ 40,578 $ 114,260 Due to other funds 502,692 23,483 526,175
Total Liabilities 576,374 64,061 640,435
Fund Balances Nonspendable Revolving Cash 475 - 475 Restricted Legally Restricted Balance 11,425 24,242 35,667 Assigned Other Assignments 1,162 1,373,261 1,374,423
Total Fund Balances 13,062 1,397,503 1,410,565
Total Liabilities and Fund Balances $ 589,436 $ 1,461,564 $ 2,051,000
69 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds (By Object) Year Ended June 30, 2015
Special Capital Revenue Projects Total Revenues Federal $ 878,255 $ - $ 878,255 Other state 53,165 - 53,165 Other local 264,905 558,451 823,356
Total Revenues 1,196,325 558,451 1,754,776
Expenditures Certificated salaries 747,835 - 747,835 Classified salaries 703,159 - 703,159 Employee benefits 474,967 - 474,967 Books and supplies 503,494 - 503,494 Services and other operating expenditures 49,209 16,420 65,629 Indirect costs 8,803 - 8,803
Total Expenditures 2,487,467 16,420 2,503,887
Excess (Deficiency) of Revenues Over (Under) Expenditures (1,291,142) 542,031 (749,111)
Other Financing Sources (Uses) Operating transfers in 1,150,000 - 1,150,000
Total Other Financing Sources (Uses) 1,150,000 - 1,150,000
Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Uses (141,142) 542,031 400,889
Fund Balances, Beginning 154,204 855,472 1,009,676
Fund Balances, Ending $ 13,062 $ 1,397,503 $ 1,410,565
70 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2015
Adult Education Cafeteria Fund Fund Total Assets Cash in county treasury $ 107,116 $ 34,796 $ 141,912 Cash in revolving fund 475 - 475 Accounts receivable 3,625 - 3,625 Due from grantor government 177,875 78,453 256,328 Due from other funds 136,726 50,370 187,096
Total Assets $ 425,817 $ 163,619 $ 589,436
Liabilities and Fund Balances Liabilities Accounts payable and accrued liabilities $ 63,322 $ 10,360 $ 73,682 Due to other funds 360,858 141,834 502,692
Total Liabilities 424,180 152,194 576,374
Fund Balances Nonspendable Revolving Cash 475 - 475 Restricted Legally Restricted Balance - 11,425 11,425 Assigned Other Assignments 1,162 - 1,162
Total Fund Balances 1,637 11,425 13,062
Total Liabilities and Fund Balances $ 425,817 $ 163,619 $ 589,436
71 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Funds (By Object) Year Ended June 30, 2015
(By Function) Adult Education Cafeteria Fund Fund Total Revenues Federal $ 266,414 $ 611,841 $ 878,255 Other state - 53,165 53,165 Other local 47,582 217,323 264,905
Total Revenues 313,996 882,329 1,196,325
Expenditures Certificated salaries 747,835 - 747,835 Classified salaries 256,195 446,964 703,159 Employee benefits 324,009 150,958 474,967 Books and supplies 60,459 443,035 503,494 Services and other operating expenditures 35,345 13,864 49,209 Indirect costs 8,803 - 8,803
Total Expenditures 1,432,646 1,054,821 2,487,467
Excess (Deficiency) of Revenues Over (Under) Expenditures (1,118,650) (172,492) (1,291,142)
Other Financing Sources (Uses) Operating transfers in 1,100,000 50,000 1,150,000
Total Other Financing Sources (Uses) 1,100,000 50,000 1,150,000
Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Uses (18,650) (122,492) (141,142)
Fund Balances, Beginning 20,287 133,917 154,204
Fund Balances, Ending $ 1,637 $ 11,425 $ 13,062
72 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Balance Sheet Nonmajor Capital Projects Funds June 30, 2015
County Capital School Facilities Facilities Fund Fund Total Assets Cash in county treasury $ 1,427,587 $ 24,201 $ 1,451,788 Accounts receivable 9,735 - 9,735 Due from grantor government - 41 41
Total Assets $ 1,437,322 $ 24,242 $ 1,461,564
Liabilities and Fund Balances Liabilities Accounts payable and accrued liabilities $ 40,578 $ - $ 40,578 Due to other funds 23,483 - 23,483
Total Liabilities 64,061 - 64,061
Fund Balances Restricted Legally Restricted Balance - 24,242 24,242 Assigned Other Assignments 1,373,261 - 1,373,261
Total Fund Balances 1,373,261 24,242 1,397,503
Total Liabilities and Fund Balances $ 1,437,322 $ 24,242 $ 1,461,564
73 JEFFERSON UNION HIGH SCHOOL DISTRICT Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Funds (By Object) Year Ended June 30, 2015
(By Function) County Capital School Facilities Facilities Fund Fund Total Revenues Other local $ 558,118 $ 333 $ 558,451
Total Revenues 558,118 333 558,451
Expenditures Services and other operating expenditures 16,420 - 16,420
Total Expenditures 16,420 - 16,420
Excess (Deficiency) of Revenues Over (Under) Expenditures 541,698 333 542,031
Fund Balances, Beginning 831,563 23,909 855,472
Fund Balances, Ending $ 1,373,261 $ 24,242 $ 1,397,503
74
Supplementary Information Section JEFFERSON UNION HIGH SCHOOL DISTRICT Organization June 30, 2015
The Jefferson Union High School District (the “District”), established in 1922, is located in the northern portion of San Mateo County. There were no changes in the boundaries of the District during the current year. The District is currently operating four (4) high schools and one (1) continuation high school, and an adult education program.
Governing Board
Name Office Term Expires
Jeanne L. Matysiak President November, 2016 Rosie Tejada Clerk November, 2018 Kalimah Salahuddin Trustee November, 2016 Nick Occhipinti Trustee November, 2018 vacant
Administration
Thomas Minshew Superintendent
Steven Fuentes Associate Superintendent - Business Services
Keith Irish Associate Superintendent - Education
Sherry Segalas Associate Superintendent-Pupil Personnel/Special Education Services
75 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Average Daily Attendance Year Ended June 30, 2015
Second Period Annual Report Report
High School: Grades 9 through 12, regular ADA 4,555 4,532 District funded county program ADA 30 31
Totals District ADA 4,585 4,563
Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of the state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs.
76 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Instructional Time Year Ended June 30, 2015
1986-87 Number of 2014-15 1982-83 1982-83 1986-87 Reduced 2014-15 Days No. of Days Grade Actual Reduced Minutes Minutes Actual Traditional Traditional Level Minutes Minutes Reqmt Reqmt Minutes Calendar Calendar Status
Grades 9 54,927 53,401 64,800 63,000 64,044 180 177 Complied Grades 10 54,927 53,401 64,800 63,000 64,044 180 177 Complied Grades 11 54,927 53,401 64,800 63,000 64,044 180 177 Complied Grades 12 54,927 53,401 64,800 63,000 64,044 180 177 Complied
Districts, including basic aid districts, must maintain their instructional minutes at either the 1982-83 actual minutes or the 1986-87 requirements, whichever is greater, as required by Education Code Section 46201. This schedule is required for all districts, including basic aid districts.
The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections 46201 though 46207.
77 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Charter Schools Year Ended June 30, 2015
The Jefferson Union High School District granted the charter for Summit Public School: Shasta which expires September 4, 2017.
Summit Public School: Shasta is responsible for reporting its financial activities and has its separate audit report independent of Jefferson Union High School District. The District accounts for the transfers to the charter school within the General fund, as a separate school/site.
78 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Financial Trends and Analysis Year Ended June 30, 2015
(Budget) 2016 2015 2014 2013 General Fund (Fund 01)
Revenues and other financial sources $ 53,519,021 $ 49,911,486 $ 45,980,789 $ 45,475,546
Expenditures 52,024,007 50,452,487 48,307,383 44,260,240 Other uses and transfers out 1,175,000 1,150,000 1,025,000 1,050,000
Total outgo 53,199,007 51,602,487 49,332,383 45,310,240
Change in fund balance (deficit) 320,014 ( 1,691,001) ( 3,351,594) 165,306
Ending fund balance $ 6,935,337 $ 6,615,323 $ 8,306,324 $ 11,657,918
Available reserves* $ 6,161,775 $ 3,126,966 $ 4,263,778 $ 6,532,972
Designated for economic uncertainties $ - . $ - . $ 2,349,302 $ 2,112,372
Undesignated fund balance $ 6,161,775 $ 3,126,966 $ 1,914,476 $ 4,420,600
Available reserves as a percentage of total outgo 11.6% 6.1% 8.6% 14.4%
Total long-term debt $197,362,942 $208,140,315 $164,707,715 $163,998,299
Average daily attendance at P-2 4,585 4,585 4,409 4,575
This schedule discloses the District’s financial trends by displaying past years’ data along with current year budget information. These financial trend disclosures are used to evaluate the district’s ability to continue as a going concern for a reasonable period of time.
The General Fund (Fund 01) balance has decreased by $5,042,595 over the past two years. This fiscal year 2015-2016 budget projects an increase of $320,014 (5%). For a district of this size, the state recommends available reserves of at least 3% of total general fund expenditures, transfers out, and other uses (total outgo).
The District has incurred an operating surplus in one of the past three years, and anticipates incurring an operating surplus during the 2015-2016 fiscal year. Total long-term debt has increased by $44,142,016 over the past two years.
Average daily attendance has increased by 10 over the past two years. ADA is anticipated to not change in the fiscal year 2015-2016.
* Includes General Fund (Fund 01) and Special Reserve Fund for Other than Capital Outlay Project (Fund 17)
79 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Expenditures of Federal Awards Year Ended June 30, 2015
Federal Total Catalog Program Program Name Number PCA Expenditures
U.S. Department of Education Passed through the California Department of Education: Title I Basic 84.010 14329 $ 297,598 Special Education Local Assistance * 84.027 13379 790,217 Special Education Private School Funding * 84.027 10115 3,548 Department of Rehab - Workability 84.126 10006 105,580 Carl D. Perkins Career and Technical Education Improvement Act of 2006 84.048 14894 89,417 Title II Part A Teacher Quality 84.367 14341 110,388 Title III - Immigrant Education 84.365 15146 2,662 Title III - Limited English Proficient Students 84.365 14346 51,960 Adult Education Basic Ed & ESL 84.002 14508 139,817 Adult Education GED Services 84.002 13978 90,363 Adult Education Basic Ed EL Civics 84.002 14109 36,234
Total U.S. Department of Education 1,717,784
U.S. Department of Agriculture Passed through the California Department of Education: Child Nutrition - National School Lunch Program * 10.555 13523 and 13524 611,841
Total U.S. Department of Agriculture 611,841
Total Federal Awards $ 2,329,625
* Identified as major programs.
Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of Jefferson Union High School District and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements.
80 JEFFERSON UNION HIGH SCHOOL DISTRICT Reconciliation of Annual Financial and Budget Report (SACS) with Audited Basic Financial Statements June 30, 2015
General Funds Special Reserve Bond Fund for Interest Other than and Nonmajor General Capital Outlay Building Redemption Governmental Fund Projects Fund Fund Funds
June 30, 2015, Annual Financial and Budget Report (SACS) Fund Balances $ 6,713,002 $ 763,392 $ 21,452,860 $ 9,777,598 $ 1,410,565
Adjustments and reclassifications increasing (decreasing) the Fund Balances
To record the TRAN payment made on 6/29/15 (97,679) - - - -
June 30, 2015, Audited Basic Financial Statements Fund Balances $ 6,615,323 $ 763,392 $ 21,452,860 $ 9,777,598 $ 1,410,565
This schedule provides the information necessary to reconcile the fund balances of all funds as reported on SACS report to the audited basic financial statements.
81 JEFFERSON UNION HIGH SCHOOL DISTRICT Notes to Supplementary Information Year Ended June 30, 2015
NOTE 1. BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards includes the federal grant activity of Jefferson Union High School District and is presented on the accrual basis of accounting. The information on this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of financial statements.
NOTE 2. SUBRECIPIENTS
Of the federal awards presented in the schedule, Jefferson Union High School District provided no federal awards to subrecipients.
82
Other Independent Auditors’ Report Section
Vargas and Company :.ertified public accountants
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of Trustees of Jefferson Union High School District Daly City, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Jefferson Union High School District, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Jefferson Union High School District's basic financial statements, and have issued our report thereon dated October 23, 20 I 5.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Jefferson Union High School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Jefferson Union High School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Jefferson Union High School District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
60 1 North First Street / San Jose, California 95112 / (408) 298-1700 / Fax (408} 293-9598 83 Compliance and Other Matters
As part of obtaining reasonable assurance about whether Jefferson Union High School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the detennination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
V~ and~ m~ San Jose, California October 23, 2015
84 Vargas and Company cert1f1ed public accountants
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY 0MB CIRCULAR A-133
To the Board of Trustees of Jefferson Union High School District Daly City, California
Report on Compliance for Each Major Federal Program
We have audited Jefferson Union High School District's compliance with the types of compliance requirements described in the 0MB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Jefferson Union High School District's major federal programs for the year ended June 30, 2015. Jefferson Union High School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of Jefferson Union High School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Jefferson Union High School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Jefferson Union High School District's compliance.
Opinion on Each Major Federal Program
In our opinion, Jefferson Union High School District, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2015.
601 North First Street / San Jose, California 95112 / (408) 298-1700 / Fax (408) 293-9598 85 Report on Internal Control Over Compliance
Management of Jefferson Union High School District, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Jefferson Union High School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and repo1t on internal control over compliance in accordance with 0MB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Jefferson Union High School District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not des igned to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over com pliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of 0MB Circular A-133 . Accordingly, this report is not suitable for any other purpose. 4,./~- Vargas and Company San Jose, California October 23, 2015
86 Vargas and Company ~ertified public accountants
INDEPENDENT AUDITORS' REPORT ON STATE COMPLIANCE
To the Board of Trustees of Jefferson Union High School District Daly City, California
We have audited Jefferson Union High School District's compliance with the types of compliance requirements described in the 2014-15 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting that could have a direct and material effect on each of Jefferson Union High School District's state programs, as listed below, for the year ended June 30, 2015.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs.
Auditor's Responsibility
Our responsibility is to express an opinion on Jefferson Union High School District's compliance with the applicable state compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the state compliance requirements described in the 2014-15 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting. Those standards require that we plan and perform the state compliance audit to obtain reasonable assurance about whether noncompliance with the types of state compliance requirements referred to above that could have a direct and material effect on the state programs occurred. An audit included examining, on a test basis, evidence about the Jefferson Union High School District's compliance with those state compliance requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our op1111011 on compliance for state programs. However, our audit does not provide a legal determination of Jefferson Union High School District's compliance.
Procedures Compliance requirement: Performed Local education agencies other than charter schools Attendance Yes Teacher certification and misassignments Yes Kindergarten continuance Not applicable Independent study No (see below) Continuation education Yes Instructional time Yes Instructional materials Yes Ratios of administrative employees to teachers Yes Classroom teacher salaries Yes 601 North First Street / San Jose, California 95112 / (408) 298-1700 / Fax (408) 293-9598 87 Procedures Com2liance reg uirement: Performed Early retirement in centive Not applicable Gann limit calculation Yes School accountability report card Yes Juvenile COLlli schools Not applicable Middle or earl y co llege high schools Not applicable K-3 grade span adjustment Not applicable Transportation maintenance of effort Yes Regional occupational centers or programs maintenance of effort Not applicable Adult edu cation mai ntenance of effort Yes School districts, county offices of education, and charter schools California clean energy jobs act Not app licable After school education and safety program Not applicable Proper expenditure of education protection account funds Yes Common core implementation funds Not app licable Unduplicated local control funding formula pupil counts Yes Local control and accountability plan Yes Charter Sc hoo ls Attendance Yes Mode of in struction Yes Nonclassroom-based instruction/independent study for charter schools No (see below) Determination of fun ding for nonclassroom-based in struction Not applicable Annual instructional minutes - classroom based Yes Charter school fac ili ty grant program Yes
The charter school procedures listed above pertains to Summit Public School: Shasta, a charter school sponsored by the District. They were audited by other auditors, whose repo1i dated November 9, 20 I 5, expressed an unmodified opinion. Additionall y, they did not perform testing for independent study because the independent study ADA was under the level wh ich requires testing.
We did not perform testing for independent study because the ind ependent study ADA was under the leve l that req uires testing.
Opinion
In our opin ion, Jefferson Union High School District complied, in al l material respects, with the applicable state compliance requirements referred to above that could have a direct and material effect on each of its state programs for the year ended June 30, 2015.
The purpose of this report is so lely to describe the scope of our testing of compliance and the results of that testing based on the requirements described in the 2014-15 Guide for Annual Audits of K- 12 Local Education Agencies and State Compliance Reporting. Accordingly, thi s report is not suitable for any other purpose.
V~ d ~ p~ San Jose, California October 23, 2015
88
Findings and Recommendations Section JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Audit Findings and Questioned Costs Year Ended June 30, 2015
Section I - Summary of Auditors’ Results
Financial Statements
Type of auditors’ report issued: Unmodified.
Internal control over financial reporting: Material weakness(es) identified? No. Significant deficiency(ies) identified? None reported.
Noncompliance material to financial statements noted? No.
Federal Awards
Internal control over major programs: Material weakness(es) identified? No. Significant deficiency(ies) identified? None reported.
Type of auditors’ report issued on compliance for major programs: Unmodified.
Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? No.
Identification of major programs:
CFDA Number Name of Federal Program or Cluster
84.027 Special Education 10.555 Child Nutrition
Dollar threshold used to distinguish between type A and type B programs $300,000.
Auditee qualified as low-risk auditee? Yes.
89 JEFFERSON UNION HIGH SCHOOL DISTRICT Schedule of Audit Findings and Questioned Costs Year Ended June 30, 2015
State Awards
Type of auditors’ report issued on compliance for state programs: Unmodified.
Section II - Financial Statement Findings
Our audit of the accompanying basic financial statements of Jefferson Union High School District as of and for the year ended June 30, 2015, disclosed no findings and questioned costs.
Our report on Jefferson Union High School District’s internal control over financial reporting and compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards, as of and for the year ended June 30, 2015, disclosed no findings nor questioned costs.
Section III - Federal Award Findings and Questioned Costs
Our report on Jefferson Union High School District’s compliance for each major program and on internal control over compliance required by OMB Circular A-133, as of and for the year ended June 30, 2015, disclosed no findings nor questioned costs.
Section IV - State Award Findings and Questioned Costs
Our report on Jefferson Union High School District’s compliance with state compliance requirements, as of and for the year ended June 30, 2015, disclosed no findings nor questioned costs.
90 JEFFERSON UNION HIGH SCHOOL DISTRICT Summary Schedule of Prior Audit Findings Year Ended June 30, 2015
Section I – Financial Statement Findings
Our audit of the basic financial statements of Jefferson Union High School District as of and for the year ended June 30, 2014, disclosed no findings and questioned costs.
Our report on Jefferson Union High School District’s internal control over financial reporting and on compliance and other matters based on an audit of the financial statements performed in accordance with Government Auditing Standards, as of and for the year ended June 30, 2014, disclosed no findings nor questioned costs.
Section II – Federal Award Findings and Questioned Costs
Our report on Jefferson Union High School District’s compliance for each major program and on internal control over compliance required by OMB Circular A-133, as of and for the year ended June 30, 2014, disclosed no findings nor questioned costs
Section III - State Award Findings and Questioned Costs
Our report on Jefferson Union High School District’s compliance with state compliance requirements, as of and for the year ended June 30, 2014, disclosed no findings nor questioned costs.
91
APPENDIX B
GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT
The information in this and other sections concerning the District's operations and operating budget is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the General Fund of the District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See "SECURITY FOR THE BONDS" in the front half of the Official Statement.
GENERAL DISTRICT INFORMATION
General Information
The District consists of an area of 35 square miles located in the cities of Daly City, Colma, Brisbane and Pacifica, all in San Mateo County (the “County”). Currently, the District operates five high schools, as follows: Jefferson High School, Terra Nova High School, Thornton High School, Westmoor High School and Oceana High School. In addition, the District maintains one adult education facility and a Community Environmental Education Program (CEEP) which serves all of the high schools in the District. Enrollment for fiscal year 2014-15 was 4,906 students, and for fiscal year 2015-16 is approximately 4,700 students.
Administration
The District is governed by a five-member Board of Trustees, each member of which is elected to a four-year term. Elections for positions to the Board of Trustees are held every two years, alternating between two and three available positions. The Board of Trustees acts as a committee of the whole for all matters concerning the District. All actions taken by the Board of Trustees are done in an appropriately noticed public meeting. The powers and duties of the Board include governance, executive, and judicial functions. These relate to the Board's own operations as a governing body and to all functions of the District.
Current members of the Board of Trustees, together with their office and the date their term expires, are listed below.
Name Position Term Expires Rosie U. Tejada President November 2018 Nick Occhipinti Vice President November 2018 Kalimah Y. Salahuddin Clerk November 2016 Andrew Lie Trustee November 2016 Jeanne L. Matysiak Trustee November 2016
The Superintendent is appointed by the Board and is responsible for management of the District’s day-to-day operations and supervises the work of other key District administrators.
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Recent Enrollment Trends
The following table shows recent enrollment history for the District.
ANNUAL ENROLLMENT Fiscal Years 2005-06 through 2017-18 (Projected) Jefferson Union High School District
School Year Enrollment % Change 2005-06 5,425 -- 2006-07 5,358 (1.2)% 2007-08 5,330 (0.5) 2008-09 5,150 (3.4) 2009-10 5,143 (0.1) 2010-11 4,960 (3.6) 2011-12 4,969 0.2 2012-13 4,870 (2.0) 2013-14 4,764 (2.2) 2014-15 4,906 3.0 2015-16* 4,700 (4.2) 2016-17* 4,650 (1.1) 2017-18* 4,600 (1.1)
*Enrollment figures do not include the District’s charter schools. Estimates and Projections as set forth in Second Interim Report for fiscal year 2015-16. Source: California Department of Education, Educational Demographics Unit through 2014-15; District for 2015-16 and 2016-17 Estimates and Projections.
Employee Relations
As of January 1, 2016, the District employed 256.0 full time equivalent (“FTE”) certificated employees, 152.3 FTE classified employees and 17.5 management/Supervisor/Confidential FTE employees. For fiscal year 2015-16, the total certificated and classified payrolls are projected to be approximately $20.5 million and $8.1 million, respectively. District employees are represented by employee bargaining units as follows:
Number of Current Contract Name of Bargaining Unit Employees Represented Expiration Date American Federation of Teachers Local 1481 517 June 2016 Teamsters (Local 856) 24 June 2016 ______Source: Jefferson Union High School District.
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DISTRICT FINANCIAL INFORMATION
The information in this and other sections concerning the District's operations and operating budget is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of and interest on the Bonds is payable from the General Fund of the District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof.
Education Funding Generally
School districts in California receive operating income primarily from two sources: the State funded portion which is derived from the State’s general fund, and a locally funded portion, being the district’s share of the one percent general ad valorem tax levy authorized by the California Constitution. As a result, decreases or deferrals in education funding by the State could significantly affect a school district’s revenues and operations.
From 1973-74 to 2012-13, California school districts operated under general purpose revenue limits established by the State Legislature. In general, revenue limits were calculated for each school district by multiplying (1) the average daily attendance (“ADA”) for such district by (2) a base revenue limit per unit of ADA. The revenue limit calculations were adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type. Funding of the District's revenue limit was provided by a mix of local property taxes and State apportionments of basic and equalization aid. Generally, the State apportionments amounted to the difference between the District's revenue limit and its local property tax revenues. Districts which had local property tax revenues which exceeded its revenue limit entitlement were deemed “Basic Aid District” and received full funding from local property tax revenues, and were entitled to keep those tax revenues which exceeded its revenue limit funding entitlement.
The fiscal year 2013-14 State budget package replaced the previous K-12 finance system with a new formula known as the Local Control Funding Formula (the “LCFF”). Under the LCFF, revenue limits and most state categorical programs were eliminated. School districts instead receive funding based on the demographic profile of the students they serve and gain greater flexibility to use these funds to improve outcomes of students. The LCFF creates funding targets based on student characteristics. For school districts and charter schools, the LCFF funding targets consist of grade span-specific base grants plus supplemental and concentration grants that reflect student demographic factors. The LCFF includes the following components:
• A base grant for each local education agency per unit of ADA, which varies with respect to different grade spans. The base grant is $2,375 more than the average revenue limit provided prior to LCFF implementation. The base grants will be adjusted upward each year to reflect cost-of-living increases. In addition, grades K-3 and 9-12 are subject to adjustments of 10.4% and 2.6%, respectively, to cover the costs of class size reduction in grades K-3 and the provision of career technical education in grades 9-12.
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• A 20% supplemental grant for English learners, students from low-income families and foster youth to reflect increased costs associated with educating those students.
• An additional concentration grant of up to 50% of a local education agency’s base grant, based on the number of English learners, students from low- income families and foster youth served by the local agency that comprise more than 55% of enrollment.
• An economic recovery target to ensure that almost every local education agency receives at least their pre-recession funding level, adjusted for inflation, at full implementation of the LCFF.
The LCFF was implemented for fiscal year 2013-14 and will be phased in gradually. Beginning in fiscal year 2013-14, an annual transition adjustment was required to be calculated for each school district, equal to each district’s proportionate share of the appropriations included in the State budget (based on the percentage of each district’s students who are low- income, English learners, and foster youth (“Targeted Students”), to close the gap between the prior-year funding level and the target allocation at full implementation of LCFF. In each year, districts will have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district’s funding gap.
Based on revenue projections, districts will reach what is referred to as “full funding” in eight years, being fiscal year 2020-21. This projection assumes that the State’s economy will improve each year; if the economy falters it could take longer to reach full funding.
The target LCFF amounts for State school districts and charter schools based on grade levels and Targeted Students is shown below.
Grade Span Funding at Full LCFF Implementation (Target Amount)
K-3 Class Size Average Average Average Average Reduction Assuming 0% Assuming 25% Assuming 50% Assuming Grade Base and 9-12 Targeted Targeted Targeted 100% Targeted Span Grant(1) Adjustments Students Students Students Students K-3 $6,845 $712 $7,557 $7,935 $8,313 $10,769 4-6 6,947 N/A 6,947 7,294 7,642 9,899 7-8 7,154 N/A 7,154 7,512 7,869 10,194 9-12 8,289 $216 8,505 8,930 9,355 12,119
(1) Does not include adjustments for cost of living. Source: California Department of Education.
The new legislation included a “hold harmless” provision which provided that a district or charter school would maintain total revenue limit and categorical funding at least equal to its 2012-13 level, unadjusted for changes in ADA or cost of living adjustments.
The LCFF includes an accountability component. Districts are required to increase or improve services for English language learners, low income, and foster youth students in proportion to supplemental and concentration grant funding received. All school districts, county offices of education, and charter schools are required to develop and adopt local control and accountability plans, which identify local goals in areas that are priorities for the State, including
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pupil achievement, parent engagement, and school climate.
County superintendents review and provide support to the districts under their jurisdiction, and the Superintendent of Public Instruction performs a corresponding role for county offices of education. In addition, the 2013-14 Budget created the California Collaborative for Education Excellence to advise and assist school districts, county offices of education, and charter schools in achieving the goals identified in their plans. Under the LCFF and related legislation, the State will continue to measure student achievement through statewide assessments, produce an Academic Performance Index for schools and subgroups of students, determine the contents of the school accountability report card, and establish policies to implement the federal accountability system.
Community Supported Districts (formerly known as “Basic Aid”) are those whose local property tax revenues exceed the funding entitlement under the LCFF. Community supported districts do not receive any funds from the State appropriation, however, it does receive funds from the State for categorical and grant programs restricted to a special population or for certain purposes such as disabled students or instructional equipment. The current law in California allows these districts to keep the excess property tax revenues without penalty. The implication for community supported districts is that the legislatively determined annual cost of living adjustment and other politically determined factors are less significant in determining such districts’ primary funding sources. Rather, property tax growth and the local economy become the determinant factors. In fiscal year 2014-15, the District was a Community Supported District under LCFF. However, the District is not a Community Supported District in fiscal year 2015-16, but rather receives its LCFF funding entitlement from the State.
District Accounting Practices
The accounting practices of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section 41010 of the California Education Code, is to be followed by all California school districts.
District accounting is organized on the basis of fund groups, with each group consisting of a separate set of self-balancing accounts containing assets, liabilities, fund balances, revenues and expenditures. The major fund classification is the general fund which accounts for all financial resources not requiring a special fund placement. The District's fiscal year begins on July 1 and ends on June 30.
District expenditures are accrued at the end of the fiscal year to reflect the receipt of goods and services in that year. Revenues generally are recorded on a cash basis, except for items that are susceptible to accrual (measurable and/or available to finance operations). Current taxes are considered susceptible to accrual. Revenues from specific state and federally funded projects are recognized when qualified expenditures have been incurred. State block grant apportionments are accrued to the extent that they are measurable and predictable. The State Department of Education sends the District updated information from time to time explaining the acceptable accounting treatment of revenue and expenditure categories.
The Governmental Accounting Standards Board (“GASB”) published its Statement No. 34 “Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments” on June 30, 1999. Statement No. 34 provides guidelines to auditors, state and local governments and special purpose governments such as school districts and public
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utilities, on new requirements for financial reporting for all governmental agencies in the United States. Generally, the basic financial statements and required supplementary information should include (i) Management’s Discussion and Analysis; (ii) financial statements prepared using the economic measurement focus and the accrual basis of accounting, (iii) fund financial statements prepared using the current financial resources measurement focus and the modified accrual method of accounting and (iv) required supplementary information.
Financial Statements
General. The District's general fund finances the legally authorized activities of the District for which restricted funds are not provided. General fund revenues are derived from such sources as State school fund apportionments, taxes, use of money and property, and aid from other governmental agencies. The District's June 30, 2015 Audited Financial Statements were prepared by Vargas and Company, Daly City, California and are attached hereto as Appendix A. Audited financial statements for the District for prior fiscal years are on file with the District and available for public inspection at the District Business Office, Jefferson Union High School District, 699 Serramonte Boulevard, Suite 100, Daly City, California 94015. The District has not requested, and the auditor has not provided, any review or update of such Financial Statements in connection with inclusion in this Official Statement. Copies of such financial statements will be mailed to prospective investors and their representatives upon written request to the District. This District may impose a charge for copying, mailing and handling.
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General Fund Revenues, Expenditures and Changes in Fund Balance. The District’s General Fund is the District’s primary operating fund. It accounts for all financial resources of the District except those required to be accounted for in another fund. The following table shows the audited income and expense statements for the District’s General Fund for the fiscal years 2010-11 through 2014-15.
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Fiscal Years 2010-11 through 2014-15 (Audited)(1) Jefferson Union High School District
Audited Audited Audited Audited Audited 2010-11 2011-12 2012-13 2013-14 2014-15 SOURCES Revenue Limit/LCFF Sources $31,083,326 $32,922,692 $35,085,400 $36,236,796 $40,687,472 Federal Revenue 3,532,547 1,897,580 1,600,968 1,462,196 1,465,640 Other State Revenue 6,034,899 5,750,296 4,496,909 2,563,345 1,685,673 Other Local Revenue(2) 4,121,083 4,432,997 4,301,145 5,734,774 6,079,194 Total Revenue Limit 44,774,855 45,003,565 45,484,422 45,997,111 49,917,979
EXPENDITURES Instruction 24,215,449 24,108,747 24,425,982 25,979,951 26,895,090 Instruction – Related Services 3,858,371 3,826,696 4,082,347 4,720,223 4,605,498 Pupil Services 4,231,735 4,225,543 4,410,267 4,626,965 5,221,880 Ancillary Services 499,311 480,334 526,891 614,786 591,447 General Administration 3,083,836 2,750,113 2,687,134 2,721,903 3,208,100 Plant Services 5,655,244 5,917,576 6,656,077 7,439,946 7,722,761 Other Outgo 1,343,905 1,452,754 1,471,542 2,203,609 2,207,681 Debt Service Principal ------Interest ------Total Expenditures 42,887,851 42,761,763 44,260,240 48,307,383 50,452,487
Excess of (Deficiency) Revenues Over (Under) Expenditures 1,887,004 2,241,802 1,224,182 (2,310,272) (534,508)
OTHER FINANCING SOURCES Operating Transfers In ------Operating Transfers Out (1,310,159) (1,125,000) (1,050,000) (1,025,000) (1,150,000) Other sources (uses) ------Total Other Financing Sources (uses) (1,310,159) (1,125,000) (1,050,000) (1,025,000) (1,150,000) NET Change in Fund Balance 576,845 1,116,802 174,182 (3,335,272) (1,684,508)
Fund Balance, July 1 10,530,666 11,107,511 12,224,313 12,398,495 9,063,223 Fund Balance, June 30 $11,107,511 $12,224,313 $12,398,495 $9,063,223 $7,378,715
(1) Totals may not foot due to rounding. (2) Includes Measure Y Parcel Tax commencing in fiscal year 2012-13. Source: Jefferson Union High School District - Audited Financial Statements.
District Budget and Interim Financial Reporting
Budgeting and Interim Reporting Procedures. State law requires school districts to maintain a balanced budget in each fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts.
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Under current law, a school district governing board must adopt and file with the county superintendent of schools a tentative budget by July 1 in each fiscal year. The District is under the jurisdiction of the San Mateo County Superintendent of Schools (the “County Superintendent”).
The County Superintendent must review and approve or disapprove the budget no later than August 15. The County Superintendent is required to examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance with the established standards. If the budget is disapproved, it is returned to the District with recommendations for revision. The District is then required to revise the budget, hold a public hearing thereon, adopt the revised budget and file it with the County Superintendent no later than September 8. Pursuant to State law, the County Superintendent has available various remedies by which to impose and enforce a budget that complies with State criteria, depending on the circumstances, if a budget is disapproved. After approval of an adopted budget, the school district's administration may submit budget revisions for governing board approval.
Subsequent to approval, the County Superintendent will monitor each district under its jurisdiction throughout the fiscal year pursuant to its adopted budget to determine on an ongoing basis if the district can meet its current or subsequent year financial obligations. If the County Superintendent determines that a district cannot meet its current or subsequent year obligations, the County Superintendent will notify the district's governing board of the determination and may then do either or both of the following: (a) assign a fiscal advisor to enable the district to meet those obligations or (b) if a study and recommendations are made and a district fails to take appropriate action to meet its financial obligations, the County Superintendent will so notify the State Superintendent of Public Instruction, and then may do any or all of the following for the remainder of the fiscal year: (i) request additional information regarding the district's budget and operations; (ii) after also consulting with the district's board, develop and impose revisions to the budget that will enable the district to meet its financial obligations; and (iii) stay or rescind any action inconsistent with such revisions. However, the County Superintendent may not abrogate any provision of a collective bargaining agreement that was entered into prior to the date upon which the County Superintendent assumed authority.
A State law adopted in 1991 (“A.B. 1200”) imposed additional financial reporting requirements on school districts, and established guidelines for emergency State aid apportionments. Under the provisions of A.B. 1200, each school district is required to file interim certifications with the County Superintendent (on December 15, for the period ended October 31, and by mid-March for the period ended January 31) as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The County Superintendent reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that is deemed unable to meet its financial obligations for the remainder of the current fiscal year or the subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or two subsequent fiscal years.
Under California law, any school district and office of education that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax anticipation notes, revenue bonds or any
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other debt instruments that do not require the approval of the voters of the district, unless the applicable county superintendent of schools determines that the district’s repayment of indebtedness is probable.
District’s Budget Approval/Disapproval and Certification History. During the past five years, each of the District’s adopted budgets have been approved by the County Superintendent and the District has received positive certifications on all of its interim reports.
Copies of the District’s budget, interim reports and certifications may be obtained upon request from the District Business Office, Jefferson Union High School District, 699 Serramonte Boulevard, Suite 100, Daly City, California 94015. The District may impose charges for copying, mailing and handling.
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District’s Fiscal Year 2015-16 General Fund Budget and Projections. The following table shows the income and expense statements for the District’s General Fund for fiscal year 2015-16 (Budget and Second Interim projections).
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Fiscal Year 2015-16 (Adopted Budget and Second Interim)(1) Jefferson Union High School District
Budgeted Second Interim Fiscal Year Fiscal Year Revenues 2015-16 2015-16(2) (3) LCFF Sources $42,196,625 $41,125,802 Federal revenues 1,402,216 1,608,368 Other state revenues 3,948,553 3,539,145 Other local revenues 5,971,627 6,209,173 Total Revenues 53,519,021 52,482,488
Expenditures Certificated salaries 20,596,877 20,636,482 Classified salaries 7,777,872 8,187,726 Employee benefits 10,852,349 10,675,513 Books and supplies 4,234,370 6,253,396 Services and other operating expenditures 6,546,266 7,910,530 Capital outlay -- 351,406 Other outgo (excluding indirect costs) 2,016,273 2,205,808 Other outgo – transfers of indirect costs -- -- Total expenditures 52,024,007 56,220,861
Excess of revenues over/(under) expenditures 1,495,014 (3,738,373)
Other financing sources (Uses) Operating transfers in -- -- Operating transfers out (1,175,000) (310,000) Total other financing sources (uses) (1,175,000) (310,000)
Net change in fund balance 320,014 (4,048,373)
(4) Fund balance, July 1 6,713,002 6,615,322 Fund balance, June 30 $7,033,016 $2,566,950
(1) Totals may not foot due to rounding. (2) Projected year totals. (3) LCFF commenced in fiscal year 2013-14. (4) The District’s General Fund Budget and Second Interim Report account for the General Fund separately from other governmental funds, including District reserves. The audited financial statements shown in the previous table combine the General Fund with other governmental funds, including reserves. As a result, the Fiscal Year 2015-16 beginning balance shown above does not correspond directly to the ending balance as presented in the 2014-15 audit, as summarized on the preceding table. Source: Jefferson Union High School District Second Interim Report for Fiscal Year 2015-16.
District Reserves. The District’s ending fund balance is the accumulation of surpluses from prior years. This fund balance is used to meet the State’s minimum required reserve of 3% of expenditures, plus any other allocation or reserve which might be approved as an expenditure by the District in the future. The District maintains, and expects to maintain, an unrestricted reserve, which meets the State’s minimum requirements. As described in the District audited financial statements for fiscal year 2014-15, the District has a minimum fund balance policy which requires a reserve for economic uncertainties, consisting of unassigned amounts equal to eight percent of General Fund operating expenses and other financing uses.
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If the fund balance drops below eight percent, it shall be recovered at a minimum rate of one percent each year.
In connection with legislation adopted in connection with the State’s fiscal year 2014- 15 Budget (“SB 858”), the Education Code was amended to provide that, beginning in fiscal year 2015-16, if a district’s proposed budget includes a local reserve above the minimum recommended level, the governing board must provide the information for review at the annual public hearing on its proposed budget. In addition, SB 858 included a provision, which became effective upon the passage of Proposition 2 at the November 4, 2014 statewide election, which limits the amount of reserves which may be maintained at the District level. Specifically, the legislation, among other things, enacted Education Code Section 42127.01, which became operative December 15, 2014, and provides that in any fiscal year immediately after a fiscal year in which a transfer is made to the State’s Public School System Stabilization Account (the Proposition 98 reserve), a school district may not adopt a budget that contains a reserve for economic uncertainties in excess of twice the applicable minimum recommended reserve for economic uncertainties established by the State Board (for school districts with ADA over 400,000, the limit is three times the amount). Exemptions can be granted by the County Superintendent under certain circumstances.
In August of 2015, a bill was introduced into the State Senate in response to SB 858 (“SB 799”) proposing reforms to the reserve cap. SB 799 proposes a cap on unassigned reserves and special reserves for other than capital outlay of seventeen percent, with exemptions from the cap for school districts with less then 2,500 average daily attendance and basic aid districts.
The District cannot predict how SB 858 or SB 799, if enacted, will impact its reserves and future spending. See “STATE FUNDING OF EDUCATION; RECENT STATE BUDGETS- 2014-15 State Budget.”
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Attendance - Revenue Limit and LCFF Funding
As described herein, prior to fiscal year 2013-14, school districts in California derived most State funding based on a formula which considered a revenue limit per unit of average daily attendance (“ADA”). With the implementation of the LCFF, commencing in fiscal year 2013-14, school districts receive base funding based on ADA, and may also be entitled to supplemental funding, concentration grants and funding based on an economic recovery target. The following two tables set forth historical revenue limit funding for the District through fiscal year 2012-13, and LCFF funding for the District for fiscal year 2013-14 and 2014-15 (Budgeted).
AVERAGE DAILY ATTENDANCE, ENROLLMENT AND BASE REVENUE LIMIT Fiscal Years 2010-11 Through 2012-13 Jefferson Union High School District Base Revenue Average Daily Limit Per Unit of Fiscal Year Attendance(1) Enrollment(2) A.D.A. 2010-11(3) 4,653 4,962 $7,353.39 2011-12(4) 4,682 4,969 7,517.29 2012-13(5) 4,575 4,870 7,517.39 ______(1) ADA. for the second period of attendance, typically in mid-April of each school year. (2) Reflects enrollment as of October report submitted to the California Basic Educational Data System (“CBEDS”) in each school year. (3) The District had a 17.963% base revenue limit deficit factor and a negative 0.39% cost of living adjustment in fiscal year 2010-11, which resulted in a funded base revenue limit of $6,032.50. (4) The District had a 20.602% base revenue limit deficit factor and a 2.24% cost of living adjustment in fiscal year 2011-12, which resulted in a funded base revenue limit of $5,970.17. (5) The District had a 22.272% base revenue limit deficit factor and a 3.243% cost of living adjustment in fiscal year 2012- 13, which resulted in a funded base revenue limit of $6,094.56. Source: Jefferson Union High School District Audited Financial Reports for fiscal years 2010-11 through 2012-13 for A.D.A.; Jefferson Union High School District for enrollment and base revenue limit.
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Attendance and LCFF. The following table sets forth the District’s estimated and budgeted A.D.A., enrollment (including percentage of students who are English language learners, from low-income families and/or foster youth (collectively, “EL/LI Students”), and targeted Base Grant per unit of A.D.A. for fiscal years 2013-14 through 2015-16, respectively. The A.D.A. and enrollment numbers reflected in the following table include special education.
AVERAGE DAILY ATTENDANCE, ENROLLMENT AND TARGETED BASE GRANT Fiscal Years 2013-14 through 2015-16 JEFFERSON UNION HIGH SCHOOL DISTRICT
(5) A.D.A./Base Grant Enrollment Percent of Fiscal Total Total EL/LI Year 9-12 A.D.A. Enrollment Students A.D.A.(2): 4,594 4,594 4,875 42% 2013-14 Targeted Base Grant(3): $8,638 ------
A.D.A.(2): 4,551 4,551 4,750 40% 2014-15 Targeted Base Grant(3)(4): $8,712 ------
A.D.A.(2): 4,457 4,457 4,624 41% 2015-16(1) Targeted Base Grant(3)(4): $9,527 ------
______(1) Projected. (2 ADA. for the second period of attendance, typically in mid-April of each school year. (3) Represents the targeted amount of Base Grant per unit of ADA. (4) Targeted fiscal year 2014-15 Base Grant amounts reflect a 0.85% cost of living adjustment. (5) Reflects enrollment as of October report submitted to the CBEDS in each school year. For purposes of calculating Supplemental and Concentration Grants, a school district’s fiscal year 2013-14 percentage of unduplicated EL/LI Students is expressed solely as a percentage of its fiscal year 2013-14 total enrollment. For fiscal year 2014-15, the percentage of unduplicated EL/LI Students enrollment is based on the two-year average of EL/LI Students enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, a school district’s percentage of unduplicated EL/LI Students will be based on a rolling average of such school district’s EL/LI Students enrollment for the then-current fiscal year and the two immediately preceding fiscal years. Source: Jefferson Union High School District.
Revenue Sources
The District categorizes its general fund revenues into four sources, being LCFF, Federal Revenues, Other State Revenues and Local Revenues. Each of these revenue sources is described below.
LCFF Sources. District funding is provided by a mix of (1) local property taxes and (2) State apportionments of funding under the LCFF. Generally, the State apportionments will amount to the difference between the District's LCFF funding entitlement and its local property tax revenues.
Beginning in 1978-79, Proposition 13 and its implementing legislation provided for each county to levy (except for levies to support prior voter-approved indebtedness) and collect all property taxes, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county.
The principal component of local revenues is the school district’s property tax revenues, i.e., the district’s share of the local 1% property tax, received pursuant to Sections 75 and
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following and Sections 95 and following of the California Revenue and Taxation Code. Education Code Section 42238(h) itemizes the local revenues that are counted towards the base revenue limit before calculating how much the State must provide in equalization aid. Historically, the more local property taxes a district received, the less State equalization aid it is entitled to. Furthermore, if a school district’s share of local property tax revenues exceeded the revenue limit, the school district was deemed a “Basic Aid” district, and entitled to keep the full share of local property taxes, even if they exceeded the revenue limit which would have been provided through State funding.
For school districts which were “Basic Aid” prior to implementation of the LCFF, provided that the per pupil funding targets under LCFF, including economic recovery targets, are met or exceeded by local property tax revenues, such districts are entitled to retain their status as Basic Aid and keep their full local property tax revenue entitlement. The threshold for Basic Aid status under the LCFF, however, is higher than under the prior funding formula, resulting in some district falling out of Basic Aid status as the result of the implementation of the LCFF. Accountability measures contained in the LCFF must be implemented by all districts, including Basic Aid districts.
Federal Revenues. The federal government provides funding for several District programs, including special education programs, programs under No Child Left Behind, the Individuals With Disabilities Education Act, and specialized programs such as Drug Free Schools.
Other State Revenues. As discussed above, the District receives State apportionment of basic and equalization aid in an amount equal to the difference between the District's revenue limit and its property tax revenues. In addition to such apportionment revenue, the District receives other State revenues.
The District receives State aid from the California State Lottery (the “Lottery”), which was established by a constitutional amendment approved in the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non-instructional purposes such as real property acquisition, facility construction, or the financing of research. Moreover, State Proposition 20 approved in March 2000 requires that 50% of the increase in Lottery revenues over 1997-98 levels must be restricted to use on instruction material.
For additional discussion of State aid to school districts, see “-State Funding of Education.”
Other Local Revenues and Voter-Approved Parcel Tax. The District receives additional local revenues from items such as a parcel tax, interest earnings and other local sources. Other local revenues comprise approximately 12.09% (or approximately $5.5 million) of the District’s general fund budgeted revenues for fiscal year 2014-15. Parcel Tax revenues and revenues derived from a long-term lease are described below.
Parcel Tax. On June 5, 2012, voters in the District approved a parcel tax of $48 annually per parcel for four years, expiring June 30, 2016 (the “Measure Y Parcel Tax”). The Measure Y Parcel Tax is estimated to generate $1,700,000 in fiscal year 2015-16. The District expects to place on the June 2016 ballot a measure requesting voters to extend the Measure Y Parcel Tax for ten more years.
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Lease of District Property. In April 1985, the District leased for 99 years, until March 31, 2084, two lots (Lot 2B and Lot 4) that comprise a former school site to a commercial real estate developer, Southwest Diversified. Under the terms of the leases, the District annually receives a fixed amount, plus increases that take into account the annual change in the consumer price index. In fiscal year 2014-15, the District received a total of $1,114,908 in lease revenues from Southwest Diversified.
Charter Schools
Charter schools are largely independent schools operating as part of the public school system created pursuant to Part 26.8 (beginning with Section 47600) of Division 4 of Title 2 of the California Education Code (the “Charter School Law”). A charter school is usually created or organized by a group of teachers, parents and community leaders, or a community-based organization, and may be approved by an existing local public school district, a county board of education or the State Board of Education. A charter school is generally exempt from the laws governing school districts, except where specifically noted in the law. The Charter School Law acknowledges that among its intended purposes are to (a) provide parents and students with expanded choices in the types of educational opportunities that are available within the public school system, (b) hold schools accountable for meeting measurable pupil outcomes and provide schools a way to shift from a rule-based to a performance-based system of accountability, and (c) provide competition within the public school system to stimulate improvements in all public schools.
There are currently two charter schools operating within the territory of the District. The California Virtual Academy @ San Mateo is an independent charter school serving grades K-12 and Summit Public School. Shasta is an independent charter school serving grades 9-12. The District can make no representation as to whether enrollment at such charter school may increase at the expense of District enrollment in future years, whether additional charter schools will be established within the territory of the District, or as to the impact these or other charter school developments may have on the District’s ADA or finances in future years.
District Retirement Programs
Qualified employees of the District are covered under multiple-employer defined benefit pension plans maintained by agencies of the State. Certificated employees are members of the State Teachers’ Retirement System (“STRS”) and classified employees are members of the Public Employees’ Retirement System (“PERS”). Both STRS and PERS are operated on a Statewide basis. The information set forth below regarding the STRS and PERS programs, other than the information provided by the District regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation by either the District or the Underwriter.
Implementation of GASB Nos. 68 and 71. Commencing with fiscal year ended June 30, 2015, the District implemented the provisions of GASB Statement Nos. 68 and 71 which require certain new pension disclosures in the notes to its audited financial statements commencing with the audit for fiscal year 2014-15. Statement No. 68 generally requires the District to recognize its proportionate share of the unfunded pension obligation for STRS and PERS by recognizing a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior fiscal year. As a result of the implementation of GASB Statement Nos. 68 and 71, the District may have to reflect a restatement of its beginning net position as of
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July 1, 2014. See “APPENDIX A - Audited Financial Statements of the District For Fiscal Year Ending June 30, 2015” and particularly Note 15.
STRS. All full-time certificated employees participate in STRS, a cost-sharing, multiple- employer contributory public employee retirement system. STRS provides retirement, disability and survivor benefits to plan members and beneficiaries under a defined benefit program. Benefit provisions and contribution amounts are established by State statutes, as legislatively amended. The program is funded through a combination of investment earnings and statutorily set contributions from three sources: employees, employers and the State. The District’s employer contributions to STRS for recent fiscal years are set forth in the following table.
STRS Contributions Jefferson Union High School District Fiscal Years 2012-13 through 2015-16 (Projected)
Fiscal Year Amount 2012-13 $1,501,922 2013-14 1,643,008 2014-15 1,669,897 2015-16* 2,152,938
*Projected in Second Interim Report. Source: Jefferson Union High School District.
Historically, employee, employer and State contribution rates did not vary annually to account for funding shortfalls or surpluses in the STRS plan. In recent years, the combination of investment earnings and statutory contributions were not sufficient to pay actuarially required amounts. As a result, the STRS defined benefit program showed an estimated unfunded actuarial liability of approximately $72.7 billion as of June 30, 2014 (the date of the last actuarial valuation). In connection with the State’s adoption of its fiscal year 2014-15 Budget, the Governor signed into law Assembly Bill 1469 (“AB 1469”), which represents a legislative effort to address the unfunded liabilities of the STRS pension plan. AB 1469 addressed the funding gap by increasing contributions by employees, employers and the State. In particular, employer contribution rates are scheduled to increase through at least fiscal year 2020-21, from a contribution rate of 8.25% in fiscal year 2013-14 to 19.1% in fiscal year 2020-21. Thereafter, employer contribution rates will be determined by the STRS board to reflect the contribution required to eliminate unfunded liabilities by June 30, 2046.
The District’s employer contribution rates for fiscal years 2014-15 and 2015-16 were 8.88% and 10.73%, respectively. Projected employer contribution rates for school districts (including the District) for fiscal year 2016-17 through fiscal year 2020-21 are set forth in the following table.
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PROJECTED EMPLOYER CONTRIBUTION RATES (STRS) Fiscal Years 2016-17 through 2020-21
Projected Employer Fiscal Year Contribution Rate(1) 2016-17 12.58% 2017-18 14.43 2018-19 16.28 2019-20 18.13 2020-21 19.10
(1) Expressed as a percentage of covered payroll. Source: AB 1469
PERS. All full-time and some part-time classified employees participate in PERS, an agent multiple-employer contributory public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State. PERS provides retirement, disability, and death benefits to plan members and beneficiaries. The District is part of a cost-sharing pool within PERS known as the “Schools Pool.” Benefit provisions are established by State statutes, as legislatively amended. Contributions to PERS are made by employers and employees. Each fiscal year, the District is required to contribute an amount based on an actuarially determined employer rate. The District’s employer contributions to PERS for recent fiscal years are set forth in the following table.
PERS Contributions Jefferson Union High School District Fiscal Years 2012-13 through 2015-16 (Projected)
Fiscal Year Amount 2012-13 $827,748 2013-14 905,694 2014-15 845,302 2015-16* 899,291
*Projected in Second Interim Report. Source: Jefferson Union High School District.
Like the STRS program, the PERS program has experienced an unfunded liability in recent years. The PERS unfunded liability, on a market value of assets basis, was approximately $8.7 billion as of June 30, 2014 (the date of the last actuarial valuation). To address this issue, the PERS board has taken a number of actions. In April 2013, for example, the PERS board approved changes to the PERS amortization and smoothing policy intended to reduce volatility in employer contribution rates. In addition, in April 2014, PERS set new contribution rates, reflecting new demographic assumptions and other changes in actuarial assumptions. The new rates and underlying assumptions, which are aimed at eliminating the unfunded liability of PERS in approximately 30 years, will be implemented for school districts beginning in fiscal year 2016-17, with the costs spread over 20 years and the increases phased in over the first five years.
The District’s employer contribution rates for fiscal years 2014-15 and 2015-16 were 11.771% and 11.847%, respectively. Projected employer contribution rates for school districts (including the District) for fiscal year 2016-17 through fiscal year 2020-21 are set forth in the following table.
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PROJECTED EMPLOYER CONTRIBUTION RATES (PERS) Fiscal Years 2016-17 through 2020-21(1)
Projected Employer Fiscal Year Contribution Rate(2) 2016-17 15.0% 2017-18 16.6 2018-19 18.2 2019-20 19.9 2020-21 20.4
(1) Rates were estimated by PERS in 2014 using 2012 financial data. The PERS board is expected to approve official employer contribution rates for each fiscal year shown during the immediately preceding fiscal year. (2) Expressed as a percentage of covered payroll. Source: PERS
California Public Employees’ Pension Reform Act of 2013. On September 12, 2012, the Governor signed into law the California Public Employees’ Pension Reform Act of 2013 (“PEPRA”), which impacted various aspects of public retirement systems in the State, including the STRS and PERS programs. In general, PEPRA (i) increased the retirement age for public employees depending on job function, (ii) capped the annual pension benefit payouts for public employees hired after January 1, 2013, (iii) required public employees hired after January 1, 2013 to pay at least 50% of the costs of their pension benefits (as described in more detail below), (iv) required final compensation for public employees hired after January 1, 2013 to be determined based on the highest average annual pensionable compensation earned over a period of at least 36 consecutive months, and (v) attempted to address other perceived abuses in the public retirement systems in the State. PEPRA applies to all public employee retirement systems in the State, except the retirement systems of the University of California, and charter cities and charter counties whose pension plans are not governed by State law. PEPRA’s provisions went into effect on January 1, 2013 with respect to new State, school, and city and local agency employees hired on or after that date; existing employees who are members of employee associations, including employee associations of the District, have a five-year window to negotiate compliance with PEPRA through collective bargaining.
PERS has predicted that the impact of PEPRA on employees and employers, including the District and other employers in the PERS system, will vary, based on each employer’s current level of benefits. As a result of the implementation of PEPRA, new members must pay at least 50% of the normal costs of the plan, which can fluctuate from year to year. To the extent that the new formulas lower retirement benefits, employer contribution rates could decrease over time as current employees retire and employees subject to the new formulas make up a larger percentage of the workforce. This change would, in some circumstances, result in a lower retirement benefit for employees than they currently earn.
With respect to the STRS pension program, employees hired after January 1, 2013 will pay the greater of either (1) fifty percent of the normal cost of their retirement plan, rounded to the nearest one-quarter percent, or (2) the contribution rate paid by then-current members (i.e., employees in the STRS plan as of January 1, 2013). The member contribution rate could be increased from this level through collective bargaining or may be adjusted based on other factors. Employers will pay at least the normal cost rate, after subtracting the member’s contribution.
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The District is unable to predict the amount of future contributions it will have to make to PERS and STRS as a result of the implementation of PEPRA, and as a result of negotiations with its employee associations, or, notwithstanding the adoption of PEPRA, resulting from any legislative changes regarding the PERS and STRS employer contributions that may be adopted in the future.
Additional Information. Additional information regarding the District’s retirement programs is available in Note 10 to the District’s audited financial statements attached hereto as APPENDIX A. In addition, both STRS and PERS issue separate comprehensive financial reports that include financial statements and required supplemental information. Copies of such reports may be obtained from STRS and PERS, respectively, as follows: (i) STRS, P.O. Box 15275, Sacramento, California 95851-0275; and (ii) PERS, 400 Q Street, Sacramento, California 95811. More information regarding STRS and PERS can also be obtained at their websites, www.calstrs.com and www.calpers.ca.gov, respectively. The references to these Internet websites are shown for reference and convenience only and the information contained on such websites is not incorporated by reference into this Official Statement. The information contained on these websites may not be current and has not been reviewed by the District or the Underwriter for accuracy or completeness.
Other Post-Employment Retirement Benefits
The Plan Generally. The Jefferson Union High School District offers a post- employment benefits plan (the “Plan”). The Plan provides health care benefits in accordance with District employment contracts to all qualified employees who retire from the District on or after attaining age 55 (age 50 for school teachers with 30 of more years of service) with at least 10 years of service. As of the 2014-15 fiscal year, 108 employees are eligible for participation in the Plan. Retirees receive benefits for lesser of seven years or age 70 if not Medicare eligible, or the lesser of 10 years or age 75 if Medicare eligible. Expenditures for post-employment benefits are recognized on a pay-as-you-go basis, as premiums are paid.
Contribution Information. The contribution requirements of Plan members and the District are established and may be amended by the District and employee bargaining units. The required contribution is based on projected pay-as-you-go financing requirements. For fiscal year 2014-15, the District contributed $1,241,105 to the Plan.
Annual OPEB Cost and Net OPEB Obligation. The District's annual other postemployment benefit (“OPEB”) cost is calculated based on the annual required contribution of the employer (“ARC”), an amount actuarially determined in accordance with the parameters of Government Accounting Standards Board Statement No. 45 (“GASB 45”). GASB 45 requires local government employers who provide OPEB as part of the compensation offered to employees to recognize he expense and related liabilities and assets in their financial statements. The District implemented GASB 45 for fiscal year ending June 30, 2009.
The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (“UAAL”) over a period not to exceed thirty years.
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OPEB Funded Status and Funding Progress. The actuarial valuation of the postretirement welfare benefits is available directly from the District. Based on the latest actuarial valuation as of November 1, 2014 (valuation date), the District’s post-employment benefits other than pension program is as follows.
Schedule of OPEB Funding Progress Jefferson Union High School District
% of Annual Fiscal Year Annual Required Contributions OPEB Cost Net OPEB Ending Contribution during the year Contributed Obligation 6/30/13 $2,163,865 $1,942,156 90% $2,604,058 6/30/14 2,163,865 1,372,204 63 3,395,719 6/30/15 2,689,055 1,241,105 46 4,843,669
Source: Jefferson Union High School District Audited Financial Statement for Fiscal Year 2014-15.
Actuarial Methods and Assumptions. As described in the District’s 2014-15 Audited Financial Statements (Note 11), the actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
In the November 1, 2014, actuarial valuation, the entry age normal method was used. The actuarial assumptions included an inflation factor of 2.75%, and a 4.55% investment rate of return (net of administrative expenses), based on the plan being funded in an irrevocable employee benefit trust invested in a combined equity and fixed income portfolio.
Existing Debt Obligations
In addition to the District’s ongoing obligations with respect to retirement plans and OPEB described above, the District has outstanding general obligation bond indebtedness, as well as certificates of participation payable from the general fund and an energy retrofit agreement. The District has never defaulted on the payment of principal or interest or Accreted Value on any of its long-term indebtedness. See “APPENDIX A - Audited Financial Statements of the District – Note 7 - General Long-Term Debt” for summaries and expected debt service requirements of the District’s long-term debt. See also “DEBT SERVICE SCHEDULES” in the body of this Official Statement.
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A schedule of the District’s outstanding long-term obligations, with more detail in the following section regarding outstanding bonded indebtedness, is as follows:
Summary of Long Term Debt Jefferson Union High School District
Balance Due in Long-Term Debt June 30, 2015 One Year Series 2000A Refunding Bonds $14,600,000 $755,000 Series 2005 Refunding Bonds 200,000 200,000 Series 2006A Bonds 1,585,000 1,585,000 Series 2006B Bonds 17,418,227 233,704 Accreted interest 6,274,807 151,296 Bond premium 445,691 24,646 Series 2006C Bonds 10,560,000 530,000 Bond premium 371,911 33,556 Series 2006D Bonds(1) 4,736,419 -- Accreted interest 2,021,925 -- 2011 Taxable BANs 4,860,000 4,860,000 Series 2012A Bonds 34,730,000 850,000 Bond Premium 1,242,525 56,265 Series 2012B Bonds 1,000,000 500,000 Series 2014A Refunding Bonds 20,360,000 -- Bond Premium 752,064 31,013 Series 2014B Refunding Bonds 720,000 -- 2015 Refunding Bonds 41,430,000 650,000 Bond Premium 5,043,873 316,893 Compensated absences 382,982 -- Net OPEB Obligation 4,843,669 -- Net Pension Liability 34,561,222 -- ______(1) Amounts do not reflect the refunding of a portion of the 2006 Series D Bonds with proceeds of the District’s Refunding Bonds. See “THE REFUNDING BONDS – Outstanding Bonds; Plan of Finance” in the front portion of this Official Statement. Source: Jefferson Union High School District Audited Financial Report for fiscal year 2014-15.
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General Obligation Bonds. In addition to the Bonds described herein, the District has other outstanding general obligation bonds or refunding bonds, each of which is secured by ad valorem taxes upon all property subject to taxation by the District, as summarized in the following table and as more particularly described below.
Summary of Outstanding General Obligation Bond Debt Jefferson Union High School District
Amount Date Original Issue Outstanding(1) GO Bond Issue Issued Final Maturity Amount (April 15, 2016) 2006 Election Bonds Series B (2009) 07/23/09 08/01/33 $17,998,936.60 $17,184,524.10 Series C (2010) 04/29/10 08/01/26 12,000,000.00 10,030,000.00 Series D (2011)(2) 02/01/11 08/01/34 14,999,736.85 4,736,418.55 2011 BAN (QSCB) 06/16/11 06/01/16 4,860,000.00 4,860,000.00
2012 Election Bonds(3) Series A (2013) 05/09/13 08/01/37 35,540,000.00 33,880,000.00 Series B (2013 EdTech) 06/27/13 08/01/16 1,500,000.00 500,000.00
Refunding Bonds Series 2000 03/30/00 08/01/29 22,060,000.00 14,495,000.00 Series 2014A 10/02/14 08/01/39 20,360,000.00 20,360,000.00 Series 2014B (Taxable) 10/02/14 08/01/18 720,000.00 720,000.00 Series 2015 05/28/15 08/01/31 41,430,000.00 40,780,000.00 Series 2016 04/07/16 08/01/34 11,519,263.10 11,519,263.10
2014 Election Bonds (4)
(1) With respect to capital appreciation bonds represents outstanding denominational amount. (2) Partially defeased with the proceeds of 2014 Refunding Bonds. (3) The 2012C Bonds described herein will be the third and final series of bonds issued pursuant to this authorization. (4) Of the $133 million authorized by District voters on November 4, 2014, the 2014A Bonds described herein will be the first series issued pursuant to such authorization. Source: Jefferson Union High School District.
2006 GO Bond Election. On November 7, 2006, over 55% of the registered voters of the District approved the authorization to issue bonds of the District in an aggregate principal amount of $136,900,000 (the “2006 Authorization”). The District has issued Series A through Series D, and has issued a Bond Anticipation Note expected to be repaid with proceeds of an additional series.
2012 GO Bond Election. On November 6, 2012, over 55% of the registered voters of the District approved the reauthorization to issue bonds of the District in an aggregate principal amount of $41,900,000 (the “2012 Reauthorization”). The District has issued two series of bonds under the 2012 Reauthorization, and the third and final series is the 2012C Bonds described herein.
2014 GO Bond Election. On November 4, 2014, over 55% of the registered voters of the District approved Measure J providing authorization to issue bonds of the District in an aggregate principal amount of $133,000,000. The 2014A Bonds described herein are the first series of said bonds to be issued pursuant to the 2014 Authorization.
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Refunding GO Bonds. The District has a number of refunding general obligation bond issues that have been issued for the purpose of refinancing outstanding general obligation bond debt.
2015 General Fund Lease Agreement. On December 18, 2015, the District entered into a Lease Agreement in the principal amount of $1,580,000 on a private placement basis in order to finance HVAC and other capital improvements to school facilities. The lease payments are payable by the District from its general fund on February 1 and August 1 of each year, with the final payment due August 1, 2020.
Joint Powers Agreement and Joint Ventures
The District participates in a joint powers agreement (JPA) with San Mateo County Schools Insurance Group, which arranges for and provides property, workers compensation, medical and liability insurance for its member school districts. The JPA is governed by a board consisting of a representative from each member district. The board controls the operations of its JPA, including selection of management and approval of operating budgets independent of any influence by the member districts beyond their representation on the board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionately to their participation in each JPA. The relationship between the District and the JPA is such that the JPA is not a component unit of the District for financial reporting purposes.
Investment of District Funds
In accordance with Government Code Section 53600 et seq., the San Mateo County Treasurer manages funds deposited with it by the District. The County is required to invest such funds in accordance with California Government Code Sections 53601 et seq. In addition, counties are required to establish their own investment policies, which may impose limitations beyond those required by the Government Code. See APPENDIX H hereto for a copy of San Mateo County’s Investment Policy and recent investment report.
Effect of State Budget on Revenues
Public school districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts generally receive the majority of their operating revenues from various State sources. The primary source of funding for school districts is LCFF funding, which is derived from a combination of State funds and local property taxes (see “—State Funding of Education – Revenue Limits” above). State funds typically make up the majority of a district’s LCFF funding. School districts also receive funding from the State for some specialized programs such as special education.
The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” below), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. The District cannot predict how education funding may further be changed in the future, or the state of the economy which in turn can impact the amounts of funds available from the State for education funding.
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STATE FUNDING OF EDUCATION; RECENT STATE BUDGETS
State Funding of Education
General. The State requires that from all State revenues there first shall be set apart the moneys to be applied for support of the public school system and public institutions of higher education. School districts in California receive operating income primarily from two sources: (1) the State funded portion which is derived from the State’s general fund, and (2) a locally funded portion, being the district’s share of the one percent general ad valorem tax levy authorized by the California Constitution (see “DISTRICT FINANCIAL INFORMATION – Education Funding Generally” above). School districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts receive an average of about 55 percent of their operating revenues from various State sources.
The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” below), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. Decreases in State revenues may significantly affect appropriations made by the legislature to school districts.
The following information concerning the State’s budgets for the current and most recent preceding years has been compiled from publicly-available information provided by the State. Neither the District, the Underwriter nor the County is responsible for the information relating to the State’s budgets provided in this section. Further information is available from the Public Finance Division of the State Treasurer’s Office.
The Budget Process. The State’s fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the “Governor’s Budget”). Under State law, the annual proposed Governor’s Budget cannot provide for projected expenditures in excess of projected revenues and balances available from prior fiscal years. Following the submission of the Governor’s Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the State Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a majority vote of each House of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (including for K-14 education) must be approved by a majority vote in each House of the Legislature, unless such appropriations require tax increases, in which case they must be approved by a two-thirds vote of each House of the Legislature, and be signed by the Governor. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution.
Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
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Recent State Budgets
Certain information about the State budgeting process and the State Budget is available through several State of California sources. A convenient source of information is the State’s website, where recent official statements for State bonds are posted. The references to internet websites shown below are shown for reference and convenience only, the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated herein by reference.
• The California State Treasurer Internet home page at www.treasurer.ca.gov, under the heading “Bond Information”, posts various State of California Official Statements, many of which contain a summary of the current State Budget, past State Budgets, and the impact of those budgets on school districts in the State.
• The California State Treasurer’s Office Internet home page at www.treasurer.ca.gov, under the heading “Financial Information”, posts the State’s audited financial statements. In addition, the Financial Information section includes the State’s Rule 15c2-12 filings for State bond issues. The Financial Information section also includes the Overview of the State Economy and Government, State Finances, State Indebtedness, Litigation from the State’s most current Official Statement, which discusses the State budget and its impact on school districts.
• The California Department of Finance’s Internet home page at www.dof.ca.gov, under the heading “California Budget”, includes the text of proposed and adopted State Budgets.
• The State Legislative Analyst’s Office prepares analyses of the proposed and adopted State budgets. The analyses are accessible on the Legislative Analyst’s Internet home page at www.lao.ca.gov under the heading “Subject Area – Budget (State)”.
Prior Years’ Budgeting Techniques. Declining revenues and fiscal difficulties which arose in the State commencing in fiscal year 2008-09 led the State to undertake a number of budgeting strategies, which had subsequent impacts on local agencies within the State. These techniques included the issuance of IOUs in lieu of warrants (checks), the enactment of statutes deferring amounts owed to public schools, until a later date in the fiscal year, or even into the following fiscal year (known as statutory deferrals), trigger reductions, which were budget cutting measures which were implemented or could have been implemented if certain State budgeting goals were not met, among others, and the dissolution of local redevelopment agencies in part to make available additional funding for local agencies. Although the fiscal year 2014-15 State Budget is balanced and projects a balanced budget for the foreseeable future, largely attributable to the additional revenues generated due to the passage of Proposition 30 at the November 2, 2012 statewide election, there can be no certainty that budget-cutting strategies such as those used in recent years will not be used in the future should the State Budget again be stressed and if projections included in such budget do not materialize.
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2013-14 State Budget: Significant Change in Education Funding. As described previously herein, the 2013-14 State Budget and its related implementing legislation enacted significant reforms to the State’s system of K-12 education finance with the enactment of the LCFF. Significant reforms such as the LCFF and other changes in law may have significant impacts on the District’s finances.
2015-16 Adopted State Budget
On June 24, 2015, Governor Brown signed the fiscal year 2015-16 State Budget Act (the "2015-16 State Budget"). The 2015-16 State Budget includes approximately $117.5 billion in State General Fund resources (including revenues, transfers and the prior year ending balance) and approximately $115.4 billion in planned State General Fund expenditures. By the end of fiscal year 2015-16, the Budget Stabilization Account will have a total balance of $3.5 billion. The 2015-16 State Budget includes an approximately 0.8% percent State General Fund spending increase from the fiscal year 2014-15 State Budget Act (the "2014-15 State Budget").
The 2015-16 State Budget includes Proposition 98 funding of $68.4 billion for the fiscal year, which is approximately $7.6 billion more in Proposition 98 funding than in the 2014-15 State Budget. When combined with increases of $6.1 billion in fiscal years 2013-14 and 2014-15 as well as other one-time savings and adjustments in those years, the 2015-16 State Budget provides a $14.4 billion increased investment in K-14 education.
The 2015-16 State Budget includes the following significant adjustments affecting California K-12 school districts:
• Local Control Funding Formula - An increase of $6 billion Proposition 98 General Fund to continue the State's transition to the LCFF. This formula commits most new funding to districts serving English language learners, students from low-income families, and youth in foster care. This increase will close the remaining funding implementation gap by more than 51 percent.
• Career Technical Education - The 2015-16 State Budget establishes the Career Technical Education ("CTE") Incentive Grant Program and provides $400 million, $300 million, and $200 million Proposition 98 General Fund in fiscal year 2015-16, fiscal year 2016-17, and fiscal year 2017-18, respectively, for local education agencies to establish new or expand high-quality CTE programs. School districts, county offices of education, and charter schools receiving funding under this program will be required to provide local-to-State matching funds of 1:1 in fiscal year 2015-16, 1.5:1 in fiscal year 2016-17, and 2:1 in fiscal year 2017-18. When determining grant recipients, the Department of Education and the State Board of Education will give priority to grant recipients that: (1) are establishing new programs; (2) serve a large number of English-learner, low-income, or foster youth students; (3) serve pupil groups with higher-than-average dropout rates; or (4) are located in areas of high unemployment.
• Educator Support - An increase of $500 million one-time Proposition 98 General Fund for education support. Of this amount, $490 million is for activities that promote educator quality and effectiveness, including beginning teacher and administrator support and mentoring, support for teachers who have been identified as needing improvement, and professional development that is aligned to the State academic content standards. These funds will be allocated to school districts, county offices of education, charter schools, and State special schools in an equal amount per certificated staff and are
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available for expenditure over the next three years. Additionally, $10 million is provided for the K-12 High Speed Network to provide professional development and technical assistance to local educational agencies related to network management.
• Special Education - The 2015-16 State Budget includes $60.1 million in Proposition 98 General Fund funding ($50.1 million ongoing and $10 million one-time) to implement selected program changes that improve service delivery and outcomes for all disabled students, with a particular emphasis on early education.
• K-12 High Speed Internet Access - An increase of $50 million in one-time funding to the Proposition 98 General Fund to support additional investments in internet connectivity and infrastructure. This builds on $26.7 million in one-time Proposition 98 funding that was provided in the 2014-15 State Budget to assist local educational agencies with securing required internet connectivity and infrastructure to implement the new computer-adaptive tests administered under Common Core.
• K-12 Deferrals - The 2015-16 State Budget provides $897 million in funding to the Proposition 98 General Fund to eliminate deferrals consistent with the revenue trigger included in the 201415 State Budget.
2016-17 Proposed State Budget
Proposed Budget. On January 7, 2016, Governor Brown presented his proposed budget for the 2016-17 fiscal year (the “2016-17 Proposed State Budget”) to the State Legislature. The 2016-17 Proposed State Budget proposes a multiyear plan that is balanced and that, among other items, provides for the following:
• contributions to both state budget reserves: the Special Fund for Economic Uncertainties, the state’s discretionary reserve, and the Budget Stabilization Account, the state’s constitutional rainy day fund, raising such reserves to $2.2 billion and $8 billion, respectively;
• an increase in funding for K-12 schools of $2.8 billion by raising the funding level under the LCFF to $14,184 per pupil in fiscal year 2015-16 (representing an increase of 5.4 percent over the LCFF funding level for fiscal year 2014-15);
• an increase of more than $1.2 billion in one-time discretionary general funds for school districts, charter schools and county offices of education to use at local discretion;
• a $1.6 billion early education block grant by combining three existing programs to promote local flexibility, focusing on disadvantaged students and improved accountability;
• $807 million for statewide deferred maintenance at levees, state parks, universities, community colleges, prisons, state hospitals, and other state facilities;
• a $3.1 billion cap-and-trade expenditure plan to reduce greenhouse gas emissions; and
• $710 million to pay for the costs of wildfires and for other effects of the drought.
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The complete 2016-17 Proposed State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District cannot, and does not, take any responsibility for the continued accuracy of such internet address or for the accuracy, completeness or timeliness of information posted on such address, and such information is not incorporated in this Official Statement by such reference.
In May 2016, Governor Brown is expected to issue the May Revision to the 2016-17 Proposed State Budget to reflect updated revenue and expenditure estimates.
The execution of the 2016-17 Proposed State Budget may be affected by numerous factors, including but not limited to: (i) shifts of costs from the federal government to the State, (ii) national, State and international economic conditions, (iii) litigation risk associated with proposed spending reductions, (iv) rising health care costs and (v) other factors, all or any of which could cause the revenue and spending projections in the 2016-17 Proposed State Budget to be unattainable. The District cannot predict the impact that the 2016-17 Proposed State Budget, or subsequent budgets, will have on its own finances and operations. Additionally, the District cannot predict the accuracy of any projections made in the 2016-17 Proposed State Budget.
LAO Budget Overview. On January 11, 2016, the Legislative Analyst’s Office (the “LAO”), a nonpartisan State office that provides fiscal and policy information and advice to the State Legislature, released its report on the 2016-17 Proposed State Budget entitled, “The 2016-17 Budget: Overview of the Governor’s Budget” (the “2016-17 Proposed Budget Overview”). In the 2016-17 Proposed Budget Overview, among other items, the LAO commends the State for its emphasis on increasing budget reserves. The LAO believes that this general approach is prudent and is the key to weathering the next recession with minimal disruption to public programs. Though the LAO anticipates the State’s economic growth will continue in the near term, the LAO warns that the Proposition 98 minimum guarantee could decrease in fiscal year 2017-18 or future years if stock market prices were to drop or growth in the economy and personal income were to decline. The LAO notes that such a scenario serves as a caution against the State committing all available Proposition 98 funding for ongoing purposes.
Availability of State Budgets. The complete 2015-16 State Budget and 2016-17 Proposed State Budget are available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated in this Official Statement by such reference. The information referred to above should not be relied upon in making an investment decision with respect to the Bonds.
Uncertainty Regarding Future State Budgets. The District cannot predict what actions will be taken in future years by the State Legislature and the Governor to address the State’s current or future budget deficits. Future State budgets will be affected by national and state economic conditions and other factors over which the District has no control. The District cannot predict what impact any future budget proposals will have on the financial condition of the District. To the extent that the State budget process results in reduced revenues to the District, the District will be required to make adjustments to its budgets.
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The State has not entered into any contractual commitment with the District, the County, or the Owners of the Bonds to provide State budget information to the District or the owners of the Bonds. Although they believe the State sources of information listed above are reliable, neither the District nor the Underwriter assumes any responsibility for the accuracy of the State Budget information set forth or referred to in this Official Statement or incorporated herein. However, the Bonds are secured by ad valorem taxes levied and collected on taxable property in the District, without limit as to rate or amount, and are not secured by a pledge of revenues of the District or its general fund.
Legal Challenges to State Funding of Education
The application of Proposition 98 and other statutory regulations has been the subject of various legal challenges in the past. The District cannot predict if or when there will be changes to education funding or legal challenges which may arise relating thereto.
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CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS
Principal of and interest on the Bonds is payable from the proceeds of an ad valorem tax levied by the County for the payment thereof. Articles XIIIA, XIIIB, XIIIC, and XIIID of the State Constitution, Propositions 62, 98, 111 and 218, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the District to levy taxes for payment of the Bonds. The tax levied by the County for payment of the Refunded Bonds and thus the Bonds was approved by the District's voters in compliance with Article XIIIA and all applicable laws.
Constitutionally Required Funding of Education
The State Constitution requires that from all State revenues, there shall be first set apart the moneys to be applied by the State for the support of the public school system and public institutions of higher education. School districts receive a significant portion of their funding from State appropriations. As a result, decreases and increases in State revenues can significantly affect appropriations made by the State Legislature to school districts.
Article XIIIA of the California Constitution
Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness (which provided the authority for the issuance of the Refunded Bonds), and (iii) (as a result of an amendment to Article XIIIA approved by State voters on November 7, 2000) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.
Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA.
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Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.
Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.
Inflationary Adjustment of Assessed Valuation. As described above, the assessed value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Orange County Superior Court, in County of Orange v. Orange County Assessment Appeals Board No. 3, held that where a home’s taxable value did not increase for two years, due to a flat real estate market, the Orange County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year’s assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court. The petition has been denied by the California Supreme Court. As a result of this litigation, the “recapture” provision described above may continue to be employed in determining the full cash value of property for property tax purposes.
Article XIIIB of the California Constitution
Article XIIIB (“Article XIIIB”) of the State Constitution, as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the 1986-87 fiscal year adjusted for the changes made from that fiscal year under the provisions of Article XIIIB, as amended.
The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.
Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from
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certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products.
Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. However, in the event that a school district’s revenues exceed its spending limit, the district may in any fiscal year increase its appropriations limit to equal its spending by borrowing appropriations limit from the State.
Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund under Section 8.5 of Article XVI of the State Constitution.
Unitary Property
Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions (“unitary property”). Under the State Constitution, such property is assessed by the State Board of Equalization (“SBE”) as part of a “going concern” rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year.
Articles XIIIC and XIIID of the California Constitution
On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the “Right to Vote on Taxes Act.” Proposition 218 added to the California Constitution Articles XIIIC and XIIID (respectively, “Article XIIIC” and “Article XIIID”), which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges.
According to the “Title and Summary” of Proposition 218 prepared by the California Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4.
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On November 2, 2010, Proposition 26 was approved by State voters, which amended Article XIIIC to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.
Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.
While the provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District (thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District), the District does not believe that Proposition 218 will directly impact the revenues available to pay debt service on the Bonds.
Proposition 98
On November 8, 1988, California voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. The Accountability Act changes State funding of public education below the university level and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as “K-14 school districts”) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in 1986-87, and (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one- year period.
The Accountability Act also changes how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount
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would, instead of being returned to taxpayers, be transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K 14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to K 14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act.
Proposition 111
On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1) called the “Traffic Congestion Relief and Spending Limit Act of 1990” (“Proposition 111”) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation.
The most significant provisions of Proposition 111 are summarized as follows:
Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the “change in the cost of living” is now measured by the change in California per capita personal income. The definition of “change in population” specifies that a portion of the State’s spending limit is to be adjusted to reflect changes in school attendance.
Treatment of Excess Tax Revenues. “Excess” tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools’ minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts’ base expenditures for calculating their entitlement for State aid in the next year, and the State’s appropriations limit is not to be increased by this amount.
Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for “qualified capital outlay projects” as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, 1990. These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.
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Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Proposition 111 had been in effect.
School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues (the “first test”) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second test”). Under Proposition 111, schools will receive the greater of (1) the first test, (2) the second test, or (3) a third test, which will replace the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income (the “third test”). Under the third test, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a “credit” to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth.
Proposition 39
On November 7, 2000, California voters approved an amendment (commonly known as “Proposition 39”) to the California Constitution. This amendment (1) allows school facilities bond measures to be approved by 55 percent (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1 percent limit in order to repay the bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another Statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. The local school jurisdictions affected by this proposition are K-12 school districts, community college districts, including the District, and county offices of education. As noted above, the California Constitution previously limited property taxes to 1 percent of the value of property. Prior to the approval of Proposition 39, property taxes could only exceed this limit to pay for (1) any local government debts approved by the voters prior to July 1, 1978 or (2) bonds to acquire or improve real property that receive two-thirds voter approval after July 1, 1978.
The 55% vote requirement authorized by Proposition 39 applies only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55 percent of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for an elementary school district or high school district), or $25 (for a community college district), per $100,000 of taxable property value. These requirements are not part of this proposition and can
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be changed with a majority vote of both houses of the Legislature and approval by the Governor.
Proposition 1A and Proposition 22
On November 2, 2004, California voters approved Proposition 1A, which amended the State constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition 1A, the State cannot (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-thirds approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Under Proposition 1A, beginning, in 2008-09, the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amended the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.
Proposition 22, a constitutional initiative entitled the “Local Taxpayer, Public Safety, and Transportation Protection Act of 2010,” approved on November 2, 2010, superseded many of the provision of Proposition 1A. This initiative amends the State constitution to prohibit the legislature from diverting or shifting revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services. Under this proposition, the State is not allowed to take revenue derived from locally imposed taxes, such as hotel taxes, parcel taxes, utility taxes and sales taxes, and local public transit and transportation funds. Further, in the event that a local governmental agency sues the State alleging a violation of these provisions and wins, then the State must automatically appropriate the funds needed to pay that local government. This Proposition was intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes. Proposition 22 did not prevent the California State Legislature from dissolving State redevelopment agencies pursuant to AB 1X26, as confirmed by the decision of the California Supreme Court decision in California Redevelopment Association v. Matosantos (2011).
Because Proposition 22 reduces the State’s authority to use or reallocate certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget, such as reducing State spending or increasing State taxes, and school and college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State’s general fund.
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Proposition 30
Proposition 30 appeared on the November 6, 2012 statewide ballot as an initiated constitutional amendment (“Proposition 30”), and it was approved by State voters. Proposition 30 increased the State sales tax from 7.25 percent to 7.50 percent, increased personal income tax rates on higher income brackets for seven years, and temporarily imposed an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, 2016. Proposition 30 also imposed an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017. This excise tax is levied at a rate of 0.25% of the sales price of the property so purchased. For personal income taxes imposed beginning in the taxable year commencing January 1, 2012 and ending December 31, 2018, Proposition 30 increased the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $680,000 for joint filers).
The revenues generated from the temporary tax increases are included in the calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts. See “Proposition 98” and “Proposition 111” above. From an accounting perspective, the revenues generated from the temporary tax increases will be deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the “EPA”). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs.
California Senate Bill 222
Senate Bill 222 (“SB 222”) was signed by the California Governor on July 13, 2015 and became effective on January 1, 2016. SB 222 amended Section 15251 of the California Education Code and added Section 52515 to the California Government Code to provide that voter approved general obligation bonds which are secured by ad valorem tax collections are secured by a statutory lien on all revenues received pursuant to the levy and collection of the property tax imposed to service those bonds. Said lien shall attach automatically and is valid and binding from the time the bonds are executed and delivered. The lien is enforceable against the issuer, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any further act. The effect of SB 222 is the treatment of general obligation bonds as secured debt in bankruptcy due to the existence of a statutory lien.
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Future Initiatives and Other Statutes
Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 98, 22, 26, 30 and 39 were each adopted as measures that qualified for the ballot under the State’s initiative process. From time to time other initiative measures and legislation could be adopted further affecting District revenues or the District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District.
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APPENDIX C
DEMOGRAPHIC INFORMATION FOR THE CITY OF DALY CITY AND SAN MATEO COUNTY
The following information concerning the City of Daly City (the “City”) and San Mateo County (the “County”) is included only for the purpose of supplying general information regarding the area of the District. The Bonds are not a debt of the City, the County, the State of California (the “State”) or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor.
General Information
The City. The City is located in the County, approximately 25 miles south of San Francisco, and encompasses an area of approximately 4.5 square miles. The City was incorporated in 1925 and is a general law city pursuant to the California Government Code. The City has a Council-Manager form of government, with five elected Council members served by a full-time City Manager and staff. The City Council consists of a Mayor and four other Councilmembers. The Mayor is selected from among the sitting Councilmembers and serves a one-year term. Councilmembers are elected at-large for staggered four-year terms. The City Treasurer and City Clerk are also elected positions.
The County. The County is located on the California coast approximately 15 miles south of the City of San Francisco. The County is a major employment base, and is also accessible to the Daly City and Silicon Valley areas approximately 30 miles south via Interstate 280 or U.S. Highway 101. The County has an approximate total area of 741 square miles, of which 448 square miles is land and 293 square miles is water. It is the third-smallest county in California by land area.
The County was formed in 1856 after San Francisco County, one of the state's 18 original counties since California's statehood in 1850, was split apart. Until 1856, San Francisco's city limits extended west to Divisadero Street and Castro Street, and south to 20th Street. In response to the lawlessness and vigilantism that escalated rapidly between 1855 and 1856, the California government decided to divide the county. A straight line was then drawn across the tip of the San Francisco Peninsula just north of San Bruno Mountain; everything south of the line became the new San Mateo County.
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Population
The following table lists population estimates for the City, the County and the State of California for the last five calendar years, as of January 1.
CITY OF DALY CITY, SAN MATEO COUNTY AND STATE OF CALIFORNIA Population Estimates Calendar Years 2011 through 2015 as of January 1
2011 2012 2013 2014 2015 Atherton 6,890 6,871 6,900 6,921 6,935 Belmont 25,923 26,058 26,344 26,573 26,748 Brisbane 4,310 4,336 4,384 4,434 4,541 Burlingame 28,888 29,034 29,458 29,700 29,890 Colma 1,458 1,443 1,459 1,471 1,480 Daly City 101,442 102,286 103,458 105,141 105,810 East Palo Alto 28,247 28,395 28,706 28,949 29,137 Foster City 30,660 30,816 31,154 32,187 32,390 Half Moon Bay 11,373 11,449 11,593 11,727 12,051 Hillsborough 10,880 10,978 11,127 11,266 11,420 Menlo Park 32,201 32,433 32,715 32,913 33,273 Millbrae 21,625 22,191 22,432 22,617 22,898 Pacifica 37,367 37,562 37,988 38,315 38,551 Portola Valley 4,373 4,400 4,453 4,483 4,527 Redwood City 77,299 78,049 79,159 80,818 81,838 San Bruno 41,663 42,345 42,874 43,247 44,409 San Carlos 28,494 28,646 28,962 29,238 29,449 San Mateo 97,557 98,052 99,167 100,170 101,429 South San Francisco 63,827 64,145 65,198 65,749 66,193 Woodside 5,313 5,372 5,446 5,500 5,539 Balance Of County 62,582 62,932 63,670 64,216 64,615 Incorporated 659,790 664,861 672,977 681,419 688,508 County Total 722,372 727,793 736,647 745,635 753,123
Source: State Department of Finance estimates (as of January 1).
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Employment and Industry
The unemployment rate in the San Francisco-Redwood City-South San Francisco MD was 3.2% in January 2016, unchanged from a revised 3.2% in December 2015, and below the year-ago estimate of 4.0%. This compares with an unadjusted unemployment rate of 5.8% for California and 5.3% for the nation during the same period. The unemployment rate was 3.3% in San Francisco County, and 3.1% in San Mateo County.
The table below list employment by industry group for San Francisco and San Mateo Counties for the years 2011 to 2015.
SAN FRANCISCO-REDWOOD CITY-SOUTH SAN FRANCISCO MD (SAN FRANCISCO AND SAN MATEO COUNTIES) Annual Average Civilian Labor Force, Employment and Unemployment; Employment by Industry (March 2015 Benchmark)
2011 2012 2013 2014 2015 Civilian Labor Force (1) 894,700 923,500 940,000 963,400 990,000 Employment 824,400 862,100 889,600 922,000 955,000 Unemployment 70,300 61,400 50,400 41,400 34,900 Unemployment Rate 7.9% 6.6% 5.4% 4.3% 3.5% Wage and Salary Employment: (2) Agriculture 1,800 1,700 1,800 1,900 1,900 Mining and Logging 100 0 100 100 100 Construction 28,400 30,300 32,600 36,100 41,500 Manufacturing 34,400 34,000 34,700 35,600 35,700 Wholesale Trade 22,300 23,500 24,700 25,600 27,100 Retail Trade 73,700 75,700 77,500 79,600 81,500 Transportation, Warehousing, Utilities 34,900 36,500 38,700 39,700 40,600 Information 40,600 46,400 49,600 54,600 59,800 Finance and Insurance 49,100 49,500 50,300 51,300 53,100 Real Estate and Rental and Leasing 17,200 18,300 19,300 19,600 20,400 Professional and Business Services 195,800 214,200 228,000 243,900 261,100 Educational and Health Services 116,800 120,000 123,400 126,000 129,900 Leisure and Hospitality 115,000 121,500 125,700 131,100 135,800 Other Services 34,100 35,800 37,600 39,600 40,100 Federal Government 18,300 17,900 17,600 17,500 17,700 State Government 33,700 33,200 32,900 33,000 34,100 Local Government 68,300 68,400 68,400 70,200 72,600 Total, All Industries (3) 884,400 926,700 962,700 1,005,300 1,053,000
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department.
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Major Employers
The following table shows the major employers in the City as reported in its Comprehensive Annual Financial Report for the Year Ended June 30, 2015.
CITY OF DALY CITY Principal Employers
Number of Percent of Total Business Name Employees (1) Employment Seton Medical Center 1,326 9.6% Jefferson Elementary School District 706 5.1 City of Daly City 560 4.1 Jefferson High School District 500 3.6 Genesys Telecommunications Laboratory 500 3.6 Cow Palace 400 2.9 St. Francis Convalescent Pavilion 350 2.5 Target Stores - Serramonte 287 2.1 Pacific, Gas & Electric 278 2.0 Macy's 265 1.9 Subtotal: 5,172 37.5% Total Daly City Employment: 13,795 (2) --
(1) Includes both full-time and part-time employees. (2) Based on 2007 Economic Census - data updated only every 5 years Source: City of Daly City, Comprehensive Annual Financial Report, For The Fiscal Year Ended June 30, 2015.
The table below lists the major employers in the County as of March 2016, in alphabetical order. SAN MATEO COUNTY Major Employers
Employer Name Location Industry Electric Charging Station Menlo Park Research Service Electronic Arts Inc Redwood City Game Designers (Mfrs) Forced Dump Debris Box Svc Burlingame Garbage Collection Franklin Resources Inc San Mateo Asset Management Franklin Templeton Investments San Mateo Investments Gate Gourmet San Francisco Caterers Gilead Sciences Inc Foster City Biological Products (Mfrs) Guckenheimer Inc Redwood City Marketing Programs & Services Hyatt Regency-San Francisco Burlingame Hotels & Motels Kaiser Permanente Medical Ctr Redwood City Hospitals Kaiser Permanente Medical Ctr South San Francisco Hospitals Lpch Menlo Park Health Care Facilities Motif Inc San Mateo Business Services NEC Oracle Corp Redwood City Computer Software-Manufacturers Peninsula Pathology Assoc Burlingame Physicians & Surgeons San Francisco Intl Airport-Sfo San Francisco Airports San Mateo County Behavior San Mateo Government Offices-County San Mateo Medical Ctr San Mateo Hospitals Sciex LLC Redwood City Scientific Apparatus & Instruments-Mfrs Seton Medical Ctr Daly City Hospitals SRI International Inc Menlo Park Research Service US Interior Dept Menlo Park Federal Government-Conservation Depts Visa Inc Foster City Credit Card & Other Credit Plans Visa International Svc Assn Foster City Credit Card-Merchant Services Visa USA Inc Foster City Credit Card & Other Credit Plans
Source: State of California Employment Development Department, extracted from the America's Labor Market Information System (ALMIS) Employer Database, 2016 1st Edition.
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Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”
The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2010 through 2014. Effective Buying Income data is not yet available for the calendar year 2015.
CITY OF DALY CITY, SAN MATEO COUNTY, STATE OF CALIFORNIA AND UNITED STATES Effective Buying Income As of January 1, 2010 through 2014
Total Effective Median Household Buying Income Effective Year Area (000s Omitted) Buying Income 2010 City of Daly City $2,089,628 $58,758 San Mateo County 23,489,013 66,508 California 801,393,028 47,177 United States 6,365,020,076 41,368
2011 City of Daly City $2,207,598 $59,235 San Mateo County 23,717,578 66,434 California 814,578,458 47,062 United States 6,438,704,664 41,253
2012 City of Daly City $2,229,835 $59,596 San Mateo County 26,570,648 68,429 California 864,088,828 47,307 United States 6,737,867,730 41,358
2013 City of Daly City $2,434,293 $62,027 San Mateo County 26,846,688 70,427 California 858,676,636 48,340 United States 6,982,757,379 43,715
2014 City of Daly City $2,508,778 $62,903 San Mateo County 28,257,708 72,165 California 901,189,699 50,072 United States 7,357,153,421 45,448
Source: The Nielsen Company (US), Inc.
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Commercial Activity
Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables. Figures are not yet available for calendar year 2014 or 2015.
Total taxable sales during the first three quarters of calendar year 2014 in the City were reported to be $698.5 million, a 1.07% increase over the total taxable sales of $691.1 million reported during the first three quarters of calendar year 2013.
CITY OF DALY CITY Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2009 897 $709,017 1,310 $774,360 2010 970 725,488 1,378 786,034 2011 982 782,617 1,383 844,326 2012 983 857,861 1,372 924,908 2013 1,057 885,371 1,437 953,203
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
Total taxable sales during the first three quarters of calendar year 2014 in the County were reported to be $11.1 billion, a 5.67% increase over the total taxable sales of $10.5 billion reported during the first three quarters of calendar year 2013.
SAN MATEO COUNTY Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2009 11,143 $7,455,767 18,840 $11,327,022 2010 11,340 7,846,274 18,979 11,966,338 2011 11,470 8,536,043 18,995 13,020,643 2012 11,748 9,277,144 19,189 13,906,978 2013 12,438 9,935,641 19,808 14,611,618
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
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Construction Activity
Provided below are the building permits and valuations for the City and the County for calendar years 2010 through 2014. Annual figures are not yet available for calendar year 2015.
CITY OF DALY CITY Total Building Permit Valuations (Valuations in Thousands)
2010 2011 2012 2013 2014 Permit Valuation New Single-family $2,484.2 $3,464.1 $2,188.8 $436.9 $5,606.8 New Multi-family 6,257.4 7,149.1 2,357.8 1,216.7 -- Res. Alterations/Additions 13,546.0 10,611.6 8,854.4 12,770.1 12,394.2 Total Residential 22,287.6 21,224.8 13,401.0 14,423.7 18,001.0
New Commercial -- -- 252.1 4,118.5 2,164.0 New Industrial -- -- 23.4 -- -- New Other 1,376.6 52.0 0.0 246.5 1,348.3 Com. Alterations/Additions 14,225.6 6,810.9 5,751.1 14,703.8 13,298.9 Total Nonresidential 15,602.2 6,862.9 6,026.6 19,068.7 16,811.2
New Dwelling Units Single Family 5 8 5 1 14 Multiple Family 36 40 13 7 -- TOTAL 41 48 18 8 14
Source: Construction Industry Research Board, Building Permit Summary.
SAN MATEO COUNTY Total Building Permit Valuations (Valuations in Thousands)
2010 2011 2012 2013 2014 Permit Valuation New Single-family $189,296.6 $194,950.1 $245,163.9 $292,893.4 $289,903.2 New Multi-family 21,309.0 107,040.0 171,390.4 151,019.5 168,859.5 Res. Alterations/Additions 262,592.1 289,619.5 201,543.1 299,830.5 348,231.2 Total Residential 473,197.6 591,609.6 618,097.4 743,743.4 806,993.9
New Commercial 62,510.5 28,247.6 83,374.0 165,578.7 413,462.8 New Industrial 0.0 3,359.4 2,021.6 15,724.2 9,600.0 New Other 66,274.8 26,029.4 1,975.6 58,726.5 103,363.4 Com. Alterations/Additions 283,752.5 244,089.0 167,438.8 263,460.8 490,364.6 Total Nonresidential 412,537.8 301,725.4 254,810.0 503,490.1 1,016,790.8
New Dwelling Units Single Family 216 213 264 350 315 Multiple Family 111 545 671 840 1,302 TOTAL 327 758 935 1,190 1,617
Source: Construction Industry Research Board, Building Permit Summary.
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Transportation
San Francisco International Airport (“SFO”), the “gateway to the Pacific,” is a world-class airport serving tens of millions of domestic and international passengers annually. One of the world’s 30 busiest airports, SFO is committed to setting the standard for our industry. This includes being a leader in safety and security, customer service and satisfaction, community relations, environmental commitment, quality of facilities, and financial and economic vitality. SFO was the first major U.S. airport to achieve 100 percent fully automated and integrated baggage screening. Today, efficient operations ensure that passenger screening wait times are among the shortest in the nation.
The Port of Redwood City is also located in the County. The Port has a deep-water channel and handles bulk cargo including lumber and scrap metal.
The County is connected to downtown San Francisco, the Airport, and the East Bay by the San Francisco Bay Area Rapid Transit (“BART”) District.
The County is also served by Caltrain, a commuter rail service between Daly City and San Francisco, running along the Southern Pacific right-of-way.
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APPENDIX D
FORM OF OPINIONS OF BOND COUNSEL
FINAL APPROVING OPINION FOR 2012C BONDS
May 17, 2016
Board of Trustees Jefferson Union High School District 699 Serramonte Boulevard, Suite 100 Daly City, California 94015
OPINION: $4,860,000 Jefferson Union High School District (San Mateo County, California) General Obligation Bonds, 2012 Election, Series C (GO Reauthorization Bonds®)
Members of the Board of Trustees:
We have acted as bond counsel to the Jefferson Union High School District (the “District”) in connection with the issuance by the District of its Jefferson Union High School District (San Mateo County, California) General Obligation Bonds 2012 Election, Series C (GO Reauthorization Bonds®), dated the date hereof (the “Bonds”), under the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the “Bond Law”) and under Resolution No. 2015-16/13 adopted by the Board of Trustees of the District on April 19, 2016 (the “Bond Resolution”). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Bond Resolution and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The District is duly established and validly existing as a high school district with the power to issue the Bonds and to perform its obligations under the Bond Resolution.
2. The Bond Resolution has been duly adopted by the Board of Trustees of the District and constitutes a valid and binding obligation of the District enforceable against the District in accordance with its terms.
3. The Bonds have been duly issued and sold by the District and are valid and binding general obligations of the District, and the County of San Mateo is obligated to levy ad valorem
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taxes for the payment of the Bonds and the interest thereon upon all property within the District subject to taxation by the District, without limitation as to rate or amount.
4. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.
The rights of the owners of the Bonds and the enforceability of the Bonds and the Bond Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases.
Respectfully submitted,
Jones Hall, A Professional Law Corporation
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FINAL APPROVING OPINION FOR 2014A BONDS
May 17, 2016
Board of Trustees Jefferson Union High School District 699 Serramonte Boulevard, Suite 100 Daly City, California 94015
OPINION: $30,000,000 Jefferson Union High School District (San Mateo County, California) General Obligation Bonds, 2014 Election, Series A
Members of the Board of Trustees:
We have acted as bond counsel to the Jefferson Union High School District (the “District”) in connection with the issuance by the District of its Jefferson Union High School District (San Mateo County, California) General Obligation Bonds, 2014 Election, Series A, dated the date hereof (the “Bonds”), under the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the “Bond Law”) and under Resolution No. 2015-16/14 adopted by the Board of Trustees of the District on April 19, 2016 (the “Bond Resolution”). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Bond Resolution and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The District is duly established and validly existing as a high school district with the power to issue the Bonds and to perform its obligations under the Bond Resolution.
2. The Bond Resolution has been duly adopted by the Board of Trustees of the District and constitute a valid and binding obligation of the District enforceable against the District in accordance with its terms.
3. The Bonds have been duly issued and sold by the District and are valid and binding general obligations of the District, and the County of San Mateo is obligated to levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the District subject to taxation by the District, without limitation as to rate or amount.
4. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose
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of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.
The rights of the owners of the Bonds and the enforceability of the Bonds and the Bond Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases.
Respectfully submitted,
Jones Hall, A Professional Law Corporation
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APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
$4,860,000 $30,000,000 JEFFERSON UNION HIGH SCHOOL DISTRICT JEFFERSON UNION HIGH SCHOOL DISTRICT (San Mateo County, California) (San Mateo County, California) General Obligation Bonds General Obligation Bonds 2012 Election, Series C 2014 Election, Series A (GO Reauthorization Bonds®)
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the Jefferson Union High School District (the “District”) in connection with the issuance of the above-captioned bonds (together, the “Bonds”). The Bonds are being issued under resolutions adopted by the Board of Trustees of the District on April 19, 2016 (the “Bond Resolutions”). The District covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2- 12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4.
“Dissemination Agent” means, initially Dale Scott & Company, Inc., or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.
“Listed Events” means any of the events listed in Section 5(a).
“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.
“Participating Underwriter” means any of the original purchasers of the Bonds required to comply with the Rule in connection with offering of the Bonds.
“Rule” means 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.
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Section 3. Provision of Annual Reports.
(a) The District shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 31, 2017 with the report for the 2015-16 fiscal year, provide to the MSRB in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the District hereunder.
(b) If the District does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A, with a copy to the Paying Agent and Participating Underwriter.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then- applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.
Section 4. Content of Annual Reports. The District’s Annual Report shall contain or incorporate by reference the following:
(a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, the following information with respect to the most recently completed fiscal year, as follows:
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(i) total assessed valuation of taxable properties in the District;
(ii) total assessed valuation of taxable properties of the top twenty taxpayers in the District;
(iii) property tax collection delinquencies for the District, but only if ad valorem taxes for general obligation bonds are not collected on the County’s Teeter Plan and such information is available from the County at the time of filing the Annual Report; and
(iv) the District’s most recently adopted budget or interim report available at the time of filing the Annual Report.
(c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
(d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission.
Section 5. Reporting of Significant Events.
(a) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds:
(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 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 security, or other material events affecting the tax status of the security. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if material.
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(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. (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Bond Resolution.
(c) The District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that District determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the District obtains knowledge of the occurrence of any of these Listed Events, the District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the District will cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above 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 United States 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. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).
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Section 8. 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 Agent, with or without appointing a successor Dissemination Agent.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized 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 proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Bond Resolution for amendments to the Bond Resolution with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(b).
Section 10. Additional Information. Nothing herein prevents the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
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Section 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Bond Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 13. Beneficiaries. This Disclosure Certificate inures solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and creates no rights in any other person or entity.
Dated: May 17, 2016 JEFFERSON UNION HIGH SCHOOL DISTRICT
By: Assistant Superintendent, Business Services
Acceptance of Duties as Dissemination Agent:
Dale Scott & Co., Inc.
By: Authorized Officer
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EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Obligor: Jefferson Union High School District
Name of Bond Issue: $4,860,000 Jefferson Union High School District (San Mateo County, California) General Obligation Bonds, 2012 Election, Series C (GO Reauthorization Bonds®)
and
$30,000,000 Jefferson Union High School District (San Mateo County, California) 2014 Election, Series A
Date of Issuance: May 17, 2016
NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.05 of the resolution adopted by the Board of Trustees of the District authorizing the issuance of the Bonds. The District anticipates that the Annual Report will be filed by ______.
Dated:
DALE SCOTT & CO., INC., as Dissemination Agent
By: Authorized Officer cc: Jefferson Union High School District
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APPENDIX F
BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.
Neither the District nor the Paying Agent take any responsibility for the information contained in this Section.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) Bonds representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (in this Appendix, 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, in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the 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
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dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.
3. 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 Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
4. 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 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.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment 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 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 registrar and request that copies of the notices be provided directly to them.
6. Redemption notices will 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.
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI
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Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and interest payments on the Bonds 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 District or 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 nor its nominee, Paying Agent, or District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to District or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered.
10. 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, Bond certificates will be printed and delivered to DTC.
11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that District believes to be reliable, but District takes no responsibility for the accuracy thereof.
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APPENDIX G
SAN MATEO COUNTY INVESTMENT POLICY AND INVESTMENT REPORT
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APPENDIX H
SPECIMEN MUNICIPAL BOND INSURANCE POLICY FOR 2014A BONDS
H-1 f\SSURED GUARANTYe MUNICIPAL BOND MUNICIPAL INSURANCE POLICY
ISSUER: Policy No: -N
BONDS: $ in aggregate principal amount of Effective Date: Premium: $
ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.
On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy.
Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the Page 2 of 2 Policy No. -N
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.
AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.
To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy.
This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer.
ASSURED GUARANTY MUNICIPAL CORP.
By Authorized Officer
A subsidiary of Assured Guaranty Municipal Holdings Inc. 31 West 52nd Street, New York, N.Y. 10019 (212) 974-0100
Form 500NY (5/90)