SECOND SUPPLEMENT to the PRELIMINARY OFFICIAL STATEMENT Relating to This Second Supplement to the Preliminary Official Statement

SECOND SUPPLEMENT TO THE PRELIMINARY OFFICIAL STATEMENT relating to $4,250,000 FAIRFAX ELEMENTARY SCHOOL DISTRICT (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable)

This Second Supplement to the Preliminary Official Statement (this “Supplement”), provides information in connection with the sale of the above-captioned refunding bonds (the “Bonds”) and supplements the Preliminary Official Statement of the Fairfax Elementary School District, dated August 26, 2020, as supplemented by the Supplement to the Preliminary Official Statement dated August 27, 2020 (collectively, the “Preliminary Official Statement”), relating to the Bonds. All persons in possession of the Preliminary Official Statement are requested to permanently insert this Supplement inside the front cover of, or otherwise attached this Supplement to, the Preliminary Official Statement. All terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Preliminary Official Statement.

1. The following paragraph shall be added at page C-4 of the Preliminary Official Statement, to follow paragraph 7 of subsection (b) of Section 5 of the Form of Continuing Disclosure Certificate in Appendix C:

8. incurrence of a Financial Obligation, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation, any of which affect Bondowners.

Dated: August 31, 2020

 Preliminary, subject to change. 1 4821-7564-8201v2/200530-0005 [THIS PAGE INTENTIONALLY LEFT BLANK]

SUPPLEMENT TO THE PRELIMINARY OFFICIAL STATEMENT relating to $4,250,000* FAIRFAX ELEMENTARY SCHOOL DISTRICT (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable)

This Supplement to the Preliminary Official Statement (this “Supplement”), provides information in connection with the sale of the above-captioned refunding bonds (the “Bonds”) and supplements the Preliminary Official Statement of the Fairfax Elementary School District, dated August 26, 2020 (the “Preliminary Official Statement”), relating to the Bonds. All persons in possession of the Preliminary Official Statement are requested to permanently insert this Supplement inside the front cover of, or otherwise attached this Supplement to, the Preliminary Official Statement. All terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Preliminary Official Statement.

1. On the front cover page of the Preliminary Official Statement, under “RATING,” the rating on the Bonds shall be modified to read as follows:

“RATING: Standard & Poor’s: “A+””

2. The entire Section beginning on page 75 of the Preliminary Official Statement, under the heading “MISCELLANEOUS - Rating” shall be replaced in its entirety with the following:

“Rating

The Bonds have been assigned a rating of “A+” by S&P. The rating reflects only the views of S&P, and any explanation of the significance of such rating should be obtained therefrom. There is no assurance that the rating will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the rating obtained may have an adverse effect on the market price of the Bonds.

The ratings reflect only the view of the rating agency, and any explanation of the significance of such rating should be obtained from the rating agency at the following address: S&P, 55 Water Street, 45th Floor, New York, New York 10041. There is no assurance that the rating will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by the rating agency if, in the judgment of the rating agency, circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the rating obtained may have an adverse effect on the market price of the Bonds.

Generally, rating agencies base their ratings on information and materials furnished to them (which may include information and material from the District which is not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies.

on the Bonds may be publicly available from the rating agency prior to such information being provided to the District and prior to the date the District is obligated to file a notice of rating change on EMMA. Purchasers of the Bonds are directed to the rating agency and its website and official media outlets for the most current rating changes with respect to the Bonds after the initial issuance of the Bonds.”

Dated: August 27, 2020

FAIRFAX ELEMENTARY SCHOOL DISTRICT

By: /s/ Michael Coleman Superintendent

______* Preliminary, subject to change.

PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 26, 2020 NEW ISSUE—FULL BOOK-ENTRY RATING: Standard & Poor’s: “___” (See “MISCELLANEOUS – Rating” herein) In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See “TAX constitute constitute an offer to MATTERS” herein with respect to tax consequences relating to the Bonds.

$4,250,000* FAIRFAX ELEMENTARY SCHOOL DISTRICT (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable) ties may not be sold, nor may offers to buy Dated: Dated Date Due: November 1, as shown herein h offer, solicitation or sale would be unlawful. iminary Official Statement This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used but not otherwise defined on this cover page shall have the meanings assigned to such terms herein.

The Fairfax Elementary School District (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable) (the “Bonds”), are being issued by the Fairfax Elementary School District (the “District”) to (i) advance refund certain of the District’s Prior Bonds (as defined herein) and (ii) pay the costs of issuing the Bonds.

The Bonds are general obligations of the District payable solely from ad valorem property taxes. The Board of Supervisors of Kern County is empowered and obligated to levy ad valorem property taxes, without limitation as to rate or amount, upon all property on or amendment. These securi within the District subject to taxation thereby (except certain personal property which is taxable at limited rates), for the payment of principal of and interest on the Bonds when due.

The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for The Depository Trust Company, New York, New York (collectively referred to herein as “DTC”). Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interest in the Bonds but will instead receive credit balances on the bonds of their respective nominees. See “THE BONDS – Book-Entry Only System” herein.

The Bonds will be dated as of their date of initial delivery (the “Dated Date”) and will be issued as current interest bonds, such that interest thereon will accrue from the Dated Date and be payable semiannually on May 1 and November 1 of each year, commencing November 1, 2020. The Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof.

ed ed herein are subject to completi Payments of principal of and interest on the Bonds will be made by the designated Paying Agent, to DTC for subsequent elivered elivered in final form. Under no circumstances shall this Prel

any sale of, these securities in any disbursement jurisdiction in which suc to DTC Participants (as defined herein) who will remit such payments to the Beneficial Owners of the Bonds. U.S. Bank National Association has been appointed as Paying Agent for the Bonds. See “THE BONDS – Book-Entry Only System” herein.

The District has applied for municipal bond insurance for the scheduled payment of principal of and interest on the Bonds when due which, if purchased, would be issued concurrently with the delivery of the Bonds.

The Bonds are subject to optional and mandatory sinking fund redemption as further described herein.* See “THE BONDS – Redemption” herein.

nt and the information contain Maturity Schedule me the Official Statement is d (see inside front cover page)

Pursuant to the terms of a public sale on September__, 2020, the Bonds were awarded to the Underwriter at a True-Interest Cost of ______%. The Bonds are being offered when, as and if issued and received by the Underwriter, subject to the approval of legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel. The Bonds, in book-entry form, will be available through the facilities of The Depository Trust Company in New York, New York, on or about September 16, 2020.*

Dated: ______, 2020. ______them them be accepted, prior to the ti sell sell or the solicitation of an offer to buy, nor shall there be This Preliminary Official Stateme * Preliminary, subject to change.

MATURITY SCHEDULE

$4,250,000* FAIRFAX ELEMENTARY SCHOOL DISTRICT (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable)

Base CUSIP(†): 30377Q

$______Serial Bonds Maturity Principal (November 1) Amount Interest Rate Yield CUSIP(†)

$______– ______% Term Bonds due November 1, 20___ – Yield ____%(1); CUSIP(†):

* Preliminary, subject to change. (1) Yield to call at par on November 1, 2030*. (†) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services (“CGS”), managed by S&P Capital IQ on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. None of the Underwriter, the Municipal Advisor or the District is responsible for the selection or correctness of the CUSIP numbers set forth herein. CUSIP numbers have been assigned by an independent company not affiliated with the District, the Municipal Advisor or the Underwriter and are included solely for the convenience of the registered owners of the applicable Bonds. None of the District, the Municipal Advisor or the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

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

The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

The information set forth herein, other than that provided by the District, has been obtained from sources which are believed to be reliable, but 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.

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 in this Official Statement, 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.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN SECURITIES DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

The District maintains a website. However, the information presented on the District’s website is not incorporated into this Official Statement by any reference, and should not be relied upon in making investment decisions with respect to the Bonds.

FAIRFAX ELEMENTARY SCHOOL DISTRICT

BOARD OF TRUSTEES

Javier Moreno, President Victoria Coronel, Clerk Virginia Lawson, Member Palmer Moland, Member Alma Rios, Member

DISTRICT ADMINISTRATION

Michael Coleman, Superintendent Lora Brown, Assistant Superintendent, Educational Services Jonathan Medina, Director of Fiscal Services

PROFESSIONAL SERVICES

MUNICIPAL ADVISOR

Fieldman, Rolapp & Associates, Inc. Irvine, California

BOND COUNSEL AND DISCLOSURE COUNSEL

Stradling Yocca Carlson & Rauth, a Professional Corporation San Francisco, California

PAYING AGENT AND ESCROW AGENT

U.S. Bank National Association, Los Angeles, California

VERIFICATION AGENT

Causey Demgen & Moore, P.C. Denver, Colorado

TABLE OF CONTENTS Page

INTRODUCTION ...... 1 GENERAL ...... 1 PURPOSES OF THE BONDS ...... 1 AUTHORITY FOR ISSUANCE OF THE BONDS ...... 2 SOURCES OF PAYMENT FOR THE BONDS ...... 2 DESCRIPTION OF THE BONDS ...... 2 TAX MATTERS ...... 3 OFFERING AND DELIVERY OF THE BONDS ...... 3 BOND OWNER’S RISKS ...... 3 CONTINUING DISCLOSURE ...... 4 PROFESSIONALS INVOLVED IN THE OFFERING ...... 4 OTHER INFORMATION ...... 4 THE BONDS ...... 5 AUTHORITY FOR ISSUANCE ...... 5 SECURITY AND SOURCES OF PAYMENT ...... 5 STATUTORY LIEN ...... 6 GENERAL PROVISIONS ...... 6 ANNUAL DEBT SERVICE ...... 7 REDEMPTION ...... 7 BOOK-ENTRY ONLY SYSTEM ...... 10 DISCONTINUATION OF BOOK-ENTRY ONLY SYSTEM; REGISTRATION, EXCHANGE AND TRANSFER OF BONDS ...... 12 DEFEASANCE ...... 13 REFUNDING PLAN ...... 14 ESTIMATED SOURCES AND USES OF FUNDS ...... 15 TAX BASE FOR REPAYMENT OF BONDS ...... 15 AD VALOREM PROPERTY TAXATION ...... 15 ASSESSED VALUATIONS ...... 17 APPEALS AND ADJUSTMENTS OF ASSESSED VALUATIONS ...... 17 ASSESSED VALUATION OF SINGLE FAMILY HOMES ...... 19 ASSESSED VALUATION AND PARCELS BY LAND USE ...... 20 ASSESSED VALUATION BY JURISDICTION ...... 20 TAX LEVIES, COLLECTIONS AND DELINQUENCIES ...... 21 ALTERNATIVE METHOD OF TAX APPORTIONMENT - “TEETER PLAN” ...... 22 TAX RATES ...... 23 PRINCIPAL TAXPAYERS ...... 24 STATEMENT OF DIRECT AND OVERLAPPING DEBT ...... 25 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ...... 27 ARTICLE XIIIA OF THE CALIFORNIA CONSTITUTION ...... 27 LEGISLATION IMPLEMENTING ARTICLE XIIIA ...... 28 PROPOSITION 50 AND PROPOSITION 171...... 29 UNITARY PROPERTY ...... 30 ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION ...... 30 ARTICLE XIIIC AND ARTICLE XIIID OF THE CALIFORNIA CONSTITUTION ...... 31 PROPOSITION 26 ...... 31 PROPOSITIONS 98 AND 111 ...... 32 PROPOSITION 39 ...... 33 PROPOSITION 1A AND PROPOSITION 22 ...... 34 JARVIS VS. CONNELL ...... 35 PROPOSITIONS 30 AND 55 ...... 35 i

TABLE OF CONTENTS (cont'd) Page

PROPOSITION 2 ...... 36 PROPOSITION 51 ...... 37 FUTURE INITIATIVES ...... 38 DISTRICT FINANCIAL INFORMATION ...... 39 STATE FUNDING OF EDUCATION ...... 39 OTHER REVENUE SOURCES ...... 42 CONSIDERATIONS REGARDING COVID-19 ...... 43 STATE DISSOLUTION OF REDEVELOPMENT AGENCIES ...... 46 BUDGET PROCESS ...... 47 ACCOUNTING PRACTICES ...... 50 COMPARATIVE FINANCIAL STATEMENTS ...... 50 STATE BUDGET MEASURES ...... 51 FAIRFAX ELEMENTARY SCHOOL DISTRICT ...... 55 INTRODUCTION ...... 55 ADMINISTRATION ...... 56 LABOR RELATIONS ...... 56 DISTRICT RETIREMENT SYSTEMS ...... 57 SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN ...... 65 OTHER POST-EMPLOYMENT BENEFITS...... 66 JOINT POWERS AUTHORITIES ...... 67 DISTRICT DEBT STRUCTURE ...... 68 TAX MATTERS ...... 72 LIMITATION ON REMEDIES; BANKRUPTCY ...... 72 LEGAL MATTERS ...... 74 LEGALITY FOR INVESTMENT IN CALIFORNIA ...... 74 EXPANDED REPORTING REQUIREMENTS ...... 74 CONTINUING DISCLOSURE ...... 74 ESCROW VERIFICATION ...... 75 NO LITIGATION ...... 75 FINANCIAL STATEMENTS ...... 75 LEGAL OPINION ...... 75 MISCELLANEOUS ...... 75 RATING ...... 75 UNDERWRITING ...... 76 ADDITIONAL INFORMATION ...... 76

APPENDIX A – FORM OF OPINION OF BOND COUNSEL ...... A-1 APPENDIX B – 2018-19 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT ...... B-1 APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE ...... C-1 APPENDIX D – GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF BAKERSFIELD AND KERN COUNTY ...... D-1 APPENDIX E – KERN COUNTY POOLED CASH PORTFOLIO REPORT AND TREASURER’S STATEMENT OF INVESTMENT POLICY ...... E-1

$4,250,000* FAIRFAX ELEMENTARY SCHOOL DISTRICT (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable)

INTRODUCTION

This Official Statement, which includes the cover page, inside cover page and appendices hereto, provides information in connection with the sale of the Fairfax Elementary School District (Kern County, California) 2020 General Obligation Refunding Bonds (Federally Taxable) (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, inside 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.

General

The Fairfax Elementary School District (the “District”) is an elementary school district organized under the laws of the State of California (the “State”). The District was established in 1891, and encompasses an area of approximately 14 square miles in the County of Kern (the “County”), and is located approximately five miles west of downtown Bakersfield. The District provides elementary school facilities for grades kindergarten through eight and currently maintains four schools. For fiscal year 2020-21, the District’s budgeted average daily attendance (“ADA”) is approximately 2,600 students, and the taxable property within the District has an assessed valuation of $1,130,634,704. However, the District’s actual student attendance and the assessed value of taxable property may be affected by the current outbreak of COVID-19. The District opened the 2020-21 school year utilizing a distance learning environment, and will continue such a learning environment at least through October, 2020. See “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein.

The District is governed by a five-member Board of Trustees (the “Board”), each member of which is elected to a four-year term. Elections for positions on the Board are held every two years, alternating between two and three available positions. The management and policies of the District are administered by a Superintendent appointed by the Board who is responsible for day-to-day District operations as well as the supervision of the District’s other key personnel. Michael Coleman is currently the District’s Superintendent.

For more information regarding the District generally, see “DISTRICT FINANCIAL INFORMATION” and “FAIRFAX ELEMENTARY SCHOOL DISTRICT,” herein and for more information regarding the District’s assessed valuation, see “TAX BASE FOR REPAYMENT OF BONDS” herein.

Purposes of the Bonds

The Bonds are being issued by the District to (i) advance refund certain of the District’s outstanding General Obligation Bonds, Election of 2010, Series 2011 (County of Kern) (Bank Qualified) (the “Prior Bonds”), and (ii) pay the costs of issuance thereof.

* Preliminary, subject to change. 1

See “THE BONDS – Application and Investment of Bond Proceeds” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

Authority for Issuance of the Bonds

The Bonds are issued pursuant to certain provisions of the State of California Government Code and pursuant to the Resolution. See “THE BONDS – Authority for Issuance” herein.

Sources of Payment for the Bonds

The Bonds are general obligations of the District payable solely from ad valorem property taxes. The Board of Supervisors of the County is empowered and obligated to levy such ad valorem property taxes, without limitation as to rate or amount, upon all property within the District subject to taxation thereby (except certain personal property which is taxable at limited rates), for the payment of principal of and interest on the Bonds when due. See “THE BONDS – Security and Sources of Payment” and “TAX BASE FOR REPAYMENT OF BONDS” herein.

Description of the Bonds

Form and Registration. The Bonds will be issued in fully registered form only, without coupons. The Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (the “DTC”), who will act as securities depository for the Bonds. See “THE BONDS – General Provisions” and “THE BONDS – Book-Entry Only System” herein. Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interests in the Bonds purchased, but will instead receive credit balances on the books of their respective nominees. In the event that the book-entry only system described below is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the Resolution (as defined herein). See “THE BONDS – Discontinuation of Book-Entry Only System; Registration, Payment and Transfer of Bonds” herein.

So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the “Owners,” “Bondowners” or “Holders” of the Bonds (other than under the caption “TAX MATTERS” and in APPENDIX A) will mean Cede & Co. and will not mean the Beneficial Owners of the Bonds.

Denominations. Individual purchases of interests in the Bonds will be available to purchasers of the Bonds in the denominations of $5,000 principal amount, or any integral multiple thereof.

Redemption.* The Bonds are subject to optional and mandatory sinking fund redemption prior to their stated maturity dates as further described herein. See “THE BONDS – Redemption” herein.

Payments. The Bonds will be dated as of the date of their initial delivery (the “Dated Date”). Interest on the Bonds accrues from the Dated Date, and is payable semiannually on each May 1 and November 1, commencing November 1, 2020 (each, a “Bond Payment Date”). Principal of the Bonds is payable on November 1, in the amounts and years as shown on the inside cover page hereof. Payments of the principal of and interest on the Bonds will be made by the designated paying agent, registrar and transfer agent (the “Paying Agent”), to DTC for subsequent disbursement through DTC Participants (defined herein) to the Beneficial Owners of the Bonds. U.S. Bank National Association has been appointed as Paying Agent for the Bonds.

* Preliminary, subject to change. 2

Bond Insurance. The District has applied for municipal bond insurance for the scheduled payment of principal of and interest on the Bonds when due which, if purchased, would be issued concurrently with the delivery of the Bonds.

In the event of a default in the payment of principal of or interest on the Bonds, when all or some becomes due, any Owner of such Bonds may have a claim under any municipal bond insurance policy (each, a “Policy”) secured in connection with the Bonds. Such a Policy may not insure against redemption premium, if any, with respect to the Bonds.

In the event that the provider of such a Policy (an “Insurer”) is unable to make payments of principal of or interest on the Bonds, as such payments become due under a Policy, such Bonds will be payable solely as otherwise described herein. In the event that an Insurer becomes obligated to make payments with respect to the Bonds, no assurance can be given that such event would not adversely affect the market price of such Bonds or the marketability or liquidity of such Bonds.

If a Policy is obtained, the long-term ratings on the Bonds will be dependent in part on the financial strength of the Insurer providing such a Policy, and its claim paying ability. Such Insurer’s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of such an Insurer and of the ratings on the Bonds insured by such Insurer will not be subject to downgrade, and such event could adversely affect the market price of the Bonds, or the marketability or liquidity for such Bonds.

Neither the District, Municipal Advisor, nor Underwriter have made independent investigations into the claims paying ability of any potential Insurer and no assurance or representation regarding the financial strength or projected financial strength of any such Insurer is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the County to levy and collect sufficient ad valorem property taxes to pay principal and interest on the Bonds, and the claims paying ability of any such Insurer, particularly over the life of the investment.

Tax Matters

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel, based on existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California (the “State”) personal income tax. See “TAX MATTERS” herein.

Offering and Delivery of the Bonds

The Bonds are offered when, as and if issued, subject to approval as to their legality by Bond Counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through the facilities of DTC in New York, New York, on or about September 16, 2020.*

Bond Owner’s Risks

The Bonds are general obligations of the District payable solely from ad valorem property taxes which may be levied on all taxable property in the District, without limitation as to rate or amount (except with respect to certain personal property which is taxable at limited rates). For more complete

* Preliminary, subject to change. 3

information regarding the District’s financial condition and taxation of property within the District, and certain other considerations related thereto, see “TAX BASE FOR REPAYMENT OF BONDS,” “DISTRICT FINANCIAL INFORMATION”, “FAIRFAX ELEMENTARY SCHOOL DISTRICT” and “LIMITATION ON REMEDIES; BANKRUPTCY” herein.

Continuing Disclosure

The District has covenanted that it will comply with and carry out the provisions of that certain Continuing Disclosure Certificate relating to the Bonds. Pursuant thereto, the District will covenant for the benefit of the Owners and Beneficial Owners of the Bonds to make available certain financial information and operating data relating to the District and to provide notices of the occurrence of certain listed events, in compliance with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be made available and of the notices of listed events is summarized below under “LEGAL MATTERS – Continuing Disclosure” herein and “APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto.

Professionals Involved in the Offering

Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Bond Counsel and Disclosure Counsel to the District with respect to the Bonds. Fieldman, Rolapp & Associates, Inc., Irvine, California, is acting as municipal advisor to the District with respect to the Bonds. Stradling Yocca Carlson and Rauth and Fieldman, Rolapp & Associates, Inc. will each receive compensation from the District contingent upon the sale and delivery of the Bonds.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Bonds are available from the Fairfax Elementary School District, 1500 S. Fairfax Road, Bakersfield, California 93307, telephone: (661) 366-7221. The District may impose a charge for copying, mailing and handling.

No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the 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 such documents, statutes and constitutional provisions.

The information set forth herein, other than that provided by the District, has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, 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.

Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Resolution.

THE BONDS

Authority for Issuance

The Bonds are being issued pursuant to the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code, and pursuant to a resolution adopted by the Board on August 13, 2020 (the “Resolution”).

Security and Sources of Payment

The Bonds are general obligations of the District payable solely from ad valorem property taxes. The Board of Supervisors of the County is empowered and obligated to annually levy ad valorem property taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except certain personal property which is taxable at limited rates), for the payment of principal of and interest on the Bonds when due. The levy may include allowance for an annual reserve, established for the purpose of avoiding fluctuating tax levies. The County, however, is not obligated to establish such a reserve, and the District can make no representation that such reserve will be established by the County or that such a reserve, if previously established by the County, will be maintained in the future.

Such taxes will be levied annually in addition to all other taxes during the period that the Bonds are outstanding in an amount sufficient to pay the principal of and interest on the Bonds when due. Such taxes, when collected, will be placed by the County in the Debt Service Fund (as defined herein), which is required to be segregated and maintained by the County and which is designated for the payment of the Bonds, and interest thereon when due, and for no other purpose. Pursuant to the Resolution, the District has pledged funds on deposit in the Debt Service Fund to the payment of the Bonds. Although the County is obligated to levy ad valorem property taxes for the payment of the Bonds as described above, and will maintain the Debt Service Fund, none of the Bonds are a debt of the County.

The moneys in the Debt Service Fund, to the extent necessary to pay the principal of and interest on the Bonds as the same become due and payable, will be transferred to the Paying Agent. The Paying Agent will in turn remit the funds to DTC for remittance of such principal and interest to its Participants for subsequent disbursement to the Beneficial Owners of the Bonds.

The amount of the annual ad valorem property taxes 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 in any year. 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 general market decline in land values, disruption in financial markets that may reduce the availability of financing for purchasers of property, outbreak of disease, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused by a natural or manmade disaster, such as earthquake, flood, fire, wildfire, drought or toxic contamination, could cause a reduction in the assessed value of taxable property within the District and necessitate a corresponding increase in the annual tax rate. For further information 5

regarding the District’s assessed valuation, tax rates, overlapping debt, and other matters concerning taxation, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Article XIIIA of the California Constitution” and “TAX BASE FOR REPAYMENT OF BONDS – Assessed Valuations” herein. See also “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein.

Statutory Lien

Pursuant to Government Code Section 53515, the Bonds will be secured by a statutory lien on all revenues received pursuant to the levy and collection of ad valorem property taxes for the payment thereof. The lien automatically attaches, without further action or authorization by the Board, and is valid and binding from the time the Bonds are executed and delivered. The revenues received pursuant to the levy and collection of the ad valorem property tax will be immediately subject to the lien, and such lien will be enforceable against the District, its successor, transferees and creditors, and all other parties asserting rights therein, irrespective of whether such parties have notice of the lien and without the need for physical delivery, recordation, filing or further act.

This statutory lien, by its terms, secures not only the Bonds, but also any other bonds of the District issued after January 1, 2016 and payable, both as to principal and interest, from the proceeds of ad valorem property taxes that may be levied pursuant to paragraphs (2) and (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution. The statutory lien provision does not specify the relative priority of obligations so secured or a method of allocation in the event that the revenues received pursuant to the levy and collection of such ad valorem property taxes are insufficient to pay all amounts then due and owing that are secured by the statutory lien.

General Provisions

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. See “—Book-Entry Only System” herein. Beneficial Owners will not receive physical certificates representing their interest in the Bonds. The Bonds will be dated as of the Dated Date.

Interest on the Bonds accrues from the Dated Date and is payable semiannually on each Bond Payment Date, commencing November 1, 2020. Interest on the Bonds will be computed on the basis of a 360-day year of twelve, 30-day months. Each Bond will bear interest from the Bond Payment Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 16th day of the month next preceding any Bond Payment Date to that Bond Payment Date, inclusive, in which event it will bear interest from such Bond Payment Date, or unless it is authenticated on or before October 15, 2020, in which event it will bear interest from the Dated Date. The Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof, and mature on November 1, in the years and amounts set forth on the inside cover page hereof.

Payment. Payment of interest on any Bond on any Bond Payment Date will be made to the person appearing on the registration books of the Paying Agent as the registered Owner thereof as of the 15th day of the month immediately preceding such Bond Payment Date (the “Record Date”), such interest to be paid by wire transfer to the bank and account number on file with the Paying Agent as of the Record Date. The principal of and redemption premiums, if any, payable on the Bonds will be payable upon maturity upon surrender at the principal office of the Paying Agent. The principal of, and interest, and redemption premiums, if any, on the Bonds will be payable in lawful money of the United States of America. The Paying Agent is authorized to pay the Bonds when duly presented for payment at maturity, and to cancel all Bonds upon payment thereof. So long as the Bonds are held in the book-entry system of

DTC, all payments of principal of and interest on the Bonds will be made by the Paying Agent to Cede & Co. (as a nominee of DTC), as the registered owner of the Bonds.

Annual Debt Service

The following table displays the annual debt service requirements of the District for the Bonds (assuming no optional redemptions):

Year Ending Annual Principal Annual Interest Total Annual Debt (November 1) Payment Payment(1) Service Payment

______(1) Interest payments on the Bonds will be made semiannually on May 1 and November 1 of each year, commencing November 1, 2020.

See “DISTRICT FINANCIAL INFORMATION – District Debt Structure – General Obligation Bonds” herein for a full table of the annual debt service requirements for the District’s outstanding general obligation bonded debt.

Redemption

Optional Redemption.* The Bonds maturing on or before November 1, 2030 are not subject to redemption prior to their respective maturity dates. The Bonds maturing on or after November 1, 2031 are subject to redemption prior to their respective stated maturity dates at the option of the District, from any source of available funds, as a whole or in part, on any date on or after November 1, 2030, at a redemption price equal to the principal amount of the Bonds called for redemption, together with interest accrued thereon to the date fixed for redemption, without premium.

* Preliminary, subject to change. 7

Mandatory Sinking Fund Redemption.* The Term Bonds maturing on November 1, 20__ (the “Term Bonds”), are subject to redemption prior to maturity from mandatory sinking fund payments on November 1 of each year, on and after November 1, 20__, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. The principal amounts represented by such Term Bonds to be so redeemed, the dates therefor and the final principal payment date are as indicated in the following table:

Redemption Date Principal Amount to (November 1) be Redeemed

______(1) Maturity.

In the event that a portion of any of the Term Bonds is optionally redeemed prior to maturity, the remaining mandatory sinking fund payments for such Term Bonds of the corresponding maturity shown above shall be reduced proportionately, or as otherwise directed by the District, in integral multiples of $5,000 of principal amount, in respect of the portion of such Term Bonds optionally redeemed.

Selection of Bonds for Redemption. Whenever provision is made for the optional redemption of Bonds and less than all outstanding Bonds are to be redeemed, the Paying Agent, upon written instruction from the District, will select the Bonds for redemption as directed by the District and if not so directed, in inverse order of maturity. Within a maturity, the Paying Agent will select Bonds for redemption as so directed by the District, and if not so directed, by lot. Redemption by lot will be in such manner as the Paying Agent will determine; provided, however, that with respect to redemption by lot, the portion of any Bond to be redeemed in part shall be in the principal amount of $5,000 or any integral multiple thereof.

Notice of Redemption. When optional redemption is authorized pursuant to the Resolution, upon written instruction from the District, the Paying Agent will give notice (a “Redemption Notice”) of the redemption of the Bonds. Each Redemption Notice will 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 portion of 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.

The Paying Agent will take the following actions with respect to each such Redemption Notice: (a) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given to the respective Owners of Bonds designated for redemption by registered or certified mail, postage prepaid, at their addresses appearing on the bond register; (b) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given by (i) registered or certified mail, postage prepaid, (ii) telephonically confirmed facsimile transmission, or (iii) overnight delivery

service, to the Securities Depository; (c) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given by (i) registered or certified mail, postage prepaid, or (ii) overnight delivery service, to one of the Information Services; and (d) provide such Redemption Notice to such other persons as may be required pursuant to the Continuing Disclosure Certificate.

“Information Services” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System; or, such other services providing information with respect to called municipal obligations as the District may specify in writing to the Paying Agent or as the Paying Agent may select.

“Securities Depository” shall mean The Depository Trust Company, 55 Water Street, New York, New York 10041.

A certificate of the Paying Agent or the District to the effect that a Redemption Notice has been given as provided in the Resolution will be conclusive as against all parties. Neither failure to receive any Redemption Notice nor any defect in any such Redemption Notice so given will affect the sufficiency of the proceedings for the redemption of the affected Bonds. Each check issued or other transfer of funds made by the Paying Agent for the purpose of redeeming Bonds shall bear or include the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

Conditional Notice of Redemption. With respect to any notice of optional redemption of Bonds (or portions thereof) as described above, unless upon the giving of such notice such Bonds (or portions thereof) shall be deemed to have been defeased as described in “—Defeasance” herein, such notice will state that such redemption will be conditional upon the receipt by the Paying Agent (or an independent escrow agent selected by the District) on or prior to the date fixed for such redemption of the moneys necessary and sufficient to pay the principal of, and premium, if any, and interest on, such Bonds (or portions thereof) to be redeemed, and that, if such moneys shall not have been so received, said notice shall be of no force and effect, no portion of the Bonds will be subject to redemption on such date and such Bonds will not be required to be redeemed on such date. In the event that such Redemption Notice contains such a condition and such moneys are not so received, the redemption will not be made and the Paying Agent will, within a reasonable time thereafter (but in no event later than the date originally set for redemption), give notice to the persons to whom and in the manner in which the Redemption Notice was given, that such moneys were not so received. In addition, the District will have the right to rescind any Redemption Notice by written notice to the Paying Agent on or prior to the date fixed for such redemption. The Paying Agent will distribute a notice of the rescission of such Redemption Notice in the same manner as such Redemption Notice was originally provided.

Partial Redemption of Bonds. Upon the surrender of any Bond redeemed in part only, the Paying Agent will authenticate and deliver to the Owner thereof a new Bond or Bonds of like tenor and maturity and of authorized denominations equal in principal amount to the unredeemed portion of the Bond surrendered (the “Transfer Amount”). Such partial redemption is valid upon payment of the amount required to be paid to such Owner, and the District will be released and discharged thereupon from all liability to the extent of such payment.

Effect of Notice of Redemption. Notice having been given as described above, and the moneys for the redemption (including the interest accrued to the applicable date of redemption) having been set aside as described in “—Defeasance” herein, the Bonds to be redeemed shall become due and payable on such date of redemption.

If on such redemption date, moneys for the redemption of all the Bonds to be redeemed, together with interest accrued to such redemption date, shall be held in trust, so as to be available therefor on such redemption date, and if a Redemption Notice thereof shall have been given as described above, then from and after such redemption date, interest on the Bonds to be redeemed will cease to accrue and become payable. All money held for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds to be so redeemed.

Bonds No Longer Outstanding. When any Bonds (or portions thereof), which have been duly called for redemption prior to maturity pursuant to the Resolution, or with respect to which irrevocable instructions to call for redemption prior to maturity at the earliest redemption date have been given to the Paying Agent, in form satisfactory to it, and sufficient moneys shall be held irrevocably in trust for the payment of the redemption price of such Bonds or portions thereof and accrued interest thereon to the date fixed for redemption, then such Bonds will no longer be deemed outstanding and shall be surrendered to the Paying Agent for cancellation.

Book-Entry Only System

The information under this caption concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but neither the District nor the Underwriter takes any responsibility for the accuracy or completeness thereof. The District and the Underwriter cannot and do not give any assurances that DTC, Direct Participants or Indirect Participants (as defined herein) (collectively, the “DTC Participants”) will distribute to the Beneficial Owners (a) payments of principal and Accreted Value of, interest on, or premium, if any, with respect to the Bonds, (b) certificates 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, Direct Participants or Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such bond, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income 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 DTC Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. However, the information presented on such website is not incorporated herein by any reference to such website.

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 Beneficial Owner is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the 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 notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the Record Date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds or distributions 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 the District or Paying Agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by DTC Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds or distributions to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.

So long as Cede & Co. is the registered Owner of the Bonds, as nominee of DTC, references herein to the “Owners,” “Bond Owners” or “Holders” of the Bonds (other than under the caption “TAX MATTERS” herein and “APPENDIX A – FORM OF OPINION OF BOND COUNSEL” attached hereto) will mean Cede & Co. and will not mean the Beneficial Owners of the Bonds.

Discontinuation of Book-Entry Only System; Registration, Exchange and Transfer of Bonds

So long as any of the Bonds remain outstanding, the District will cause the Paying Agent to maintain at its principal office all books and records necessary for the registration, exchange and transfer of such Bonds, which shall at all times be open to inspection by the District, and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register, exchange or transfer or cause to be registered, exchanged or transferred, on said books, Bonds as provided in the Resolution.

In the event that the book-entry only system as described herein is no longer used with respect to the Bonds, the following provisions will govern the registration, transfer, and exchange of the Bonds.

The principal of the Bonds and any interest upon the redemption thereof prior to maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Bonds at the designated office of the Paying Agent. Interest on the Bonds will be paid by the Paying Agent by wire to a bank and account number on file with the Paying Agent as of the Record Date.

Any Bond may be exchanged for Bonds of like tenor, series, maturity and Transfer Amount upon presentation and surrender at the designated office of the Paying Agent, together with a request for exchange signed by the Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of the Bond at the designated office of the Paying Agent together with an assignment executed by the Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent will complete, authenticate and deliver a new bond or bonds of like tenor and

of any authorized denomination or denominations requested by the Owner equal to the Transfer Amount of the Bond surrendered and bearing or accruing interest at the same rate and maturing on the same date.

Neither the District nor the Paying Agent will be required to (a) issue or transfer any Bonds during a period beginning with the opening of business on the 16th day next preceding either any Bond Payment Date or any date of selection of Bonds to be redeemed and ending with the close of business on the Bond Payment Date or any day on which the applicable Redemption Notice is given or (b) transfer any Bonds which have been selected or called for redemption in whole or in part.

Defeasance

All or any portion of the outstanding maturities of the Bonds may be defeased prior to maturity in the following ways:

(a) Cash: by irrevocably depositing with an independent escrow agent selected by the District an amount of cash which, together with any amounts transferred from the Debt Service Fund, is sufficient to pay all Bonds outstanding and designated for defeasance (including all principal thereof, accrued interest thereon, and redemption premiums, if any) at or before their maturity date; or

(b) Government Obligations: by irrevocably depositing with an independent escrow agent selected by the District noncallable Government Obligations, together with any amounts transferred from the Debt Service Fund, and any other cash, if required, in such amount as will, together with interest to accrue thereon, in the opinion of an independent certified public accountant, be fully sufficient to pay and discharge all Bonds outstanding and designated for defeasance (including all principal thereof, accrued interest thereon, and redemption premiums, if any) at or before their maturity date;

then, notwithstanding that any of such Bonds shall not have been surrendered for payment, all obligations of the District with respect to such designated outstanding Bonds will cease and terminate, except only the obligation of the independent escrow agent selected by the District to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) above, to the owners of such designated Bonds not so surrendered and paid all sums due with respect thereto.

“Government Obligations” means direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America (which may consist of obligations of the Resolution Funding Corporation that constitute interest strips), or obligations secured or otherwise guaranteed, directly or indirectly, as to principal and interest by a pledge of the full faith and credit of the United States of America. In the case of direct and general obligations of the United States of America, Government Obligations shall include evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances where (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations are held in a special account, segregated from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed at least as high as direct and general obligations of the United States of America by either S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”) or Moody’s Investors Service (“Moody’s”).

REFUNDING PLAN

The Bonds are being issued to (i) advance refund certain of the Prior Bonds, as further described below (so refunded, the “Refunded Bonds”), and (ii) pay the costs of issuing the Bonds.

The net proceeds from the sale of the Bonds will be deposited with U.S. Bank National Association, as Escrow Agent, to the credit of an escrow fund (the “Escrow Fund”) held pursuant to that certain Escrow Agreement, dated as of September 1, 2020, by and between the District and the Escrow Agent. Amounts deposited in the Escrow Fund will be used to purchase certain non-callable direct and general obligations of the United States of America, or non-callable obligations the payment of which is unconditionally guaranteed by the United States of America (collectively, the “Federal Securities”), the principal of and interest on which will be sufficient, together with any monies deposited in the Escrow Fund and held as cash, to enable the Escrow Agent to pay the redemption price of the Refunded Bonds on the first optional redemption date therefor, as well as the interest due on the Refunded Bonds on and prior to such date. The tables below show information on the specific maturities of the Refunded Bonds. REFUNDED BONDS Fairfax Elementary School District General Obligation Bonds, Election of 2010, Series 2011 (Bank Qualified)

Outstanding Maturity Date Principal Principal to Redemption Redemption Price (November 1) CUSIP Amount be Refunded Date (% of Principal Amount) 2022 30377QAH7 $90,000 $90,000 11/1/2021 100% 2024 30377QAK0 165,000 165,000 11/1/2021 100 2025 30377QAL8 210,000 210,000 11/1/2021 100 2026 30377QAM6 255,000 255,000 11/1/2021 100 2040 30377QAP9 3,000,000 3,000,000 11/1/2021 100

The sufficiency of the amounts on deposit in the Escrow Fund, together with realizable interest and earnings thereon, to refund the Refunded Bonds as described above will be verified by Causey Demgen & Moore P.C., as the verification agent (the “Verification Agent”). As a result of the deposit and application of funds so provided in the Escrow Agreement, and assuming the accuracy of the computations of the Underwriter and the Verification Agent, the Refunded Bonds will be defeased and the obligation of the County to levy ad valorem property taxes for payment thereof will terminate.

Any accrued interest received by the County from the sale of the Bonds will be paid to the County treasury, to the credit of the debt service fund created by the Refunding Resolution (the “Debt Service Fund”) and used only for payment of principal of and interest on the Bonds, and for no other purpose.

A portion of the proceeds received by the District from the sale of the Bonds, and any accrued interest and surplus moneys in the Escrow Fund following the redemption of the Refunded Bonds will be deposited or transferred to and accounted for in the fund designated as the “Fairfax Elementary School District 2020 General Obligation Refunding Bonds (Federally Taxable) Debt Service Fund” (the “Debt Service Fund”) and used by the District only for payment of principal of and interest on the Bonds and for no other purpose. Any excess proceeds of the Bonds not needed for the authorized purposes for which

 Preliminary, subject to change. 14

the Bonds are being issued will be transferred to the Debt Service Fund and applied to the payment of principal of and interest on the Bonds. Pursuant to the Resolution, the District has pledged monies on deposit in the Debt Service Fund to the payment of the Bonds. If, after payment in full of the Bonds, there remain excess proceeds, any such excess amounts will be transferred to the general fund of the District.

Investment of Proceeds. Moneys in the Escrow Fund will be invested through the County’s pooled investment fund. See “APPENDIX E – KERN COUNTY POOLED CASH PORTFOLIO REPORT AND TREASURER’S STATEMENT OF INVESTMENT POLICY” herein.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds with respect to the Bonds are as follows:

Sources of Funds Principal Amount of Bonds Original Issue Premium/Discount Total Sources

Uses of Funds Deposit to Escrow Fund Costs of Issuance(1) Total Uses

(1) A portion of the proceeds of the Bonds will be used to pay costs of issuance thereof, including, but not limited to, the underwriting discount, legal fees, Municipal Advisory fees, printing costs, rating agency fees, the costs and fees of the Paying Agent, Escrow Agent and Verification Agent, and other costs of issuance of the Bonds.

TAX BASE FOR REPAYMENT OF BONDS

The information in this section describes ad valorem property taxation, assessed valuation, and other measures of the tax base of the District. The Bonds are payable solely from ad valorem property taxes levied and collected by the County on taxable property in the District, which taxes are unlimited as to rate or amount. The District’s general fund is not a source for the repayment of the Bonds. Ad Valorem Property Taxation

District property taxes are assessed and collected by the County at the same time and on the same tax rolls as County, city and special district property taxes. Assessed valuations are the same for both the District and the Countys’ taxing purposes.

Taxes are levied for each fiscal year on taxable real and personal property which is located in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Unsecured property is assessed on the “unsecured roll.” Unsecured property comprises all property not attached to land, such as personal property or business property. Boats and airplanes are examples of unsecured property. A supplemental roll is developed when property changes hands or new construction is completed. The County levies and collects all property taxes for property falling within the County’s taxing boundaries.

The valuation of secured property is established as of January 1 and is subsequently equalized in August. Property taxes on the secured roll are payable in two installments, due November 1 and February 1 of the calendar year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent installment plus any additional amount determined by the Tax Collector of the County (the “Tax Collector”). After the second installment of taxes on the secured roll is delinquent, the tax collector shall collect a cost of $10 for preparing the delinquent tax records and giving notice of delinquency. Property on the secured roll with delinquent taxes is declared tax-defaulted on July 1 of the calendar year. Such property may thereafter be redeemed, until the right of redemption is terminated, by payment of the delinquent taxes and the delinquency penalty, plus a $15 redemption fee and a redemption penalty of 1.5% 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 Tax Collector.

Property taxes on the unsecured roll as of July 31 become delinquent if they are not paid by August 31 and are thereafter subject to a delinquent penalty of 10%. Taxes added to the unsecured tax roll after July 31, if unpaid are delinquent and subject to a penalty of 10% on the last day of the month succeeding the month of enrollment. In the case of unsecured property taxes, an additional penalty of 1.5% per month begins to accrue when such taxes remain unpaid on the last day of the second month after the 10% penalty attaches. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the assessee; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on specific property of the assessee; (3) filing a certificate of delinquency for record in the county recorder’s office in order to obtain a lien on specified property of the assessee; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. See also “– Tax Levies, Collections and Delinquencies” herein.

State law exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the value of the exemptions.

All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property, such as churches, colleges, non-profit hospitals, and charitable institutions.

Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, 2% inflation) is allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies, including school districts, will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year.

Assessed Valuations Property within the District has a total assessed valuation for fiscal year 2020-21 of $1,130,634,704. The following table shows a ten-year history of assessed valuations in the District.

ASSESSED VALUATIONS Fiscal Years 2011-12 through 2020-21 Fairfax Elementary School District

Local Secured Utility Unsecured Total 2011-12 $765,790,048 $540 $12,279,508 $778,070,096 2012-13 755,129,298 540 12,601,834 767,731,672 2013-14 795,273,742 540 11,518,481 806,792,763 2014-15 838,122,069 540 12,517,173 850,639,782 2015-16 895,414,059 540 12,635,011 908,049,610 2016-17 989,729,612 1,743 14,262,053 1,003,993,408 2017-18 996,868,669 1,743 16,182,492 1,013,052,904 2018-19 1,025,862,096 1,743 15,982,417 1,041,846,256 2019-20 1,074,744,084 1,743 16,433,004 1,091,178,831 2020-21 1,113,753,550 2,614 16,878,540 1,130,634,704

Source: California Municipal Statistics, Inc.

Economic and other factors beyond the District’s control, such as a general market decline in real property values, disruption in financial markets that may reduce availability of financing for purchasers of property, outbreak of disease, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused by a natural or manmade disaster, such as earthquake, drought, flood, fire, wildfire, outbreak of disease or toxic contamination, could cause a reduction in the assessed value of taxable property within the District. Any such reduction would result in a corresponding increase in the annual tax rate levied by the County to pay the debt service with respect to the Bonds. See “THE BONDS – Security and Sources of Payment,” as well as “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein.

Appeals and Adjustments of Assessed Valuations

Under State law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most 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.

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.

In addition to the above-described taxpayer appeals, county assessors may independently reduce assessed valuations based on changes in the market value of property, or for other factors such as the

complete or partial destruction of taxable property caused by natural or man-made disasters such as earthquakes, floods, fire, drought or toxic contamination pursuant to relevant provisions of the State Constitution.

Whether resulting from taxpayer appeals or county assessor reductions, adjustments to assessed value are subject to yearly reappraisals by the county assessor and may be adjusted back to their original values when real estate market conditions improve. Once property has regained its prior assessed value, adjusted for inflation, it once again is subject to the annual inflationary growth rate factor allowed under Article XIIIA. See also “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Article XIIIA of the California Constitution” herein.

The District does not have information regarding pending appeals of assessed valuation of property within the District. No assurance can be given that property tax appeals currently pending or in the future will not significantly reduce the assessed valuation of property within the District.

Assembly Bill 102. On June 27, 2017, the Governor signed into law Assembly Bill 102 (“AB 102”). AB 102 restructures the functions of the SBE and creates two new separate agencies: (i) the California Department of Tax and Fee Administration, and (ii) the Office of Tax Appeals. Under AB 102, the California Department of Tax and Fee Administration will take over programs previously in the SBE Property Tax Department, such as the Tax Area Services Section, which is responsible for maintaining all property tax-rate area maps and for maintaining special revenue district boundaries. Under AB 102, the SBE will continue to perform the duties assigned by the State Constitution related to property taxes, however, beginning January 1, 2018, the SBE will only hear appeals related to the programs that it constitutionally administers and the Office of Tax Appeals will hear tax appeals on all other taxes and fee matters, such as sales and use tax and other special taxes and fees. AB 102 obligates the Office of Tax Appeals to adopt regulations as necessary to carry out its duties, powers, and responsibilities.

Assessed Valuation of Single Family Homes

The following table shows a per-parcel analysis of single family residences within the District, in terms of their fiscal year 2020-21 assessed valuation.

ASSESSED VALUATION OF SINGLE FAMILY HOMES Fiscal Year 2020-21 Fairfax Elementary School District

No. of 2020-21 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 2,834 $455,149,930 $160,603 $153,390

2020-21 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels(1) Total % of Total Valuation Total % of Total $0 - $24,999 34 1.200% 1.200% $612,985 0.135% 0.135% 25,000 - 49,999 139 4.905 6.104 5,504,472 1.209 1.344 50,000 - 74,999 202 7.128 13.232 12,660,144 2.782 4.126 75,000 - 99,999 284 10.021 23.253 25,008,654 5.495 9.620 100,000 - 124,999 359 12.668 35.921 40,572,445 8.914 18.534 125,000 - 149,999 362 12.773 48.694 49,382,413 10.850 29.384 150,000 - 174,999 283 9.986 58.680 46,066,793 10.121 39.505 175,000 - 199,999 350 12.350 71.030 65,680,874 14.431 53.936 200,000 - 224,999 395 13.938 84.968 83,471,288 18.339 72.275 225,000 - 249,999 182 6.422 91.390 42,812,947 9.406 81.681 250,000 - 274,999 72 2.541 93.931 18,748,108 4.119 85.801 275,000 - 299,999 52 1.835 95.766 14,871,414 3.267 89.068 300,000 - 324,999 17 0.600 96.366 5,315,613 1.168 90.236 325,000 - 349,999 14 0.494 96.860 4,698,594 1.032 91.268 350,000 - 374,999 23 0.812 97.671 8,327,704 1.830 93.098 375,000 - 399,999 15 0.529 98.200 5,786,598 1.271 94.369 400,000 - 424,999 7 0.247 98.447 2,893,725 0.636 95.005 425,000 - 449,999 8 0.282 98.730 3,462,934 0.761 95.766 450,000 - 474,999 8 0.282 99.012 3,692,939 0.811 96.577 475,000 - 499,999 8 0.282 99.294 3,913,915 0.860 97.437 500,000 and greater 20 0.706 100.000 11,665,371 2.563 100.000 2,834 100.000% $455,149,930 100.000% ______(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

Assessed Valuation and Parcels by Land Use

The following table shows a per-parcel analysis of the distribution of taxable property within the District by principal use, and the fiscal year 2020-21 assessed valuation of such parcels.

ASSESSED VALUATION AND PARCELS BY LAND USE Fiscal Year 2020-21 Fairfax Elementary School District

2020-21 % of No. of % of Non-Residential: Assessed Valuation(1) Total Parcels Total Agricultural $13,815,669 1.24% 66 1.61% Commercial 47,378,408 4.25 99 2.41 Vacant Commercial 3,054,381 0.27 37 0.90 Industrial 474,278,786 42.58 157 3.82 Vacant Industrial 13,052,396 1.17 93 2.27 Recreational 2,993,817 0.27 3 0.07 Government/Social/Institutional 448,167 0.04 220 5.36 Subtotal Non-Residential $555,021,624 49.83% 675 16.44%

Residential: Single Family Residence $455,149,930 40.87% 2,834 69.04% Mobile Home 23,226,192 2.09 168 4.09 Mobile Home Park 7,691,668 0.69 8 0.19 2-4 Residential Units 43,252,159 3.88 130 3.17 5+ Residential Units/Apartments 18,236,514 1.64 24 0.58 Vacant Residential 11,175,463 1.00 266 6.48 Subtotal Residential $558,731,926 50.17% 3,430 83.56%

Total $1,113,753,550 100.00% 4,105 100.00% ______(1) Local secured assessed valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

Assessed Valuation by Jurisdiction

The following table shows the fiscal year 2020-21 assessed valuation of the District by jurisdiction.

ASSESSED VALUATION BY JURISDICTION Fiscal Year 2020-21 Fairfax Elementary School District

Assessed Valuation % of Assessed Valuation % of Jurisdiction Jurisdiction: in District District of Jurisdiction in District City of Bakersfield $296,101,065 26.19% $32,721,827,049 0.90% Unincorporated Kern County 834,533,639 73.81 $55,265,049,948 1.51% Total District $1,130,634,704 100.00%

Kern County $1,130,634,704 100.00% $98,416,261,313 1.15% ______Source: California Municipal Statistics, Inc.

Tax Levies, Collections and Delinquencies

Property taxes on the secured roll are due in two installments, November 1 and February 1 of the calendar year, and if unpaid, become delinquent after December 10 and April 10, respectively. A 10% penalty attaches to any delinquent installment plus a minimum $10 cost on the second installment, plus any additional amount determined by the Treasurer-Tax Collector of the County. See “— Ad Valorem Property Taxation” herein. Pursuant to Revenue and Taxation Code Section 4985.2, the Treasurer-Tax Collector may cancel any penalty, costs or other charges resulting from tax delinquency upon a finding that the late payment is due to reasonable cause and circumstances beyond the taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect, provided the property taxes are paid within four fiscal years of such taxes coming due. In addition, on May 6, 2020, the Governor signed Executive Order N-61-20 (“Order N-61-20”). Under Order N-61-20, certain provisions of the State Revenue and Taxation Code are suspended until May 6, 2021 to the extent said provisions require a tax collector to impose penalties, costs or interest for the failure to pay secured or unsecured property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent, subject to certain conditions set forth in in Order N-61-20. See “Alternative Method of Tax Apportionment – ‘Teeter Plan’” and “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein. The following table shows secured tax levies and delinquencies within the District, and amounts delinquent as of June 30, for fiscal years 2014-15 through 2019-20.

SECURED TAX CHARGES AND DELINQUENCIES(1) Fiscal Years 2014-15 through 2019-20 Fairfax Elementary School District

Secured Amt. Del. % Del. Tax Charge(2) June 30 June 30 2014-15 $1,480,135.43 $19,138.42 1.29% 2015-16 1,553,080.37 19,528.08 1.26 2016-17 1,558,008.22 23,927.69 1.54 2017-18 1,752,793.16 21,086.41 1.20 2018-19 1,812,467.17 23,287.17 1.28 2019-20 1,841,979.61 30,262.73 1.64

Secured Amt. Del. % Del. Tax Charge(3) June 30 June 30 2014-15 $584,915.33 $10,769.23 1.84% 2015-16 657,285.72 14,325.63 2.18 2016-17 631,738.39 12,070.34 1.91 2017-18 1,101,678.22 20,950.12 1.90 2018-19 1,115,116.67 17,468.72 1.57 2019-20 879,866.98 14,598.88 1.66

(1) Kern County utilizes the Teeter Plan for assessment levy and distribution. This method guarantees distribution of 100% of the assessments levied to the taxing entity, with the County retaining all penalties and interest. (2) 1% General fund apportionment. (3) Debt service levy only. Source: California Municipal Statistics, Inc.

Alternative Method of Tax Apportionment - “Teeter Plan”

The County Board has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis when due (irrespective of actual collections) to its local political subdivisions, including the District, for which the County acts as the tax-levying or tax- collecting agency, or for which the County’s treasury is the legal depository of the tax collections.

If the Teeter Plan, in its current form, remains in effect during the term of the Bonds, the District will receive 100% of the secured ad valorem property tax levied in the County to pay the Bonds irrespective of actual delinquencies in the collection of the tax by the County. The District can give no assurance that the Teeter Plan will remain in effect in its present form, or in any form, during the respective terms of the Bonds.

The Teeter Plan is to remain in effect unless the County Board orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1 for the County), the County Board receives a petition for its discontinuance joined in by a resolution adopted by at least two-thirds of the participating revenue districts in the County, in which event the County Board is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. The County Board may, by resolution adopted not later than July 15 of the fiscal year for which it is to apply, after holding a public hearing on the matter, discontinue the procedures under the Teeter Plan with respect to any tax levying agency or assessment levying agency in such county if the rate of secure tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls for that agency. In the event the County Board is to order discontinuance of the Teeter Plan subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the District) for which such county acts as the tax-levying or tax- collecting agency. The District is not aware of any intention on the part of the County, or formal actions taken thereby, to abrogate the Teeter Plan, as now in effect in the County.

There can be no assurance that the County will always maintain the Teeter Plan or will have sufficient funds available to distribute the full amount of the District’s share of property tax collections to the District. The ability of the County to maintain the Teeter Plan may depend on its financial resources and may be affected by future property tax delinquencies. Property tax delinquencies may be impacted by economic and other factors beyond the District’s or the County’s control, including the ability or willingness of property owners to pay property taxes during an economic recession or depression. An economic recession or depression could be caused by many factors outside the control of the District, including high interest rates, reduced consumer confidence, reduced real wages or reduced economic activity as a result of the spread of COVID-19 or other pandemic or natural or manmade disaster. See “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19.” However, notwithstanding any possible future change to or discontinuation of the Teeter Plan, State law requires the County to levy ad valorem property taxes sufficient to pay the Bonds when due.

Tax Rates

A representative tax rate area (“TRA”) located within the District is TRA 68-031. The table below shows the total ad valorem property tax rates, as a percentage of assessed valuation, levied by all taxing entities in this TRA during the five-year period from fiscal years 2015-16 through 2019-20.

SUMMARY OF AD VALOREM PROPERTY TAX RATES (TRA 68-031)(1) Fiscal Years 2015-16 through 2019-20 Fairfax Elementary School District

2015-16 2016-17 2017-18 2018-19 2019-20 General 1.000000% 1.000000% 1.000000% 1.000000% 1.000000% Fairfax School District .071193 .063052 .107519 .100935 .074340 Kern High School District .032389 .025969 .053319 .051182 .053189 Kern Community College District SRID .013571 .013180 .014412 .012338 .014243 Kern Community College District SFID No. 1 -- -- .021837 .021330 .018785 Total Tax Rate 1.117153% 1.102201% 1.197087% 1.185785% 1.160557%

(1) 2019-20 Assessed Valuation of TRA is $369,545,965, which is 33.87% of district’s total assessed valuation. Source: California Municipal Statistics, Inc.

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Principal Taxpayers

The more property (by assessed value) which is owned by a single taxpayer within the District, the greater amount of tax collections that are exposed to weaknesses in such a taxpayer’s financial situation and ability or willingness to pay property taxes. The table below lists the 20 largest local secured taxpayers in the District in terms of their fiscal year 2020-21 secured assessed valuations. Each taxpayer listed below is a name listed on the tax rolls. The District cannot make any representation as to 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.

20 LARGEST LOCAL SECURED TAXPAYERS Fiscal Year 2020-21 Fairfax Elementary School District 2020-21 % of Property Owner Primary Land Use Assessed Valuation Total(1) 1. William Bolthouse Farms Inc. Industrial – Food Processing $378,407,497 33.98% 2. Hardt Investments Residential Properties 22,316,326 2.00 3. NSA Prop Holdings LLC Public Storage 8,602,607 0.77 4. Cha Family Trust Hotel/Motel 8,274,313 0.74 5. Wal Mart Real Estate Business Trust Commercial 8,222,603 0.74 6. Bakfld Invs Land LLC Hotel/Motel 6,799,255 0.61 7. Lundy Family Trust Commercial 4,733,521 0.43 8. Class 8 Prop LLC Industrial 4,244,832 0.38 9. Dashtiland Inv LLC Commercial – Service Station 3,863,780 0.35 10. Lima Punta Family Trust Industrial 3,748,698 0.34 11. Veer Hospitality LLC Hotel/Motel 3,607,868 0.32 12. Cummins Pac LLC Commercial – Auto Repair 3,478,813 0.31 13. Randall C. Journey Industrial 3,029,897 0.27 14. California Water Service Co. Water Company 3,003,264 0.27 15. Charnpreet Upple Undeveloped 2,730,324 0.25 16. Richard Phillips Construction LLC Residential Properties 2,631,500 0.24 17. Fairfax Holdings LP Undeveloped 2,546,100 0.23 18. Tele Inc. Recreational 2,494,328 0.22 19. W & F Development LLC Industrial 2,316,341 0.21 20. Proffitt Family LLC Industrial 2,312,907 0.21 $477,364,774 42.86%

(1) The District has a fiscal year 2020-21 local secured assessed valuation of $1,113,753,550. Source: California Municipal Statistics, Inc.

William Bolthouse Farms Inc. was established in 1915, and is a vertically integrated company specializing in refrigerated beverages and carrots. It does business as Bolthouse Farms and is located in the San Joaquin Valley, with its headquarters in Bakersfield, California. The company operates farms, processing facilities and its headquarters within the boundaries of the District. It is one the largest producers of fresh-cut carrots in the United States. The company has been under control of Butterfly Equity since June 2019. Bolthouse Farms is privately held, has approximately 2,250 employees and an estimated annual revenue of $1,142,021,900.

Statement of Direct and Overlapping Debt

Set forth on the following page is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc., effective as of September 1, 2020, for debt issued as of August 11, 2020. 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.

The table shows the percentage of each overlapping entity’s assessed value located within the boundaries of the District. The table also shows the corresponding portion of the overlapping entity’s existing debt payable from property taxes levied within the District. The total amount of debt for each overlapping entity is not given in the table.

The first column in the table names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.

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STATEMENT OF DIRECT AND OVERLAPPING DEBT Fairfax Elementary School District

2020-21 Assessed Valuation: $1,130,634,704

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable(1) Debt 9/1/20 Kern Community College District School Facilities Improvement District 1.177% $663,298 Kern Community College District Safety, Repair & Improvement District 1.184 1,395,179 Kern High School District 1.848 4,578,165 Fairfax School District 100.000 8,709,402(2) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $15,346,044

DIRECT AND OVERLAPPING GENERAL FUND DEBT: Kern County Certificates of Participation 1.142% $974,982 Kern County Pension Obligation Bonds 1.142 1,718,272 Kern County Board of Education Certificates of Participation 1.142 399,700 Kern Community College District Certificates of Participation 1.063 292,006 Kern Community College District Other Post Employment Benefit (OPEB) Bonds 1.063 804,053 Kern High School District Certificates of Participation 1.848 1,299,052 Fairfax School District General Fund Obligations 100.000 2,088,129 City of Bakersfield General Fund Obligations 0.881 51,759 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $7,627,953

OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $15,779

COMBINED TOTAL DEBT $22,989,776(3)

Ratios to 2019-20 Assessed Valuation: Direct Debt ($8,709,402) ...... 0.77% Total Direct and Overlapping Tax and Assessment Debt ...... 1.36% Combined Direct Debt ($10,797,531) ...... 0.95% Combined Total Debt ...... 2.03%

Ratio to Redevelopment Incremental Valuation ($15,874,651): Total Overlapping Tax Increment Debt ...... 0.10%

(1) 2019-20 ratios. (2) Excludes the Bonds, and includes Prior Bonds. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied by the County on taxable property within the District in an amount sufficient for the payment thereof. See “THE BONDS – Security and Sources of Payment” herein. Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 98 and 111, 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 County to levy taxes on behalf of the District and to the District to 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 County to levy taxes for payment of the Bonds.

Article XIIIA of the California Constitution

Article XIIIA (“Article XIIIA”) of the State Constitution limits the amount of ad valorem property taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975-76 bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed or a change in ownership has occurred after the 1975 assessment,” subject to exemptions in certain circumstances of property transfer or reconstruction. Determined in this manner, the full cash value is also referred to as the “base year value.” The “full cash value” is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

Article XIIIA has been amended to allow for temporary reductions of assessed value in instances where the fair market value of real property falls below the adjusted base year value described above. Proposition 8—approved by the voters in November of 1978—provides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a similar decline. In these instances, the market value is required to be reviewed annually until the market value exceeds the base year value, adjusted for inflation. Reductions in assessed value could result in a corresponding increase in the annual tax rates levied by the County to pay debt service on the Bonds. See “THE BONDS – Security and Sources of Payment” and “TAX BASE FOR REPAYMENT OF BONDS” herein.

Article XIIIA requires a vote of two-thirds or more of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorem property, sales or transaction tax on real property. Article XIIIA exempts from the 1% tax limitation any taxes above that level required to pay debt service (a) on any indebtedness approved by the voters prior to July 1, 1978, or (b) as the result of an amendment approved by State voters on June 3, 1986, on any bonded indebtedness approved by two-thirds or more of the votes cast by the voters for the acquisition or improvement of real property on or after July 1, 1978, or (c) 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% or more of the votes cast on the proposition, but only if certain accountability measures are included in the proposition. In addition, Article XIIIA requires the approval of two-thirds or more of all members of the legislature of the State (the “State Legislature”) to change any State taxes for the purpose of increasing tax revenues.

Property Tax Ballot Measures. On May 29, 2020, a proposed voter initiated ballot initiative became eligible and subsequently qualified for the November 2020 Statewide ballot (the “Proposition 15”). If approved by a majority of voters casting a ballot at the November 2020 Statewide election, Proposition 15 would amend Article XIIIA such that the “full cash value” of commercial and industrial real property, for each lien date, would be equal to the fair market value of that property. If approved, Proposition 15 would not affect the “full cash value” of residential property, real property used for commercial agricultural production, or commercial and industrial real property with combined value of $3 million or less, which would continue to be subject to annual increases not to exceed 2%. In addition, Proposition 15 would eliminate the business tangible personal property tax on equipment and fixtures for small businesses and provide a $500,000 per year exemption for all other businesses. After compensating the State General Fund for resulting reductions in State personal income tax and corporate tax revenues, and compensating cities, counties and special districts for the cost of implementing Proposition 15, approximately 40% of the remaining additional tax revenues generated as a result of Proposition 15 would be deposited into a fund created pursuant to Proposition 15 called the Local School and Community College Property Tax Fund, with such funds being used to supplement, and not replace, existing funding school districts and community college districts receive under the State’s constitutional minimum funding requirement. With respect to the tax revenues deposited into the Local School and Community College Property Tax Fund, 11% would be allocated by the Board of Governors of the California Community Colleges to community college districts and 89% of such tax revenues would be allocated by the Superintendent of Public Instruction to school districts, charter schools and county offices of education.

On July 1, 2020, a legislatively referred constitutional amendment was filed with the Secretary of State and subsequently qualified for the November 2020 Statewide ballot (“Proposition 19”). If approved by a majority of voters casting a ballot at the November 2020 Statewide election, Proposition 19 would amend Article XIIIA to: (i) expand special rules that give property tax savings to homeowners that are over the age of 55, severely disabled, or whose property has been impacted by wildfire or natural disaster, when they buy a different home; (ii) narrow existing special rules for inherited properties; and (iii) dedicate most of the potential new State revenue generated from Proposition 19 toward fire protection.

The District cannot predict whether either Proposition 15 or Proposition 19 will be approved by a majority of voters casting a ballot. If approved, the District cannot make any assurance as to what effect the implementation of either Proposition 15 or Proposition 19 will have on District revenues or the assessed valuation of real property in the District.

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 relevant 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 or 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.

All taxable property value included in this Official Statement is shown at 100% of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Both the United States Supreme Court and the State Supreme Court have upheld the general validity of Article XIIIA.

Proposition 50 and Proposition 171

On June 3, 1986, the voters of the State approved Proposition 50. Proposition 50 amends Section 2 of Article XIIIA of the State Constitution to allow owners of property that was “substantially damaged or destroyed” by a disaster, as declared by the Governor, (the “Damaged Property”), to transfer their existing base year value (the “Original Base Year Value”) to a comparable replacement property within the same county, which is acquired or constructed within five years after the disaster. At the time of such transfer, the Damaged Property will be reassessed at its full cash value immediately prior to damage or destruction (the “Original Cash Value”); however, such property will retain its base year value notwithstanding such a transfer. Property is substantially damaged or destroyed if either the land or the improvements sustain physical damage amounting to more than 50 percent of either the land or improvements full cash value immediately prior to the disaster. There is no filing deadline, but the assessor can only correct four years of assessments when the owner fails to file a claim within four years of acquiring a replacement property.

Under Proposition 50, the base year value of the replacement property (the “Replacement Base Year Value”) depends on the relation of the full cash value of the replacement property (the “Replacement Cash Value”) to the Original Cash Value: if the Replacement Cash Value exceeds 120 percent of the Original Cash Value, then the Replacement Base Year Value is calculate by combining the Original Base Year Value with such excessive Replacement Cash Value; if the Replacement Cash Value does not exceed 120 percent of the Original Cash Value, then the Replacement Base Year Value equals the Original Base Year Value; if the Replacement Cash Value is less than the Original Cash Value, then the Replacement Base Year Value equals the Replacement Cash Value. The replacement property must be comparable in size, utility, and function to the Damaged Property.

On November 2, 1993, the voters of the State approved Proposition 171. Proposition 171 amends subdivision (e) of Section 2 of Article XIIIA of the State Constitution to allow owners of Damaged Property to transfer their Original Base Year Value to a “comparable replacement property” located within another county in the State, which is acquired or newly constructed within three years after the disaster.

Intra-county transfers under Proposition 171 are more restrictive than inter-county transfers under Proposition 50. For example, Proposition 171 (1) only applies to (a) structures that are owned and occupied by property owners as their principal place of residence and (b) land of a “reasonable size that is used as a site for a residence;” (2) explicitly does not apply to property owned by firms, partnerships, associations, corporations, companies, or legal entities of any kind; (3) only applies to replacement property located in a county that adopted an ordinance allowing Proposition 171 transfers; (4) claims must be timely filed within three years of the date of purchase or completion of new construction; and (5) only applies to comparable replacement property, which has a full cash value that is of “equal or lesser value” than the Original Cash Value.

Within the context of Proposition 171, “equal or lesser value” means that the amount of the Replacement Cash Value does not exceed either (1) 105 percent of the Original Cash Value when the replacement property is acquired or constructed within one year of the destruction, (2) 110 percent of the Original Cash Value when the replacement property is acquired or constructed within two years of the destruction, or (3) 115 percent of the Original Cash Value when the replacement property is acquired or constructed within three years of the destruction.

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 SBE as part of a “going concern” rather than as individual pieces of real or personal property. Such State-assessed unitary and certain other property is allocated to counties by the SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. So long as the District is not a community funded district, taxes lost through any reduction in assessed valuation will be compensated by the State as equalization aid under the State’s school financing formula. See “DISTRICT FINANCIAL INFORMATION – State Funding of Education” herein.

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. As amended, Article XIIIB defines:

(a) “change in the cost of living” with respect to school districts to mean the percentage change in State per capita income from the preceding year, and

(b) “change in population” with respect to a school district to mean the percentage change in the ADA of the school district from the preceding fiscal year.

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 pursuant to 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 such as the Bonds, (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 State Legislature, (f) appropriations derived from 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.

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 pursuant to Section 8.5 of Article XVI of the State Constitution. See “— Propositions 98 and 111” herein.

Article XIIIC and Article XIIID of the California Constitution

On November 5, 1996, the voters of the State approved Proposition 218, popularly known as the “Right to Vote on Taxes Act.” Proposition 218 added to the State 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 State Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the State Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

The District does not impose any taxes, assessments, or property-related fees or charges which are subject to the provisions of Proposition 218. It does, however, receive a portion of the basic 1% ad valorem property tax levied and collected by the County pursuant to Article XIIIA of the State Constitution. The provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District.

Proposition 26

On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution 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.

Propositions 98 and 111

On November 8, 1988, voters of the State 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 were modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. The Accountability Act changed State funding of public education below the university level and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-14 school districts at a level equal to the greater of (a) the same percentage of State general fund revenues as the percentage appropriated to such districts in the 1986-87 fiscal year, and (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the State Legislature to suspend this formula for a one-year period.

The Accountability Act also changed how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount are, instead of being returned to taxpayers, is transferred to K-14 school districts. Any such transfer to K-14 school districts is excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year is automatically increased by the amount of such transfer. These additional moneys 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 can be transferred to K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act.

Since the Accountability Act is unclear in some details, there can be no assurances that the State Legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State’s budgets in a different way than is proposed in the Governor’s budget.

On June 5, 1990, the voters of the State approved Proposition 111 (Senate Constitutional Amendment No. 1) called the “Traffic Congestion Relief and Spending Limitation 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:

a. 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 State 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.

b. 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 such districts’ 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.

c. Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit: (i) all appropriations for “qualified capital outlay projects” as defined by the State Legislature, and (ii) 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 State Legislature and the Governor, which was expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.

d. 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.

e. 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 (“Test 1”) 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 (“Test 2”). Under Proposition 111, K-14 school districts will receive the greater of (1) Test 1, (2) Test 2, or (3) a third test (“Test 3”), which will replace Test 2 in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in State per capita personal income. Under Test 3, K-14 school districts 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 Test 3 is used in any year, the difference between Test 3 and Test 2 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, State voters approved an amendment (commonly known as “Proposition 39”) to the State Constitution. Proposition 39 is an initiated Constitutional amendment that (1) allows school facilities bond measures to be approved by 55% (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1% 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 State 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, including the District, community college districts, and county offices of education. As noted above, the State Constitution previously limited property taxes to 1% of the value of property, such that property taxes could only exceed this limit to pay for (1) any local government debt 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% of the voters. These provisions require that the tax rate projected to be levied as the result of any single election be no more than $60 (for a unified school district, such as the District), $30 (for an elementary school district or a high school district, such as the District), or $25 (for a community college district), per $100,000 of taxable property value, when assessed valuation is projected to increase in accordance with Article XIIIA of the State Constitution. These requirements are not part of Proposition 39 and can be changed with a majority vote of both houses of the State Legislature and approval by the Governor. See “- Article XIIIA of the California Constitution” herein.

Proposition 1A and Proposition 22

On November 2, 2004, State voters approved Proposition 1A, which amends 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-third approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. 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 amends the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.

Proposition 22, The Local Taxpayer, Public Safety, and Transportation Protection Act, approved by the voters of the State on November 2, 2010, prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies and eliminates the State’s authority to shift property taxes temporarily during a severe financial hardship of the State. In addition, Proposition 22 restricts the State’s authority to use State fuel tax revenues to pay debt service on state transportation bonds, to borrow or change the distribution of state fuel tax revenues, and to use vehicle license fee revenues to reimburse local governments for state mandated costs. Proposition 22 impacts resources in the State’s general fund and transportation funds, the State’s main funding source for schools and community colleges, as well as universities, prisons and health and social services programs. According to an analysis of Proposition 22 submitted by the Legislative Analyst’s Office (the “LAO”) on July 15, 2010, the expected reduction in resources available for the State to spend on these other programs as a

consequence of the passage of Proposition 22 was expected to be approximately $1 billion in fiscal year 2010-11, with an estimated immediate fiscal effect equal to approximately 1% of the State’s total general fund spending. The longer-term effect of Proposition 22, according to the LAO analysis, was projected to be an increase in the State’s general fund costs by approximately $1 billion annually for several decades. See also “DISTRICT FINANCIAL INFORMATION – State Dissolution of Redevelopment Agencies” herein.

Jarvis vs. Connell

On May 29, 2002, the State Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State). The Court of Appeal held that either a final budget bill, an emergency appropriation, a self-executing authorization pursuant to state statutes (such as continuing appropriations) or the State Constitution or a federal mandate is necessary for the State Controller to disburse funds. The foregoing requirement could apply to amounts budgeted by the District as being received from the State. To the extent the holding in such case would apply to State payments reflected in the District’s budget, the requirement that there be either a final budget bill or an emergency appropriation may result in the delay of such payments to the District if such required legislative action is delayed, unless the payments are self-executing authorizations or are subject to a federal mandate. On May 1, 2003, the State Supreme Court upheld the holding of the Court of Appeal, stating that the Controller is not authorized under State law to disburse funds prior to the enactment of a budget or other proper appropriation, but under federal law, the Controller is required, notwithstanding a budget impasse and the limitations imposed by State law, to timely pay those State employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act.

Propositions 30 and 55

The California Children’s Education and Health Care Protection Act of 2016 (also known as “Proposition 55”) is a constitutional amendment approved by the voters of the State on November 8, 2016. Proposition 55 extends, through 2030, the increases to personal income tax rates for high-income taxpayers that were approved as part of Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also known as “Proposition 30”). Proposition 30 increased the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,001 for single filers (over $500,000 but less than $600,001 for joint filers and over $340,000 but less than $408,001 for head-of-household filers), (ii) 2% for taxable income over $300,000 but less than $500,001 for single filers (over $600,000 but less than $1,000,001 for joint filers and over $408,000 but less than $680,001 for head-of-household filers), and (iii) 3% for taxable income over $500,000 for single filers (over $1,000,000 for joint filers and over $680,000 for head-of-household filers).

The revenues generated from the personal income tax increases will be included in the calculation of the Proposition 98 Minimum Funding Guarantee (defined herein) for school districts and community college districts. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Propositions 98 and 111” herein. From an accounting perspective, the revenues generated from the personal income tax increases are being 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 board is prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs.

Proposition 2

On November 4, 2014, voters approved the Rainy Day Budget Stabilization Fund Act (also known as “Proposition 2”). Proposition 2 is a legislatively-referred constitutional amendment which makes certain changes to State budgeting practices, including substantially revising the conditions under which transfers are made to and from the State’s Budget Stabilization Account (the “BSA”) established by the California Balanced Budget Act of 2004 (also known as Proposition 58).

Under Proposition 2, and beginning in fiscal year 2015-16 and each fiscal year thereafter, the State will generally be required to annually transfer to the BSA an amount equal to 1.5% of estimated State general fund revenues (the “Annual BSA Transfer”). Supplemental transfers to the BSA (a “Supplemental BSA Transfer”) are also required in any fiscal year in which the estimated State general fund revenues that are allocable to capital gains taxes exceed 8% of the total estimated general fund tax revenues. Such excess capital gains taxes—net of any portion thereof owed to K-14 school districts pursuant to Proposition 98—will be transferred to the BSA. Proposition 2 also increases the maximum size of the BSA to an amount equal to 10% of estimated State general fund revenues for any given fiscal year. In any fiscal year in which a required transfer to the BSA would result in an amount in excess of the 10% threshold, Proposition 2 requires such excess to be expended on State infrastructure, including deferred maintenance.

For the first 15-year period ending with the 2029-30 fiscal year, Proposition 2 provides that half of any required transfer to the BSA, either annual or supplemental, must be appropriated to reduce certain State liabilities, including making certain payments owed to K-14 school districts, repaying State interfund borrowing, reimbursing local governments for State mandated services, and reducing or prefunding accrued liabilities associated with State-level pension and retirement benefits. Following the initial 15-year period, the Governor and the State Legislature are given discretion to apply up to half of any required transfer to the BSA to the reduction of such State liabilities. Any amount not applied towards such reduction must be transferred to the BSA or applied to infrastructure, as described above.

Proposition 2 changes the conditions under which the Governor and the State Legislature may draw upon or reduce transfers to the BSA. The Governor does not retain unilateral discretion to suspend transfers to the BSA, nor does the State Legislature retain discretion to transfer funds from the BSA for any reason, as previously provided by law. Rather, the Governor must declare a “budget emergency,” defined as an emergency within the meaning of Article XIIIB of the State Constitution or a determination that estimated resources are inadequate to fund State general fund expenditures, for the current or ensuing fiscal year, at a level equal to the highest level of State spending within the three immediately preceding fiscal years. Any such declaration must be followed by a legislative bill providing for a reduction or transfer. Draws on the BSA are limited to the amount necessary to address the budget emergency, and no draw in any fiscal year may exceed 50% of the funds on deposit in the BSA unless a budget emergency was declared in the preceding fiscal year.

Proposition 2 also requires the creation of the Public School System Stabilization Account (the “PSSSA”) into which transfers will be made in any fiscal year in which a Supplemental BSA Transfer is required (as described above). Such transfer will be equal to the portion of capital gains taxes above the 8% threshold that would otherwise be paid to K-14 school districts as part of the minimum funding guarantee. A transfer to the PSSSA will only be made if certain additional conditions are met, as follows:

(i) the minimum funding guarantee was not suspended in the immediately preceding fiscal year, (ii) the operative Proposition 98 formula for the fiscal year in which a PSSSA transfer might be made is “Test 1,” (iii) no maintenance factor obligation is being created in the budgetary legislation for the fiscal year in which a PSSSA transfer might be made, (iv) all prior maintenance factor obligations have been fully repaid, and (v) the minimum funding guarantee for the fiscal year in which a PSSSA transfer might be made is higher than the immediately preceding fiscal year, as adjusted for ADA growth and cost of living. Proposition 2 caps the size of the PSSSA at 10% of the estimated minimum guarantee in any fiscal year, and any excess funds must be paid to K-14 school districts. Reductions to any required transfer to the PSSSA, or draws on the PSSSA, are subject to the same budget emergency requirements described above. However, Proposition 2 also mandates draws on the PSSSA in any fiscal year in which the estimated minimum funding guarantee is less than the prior year’s funding level, as adjusted for ADA growth and cost of living.

SB 858. Senate Bill 858 (“SB 858”) became effective upon the passage of Proposition 2. SB 858 includes provisions which could limit the amount of reserves that may be maintained by a school district in certain circumstances. Under SB 858, in any fiscal year immediately following a fiscal year in which the State has made a transfer into the PSSSA, any adopted or revised budget by a school district would need to contain a combined unassigned and assigned ending fund balance that (a) for school districts with an ADA of less than 400,000, is not more than two times the amount of the reserve for economic uncertainties mandated by the Education Code, or (b) for school districts with an ADA that is more than 400,000, is not more than three times the amount of the reserve for economic uncertainties mandated by the Education Code. In certain cases, the county superintendent of schools may grant a school district a waiver from this limitation on reserves for up to two consecutive years within a three-year period if there are certain extraordinary fiscal circumstances.

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

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

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

Proposition 51

The Kindergarten Through Community College Public Education Facilities Bond Act of 2016 (also known as Proposition 51) is a voter initiative that was approved by voters on November 8, 2016. Proposition 51 authorizes the sale and issuance of $9 billion in general obligation bonds by the State for the new construction and modernization of K-14 facilities.

K-12 School Facilities. Proposition 51 includes $3 billion for the new construction of K-12 facilities and an additional $3 billion for the modernization of existing K-12 facilities. K-12 school

districts will be required to pay for 50% of the new construction costs and 40% of the modernization costs with local revenues. If a school district lacks sufficient local funding, it may apply for additional state grant funding, up to 100% of the project costs. In addition, a total of $1 billion will be available for the modernization and new construction of charter school facilities ($500 million) and technical education facilities ($500 million). Generally, 50% of modernization and new construction project costs for charter school and technical education facilities must come from local revenues. However, school districts that cannot cover their local share for these two types of projects may apply for State loans. State loans must be repaid over a maximum of 30 years for charter school facilities and 15 years for career technical education facilities. For career technical education facilities, State grants are capped at $3 million for a new facility and $1.5 million for a modernized facility. Charter schools must be deemed financially sound before project approval.

Community College Facilities. Proposition 51 includes $2 billion for community college district facility projects, including buying land, constructing new buildings, modernizing existing buildings, and purchasing equipment. In order to receive funding, community college districts must submit project proposals to the Chancellor of the community college system, who then decides which projects to submit to the State Legislature and Governor based on a scoring system that factors in the amount of local funds contributed to the project. The Governor and State Legislature will select among eligible projects as part of the annual state budget process.

The District makes no representation or guarantees that it will either pursue or qualify for Proposition 51 State facilities funding.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the State Constitution and Propositions 22, 26, 30, 39, 98, 55 and 51 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District.

DISTRICT FINANCIAL INFORMATION

The information in this section concerning the District’s general fund finances and State funding of public education is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied by the County in an amount sufficient for the payment thereof. See “THE BONDS – Security and Sources of Payment” herein.

State Funding of Education

School district revenues consist primarily of guaranteed State moneys, local property taxes and funds received from the State in the form of categorical aid under ongoing programs of local assistance. All State aid is subject to the appropriation of funds in the State’s annual budget.

Revenue Limit Funding. Previously, school districts operated under general purpose revenue limits established by the State Department of Education. In general, revenue limits were calculated for each school district by multiplying the ADA for such district by a base revenue limit per unit of ADA. Revenue limit calculations were subject to adjustment in accordance with a number of factors designed to provide cost of living adjustments (“COLAs”) and to equalize revenues among school districts of the same type. Funding of a school district’s revenue limit was provided by a mix of local property taxes and State apportionments of basic and equalization aid. Since fiscal year 2013-14, school districts have been funded based on a uniform system of funding grants assigned to certain grade spans, as described below. See “ – Local Control Funding Formula.”

Local Control Funding Formula. State Assembly Bill 97 (Stats. 2013, Chapter 47) (“AB 97”), as amended by Senate Bill 91 (Stats. 2013, Chapter 49) (“SB 91”), established the current system for funding school districts, charter schools and county offices of education.

The primary component of AB 97 was the implementation of the Local Control Funding Formula (“LCFF”), which replaced the revenue limit funding system for determining State apportionments, as well as the majority of categorical program funding. State allocations are now provided on the basis of target base funding grants per unit of ADA (a “Base Grant”) assigned to each of four grade spans. Each Base Grant is subject to certain adjustments and add-ons, as discussed below. During the implementation period of the LCFF, an annual transition adjustment was calculated for each school district, equal to such district’s proportionate share of appropriations included in the State budget to close the gap between the prior-year funding level and the target allocation following full implementation of the LCFF. In each year, school districts had the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district’s funding gap.

The Base Grants per unit of ADA for each grade span are as follows: (i) $7,820 for grades K-3; (ii) $7,189 for grades 4-6; (iii) $7,403 for grades 7-8; and (iv) $8,801 for grades 9-12. Beginning in fiscal year 2013-14, and in each subsequent year, the Base Grants are to be adjusted for cost-of-living increases by applying the implicit price deflator for government goods and services. Following full implementation of the LCFF, the provision of COLAs will be subject to appropriation for such adjustment in the annual State budget. The differences among Base Grants are linked to differentials in statewide average revenue limit rates by district type, and are intended to recognize the generally higher costs of education at higher grade levels. See also “— State Budget Measures” herein.

The Base Grants for 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 early grades and the provision of career technical education in high schools. Unless otherwise collectively bargained for, school districts serving students in grades K-3 must maintain an average class enrollment of 24 or fewer students in grades K-3 at each school site in order to continue receiving the adjustment to the K-3 Base Grant. Such school districts must also make progress towards this class size reduction goal in proportion to the growth in their funding over the implementation period. AB 97 also provides additional add-ons to school districts that received categorical block grant funding pursuant to the Targeted Instructional Improvement and Home-to-School Transportation programs during fiscal year 2012-13.

School districts that serve students of limited English proficiency (“EL” students), students from low income families that are eligible for free or reduced priced meals (“LI” students) and foster youth are eligible to receive additional funding grants. Enrollment counts are unduplicated, such that students may not be counted as both EL and LI (foster youth automatically meet the eligibility requirements for free or reduced priced meals). AB 97 authorizes a supplemental grant add-on (each, a “Supplemental Grant”) for school districts that serve EL/LI students, equal to 20% of the applicable Base Grant multiplied by such districts’ percentage of unduplicated EL/LI student enrollment. School districts whose EL/LI populations exceed 55% of their total enrollment are eligible for a concentration grant add-on (each, a “Concentration Grant”) equal to 50% of the applicable Base Grant multiplied by the percentage of such district’s unduplicated EL/LI student enrollment in excess of the 55% threshold.

The following table shows a breakdown of the District’s ADA by grade span, total enrollment, and the percentage of EL/LI student enrollment, for fiscal years 2014-15 through 2019-20 and projected figures for fiscal year 2020-21. The District’s actual enrollment and ADA figures for fiscal year 2019-20, and future years, may be affected by the recent COVID-19 outbreak. See “—Considerations Regarding COVID-19” below. ADA, ENROLLMENT AND EL/LI ENROLLMENT PERCENTAGE Fiscal Years 2014-15 through 2020-21 Fairfax Elementary School District Average Daily Attendance (1) Enrollment(2) Fiscal Total District Total District % of EL/LI Year K-3 4-6 7-8 ADA Enrollment Enrollment(3) 2014-15 1,075 796 481 2,351 2,412 92% 2015-16 1,129 842 504 2,475 2,540 93 2016-17 1,163 847 574 2,584 2,699 93 2017-18 1,170 845 555 2,569 2,705 93 2018-19 1,191 817 557 2,564 2,682 92 2019-20 1,174 850 571 2,595 2,693 90 2020-21(4) 1,183 862 556 2,601 2,725 88

(1) Except for fiscal year 2020-21, reflects ADA as of the second principal reporting period (P-2 ADA), ending on or before the last attendance month prior to April 15 of each school year. An attendance month is equal to each four-week period of instruction beginning with the first day of school for a particular school district. For the 2019-20 school year, due to the outbreak of COVID-19, P-2 ADA only reflects full school months from July 1, 2019 through February 29, 2020. See “—Considerations Regarding COVID- 19” herein. (2) Except for fiscal year 2020-21, reflects certified enrollment as of the fall census day (the first Wednesday in October), which is reported to the California Longitudinal Pupil Achievement Data System (“CALPADS”) in each school year and is used to calculate each school district’s unduplicated EL/LI student enrollment. Adjustments may be made to the certified EL/LI counts by the State Department of Education. (3) For fiscal year 2014-15, the percentage of unduplicated EL/LI enrollment was based on the two-year average of EL/LI enrollment in fiscal years 2013-14 and 2014-15. Since fiscal year 2015-16, a school district’s percentage of unduplicated EL/LI students has been based on a rolling average of such district’s EL/LI enrollment for the then-current fiscal year and the two immediately preceding fiscal years. (4) Projected. Source: Fairfax Elementary School District. 40

For certain school districts that would have received greater funding levels under the prior revenue limit system, the LCFF provides for a permanent economic recovery target (“ERT”) add-on, equal to the difference between the revenue limit allocations such districts would have received under the prior system in fiscal year 2020-21, and the target LCFF allocations owed to such districts in the same year. To derive the projected funding levels, the LCFF assumes the discontinuance of deficit revenue limit funding, implementation of a COLA in fiscal years 2014-15 through 2020-21, and restoration of categorical funding to pre-recession levels. The ERT add-on will be paid incrementally over the implementation period of the LCFF. The District does not qualify for the ERT add-on.

The sum of a school district’s adjusted Base, Supplemental and Concentration Grants will be multiplied by such district’s P-2 ADA for the current or prior year, whichever is greater (with certain adjustments applicable to small school districts). This funding amount, together with any applicable ERT or categorical block grant add-ons, will yield a district’s total LCFF allocation. Generally, the amount of annual State apportionments received by a school district will amount to the difference between such total LCFF allocation and such district’s share of applicable local property taxes. Most school districts receive a significant portion of their funding from such State apportionments. As a result, decreases in State revenues may significantly affect appropriations made by the Legislature to school districts.

Certain schools districts, referred to as “basic aid” (or “community funded”), have allocable local property tax collections that equal or exceed such districts’ total LCFF allocation, and result in the receipt of no State apportionment aid. Community funded school districts receive only special categorical funding, which is deemed to satisfy the “basic aid” requirement of $120 per student per year guaranteed by Article IX, Section 6 of the State Constitution. The implication for community funded districts is that the legislatively determined allocations to school districts, and other politically determined factors, are less significant in determining their primary funding sources. Rather, property tax growth and the local economy are the primary determinants. The District does not currently qualify as a community funded district.

Accountability. Regulations adopted by the State Board of Education require that school districts increase or improve services for EL/LI students in proportion to the increase in funds apportioned to such districts on the basis of the number and concentration of such EL/LI students, and detail the conditions under which school districts can use supplemental or concentration funding on a school-wide or district- wide basis.

School districts are also required to adopt local control and accountability plans (“LCAPs”) disclosing annual goals for all students, as well as certain numerically significant student subgroups, to be achieved in eight areas of State priority identified by the LCFF. LCAPs may also specify additional local priorities. LCAPs must specify the actions to be taken to achieve each goal, including actions to correct identified deficiencies with regard to areas of State priority. LCAPs covering a three-year period were required to be adopted beginning in fiscal year 2014-15, and updated annually thereafter. The State Board of Education has adopted a template LCAP for use by school districts.

Support and Intervention. AB 97, as amended by SB 91, established a new system of support and intervention to assist school districts meet the performance expectations outlined in their respective LCAPs. School districts must adopt their LCAPs (or annual updates thereto) in tandem with their annual operating budgets, and not later than five days thereafter submit such LCAPs or updates to their respective county superintendents of schools. On or before August 15 of each year, a county superintendent may seek clarification regarding the contents of a district’s LCAP (or annual update thereto), and the district is required to respond to such a request within 15 days. Within 15 days of receiving such a response, the county superintendent can submit non-binding recommendations for amending the LCAP or annual update, and such recommendations must be considered by the respective school district at a public hearing within 15 days. A district’s LCAP or annual update must be approved by the county superintendent by October 8 of each year if the superintendent determines that (i) the LCAP or annual update adheres to the State template, and (ii) the district’s budgeted expenditures are sufficient to implement the actions and strategies outlined in the LCAP.

A school district is required to receive additional support if its respective LCAP or annual update thereto is not approved, if the district requests technical assistance from its respective county superintendent, or if the district does not improve student achievement across more than one State priority for one or more student subgroups. Such support can include a review of a district’s strengths and weaknesses in the eight State priority areas, or the assignment of an academic expert to assist the district identify and implement programs designed to improve outcomes. Assistance may be provided by the California Collaborative for Educational Excellence, a state agency created by the LCFF and charged with assisting school districts achieve the goals set forth in their LCAPs. The State Board of Education has developed rubrics to assess school district performance and the need for support and intervention.

The State Superintendent of Public Instruction (the “State Superintendent”) is further authorized, with the approval of the State Board of Education, to intervene in the management of persistently underperforming school districts. The State Superintendent may intervene directly or assign an academic trustee to act on his or her behalf. In so doing, the State Superintendent is authorized to (i) modify a district’s LCAP, (ii) impose budget revisions designed to improve student outcomes, and (iii) stay or rescind actions of the local governing board that would prevent such district from improving student outcomes; provided, however, that the State Superintendent is not authorized to rescind an action required by a local collective bargaining agreement.

Other State Sources. In addition to State allocations determined pursuant to the LCFF, the District receives other State revenues consisting primarily of restricted revenues designed to implement State mandated programs. Beginning in fiscal year 2013-14, categorical spending restrictions associated with a majority of State mandated programs were eliminated, and funding for these programs was folded into the LCFF. Categorical funding for certain programs was excluded from the LCFF, and school districts will continue to receive restricted State revenues to fund these programs.

Other Revenue Sources

Federal and Local Sources. The federal government provides funding for several of the District’s programs, including special education programs, programs under the Every Student Succeeds Act, and specialized programs such as Drug Free Schools, Innovative Strategies, and Vocational & Applied Technology. In addition, school districts may receive additional local revenues beyond local property tax collections, such as interest earnings, interagency services, parcel taxes, developer fees, redevelopment revenues and other local sources.

Developer Fees. The District receives developer fees (the “Developer Fees”) pursuant to Government Code Section 65995. The following table shows the Developer Fees collected by the District for fiscal years 2014-15 through 2019-20, and a projected amount for fiscal year 2020-21.

DEVELOPER FEES Fiscal Years 2014-15 through 2020-21 Fairfax Elementary School District

Developer Fees Fiscal Year Collected 2014-15 $221,982 2015-16 171,684 2016-17 427,714 2017-18 112,308 2018-19 318,583 2019-20 362,804 2020-21(1) 165,000

(1) Projected. Source: Fairfax Elementary School District.

Considerations Regarding COVID-19

An outbreak of disease or similar public health threat, such as the current coronavirus (“COVID- 19”) outbreak, or fear of such an event, could have an adverse impact on the District’s financial condition and operating results.

The spread of COVID-19 is having significant negative impacts throughout the world, including in the District. The World Health Organization has declared the COVID-19 outbreak to be a pandemic, and states of emergency have been declared by the State and the United States. The purpose behind these declarations are to coordinate and formalize emergency actions and across federal, State and local governmental agencies, and to proactively prepare for a wider spread of the virus. On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed by the President of the United States. The CARES Act appropriates over $2 trillion to, among other things, (i) provide cash payments to individuals, (ii) expand unemployment assistance and eligibility, (iii) provide emergency grants and loans for small businesses, (iv) provide loans and other assistance to corporations, including the airline industry, (v) provide funding for hospitals and community health centers, (vi) expand funding for safety net programs, including child nutrition programs, and (vii) provide aid to state and local governments. The District expects to receive $3,971,619 in CARES Act funding. However, no assurances can be given that the District will ultimately receive the moneys it expects to receive from the CARES Act, or any additional future State or federal funds related to COVID-19, or the timing of receipt of such funds.

State law allows school districts to apply for a waiver to hold them harmless from the loss of LCFF funding based on attendance and state instructional time penalties when they are forced to close schools due to emergency conditions. In addition, the Governor of the State has enacted Executive Order N-26-20 (“Executive Order N-26-20”), which (i) generally streamlines the process of applying for such waivers for closures related to COVID-19 and (ii) directs school districts to use LCFF apportionment to fund distance learning and high quality educational opportunities, provide school meals and, as practicable, arrange for the supervision of students during school hours.

On March 17, 2020, Senate Bill 89 (“SB 89”) and Senate Bill 117 (“SB 117”) were signed by the Governor, both of which take effect immediately. SB 89 amends the Budget Act of 2019 by appropriating $500,000,000 from the State general fund for any purpose related to the Governor’s March 4, 2020 emergency proclamation. SB 117, among other things, (i) specifies that for school districts that comply with Executive Order N–26–20, the ADA reported to the State Department of Education for the second period and the annual period for apportionment purposes for the 2019-20 school year only includes all full school months from July 1, 2019 through February 29, 2020, (ii) prevents the loss of funding related to an instructional time penalty because of a school closed due to the COVID–19 by deeming the instructional days and minutes requirements to have been met during the period of time the school was closed due to COVID–19, (iii) requires a school district to be credited with the ADA it would have received had it been able to operate its After School Education and Safety Program during the time the school was closed due to COVID–19, and (iv) appropriates $100,000,000 from the State general fund to the State Superintendent to be apportioned to certain local educational agencies for purposes of purchasing personal protective equipment, or paying for supplies and labor related to cleaning school sites. The District has received approximately $45,011 of additional State funding as a result of SB 117.

On March 19, 2020, the Governor ordered all California residents to stay home or at their place of residence to protect the general health and well-being, except as needed to maintain continuity of 16 critical infrastructure sectors described therein (the “Stay Home Order”).

To date there have been a number of confirmed cases of COVID-19 in the County and health officials are expecting the number of confirmed cases to grow. The outbreak has resulted in the imposition of restrictions on mass gatherings and widespread temporary closings of businesses, universities and schools (including the District’s schools). The U.S. is restricting certain non-US citizens and permanent residents from entering the country. In addition, stock markets in the U.S. and globally have been volatile, with significant declines attributed to coronavirus concerns.

On May 4, 2020, the Governor enacted Executive Order N-60-20 (“Executive Order N-60-20”), which directs the State Public Health Officer to establish criteria to determine whether and how particular local jurisdictions may implement public health measures that are less restrictive than statewide directives, as the State transitions from Stage 1 to Stage 2, and then Stage 3 of reopening. The stages will be phased in gradually, and counties which have met readiness criteria and worked with the State Department of Public Health can open more public spaces and workplaces, as outlined by the State, with variances allowed by county. The State is currently in Stage 2, where retail, related logistics and manufacturing, office workplaces, limited personal services, outdoor museums, child care, and essential businesses can open with modifications. The State will continue to issue guidance to assist workplaces to reopen safely.

On June 29, 2020, Senate Bill 98 (“SB 98”), the education omnibus bill to the 2020-21 State Budget, was signed by the Governor, which takes effect immediately. SB 98 provides that distance learning may be offered by a school district during the 2020-21 academic year on a local educational agency or schoolwide level as a result of an order or guidance from a State public health officer or a local public health officer or for pupils who are medically fragile or would be put at risk by in-person instruction, or who are self-quarantining because of exposure to COVID-19. SB 98 provides requirements for distance learning, including, but not limited to: (i) confirmation or provision of access for all pupils to connectivity and devices adequate to participate in the educational pram and complete assigned work, (ii) content aligned to grade level standards that is provided at a level of quality and intellectual challenge substantially equivalent to in-person instruction, (iii) support for pupils who are not performing at grade level or need support in other areas, (iv) special education services, (v) designated and integrated instruction in English language development for English learners, and (vi) daily live

interaction with certificated employees and peers. See “DISTRICT FINANCIAL INFORMATION – State Budget Measures” herein.

On July 2, 2020, the State Public Health Officer issued an order for Kern County stating that for those counties that have been on the State monitoring list for three consecutive days or more, the following sectors must close until further notice: bars, pubs, brewpub and brewers. Dine-in restaurants, wineries and tasting rooms, family entertainment centers and movie theaters, zoos and museums must close indoor services to customers. Pursuant to Executive Order N-60-20, local jurisdictions may issue their own public health measures to slow the spread of COVID-19.

On July 17, 2020, as amended on August 3, 2020, the Governor released guidelines for the reopening of schools and school based programs, which tracks the level of COVID-19 infections in a community as well as the preparedness of the community’s healthcare system. In order to resume in- person class instruction, a county must have been off the State’s COVID-19 monitoring list for 14 consecutive days. School districts in counties on the State’s COVID-19 monitoring list are required to conduct distance learning. Once a county is off of the State’s COVID-19 monitoring list, the guidelines provide that if schools meet the criteria outlined and have adequate preparedness measures in place, they may implement the guidelines as part of a phased reopening. However, a school site must revert to distance learning when 5% of students and staff test positive within a 14-day period. The entire school district must revert to distance learning when 25% or more of its schools have been physically closed due to COVID-19 within a 14-day period. After 14 days, school districts may resume in-person instruction with the approval of the local public health officer.

As a result of the outbreak of COVID-19, the District closed its schools for in-person learning for the remainder of the 2019-20 school year effective March 16, 2020, and began instruction through distance learning. Since Kern County is currently on the State’s COVID-19 monitoring list, the District opened the 2020-21 school year in an all distance learning environment and plans to continue such a learning environment at least through October, 2020. The District may not reopen for in-person learning until Kern County is off of the State’s COVID-19 monitoring list for 14 consecutive days. The District will continue to evaluate the State’s school reopening guidelines and will consult with local health officials and the State’s school reopening guidelines in implementing the District’s plans for the 2020-21 academic year.

Potential impacts to the District associated with the COVID-19 outbreak include, but are not limited to, increasing costs and challenges relating to establishing distance learning programs or other measures to permit instruction while schools remain closed, disruption of the regional and local economy with corresponding decreases in tax revenues, including property tax revenue, sales tax revenue and other revenues, increases in tax delinquencies, potential declines in property values, and decreases in new home sales, and real estate development. The economic consequences and the declines in the U.S. and global stock markets resulting from the spread of COVID-19, and responses thereto by local, State, and the federal governments, could have a material impact on the investments in the State pension trusts, which could materially increase the unfunded actuarial accrued liability of the STRS Defined Benefit Program and PERS Schools Pool, which, in turn, could result in material changes to the District’s required contribution rates in future fiscal years. See also “FAIRFAX ELEMENTARY SCHOOL DISTRICT – District Retirement Systems” herein.

The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak, and the economic and other of actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. Additional information with respect to events surrounding the outbreak of COVID-19 and responses thereto can be found on State and local government websites, including but not limited to: the Kern County Public Health Services Department 45

(https://kernpublichealth.com/2019-novel-coronavirus/), the Governor’s office (http://www.gov.ca.gov) and the California Department of Public Health (https://covid19.ca.gov/). The District has not incorporated by reference the information on such websites, and the District does not assume any responsibility for the accuracy of the information on such websites.

The ultimate impact of COVID-19 on the District’s operations and finances is unknown. There can be no assurances that the spread of COVID-19, or the responses thereto by local, State, or the federal government, will not materially adversely impact the local, state and national economies or the assessed valuation of property within the District, or adversely impact enrollment or ADA within the District and, notwithstanding Executive Order N-26-20 or SB 117, materially adversely impact the financial condition or operations of the District. See also “TAX BASES FOR REPAYMENT OF THE BONDS –Assessed Valuation of the District” herein.

State Dissolution of Redevelopment Agencies

On December 30, 2011, the State Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos (“Matosantos”), finding ABX1 26, a trailer bill to the 2011-12 State budget, to be constitutional. As a result, all redevelopment agencies in the State ceased to exist as a matter of law on February 1, 2012. The Court in Matosantos also found that ABX1 27, a companion bill to ABX1 26, violated the State Constitution, as amended by Proposition 22. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Proposition 1A and Proposition 22” herein. ABX1 27 would have permitted redevelopment agencies to continue operations provided their establishing cities or counties agreed to make specified payments to school districts and county offices of education, totaling $1.7 billion statewide.

ABX1 26 was modified by Assembly Bill No. 1484 (Chapter 26, Statutes of 2011-12) (“AB 1484”), which, together with ABx1 26, is referred to herein as the “Dissolution Act.” The Dissolution Act provides that all rights, powers, duties and obligations of a redevelopment agency under the California Community Redevelopment Law that have not been repealed, restricted or revised pursuant to ABx1 26 will be vested in a successor agency, generally the county or city that authorized the creation of the redevelopment agency (each, a “Successor Agency”). All property tax revenues that would have been allocated to a redevelopment agency, less the corresponding county auditor-controller’s cost to administer the allocation of property tax revenues, are now allocated to a corresponding Redevelopment Property Tax Trust Fund (“Trust Fund”), to be used for the payment of pass-through payments to local taxing entities, and thereafter to bonds of the former redevelopment agency and any “enforceable obligations” of the Successor Agency, as well as to pay certain administrative costs. The Dissolution Act defines “enforceable obligations” to include bonds, loans, legally required payments, judgments or settlements, legal binding and enforceable obligations, and certain other obligations.

Among the various types of enforceable obligations, the first priority for payment is tax allocation bonds issued by the former redevelopment agency; second is revenue bonds, which may have been issued by the host city, but only where the tax increment revenues were pledged for repayment and only where other pledged revenues are insufficient to make scheduled debt service payments; third is administrative costs of the Successor Agency, not to exceed $250,000 in any year, to the extent such costs have been approved in an administrative budget; then, fourth tax revenues in the Trust Fund in excess of such amounts, if any, will be allocated as residual distributions to local taxing entities in the same proportions as other tax revenues. Moreover, all unencumbered cash and other assets of former redevelopment agencies will also be allocated to local taxing entities in the same proportions as tax revenues. Notwithstanding the foregoing portion of this paragraph, the order of payment is subject to modification in the event a Successor Agency timely reports to the State Controller and the State Department of Finance that application of the foregoing will leave the Successor Agency with amounts

insufficient to make scheduled payments on enforceable obligations. If the county auditor-controller verifies that the Successor Agency will have insufficient amounts to make scheduled payments on enforceable obligations, it shall report its findings to the State Controller. If the State Controller agrees there are insufficient funds to pay scheduled payments on enforceable obligations, the amount of such deficiency shall be deducted from the amount remaining to be distributed to taxing agencies, as described as the fourth distribution above, then from amounts available to the Successor Agency to defray administrative costs. In addition, if a taxing agency entered into an agreement pursuant to Health and Safety Code Section 33401 for payments from a redevelopment agency under which the payments were to be subordinated to certain obligations of the redevelopment agency, such subordination provisions shall continue to be given effect.

As noted above, the Dissolution Act expressly provides for continuation of pass-through payments to local taxing entities, including the District. Per statute, 100% of contractual and statutory two percent pass-throughs, and 56.7% of statutory pass-throughs authorized under the Community Redevelopment Law Reform Act of 1993 (AB 1290, Chapter 942, Statutes of 1993) (“AB 1290”), are restricted to educational facilities without offset against apportionments by the State. Only 43.3% of AB 1290 pass-throughs are offset against State aid so long as the District uses the moneys received for land acquisition, facility construction, reconstruction, or remodeling, or deferred maintenance as provided under Education Code Section 42238(h).

ABX1 26 states that in the future, pass-throughs shall be made in the amount “which would have been received had the redevelopment agency existed at that time,” and that the County Auditor-Controller shall “determine the amount of property taxes that would have been allocated to each redevelopment agency had the redevelopment agency not been dissolved pursuant to the operation of ABX1 26 using current assessed values and pursuant to statutory [pass-through] formulas and contractual agreements with other taxing agencies.”

Successor Agencies continue to operate until all enforceable obligations have been satisfied and all remaining assets of the Successor Agency have been disposed of. AB 1484 provides that once the debt of the Successor Agency is paid off and remaining assets have been disposed of, the Successor Agency shall terminate its existence and all pass-through payment obligations shall cease.

The District can make no representations as to the extent to which any apportionments from the State may be offset by the future receipt of residual distributions or from unencumbered cash and assets of former redevelopment agencies or any other surplus property tax revenues pursuant to the Dissolution Act.

Budget Process

State Budgeting Requirements. The District is required by provisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-over fund balance from the previous year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially amended by Assembly Bill 1200 (“AB 1200”), which became State law on October 14, 1991. Portions of AB 1200 are summarized below. Additional amendments to the budget process were made by Assembly Bill 2585, effective as of September 9, 2014, including the elimination of the dual budget cycle option for school districts. All school districts must now be on a single budget cycle.

School districts must adopt a budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first.

The county superintendent will 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, and will determine if the budget allows the district to meet its current obligations, if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments, whether the budget includes the expenditures necessary to implement a LCAP, and whether the budget’s ending fund balance exceeds the minimum recommended reserve for economic uncertainties.

On or before September 15, the county superintendent will approve, conditionally approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The district board must be notified by September 15 of the county superintendent’s recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent’s recommendations. The committee must report its findings no later than September 20. Any recommendations made by the county superintendent must be made available by the district for public inspection. No later than October 22, the county superintendent must notify the State Superintendent of Public Instruction of all school districts whose budget may be disapproved.

A school district whose budget has been disapproved must revise and readopt its budget by October 8, reflecting changes in projected income and expense since July 1, including responding to the county superintendent’s recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final school district budgets and not later than November 8, must approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section 42127.1. No later than November 8, the county superintendent must notify the State Superintendent of Public Instruction of all school districts whose budget has been disapproved. Until a school district’s budget is approved, the school district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year.

Interim Financial Reporting. Under the provisions of AB 1200, each school district is required to file interim certifications with the county office of education 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 two fiscal years. The county office of education 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 will be 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 the two subsequent fiscal years.

The District has never received a qualified or negative certification of an interim financial report and has never had an adopted budget disapproved by the County Superintendent of Schools.

Budgeting Trends. The table on the following page summarizes the District’s general fund adopted budgets for fiscal years 2015-16 through 2020-21, audited ending results for fiscal years 2015-16 through 2018-19, and estimated totals for fiscal year 2019-20.

GENERAL FUND BUDGETING(1) Fiscal Years 2015-16 through 2020-21 Fairfax Elementary School District Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year (2) (2) (2) (2) 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Budgeted Ending Budgeted Ending Budgeted Ending Budgeted Ending Budgeted(3) Estimated(4) Budgeted(4) REVENUES Local Control Funding $22,126,762 $21,946,638 $24,657,674 $24,951,090 $26,054,683 $25,189,897 $27,513,182 $27,111,579 $28,750,798 $28,696,332 $26,229,245 Formula Federal Sources 1,729,990 1,792,459 1,794,986 2,022,949 1,903,102 2,066,823 2,322,845 2,344,369 72,390 3,532,340 2,523,329 Other State Sources 2,424,681 2,509,022 1,654,901 1,696,784 1,153,995 3,310,263 1,950,497 3,765,462 510,115 1,225,585 950,982 Other Local Sources 1,347,277 1,795,037 1,558,530 1,623,915 1,527,658 1,524,991 1,804,965 1,609,526 335,928 1,636,239 1,826,304 Total Revenues 27,628,710 28,043,156 29,666,091 30,294,738 30,639,438 32,091,974 33,591,489 34,830,936 29,669,231 35,090,497 31,529,860 EXPENDITURES Current: Certificated Salaries 10,884,330 10,675,865 11,865,785 11,792,434 12,391,570 12,425,461 12,641,366 12,317,039 10,335,125 12,868,286 12,883,149 Classified Salaries 3,980,683 3,838,201 4,203,350 4,192,527 4,457,878 4,556,375 4,831,648 4,676,757 3,506,712 4,770,632 4,621,362 Employee Benefits 6,329,712 5,968,734 6,938,311 7,440,854 7,461,854 8,773,637 7,936,580 10,043,029 6,849,880 8,570,645 8,240,811 Books & Supplies 1,932,682 2,035,228 2,657,227 2,329,688 2,474,085 1,970,726 2,608,589 2,012,868 2,031,149 2,572,297 1,973,073 Services & Operating 3,179,685 3,164,558 3,546,157 2,865,035 2,578,693 3,677,662 3,776,187 2,767,916 2,886,239 3,979,127 2,783,218 Expenditures Capital Outlay -- -- 30,000 101,919 110,600 606,348 634,000 276,958 206,000 984,093 -- Other Outgo Excluding transfers of 789,862 886,478 755,692 1,142,102 1,016,350 1,190,159 1,023,902 1,437,639 168,660 1,219,236 1,479,012 indirect costs Transfers of indirect (83,880) -- (62,951) -- (62,951) (32,035) (62,951) (1) (613,764)) (67,052) (90,707) costs

Debt Service: Principal ------64,990 74,652 ------Interest ------27,876 125,024 98,751 ------Total Expenditures 27,013,075 26,569,064 29,933,571 29,864,559 30,428,079 33,196,209 33,579,335 33,705,610 25,370,001 34,897,265 21,889,919 Excess (Deficiency) of Revenues Over 615,635 1,474,092 (267,480) 430,179 211,359 (1,104,235) 12,154 1,125,326 4,299,230 193,232 (360,059) Expenditures Other Financing Sources (Uses) Transfers In -- 12 -- 12 ------Transfers Out (515,936) (64,000) (406,233) (21,680) (54,102) -- (54,102) ------Other Sources ------58,704 ------Contributions ------(4,274,985) -- -- Net Financing Sources (515,936) (63,988) (406,233) (21,668) (54,102) -- (54,102) 58,704 (4,274,985) -- -- (Uses) Net Change in Fund 99,699 1,410,104 (673,713) 408,511 157,257 (1,104,235) (41,948) 1,184,030 24,245 193,232 (360,059) Balance Fund Balance – Beginning 4,079,357 4,079,357 5,489,460 5,489,460 5,897,264 5,897,971 4,793,736 4,793,736 4,776,471(5) 4,878,776 (5)(6) 5,072,008 (5) Fund Balance - Ending $4,179,056 $5,489,461 $4,815,747 $5,897,971 $6,054,521 $4,793,736 $4,751,788 $5,977,766 $4,800,716 $5,072,008 $4,711,948

(1) Reflects combined unrestricted and restricted general fund. All amounts rounded to nearest whole number. On behalf payments are not included in the actual revenues and expenditures. (2) From the District’s audited financial statements for fiscal years 2015-16 through 2018-19, respectively. (3) From the District’s fiscal year 2019-20 Second Interim Financial Report, approved by the Board on March 12, 2020. (4) From the District’s adopted budget for fiscal year 2020-21, approved by the Board on June 25, 2020. (5) Beginning fund balance reflects the general fund only, and do not agree with the amounts reported for fiscal years 2015-16 through 2018-19 of this table and the amounts reported under “-Comparative Financial Statements” herein, because amounts included in the audited financial statements for fiscal years 2015-16 through 2018-19 include the financial activity of Fund 20 (Special Reserve Fund for Postemployment Benefits), in accordance with the fund type definitions promulgated by GASB Statement No. 54. (6) Reflects restatement of $116,120, to correct a manual error. Source: Fairfax Elementary School District. 49

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 State Education Code, is to be followed by all State school districts.

The District’s 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. Delinquent taxes not received after the fiscal year end are not recorded as revenue until received. 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 District’s 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 type of fund. The District’s fiscal year begins on July 1 and ends on June 30.

Comparative Financial Statements

Audited financial statements for the District for the fiscal year ended June 30, 2019, and prior fiscal years are on file with the District and available for public inspection at the Office of the Superintendent of the District, 1500 S. Fairfax Road, Bakersfield, California 93307, telephone: (661) 366-7221. The audited financial statements for the year ended June 30, 2019, are attached hereto as APPENDIX B.

The table on the following page reflects the District’s audited general fund revenues, expenditures and fund balances from fiscal year 2014-15 through fiscal year 2018-19.

AUDITED GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCE(1) Fiscal Years 2014-15 through 2018-19 Fairfax Elementary School District

2014-15 2015-16 2016-17 2017-18 2018-19 REVENUES LCFF Sources $18,137,755 $21,946,638 $24,951,090 $25,189,897 $27,111,579 Federal Sources 1,926,749 1,792,459 2,022,949 2,066,823 2,344,369 Other State Sources 1,984,582 2,509,022 1,696,784 3,310,263 3,765,462 Other Local Sources 1,831,278 1,795,037 1,623,915 1,524,991 1,609,526 Total Revenues 23,880,364 28,043,156 30,294,738 32,091,974 34,830,936 EXPENDITURES Current Instruction 14,900,073 16,762,334 18,894,953 20,242,946 20,901,993 Instruction-Related Services 1,678,038 1,834,155 2,065,696 2,298,010 2,453,764 Pupil Services 1,920,869 2,267,232 2,259,668 2,415,678 2,627,485 Ancillary Services 55,893 65,181 57,412 56,883 58,811 Community Services 45,550 ------General Administration 1,236,062 1,587,177 1,822,458 1,918,878 2,17,809 Plant Services 3,675,451 3,166,507 3,430,351 4,439,431 3,757,748 Other Outgo 806,961 886,478 1,142,102 1,190,159 1,437,639 Capital Outlay -- -- 101,919 606,348 276,958 Debt Service: Principal ------74,652 Interest ------27,876 98,751 Total Expenditures 24,318,897 26,569,064 29,864,559 $33,196,209 33,705,610 Excess (Deficiency) of Revenues Over (Under) (438,533) 1,474,092 430,179 (1,104,235) 1,125,326 Expenditures Other Financing Sources (Uses): Transfers In -- 12 12 -- -- Transfers Out (487,139) (64,000) (21,680) -- -- Other Sources ------58,704 Net Financing Sources (Uses) (487,139) (63,988) (21,668) -- 58,704 NET CHANGE IN FUND BALANCES (925,672) 1,410,104 408,511 (1,104,235) 1,184,030 Fund Balance - Beginning 5,005,029 4,079,357 5,489,460 5,897,971 4,793,736 Fund Balance – Ending $4,079,357 $5,489,461 $5,897,971 $4,793,736 $5,977,766

(1) From the District’s comprehensive audited financial statements for fiscal years 2014-15 through 2018-19, respectively. Reflects combined unrestricted and restricted general fund. All amounts rounded to nearest whole number. Source: Fairfax Elementary School District.

State Budget Measures

The following information concerning the State’s budgets has been obtained from publicly available information which the District believes to be reliable; however, the District does not guarantee the accuracy or completeness of this information and has not independently verified such information. Furthermore, it should not be inferred from the inclusion of this information herein that the principal of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied by the County on taxable property within the District in an amount sufficient for the payment thereof.

2020-21 State Budget. On June 29, 2020, the Governor signed into law the State budget for fiscal year 2020-21 (the “2020-21 Budget”). The following information is drawn from the DOF’s summary of the 2020-21 Budget.

As with the Governor’s May revision (the “May Revision”) to the proposed State budget, the 2020-21 Budget acknowledges that the rapid onset of COVID-19 has had an immediate and severe impact on the State’s economy. The ensuing recession has caused significant job losses, precipitous drops in family and business income, and has exacerbated inequality. The May Revision forecast included a peak unemployment rate of 24.5% in the second quarter of 2020 and a decline in personal income of nearly 9%. The 2020-21 Budget reports that the official unemployment rate exceeded 16% in both April and May of 2020.

The 2020-21 Budget includes a number of measures intended to address a projected deficit of $54.3 billion identified by the May Revision, and occasioned principally by declines in the State’s three main tax revenues (personal income, sales and use, and corporate). The measures included in the 2020- 21 Budget, and described below, are intended to close this deficit and set aside $2.6 billion in the State’s traditional general fund reserve, including $716 million for the State to respond to the changing conditions of the COVID-19 pandemic:

 Draw Down of Reserves – The 2020-21 Budget draws down $8.8 billion in total State reserves, including $7.8 billion from the BSA, $450 million from the Safety Net Reserve and all funds in the PSSSA.

 Triggers – The 2020-21 Budget includes $11.1 billion in reductions and deferrals that would be restored if at least $14 billion in federal funds are received by October 15, 2020. If the State receives less than this amount, reductions and deferrals would be partially restored. The triggers includes $6.6 billion in deferred spending on education, $970 million in funding for the California State University and University of California systems, $2.8 billion in State employee compensation and $150 million for courts, as well as funding for various other State programs. The triggers would also fund an additional $250 million for county programs to backfill revenue losses.

 Federal Funds – The 2020-21 Budget relies on $10.1 billion in federal funds, including $8.1 billion of which has already been received. This relief includes recent congressional approval for a temporary increase in the federal government’s share of Medicaid costs, a portion of the State’s Coronavirus Relief Fund allocation pursuant to the CARES Act and federal funds provided for childcare programs.

 Borrowing/Transfers/Deferrals – The 2020-21 Budget relies on $9.3 billion in special fund borrowing and transfers, as well as deferrals to K-14 education discussed further herein. Approximately $900 million of special fund borrowing is associated with reductions to State employee compensation and is subject to the triggers discussed above.

 Increased Revenues – The 2020-21 Budget temporarily suspends for three years net operating loss tax deductions for medium and large businesses and limits business tax credits, with an estimated increase in tax revenues of $4.3 billion in fiscal year 2020-21.

 Cancelled Expansions, Updated Assumptions and Other Measures – The 2020-21 Budget includes an additional $10.6 billion of measures, including cancelling multiple programmatic expansions, anticipated governmental efficiencies, higher ongoing revenues above the forecast included in the May Revision, and lower health and human services caseload costs than assumed by the May Revision.

For fiscal year 2019-20, the 2020-21 Budget projects total general fund revenues and transfers of $137.6 billion and authorizes expenditures of $146.9 billion. The State is projected to end the 2019-20 52

fiscal year with total available general fund reserves of $17 billion, including $16.1 billion in the BSA and $900 million in the Safety Net Reserve Fund. For fiscal year 2020-21, the 2020-21 Budget projects total general fund revenues and transfers of $137.7 billion and authorizes expenditures of $133.9 billion. The State is projected to end the 2020-21 fiscal year with total available general fund reserves of $11.4 billion, including $2.6 billion in the traditional general fund reserve (of which $716 million is earmarked for COVID-related responses), $8.3 billion in the BSA and $450 million in the Safety Net Reserve Fund.

As a result of the projected reduction of State revenues occasioned by the COVID-19 pandemic, the 2020-21 Budget estimates that the Proposition 98 minimum funding guarantee for fiscal year 2020-21 is $70.1 billion, approximately $10 billion below the revised prior-year funding level. For K-12 school districts, this results in per-pupil spending in fiscal year 2020-21 of $10,654, a reduction of $1,339 from the prior year.

The 2020-21 Budget proposes several measures intended to ameliorate the immediate impact of State revenue declines, and avoid a permanent decline in education funding:

 Local Control Funding Formula – The 2020-21 Budget provides for $1.9 billion in LCFF apportionment deferrals for fiscal year 2019-20. The deferrals increase to $11 billion in fiscal year 2020-21, which results in LCFF funding remaining at 2019-20 levels in both years. The 2020-21 Budget also suspends the statutory COLA in fiscal 2020-21. Of the total deferrals, $5.8 billion will be triggered off in fiscal year 2020-21 if sufficient federal funding for this purpose is received.

 Learning Loss Mitigation – The 2020-21 Budget includes a one-time investment of $5.3 billion ($4.75 billion in CARES Act funding and $539.9 million in Proposition 98 funding) to local educational agencies to address learning losses related to COVID-19 school closures. Of these funds, $2.9 billion will be allocated based on LCFF supplemental and concentration grant allocations, $1.5 billion based on the number of students with exceptional needs, and $979.8 million based on total LCFF allocations.

 Supplemental Appropriations – The 2020-21 Budget provides for a new, multi-year payment obligation to supplement K-14 education funding. The total obligation would equal approximately $12.4 billion, and reflects the administration’s estimate of the additional funding K-14 school districts would have received in the absence of COVID-19-related reductions. Under this proposal the State will make annual payments toward this obligation beginning in fiscal year 2021-22. These payments would equal 1.5% of State general fund revenue. The 2020-21 Budget also increases the share of State general fund revenue required to be spent on K-14 school districts from 38% to 40% by fiscal year 2023-24.

 CalSTRS/CalPERS – The 2020-21 Budget redirects $2.3 billion in funds previously appropriated for prefunding CalSTRS and CalPERS liabilities, and instead applies them to further reduce local educational agency contribution rates for such programs in fiscal years 2020-21 and 2021-22. This reduces CalSTRS employer rates to 16.15% in fiscal year 2020- 21 and 16.02% in fiscal year 2021-22. CalPERS employer rates would be reduced to 20.7% in fiscal year 2020-21 and 22.84% in fiscal year 2021-22. See also “FAIRFAX ELEMENTARY SCHOOL DISTRICT – District Retirement Systems” herein.

 Federal Funds – In addition to the CARES Act funding previously discussed, the 2020-21 Budget appropriates $1.6 billion in federal Elementary and Secondary School Emergency Relief funds recently awarded to the State. Of this amount, approximately $1.5 billion will be allocated to local educational agencies in proportion to the amount of federal Title I-A 53

funding such agencies receive, to be used for COVID-19 related costs. The remaining amount will be allocated to state-level activities.

 Temporary Revenue Increases – As discussed above, as part of closing the State’s projected deficit, the 2020-21 Budget provides for a temporary revenue increase of approximately $4.3 billion in fiscal year 2020-21, of which approximately $1.6 billion counts towards the Proposition 98 funding guarantee.

Other significant features of K-12 education funding in the 2020-21 Budget include the following:

 Special Education – The 2020-21 Budget increases special education base rates to $625 per pupil, and provides $100 million to increase funding for students with low-incidence disabilities.

 Average Daily Attendance – The 2020-21 Budget provides for a hold-harmless for calculating apportionments in fiscal year 2020-21. ADA will be based on the 2019-20 year, except for new charter schools commencing instruction in fiscal year 2020-21. The 2020-21 Budget also provides an exemption for local educational agencies from certain annual minimum instructional minute requirements, and includes requirements for distance learning to ensure that, in the absence of in-person instruction, students continue to receive access to quality education.

 LCAPs – In April of 2020, the Governor issued an executive order allowing local educational agencies to submit their LCAP for fiscal year 2020-21 in December, in lieu of the usual July 1 deadline. Recognizing that federal relief funds need to be expended on an accelerated timeline, and to ensure transparency, the 2020-21 Budget replaces the December LCAP with a Learning Continuity and Attendance Plan to be completed by September 30, 2020. The 2020-21 Budget requires the State Superintendent of Public Instruction to develop a template of this plan for use by local educational agencies which will include a description of how such agencies will provide continuity of learning during the pandemic, expenditures related to addressing the impacts of the pandemic, and how such agencies are increasing or improving services in proportion to concentration funding that is received under the LCFF.

 Employee Protections – The 2020-21 Budget suspends school districts’ window to lay off teachers and other non-administrative certificated staff, which typically runs from the time the budget is approved by the State Legislature to August 15. The 2020-21 Budget also suspends layoffs of classified staff working in transportation, nutrition and custodial services from July 1, 2020 through June 30, 2021.

For additional information regarding the 2020-21 Budget, see the DOF website at www.dof.ca.gov. However, the information presented on such website is not incorporated herein by reference.

Future Actions and Events. The District cannot predict what actions will be taken in the future by the State legislature and the Governor to address changing State revenues and expenditures. The District also cannot predict the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions or results could produce a significant shortfall of revenue and cash, and could consequently impair the State’s ability to fund schools. The COVID-19 pandemic has already resulted in significant negative economic effects at State 54

and federal levels, and additional negative economic effects are possible, each of which could negatively impact anticipated State revenue levels. In addition, the pandemic could also result in higher State expenditures, of both a direct nature (such as those related to managing the outbreak) and an indirect nature (such as higher public usage of need-based programs resulting from unemployment or disability). See “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein. The District also cannot predict whether the federal government will provide additional funding in amounts sufficient to offset any of the fiscal impacts of the COVID-19 pandemic described above. State budget shortfalls in future fiscal years may also have an adverse financial impact on the financial condition of the District. However, the obligation to levy ad valorem property taxes upon all taxable property within the District for the payment of principal of and interest on the Bonds would not be impaired.

FAIRFAX ELEMENTARY SCHOOL DISTRICT

The information in this section concerning the operations of the District and the District’s finances are 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 solely from the revenues generated by an ad valorem property tax required to be levied by the County on taxable property within the District for the payment thereof. See “THE BONDS – Security and Sources of Payment” herein.

Introduction

The District is an elementary school district organized under the laws of the State. The District was established in 1891, and encompasses an area of approximately 14 square miles in the County, and is located approximately five miles west of downtown Bakersfield. The District provides elementary school facilities for grades kindergarten through eight, and currently maintains four schools. For fiscal year 2020-21, the District’s budgeted average daily attendance (“ADA”) is approximately 2,600 students, and the taxable property within the District has an assessed valuation of $1,130,634,704. However, the District’s actual student attendance and the assessed value of taxable property may be affected by the current outbreak of COVID-19. The District opened the 2020-21 school year utilizing a distance learning environment, and will continue such a learning environment at least through October, 2020. See “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein.

Unless otherwise indicated, the following financial, statistical and demographic data has been provided by the District. Additional information concerning the District and copies of subsequent audited financial reports of the District may be obtained by contacting: Fairfax Elementary School District, Attention: Superintendent, 1500 S. Fairfax Road, Bakersfield, California 93307.

Administration

The District is governed by a five-member Board, each member of which is elected to a four-year term. Elections for positions on the Board are held every two years, alternating between two and three available positions. Current members of the Board, together with their offices and the dates their term expires, are listed below:

BOARD OF TRUSTEES Fairfax Elementary School District

Name Office Term Expires Javier Moreno President December 2020 Victoria Coronel Clerk December 2022 Virginia Lawson Trustee December 2020 Palmer Moland Trustee December 2022 Alma Rios Trustee December 2022

The Superintendent of the District is responsible for administering the affairs of the District in accordance with the policies of the Board. A brief biography of the Superintendent follows:

Michael Coleman, Superintendent. Mr. Coleman has served as Superintendent of the District for the past six years, having served as the District’s Assistant Superintendent, Business Services for the preceding five years. Prior to arriving at the District, Mr. Coleman served as a Director of District Advisory Services for the Kern County Superintendent of Schools. Prior to these positions, he served as Superintendent for Di Giorgio Elementary School District, Principal/Teacher for Blake School District, and Science Teacher for Standard School District. He has a degree in Liberal Studies from California State University, San Bernardino, and received his Masters of Arts degree in Educational Administration from Chapman University. He has completed the State chief business officer certificate program from University of Southern California and the Coalition for Adequate School Housing Facilities Academy sponsored by the Fiscal Crisis Management Assistance Team.

Labor Relations

The District currently employs approximately 152 full-time certificated employees, approximately 67 full-time classified employees, and approximately 101 part-time employees. District employees are represented by the two bargaining units as noted below:

BARGAINING UNITS Fairfax Elementary School District

Name of Number of Current Contract Bargaining Unit Employees Represented Expiration Date Kern Fairfax Teachers Association 139 June 30, 2022 California School Employees Association 126 June 30, 2020(1)

(1) Bargaining unit currently working under terms of expired contract while new agreement under negotiation.. Source: Fairfax Elementary School District.

District Retirement Systems

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.

STRS. All full-time certificated employees, as well as certain classified employees, are members of the State Teachers’ Retirement System (“STRS”). STRS provides retirement, disability and survivor benefits to plan members and beneficiaries under a defined benefit program (the “STRS Defined Benefit Program”). The STRS Defined Benefit Program is funded through a combination of investment earnings and statutorily set contributions from three sources: employees, employers, and the State. Benefit provisions and contribution amounts are established by State statutes, as legislatively amended from time to time.

Prior to fiscal year 2014-15, and unlike typical defined benefit programs, none of the employee, employer nor State contribution rates to the STRS Defined Benefit Program varied annually to make up funding shortfalls or assess credits for actuarial surpluses. In recent years, the combined employer, employee and State contributions to the STRS Defined Benefit Program have not been sufficient to pay actuarially required amounts. As a result, and due to significant investment losses, the unfunded actuarial liability of the STRS Defined Benefit Program has increased significantly in recent fiscal years. In September 2013, STRS projected that the STRS Defined Benefit Program would be depleted in 31 years assuming existing contribution rates continued, and other significant actuarial assumptions were realized. In an effort to reduce the unfunded actuarial liability of the STRS Defined Benefit Program, the State passed the legislation described below to increase contribution rates.

Prior to July 1, 2014, K-14 school districts were required by such statutes to contribute 8.25% of eligible salary expenditures, while participants contributed 8% of their respective salaries. On June 24, 2014, the Governor signed AB 1469 (“AB 1469”) into law as a part of the State’s fiscal year 2014-15 budget. AB 1469 seeks to fully fund the unfunded actuarial obligation with respect to service credited to members of the STRS Defined Benefit Program before July 1, 2014 (the “2014 Liability”), within 32 years, by increasing member, K-14 school district and State contributions to STRS. Commencing July 1, 2014, the employee contribution rate increased over a three-year phase-in period in accordance with the following schedule:

MEMBER CONTRIBUTION RATES STRS (Defined Benefit Program)

STRS Members Hired Prior to STRS Members Hired Effective Date January 1, 2013 After January 1, 2013 July 1, 2014 8.150% 8.150% July 1, 2015 9.200 8.560 July 1, 2016 10.250 9.205 ______Source: AB 1469.

Pursuant to the Reform Act (defined below), the contribution rates for members hired after the Implementation Date (defined below) will be adjusted if the normal cost increases by more than 1% since the last time the member contribution was set. The contribution rate for employees hired after the Implementation Date (defined below) increased from 9.205% of creditable compensation for fiscal year commencing July 1, 2017 to 10.205% of creditable compensation effective July 1, 2018. For fiscal year

commencing July 1, 2019, the contribution rate was 10.250% for employees hired before the Implementation Date and 10.205% for employees hired after the Implementation Date. For fiscal year commencing July 1, 2020, the contribution rate will be 10.250% for employees hired before the Implementation Date and 10.205% employees hired after the Implementation Date.

Pursuant to AB 1469, K-14 school districts’ contribution rate will increase over a seven-year phase-in period in accordance with the following schedule:

K-14 SCHOOL DISTRICT CONTRIBUTION RATES STRS (Defined Benefit Program)

Effective Date K-14 school districts July 1, 2014 8.88% July 1, 2015 10.73 July 1, 2016 12.58 July 1, 2017 14.43 July 1, 2018 16.28 July 1, 2019 18.13 July 1, 2020 19.10 ______Source: AB 1469.

Based upon the recommendation from its actuary, for fiscal year 2021-22 and each fiscal year thereafter the STRS Teachers’ Retirement Board (the “STRS Board”), is required to increase or decrease the K-14 school districts’ contribution rate to reflect the contribution required to eliminate the remaining 2014 Liability by June 30, 2046; provided that the rate cannot change in any fiscal year by more than 1% of creditable compensation upon which members’ contributions to the STRS Defined Benefit Program are based; and provided further that such contribution rate cannot exceed a maximum of 20.25%. In addition to the increased contribution rates discussed above, AB 1469 also requires the STRS Board to report to the State Legislature every five years (commencing with a report due on or before July 1, 2019) on the fiscal health of the STRS Defined Benefit Program and the unfunded actuarial obligation with respect to service credited to members of that program before July 1, 2014. The reports are also required to identify adjustments required in contribution rates for K-14 school districts and the State in order to eliminate the 2014 Liability.

On June 27, 2019, the Governor signed SB 90 (“SB 90”) into law as a part of the 2019-20 Budget. Pursuant to SB 90, the State Legislature appropriated $2.246 billion to be transferred to the Teacher’s Retirement Fund for the STRS Defined Benefit Program to pay in advance, on behalf of employers, part of the contributions required for fiscal years 2019-20 and 2020-21, resulting in K-14 school districts having to contribute 1.03% less in fiscal year 2019-20 and 0.70% less in fiscal year 2020- 21, resulting in employer contribution rates of 17.1% in fiscal year 2019-20 and 18.4% in fiscal year 2020-21. In addition, the State made a contribution of $1.117 billion to be allocated to reduce the employer’s share of the unfunded actuarial obligation determined by the STRS Board upon recommendation from its actuary. This additional payment will be reflected in the June 30, 2020 actuarial valuation. Subsequently, the State’s 2020-21 Budget redirected $2.3 billion previously appropriated to STRS and PERS pursuant to SB 90 for long-term unfunded liabilities to further reduce the employer contribution rates in fiscal year 2020-21 and 2021-22. As a result, the effective employer contribution rate is 16.15% in fiscal year 2020-21 and is projected to be 16.02% in fiscal year 2021-22. See “DISTRICT FINANCIAL INFORMATION – State Budget Measures” herein.

The District’s contributions to STRS were $813,777 in fiscal year 2014-15, $1,111,371 in fiscal year 2015-16, $1,036,840 in fiscal year 2016-17, $1,392,049 for fiscal year 2017-18, and $1,701,529 in fiscal year 2018-19, and in each such year was equal to 100% of the required contributions. The District estimates $2,143,155 for its contribution to STRS for fiscal year 2019-20, and has budgeted $2,057,218 for its contribution for fiscal year 2020-21.

The State also contributes to STRS, currently in an amount equal to 7.828% for fiscal year 2019- 20 and 8.328% for fiscal year 2020-21. The State’s contribution reflects a base contribution rate of 2.017%, and a supplemental contribution rate that will vary from year to year based on statutory criteria. Based upon the recommendation from its actuary, for fiscal year 2017-18 and each fiscal year thereafter, the STRS Board is required, with certain limitations, to increase or decrease the State’s contribution rates to reflect the contribution required to eliminate the unfunded actuarial accrued liability attributed to benefits in effect before July 1, 1990. The STRS Board approved State supplemental contribution rate for fiscal year 2020-21 reflects an increase of 0.5% of payroll, the maximum allowed under current law.

In addition, the State is currently required to make an annual general fund contribution up to 2.5% of the fiscal year covered STRS member payroll to the Supplemental Benefit Protection Account (the “SBPA”), which was established by statute to provide supplemental payments to beneficiaries whose purchasing power has fallen below 85% of the purchasing power of their initial allowance.

PERS. Classified employees working four or more hours per day are members of the Public Employees’ Retirement System (“PERS”). PERS 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 from time to time. PERS operates a number of retirement plans including the Public Employees Retirement Fund (“PERF”). PERF is a multiple- employer defined benefit retirement plan. In addition to the State, employer participants at June 30, 2019 included 1,612 public agencies and 1,319 K-14 school districts and charter schools. PERS acts as the common investment and administrative agent for the member agencies. The State and K-14 school districts (for “classified employees,” which generally consist of school employees other than teachers) are required by law to participate in PERF. Employees participating in PERF generally become fully vested in their retirement benefits earned to date after five years of credited service. One of the plans operated by PERS is for K-14 school districts throughout the State (the “Schools Pool”).

Contributions by employers to the Schools Pool are based upon an actuarial rate determined annually and contributions by plan members vary based upon their date of hire. The employer contribution rate for fiscal year 2020-21 is 20.7%, which reflects an initial actuarially determined rate of 23.35% that was reduced by pursuant to SB 90 (discussed below) and further reduced by the State’s 2020- 21 Budget as a result of the redirection of funds previously appropriated pursuant to SB 90 for long-term unfunded liabilities (discussed above). The State’s 2020-21 State Budget projects an employer contribution rate of 22.84% in fiscal year 2021-22 See “DISTRICT FINANCIAL INFORMATION – State Budget Measures” herein. Participants enrolled in PERS prior to January 1, 2013 contribute at a rate established by statute, which is 7% of their respective salaries in fiscal year 2019-20 and will be 7% of such salaries in fiscal year 2020-21, while participants enrolled after January 1, 2013 contribute at an actuarially determined rate, which is 7% in fiscal year 2019-20 and will be 7% in fiscal year 2020-21. See “—California Public Employees’ Pension Reform Act of 2013” herein.

Pursuant to SB 90, the State Legislature appropriated $144 million for fiscal year 2019-20 and $100 million for fiscal year 2020-21 to be transferred to the Public Employees’ Retirement Fund, to pay in advance, on behalf of K-14 school district employers, part of the contributions required for K-14 school district employers for such fiscal years. In addition, the State Legislature appropriated $660 million to be

applied toward certain unfunded liabilities for K-14 school district employers. As a result of the payments made by the State pursuant to SB 90, the employer contribution rate for fiscal year 2019-20 was 19.721%. See “DISTRICT FINANCIAL INFORMATION – State Budget Measures” herein.

The District’s contributions to PERS were $389,247 in fiscal year 2014-15, $443,106 in fiscal year 2015-16, $573,674 in fiscal year 2016-17, $574,326 for fiscal year 2017-18 and $681,542 in fiscal year 2018-19, and in each such year was equal to 100% of the required contributions. The District estimates $816,446 for its contribution to PERS for fiscal year 2019-20, and has budgeted $895,756 for its contribution for fiscal year 2020-21.

For further information about the District’s contributions to STRS and PERS, see “APPENDIX B – 2018-19 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Note L” attached hereto.

State Pension Trusts. Each of STRS and PERS issues a separate comprehensive financial report that includes financial statements and required supplemental information. Copies of such financial reports may be obtained from each of STRS and PERS as follows: (i) STRS, P.O. Box 15275, Sacramento, California 95851-0275; (ii) PERS, P.O. Box 942703, Sacramento, California 94229-2703. Moreover, each of STRS and PERS maintains a website, as follows: (i) STRS: www.calstrs.com; (ii) PERS: www.calpers.ca.gov. However, the information presented in such financial reports or on such websites is not incorporated into this Official Statement by any reference.

Both STRS and PERS have substantial statewide unfunded liabilities. The amount of these unfunded liabilities will vary depending on actuarial assumptions, returns on investments, salary scales and participant contributions. The following table summarizes information regarding the actuarially-determined accrued liability for both STRS and PERS. Actuarial assessments are “forward- looking” information that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans.

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FUNDED STATUS STRS (Defined Benefit Program) and PERS (Schools Pool) (Dollar Amounts in Millions) (1) Fiscal Years 2010-11 through 2018-19 STRS Value of Value of Trust Unfunded Trust Unfunded Fiscal Accrued Assets Liability Assets Liability Year Liability (MVA)(2) (MVA)(2) (AVA)(3) (AVA)(3) 2010-11 $208,405 $147,140 $68,365 $143,930 $64,475 2011-12 215,189 143,118 80,354 144,232 70,957 2012-13 222,281 157,176 74,374 148,614 73,667 2013-14 231,213 179,749 61,807 158,495 72,718 2014-15 241,753 180,633 72,626 165,553 76,200 2015-16 266,704 177,914 101,586 169,976 96,728 2016-17 286,950 197,718 103,468 179,689 107,261 2017-18 297,603 211,367 101,992 190,451 107,152 2018-19 310,719 225,466 102,636 205,016 105,703 PERS Value of Value of Trust Unfunded Trust Unfunded Fiscal Accrued Assets Liability Assets Liability Year Liability (MVA) (MVA) (AVA)(3) (AVA)(3) 2010-11 $58,358 $45,901 $12,457 $51,547 $6,811 2011-12 59,439 44,854 14,585 53,791 5,648 2012-13 61,487 49,482 12,005 56,250 5,237 2013-14 65,600 56,838 8,761 --(4) --(4) 2014-15 73,325 56,814 16,511 --(4) --(4) 2015-16 77,544 55,785 21,759 --(4) --(4) 2016-17 84,416 60,865 23,551 --(4) --(4) 2017-18 92,071 64,846 27,225 --(4) --(4) 2018-19(5) 99,528 68,177 31,351 --(4) --(4)

(1) Amounts may not add due to rounding. (2) Reflects market value of assets, including the assets allocated to the SBPA reserve. Since the benefits provided through the SBPA are not a part of the projected benefits included in the actuarial valuations summarized above, the SBPA reserve is subtracted from the STRS Defined Benefit Program assets to arrive at the value of assets available to support benefits included in the respective actuarial valuations. (3) Reflects actuarial value of assets. (4) Effective for the June 30, 2014 actuarial valuation, PERS no longer uses an actuarial value of assets. (5) On April 21, 2020, the PERS Board (defined below) approved the K-14 school district contribution rate for fiscal year 2020- 21 and released certain actuarial information to be incorporated into the June 30, 2019 actuarial valuation to be released in the latter half of 2020. Source: PERS Schools Pool Actuarial Valuation; STRS Defined Benefit Program Actuarial Valuation.

The STRS Board has sole authority to determine the actuarial assumptions and methods used for the valuation of the STRS Defined Benefit Program. Based on the multi-year CalSTRS Experience Analysis (spanning from July 1, 2010, through June 30, 2015) (the “2017 Experience Analysis”), on February 1, 2017, the STRS Board adopted a new set of actuarial assumptions that reflect member’s increasing life expectancies and current economic trends. These new assumptions were first reflected in the STRS Defined Benefit Program Actuarial Valuation, as of June 30, 2016 (the “2016 STRS Actuarial Valuation”). The new actuarial assumptions include, but are not limited to: (i) adopting a generational mortality methodology to reflect past improvements in life expectancies and provide a more dynamic assessment of future life spans, (ii) decreasing the investment rate of return (net of investment and administrative expenses) to 7.25% for the 2016 STRS Actuarial Valuation and 7.00% for the June 30,

2017 actuarial evaluation (the “2017 STRS Actuarial Valuation”), and (iii) decreasing the projected wage growth to 3.50% and the projected inflation rate to 2.75%.

Based on the multi-year CalSTRS Experience Analysis (spanning from July 1, 2015, through June 30, 2018) (the “2020 Experience Analysis”), on January 31, 2020, the STRS Board adopted a new set of actuarial assumptions that were first reflected in the STRS Defined Benefit Program Actuarial Valuation, as of June 30, 2019 (the “2019 STRS Actuarial Valuation”). While no changes were made to the actuarial assumptions discussed above, which were established as a result of the 2017 Experience Analysis, certain demographic changes were made, including: (i) lowering the termination rates to reflect a continued trend of lower than expected teachers leaving their employment prior to retirement, and (ii) adopting changes to the retirement rates for both employees hire before the Implementation Date and after the Implementation Date to better reflect the anticipated impact of years of service on retirements. The 2019 STRS Actuarial Valuation continues using the Entry Age Normal Actuarial Cost Method.

Based on salary increases less than assumed, additional State contributions, and actuarial asset gains recognized from the current and prior years, the 2019 STRS Actuarial Valuation reports that the unfunded actuarial obligation decreased by $1.5 billion since the 2018 STRS Actuarial Valuation and the funded ratio increased by 2.0% to 66.0% over such time period.

According to the 2019 STRS Actuarial Valuation, the future revenues from contributions and appropriations for the STRS Defined Benefit Program are projected to be approximately sufficient to finance its obligations with a projected ending funded ratio in fiscal year ending June 30, 2046 of 99.9%, except for a small portion of the unfunded actuarial obligation related to service accrued on or after July 1, 2014 for member benefits adopted after 1990, for which AB 1469 provides no authority to the STRS Board to adjust rates to pay down that portion of the unfunded actuarial obligation. This finding reflects the scheduled contribution rate increases directed by statute, assumes additional increases in the scheduled contribution rates allowed under the current law will be made, and is based on the valuation assumptions and valuation policy adopted by the STRS Board, including a 7.00% investment rate of return assumption and includes the $1.117 billion State contribution made in July 2019 pursuant to SB 90.

The actuary for the STRS Defined Benefit Program notes in the 2019 STRS Actuarial Report that, since such report is dated as of June 30, 2019, the significant declines in the investment markets that have occurred in the first half the 2020 calendar year are not directly reflected in the 2019 STRS Actuarial Report. The actuary notes that such declines will almost certainly impact the future of the STRS Defined Benefit Program funding, and that, all things being equal, it is expected that the actuarial valuation for the fiscal year ending June 30, 2020 will show a greater increase in the projected State contribution rate (and possibly the employer rate) and a possible decline in the funded ratio. See “DISTRICT FINANCIAL INFORMATION – Considerations Regarding COVID-19” herein.

In recent years, the PERS Board of Administration (the “PERS Board”) has taken several steps, as described below, intended to reduce the amount of the unfunded accrued actuarial liability of its plans, including the Schools Pool.

On March 14, 2012, the PERS Board voted to lower the PERS’ rate of expected price inflation and its investment rate of return (net of administrative expenses) (the “PERS Discount Rate”) from 7.75% to 7.5%. On February 18, 2014, the PERS Board voted to keep the PERS Discount Rate unchanged at 7.5%. On November 17, 2015, the PERS Board approved a new funding risk mitigation policy to incrementally lower the PERS Discount Rate by establishing a mechanism whereby such rate is reduced by a minimum of 0.05% to a maximum of 0.25% in years when investment returns outperform the existing PERS Discount Rate by at least four percentage points. On December 21, 2016, the PERS Board voted to lower the PERS Discount Rate to 7.0% over a three year phase-in period in accordance with the

following schedule: 7.375% for the June 30, 2017 actuarial valuation, 7.25% for the June 30, 2018 actuarial valuation and 7.00% for the June 30, 2019 actuarial valuation. The new discount rate went into effect July 1, 2017 for the State and July 1, 2018 for K-14 school districts and other public agencies. Lowering the PERS Discount Rate means employers that contract with PERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Reform Act (defined below) will also see their contribution rates rise.

On April 17, 2013, the PERS Board approved new actuarial policies aimed at returning PERS to fully-funded status within 30 years. The policies include a rate smoothing method with a 30-year fixed amortization period for gains and losses, a five-year increase of public agency contribution rates, including the contribution rate at the onset of such amortization period, and a five year reduction of public agency contribution rates at the end of such amortization period. The new actuarial policies were first included in the June 30, 2014 actuarial valuation and were implemented with respect the State, K-14 school districts and all other public agencies in fiscal year 2015-16.

Also, on February 20, 2014, the PERS Board approved new demographic assumptions reflecting (i) expected longer life spans of public agency employees and related increases in costs for the PERS system and (ii) trends of higher rates of retirement for certain public agency employee classes, including police officers and firefighters. The new actuarial assumptions were first reflected in the Schools Pool in the June 30, 2015 actuarial valuation. The increase in liability due to the new assumptions will be amortized over 20 years with increases phased in over five years, beginning with the contribution requirement for fiscal year 2016-17. The new demographic assumptions affect the State, K-14 school districts and all other public agencies.

The PERS Board is required to undertake an experience study every four years under its Actuarial Assumptions Policy and State law. As a result of the most recent experience study, on December 20, 2017, the PERS Board approved new actuarial assumptions, including (i) lowering the inflation rate to 2.625% for the June 30, 2018 actuarial valuation and to 2.50% for the June 30, 2019 actuarial valuation, (ii) lowering the payroll growth rate to 2.875% for the June 30, 2018 actuarial valuation and 2.75% for the June 30, 2019 actuarial valuation, and (iii) certain changes to demographic assumptions relating to the salary scale for most constituent groups, and modifications to the morality, retirement, and disability retirement rates.

On February 14, 2018, the PERS Board approved a new actuarial amortization policy with an effective date for actuarial valuations beginning on or after June 30, 2019, which includes (i) shortening the period over which actuarial gains and losses are amortized from 30 years to 20 years, (ii) requiring that amortization payments for all unfunded accrued liability bases established after the effective date be computed to remain a level dollar amount throughout the amortization period, (iii) removing the 5-year ramp-up and ramp-down on unfunded accrued liability bases attributable to assumptions changes and non-investment gains/losses established on or after the effective date and (iv) removing the 5-year ramp- down on investment gains/losses established after the effective date. While PERS expects that reducing the amortization period for certain sources of unfunded liability will increase future average funding ratios, provide faster recovery of funded status following market downturns, decrease expected cumulative contributions, and mitigate concerns over intergenerational equity, such changes may result in increases in future employer contribution rates.

On April 21, 2020, the PERS Board established the employer contribution rates for 2020-21 and released certain information from the Schools Pool Actuarial Valuation as of June 30, 2019, ahead of its release date in the latter half of 2020. From June 30, 2018 to June 30, 2019 the funded status for the Schools Pool decreased by 1.9% (from 70.4% to 68.5%); mainly due to the reduction in the discount rate from 7.25% to 7.00% and investment return in 2018-19 being lower than expected. The funded status as

of June 30, 2019 does not reflect the State’s additional payment of $660 million that was made pursuant to SB 90, since PERS received the payment in July 2019. PERS attributes the decline in the funded status over the last five years to recent investment losses in excess of investment gains, adoption of new assumptions, both demographic and economic, lowering of the discount rate, and negative amortization. Assuming all actuarial assumptions are realized, including investment return of 7% in fiscal year 2019-20, that no changes to assumptions, methods of benefits will occur during the projection period, along with the expected reductions in normal cost due to the continuing transition of active members from those employees hired prior to the Implementation Date (defined below), to those hired after such date, the contribution rate was projected to increase annually, resulting in a projected 26.2% employer contribution rate for fiscal year 2026-27. As of the April 21, 2020, PERS reported that the year to date return for the 2019-20 fiscal year was well below the 7% assumed return.

The District can make no representations regarding the future program liabilities of STRS, or whether the District will be required to make additional contributions to STRS in the future above those amounts required under AB 1469. The District can also provide no assurances that the District’s required contributions to PERS will not increase in the future.

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 (the “Reform Act”), which makes changes to both STRS and PERS, most substantially affecting new employees hired after January 1, 2013 (the “Implementation Date”). For STRS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor (the age factor is the percent of final compensation to which an employee is entitled for each year of service) from age 60 to 62 and increasing the eligibility of the maximum age factor of 2.4% from age 63 to 65. Similarly, for non-safety PERS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor from age 55 to 62 and increases the eligibility requirement for the maximum age factor of 2.5% to age 67. Among the other changes to PERS and STRS, the Reform Act also: (i) requires all new participants enrolled in PERS and STRS after the Implementation Date to contribute at least 50% of the total annual normal cost of their pension benefit each year as determined by an actuary, (ii) requires STRS and PERS to determine the final compensation amount for employees based upon the highest annual compensation earnable averaged over a consecutive 36-month period as the basis for calculating retirement benefits for new participants enrolled after the Implementation Date (previously 12 months for STRS members who retire with 25 years of service), and (iii) caps “pensionable compensation” for new participants enrolled after the Implementation Date at 100% of the federal Social Security contribution (to be adjusted annually based on changes to the Consumer Price Index for all Urban Consumers) and benefit base for members participating in Social Security or 120% for members not participating in social security (to be adjusted annually based on changes to the Consumer Price Index for all Urban Consumers), while excluding previously allowed forms of compensation under the formula such as payments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off.

GASB Statement Nos. 67 and 68. On June 25, 2012, GASB approved Statements Nos. 67 and 68 (“Statements”) with respect to pension accounting and financial reporting standards for state and local governments and pension plans. The new Statements, No. 67 and No. 68, replace GASB Statement No. 27 and most of Statements No. 25 and No. 50. The changes impact the accounting treatment of pension plans in which state and local governments participate. Major changes include: (1) the inclusion of unfunded pension liabilities on the government’s balance sheet (currently, such unfunded liabilities are typically included as notes to the government’s financial statements); (2) more components of full pension costs being shown as expenses regardless of actual contribution levels; (3) lower actuarial discount rates being required to be used for underfunded plans in certain cases for purposes of the financial statements; (4) closed amortization periods for unfunded liabilities being required to be used for

certain purposes of the financial statements; and (5) the difference between expected and actual investment returns being recognized over a closed five-year smoothing period. In addition, according to GASB, Statement No. 68 means that, for pensions within the scope of the Statement, a cost-sharing employer that does not have a special funding situation is required to recognize a net pension liability, deferred outflows of resources, deferred inflows of resources related to pensions and pension expense based on its proportionate share of the net pension liability for benefits provided through the pension plan. Because the accounting standards do not require changes in funding policies, the full extent of the effect of the new standards on the District is not known at this time. The reporting requirements for pension plans took effect for the fiscal year beginning July 1, 2013 and the reporting requirements for government employers, including the District, took effect for the fiscal year beginning July 1, 2014.

The District’s proportionate shares of the net pension liabilities for STRS and PERS, as of June 30, 2019, are as shown in the following table.

Proportionate Share of Net Pension Pension Plan Liability STRS $20,407,027 PERS 8,775,378 Total $29,182,405 ______Source: Fairfax Elementary School District.

Supplemental Employee Retirement Plan

The District adopted a supplemental early retirement plan (“SERP”) in fiscal year 2019-20, whereby certain eligible employees are provided an annuity to supplement the retirement benefits such employees are entitled. Eligible employees will need to (1) select a retirement/resignation date between June 2, 2020 and July 2, 2020, (2) be over the age of 55 at the retirement date, and (3) have completed 10 consecutive years of service by the retirement date. An annual contribution will be made to eligible employees who opt to participate in the program. Applicants are required to enroll in a District approved 403(b) provider program. The total contribution will be divided into three equal installments, paid each September from 2020 to 2022. The total contribution will be $55,000 for certificated staff, $22,000 for classified staff, $27,500 for confidential staff, and $68,750 for administration/management staff. These amounts represent the contribution for one FTE. The incentive is prorated for based on the employee’s actual FTE. Applicants would remain eligible for retiree benefits as outlined in their respective bargaining agreements.

The accumulated future liability for the District for the SERP, as of June 30, 2020 amounted to $189,750, and future payments are as shown in the following table.

Year Ending June 30 Payment 2020 $63,250 2021 63,250 2022 63,250 Total $189,750

Other Post-Employment Benefits

Benefits Plan. The District administers a single-employer defined benefit other postemployment benefit plan (the “Plan”) that provides medical benefits (the “Benefits”) to eligible retirees and their spouses. The following is a description of the Plan and Benefits:

Management/ Certificated Classified Confidential Applies to Hired after 6/30/06 Hired after 6/30/06 Hired after 6/30/06 Benefit types provided Medical only Medical only Medical only Duration of Benefits To age 65 To age 65 To age 65 Required Service 15 years† 15 years† 15 years Minimum Age 55† 55† 55† Dependent Coverage Spouse & Family Spouse & Family Spouse & Family District Contribution % 100% 100% 100% District Cap Active cap† Active cap† Active cap†

† All employees hired after 10/31/2005 will have the District contribution frozen at retirement.

There are 8 retirees and beneficiaries currently receiving Benefits, and 25 active plan members eligible for, but not yet receiving, the Benefits. For more information regarding the Plan and the Benefits, see “APPENDIX B – 2018-19 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Note N” attached hereto.

Funding Policy. The District’s funding policy for the Benefits is based on the projected pay-as-you-go financing requirements, together with an additional amount determined annually to prefund the District’s outstanding accrued liability for the Benefits. For fiscal year 2015-16 through 2018-19, the District contributed $472,924, $581,995, $601,496 and $598,150 to the Plan, respectively, which expenditures include a deposit to the OPEB Trust in each fiscal year. The District estimates $593,640 for such expenditures in fiscal 2019-20, which includes a deposit to the OPEB Trust, and has budgeted $108,109 for such expenditures in fiscal year 2020-21, all of which is budgeted to be used for current premiums of Benefits for retired employees. The District has not budgeted a contribution to the OPEB Trust for fiscal year 2020-21.

The District pre-funds its accrued liability for the Benefits through an irrevocable trust (the “OPEB Trust”). The District contributed $650,285.25 to the OPEB Trust in fiscal year 2019-20. As of June 30, 2020, the value of assets in the OPEB Trust was $4,124,510.51.

GASB Statement Nos. 74 and 75. On June 2, 2015, GASB approved Statements Nos. 74 and 75 (each, “GASB 74” and “GASB 75”) with respect to pension accounting and financial reporting standards for public sector post-retirement benefit programs and the employers that sponsor them. GASB 74 replaces GASB Statements No. 43 and 57 and GASB 75 replaces GASB 45.

Most of GASB 74 applies to plans administered through trusts, in which contributions are irrevocable, trust assets are dedicated to providing other post–employment benefits to plan members, and trust assets are legally protected from creditors. GASB Statements No. 74 and No. 75 will require a liability for OPEB obligations, known as the NOL, to be recognized on the balance sheet of the plan and the participating employer’s financial statements. In addition, an OPEB expense (service cost plus interest on total OPEB liability plus current-period benefit changes minus member contributions minus assumed earning on plan investments plus administrative expenses plus recognition of deferred outflows minus recognition of deferred inflows) will be recognized in the income statement of the participating employers. In the notes to its financial statements, employers providing other post-employment benefits

will also have to include information regarding the year-to-year change in the NOL and a sensitivity analysis of the NOL to changes in the discount rate and healthcare trend rate. The required supplementary information will also be required to show a 10-year schedule of the plan’s net OPEB liability reconciliation and related ratios, and any actuarially determined contributions and investment returns.

Under GASB 74, the measurement date must be the same as the plan’s fiscal year end, but the actuarial valuation date may be any date up to 24 months prior to the measurement date. For the Total OPEB Liability (the “TOL”), if the valuation date is before the measurement date, the results must be projected forward from the valuation date to the measurement date using standard actuarial roll-forward techniques. For plans that are unfunded or have assets insufficient to cover the projected benefit payments, a discount rate reflecting a 20-year tax-exempt municipal bond yield or index rate must be used. For plans with assets that meet the GASB 74 requirements, a projection of the benefit payments and future Fiduciary Net Position (the “FNP”) is performed based on the funding policy and assumptions of the plan, along with the methodology specified in GASB.

GASB 74 has an effective date for plan fiscal years beginning after June 15, 2016 and GASB 75 is effective for employer fiscal years beginning after June 15, 2017. The District has recognized GASB 74 and GASB 75 in their financial statements for fiscal year 2018-19. See “APPENDIX B – 2018-19 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Note 9 – Change in Accounting Policies” attached hereto.

Actuarial Study. The District’s most recent actuarial study, dated as of May 24, 2019, calculated the District’s accrued liability in accordance with GASB No. 74 and GASB No. 75. The study concluded that, as of a June 30, 2018 measurement date, the District’s Total OPEB Liability was $4,472,561, its Fiduciary Net Position was $1,391,121 and its Net OPEB Liability was $3,081,440. In calculating the accrued liability, the District is required to recognize an implicit subsidy in retiree premium rates because retirees and current employees in the District’s health insurance plan are insured as a group, and it is assumed that the premiums paid for retiree insurance coverage are lower than they would have been if current retirees were insured separately.

Joint Powers Authorities

The District participates in joint powers agreements with three entities (each, a “JPA”): Self- Insured Schools of California I, II and III (“SISC I,” “SISC II,” and “SISC III,” respectively, and collectively, “SISC”); Kern Schools Legal Service (“KSLS”); and Partners in Nutrition Cooperative (“PinCo”).

SISC I arranges for and provides workers’ compensation insurance for its members, SISC II arranges for and provides property and liability insurance for its members and SISC III arranges for and provides health insurance for its members. SISC is governed by a board consisting of representatives from the member districts. The board controls the operations of the SISC, including selections 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 SISC.

KSLS provides legal services for its members.

PinCo provides storage of food items and ensures member districts receive competitive prices for such items.

The relationships between the District and the JPAs are such that neither JPA is a component unit of the District for financial reporting purposes.

See also “APPENDIX B – 2018-19 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT – Notes to Financial Statements – Note R” attached hereto.

District Debt Structure

Short-Term Obligations. The District currently has no outstanding short-term debt obligations. Long-Term Obligations. A schedule of changes in long-term debt for the fiscal year ended June 30, 2019, is shown below: SCHEDULE OF LONG TERM DEBT As of June 30, 2019 Fairfax Elementary School District

Balance Balance July 1, 2018 Additions Deductions June 30, 2019 General obligation bonds $9,595,246 -- $463,764 $9,131,482 Accreted interest 3,182,283 $1,123,272 326,236 3,979,319 Other post-employment benefits 3,932,771 -- 1,097,126 2,835,645 payable Net pension liability 27,040,773 2,141,632 -- 29,182,405 Compensated absences 209,537 32,040 -- 241,577 Capital Lease payable 3,342,649 (1,056,174) 83,213 2,203,262 Total governmental activities(1) $47,303,259 $2,240,770 $1,970,339 $ 47,573,690

(1) Does not include liabilities related to pension obligations and other post-employment benefits. See “Fairfax Elementary School District – District Retirement Systems” and “ – Other Post-Employment Benefits” above. Source: Fairfax Elementary School District.

Capital Lease. The District has entered into agreements to lease portable classrooms. Each such agreement is, in substance, a purchase (capital lease) and is reported as a capital lease obligation. The security for such leases is funded by developer fee revenues. The District’s liability on the lease agreements is summarized below:

Year Ending June 30 Payment 2021 $194,787.82 2022 160,291.82 Total $355,078.64

2017 Lease/Purchase Agreement. The District entered into a lease agreement (the “Lease Agreement”) in the aggregate principal amount of $2,227,771, with the Public Property Financing Corporation of California (the “Corporation”), dated as of December 1, 2017, which was assigned by the Corporation to City National Bank (the “Purchaser”), pursuant to an assignment agreement. The Lease Agreement provides for the payment by the District of certain rental payments, a portion of which, in the aggregate principal amount of $1,564,708 were designated as “New Clean Energy Renewable Bonds” (the “2017 CREBs”), pursuant to Section 54C(a)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and portion of which, in the aggregate principal amount of $663,063, the interest on which is excludable from gross income for federal income tax purposes (the “2017 Tax-Exempt Lease”), in order to finance the acquisition and installation of energy facilities.

With respect to the 2017 CREBs, the District expects to receive, on or before each lease payment date, a cash subsidy payment (each a “Subsidy Payment”) from the United States Treasury equal to 2.863%, which is equal to 70% of the interest that would have been payable with respect to such CREBs on or about each semi-annual lease payment date, if such interest was calculated at a federal tax credit rate of 4.09%, as determined under Section 54A(b)(3) of the Code. The District has $2,016,125.30 amount of principal outstanding of the Lease Agreement. The future lease payments are shown below: 2017 Tax-Exempt 2017 CREBs(1) Lease(1) Year Ending Lease Lease June 30 Payment Payment 2021 $115,638.91 $8,883.19 2022 118,749.91 50,399.41 2023 121,966.67 51,585.41 2024 125,292.41 52,810.69 2025 128,730.71 54,076.85 2026 132,284.82 55,385.11 2027 135,958.71 56,736.95 2028 139,755.89 58,133.99 2029 143,680.40 59,577.56 2030 147,736.65 61,069.60 2031 151,927.73 62,611.48 2032 156,258.80 64,205.07 2033(2) 160,734.28 65,852.43 2034 86,025.56 -- 2035 88,936.17 -- 2036 91,940.77 -- 2037 95,042.14 -- 2038(3) 98,243.21 -- Total $2,238,903.74 $701,327.74

(1) Lease payments due on March 15 and September 15 of each year. (2) Final lease payment due on September 15, 2032. (3) Final lease payment due on September 15, 2037. (4) The table above reflects gross debt service payments and does not reflect the anticipated receipt of the subsidy. The subsidy payments do not constitute a full faith and credit guarantee of the United States Government, but are required to be paid by the Treasury pursuant to the Hiring Incentives to Restore Employment Act of 2010. The subsidy payments are subject to reduction (the “Sequestration Reduction”) pursuant to the federal Balanced Budget and Emergency Deficit Control Act of 1985, as amended, which currently includes provisions reducing the subsidy payments by 5.9% through the end of the current federal fiscal year (September 30, 2020). In the absence of action by the U.S. Congress, the rate of the Sequestration Reduction is subject to change in the following federal fiscal year. The District cannot predict whether or how subsequent sequestration actions may affect subsidy payments currently scheduled for receipt in future federal fiscal years. However, notwithstanding current and any future reductions, the District is required to make all lease payments from legally available sources, and to make any necessary supplemental budgetary appropriations therefor. Source: Fairfax Elementary School District.

General Obligation Bonds. The District received authorization at an election held on May 23, 2000, by at least two-thirds of the votes cast by eligible voters within the District to issue $4,260,000 maximum principal amount of general obligation bonds (the “2000 Authorization”).

The District issued three series of bonds pursuant to the 2000 Authorization (collectively, the “2000 Bonds”). On August 22, 2000, the District issued $2,484,892.05 aggregate principal amount of its General Obligation Bonds, Election of 2000, Series 2000A (the “Series 2000A Bonds”). On May 16, 2002, the District issued $1,441,409.80 aggregate principal amount of its General Obligation Bonds, Election of 2000, Series 2002A (the “Series 2002A Bonds”). On August 4, 2004, the District issued $333,554.75 aggregate principal amount of its General Obligation Bonds, Election of 2000, Series 2004 (the “Series 2004A Bonds”).

The District received authorization at an election held on November 2, 2010, by the requisite 55% or more of the votes cast by eligible voters within the District to issue $24,800,000 maximum principal amount of general obligation bonds (the “2010 Authorization”). On February 23, 2011, the District issued a first series of general obligation bonds pursuant to the 2010 Authorization in an aggregate principal amount of $5,694,506.65 (the “Series 2011 Bonds”).

The 2016 Authorization was approved by voters at an election held on June 7, 2016, at which the requisite 55% or more of the persons voting on the proposition voted to authorize the issuance and sale of $19,000,000 principal amount of general obligation bonds of the District. On February 2, 2017, the District issued its first series of general obligation bonds pursuant to the 2016 Authorization in an aggregate principal amount of $2,500,000 (the “Series 2017 Bonds”). After the issuance of the 2017 Bonds, $16,500,000 of the 2016 Authorization remains unissued.

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The following table shows the combined debt service schedule with respect to the District’s total outstanding general obligation bonded debt following the issuance of the Bonds, assuming no optional redemptions are made.

COMBINED DEBT SERVICE SCHEDULE Fairfax Elementary School District*

Year Ending Series 2000A Series 2002A Series 2004A Series 2011 Series 2017 The Total Annual (November 1) Bonds(1) Bonds Bonds(2) Bonds(3) Bonds Bonds Debt Service 2020 $340,000.00 $210,000.00 $17,690.00 $260,050.00 $140,787.50 2021 370,000.00 215,000.00 17,690.00 278,050.00 148,037.50 2022 390,000.00 240,000.00 17,690.00 298,050.00 104,787.50 2023 410,000.00 265,000.00 17,690.00 329,000.00 108,537.50 2024 440,000.00 285,000.00 17,690.00 369,000.00 112,037.50 2025 470,000.00 305,000.00 17,690.00 405,750.00 85,287.50 2026 -- -- 162,690.00 440,250.00 89,787.50 2027 -- -- 169,280.00 467,500.00 94,187.50 2028 -- -- 175,000.00 502,500.00 98,387.50 2029 -- -- 175,000.00 552,500.00 102,387.50 2030 ------622,500.00 106,187.50 2031 ------682,100.00 109,787.50 2032 ------737,100.00 113,187.50 2033 ------782,100.00 116,387.50 2034 ------812,100.00 124,387.50 2035 ------862,100.00 126,837.50 2036 ------932,100.00 134,075.00 2037 ------1,017,100.00 140,887.50 2038 ------1,147,487.50 142,275.00 2039 ------1,263,675.00 148,450.00 2040 ------1,365,950.00 154,200.00 2041 ------1,444,600.00 164,525.00 2042 ------1,505,475.00 169,212.50 2043 ------1,595,981.95 173,475.00 2044 ------1,723,426.60 182,312.50 2045 ------1,895,471.90 190,512.50 2046 ------2,048,761.50 198,075.00 2047 ------2,171,652.00 -- 2048 ------2,254,600.00 -- 2049 ------2,299,600.00 -- 2050 ------2,322,000.00 -- Total $2,420,000.00 $1,520,000.00 $788,110.00 $33,388,531.45 $3,579,000.00

 Preliminary, subject to change. (1) Final maturity of Series 2000A Bonds occurs on May 1, 2025. (2) Final maturity of Series 2004A Bonds occurs on May 1, 2029. (3) Includes debt service on Prior Bonds, to be redeemed with proceeds from the Bonds. Source: Fairfax Elementary School District.

TAX MATTERS

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulation, rulings and judicial decisions, interest (and original issue discount) on the Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code but is exempt from State of California personal income tax.

Except for certain exceptions, the difference between the issue price of a Refunding Bond (the first price at which a substantial amount of the Bonds of the same maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Refunding Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method. The amount of original issue discount deemed received by the Owner of a Refunding Bond will increase the Owner’s basis in the Refunding Bond. Owners of Bonds should consult their own tax advisor with respect to taking into account any original issue discount on the Bonds.

In the event of a legal defeasance of a Refunding Bond, such bond might be treated as retired and “reissued” for federal tax purposes as of the date of the defeasance, potentially resulting in recognition of taxable gain or loss to the applicable Refunding Bondholder generally equal to the difference between the amount deemed realized from the deemed redemption and reissuance and the Refunding Bondholder’s adjusted tax basis in such bond.

The amount by which a Refunding Bond Owner’s original basis for determining loss on sale or exchange in the applicable Refunding Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which the Owner of a Refunding Bond may elect to amortize under Section 171 of the Code. Such amortizable bond premium reduces the Refunding Bond Owner’s basis in the applicable Refunding Bond (and the amount of taxable interest received) and is deductible for federal income tax purposes. The basis reduction as a result of the amortization of Refunding Bond premium may result in the Owner of a Refunding Bond realizing a taxable gain when a Refunding Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Refunding Bond to the Owner. The Owners of the Bonds that have a basis in the Bonds that is greater than the principal amount of the Bonds should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code.

The federal tax and State of California personal income tax discussion set forth above with respect to the Bonds is included for general information only and may not be applicable depending upon an Owner’s particular situation. The ownership and disposal of the Bonds and the accrual or receipt of interest with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences.

A copy of the proposed form of opinion of Bond Counsel for the Bonds is attached hereto as APPENDIX A.

LIMITATION ON REMEDIES; BANKRUPTCY

General. State law contains certain safeguards to protect the financial solvency of school districts. See “DISTRICT FINANCIAL INFORMATION – Budget Process” herein. If the safeguards are not successful in preventing a school district from becoming insolvent, the State Superintendent, operating through an administrator appointed by the State Superintendent, may be authorized under State law to file a petition under Chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”) on

behalf of the school district for the adjustment of its debts, assuming that the school district meets certain other requirements contained in the Bankruptcy Code necessary for filing a petition under Chapter 9. School districts are not themselves authorized to file a bankruptcy proceeding, and they are not subject to involuntary bankruptcy.

Bankruptcy courts are courts of equity and as such have broad discretionary powers. If the District were to become the debtor in a proceeding under Chapter 9 of the Bankruptcy Code, the automatic stay provisions of Bankruptcy Code Sections 362 and 922 generally would prohibit creditors from taking any action to collect amounts due from the District or to enforce any obligation of the District related to such amounts due, without consent of the District or authorization of the bankruptcy court (although such stays would not operate to block creditor application of pledged special revenues to payment of indebtedness secured by such revenues). In addition, as part of its plan of adjustment in a Chapter 9 bankruptcy case, the District may be able to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other terms or provisions of the Bonds and other transaction documents related to the Bonds, as long as the bankruptcy court determines that the alterations are fair and equitable. There also may be other possible effects of a bankruptcy of the District that could result in delays or reductions in payments on the Bonds. Moreover, regardless of any specific adverse determinations in any District bankruptcy proceeding, the fact of a District bankruptcy proceeding could have an adverse effect on the liquidity and market price of the Bonds.

Statutory Lien. Pursuant to Government Code Section 53515, the Bonds are secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax, and such lien automatically arises, without the need for any action or authorization by the District or the Board, and is valid and binding from the time the Bonds are executed and delivered. See “THE BONDS – Security and Sources of Payment” herein. Although a statutory lien would not be automatically terminated by the filing of a Chapter 9 bankruptcy petition by the District, the automatic stay provisions of the Bankruptcy Code would apply and payments that become due and owing on the Bonds during the pendency of the Chapter 9 proceeding could be delayed, unless the Bonds are determined to be secured by a pledge of “special revenues” within the meaning of the Bankruptcy Code and the pledged ad valorem property taxes are applied to pay the Bonds in a manner consistent with the Bankruptcy Code.

Special Revenues. If the ad valorem property tax revenues that are pledged to the payment of the Bonds are determined to be “special revenues” within the meaning of the Bankruptcy Code, then the application in a manner consistent with the Bankruptcy Code of the pledged ad valorem property tax revenues should not be subject to the automatic stay. “Special revenues” are defined to include, among others, taxes specifically levied to finance one or more projects or systems of the debtor, but excluding receipts from general property, sales, or income taxes levied to finance the general purposes of the debtor. State law prohibits the use of the tax proceeds for any purpose other than payment of the Bonds and the Bond proceeds can only be used to finance or refinance the acquisition or improvement of real property and other capital expenditures included in the proposition, so such tax revenues appear to fit the definition of special revenues. However, there is no binding judicial precedent dealing with the treatment in bankruptcy proceedings of ad valorem property tax revenues collected for the payments of general obligation bonds in the State, so no assurance can be given that a bankruptcy court would not hold otherwise.

Possession of Tax Revenues; Remedies. The County on behalf of the District is expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bonds and may invest these funds in the Kern County Treasury Pool, as described in “THE BONDS – Application and Investment of Bond Proceeds” herein and “APPENDIX E – KERN COUNTY POOLED CASH PORTFOLIO REPORT AND TREASURER’S STATEMENT OF INVESTMENT POLICY” attached

hereto. If the County goes into bankruptcy and has possession of tax revenues (whether collected before or after commencement of the bankruptcy), and if the County does not voluntarily pay such tax revenues to the owners of the Bonds, it is not entirely clear what procedures the owners of the Bonds would have to follow to attempt to obtain possession of such tax revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful. Further, should those investments suffer any losses, there may be delays or reductions in payments on the Bonds.

Opinion of Bond Counsel Qualified by Reference to Bankruptcy, Insolvency and Other Laws Relating to or Affecting Creditor’s Rights. The proposed form of the approving opinion of Bond Counsel attached hereto as APPENDIX A is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights. Bankruptcy proceedings, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or modification of their rights.

LEGAL MATTERS

Legality for Investment in California

Under provisions of the State Financial Code, the Bonds are legal investments for commercial banks in the State to the extent that the Bonds, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and, under provisions of the State Government Code, are eligible for security for deposits of public moneys in the State.

Expanded Reporting Requirements

On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”). Under Section 6049 of the Internal Revenue Code of 1986, as amended by TIPRA, interest paid on tax-exempt obligations will be subject to information reporting in a manner similar to interest paid on taxable obligations. The effective date for this provision is for interest paid after December 31, 2005, regardless of when the tax-exempt obligations were issued. The purpose of this change was to assist in relevant information gathering for the IRS relating to other applicable tax provisions. TIPRA provides that backup withholding may apply to such interest payments made after March 31, 2007 to any bondholder who fails to file an accurate Form W-9 or who meets certain other criteria. The information reporting and backup withholding requirements of TIPRA do not affect the excludability of such interest from gross income for federal income tax purposes.

Continuing Disclosure

Current Undertaking. The District has covenanted for the benefit of the Owners and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District (the “Annual Report”) by not later than nine months following the end of the District’s fiscal year (which currently ends June 30), commencing with the report for the 2019-20 fiscal year, and to provide notices of the occurrence of certain listed events. The Annual Report and notices of listed events will be filed by the District in accordance with the requirements of the Rule. The specific nature of the information to be contained in the Annual Report or the notices of listed events is included in “APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. These covenants have been made in order to assist the Underwriter in complying with the Rule.

Prior Undertakings. Within the past five years, the District filed the annual report for fiscal year 2014-15 one day late, as required in connection with its existing continuing disclosure obligations associated with the Series 2000A Bonds, the Series 2002A Bonds and the Series 2004A Bonds. The 74

District has not, in the past five years, failed to file in a timely manner notices of listed events, as required by its existing prior continuing disclosure undertakings.

Escrow Verification

Upon delivery of the Bonds, the Verification Agent will deliver a report on the mathematical accuracy of certain computations based upon certain information and assertions provided to them by the Underwriter relating to the adequacy of the maturing principal of and interest on the Federal Securities in the Escrow Fund, together with any moneys held therein as cash, to pay the redemption price of and interest on the Refunded Bonds.

No Litigation

No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect 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 questioning the political existence of the District or contesting the District’s ability to receive ad valorem property taxes or to collect other revenues or contesting the District’s ability to issue and retire the Bonds.

The District is subject to lawsuits and claims in the ordinary course of its operations. 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 finances of the District.

Financial Statements

The audited financial statements with supplemental information for the year ended June 30, 2019, the independent auditor’s report of the District, and the related statements of activities and of cash flows for the year then ended, and the report dated December 13, 2019, of Linger, Peterson & Shrum. (the “Auditor”), are included in this Official Statement as Appendix B. In connection with the inclusion of the financial statements and the report of the Auditor herein, the District did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report.

Legal Opinion

The legal opinion of Bond Counsel, approving the validity of the Bonds, will be supplied to the original purchasers of the Bonds without cost. A copy of the proposed form of such legal opinion is attached to this Official Statement as APPENDIX A.

MISCELLANEOUS

Rating

The Bonds have been assigned a rating of “___” by S&P. The rating reflects only the views of S&P, and any explanation of the significance of such rating should be obtained therefrom. There is no assurance that the rating will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the rating obtained may have an adverse effect on the market price of the Bonds. 75

The District has covenanted in a Continuing Disclosure Certificate to file on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website (“EMMA”) notices of any rating changes on the Bonds. See “APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. Notwithstanding such covenant, information relating to rating changes on the Bonds may be publicly available from the rating agency prior to such information being provided to the District and prior to the date the District is obligated to file a notice of rating change on EMMA. Purchasers of the Bonds are directed to the rating agency and its website and official media outlets for the most current rating changes with respect to the Bonds after the initial issuance of the Bonds.

Underwriting

Pursuant to the terms of an Official Notice of Sale for the Bonds (the “Notice of Sale”), ______(the “Underwriter”) will purchase all of the Bonds for a purchase price of $______, which is equal to the initial principal amount of the Bonds of $______, plus net original issue premium of $______, less $______of underwriting discount.

The Notice of Sale provides that the Underwriter will purchase all of the Bonds, if any are purchased. The initial offering prices stated on the inside cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than such initial offering prices.

Additional Information

The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the Escrow Agreement, the Resolution providing for issuance of the Bonds, and the constitutional provisions, statutes and other documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions.

Certain of the data contained herein has been taken or constructed from District records. Appropriate District officials, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the District.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended only 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, beneficial or otherwise, of any of the Bonds. FAIRFAX ELEMENTARY SCHOOL DISTRICT

By: Michael Coleman Superintendent

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APPENDIX A

FORM OF OPINION OF BOND COUNSEL

Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion with respect to the Bonds in substantially the following form:

______, 2020

Board of Trustees Fairfax Elementary School District

Members of the Board of Trustees:

We have examined a certified copy of the record of the proceedings relative to the issuance and sale of $______Fairfax Elementary School District 2020 General Obligation Refunding Bonds (Federally Taxable) (the “Bonds”). As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation.

Based on our examination as bond counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that:

1. Such proceedings and proofs show lawful authority for the issuance and sale of the Bonds pursuant to Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, and a resolution (the “Resolution”) of the Board of Trustees of the Fairfax Elementary School District (the “District”).

2. The Bonds constitute valid and binding general obligations of the District, payable as to both principal and interest from the proceeds of a levy of ad valorem property taxes on all property subject to such taxes in the District, which taxes are unlimited as to rate or amount.

3. Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”).

4. Interest on the Bonds is exempt from State of California personal income tax.

5. Except for certain exceptions, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated payment price at maturity with respect to such Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner’s basis in the applicable Bond.

6. The amount by which a Bond owner’s original basis for determining gain or loss on sale or exchange of the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which the

A-1

owner of Bond may elect to amortize under Section 171 of the Code. Such amortizable bond premium reduces the Bond owner’s basis in the applicable Bond (and the amount of taxable interest received) for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in the owner of a Bond realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. The owners of the Bonds that have a basis in the Bonds that is greater than the principal amount of the Bonds should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code.

Except as expressly set forth in paragraphs (3), (4), (5) and (6), we express no opinion regarding any tax consequences with respect to the Bonds.

The opinions expressed herein are based upon our analysis and interpretation of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement as bond counsel to the District terminates upon the issuance of the Bonds.

The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against public agencies in the State of California.

Respectfully submitted,

A-2

APPENDIX B

2018-19 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT

B-1

[THIS PAGE INTENTIONALLY LEFT BLANK] FAIRFAX SCHOOL DISTRICT COUNTY OF KERN BAKERSFIELD, CALIFORNIA

AUDIT REPORT

JUNE 30, 2019

Linger, Peterson & Shrum Certified Public Accountants 575 E. Locust Ave., Suite 308 Fresno, California 93720-2928 (559) 438-8740 This page is intentionally left blank. Introductory Section Fairfax School District Audit Report For The Year Ended June 30, 2019

TABLE OF CONTENTS

Page Exhibit/Table

FINANCIAL SECTION

Independent Auditor's Report...... 2 Management's Discussion and Analysis (Required Supplementary Information)...... 6

Basic Financial Statements

Government-wide Financial Statements: Statement of Net Position...... 16 Exhibit A-1 Statement of Activities...... 17 Exhibit A-2 Fund Financial Statements: Balance Sheet - Governmental Funds...... 18 Exhibit A-3 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position...... 20 Exhibit A-4 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds...... 22 Exhibit A-5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities...... 24 Exhibit A-6 Statement of Fiduciary Net Position - Fiduciary Funds...... 25 Exhibit A-7 Statement of Changes in Fiduciary Net Position - Fiduciary Funds...... 26 Exhibit A-8 Notes to the Financial Statements ...... 27

Required Supplementary Information

Budgetary Comparison Schedules:

General Fund...... 58 Exhibit B-1 Cafeteria Fund...... 59 Exhibit B-2

Schedule of the District's Proportionate Share of the Net Pension Liability - California State Teachers' Retirement System...... 60 Exhibit B-3 Schedule of District's Contributions - California State Teachers' Retirement System...... 61 Exhibit B-4 Schedule of the District's Proportionate Share of the Net Pension Liability - California Public Employees' Retirement System...... 62 Exhibit B-5 Schedule of District's Contributions - California Public Employees' Retirement System.. 63 Exhibit B-6 Schedule of Changes in the District's Net OPEB Liability And Related Ratios -OPEB Plan ...... 64 Exhibit B-7 Schedule of District's Contributions - OPEB Plan...... 65 Exhibit B-8

Combining Statements and Budgetary Comparison Schedules as Supplementary Information:

General Fund:

Combining Balance Sheet...... 68 Exhibit C-1 Combining Statement of Revenues, Expenditures and Changes in Fund Balances...... 69 Exhibit C-2 Fairfax School District Audit Report For The Year Ended June 30, 2019

TABLE OF CONTENTS

Page Exhibit/Table

Combining Balance Sheet - All Nonmajor Governmental Funds...... 70 Exhibit C-3 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - All Nonmajor Governmental Funds...... 71 Exhibit C-4

Special Revenue Funds:

Budgetary Comparison Schedule:

Deferred Maintenance Fund...... 72 Exhibit C-5

Capital Projects Funds:

Combining Balance Sheet - Nonmajor Capital Projects Funds...... 73 Exhibit C-6 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Projects Funds...... 74 Exhibit C-7

Budgetary Comparison Schedule:

Building Fund...... 75 Exhibit C-8

Fiduciary Funds:

Agency Funds:

Combining Statement of Changes in Assets and Liabilities...... 76 Exhibit C-9

OTHER SUPPLEMENTARY INFORMATION SECTION

Local Education Agency Organization Structure...... 79 Schedule of Average Daily Attendance...... 80 Table D-1 Schedule of Instructional Time...... 81 Table D-2 Schedule of Financial Trends and Analysis...... 82 Table D-3 Reconciliation of Annual Financial and Budget Report With Audited Financial Statements...... 83 Table D-4 Schedule of Charter Schools...... 84 Table D-5 Schedule of Expenditures of Federal Awards ...... 85 Table D-6 Notes to the Schedule of Expenditures of Federal Awards...... 86 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...... 90 Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance...... 92 Independent Auditor's Report on State Compliance...... 94 Schedule of Findings and Questioned Costs ...... 98 Summary Schedule of Prior Audit Findings...... 100 This page is intentionally left blank. Financial Section

1 Linger, Peterson & Shrum Certified Public Accountants 575 E. Locust Ave., Suite 308 Fresno, California 93720-2928

Independent Auditor's Report

To the Board of Trustees Fairfax School District Bakersfield, California 93307

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Fairfax School District ("the District") as of and for the year ended June 30, 2019, 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

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 Fairfax School District as of June 30, 2019, and the respective changes in financial position, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

2 Other Matters

Required Supplementary Information

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

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Fairfax School District's basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not required parts of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The accompanying other supplementary information is presented for purposes of additional analysis as required by the State's audit guide, 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting prescribed in Title 5, California Code of Regulations, Section 19810 and is also not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements and other 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 and individual nonmajor fund financial statements and other 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.

3 Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 13, 2019 on our consideration of Fairfax School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Fairfax School District's internal control over financial reporting and compliance.

Respectfully submitted,

Linger, Peterson & Shrum Fresno, California December 13, 2019

4 Management's Discussion and Analysis

5 BOARD OF TRUSTEES DISTRICT SUPERINTENDENT Javier Moreno, President Michael Coleman Victoria Coronel ASSISTANT SUPERINTENDENT Virginia Lawson Lora Brown Palmer Moland Alma Rios

FAIRFAX ELEMENTARY SCHOOL DISTRICT Management Discussion & Analysis For the Fiscal Year Ending June 30, 2019

Introduction

The discussion and analysis of Fairfax Elementary School District’s financial performance provides an overall review of the District’s financial activities for the fiscal year ended June 30, 2019. The intent of the analysis is to look at the District’s financial performance as a whole; readers should also review the auditor’s transmittal letter, notes that pertain to the basic financial statements and the basic governmental wide financial statements to enhance their understanding of the District’s financial performance.

The Fairfax Elementary School District is a K-8 district located in the southeastern area of Bakersfield, California. The district opened its doors in 1891 with eight students, the children of rural farmers. The location chosen for the school was seven miles from the intersection of Truxtun and Chester Avenues, which at the time was considered to be the center of a small, but developing city by the name of Bakersfield. The Fairfax site grew to about one hundred students through the depression years. At times, however, the student population would double due to the seasonal influx of migrant farm worker families. Large tents would be put up, temporary teachers were hired and the learning process would continue.

After World War II, the Fairfax District grew to over one thousand students and with this growth came the need for a second school site; Virginia Avenue Elementary School was opened in January 1953, with eight classrooms and a cafeteria building. At present, the Fairfax School District continues to grow and expand even as the construction within the district has slowed similar to all communities in the Kern county area. The district is comprised of three K-6 campuses, Virginia Avenue, Shirley Lane Elementary opened in August 2004, Zephyr Lane Elementary opened in August 2015, and Fairfax Junior High School, a 7th through 8th campus. Enrollment is approximately 2682 (CBEDS 2018/19) and has been growing for the past several years. Fairfax Elementary School District operates on a traditional school year schedule (August through June).

•1500 South Fairfax Road • Bakersfield, California 93307 • (661) 366-7221 • Fax (661) 366-1901 • 6 The ethnic distribution of Fairfax Elementary School District is approximately 87% Hispanic, 5% White, 3% African-American, and 2% Asian. The remaining population is made up of students with various ethnic backgrounds. Of the student population, 452 students are considered Fluent English Proficient (FEP) and 1,079 are considered Limited English Proficient (LEP). 90% of the students participate in the free or reduced lunch program. Breakfast and supper are also served. Fairfax Elementary School District’s motto is “Empowering Students to Succeed.”

Using the Comprehensive Annual Financial Report

 This comprehensive annual financial report consists of a series of financial statements and notes to those statements. The statements are organized so the reader can understand the Fairfax Elementary School District as a whole and then proceed to provide an increasingly detailed look at specific financial activities.

 The “Statement of Net Assets” and “Statement of Activities” provide information about the activities of the whole school district, presenting both an aggregate view of the school district’s finances and a longer-term view of those finances. “Fund Financial Statements” provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the district’s major funds with all other non-major funds presented in total in one column.

 The Management Discussion and Analysis Statement is provided to assist our citizens, taxpayers and investors in reviewing the District’s finances and to show the District’s accountability for the money it receives.

Financial Highlights

 The Fairfax Elementary School District’s Government-wide Statement of Net Position shows total net position of $1,340,038, which is the result of assets and deferred outflows of $52,748,419 minus liabilities and deferred inflows of $51,408,381 (Table 1).

 General Revenues accounted for $34,023,770 in revenue or 80.3% of all revenues. Program specific revenues in the form of charges for services, and grants and contributions accounted for $8,368,878 or 19.7% of total revenues of $42,392,648. (Table 2)

 The District had $41,819,184 in expenses related to governmental activities, and $8,368,878 of these expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily state revenue limit sources and property taxes) of $34,023,770 were adequate to provide for these programs. (Table 2 & 3)

The Statement of Net Assets and Statement of Activities

 The Statement of Net Assets and Statement of Activities

7 One of the most important questions asked about the District’s finances is, “Is the District better off or worse off as a result of the year’s activities?” “The Statement of Net Assets” reports information about the District as a whole. The statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by private sector corporations. All of the current year’s revenues and expenses are taken into consideration regardless of when cash is received or paid.

In the “Statement of Net Assets” the district is divided into two kinds of activities:

- Governmental Activities – Most of the school district’s programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation and extra-curricular activities.

- Business-Type activities – These services are provided on a charge for goods or services basis to recover all of the expenses of the goods or services provided. Fairfax Elementary School District does not have any of these types of activities at this time

 Fund Financial Statements

The fund financial statements provide detailed information about the most significant funds, not the District as a whole. Some funds are required to be established by State statute, while many other funds are established by the District to help manage money for particular purposes and compliance with various grant provisions.

 Governmental Funds

Most of the District’s activities are reported in governmental funds which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting. Governmental fund statements provide a detailed short-term view of the District’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or less financial resources available to spend in the near future to finance the District’s programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements.

Governmental funds include all of the major funds of the District. A more detailed discussion of Governmental Funds follows.

8  Proprietary Funds

Proprietary funds use the same basis of accounting as business-type activities; therefore, the statements will essentially match.

 Fiduciary Funds

Fiduciary funds are used to account for resources held for the benefit of parties outside the governmental entity. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the District’s own programs. The Fairfax Elementary School District is the trustee, or fiduciary, for its student activity funds. All of the School District’s fiduciary activities are reported in a separate Statements of Fiduciary Net Assets. We exclude these activities from the District’s other financial statements because the District cannot use these assets to finance its operations. The Fairfax Elementary School District is responsible for ensuring that the assets reported in these funds are used for their intended purpose.

 Notes to the Financial Statements

The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements.

9  The School District as a whole

Table 1 provides a summary of the District's assets for fiscal year 2018-19

Table 1 Fairfax School District Net Assets - Governmental Activities

Governmental Activities Percentage 2019 2018 Change Assets Current and other assets $ 10,120,066 $ 11,366,609 -10.97% Capital assets 32,192,004 31,396,496 2.53% Total Assets $ 42,312,070 $ 42,763,105 -1.05%

Deferred Outflows of Resources $ 10,436,349 $ 9,560,421 9.16%

Liabilities Current liabilities 1,052,457 1,839,478 -42.79% Long-term liabilities 47,573,690 47,303,259 0.57% Total Liabilities $ 48,626,147 $ 49,142,737 -1.05%

Deferred Inflows of Resources $ 2,782,234 $ 2,414,215 15.24%

Net Position Net investment in capital assets $ 20,801,406 $ 18,407,361 13.01% Restricted 3,081,174 4,636,518 -33.55% Unrestricted (22,542,542) (22,277,305) 1.19% Total Net Position $ 1,340,038 $ 766,574 74.81%

10 Table 2 shows the changes in net assets for fiscal years 2017-18 and 2018-19.

Table 2 Fairfax School District Change in Net Assets

Governmental Activities Percentage 2019 2018 Change Revenues Program Revenues: Charges for services $ 11,412 $ 80,210 -85.77% Operating grants and contributions 8,357,466 6,201,468 34.77% General Revenues: LCFF Sources 28,094,579 26,379,419 6.50% Federal Revenues 59,785 72,389 -98.27% State Revenues 3,963,270 3,458,494 1.69% Local Revenues 1,906,136 3,897,551 -51.09% Total Revenues 42,392,648 40,089,531 5.74%

Expenses Program Expenses: Instruction 24,834,606 22,288,975 11.42% Instruction-related services 2,771,722 2,371,869 16.86% Pupil Services 5,106,100 4,522,560 12.90% Ancillary Services 58,313 56,692 2.86% Administration 2,172,606 1,987,871 9.29% Maintenance and operations 3,878,783 6,360,555 -39.02% Other outgo 1,437,639 1,190,159 20.79% Interest on long-term debt 1,559,415 880,771 77.05% Total Expenses 41,819,184 39,659,452 5.45%

Changes in Net Position $ 573,464 $ 430,079 33.34%

 Governmental Activities

Program specific Grants and Entitlements made up 19.7% of revenues for governmental activities. General Revenues not restricted to specific programs made up 80.3% of the total revenues available.

Instruction, Instruction-Related Services and Pupil Services comprises 78.2% of expenses; administration comprises only 5.2%, with the balance going to ancillary services, plant services and other outgo, including interest on long-term obligations.

11  General Fund Budget Information

The District’s budget is prepared in accordance with California law and is based on accounting for certain transactions on a basis of cash receipt, disbursements and encumbrances. The most significant budgeted fund is the General Fund.

The District begins the budget process in February of each year, to be completed by June 30. During the course of the fiscal year, the school district revises its budget as it deals with changes in revenues and expenditures.

For the General Fund, actual revenues were $34,830,936 with original budget estimated at $33,591,489. The difference of $1,239,447 was due to additional state and federal revenues received in the fiscal year. In a normal year, grants and entitlements are frequently not finalized until late in the year. Carryover amounts and ending balances are not determined until the books are finally closed. Finally, the federal government authorized one-time stimulus funds that were not assumed at the beginning budget.

Many reasons exist for expenditure budget revisions. Most notable are changes in revenues and expenditures due to carryover funds.

The implementation of new instructional programs can also affect budget projections. New academically focused programs will impact expenditures in personnel, instructional material, outside services and supplies.

Capital Assets and Debt Administration

 Capital Assets

At the end of the fiscal year 2018-2019 the District had $32,192,004 invested in land, building, equipment, and improvements.

Percentage 2019 2018 Change

Land $ 1,692,804 $ 1,692,804 0.00% Land Improvement 2,157,991 971,450 122.14% Buildings 26,529,083 27,744,037 -4.38% Equipment 1,099,015 173,542 533.28% Work in Progress 713,111 814,663 0.00% $ 32,192,004 $ 31,396,496 2.53%

12  Debt

At June 30, 2019 the Fairfax Elementary School District had $47,573,690 in debt outstanding.

Percentage 2019 2018 Change

General Obligation Bonds Payable $ 9,131,482 $ 9,595,246 -4.83% Accreted Interest 3,979,319 3,182,283 25.05% Compensated Absences 241,577 209,537 15.29% Capital leases payable 2,203,262 3,342,649 -34.09% Other Post Employment Benefits 2,835,645 3,932,771 -27.90% Net Pension Liability 29,182,405 27,040,773 7.92%

$ 47,573,690 $ 47,303,259 0.57%

 For the Future

The Fairfax Elementary School District student enrollment has increased steadily over the past years. Growth in student enrollment and the expectation of residential growth in the district will provide additional income for the district and help offset reductions in state funding. With careful monitoring and prudent financial planning, the Fairfax Elementary School District is confident that we can continue to provide a quality education for our students and meet the challenges of the future.

 Contacting the School District's Financial Management

This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the Fairfax Elementary School District’s finances and to show the District’s accountability for the funds it receives. If you have questions concerning this report or need additional financial information, please contact Michael Coleman, Superintendent, or Jonathan Medina, Director of Fiscal Services, 1500 S. Fairfax Road, Bakersfield, California 93307.

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14 Basic Financial Statements

15 EXHIBIT A-1 FAIRFAX SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2019

Governmental Activities ASSETS: Cash in County Treasury $ 7,630,422 Cash in Revolving Fund 10,000 Accounts Receivable 2,334,357 Stores Inventories 69,497 Prepaid Expenses 75,790 Capital Assets: Land 1,692,804 Land Improvements, Net 2,157,991 Buildings, Net 26,529,083 Equipment, Net 1,099,015 Work in Progress 713,111 Total Assets 42,312,070

DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflows of Resources - Pensions 9,686,198 Deferred Outflows of Resources - OPEB 750,151 Total Deferred Outflows of Resources 10,436,349

LIABILITIES: Accounts Payable 1,051,750 Unearned Revenue 707 Noncurrent Liabilities: Net Pension Liability 29,182,405 Other Postemployment Benefit Obligation 2,835,645 Due within one year 854,666 Due in more than one year 14,700,974 Total Liabilities 48,626,147

DEFERRED INFLOWS OF RESOURCES: Deferred Inflows of Resources - Pensions 2,728,018 Deferred Inflows of Resources - OPEB 54,216 Total Deferred Inflows of Resources 2,782,234

NET POSITION: Net Investment in Capital Assets 20,801,406 Restricted For: Debt Service 1,026,312 Capital Projects 1,871,373 Other Purposes 183,489 Unrestricted (22,542,542) Total Net Position $ 1,340,038

The accompanying notes are an integral part of this statement.

16 EXHIBIT A-2 FAIRFAX SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019

Net (Expense) Revenue and Changes in Program Revenues Net Position Operating Charges for Grants and Governmental Functions/Programs Expenses Services Contributions Activities PRIMARY GOVERNMENT: Governmental Activities: Instruction $ 24,834,606 $ - $ 4,268,439 $ (20,566,167) Instruction-Related Services 2,771,722 - 462,690 (2,309,032) Pupil Services 5,106,100 11,346 2,484,693 (2,610,061) Ancillary Services 58,313 - 10,805 (47,508) General Administration 2,172,606 - 383,881 (1,788,725) Plant Services 3,878,783 66 746,958 (3,131,759) Other Outgo 1,437,639 - - (1,437,639) Interest on Long-Term Obligations 1,559,415 - - (1,559,415) Total Governmental Activities 41,819,184 11,412 8,357,466 (33,450,306) Total Primary Government $ 41,819,184 $ 11,412 $ 8,357,466 (33,450,306)

General Revenues: LCFF Sources 28,094,579 Federal Revenues 59,785 State Revenues 3,963,270 Local Revenues 1,906,136 Total General Revenues 34,023,770 Change in Net Position 573,464 Net Position - Beginning 766,574 Net Position - Ending $ 1,340,038

The accompanying notes are an integral part of this statement.

17 FAIRFAX SCHOOL DISTRICT BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2019

General Cafeteria Fund Fund ASSETS: Cash in County Treasury $ 4,514,892 $ 120,902 Cash in Revolving Fund 10,000 - Accounts Receivable 2,094,173 209,048 Due from Other Funds 328,155 100,000 Stores Inventories - 69,497 Prepaid Expenditures - 75,790 Total Assets 6,947,220 575,237

LIABILITIES AND FUND BALANCE: Liabilities: Accounts Payable $ 868,747 $ 49,082 Due to Other Funds 100,000 328,155 Unearned Revenue 707 - Total Liabilities 969,454 377,237

Fund Balance: Nonspendable Fund Balances: Revolving Cash 10,000 - Stores Inventories - 14,199 Prepaid Items - 75,790 Restricted Fund Balances 102,304 81,185 Committed Fund Balances - 26,826 Assigned Fund Balances 3,777,894 - Unassigned: Other Unassigned 2,087,568 - Total Fund Balance 5,977,766 198,000

Total Liabilities and Fund Balances $ 6,947,220 $ 575,237

The accompanying notes are an integral part of this statement.

18 EXHIBIT A-3

Other Total Building Governmental Governmental Fund Funds Funds

$ 1,788,399 $ 1,206,229 $ 7,630,422 - - 10,000 12,964 18,172 2,334,357 - 29,093 457,248 - - 69,497 - - 75,790 1,801,363 1,253,494 10,577,314

$ 65,295 $ 12,772 $ 995,896 29,093 - 457,248 - - 707 94,388 12,772 1,453,851

- - 10,000 - - 14,199 - - 75,790 1,706,975 1,190,710 3,081,174 - - 26,826 - 50,012 3,827,906

- - 2,087,568 1,706,975 1,240,722 9,123,463

$ 1,801,363 $ 1,253,494 $ 10,577,314

19 EXHIBIT A-4 FAIRFAX SCHOOL DISTRICT RECONCILIATION OF THE BALANCE SHEET, GOVERNMENTAL FUNDS, TO THE STATEMENT OF NET POSITION JUNE 30, 2019

Total Fund Balances - Balance Sheet, Governmental Funds $ 9,123,463

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds: Capital assets 49,262,667 Accumulated depreciation (17,070,663)

Certain liabilities are not due and payable in the current period and therefore are not reported in the funds: Accrued interest payable (55,854) General obligation bonds payable (9,131,482) Accreted interest (3,979,319) Other post-employment benefits payable (OPEB) (2,835,645) Net pension liability (29,182,405) Compensated absences payable (241,577) Capital leases payable (2,203,262)

Deferred outflows and inflows of resources are not reported in the funds because they are applicable to future periods: Deferred outflows of resources related to pensions 9,686,198 Deferred inflows of resources related to pensions (2,728,018) Deferred outflows of resources related to OPEB 750,151 Deferred inflows of resources related to OPEB (54,216)

Total Fund Balance of Governmental Activities - Statement of Net Position $ 1,340,038

The accompanying notes are an integral part of this statement.

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21 FAIRFAX SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2019

General Cafeteria Fund Fund Revenues: LCFF Sources: State Apportionment or State Aid $ 21,680,000 $ - Education Protection Account Funds 4,019,692 - Local Sources 1,411,887 - Federal Revenue 2,344,369 1,804,215 Other State Revenue 3,765,462 193,960 Other Local Revenue 1,609,526 15,075 Total Revenues 34,830,936 2,013,250

Expenditures: Current: Instruction 20,901,993 - Instruction - Related Services 2,453,764 - Pupil Services 2,627,485 2,145,879 Ancillary Services 58,811 - General Administration 2,017,809 - Plant Services 3,757,748 12,414 Other Outgo 1,437,639 - Capital Outlay 276,958 - Debt Service: Principal 74,652 - Interest 98,751 - Total Expenditures 33,705,610 2,158,293

Excess (Deficiency) of Revenues Over (Under) Expenditures 1,125,326 (145,043)

Other Financing Sources (Uses): Transfers In - - Transfers Out - - Proceeds From Sale of Bonds - - Other Sources 58,704 - Total Other Financing Sources (Uses) 58,704 -

Net Change in Fund Balance 1,184,030 (145,043)

Fund Balance, July 1 4,793,736 343,043 Fund Balance, June 30 $ 5,977,766 $ 198,000

The accompanying notes are an integral part of this statement.

22 EXHIBIT A-5

Other Total Building Governmental Governmental Fund Funds Funds

$ - $ - $ 21,680,000 - - 4,019,692 - 983,000 2,394,887 20,920 - 4,169,504 - 10,245 3,969,667 63,810 1,476,183 3,164,594 84,730 2,469,428 39,398,344

- - 20,901,993 - - 2,453,764 - - 4,773,364 - - 58,811 - 6,640 2,024,449 29,240 959,971 4,759,373 - - 1,437,639 1,771,069 178,765 2,226,792

- 463,764 538,416 - 659,014 757,765 1,800,309 2,268,154 39,932,366

(1,715,579) 201,274 (534,022)

- 29,093 29,093 (29,093) - (29,093) 20,410 - 20,410 - - 58,704 (8,683) 29,093 79,114

(1,724,262) 230,367 (454,908)

3,431,237 1,010,355 9,578,371 $ 1,706,975 $ 1,240,722 $ 9,123,463

23 EXHIBIT A-6 FAIRFAX SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019

Net Change in Fund Balances - Total Governmental Funds $ (454,908)

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

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period: Expenditures for capital outlay 2,277,973 Depreciation expense (1,482,465)

Governmental funds report repayments of long-term debt as expenditures. In the Government-wide statements, repayments of long-term debt are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long-term debt were: 546,977

Expenses reported in the statement of activities that do not require the use of current financial resources are not reported as expenditures in the funds: Change in accrued interest payable and accreted interest (801,650) Compensated absences (32,040) Other post-employment benefits cost in excess of contributions 1,793,061

Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Amounts recognized in the funds as proceeds from debt were: (79,114)

Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. 1,135,288

In governmental 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: (2,329,658)

Change in Net Position of Governmental Activities - Statement of Activities $ 573,464

The accompanying notes are an integral part of this statement.

24 EXHIBIT A-7 FAIRFAX SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2019 Pension Trust Agency Fund Fund

Retiree Student Benefit Body Fund Fund ASSETS: Cash in County Treasury $ 110,740 $ - Cash on Hand and in Banks - 32,808 Cash with a Fiscal Agent/Trustee 3,461,890 - Accounts Receivable 647,812 - Total Assets 4,220,442 32,808

LIABILITIES: Accounts Payable $ 147,173 $ - Due to Student Groups - 32,808 Total Liabilities 147,173 32,808

NET POSITION: Held in Trust for Pension Benefit 4,073,269 - Total Net Position $ 4,073,269 $ -

The accompanying notes are an integral part of this statement.

25 EXHIBIT A-8 FAIRFAX SCHOOL DISTRICT STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2019

GASB 75 Retiree Benefit Trust Fund Additions: Net (Decrease) in Fair Value of Investments $ 2,173,448 Total Additions 2,173,448

Deductions: Administrative Expenses 2,389 Total Deductions 2,389

Change in Net Position 2,171,059

Net Position-Beginning of the Year 1,902,210 Net Position-End of the Year $ 4,073,269

The accompanying notes are an integral part of this statement.

26 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

A. Summary of Significant Accounting Policies

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

1. Reporting Entity

The District's combined financial statements include the accounts of all its operations. The District evaluated whether any other entity should be included in these financial statements. The criteria for including organizations as component units within the District's reporting entity, as set forth in GASB Statement No. 14, "The Financial Reporting Entity," include whether:

- the organization is legally separate (can sue and be sued in its name) - the District holds the corporate powers of the organization - the District appoints a voting majority of the organization's board - the District is able to impose its will on the organization - the organization has the potential to impose a financial benefit/burden on the District - there is fiscal dependency by the organization on the District

The District also evaluated each legally separate, tax-exempt organization whose resources are used principally to provide support to the District to determine if its omission from the reporting entity would result in financial statements which are misleading or incomplete. GASB Statement No. 14 requires inclusion of such an organization as a component unit when: 1) The economic resources received or held by the organization are entirely or almost entirely for the direct benefit of the District, its component units or its constituents; and 2) The District or its component units is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the organization; and 3) Such economic resources are significant to the District.

Based on these criteria, the District has no component units. Additionally, the District is not a component unit of any other reporting entity as defined by the GASB Statement.

2. Basis of Presentation, Basis of Accounting

a. Basis of Presentation

Government-wide Statements: The statement of net position and the statement of activities include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.

The statement of activities presents a comparison between direct expenses and program revenues for each function of the District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The District does not allocate indirect expenses in the statement of activities. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.

Fund Financial Statements: The fund financial statements provide information about the District's funds, with separate statements presented for each fund category. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.

27 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

The District reports the following major governmental funds:

General Fund. This is the general operating fund of the District. It is used to account for all financial resources not accounted for and reported in another fund.The General Fund, reported in these financial statements, includes three Funds maintained by the District: The General Fund (Fund 01), the Deferred Maintenance Fund (Fund 14), and the Special Reserve Fund for Post-Employment Benefits (Fund 17). Although funds 14 and 17 are separate funds authorized in the Education Code, it does not meet the definition of a Special Revenue Fund under accounting principles generally accepted in the United States of America, and has therefore been combined into the General Fund.

Cafeteria Special Revenue Fund. This fund is used to account separately for federal, state and local revenues received and expenditures made to operate the District cafeterias.

Building Fund. This fund is used to account for the acquisition of major governmental capital facilities and buildings from the sale of bond proceeds.

The District reports the following nonmajor governmental funds:

Deferred Maintenance Fund. This fund is used to account separately for revenues that are restricted or committed for deferred maintenance purposes (Education Code section 17582).

Capital Facilities Fund. This fund is used to account for resources received from developer impact fees assessed under provisions of the California Environmental Quality Act (CEQA).

County School Facilities Fund. This fund is used to account for the accumulation and expenditure of funds for projects funded under the Leroy F. Greene School Facilities Act of 1998, as established by the Board in accordance with Education Code 42840 et seq.

Special Reserve (Capital Projects) Fund. This fund is used to account for the accumulation and expenditure of funds for capital outlay purposes, as established by the Board in accordance with Education Code 42840 et seq.

Bond Interest and Redemption Fund. This fund is maintained by the County Treasurer and is used to account for both the accumulation of resources from ad valorem tax levies and the interest and redemption of principal of bonds issued by the District.

In addition, the District reports the following fund types:

Pension (and Other Employee Benefit) Trust Funds: These funds are used to report resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution plans, other postemployment benefit plans, or other employee benefit plans.

Agency Funds: These funds are used to report student activity funds and other resources held in a purely custodial capacity (assets equal liabilities). Agency funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments.

Fiduciary funds are reported in the fiduciary fund financial statements. However, because their assets are held in a trustee or agent capacity and are therefore not available to support District programs, these funds are not included in the government-wide statements.

28 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

b. Measurement Focus, Basis of Accounting

Government-wide and Fiduciary Fund Financial Statements: These financial statements are reported using the economic resources measurement focus. They are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available.

The District considers all revenues reported in the governmental funds to be available if the revenues are collected within one year after year-end. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptible-to-accrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

When the District incurs an expenditure or expense for which both restricted and unrestricted resources may be used, it is the District's policy to use restricted resources first, then unrestricted resources.

3. 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.

4. 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 board 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.

Formal budgetary integration was used as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object code.

29 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

5. Assets, Liabilities, and Equity

a. Deposits and Investments

Cash balances held in banks and in revolving funds are insured to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institutions is fully insured or collateralized.

In accordance with Education Code Section 41001, the District maintains substantially all its cash in the Kern 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, except for the Tax Override Funds, in which interest earned is credited to the general fund. 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.

Information regarding the amount of dollars invested in derivatives with Kern County Treasury was not available.

b. Stores 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. Inventories of the General Fund are immaterial and have been omitted from these statements.

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.

c. Capital Assets

Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated fixed assets are recorded at their estimated fair value at the date of the donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. A capitalization threshold of $5,000 is used.

Capital assets are being depreciated using the straight-line method over the following estimated useful lives:

Estimated Useful Life Asset Class Examples in Years

Land N/A Site improvements Paving, flagpoles, retaining walls, sidewalks, fencing, outdoor lighting 20 School buildings 50 Portable classrooms 25 HVAC systems Heating, ventilation AC systems 20 Roofing 20 Interior construction 25 Carpet replacement 7 Electrical/plumbing 30 Sprinkler/fire system Fire suppression systems 25

30 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

Outdoor equipment Playground, radio towers, fuel tanks, pumps 20 Machinery and tools Shop, maintenance equipment, tools 15 Kitchen equipment Appliances 15 Custodial equipment Floor scrubbers, vacuums, other 15 Science and engineering Lab equipment, scientific apparatus 10 Furniture and accessories Classroom and other furniture 20 Business machines Fax, duplicating and printing equipment 10 Copiers 5 Communication equipment Mobile, portable radios, non-computerized 10 Computer hardware PC's, printers, network hardware 5 Computer software Instructional, other short-term 5 to 10 Computer software Administrative or long-term 10 to 20 Audio visual equipment Projectors, cameras (still and digital) 10 Athletic equipment Gymnastics, football, weight machines, wrestling mats 10 Musical instruments Pianos, strings, brass, percussion 10 Library books Collections 5 to 7 Licensed vehicles Buses, other on-road vehicles 8 Contractors equipment Major off-road vehicles, front-end loaders, large tractors, mobile air compressors 10 Grounds equipment Mowers, tractors, attachments 15

d. Receivable and Payable Balances

There are no significant receivables which are not scheduled for collection within one year of year end.

e. Compensated Absences

Accumulated unpaid employee vacation benefits are recognized as liabilities of the District. The current portion of the liabilities is recognized in the general fund at year end.

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.

f. Unearned Revenue

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

31 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

g. Interfund Activity

Interfund activity results from loans, services provided, reimbursements or transfers between funds. 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 or 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 In and Transfers Out are netted and presented as a single "Transfers" line on the government-wide statement of activities. Similarly, interfund receivables and payables are netted and presented as a single "Internal Balances" line of the government-wide statement of net position.

h. Property Taxes

Secured property taxes attach as an enforceable lien on property as of March 1. Taxes are payable in two installments on November 15 and March 15. Unsecured property taxes are payable in one installment on or before August 31. The County of Kern bills and collects the taxes for the District.

i. Fund Balances - Governmental Funds

Fund balances of the governmental funds are classified as follows:

Nonspendable Fund Balance - represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaid insurance) or legally required to remain intact (such as notes receivable or principal of a permanent fund).

Restricted Fund Balance - represents amounts that are constrained by external parties, constitutional provisions or enabling legislation.

Committed Fund Balance - represents amounts that can only be used for a specific purpose because of a formal action by the District's governing board. Committed amounts cannot be used for any other purpose unless the governing board removes those constraints by taking the same type of formal action. Committed fund balance amounts may be used for other purposes with appropriate due process by the governing board. Commitments are typically done through adoption and amendment of the budget. Committed fund balance amounts differ from restricted balances in that the constraints on their use do not come from outside parties, constitutional provisions, or enabling legislation.

Assigned Fund Balance - represents amounts which the District intends to use for a specific purpose, but that do not meet the criteria to be classified as restricted or committed. Intent may be stipulated by the governing board or by an official or body to which the governing board delegates the authority. Specific amounts that are not restricted or committed in a special revenue, capital projects, debt service or permanent fund are assigned for purposes in accordance with the nature of their fund type or the fund's primary purpose. Assignments within the general fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purposes of the District itself.

Unassigned Fund Balance - represents amounts which are unconstrained in that they may be spent for any purpose. Only the general fund reports a positive unassigned fund balance. Other governmental funds might report a negative balance in this classification because of overspending for specific purposes for which amounts had been restricted, committed or assigned.

When an expenditure is incurred for a purpose for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds.

32 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

6. Deferred Inflows and Deferred Outflows of Resources

Deferred outflows of resources is a consumption of net assets or net position that is applicable to a future reporting period. Deferred inflows of resources is an acquisition of net assets or net position that is applicable to a future reporting period. Deferred outflows of resources and deferred inflows of resources are recorded in accordance with GASB Statement numbers 63 and 65.

7. GASB 54 Fund Presentation

Consistent with fund reporting requirements established by GASB Statement No. 54, Fund 20 (Special Reserve Fund for Postemployment Benefits) are merged with the General Fund for purposes of presentation in the audit report, as applicable.

8. Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the CalPERS Schools Pool Cost-Sharing Multiple-Employer Plan (CalPERS Plan) and CalSTRS Schools Pool Cost-Sharing Multiple Employer Plan (CalSTRS Plan) and additions to/deductions from the CalPERS Plan and CalSTRS Plan's fiduciary net positions have been determined on the same basis as they are reported by the CalPERS Financial Office and CalSTRS Financial Office. 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.

GASB 68 requires that the reported results must pertain to liability and asset information within certain defined time frames. For this report, the following time frames are used:

Valuation Date (VD) (STRS) June 30, 2018

Valuation Date (VD) (PERS) June 30, 2017

Measurement Date (MD) June 30, 2018

Measurement Period (MP) July 1, 2017 to June 30, 2018

9. Use of Estimates

The preparation of financial statements in conformity with GAAP requires the use of management's estimates. Actual results could differ from those estimates.

10. Fair Value Measurements

The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles as defined by Governmental Accounting Standards Board (GASB) Statement No. 72. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The hierarchy is detailed as follows:

Level 1 Inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities that a government can access at the measurement date.

Level 2 Inputs: Inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly or indirectly.

Level 3 Inputs: Unobservable inputs for an asset or liability.

For the current fiscal year the District did not have any recurring or nonrecurring fair value measurements.

33 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

11. Implementation of New Standards

In the current fiscal year, the District implemented the following new standards. The applicable provisions of the new standards are summarized below. Implementation is reflected in the financial statements and the notes to the financial statements.

GASB 88 - Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements

The primary objective of this statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt.

This statement defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. This statement requires that additional essential information related to debt be disclosed in notes to financial statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant subjective acceleration clauses.

For notes to financial statements related to debt, this Statement also requires that existing and additional information be provided for direct borrowings and direct placements of debt separately from other debt.

GASB Statement No. 83, Certain Asset Retirement Obligations

This statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this statement.

The District does not currently have any AROs and does not expect that implementation of the pronouncement will have an impact on the financial statements.

34 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

B. Excess of Expenditures Over Appropriations

As of June 30, 2019, expenditures exceeded appropriations in individual funds as follows:

Excess Appropriations Category Expenditures

General Fund: Employee Benefits $ 2,034,317 Other Outgo 412,631 Direct Support/Indirect Costs 62,952 Capital Outlay 62,968 Debt Service: Principal 9,662

Cafeteria Fund: Classified Salaries 6,838 Employee Benefits 136,350 Services And Other Operating Expenditures 34,918

Deferred Maintenance Fund: Books And Supplies 10,974 Capital Outlay 178,765

Building Fund: Services And Other Operating Expenditures 35,835 Capital Outlay 178,765

General Fund: The District recognized additional employee benefits expenditures as result of on-behalf STRS and PERS contributions paid by the State of California on behalf of the District, pursuant to Senate Bill Number 90 (SB-90). In addition, there were other unexpected increases in other costs.

Cafeteria Fund: The operating expenditures exceeded expectations. Further, as with the General Fund, there were

Deferred Maintenance Fund: The District incurred unanticipated expenditures for various items and capital outlay expenditures were incurred earlier than originally anticipated.

Building Fund: The District incurred unanticipated expenditures for various items and capital outlay expenditures were incurred earlier than originally anticipated.

C. Cash and Investments

1. Cash in County Treasury:

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Kern County Treasury as part of the common investment pool ($7,630,422 as of June 30, 2019). The fair value of the District's portion of this pool as of that date, as provided by the pool sponsor, was $7,630,422. Assumptions made in determining the fair value of the pooled investment portfolios are available from the County Treasurer.

2. Cash on Hand, in Banks, and in Revolving Fund

Cash balances on hand and in banks ($0 as of June 30, 2019) and in the revolving fund ($10,000) are insured up to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institution is fully insured or collateralized.

35 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

3. Investments:

The District's investments at June 30, 2019 are shown below.

Fair Investment or Investment Type Maturity Value Cash in County Treasury Less than 12 months $ 7,630,422 Cash in Revolving Fund Less than 12 months 10,000 Total Investments $ 7,640,422

4. Analysis of Specific Deposit and Investment Risks

GASB Statement No. 40 requires a determination as to whether the District was exposed to the following specific investment risks at year end and if so, the reporting of certain related disclosures:

a. Credit Risk

Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The county is restricted by Government Code Section 53635 pursuant to Section 53601 to invest only 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. The ratings of securities by nationally recognized rating agencies are designed to give an indication of credit risk. At year end, the District was not exposed to significant credit risk.

b. Custodial Credit Risk

Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the deposits are uncollateralized, collateralized with securities held by the pledging financial institution, or collateralized with securities held by the pledging financial institution's trust department or agent but not in the District's name.

Investment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of the government, and are held by either the counterparty or the counterparty's trust department or agent but not in the District's name. At year end, the District was not exposed to significant custodial credit risk.

c. Concentration of Credit Risk

This risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. At year end, the District was not exposed to significant concentration of credit risk.

d. Interest Rate Risk

This is the risk that changes in interest rates will adversely affect the fair value of an investment. At year end, the District was not exposed to significant interest rate risk.

e. Foreign Currency Risk

This is the risk that exchange rates will adversely affect the fair value of an investment. At year end, the District was not exposed to significant foreign currency risk.

36 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

5. Investment Accounting Policy

The District is required by GASB Statement No. 31 to disclose its policy for determining which investments, if any, are reported at amortized cost. The District's general policy is to report money market investments and short-term participating interest-earning investment contracts at amortized cost and to report nonparticipating interest-earning investment contracts using a cost-based measure. However, if the fair value of an investment is significantly affected by the impairment of the credit standing of the issuer or by other factors, it is reported at fair value. All other investments are reported at fair value unless a legal contract exists which guarantees a higher value. The term "short-term" refers to investments which have a remaining term of one year or less at time of purchase. The term "nonparticipating" means that the investment's value does not vary with market interest rate changes. Nonnegotiable certificates of deposit are examples of nonparticipating interest-earning investment contracts.

The District's investments in external investment pools are reported in conformity with GASB Statement No. 77 unless the pool is 2a7-like, in which case they are reported at share value. A 2a7-like pool is one which is not registered with the Securities and Exchange Commission ("SEC") as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940.

D. Accounts Receivable

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

General Cafeteria Building All Other (Combined) Special Revenue Funds Governmental Fund Fund Funds

Federal programs $ 1,030,221 $ 208,264 $ - $ - State categorical aid programs 222,981 - - - State lottery 738,367 - - - Interest 28,150 784 12,964 1,021 Other 74,454 - - 17,151

Total $ 2,094,173 $ 209,048 $ 12,964 $ 18,172

Total Governmental Funds

Federal programs $ 1,238,485 State categorical aid programs 222,981 State lottery 738,367 Interest 42,919 Other 91,605

Total $ 2,334,357

37 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

E. Capital Assets

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

Beginning Ending Balances Increases Decreases Balances Governmental activities: Capital assets not being depreciated: Land $ 1,692,804 $ - $ - $ 1,692,804 Work in progress 814,663 716,891 818,443 713,111 Total capital assets not being depreciated 2,507,467 716,891 818,443 2,405,915

Capital assets being depreciated: Buildings 41,080,463 114,010 - 41,194,473 Improvements 1,762,301 1,284,124 - 3,046,425 Equipment 1,634,463 981,391 - 2,615,854 Total capital assets being depreciated 44,477,227 2,379,525 - 46,856,752 Less accumulated depreciation for: Buildings (13,336,427) (1,328,963) - (14,665,390) Improvements (790,851) (97,583) - (888,434) Equipment (1,460,920) (55,919) - (1,516,839) Total accumulated depreciation (15,588,198) (1,482,465) - (17,070,663) Total capital assets being depreciated, net 28,889,029 897,060 - 29,786,089 Governmental activities capital assets, net $ 31,396,496 $ 1,613,951 $ 818,443 $ 32,192,004

Depreciation was charged to functions as follows:

Instruction $ 1,287,427 Instruction-Related Services 1,108 Pupil Services 42,031 General Administration 1,090 Plant Services 150,809 $ 1,482,465

F. Interfund Balances and Activities

1. Due To and From Other Funds

Balances due to and due from other funds at June 30, 2019, consisted of the following:

Fund Due From Due To

General Fund $ 328,155 100,000 Cafeteria Special Revenue Fund 100,000 328,155 Building Fund - 29,093 Special Reserve Fund for Capital Outlay Projects 29,093 - Total $ 457,248 457,248

All amounts due are scheduled to be repaid within one year.

38 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

2. Transfers To and From Other Funds

Transfers to and from other funds at June 30, 2019, consisted of the following:

Transfers In Transfers Out Amount Reason

Special Reserve Fund for Building Fund $ 29,093 Reimbursement for Capital Outlay Projects Capital Outlay Expenditure

Total $ 29,093

G. Accounts Payable

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

Cafeteria All Other Total General Fund Special Revenue Building Governmental Governmental (Combined) Fund Fund Funds Funds

Vendor payables $ 864,466 $ 49,082 $ 65,295 $ 12,772 $ 991,615 Salaries and benefits 3,629 - - - 3,629 Other 652 - - - 652

Total $ 868,747 $ 49,082 $ 65,295 $ 12,772 $ 995,896

H. Unearned Revenue

The District has received revenues for programs as advances, or before program expenditures were incurred. Such revenues are reported in these statements as "unearned", and will be recognized in subsequent periods as program expenditures are made.

Unearned revenue at June 30, 2019 consisted of the following: General Fund After School Education and Safety $ 707

I. Long-Term Obligations

1. Long-Term Obligation Activity

Long-term obligations include debt and other long-term liabilities. Changes in long-term obligations for the year ended June 30, 2019, are as follows:

Amounts Beginning Ending Due Within Governmental activities: Balance Increases Decreases Balance One Year General obligation bonds $ 9,595,246 $ - $ 463,764 $ 9,131,482 422,079 Accreted interest 3,182,283 1,123,272 326,236 3,979,319 352,921 Other Post-Employment Benefits Payable 3,932,771 - 1,097,126 2,835,645 - Net Pension Liability 27,040,773 2,141,632 29,182,405 - Compensated absences 209,537 32,040 - 241,577 - Capital Lease Payable 3,342,649 (1,056,174) 83,213 2,203,262 79,666 Total governmental activities $ 47,303,259 $ 2,240,770 $ 1,970,339 $ 47,573,690 $ 854,666

39 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

The funds typically used to liquidate other long-term liabilities in the past are as follows:

Liability Activity Type Fund General obligation bonds Governmental Bond Interest and Redemption Accreted interest Governmental Bond Interest and Redemption Other Post-Employment Benefits Payable Governmental General Net Pension Liability Governmental General Compensated absences Governmental General Capital Lease Payable Governmental General

2. General Obligation Bonds and Accreted Interest on Capital Appreciation Bonds

The outstanding general obligation bond debt of the District at June 30, 2019, is as follows:

Issue Maturity Interest Bond Date Date Rate % 2000, Series 2000 A 08/11/2000 05/01/2025 4.00-5.81% 2000, Series 2002 A 05/14/2002 11/01/2025 5.00% 2000, Series 2004 07/22/2004 11/01/2019 5.80% 2010, Series 2011 02/10/2011 11/01/2041 4.00-11.50% 2016, Series 2017 01/19/2017 11/01/2046 4.00-5.00%

Bonds Bonds Original Outstanding Issued Redeemed Outstanding Bond Issue July 1, 2018 During Year During Year June 30, 2019 2000, Series 2000 A $ 2,484,892 $ 673,364 $ - $ 105,244 $ 568,120 2000, Series 2002 A 1,441,410 441,410 - 57,688 383,722 2000, Series 2004 333,555 333,555 - - 333,555 2010, Series 2011 5,694,507 5,646,917 - 20,832 5,626,085 2016, Series 2017 2,500,000 2,500,000 - 280,000 2,220,000 $ 12,454,364 $ 9,595,246 $ - $ 463,764 $ 9,131,482

The annual requirements to amortize general obligation bonds, payable and outstanding, and accreted interest as of June 30, 2019 are as follows:

General Obligation Bonds Year Ending June 30, Principal Interest Total 2020 $ 422,079 $ 685,198 $ 1,107,277 2021 240,879 732,273 973,152 2022 232,855 797,298 1,030,153 2023 245,654 804,473 1,050,127 2024 216,069 914,784 1,130,853 2025-2029 1,501,831 3,183,186 4,685,017 2030-2034 558,263 3,544,475 4,102,738 2035-2039 1,631,337 3,780,858 5,412,195 2040-2044 2,522,919 5,422,489 7,945,408 2045-2049 680,264 9,998,786 10,679,050 2050-2051 879,332 3,742,268 4,621,600 Total $ 9,131,482 $ 33,606,088 $ 42,737,570

40 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

Year Ending June 30, Accreted Interest 2020 $ 322,467 2021 342,931 2022 364,554 2023 343,732 2024 379,604 2025-2029 876,977 2030-2034 423,983 2035-2039 140,723 2040-2044 166,567 2045-2049 250,881 2050-2051 366,900 Total $ 3,979,319

3. Capital Leases

Commitments under capitalized lease agreements for facilities and equipment provide for minimum future lease payments as of June 30, 2019, as follows:

Year Ending June 30: Principal Interest Total 2020 $ 79,666 $ 95,780 $ 175,446 2021 86,680 92,886 179,566 2022 94,161 89,665 183,826 2023 93,574 86,093 179,667 2024 95,956 82,147 178,103 2025-2029 627,698 336,623 964,321 2030-2034 787,711 168,710 956,421 2035-2038 337,816 36,346 374,162 Total Minimum Rentals $ 2,203,262 $ 988,250 $ 3,191,512

J. Compensated Absences

Compensated absences at June 30, 2019 consisted of:

Compensated Absences Benefits Totals Classified $ 198,878 $ 42,699 $ 241,577

All amounts are due after one year.

K. Commitments Under Noncapitalized Leases

Commitments under operating (noncapitalized) lease agreements for facilities and equipment provide for minimum future rental payments as of June 30, 2019, as follows:

Year Ending June 30, 2020 $ 218,288 2021 218,288 2022 177,945 2023 51,695 2024 24,095 Total Minimum Rentals $ 690,311

The District will receive no sublease rental revenues nor pay any contingent rentals associated with these leases.

41 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

L. Pension Plans

1. General Information About the Pension Plans

a. Plan Descriptions

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers Retirement System (CalSTRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS). Benefit provisions under the Plans are established by State statute and Local Government resolution. Support by the State for the CalSTRS plan is such that the plan has a special funding situation as defined by GASB Statement No. 68. CalSTRS and CalPERS issue publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on their respective websites.

b. Benefits Paid

CalSTRS and CalPERS provide service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 62 for normal benefits or at age 55 with statutorily reduced benefits. Employees hired prior to January 1, 2013 are eligible to retire at age 60 for normal benefits or at age 55 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. All members are eligible for death benefits after one year of total service.

The Plans' provisions and benefits in effect at June 30, 2019 are summarized as follows:

CalSTRS Before On or After Hire Date Jan. 1, 2013 Jan. 1, 2013 Benefit Formula 2% at 60 2% at 62** Benefit Vesting Schedule 5 Years 5 Years Benefit Payments Monthly for Life Monthly for Life Retirement Age 55-60 55-62 Monthly benefits, as a % of eligible compensation 1.1 - 2.4% 1.0 - 2.4%* Required Employee Contribution Rates (at June 30, 2019) 10.250% 10.205% Required Employer Contribution Rates (at June 30, 2019) 16.280% 16.280% Required State Contribution Rates (at June 30, 2019) 14.772% 14.772%

*Amounts are limited to 120% of Social Security Wage Base. **The rate imposed on CalSTRS 2% at 62 members is based on the normal cost of benefits.

CalPERS Before On or After Hire Date Jan. 1, 2013 Jan. 1, 2013 Benefit Formula 2% at 55 2% at 62** Benefit Vesting Schedule 5 Years 5 Years Benefit Payments Monthly for Life Monthly For Life Retirement Age 50-62 52-67 Monthly Benefits as a % of Eligible Compensation 1.1- 2.5% 1.0- 2.5% Required Employee Contribution Rates (at June 30, 2019) 7.000% 7.000% Required Employer Contribution Rates (at June 30, 2019) 18.062% 18.062%

42 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

c. Contributions

CalSTRS

For the fiscal year ended June 30, 2019 (measurement date June 30), 2018, Section 22950 of the California Education code requires members to contribute monthly to the system 10.205% (if hired prior to January 1, 2013) or 10.25% (if hired on or after January 1, 2013) of the creditable compensation upon which members' contributions under this part are based. In addition, the employer required rates established by the CalSTRS Board have been established at 16.28% of creditable compensation for the fiscal year ended June 30, 2019 Rates are defined in Section 22950.5 through the fiscal year ending June 30, 2021. Beginning in the fiscal year ending June 30, 2022 and for each fiscal year thereafter, the CalSTRS Board has the authority to increase or decrease percentages paid specific to reflect the contribution required to eliminate by June 30, 2046, the remaining unfunded actuarial obligation with respect to service credited to members before July 1, 2014, as determined by the Board based upon a recommendation from its actuary.

CalPERS

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate. The CalPERS Board retains the authority to amend contribution rates. The total plan contributions are determined through CalPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of the employees. For the fiscal year ended June 30, 2019 (measurement date June 30, 2018) the employee contribution rate was 7.00% and employer contribution rate was 18.062% of covered payroll.

On Behalf Payments

Consistent with Section 22955.1 of the California Education Code, the State of California makes contributions to CalSTRS on behalf of employees working for the District. For the fiscal year ended June 30, 2019 (measurement date June 30, 2018) the State contributed 14.772% of salaries creditable to CalSTRS. The contributions made by the State during the fiscal year ended June 30, 2019 included amounts resulting from Senate Bill (SB) 90 settlement in which the State contributed an additional $2.2 Billion to CalSTRS on behalf of the Districts during the 2018-19 fiscal year in order to reduce contribution rates for Districts in 2019-20 and 2020-21. The contribution resulting from SB 90 made up 42% of the total contributions made by the State on behalf of the District. Consistent with the requirements of GASB 85, the District has recorded these contributions as revenue and expense in the fund financial statements (current financial resources measurement focus). The government-wide financial statements have recorded revenue and expense for pension expense paid on behalf of the District (economic resources measurement focus). Contributions reported for on behalf payments are based on the District's proportionate share of the State's contribution for the fiscal year.

43 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

Contributions made by the State on behalf of the District and the State's pension expense associated with District employees for the past three fiscal years are as follows:

CalSTRS On Behalf On Behalf On Behalf Year Ended Contribution Contribution Pension June 30, Rate Amount Expense 2017 7.470% $ 826,653 $ 397,005 2018 8.292% 977,800 928,909 2019 14.772% 1,845,763 1,858,345

CalPERS On Behalf On Behalf On Behalf Year Ended Contribution Contribution Pension June 30, Rate Amount Expense 2019 7.087% $ 300,761 $ 300,761

d. Contributions Recognized

For the fiscal year ended June 30, 2019 (measurement period June 30, 2018), the contributions recognized for each plan were:

Fund Financial Statements (Current Financial Resources Measurement Focus) CalSTRS CalPERS Total Contributions - Employer $ 2,034,236 $ 766,564 $ 2,800,800 Contributions - State On Behalf Payments 1,845,763 300,761 2,146,524 Total Contributions $ 3,879,999 $ 1,067,325 $ 4,947,324

Government-Wide Financial Statements (Economic Resources Measurement Focus) CalSTRS CalPERS Total Contributions - Employer $ 1,701,529 $ 681,542 $ 2,383,071 Contributions - State On Behalf Payments 1,845,763 300,761 2,146,524 Total Contributions $ 3,547,292 $ 982,303 $ 4,529,595

2. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

As of June 30, 2019, the District reported net pension liabilities for its proportionate shares of the net pension liability of each plan as follows:

Proportionate Share of Net Pension Liability CalSTRS $ 20,407,027 CalPERS 8,775,378 Total Net Pension Liability $ 29,182,405

The District's net pension liability for each Plan is measured as the proportionate share of the total net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2018. The total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2017 rolled forward to June 30, 2018 using standard update procedures. 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 plans relative to the projected contributions of all participating employers, as actuarially determined.

44 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

The District's proportionate share of the net pension liability for each Plan as of June 30, 2018 and June 30, 2019 were as follows:

CalSTRS District's State's Total For Proportionate Proportionate District Share Share Employees CalPERS Proportion June 30, 2018 0.0209% 0.0124% 0.0334% 0.0322% Proportion June 30, 2019 0.0222% 0.0128% 0.0350% 0.0329% Change in Proportion 0.0013% 0.0003% 0.0016% 0.0007%

a. Pension Expense

For the measurement period ended June 30, 2018 (fiscal year June 30, 2019), pension expense was recognized as follows:

CalSTRS CalPERS Total Change in Net Pension Liability (Asset) $ 1,052,761 $ 1,088,865 $ 2,141,626 State On Behalf Pension Expense 1,858,345 300,761 2,159,106 Employer Contributions to Pension Expense 2,034,236 766,564 2,800,800 (Increase)/Decrease in Deferred Outflows of Resources Employer Contributions Subsequent to Measurement Date (314,929) (70,931) (385,860) Difference Between Actual & Expected Experience 16,701 (387,568) (370,867) Change in Assumptions 836,618 180,896 1,017,514 Change in Proportionate Shares (879,408) (83,002) (962,410) Net Difference Between Projected & Actual Earnings 337,575 238,271 575,846 Increase/(Decrease) in Deferred Inflows of Resources Difference Between Actual & Expected Experience 16,698 - 16,698 Change in Assumptions - - - Change in Proportionate Shares - - - Net Difference Between Projected & Actual Earnings 235,528 61,577 297,105 Total Pension Expense $ 5,194,125 $ 2,095,433 $ 7,289,558

b. Deferred Outflows and Inflows of Resources

At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows of Resources CalSTRS CalPERS Total Pension contributions subsequent to measurement date $ 2,034,236 $ 766,564 $ 2,800,800 Differences between actual and expected experience 50,101 722,699 772,800 Changes in assumptions 2,509,853 1,016,689 3,526,542 Change in employer's proportionate share 1,137,926 296,439 1,434,365 Net difference between projected and actual earnings 675,150 476,541 1,151,691 Total Deferred Outflows of Resources $ 6,407,266 $ 3,278,932 $ 9,686,198

Deferred Inflows of Resources CalSTRS CalPERS Total Differences between actual and expected experience $ (16,698) $ - $ (16,698) Changes in assumptions - - - Change in employer's proportionate share - - - Net difference between projected and actual earnings (2,067,314) (644,006) (2,711,320) Total Deferred Inflows of Resources $ (2,084,012) $ (644,006) $ (2,728,018)

45 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

Pension contributions made subsequent to measurement date reported as deferred outflows of resources will be recognized as a portion of pension expense in the year ended June 30, 2020. The remaining amounts reported as deferred outflows or deferred inflows of resources will be recognized as an increase or decrease to pension expense over a five year period. Pension expense resulting from deferred outflows and deferred inflows of resources will be recognized as follows:

Year Ended Deferred Outflows of Resources Deferred Inflows of Resources Net Effect June 30 CalSTRS CalPERS CalSTRS CalPERS on Expenses 2020 $ 3,525,768 $ 1,643,565 $ (635,490) $ (197,403) $ 4,336,440 2021 1,491,532 877,000 (635,490) (197,403) 1,535,639 2022 1,153,958 572,687 (635,491) (197,404) 893,750 2023 236,008 185,680 (177,541) (51,796) 192,351 2024 ----- Total $ 6,407,266 $ 3,278,932 $ (2,084,012) $ (644,006) $ 6,958,180

c. Actuarial Assumptions

Total pension liabilities for the fiscal year ended June 30, 2019 were based on actuarial valuations were determined using the following actuarial assumptions:

CalSTRS CalPERS Fiscal Year June 30, 2019 June 30, 2019 Measurement Date June 30, 2018 June 30, 2018 Valuation Date June 30, 2017 June 30, 2017 Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Discount Rate 7.10% 7.15% Inflation 2.75% 2.50% Wage Growth 3.50% (3) Investment Rate of Return 7.10% 7.15% Post Retirement Benefit Increase (1) (4) Mortality (2) (5)

(1) CalSTRS post retirement benefit increases assumed at 2% simple for DB (annually) maintaining 85% purchasing power level for DB. Increases are not applicable for DBS/CBB.

(2) CalSTRS projects mortality by setting the projection scale equal to 110% of the ultimate improvement factor from the Mortality Improvement Scale (MP-2016) table issued by the Society of Actuaries.

(3) Wage growth is a component of inflation for CalPERS assumptions.

(4) CalPERS post retirement benefit increases assumes 2.00% until PPPA floor on purchasing power applies, 2.50% thereafter.

(5) CalPERS mortality table was developed based on CalPERS specific data. The table includes 15 years of mortality improvement using the Society of Actuaries 90% of scale MP-2016. For more details on this table, please refer to the December 2017 experience study report (based on CalPERS demographic data from 1997 to 2015) that can be found on the CalPERS website.

46 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

d. Discount Rate

The discount rate used to measure the total pension liability was 7.1000% for CalSTRS and 7.1500% for CalPERS. The projection of cash flows used to determine the discount rate assumed the contributions from plan members, employers, and state contributing agencies (where applicable) will be made at statutory contribution rates. To determine whether the District bond rate should be used in the calculation of a discount rate for each plan, CalSTRS and CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current discount rates are adequate and the use of the District bond rate calculation is not necessary for either plan. The stress test results are presented in a detailed report that can be obtained from the CalPERS and CalSTRS respective websites.

The CalPERS discount rate was increased from 7.50% to 7.65% at measurement date June 30, 2015 (Fiscal year June 30, 2016) to correct for an adjustment to exclude administrative expenses. Subsequently CalPERS discount rate was decreased from 7.65% to 7.15% at measurement date June 30, 2017 (Fiscal year June 30, 2018) to adjust for changes resulting from actuarially determined amounts.

The CalSTRS discount rate was adjusted from 7.60% to 7.10% for measurement date June 30, 2017 (Fiscal year June 30, 2018) to adjust for changes resulting from a new actuarial experience study.

According to Paragraph 30 of GASB Statement No. 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The investment return assumption used in the accounting valuations is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. Using this lower discount rate has resulted in a slightly higher Total Pension Liability and Net Pension Liability. CalSTRS and CalPERS checked the materiality threshold for the difference in calculation and did not find it to be a material difference.

CalSTRS and CalPERS are scheduled to review actuarial assumptions as part of their regular Asset Liability Management (ALM) review cycle. The last ALM completed by CalSTRS was conducted in 2015. CalSTRS is in process of completing the next ALM and expects to complete the process by November 2019. CalPERS completed their ALM in 2018 with new policies in effect on July 1, 2018. Both CalSTRS and CalPERS conduct new ALM's every 4 years.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalSTRS and CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 10 years) and 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 quarter of one percent.

47 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

The tables below reflect the 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 rates of return are net of administrative expenses.

CalSTRS Assumed Long Term Asset Expected Real Asset Class Allocation Rate of Return* Global Equity 47.00% 6.30% Fixed Income 12.00% 0.30% Real Estate 13.00% 5.20% Private Equity 13.00% 9.30% Risk Mitigating Strategies 9.00% 2.90% Inflation Sensitive 4.00% 3.80% Cash/Liquidity 2.00% -1.00%

*20 year average

CalPERS Assumed Real Return Real Return Asset Years Years Asset Class* Allocation 1-10** 11+*** Global Equity 50.00% 4.80% 5.98% Fixed Income 28.00% 1.00% 2.62% Inflation Assets 0.00% 0.77% 1.81% Private Equity 8.00% 6.30% 7.23% Real Assets 13.00% 3.75% 4.93% Liquidity 1.00% 0.00% -0.92%

* In the Basic Financial Statements, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-Term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities

** An expected inflation of 2.00% used for this period

*** An expected inflation of 2.92% used for this period

e. Sensitivity to Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following represents the District's proportionate share of the net pension liability for each Plan, calculated using the discount rate for each Plan, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:

CalSTRS CalPERS

1% Decrease 6.10% 6.15% Net Pension Liability $ 29,893,910 $ 12,776,527

Current Discount Rate 7.10% 7.15% Net Pension Liability $ 20,407,027 $ 8,775,378

1% Increase 8.10% 8.15% Net Pension Liability $ 12,541,487 $ 5,455,847

48 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

f. Total Pension Liability, Pension Plan Fiduciary Net Position and Net Pension Liability

CalSTRS - Governmental Activities Increase (Decrease) Total Plan Net State's Share District's Share Pension Fiduciary Pension of Net Pension of Net Pension Liability Net Position Liability Liability Liability (a) (b) (a) - (b) (c) (a) - (b) - (c) Balance at June 30, 2018 (Previously Reported) $ 100,995,038 $ 70,146,402 $ 30,848,636 $ 11,494,370 $ 19,354,266

Changes for the year: CalSTRS Auditor Adjustment - (177,961) 177,961 64,943 113,018 Change in Prop share 4,862,489 3,377,256 1,485,233 305,185 1,180,048 Service Cost 2,497,057 - 2,497,057 911,248 1,585,809 Interest 7,515,646 - 7,515,646 2,742,675 4,772,971 Differences between expected and actual experience (32,865) - (32,865) (11,993) (20,872) Contributions: Employer - 1,701,531 (1,701,531) (620,937) (1,080,594) Employee - 1,222,392 (1,222,392) (446,086) (776,306) State On Behalf Payments - 977,801 (977,801) (356,828) (620,973) Net Investment Income - 6,528,829 (6,528,829) (2,382,557) (4,146,272) Other Income - 36,761 (36,761) (13,415) (23,346) Benefit Payments, including refunds of employee contributions (5,082,465) (5,082,465) - - - Administrative expenses - (75,549) 75,549 27,570 47,979 Borrowing Costs - (32,952) 32,952 12,025 20,927 Other Expenses - (587) 587 214 373

Net Changes 9,759,862 8,475,056 1,284,806 232,045 1,052,761

Balance at June 30, 2019 $ 110,754,900 $ 78,621,458 $ 32,133,442 $ 11,726,415 $ 20,407,027

49 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

CalPERS - Governmental Activities Increase (Decrease) Total Plan Net Pension Fiduciary Pension Liability Net Position Liability (a) (b) (a) - (b)

Balance at June 30, 2018 $ 27,326,773 $ 19,640,260 $ 7,686,513 (Previously Reported) Changes for the year: Change in Proportionate Share 605,979 435,528 170,451 Service Cost 715,078 - 715,078 Interest 2,029,260 - 2,029,260 Differences between expected and actual experience 609,827 - 609,827 Change in Assumptions 148,125 - 148,125 Contributions: Employer - 681,552 (681,552) Employee - 313,645 (313,645) Net Investment Income - 1,676,887 (1,676,887) Plan to Plan Resource Movement - - - Benefit Payments, including refunds of employee contributions (1,333,962) (1,333,962) - Administrative expenses - (30,427) 30,427 Other expenses - (57,781) 57,781 Net Changes 2,774,307 1,685,442 1,088,865

Balance at June 30, 2019 $ 30,101,080 $ 21,325,702 $ 8,775,378

M. Other Retirement Plans

Section 403(b) Tax-Sheltered Annuity Plan

Plan Description

The District's Board of Trustees authorized the establishment of a Section 403(b) Tax-Sheltered Annuity Plan. This is a retirement plan funded by elective deferrals made under salary reduction agreements.

Funding Policy

All eligible employees electing to participate in this plan choose the amount of monthly compensation deferrals up to the maximums allowed by the Internal Revenue Code and its regulations and rulings. The District does not contribute to the plan on behalf of participating employees. For the fiscal year ended June 30, 2019, there were 86 employees that had elected to participate, with total compensation deferrals of $366,184.

50 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

N. Postemployment Benefits Other Than Pension Benefits

1. General Information about the OPEB Plan

Plan Description

The Self-Insured Schools of California (SISC III) administers the District's Retiree Benefits Plan (the Plan) - a single-employer defined benefit plan that is used to provide postemployment benefits other than pensions (OPEB) for all permanent, full-time, certificated and classified employees of the District.

The OPEB plan does not issue stand-alone financial reports that are available to the public.

Assumed Asset Allocation

The OPEB plan is associated with a trust. The assumed asset allocation of the plan's portfolio and the long-term expected rates of return are as follows.

Assumed Asset Class Allocation Cash / money market 0.85% Fixed income 16.98% Large cap securities 26.21% Mid cap securities 8.88% Small cap securities 8.47% International securities 11.79% Commodities / natural resources 3.12% Emerging market securities 6.02% Other 17.68% 100.00%

The expected real rate of return for each major asset class was not available. However, in aggregate, the expected real rate of return is 2.05%, based on historical experience.

The District does not have a formalized plan to contribute to the trust, nor is contractually required to contribute to the trust, therefore, assumptions made about projected cash flows for contributions were not used, as expectations regarding those contributions is not readily determinable.

Benefits Provided

The District provides healthcare benefits for retirees and their dependents, consistent with the plan commitments and current District benefits. Benefits are provided through a third-party insurer, and the full cost of benefits is covered by the Plan. The Board has the authority to establish and amend the benefit terms to the Plan.

Employees Covered by Benefit Terms

At June 30, 2019, the following retirees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefit payments 7 Inactive employees entitled to but not yet receiving benefit payments - Active employees 217 Total number of participants 224

51 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

2. Total OPEB Liability

The District's total restated OPEB liability was $4,968,863 as of June 30, 2019, and was determined using actuarial assumptions and other inputs.

Actuarial Assumptions and Other Inputs

The total OPEB liability actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified.

Inflation 2.75%

Salary Increases 2.75% per year

Discount Rate 6.40%

Healthcare Cost Trend Rates 4.00% per year

Retiree's Share of Costs 0.00% of projected health insurance premiums

The discount rate was based on the Bond Buyer 20 Bond Index.

Mortality rates were based on the 2014 CalPERS Active Mortality for Miscellaneous Employees table created by CalPERS.

Changes in Total OPEB Liability Increase (Decrease) Plan Total OPEB Fiduciary Net OPEB Liability Net Position Liability (a) (b) (a)-(b)

Balance at June 30, 2018 $ 5,834,981 $ 1,902,210 $ 3,932,771 Changes for the year: Service cost 328,506 - 328,506 Interest 292,757 - 292,757 Expected investment income - 107,601 (107,601) Investment gains/losses - 54,216 (54,216) Benefit payments (124,961) (124,961) - Contributions - 707,131 (707,131) Administrative expenses and other - (1,890) 1,890 Other adjustments (1,362,420) (511,089) (851,331) Net changes (866,118) 231,008 (1,097,126)

Balance at June 30, 2019 $ 4,968,863 $ 2,133,218 $ 2,835,645

There were no changes in benefit terms or assumptions and other inputs for the fiscal year ended June 30, 2019.

52 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

The following presents the net OPEB liability of the District, as well as what the District's net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point-higher than the current discount rate:

1% Decrease Discount Rate 1% Increase 5.40% 6.40% 7.40% Net OPEB Liability $ 3,223,220 $ 2,835,645 $ 2,475,619

Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates

The following presents the net OPEB liability of the District, as well as what the District's net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point-lower or 1-percentage-point higher than the current healthcare cost trend rates:

Healthcare Cost Trend 1% Decrease Rate 1% Increase 3.00% 4.00% 5.00% Net OPEB Liability $ 2,437,495 $ 2,835,645 $ 3,239,402

3. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

For the fiscal year ended June 30, 2019, the District recognized OPEB benefit of $1,042,910.

At June 30, 2019 the District reported deferred inflows of resources related to the following sources:

Deferred Inflows of Resources

Investment gains/losses $ (54,216)

At June 30, 2019 the District reported deferred outflows of resources related to the following sources:

Deferred Outflows of Resources

Contributions made subsequent to measurement date $ 750,151

Amounts reported as deferred inflows and outflows of resources related to OPEB will be recognized in OPEB expense are as follows:

Deferred Deferred Year Ending June 30, Inflows Outflows 2020 $ (10,844) 750,151 2021 (10,844) - 2022 (10,844) - 2023 (10,844) - 2024 (10,840) - Thereafter - -

Total $ (54,216) 750,151

53 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

O. Commitments and Contingencies

1. Pending Assessment for Disputed Tax Revenues

The Kern County Auditor-Controller's Office has impounded disputed revenues of school district taxes on secured and unsecured property based on claims or actions filed for the return of such tax revenues. The claims and actions are regarding the valuation of mineral rights that could trigger repayment of property taxes. Revenues are impounded until the final disposition of the claim or action.

The Kern County Auditor-Controller has estimated the contingent liability as of June 30, 2019 as follows:

Pending appeals for taxes $ 771,147 Pending appeals for interest 40,205 Total 811,352 Less amount held by Kern County Auditor-Controller (1,136,963) Net Contingent Liability $ (325,611)

2. State and Federal Allowances, Awards, and Grants

The District has received state and federal funds for specific purposes that are subject to view and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursement will not be material.

P. Construction in Progress

The District has construction contracts-in-progress as follows:

Project Expended to Remaining Authorization 6/30/2019 Commitment

FJH Commons groundwork $ 280,740 $ 121,280 $ 159,460 Wings B&C Restrooms Remodel 142,762 34,398 108,364

$ 423,502 $ 155,678 $ 267,824

Q. Restricted Fund Balances

Restricted fund balances at June 30, 2019 are as follows:

Medi-Cal Billing Option $ 1 Special Education 30,220 Special Ed: Mental Health Services 7,286 Classified School Employee Professional Development Block G 15,842 Low-Performing Students Block Grant 44,461 Other Restricted Local 4,494 Cafeteria Special Revenue Fund 81,185 Building Fund 1,706,975 Capital Facilities Fund 164,398 Bond Interest and Redemption Fund 1,026,312

Totals $ 3,081,174

54 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

R. Joint Ventures (Joint Powers Agreements)

The District participates in three joint ventures under joint powers agreements (JPAs) as follows:

Partners in Nutrition Cooperative (PINCO) (commodities and other food items)

Schools Legal Services (legal services)

Self-Insured Schools of California I (SISC I) (workers' compensation insurance)

Self-Insured Schools of California II (SISC II) (property and liability insurance)

Self-Insured Schools of California III (SISC III) (health insurance)

The relationships between the District and the other JPAs are such that none of the other JPAs are component units of the District for financial reporting purposes.

The JPAs provide insurance and services as noted for member school districts.

Each JPA is governed by a board consisting of a representative from each member district. Such governing 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 representation on the governing board.

Each district pays premiums and fees commensurate with the level of coverage or services requested, and shares surpluses and deficits proportionate to its participation in each JPA.

Each JPA is independently accountable for its fiscal matters, and maintains its own accounting records.

The District's share of year-end assets, liabilities, or fund equity has not been calculated by the entities.

Condensed financial information for the above JPAs for the year ended June 30, 2019 was not available as of the audit report date. Complete financial statements for the JPAs may be obtained from the JPAs at the addresses indicated below:

PINCO C/O Antelope Valley Union High School District 44811 N. Sierra Highway Lancaster, CA 93534-3226

Schools Legal Services Kern County Superintendent of Schools 1300 17th St., No. 7 Bakersfield, CA 93301

SISC I, II and III Self-Insured Schools of California Kern County Superintendent of Schools P. O. Box 1847 Bakersfield, CA 93303-1847

55 FAIRFAX SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

S. Subsequent Events

Implementation of New Accounting Guidance

The District is evaluating accounting policies compliant with new pronouncements issued by the Government Accounting Standards Board (GASB) that are not yet effective for the fiscal year ended June 30, 2019. Those newly issued pronouncements are as follows:

GASB Statement No. 84 - Fiduciary Activities

This statement establishes standards of accounting and financial reporting by establishing specific criteria for identifying activities that should be reported as fiduciary activities and clarifying whether and how business-type activities should report their fiduciary activities. The focus of the criteria generally is on whether a government is controlling the assets of the fiduciary activity and the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities.

The requirements of this statement are effective for reporting periods beginning after December 15, 2018. The District is currently evaluating what impact, if any, the implementation of this pronouncement will have on the financial statements.

GASB Statement No. 87 - Leases

This statement requires the recognition of certain lease assets and liabilities for leases that previously were classified as operating leases. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. The statement also clarifies the definition and identification of leases.

The requirements of this statement are effective for reporting periods beginning after December 15, 2019. The District is currently evaluating what impact, if any, the implementation of this pronouncement will have on the financial statements.

56 Required Supplementary Information

Required supplementary information includes financial information and disclosures required by the Governmental Accounting Standards Board but not considered a part of the basic financial statements.

57 FAIRFAX SCHOOL DISTRICT EXHIBIT B-1 GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: LCFF Sources: State Apportionment or State Aid $ 23,220,728 $ 22,223,846 $ 21,680,000 $ (543,846) Education Protection Account Funds 3,190,718 3,389,178 4,019,692 630,514 Local Sources 1,101,736 1,235,546 1,411,887 176,341 Federal Revenue 2,322,845 2,440,868 2,344,369 (96,499) Other State Revenue 1,950,497 2,067,945 3,765,462 1,697,517 Other Local Revenue 1,804,965 1,873,355 1,609,526 (263,829) Total Revenues 33,591,489 33,230,738 34,830,936 1,600,198

Expenditures: Current: Certificated Salaries 12,641,366 12,523,837 12,317,039 206,798 Classified Salaries 4,831,648 4,814,695 4,676,757 137,938 Employee Benefits 7,936,580 8,008,712 10,043,029 (2,034,317) Books And Supplies 2,608,589 2,634,770 2,012,868 621,902 Services And Other Operating Expenditures 3,776,187 3,924,746 2,767,916 1,156,830 Other Outgo 1,023,902 1,025,008 1,437,639 (412,631) Direct Support/Indirect Costs (62,951) (62,951) 1 (62,952) Capital Outlay 634,000 213,990 276,958 (62,968) Debt Service: Principal 64,990 64,990 74,652 (9,662) Interest 125,024 125,024 98,751 26,273 Total Expenditures 33,579,335 33,272,821 33,705,610 (432,789)

Excess (Deficiency) of Revenues Over (Under) Expenditures 12,154 (42,083) 1,125,326 1,167,409

Other Financing Sources (Uses): Transfers Out (54,102) - - - Other Sources - - 58,704 58,704 Total Other Financing Sources (Uses) (54,102) - 58,704 58,704

Net Change in Fund Balance (41,948) (42,083) 1,184,030 1,226,113

Fund Balance, July 1 4,793,736 4,793,736 4,793,736 - Fund Balance, June 30 $ 4,751,788 $ 4,751,653 $ 5,977,766 $ 1,226,113

58 FAIRFAX SCHOOL DISTRICT EXHIBIT B-2 CAFETERIA FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Federal Revenue $ 2,030,681 $ 2,030,681 $ 1,804,215 $ (226,466) Other State Revenue 123,751 123,751 193,960 70,209 Other Local Revenue 83,125 83,125 15,075 (68,050) Total Revenues 2,237,557 2,237,557 2,013,250 (224,307)

Expenditures: Current: Classified Salaries 605,775 605,775 612,613 (6,838) Employee Benefits 337,846 337,846 474,196 (136,350) Books And Supplies 1,193,793 1,193,793 959,230 234,563 Services And Other Operating Expenditures 77,336 77,336 112,254 (34,918) Direct Support/Indirect Costs 62,951 62,951 - 62,951 Capital Outlay 9,500 9,500 - 9,500 Total Expenditures 2,287,201 2,287,201 2,158,293 128,908

Excess (Deficiency) of Revenues Over (Under) Expenditures (49,644) (49,644) (145,043) (95,399)

Other Financing Sources (Uses): Total Other Financing Sources (Uses) ----

Net Change in Fund Balance (49,644) (49,644) (145,043) (95,399)

Fund Balance, July 1 343,043 343,043 343,043 - Fund Balance, June 30 $ 293,399 $ 293,399 $ 198,000 $ (95,399)

59 EXHIBIT B-3 FAIRFAX SCHOOL DISTRICT SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM LAST TEN FISCAL YEARS *

Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

District's proportion of the net pension liability (asset) 0.022% 0.021% 0.021% 0.019% 0.016% - - - - -

District's proportionate share of the net pension liability (asset) $ 20,407,027 $ 19,354,261 $ 16,603,670 $ 5,565,055 $ 4,532,389 $ - $ - $ - $ - $ -

State's proportionate share of the net pension liability (asset) associated with the District 11,726,415 11,494,372 9,497,880 5,754,945 5,106,611 - - - - -

Total $ 32,133,442 $ 30,848,633 $ 26,101,550 $ 11,320,000 $ 9,639,000 $ - $ - $ - $ - $ -

District's covered-employee payroll $ 12,317,039 $ 11,914,809 $ 11,792,433 $ 10,675,862 $ 9,475,151 $ - $ - $ - $ - $ -

District's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 165.68% 162.44% 140.80% 52.13% 47.83% - - - - -

Plan fiduciary net position as a percentage of the total pension liability 70.99% 69.46% 69.00% 70.00% 77.00% - - - - -

* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, this schedule provides the information only for those years for which information is available.

60 EXHIBIT B-4 FAIRFAX SCHOOL DISTRICT SCHEDULE OF DISTRICT CONTRIBUTIONS CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM LAST TEN FISCAL YEARS *

Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

Contractually required contribution $ 2,034,236 $ 1,719,307 $ 1,433,845 $ 1,111,371 $ 813,777 $ - $ - $ - $ - $ -

Contributions in relation to the contractually required contribution (2,034,236) (1,719,307) (1,433,845) (1,111,371) (813,777) - - - - -

Contribution deficiency (excess)$-$-$-$-$-$-$-$-$-$ -

District's covered-employee payroll $ 12,317,039 $ 11,914,809 $ 11,792,433 $ 10,675,862 $ 9,475,151 $ - $ - $ - $ - $ -

Contributions as a percentage of covered-employee payroll 16.52% 14.43% 12.16% 10.41% 8.59% - - - - -

* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, this schedule provides the information for those years for which information is available.

61 EXHIBIT B-5 FAIRFAX SCHOOL DISTRICT SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM LAST TEN FISCAL YEARS *

Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

District's proportion of the net pension liability (asset) 0.033% 0.032% 0.031% 0.030% 0.025% - - - - -

District's proportionate share of the net pension liability (asset) $ 8,775,378 $ 7,686,512 $ 6,150,000 $ 3,816,000 $ 2,802,000 $ - $ - $ - $ - $ -

District's covered-employee payroll $ 5,321,410 $ 4,478,997 $ 4,828,840 $ 4,407,499 $ 4,012,916 $ - $ - $ - $ - $ -

District's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 164.91% 171.61% 127.36% 86.58% 69.82% - - - - -

Plan fiduciary net position as a percentage of the total pension liability 70.85% 71.87% 73.90% 79.40% 83.38% - - - - -

62 EXHIBIT B-6 FAIRFAX SCHOOL DISTRICT SCHEDULE OF DISTRICT CONTRIBUTIONS CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM LAST TEN FISCAL YEARS *

Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

Contractually required contribution $ 766,564 $ 695,633 $ 573,674 $ 443,106 $ 389,247 $ - $ - $ - $ - $ -

Contributions in relation to the contractually required contribution (766,564) (695,633) (573,674) (443,106) (389,247) - - - - -

Contribution deficiency (excess)$-$-$-$-$-$-$-$-$-$ -

District's covered-employee payroll $ 5,321,410 $ 4,478,997 4,828,840 4,407,499 4,012,916 $ - $ - $ - $ - $ -

Contributions as a percentage of covered-employee payroll 14.41% 15.53% 11.88% 10.05% 9.70% - - - - -

* This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, this schedule provides the information for those years for which information is available.

63 EXHIBIT B-7 FAIRFAX SCHOOL DISTRICT SCHEDULE OF CHANGES IN THE DISTRICT'S NET OPEB LIABILITY AND RELATED RATIOS SINGLE EMPLOYER TRUSTED PLAN LAST TEN FISCAL YEARS *

Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total OPEB liability: Service cost $ 328,506 $ 328,506 $ - $ - $ - $ - $ - $ - $ - $ - Interest 292,757 262,760 ------Changes of benefit terms ------Differences between expected and actual experience ------Changes of assumptions ------Other adjustments (1,362,420) ------Benefit payments, including refunds of employee contributions (124,961) (620,729) ------Net change in total OPEB liability (866,118) (29,463) ------Total OPEB liability - beginning 5,834,981 5,864,444 ------Total OPEB liability - ending (a) $ 4,968,863 $ 5,834,981 $ - $ - $ - $ - $ - $ - $ - $ -

Plan fiduciary net position: Contributions - employer $ 707,131 $ 1,222,225 $ - $ - $ - $ - $ - $ - $ - $ - Contributions - employee ------Net investment income 161,817 3,443 ------Benefit payments, including refunds of employee contributions (124,961) (620,729) ------Administrative expense (1,890) ------Other (511,089) (94,612) ------Net change in plan fiduciary net position 231,008 510,327 ------Plan fiduciary net position - beginning 1,902,210 1,391,883 ------Plan fiduciary net position - ending (b) $ 2,133,218 $ 1,902,210 $ - $ - $ - $ - $ - $ - $ - $ - District's net OPEB liability - ending (a) - (b) $ 2,835,645 $ 3,932,771 $ - $ - $ - $ - $ - $ - $ - $ - Plan fiduciary net position as a percentage of the total OPEB liability 42.93% 32.60% ------Covered-employee payroll $ 17,638,449 $ 17,597,513 $ - $ - $ - $ - $ - $ - $ - $ - District's net OPEB liability as a percentage of covered-employee payroll 16.08% 22.35% ------

Notes to Schedule: * This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, this schedule provides the information only for those years for which information is available.

64 EXHIBIT B-8 FAIRFAX SCHOOL DISTRICT SCHEDULE OF DISTRICT CONTRIBUTIONS SINGLE EMPLOYER TRUSTED PLAN LAST TEN FISCAL YEARS *

Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

Actuarially determined contribution $ 707,131 $ 620,729 $ - $ - $ - $ - $ - $ - $ - $ -

Contributions in relation to the actuarially determined contribution (707,131) (620,729) ------

Contribution deficiency (excess)$-$-$-$-$-$-$-$-$-$ -

Covered-employee payroll $ 17,638,449 $ 17,597,513 $ - $ - $ - $ - $ - $ - $ - $ -

Contributions as a percentage of covered-employee payroll 4.01% 3.53% ------

Notes to Schedule

Valuation date: June 30, 2017

Methods and assumptions used to determine contribution rates:

Inflation 2.75% Salary increases 2.75% Investment return / discount rate 6.40% Healthcare cost trend rates 4.00% Retirees' share of costs 0.00%

The discount rate was based on an index of 20-year general obligation municipal bonds.

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66 Combining Statements and Budget Comparisons as Supplementary Information

This supplementary information includes financial statements and schedules not required by the Governmental Accounting Standards Board, nor a part of the basic financial statements, but are presented for purposes of additional analysis.

67 FAIRFAX SCHOOL DISTRICT EXHIBIT C-1 COMBINING BALANCE SHEET ALL GENERAL FUNDS JUNE 30, 2019

General Fund Post Totals County School Employment June 30, Service Fund Benefits Fund 2019 ASSETS: Cash in County Treasury $ 3,307,038 $ 1,207,854 $ 4,514,892 Cash in Revolving Fund 10,000 - 10,000 Accounts Receivable 2,086,918 7,255 2,094,173 Due from Other Funds 328,155 - 328,155 Total Assets 5,732,111 1,215,109 6,947,220

LIABILITIES AND FUND BALANCE: Liabilities: Accounts Payable $ 868,747 $ - $ 868,747 Due to Other Funds 100,000 - 100,000 Unearned Revenue 707 - 707 Total Liabilities 969,454 - 969,454

Fund Balance: Nonspendable Fund Balances: Revolving Cash 10,000 - 10,000 Restricted Fund Balances 102,304 - 102,304 Assigned Fund Balances 2,562,785 1,215,109 3,777,894 Unassigned: Other Unassigned 2,087,568 - 2,087,568 Total Fund Balance 4,762,657 1,215,109 5,977,766

Total Liabilities and Fund Balances $ 5,732,111 $ 1,215,109 $ 6,947,220

68 FAIRFAX SCHOOL DISTRICT EXHIBIT C-2 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - ALL GENERAL FUNDS YEAR ENDED JUNE 30, 2019

General Fund Post Totals County School Employment June 30, Service Fund Benefits Fund 2019 Revenues: LCFF Sources: State Apportionment or State Aid $ 21,680,000 $ - $ 21,680,000 Education Protection Account Funds 4,019,692 - 4,019,692 Local Sources 1,411,887 - 1,411,887 Federal Revenue 2,344,369 - 2,344,369 Other State Revenue 3,765,462 - 3,765,462 Other Local Revenue 1,591,348 18,178 1,609,526 Total Revenues 34,812,758 18,178 34,830,936

Expenditures: Current: Instruction 20,901,993 - 20,901,993 Instruction - Related Services 2,453,764 - 2,453,764 Pupil Services 2,627,485 - 2,627,485 Ancillary Services 58,811 - 58,811 General Administration 2,017,809 - 2,017,809 Plant Services 3,757,748 - 3,757,748 Other Outgo 1,437,639 - 1,437,639 Capital Outlay 276,958 - 276,958 Debt Service: Principal 74,652 - 74,652 Interest 98,751 - 98,751 Total Expenditures 33,705,610 - 33,705,610

Excess (Deficiency) of Revenues Over (Under) Expenditures 1,107,148 18,178 1,125,326

Other Financing Sources (Uses): Other Sources 58,704 - 58,704 Total Other Financing Sources (Uses) 58,704 - 58,704

Net Change in Fund Balance 1,165,852 18,178 1,184,030

Fund Balance, July 1 3,596,805 1,196,931 4,793,736 Fund Balance, June 30 $ 4,762,657 $ 1,215,109 $ 5,977,766

69 EXHIBIT C-3 FAIRFAX SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2019 Special Debt Revenue Service Total Fund Fund Nonmajor Deferred Bond Capital Governmental Maintenance Interest Projects Funds (See Fund & Redemption Funds Exhibit A-3) ASSETS: Cash in County Treasury $ 1,888 $ 1,026,312 $ 178,029 $ 1,206,229 Accounts Receivable 17,167 - 1,005 18,172 Due from Other Funds - - 29,093 29,093 Total Assets 19,055 1,026,312 208,127 1,253,494

LIABILITIES AND FUND BALANCE: Liabilities: Accounts Payable $ 9,855 $ - $ 2,917 $ 12,772 Total Liabilities 9,855 - 2,917 12,772

Fund Balance: Restricted Fund Balances - 1,026,312 164,398 1,190,710 Assigned Fund Balances 9,200 - 40,812 50,012 Total Fund Balance 9,200 1,026,312 205,210 1,240,722

Total Liabilities and Fund Balances $ 19,055 $ 1,026,312 $ 208,127 $ 1,253,494

70 EXHIBIT C-4 FAIRFAX SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2019 Special Debt Revenue Service Total Fund Fund Nonmajor Deferred Bond Capital Governmental Maintenance Interest Projects Funds (See Fund & Redemption Funds Exhibit A-5) Revenues: LCFF Sources: Local Sources $ 983,000 $ - $ - $ 983,000 Other State Revenue - 10,245 - 10,245 Other Local Revenue 474 1,154,717 320,992 1,476,183 Total Revenues 983,474 1,164,962 320,992 2,469,428

Expenditures: Current: General Administration - - 6,640 6,640 Plant Services 801,375 - 158,596 959,971 Capital Outlay 178,765 - - 178,765 Debt Service: Principal - 463,764 - 463,764 Interest - 659,014 - 659,014 Total Expenditures 980,140 1,122,778 165,236 2,268,154

Excess (Deficiency) of Revenues Over (Under) Expenditures 3,334 42,184 155,756 201,274

Other Financing Sources (Uses): Transfers In - - 29,093 29,093 Total Other Financing Sources (Uses) - - 29,093 29,093

Net Change in Fund Balance 3,334 42,184 184,849 230,367

Fund Balance, July 1 5,866 984,128 20,361 1,010,355 Fund Balance, June 30 $ 9,200 $ 1,026,312 $ 205,210 $ 1,240,722

71 FAIRFAX SCHOOL DISTRICT EXHIBIT C-5 DEFERRED MAINTENANCE FUND SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Variance Positive Budget Actual (Negative) Revenues: Local Sources $ 1,157,292 $ 983,000 $ (174,292) Other Local Revenue - 474 474 Total Revenues 1,157,292 983,474 (173,818)

Expenditures: Current: Books And Supplies - 10,974 (10,974) Services And Other Operating Expenditures 1,157,292 790,401 366,891 Capital Outlay - 178,765 (178,765) Total Expenditures 1,157,292 980,140 177,152

Excess (Deficiency) of Revenues Over (Under) Expenditures - 3,334 3,334

Other Financing Sources (Uses): Total Other Financing Sources (Uses) - - -

Net Change in Fund Balance - 3,334 3,334

Fund Balance, July 1 5,866 5,866 - Fund Balance, June 30 $ 5,866 $ 9,200 $ 3,334

72 EXHIBIT C-6 FAIRFAX SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2019 Total Nonmajor Capital Capital Capital Projects Facilities Outlay Funds (See Fund Projects Exhibit C-3) ASSETS: Cash in County Treasury $ 166,394 $ 11,635 $ 178,029 Accounts Receivable 921 84 1,005 Due from Other Funds - 29,093 29,093 Total Assets 167,315 40,812 208,127

LIABILITIES AND FUND BALANCE: Liabilities: Accounts Payable $ 2,917 $ - $ 2,917 Total Liabilities 2,917 - 2,917

Fund Balance: Restricted Fund Balances 164,398 - 164,398 Assigned Fund Balances - 40,812 40,812 Total Fund Balance 164,398 40,812 205,210

Total Liabilities and Fund Balances $ 167,315 $ 40,812 $ 208,127

73 EXHIBIT C-7 FAIRFAX SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS FOR THE YEAR ENDED JUNE 30, 2019 Total Nonmajor Capital Capital Capital Projects Facilities Outlay Funds (See Fund Projects Exhibit C-4) Revenues: Other Local Revenue $ 320,614 $ 378 $ 320,992 Total Revenues 320,614 378 320,992

Expenditures: Current: General Administration 6,640 - 6,640 Plant Services 138,823 19,773 158,596 Total Expenditures 145,463 19,773 165,236

Excess (Deficiency) of Revenues Over (Under) Expenditures 175,151 (19,395) 155,756

Other Financing Sources (Uses): Transfers In - 29,093 29,093 Total Other Financing Sources (Uses) - 29,093 29,093

Net Change in Fund Balance 175,151 9,698 184,849

Fund Balance, July 1 (10,753) 31,114 20,361 Fund Balance, June 30 $ 164,398 $ 40,812 $ 205,210

74 FAIRFAX SCHOOL DISTRICT EXHIBIT C-8 BUILDING FUND CAPITAL PROJECTS FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2019

Variance Positive Budget Actual (Negative) Revenues: Federal Revenue $ - $ 20,920 $ 20,920 Other Local Revenue - 63,810 63,810 Total Revenues - 84,730 84,730

Expenditures: Current: Services And Other Operating Expenditures - 29,240 (29,240) Capital Outlay 1,518,000 1,771,069 (253,069) Total Expenditures 1,518,000 1,800,309 (282,309)

Excess (Deficiency) of Revenues Over (Under) Expenditures (1,518,000) (1,715,579) (197,579)

Other Financing Sources (Uses): Transfers Out - (29,093) (29,093) Other Sources - 20,410 20,410 Total Other Financing Sources (Uses) - (8,683) (8,683)

Net Change in Fund Balance (1,518,000) (1,724,262) (206,262)

Fund Balance, July 1 3,431,237 3,431,237 - Fund Balance, June 30 $ 1,913,237 $ 1,706,975 $ (206,262)

75 FAIRFAX SCHOOL DISTRICT EXHIBIT C-9 COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAR ENDED JUNE 30, 2019

Balance Balance July 1, June 30, 2018 Additions Deductions 2019 SHIRLEY LANE ELEMENTARY ASSETS Cash and investments $ 2,955 $ 48,501 $ 46,710 $ 4,746 Total Assets $ 2,955 $ 48,501 $ 46,710 $ 4,746

LIABILITIES Due to student groups $ 2,955 $ 48,501 $ 46,710 $ 4,746 Total Liabilities $ 2,955$ 48,501$ 46,710 $ 4,746

VIRGINIA AVENUE ELEMENTARY ASSETS Cash and investments $ 6,027 $ 26,979 $ 25,252 $ 7,754 Total Assets $ 6,027 $ 26,979 $ 25,252 $ 7,754

LIABILITIES Due to student groups $ 6,027 $ 26,979 $ 25,252 $ 7,754 Total Liabilities $ 6,027$ 26,979$ 25,252 $ 7,754

ZEPHYR LANE ELEMENTARY ASSETS Cash and investments $ 3,141 $ 32,190 $ 32,575 $ 2,756 Total Assets $ 3,141 $ 32,190 $ 32,575 $ 2,756

LIABILITIES Due to student groups $ 3,141 $ 32,190 $ 32,575 $ 2,756 Total Liabilities $ 3,141$ 32,190$ 32,575 $ 2,756

FAIRFAX JUNIOR HIGH ASSETS Cash and investments $ 20,670 $ 70,317 $ 73,435 $ 17,552 Total Assets $ 20,670 $ 70,317 $ 73,435 $ 17,552

LIABILITIES Due to student groups $ 20,670 $ 70,317 $ 73,435 $ 17,552 Total Liabilities $ 20,670$ 70,317$ 73,435 $ 17,552

TOTAL AGENCY FUNDS: ASSETS Cash and investments $ 32,793 $ 177,987 $ 177,972 $ 32,808 Total Assets $ 32,793 $ 177,987 $ 177,972 $ 32,808

LIABILITIES Due to student groups $ 32,793 $ 177,987 $ 177,972 $ 32,808 Total Liabilities $ 32,793 $ 177,987 $ 177,972 $ 32,808

76 Other Supplementary Information

This section includes financial information and disclosures not required by the Governmental Accounting Standards Board and not considered a part of the basic financial statements. It may, however, include information which is required by other entities.

77 Supplementary Information Section

78 FAIRFAX SCHOOL DISTRICT LOCAL EDUCATION AGENCY ORGANIZATION STRUCTURE JUNE 30, 2019

The Fairfax School District was established on May 6, 1891 and is located in the southeastern part of Bakersfield, California. The District is currently operating one junior high and three elementary schools: Fairfax Junior High, Virginia Avenue Elementary, Shirley Lane Elementary, and Zephyr Lane Elementary. The junior high school has a grade of seventh and eighth; and the elementary schools have grade spans of Kindergarten through sixth. There were no changes in the boundaries of the District during the year ended June 30, 2019.

Governing Board

Name Office Term and Term Expiration

Javier Moreno President 2020

Virginia Lawson Clerk 2020

Victoria Coronel Member 2022

Alma Rios Member 2022

Palmer Moland Member 2022

Administration

Michael Coleman Superintendent

Lora Brown Assistant Superintendent Educational Services

Jonathan Medina Director of Fiscal Services

79 FAIRFAX SCHOOL DISTRICT TABLE D-1 SCHEDULE OF AVERAGE DAILY ATTENDANCE YEAR ENDED JUNE 30, 2019

Second Period Annual Report Report TK/K-3: Regular ADA 1,186.11 1,185.69 Extended Year Special Education 4.63 4.63 TK/K-3 Totals 1,190.74 1,190.32

Grades 4-6: Regular ADA 810.26 809.83 Extended Year Special Education 6.47 6.47 Grades 4-6 Totals 816.73 816.30

Grades 7 and 8: Regular ADA 555.09 555.18 Extended Year Special Education 1.72 1.72 Grades 7 and 8 Totals 556.81 556.90

ADA Totals 2,564.28 2,563.52

There were no audit findings which resulted in necessary revisions to attendance.

Average daily attendance is a measurement of the number of pupils attending classes of the district or charter school. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts and charter schools. This schedule provides information regarding the attendance of students at various grade levels and in different programs.

80 FAIRFAX SCHOOL DISTRICT TABLE D-2 SCHEDULE OF INSTRUCTIONAL TIME YEAR ENDED JUNE 30, 2019

Ed. Code Ed. Code Number Number 46207 46207 2018-19 of Daysof Days Minutes Adjusted & Actual Traditional Multitrack Grade Level Requirement Reduced Minutes Calendar Calendar Status

Transitional Kindergarten 36,000 N/A 55,344 180 N/A Complied

Kindergarten 36,000 N/A 55,344 180 N/A Complied

Grade 1 50,400 N/A 51,044 180 N/A Complied

Grade 2 50,400 N/A 51,044 180 N/A Complied

Grade 3 50,400 N/A 55,334 180 N/A Complied

Grade 4 54,000 N/A 55,334 180 N/A Complied

Grade 5 54,000 N/A 58,784 180 N/A Complied

Grade 6 54,000 N/A 58,784 180 N/A Complied

Grade 7 54,000 N/A 59,689 180 N/A Complied

Grade 8 54,000 N/A 59,689 180 N/A Complied

School districts and charter schools must maintain their instructional minutes as defined in Education Code Section 46207. This schedule is required of 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 instruction time offered by the District and whether the District complied with the provisions of Education Code Sections 46200 through 46206. The District did not meet its target funding.

81 FAIRFAX SCHOOL DISTRICT TABLE D-3 SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS YEAR ENDED JUNE 30, 2019

Budget 2020 General Fund (see note 1) 2019 2018 2017

Revenues and other financial sources $ 34,398,141 $ 34,889,640 $ 32,091,974 $ 30,294,750

Expenditures 34,370,334 33,705,610 33,196,209 29,864,559

Other uses and transfers out - - - 21,680

Total outgo 34,370,334 33,705,610 33,196,209 29,886,239

Change in fund balance (deficit) 27,807 1,184,030 (1,104,235) 408,511

Ending fund balance $ 6,005,573 $ 5,977,766 $ 4,793,736 $ 5,897,971

Available reserves (see note 2) $ 2,024,784 $ 2,087,568 $ 954,125 $ 1,432,225

Available reserves as a percentage of total outgo 6.0% 6.0% 3.0% 5.0%

Total long-term debt $ 46,568,184 $ 46,931,157 $ 46,310,452 $ 43,780,251

Average daily attendance at P-2 2,587 2,564 2,569 2,584

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 fund balance of the general fund has increased by $79,795 (1.4%) over the past two years. The fiscal year 2019-2020 budget projects an increase of $27,807 (0.5%). 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 any operating deficits in one of the past three years, and projects an increase during the 2019-2020 fiscal year. Total long-term debt has increased by $3,150,906 over the past two years.

Average daily attendance has decreased by 20 over the past two years. During fiscal year 2019-2020, an increase of 23 average daily attendance is anticipated.

NOTES: 1 The budget for 2020 is included for analytical purposes only and has not been subjected to audit. 2 Available reserves consist of all unassigned fund balances and all funds reserved for economic uncertainties contained within the General Fund.

82 FAIRFAX SCHOOL DISTRICT TABLE D-4 RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2019

Cafeteria Building Fund Fund June 30, 2019, annual financial and budget report fund balances $ 142,703 $ 1,736,069

Adjustments and reclassifications:

Increasing (decreasing) the fund balance:

Interfund transfers - (29,094)

Stores inventory adjustment to physical count 55,297 -

Net adjustments and reclassifications 55,297 (29,094)

June 30, 2019, audited financial statement fund balances $ 198,000 $ 1,706,975

Capital Project Fund June 30, 2019, annual financial and budget report fund balances $ 11,718

Adjustments and reclassifications:

Increasing (decreasing) the fund balance:

Interfund transfers 29,094

Net adjustments and reclassifications 29,094

June 30, 2019, audited financial statement fund balances $ 40,812

This schedule provides the information necessary to reconcile the fund balances of all funds and the total liabilities balance of the general long-term debt account group as reported on the SACS report to the audited financial statements. Funds that required no adjustment are not presented.

83 FAIRFAX SCHOOL DISTRICT TABLE D-5 SCHEDULE OF CHARTER SCHOOLS YEAR ENDED JUNE 30, 2019

No charter schools are chartered by Fairfax School District.

Included In Charter Schools Audit?

None N/A

Subrecipients The District did not provide any awards to subrecipients.

De Minimis Cost Rate The District did not elect to use the 10% de minimis cost rate.

Excess Sick Leave The District did not authorize or accrue any excess sick leave as that term is defined in subdivision (c) of Education Code Section 22170.5 for the District's employees who are members of the California State Teachers' Retirement System (CalSTRS).

84 FAIRFAX SCHOOL DISTRICT TABLE D-6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Page 1 of 2 FOR THE YEAR ENDED JUNE 30, 2019

Pass- Through Federal Grantor/ Federal Entity Passed Pass-Through Grantor/ CFDA Identifying Through to Federal Program or Cluster Title Number Number Subrecipients Expenditures

CHILD NUTRITION CLUSTER:

U. S. Department of Agriculture Passed Through California Department of Education (CDE): School Breakfast Program-Basic 10.553 13525 $ - $ 284,125

National School Lunch Program 10.555 13523,13524 - 1,183,704 Total Passed Through California Department of Education (CDE) - 1,467,829 Total U. S. Department of Agriculture - 1,467,829 Total Child Nutrition Cluster - 1,467,829

MEDICAID CLUSTER:

U. S. Department of Health and Human Services Passed Through County Office of Education: Medical Assistance Program (Billing Option) 93.778 10013 - 132,965 Total U. S. Department of Health and Human Services - 132,965 Total Medicaid Cluster - 132,965

SPECIAL EDUCATION (IDEA) CLUSTER:

U. S. Department of Education Passed Through California Department of Education (CDE): Special Ed: IDEA Basic Local Assistance Entitlement, Part B, Section84.027 13379 - 462,766 Special Ed: IDEA Preschool Local Entitlement, Part B, Sec 611 84.027 13682 - 39,197

Special Ed:IDEA Preschool grants, Part B, Sec 619 84.173 13430 - 5,752 Total Passed Through California Department of Education (CDE) - 507,715 Total U. S. Department of Education - 507,715 Total Special Education (IDEA) Cluster - 507,715

OTHER PROGRAMS:

U. S. Department of Education Direct Program: NCLB: Title IV, Part B, 21st Century Community Learning Centers Pr 84.287 14349 - 242,233 Passed Through California Deparment of Education (CDE): NCLB-Title I, Part B, Even State Migrant Education (MEES) 84.214 10030 - 14,016 Passed Through California Department of Education (CDE): NCLB-Title I, Part A, Basic Grants Low Income and Neglected 84.010 14329 - 892,781

NCLB-Titl I, Part C, Migrant Ed-Regular 84.011 14326 - 300,240 NCLB-Titl I, Part C, Migrant Ed-Summer 84.011 14326 - 52,933

NCLB: Title II, Part A Teacher Quality 84.367 14341 - 112,702 Total Passed Through California Department of Education (CDE) - 1,358,656 Passed Through California Department of Education (CDE) : NCLB: Title III, Limited English Proficiency (LEP) Student Program 84.365 10084 - 109,704 Total U. S. Department of Education $ - $ 1,724,609

85 FAIRFAX SCHOOL DISTRICT TABLE D-6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Page 2 of 2 FOR THE YEAR ENDED JUNE 30, 2019

Pass- Through Federal Grantor/ Federal Entity Passed Pass-Through Grantor/ CFDA Identifying Through to Federal Program or Cluster Title Number Number Subrecipients Expenditures U. S. Department of Agriculture Passed Through California Department of Education (CDE): Child and Adult Care Food Program 10.558 13393 $ - $ 283,887

Child Nutrition: Fresh Fruit and Vegetable Program 10.582 14968 - 52,499 Total Passed Through California Department of Education (CDE) - 336,386 Total U. S. Department of Agriculture - 336,386 TOTAL EXPENDITURES OF FEDERAL AWARDS $ - $ 4,169,504

The accompanying notes are an integral part of this schedule.

86 FAIRFAX SCHOOL DISTRICT NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2019

Basis of Presentation

The accompanying schedule of expenditures of federal awards ("the Schedule") includes the federal grant activity of Fairfax School District. The information in the Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"). Therefore, some amounts may differ from amounts presented in, or used in the preparation of, the basic financial statements.

Summary of Significant Accounting Policies

Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. These expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.

Fairfax School District has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.

The District did not participate in any loan or loan guarantee programs as described in Title 2, Code of Federal Regulations, Part 200.502(b) during the year.

87 This page is intentionally left blank.

88 Other Independent Auditor's Reports

89 Linger, Peterson & Shrum Certified Public Accountants 575 E. Locust Ave., Suite 308 Fresno, California 93720-2928

Independent Auditor's 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

Board of Trustees Fairfax School District Bakersfield, California 93307

Members of the Board of Trustees:

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 Fairfax School District, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise Fairfax School District's basic financial statements, and have issued our report thereon dated December 13, 2019.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Fairfax 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 the Fairfax School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the Fairfax 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.

90 Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Fairfax School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Respectfully submitted,

Linger, Peterson & Shrum Fresno, California December 13, 2019

91 Linger, Peterson & Shrum Certified Public Accountants 575 E. Locust Ave., Suite 308 Fresno, California 93720-2928

Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance

Board of Trustees Fairfax School District Bakersfield, California 93307

Members of the Board of Trustees:

Report on Compliance for Each Major Federal Program

We have audited the Fairfax School District's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Fairfax School District's major federal programs for the year ended June 30, 2019. Fairfax School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of Fairfax School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Fairfax 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 the Fairfax School District's compliance.

Opinion on Each Major Federal Program

In our opinion, the Fairfax School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2019.

92 Report on Internal Control Over Compliance

Management of the Fairfax 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 the Fairfax School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Fairfax 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 a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we considered to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Respectfully submitted,

Linger, Peterson & Shrum Fresno, California December 13, 2019

93 Linger, Peterson & Shrum Certified Public Accountants 575 East Locust Ave., Suite 308 Fresno, California 93720-2928

Independent Auditor's Report on State Compliance

Board of Trustees Fairfax School District Bakersfield, California 93307

Members of the Board of Trustees:

Report on State Compliance

We have audited the District's compliance with the types of compliance requirements described in the 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, prescribed in Title 5, California Code of Regulations, Section 19810 that could have a direct and material effect on each of the District's state programs identified below for the fiscal year ended June 30, 2019.

Management's Responsibility for State Compliance

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each applicable program as identified in the State's audit guide, 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting prescribed in Title 5, California Code of Regulations, Section 19810. 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's audit guide, 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, prescribed in Title 5, California Code of Regulations, Section 19810. Those standards and audit guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on the state programs noted below occurred. An audit includes examining, on a test basis, evidence about the 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. Our audit does not provide a legal determination of the District's compliance with those requirements.

In connection with the audit referred to above, we selected and tested transactions and records to determine the District's compliance with the state laws and regulations applicable to the following items:

94 Procedures in Audit Guide Compliance Requirements Performed?

LOCAL EDUCATION AGENCIES OTHER THAN CHARTER SCHOOLS: Attendance Accounting: Attendance Reporting ...... Yes Teacher Certification and Misassignments ...... Yes Kindergarten Continuance ...... Yes Independent Study ...... N/A Continuation Education ...... Yes Instructional Time ...... Yes Instructional Materials...... Yes Ratio of Administrative Employees to Teachers ...... Yes Classroom Teacher Salaries ...... Yes Early Retirement Incentive ...... N/A GANN Limit Calculation ...... Yes School Accountability Report Card ...... Yes Juvenile Court Schools ...... N/A Middle or Early College High Schools ...... N/A K-3 Grade Span Adjustment ...... Yes Transportation Maintenance of Effort ...... Yes Apprenticeship: Related and Supplemental Instruction ...... N/A Comprehensive School Safety Plan ...... Yes District of Choice ...... N/A

SCHOOL DISTRICTS, COUNTY OFFICES OF EDUCATION, AND CHARTER SCHOOLS: California Clean Energy Jobs Act ...... N/A After School Education and Safety Program: After School ...... N/A Before School ...... N/A General Requirements ...... N/A Proper Expenditure of Education Protection Account Funds ...... Yes Unduplicated Local Control Funding Formula Pupil Counts ...... Yes Local Control and Accountability Plan ...... Yes Independent Study-Course Based ...... N/A

CHARTER SCHOOLS: Attendance ...... N/A Mode of Instruction ...... N/A Nonclassroom-Based Instruction/Independent Study...... N/A Determination of Funding for Nonclassroom-Based Instruction ...... N/A Annual Instructional Minutes - Classroom Based ...... N/A Charter School Facility Grant Program ...... N/A

The term "N/A" is used above to mean either the District did not offer the program during the current fiscal year or the program applies to a different type of local education agency.

95 Opinion on State Compliance

In our opinion, Fairfax School District complied, in all material respects, with the compliance requirements referred to above that are applicable to the statutory requirements listed in the schedule above for the year ended June 30, 2019.

Fairfax School District's Response to Findings

Fairfax School District's response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. Fairfax School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of This Report

The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion of the effectiveness of the entity's internal control or on compliance outside of the items tested as noted above. This report is an integral part of an audit performed in accordance with the 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting prescribed in Title 5, California Code of Regulations, Section 19810 in considering the entity's compliance. Accordingly, this communication is not suitable for any other purpose.

Respectfully submitted,

Linger, Peterson & Shrum

Fresno, California December 13, 2019

96 Findings and Recommendations Section

97 FAIRFAX SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

A. Summary of Auditor's Results

1. Financial Statements

Type of auditor's report issued: Unmodified

Internal control over financial reporting:

One or more material weaknesses identified? Yes X No

One or more significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported

Noncompliance material to financial statements noted? Yes X No

2. Federal Awards

Internal control over major programs:

One or more material weaknesses identified? Yes X No

One or more significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported

Type of auditor's report issued on compliance for major programs: Unmodified

Version of compliance supplement used in audit: 8/1/2019

Any audit findings disclosed that are required to be reported in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200? Yes X No

Identification of major programs:

CFDA Number(s) Name of Federal Program or Cluster

84.010 Title I Grants to Local Educational Agencies (Title I of IASA) 10.553, 10.555 Child Nutrition Cluster

Dollar threshold used to distinguish between type A and type B programs: $750,000

Auditee qualified as low-risk auditee? Yes X No

98 FAIRFAX SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2019

3. State Awards

Any audit findings disclosed that are required to be reported in accordance with the state's Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting? Yes X No

Type of auditor's report issued on compliance for state programs: Unmodified

B. Financial Statement Findings

This section identifies the significant deficiencies, material weaknesses, and instances of noncompliance related to the financial statements that are required to be reported in accordance with paragraphs 5.18 through 5.20 of "Government Auditing Standards."

There were no Financial Statement findings or questioned costs.

C. Federal Award Findings and Questioned Costs

This section identifies the audit findings required to be reported by the Uniform Guidance (e.g., significant deficiencies, material weaknesses, and instances of noncompliance, including questioned costs).

There were no Federal award findings or questioned costs.

D. State Award Findings and Questioned Costs

This section identifies the audit findings pertaining to noncompliance with State program rules and regulations.

There were no State award findings or questioned costs.

99 FAIRFAX SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2019

Management's Explanation Finding/Recommendation Current Status If Not Implemented

2018-001 Federal Compliance [50000] The percentage of payroll being charged to Title 1, Part Implemented A (84.010) and Special Ed IDEA (84.027) were supported by a completed and signed personnel activity report (PAR). However, PARs were completed late. The District now completes and signs personnel activity reports in a timely manner and documents all salary expenditures being charged to Federal programs.

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APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Fairfax Elementary School District (the “District”) in connection with the issuance of $______of the District’s 2020 General Obligation Refunding Bonds (Federally Taxable) (the “Bonds”). The Bonds are being issued pursuant to Resolution of the District adopted on August 13, 2020. The District covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Dissemination Agent” shall mean initially Fieldman, Rolapp & Associates, Inc. dba Applied Best Practices, or any successor Dissemination Agent designated in writing by the District (which may be the District) and which has filed with the District a written acceptance of such designation.

“Financial Obligation” shall mean (a) a debt obligation; (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule.

“Holders” shall mean the registered owners of the Bonds.

“Listed Events” shall mean any of the events listed in Section 5(a) or Section 5(b) of this Disclosure Certificate.

“Official Statement” means that certain official statement, dated ______, 2020, relating to the offering and sale of the Bonds.

“Participating Underwriter” shall mean ______, as the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

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“Repository” shall mean, the Municipal Securities Rulemaking Board, which can be found at http://emma.msrb.org/, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“State” shall mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District’s fiscal year (presently ending June 30), commencing with the report for the 2019-20 fiscal year, provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) Not later than thirty (30) days (nor more than sixty (60) days) prior to said date the Dissemination Agent shall give notice to the District that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the District shall provide the Annual Report in a format suitable for reporting to the Repository to the Dissemination Agent (if other than the District). If the District is unable to provide to the Repository an Annual Report by the date required in subsection (a), the District shall send a timely notice to the Repository in substantially the form attached as Exhibit A with a copy to the Dissemination Agent. The Dissemination Agent shall not be required to file a Notice to Repository of Failure to File an Annual Report.

(c) The Dissemination Agent shall file a report with the District stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was provided to the Repository.

SECTION 4. Content and Form of Annual Reports. (a) The District’s Annual Report shall contain or include by reference the following:

1. The audited financial statements of the District for the prior fiscal year, 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 time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

2. Material financial information and operating data with respect to the District of the type included in the Official Statement in the following categories (to the extent not included in the District’s audited financial statements):

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(a) State funding received by the District for the last completed fiscal year;

(b) average daily attendance of the District for the last completed fiscal year;

(d) summary financial information on revenues, expenditures and fund balances for the District’s general fund reflecting adopted budget for the current fiscal year;

(e) assessed valuation of taxable property within the District for the current fiscal year; and

(f) secured tax levy collections and delinquencies within the District for the last completed fiscal year, except to the extent the Teeter Plan, if adopted by Kern County, applies to both the 1% general purpose ad valorem property tax levy and to the tax levy for general obligation bonds of the District.

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 have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference.

(b) The Annual Report shall be filed in an electronic format, and accompanied by identifying information, prescribed by the Municipal Securities Rulemaking Board.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5(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 in a timely manner not in excess of 10 business days after the occurrence of the event:

1. principal and interest payment delinquencies.

2. tender offers.

3. defeasances.

4. rating changes.

5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB).

6. unscheduled draws on the debt service reserves reflecting financial difficulties.

7. unscheduled draws on credit enhancement reflecting financial difficulties.

8. substitution of the credit or liquidity providers or their failure to perform.

9. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation, any of which reflect financial difficulties; and

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10. bankruptcy, insolvency, receivership or similar event (within the meaning of the Rule) of the District. For the purposes of the event identified in this Section 5(a)(10), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

(b) Pursuant to the provisions of this Section 5(b), the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

1. non-payment related defaults.

2. modifications to rights of Bondholders.

3. optional, contingent or unscheduled Bond calls.

4. unless described under Section 5(a)(5) above, material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.

5. release, substitution or sale of property securing repayment of the Bonds.

6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.

7. appointment of a successor or additional trustee or paying agent with respect to the Bonds or the change of name of such a trustee or paying agent.

(c) Whenever the District obtains knowledge of the occurrence of a Listed Event under Section 5(b) hereof, the District shall as soon as possible determine if such event would be material under applicable federal securities laws.

(d) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) hereof would be material under applicable federal securities laws, the District shall (i) file a notice of such occurrence with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event or (ii) provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the District’s determination of materiality pursuant to Section 5(c).

SECTION 6. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all

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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(a) or Section 5(b), as applicable.

SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent (or substitute 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. The Dissemination Agent may resign upon fifteen (15) days written notice to the District. Upon such resignation, the District shall act as its own Dissemination Agent until it appoints a successor. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate and shall not be responsible to verify the accuracy, completeness or materiality of any continuing disclosure information provided by the District. The District shall compensate the Dissemination Agent for its fees and expenses hereunder as agreed by the parties. Any entity succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the execution or filing of any paper or further act.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5(a) or 5(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances;

(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds; and

(d) No duties of the Dissemination Agent hereunder shall be amended without its written consent thereto.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in

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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 Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The Dissemination Agent acts hereunder solely for the benefit of the District; this Disclosure Certificate shall confer no duties on the Dissemination Agent to the Participating Underwriter, the Holders and the Beneficial Owners. 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 attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s gross 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. The Dissemination Agent shall have no liability for the failure to report any event or any financial information as to which the District has not provided an information report in format suitable for filing with the Repository. The Dissemination Agent shall not be required to monitor or enforce the District’s duty to comply with its continuing disclosure requirements hereunder.

SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Dated: ______, 2020 FAIRFAX ELEMENTARY SCHOOL DISTRICT

By: Michael Coleman Superintendent

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EXHIBIT A

NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT

Name of District: FAIRFAX ELEMENTARY SCHOOL DISTRICT

Name of Bond Issue: 2020 General Obligation Refunding Bonds (Federally Taxable)

Date of Issuance: ______, 2020

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate relating to the Bonds. The District anticipates that the Annual Report will be filed by ______.

Dated:______

FAIRFAX ELEMENTARY SCHOOL DISTRICT

By [form only; no signature required]

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APPENDIX D

GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF BAKERSFIELD AND KERN COUNTY

The following information regarding the City of Bakersfield (the “City”), and Kern County (the “County”) is included only for the purpose of supplying general information regarding the local community and economy. The Bonds are not a debt of the City or of the County. This material has been prepared by or excerpted from the sources as noted herein and has not been reviewed for accuracy by the District or Bond Counsel.

General

City of Bakersfield. The City is located at the southern end of the San Joaquin Valley in the County, approximately 110 miles north of the City of Los Angeles and approximately 290 miles south of the City and County of San Francisco. The City covers over 150 square miles of land and an additional 162 square miles of land area is located within the City’s sphere of influence. The City is a regional center for industry, government, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers of the state and is the commercial hub of the County. As the County seat, it is the location of many county, state, and federal offices.

Kern County. The County is located approximately 100 miles north of Los Angeles County and spans the southern end of the Central Valley. Kern is the third largest county in State of California (the “State”), covering 8,073 square miles ranging west to the southern slope of the Coast Ranges, east beyond the southern slope of the eastern Sierra Nevada into the Mojave Desert, north to Kings, Tulare and Inyo Counties, and south to Los Angeles County. The county's economy is heavily linked to agriculture and to petroleum extraction. There is also a strong aviation, space, and military presence, such as Edwards Air Force Base, the China Lake Naval Air Weapons Station, and the Mojave Air and Space Port. Bakersfield is the largest city in the County and became the county seat in 1874. An elected five-member Board of Supervisors serves as the County’s governing body.

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Population

The following table shows historical population figures for the City, the County and the State for the past 10 years.

POPULATION ESTIMATES 2011 through 2020 City of Bakersfield, Kern County and the State of California Year(1) City of Bakersfield Kern County State of California 2011 351,124 847,014 37,561,624 2012 356,492 855,275 37,924,661 2013 362,345 864,605 38,269,864 2014 366,268 870,642 38,556,731 2015 370,701 878,094 38,870,150 2016 374,663 882,825 39,131,307 2017 378,903 890,784 39,398,702 2018 383,404 899,940 39,586,646 2019 387,236 908,405 39,695,376 2020 392,756 917,553 39,782,870

(1) As of January 1. Source: 2011-20 (2010 Demographic Research Unit Benchmark): California Department of Finance.

Income

The following table summarizes per capita personal income for the County, the State and the United States from 2009 through 2018.

PER CAPITA PERSONAL INCOME 2009 through 2018 Kern County, State of California, and United States Year Kern County State of California United States 2009 $28,915 $33,276 $39,284 2010 31,028 34,373 40,546 2011 32,710 35,527 42,735 2012 34,508 36,438 44,599 2013 35,218 37,728 44,851 2014 37,461 39,802 47,058 2015 38,015 41,855 48,978 2016 37,920 42,701 49,870 2017 38,467 43,405 51,885 2018 39,703 44,793 54,446

Note: Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation). Source: U.S. Department of Commerce, Bureau of Economic Analysis.

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Employment

The following table summarizes the labor force, employment and unemployment figures for the years 2015 through 2019 for the City, the County and the State.

LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT ANNUAL AVERAGES 2015 through 2019 City of Bakersfield, Kern County and the State of California Unemployment Year Area Labor Force Employment Unemployment Rate (%) 2015 City of Bakersfield 179,200 162,900 16,300 9.1 Kern County 390,000 350,100 39,800 10.2 State of California 18,828,800 17,660,700 1,168,100 6.2 2016 City of Bakersfield 176,200 162,500 13,700 7.8 Kern County 388,000 347,700 40,300 10.4 State of California 19,021,200 17,980,100 1,041,100 5.5 2017 City of Bakersfield 174,800 163,500 11,300 6.4 Kern County 384,400 349,000 35,400 9.2 State of California 19,176,400 18,257,100 919,300 4.8 2018 City of Bakersfield 176,600 166,700 9,900 5.6 Kern County 386,200 354,900 31,300 8.1 State of California 19,280,800 18,460,700 820,100 4.3 2019 City of Bakersfield 178,900 169,500 9,400 5.3 Kern County 391,000 360,800 30,200 7.7 State of California 19,411,600 18,627,400 784,200 4.0

Note: Data is based on annual averages, unless otherwise specified, and is not seasonally adjusted. Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. March 2019 Benchmark.

Principal Employers

The following tables list the principal employers located in the City and the County.

PRINCIPAL EMPLOYERS 2019 City of Bakersfield Employer Employees County of Kern 7,539 Kern High School District 4,342 Bakersfield City School District 4,039 Dignity Health 3,489 Panama-Buena Vista Union School Dist. 2,489 William Bolthouse Farms 2,110 Adventist Health Bakersfield 1,973 Kern Medical Center 1,800 Kern County Superintendent of Schools 1,540 City of Bakersfield 1,454

Source: City of Bakersfield Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2019.

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PRINCIPAL EMPLOYERS 2019 County of Kern Employer Employees Edwards Air Force Base 9,353 County of Kern 7,402 China Lake Naval Air Weapons Station 7,000 Grimmway Enterprises 3,700 Dignity Health 3,296 Adventist Health Bakersfield 2,718 William Bolthouse Farms 2,250 Kern Medical Center 1,800 City of Bakersfield 1,600 Sun World International 1,600

Source: County of Kern Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2019.

Industry

The City and the County are included in the Bakersfield Metropolitan Statistical Area (the “MSA”). The distribution of employment in the MSA is presented in the following table for the years 2015 through 2019. These figures are multi county-wide statistics and may not necessarily accurately reflect employment trends in the County.

INDUSTRY EMPLOYMENT & LABOR FORCE ANNUAL AVERAGES 2015 through 2019 Bakersfield Metropolitan Statistical Area

2015 2016 2017 2018 2019 Total Farm 59,300 62,700 62,100 62,400 63,900 Mining and Logging 11,400 9,000 8,600 9,300 9,500 Construction 16,500 14,500 14,900 15,900 16,300 Manufacturing 14,200 13,500 13,400 13,200 12,800 Wholesale Trade 8,300 8,100 8,200 8,300 8,000 Retail Trade 31,500 32,100 32,000 31,800 31,100 Transportation, Warehousing & Utilities 10,900 11,000 11,500 13,200 13,600 Information 2,700 2,200 2,000 2,000 2,000 Financial Activities 8,000 7,800 7,700 7,600 7,500 Professional and Business Services 26,800 26,500 26,100 27,200 28,600 Education and Health Services 33,400 34,800 36,400 38,100 40,700 Leisure and Hospitality 25,000 25,500 25,900 26,700 27,500 Other Services 7,700 7,700 7,700 7,900 8,300 Government 61,500 63,800 65,200 66,100 67,700 Total All Industries 317,200 319,100 321,800 329,700 337,600

Note: Items may not add to total due to independent rounding. Source: California Employment Development Department, Labor Market Information Division. March 2019 Benchmark.

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Commercial Activity

Summaries of annual taxable sales for the City and the County from 2015 through 2019 are shown in the following tables.

ANNUAL TAXABLE SALES 2015 through 2019 City of Bakersfield (Dollars in Thousands) Retail Stores Total Taxable Year Retail Permits Taxable Transactions Total Permits Transactions 2015 6,202 $4,782,316 9,085 $5,988,260 2016 6,348 4,742,311 9,338 5,806,458 2017 6,315 4,952,589 9,246 6,117,691 2018(1) 6,680 5,156,811 9,937 6,378,358 2019(1) 6,985 5,256,931 10,489 6,500,090

(1) Preliminary, subject to change. Source: Taxable Sales in California, California Department of Tax and Fee Administration (“CDTFA”) for 2015-19.

ANNUAL TAXABLE SALES 2015 through 2019 Kern County (Dollars in Thousands) Retail Stores Total Taxable Year Retail Permits Taxable Transactions Total Permits Transactions 2015 11,929 $8,622,476 18,244 $14,394,758 2016 12,141 8,638,096 18,628 13,957,115 2017 12,253 9,104,669 18,743 13,967,392 2018(1) 12,558 9,716,458 19,612 15,130,972 2019(1) 13,152 10,076,907 20,757 15,688,343

(1) Preliminary, subject to change. Source: Taxable Sales in California, California Department of Tax and Fee Administration (“CDTFA”) for 2015-19.

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Construction Activity

The annual building permit valuations and number of permits for new dwelling units issued from 2015 through 2019 for the City and the County are shown in the following tables.

BUILDING PERMIT VALUATIONS 2015 through 2019 City of Bakersfield (Dollars in Thousands) 2015 2016 2017 2018 2019 Valuation Residential $396,846 $385,391 $284,646 $313,153 $406,250 Non-Residential 127,375 140,918 155,458 149,927 103,167 Total $524,221 $526,309 $440,104 $463,080 $509,417

Units Single Family 1,333 1,338 930 997 1,378 Multi Family 198 56 6 126 56 Total 1,531 1,394 936 1,123 1,434

Note: Totals may not add to sum due to rounding. Source: Construction Industry Research Board.

BUILDING PERMITS AND VALUATIONS 2015 through 2019 Kern County (Dollars in Thousands) 2015 2016 2017 2018 2019 Valuation Residential $552,696 $532,529 $443,194 $499,650 $587,466 Non-Residential 919,751 343,670 370,695 570,621 363,047 Total $1,472,447 $876,199 $813,889 $1,070,271 $950,513

Units Single Family 2,184 2,181 1,844 1,894 2,260 Multiple Family 270 66 10 346 659 Total 2,454 2,247 1,854 2,240 2,919

Note: Totals may not add to sum because of rounding. Source: Construction Industry Research Board.

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Agriculture

Agricultural-related industries are a major source of employment in the County. The County’s agriculture commodities grossed $7,466,152,000 in 2018. The leading farm commodities in the County for 2018 are listed below. TOP COMMODITIES 2018 Kern County Rank Commodity Value 1. Grapes (all) $1,512,473,000 2. Almonds (including by-products) 1,235,158,000 3. Pistachios 1,143,972,000 4. Citrus (fresh and processing) 1,063,063,000 5. Milk (market and manufacturing) 591,895,000 6. Carrots (fresh and processing) 398,286,000 7. Cattle & Calves 254,995,000 8. Alfalfa 114,991,000 9. Apiary 111,819,000 10. Nursery (fruit and nut trees and vines) 96,641,000 11. Eggs and egg products 91,115,000 12. Silage & Forage 87,538,000 13. Potatoes (fresh and processing) 87,477,000 14. Pomegranates (fresh and processing) 74,019,000 15. Garlic (fresh and processing) 71,392,000 16. Cotton (includes processed cotton) 67,634,000 17. Tomato (fresh and processing) 51,792,000 18. Bell Peppers (fresh and processing) 41,674,000 19. Onion (fresh and processing) 38,249,000 20. Pasture, All 38,048,000

Source: Kern County Department of Agriculture and Measurement Standards, 2018 Kern County Agricultural Crop Report.

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APPENDIX E

KERN COUNTY POOLED CASH PORTFOLIO REPORT AND TREASURER’S STATEMENT OF INVESTMENT POLICY

The following information concerning the Kern County (the “County”) Treasury Pool (the “Treasury Pool”) has been provided by the Treasurer and Tax Collector of the County (the “Treasurer”), and has not been confirmed or verified by the District, the Municipal Advisor or the Underwriter. Neither the District, the Municipal Advisor nor the Underwriter has made an independent investigation of the investments in the Treasury Pool nor any assessment of the current County investment policy. The value of the various investments in the Treasury Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the Treasurer may change the investment policy at any time. Therefore, there can be no assurance that the values of the various investments in the Treasury Pool will not vary significantly from the values described herein. Finally, neither the District, the Municipal Advisor nor the Underwriter makes any representation as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained is correct as of any time subsequent to its date. Further information may be obtained from the Treasurer at the following website: http://www.kcttc.co.kern.ca.us/. However, the information presented on such website is not incorporated into this Official Statement by any reference.

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[THIS PAGE INTENTIONALLY LEFT BLANK] Kern County Treasurer's Pooled Cash Portfolio Summary 7/31/2020

Portfolio Yield for the Trailing 4 Quarters Total Market Value $ 3,715,227,657 2.5%

2.0% Yield to Maturity at Cost 1.49% 1.5% Yield to Maturity at Market 0.37% Yield 1.0% Effective Duration 1.11 Kern Portolio 0.5% 1 Yr T-Bill (qtr-end) Weighted Average Years to Maturity 1.35 LAIF (monthly avg) 0.0% Sep-19 Dec-19 Mar-20 Jun-20

Maturity Distribution Maturity Range

45% 70% Policy Maximum 40% 60% Policy Minimum 35% 50% 30% 25% 40% 20% 30% 15% 20% 10% 5% 10% 0% 0% 0-6M 6-12M 1-2Y 2-3Y 3-4Y 4-5Y 0-1Y 1-3Y 3-5Y

*The County Treasurer believes the Treasury Investment Pool contains sufficient cash flow from liquid and maturing securities, bank deposits, and incoming cash to meet the next six months of expected expenditures.

1 Kern County Treasurer's Pooled Cash Portfolio Summary 7/31/2020

% of Total Policy Limit Days to Sector Par Amount Original Cost Market Value Original Yield Assets Rating Maturity Local Agency Investment Fund 74,407,443 74,407,443 74,407,443 0.84% 2.00% $65 Million 1 California Asset Management Program 295,433,675 295,433,675 295,433,675 0.18% 7.95% 10% 1 CalTRUST 11,549,295 11,549,295 11,549,295 0.27% 0.31% 10% 1 Bank Sweep (ICS) 15,053,935 15,053,935 15,053,935 0.25% 0.41% 10% 1 U.S. Treasuries 629,000,000 627,050,006 641,371,610 1.43% 17.26% 100% 424 Federal Agencies 1,413,084,000 1,420,346,707 1,445,332,580 1.29% 38.90% 75% 560 Municipal Bonds 68,110,000 69,296,438 71,792,472 2.37% 1.93% 10% 766 Supranationals 170,506,000 173,774,103 178,331,778 1.70% 4.80% 10% 738 Negotiable CDs 50,000,000 50,000,000 50,016,143 1.45% 1.35% 30% 9 Commercial Paper 125,000,000 123,818,257 124,986,404 1.52% 3.36% 40% 24 Corporate Notes 709,061,000 710,478,064 739,139,212 2.46% 19.89% 30% 723 Total Securities 3,561,205,349 3,571,207,923 3,647,414,548 1.49% 98.17% 493 Total Cash 67,813,109 67,813,109 67,813,109 1.83% Total Assets 3,629,018,458 3,639,021,032 3,715,227,657 100.00%

Sector Allocations Moody's Ratings S&P Ratings 50% 45% July 31, 2020 P-1 9.1% A-1+ 5.0% A-1 40% June 30, 2020 AAA 58.7% 4.1% 35% Aa1 3.0% AAA 15.2% AA+ 54.1% 30% Aa2 8.3% AA 5.0% 25% Aa3 1.8% 20% AA- 6.7% A1 6.3% 15% A+ 5.5% A2 0.0% 10% A 0.0% 5% A3 0.0% A- 0.0% 0% Baa1 0.0% BBB+ 0.0% NR 12.8% NR 4.3% 0% 25% 50% 75% 0% 25% 50% 75% 100%

2 Treasurer's Pooled Cash

Portfolio Management Page 1 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Pooled Funds 928989367 8940 JPM Short Term Inv Fund 07/01/2019 257,323.82 257,323.82 257,323.82 0.001 Aaa AAA 0.001 539995217 419 Local Agency Investment Fund 07/01/2019 74,150,119.49 74,150,119.49 74,150,119.49 0.840 0.840

Subtotal and Average 74,290,469.19 74,407,443.31 74,407,443.31 74,407,443.31 0.837 Negotiable CD's 06367BJP5 15632 Bank of Montreal Chicago 03/13/2020 25,000,000.00 25,012,966.00 25,000,000.00 1.230 P-1 A-1 1.247 08/17/2020 89114NG90 15622 Toronto Dominion Bank NY 01/28/2020 25,000,000.00 25,003,177.25 25,000,000.00 1.630 P-1 A-1 1.653 08/03/2020

Subtotal and Average 87,903,225.81 50,000,000.00 50,016,143.25 50,000,000.00 1.450 Commercial Paper - Discount 22533TH33 15607 Credit Agricole 01/06/2020 25,000,000.00 24,999,804.25 24,744,791.67 1.750 P-1 A-1 1.815 08/03/2020 2254EAHH9 15615 Credit Suisse New York 01/22/2020 25,000,000.00 24,998,123.00 24,750,111.11 1.730 P-1 A-1 1.794 08/17/2020 62479LH57 15582 MUFG BANK LTD/NY 11/20/2019 25,000,000.00 24,999,722.25 24,667,256.94 1.850 P-1 A-1 1.922 08/05/2020 62479LJ48 15602 MUFG BANK LTD/NY 12/19/2019 25,000,000.00 24,997,083.25 24,664,166.67 1.860 P-1 A-1 1.933 09/04/2020 62479LK61 15710 MUFG BANK LTD/NY 07/15/2020 25,000,000.00 24,991,671.50 24,991,930.56 0.140 P-1 A-1 0.144 10/06/2020

Subtotal and Average 173,015,416.09 125,000,000.00 124,986,404.25 123,818,256.95 1.518 Treasury Securities - Discount 9127962H1 15711 U S Treasury Bills 07/15/2020 50,000,000.00 49,993,000.00 49,989,152.78 0.110 Aaa AA 0.113 09/24/2020 9127962T5 15713 U S Treasury Bills 07/15/2020 40,000,000.00 39,990,400.00 39,985,866.67 0.120 Aaa AA 0.123 10/29/2020 9127964J5 15716 U S Treasury Bills 07/21/2020 10,000,000.00 9,998,100.00 9,997,402.71 0.103 Aaa AA 0.106 10/20/2020 9127964J5 15721 U S Treasury Bills 07/27/2020 25,000,000.00 24,995,250.00 24,994,539.93 0.093 Aaa AA 0.095 10/20/2020 912796TP4 15723 U S Treasury Bills 07/29/2020 33,000,000.00 32,991,750.00 32,991,832.50 0.090 Aaa AA 0.093 11/05/2020

Subtotal and Average 60,112,740.57 158,000,000.00 157,968,500.00 157,958,794.59 0.108 Federal Agency Issues - Coupon 3133EFXV4 14630 Federal Farm Credit Bank 02/04/2016 10,000,000.00 10,000,400.00 10,037,800.00 1.450 Aaa AA 1.363 08/04/2020 3133EHWM1 15241 Federal Farm Credit Bank 09/01/2017 10,000,000.00 10,166,200.00 10,005,800.00 1.700 Aaa AA 1.685 09/01/2021 3133EHVS9 15255 Federal Farm Credit Bank 09/29/2017 8,065,000.00 8,336,548.55 8,019,594.05 1.840 Aaa AA 1.961 08/23/2022 3133EHTS2 15259 Federal Farm Credit Bank 09/29/2017 10,000,000.00 10,339,400.00 9,980,100.00 1.900 Aaa AA 1.943 08/03/2022 3133EHF57 15263 Federal Farm Credit Bank 10/13/2017 10,000,000.00 10,029,600.00 10,000,000.00 1.680 Aaa AA 1.680 10/13/2020 3133EHW58 15278 Federal Farm Credit Bank 11/28/2017 10,000,000.00 10,056,600.00 9,997,970.00 1.900 Aaa AA 1.907 11/27/2020 3133EHU84 15316 Federal Farm Credit Bank 01/03/2018 23,925,000.00 24,489,630.00 23,742,930.75 1.980 Aaa AA 2.185 11/22/2021 3133EJAW9 15336 Federal Farm Credit Bank 01/29/2018 10,000,000.00 10,103,600.00 10,000,000.00 2.250 Aaa AA 2.250 01/29/2021 3133EJK24 15429 Federal Farm Credit Bank 10/19/2018 10,000,000.00 10,343,600.00 9,994,700.00 3.000 Aaa AA 3.019 10/19/2021

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

Report Ver. 7.3.6.1 3 Treasurer's Pooled Cash

Portfolio Management Page 2 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Federal Agency Issues - Coupon 3133EJK24 15430 Federal Farm Credit Bank 10/19/2018 10,000,000.00 10,343,600.00 9,994,700.00 3.000 Aaa AA 3.019 10/19/2021 3133EJZU6 15434 Federal Farm Credit Bank 10/31/2018 15,000,000.00 15,461,100.00 14,954,850.00 2.850 Aaa AA 2.959 09/20/2021 3133EJV63 15439 Federal Farm Credit Bank 11/28/2018 11,311,000.00 12,268,136.82 11,324,573.20 3.050 Aaa AA 3.023 08/23/2023 3133EJWV7 15454 Federal Farm Credit Bank 12/12/2018 10,589,000.00 11,430,507.83 10,622,355.35 2.900 Aaa AA 2.827 08/14/2023 3133EJP60 15463 Federal Farm Credit Bank 12/20/2018 15,000,000.00 16,131,750.00 15,140,100.00 3.000 Aaa AA 2.771 05/02/2023 3133EJQX0 15466 Federal Farm Credit Bank 01/04/2019 15,000,000.00 16,118,850.00 15,249,900.00 2.900 Aaa AA 2.498 05/30/2023 3133EJ4Q9 15477 Federal Farm Credit Bank 01/11/2019 10,000,000.00 10,106,900.00 9,996,700.00 2.550 Aaa AA 2.567 01/11/2021 3133EJQX0 15478 Federal Farm Credit Bank 01/15/2019 10,000,000.00 10,745,900.00 10,106,600.00 2.900 Aaa AA 2.640 05/30/2023 3133EJ5G0 15479 Federal Farm Credit Bank 01/16/2019 20,000,000.00 21,688,200.00 20,006,600.00 2.700 Aaa AA 2.693 01/16/2024 3133EJ7C7 15485 Federal Farm Credit Bank 02/06/2019 10,000,000.00 10,858,300.00 9,994,500.00 2.700 Aaa AA 2.712 02/06/2024 3133EKRD0 15532 Federal Farm Credit Bank 06/25/2019 10,000,000.00 10,313,100.00 10,016,460.00 1.875 Aaa AA 1.818 06/14/2022 3133EKSN7 15535 Federal Farm Credit Bank 06/28/2019 5,500,000.00 5,740,405.00 5,481,960.00 1.770 Aaa AA 1.856 06/26/2023 3133EKUA2 15537 Federal Farm Credit Bank 07/01/2019 10,000,000.00 10,405,000.00 10,007,200.00 1.850 Aaa AA 1.829 02/01/2023 3133EKTV8 15538 Federal Farm Credit Bank 07/01/2019 12,650,000.00 13,443,914.00 12,650,253.00 1.900 Aaa AA 1.900 07/01/2024 3133ELDK7 15598 Federal Farm Credit Bank 12/16/2019 25,000,000.00 25,671,250.00 24,998,675.50 1.630 Aaa AA 1.632 06/15/2022 3133ELJH8 15633 Federal Farm Credit Bank 03/16/2020 10,000,000.00 10,340,300.00 10,240,163.80 1.600 Aaa AA 0.747 01/23/2023 3133ELTN4 15634 Federal Farm Credit Bank 03/18/2020 15,000,000.00 15,077,550.00 14,985,300.00 0.530 Aaa AA 0.585 01/08/2022 3133EJBP3 15647 Federal Farm Credit Bank 04/01/2020 10,000,000.00 10,571,100.00 10,580,500.00 2.500 Aaa AA 0.438 02/02/2023 3133EGAM7 15662 Federal Farm Credit Bank 04/28/2020 10,160,000.00 10,744,504.80 10,653,064.80 1.800 Aaa AA 0.586 05/16/2024 3133ELXM1 15664 Federal Farm Credit Bank 04/28/2020 25,000,000.00 25,023,750.00 24,992,750.00 0.250 Aaa AA 0.273 07/27/2021 3133EET67 15665 Federal Farm Credit Bank 04/28/2020 7,174,000.00 7,589,733.30 7,576,891.84 2.300 Aaa AA 0.474 06/05/2023 3133ELGV0 15669 Federal Farm Credit Bank 04/30/2020 25,000,000.00 26,125,500.00 26,063,500.00 1.550 Aaa AA 0.389 01/10/2024 3133ELZN7 15680 Federal Farm Credit Bank 05/19/2020 15,000,000.00 14,992,950.00 14,971,500.00 0.160 Aaa AA 0.255 05/18/2022 3130AB3E4 15114 Federal Home Loan Bank 04/05/2017 15,000,000.00 15,041,550.00 15,053,850.00 1.750 Aaa AA 1.644 10/05/2020 3130AB3E4 15129 Federal Home Loan Bank 04/13/2017 10,000,000.00 10,027,700.00 10,046,500.00 1.750 Aaa AA 1.612 10/05/2020 313379RB7 15193 Federal Home Loan Bank 06/22/2017 10,000,000.00 10,152,900.00 10,059,200.00 1.875 Aaa AA 1.720 06/11/2021 3130A8QS5 15243 Federal Home Loan Bank 09/14/2017 10,000,000.00 10,095,800.00 9,817,000.00 1.125 Aaa AA 1.619 07/14/2021 3130A1W95 15293 Federal Home Loan Bank 12/07/2017 10,000,000.00 10,182,300.00 10,068,400.00 2.250 Aaa AA 2.901 06/11/2021 3130A0XD7 15346 Federal Home Loan Bank 03/20/2018 10,000,000.00 10,135,000.00 9,957,800.00 2.375 Aaa AA 2.523 03/12/2021 3130ADRG9 15376 Federal Home Loan Bank 04/12/2018 15,000,000.00 15,985,350.00 15,030,300.00 2.750 Aaa AA 2.705 03/10/2023 3130AEBM1 15396 Federal Home Loan Bank 06/27/2018 20,000,000.00 20,937,600.00 19,969,600.00 2.750 Aaa AA 2.790 06/10/2022 3130AEVF4 15413 Federal Home Loan Bank 08/30/2018 7,000,000.00 7,013,160.00 7,000,000.00 3.050 Aaa AA 3.050 08/28/2023 3130AFBS5 15435 Federal Home Loan Bank 11/16/2018 15,000,000.00 15,120,150.00 15,000,000.00 3.250 Aaa AA 3.250 11/16/2022 313383QR5 15469 Federal Home Loan Bank 01/08/2019 20,000,000.00 21,682,600.00 20,502,000.00 3.250 Aaa AA 2.644 06/09/2023 3130AFWX1 15496 Federal Home Loan Bank 03/28/2019 10,000,000.00 10,644,900.00 10,132,300.00 2.550 Aaa AA 2.248 05/30/2023 3130AGHA6 15526 Federal Home Loan Bank 06/03/2019 10,000,000.00 10,165,400.00 10,000,000.00 2.430 Aaa AA 2.430 06/03/2024

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

4 Treasurer's Pooled Cash

Portfolio Management Page 3 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Federal Agency Issues - Coupon 313379Q69 15553 Federal Home Loan Bank 09/06/2019 10,000,000.00 10,354,000.00 10,159,600.00 2.125 Aaa AA 1.532 06/10/2022 3130AJ7E3 15630 Federal Home Loan Bank 02/21/2020 15,000,000.00 15,447,000.00 14,972,400.00 1.375 Aaa AA 1.438 02/17/2023 313380GJ0 15650 Federal Home Loan Bank 04/08/2020 10,000,000.00 10,379,100.00 10,366,177.80 2.000 Aaa AA 0.476 09/09/2022 3130A2UW4 15663 Federal Home Loan Bank 04/28/2020 13,140,000.00 14,473,053.00 14,412,740.40 2.875 Aaa AA 0.627 09/13/2024 3133834G3 15668 Federal Home Loan Bank 04/30/2020 11,570,000.00 12,184,135.60 12,196,862.60 2.125 Aaa AA 0.370 06/09/2023 3133834G3 15674 Federal Home Loan Bank 05/05/2020 15,000,000.00 15,796,200.00 15,814,424.40 2.125 Aaa AA 0.359 06/09/2023 3134GBEK4 15099 Federal Home Loan Mort Corp 03/29/2017 20,000,000.00 20,229,200.00 20,000,000.00 1.850 Aaa AA 1.850 03/29/2021 3134GBJM5 15158 Federal Home Loan Mort Corp 05/03/2017 20,000,000.00 20,607,800.00 20,000,000.00 1.910 Aaa AA 1.910 05/03/2022 3134G9S24 15198 Federal Home Loan Mort Corp 06/27/2017 25,000,000.00 25,394,750.00 25,042,000.00 1.750 Aaa AA 1.707 07/26/2021 3134GSVD4 15412 Federal Home Loan Mort Corp 08/29/2018 5,000,000.00 5,009,550.00 4,996,250.00 3.000 Aaa AA 3.018 02/28/2023 3134GTGS6 15521 Federal Home Loan Mort Corp 04/16/2019 20,000,000.00 20,072,600.00 20,000,000.00 2.550 Aaa AA 2.550 10/16/2023 3134GUF70 15606 Federal Home Loan Mort Corp 01/06/2020 20,000,000.00 20,130,600.00 20,000,000.00 1.950 Aaa AA 1.950 01/06/2025 3134GU3H1 15620 Federal Home Loan Mort Corp 01/27/2020 10,000,000.00 10,071,900.00 10,000,000.00 1.670 Aaa AA 1.670 01/27/2023 3134GU6G0 15625 Federal Home Loan Mort Corp 02/05/2020 15,000,000.00 15,194,700.00 15,000,000.00 1.700 Aaa AA 1.700 08/05/2024 3137EAER6 15678 Federal Home Loan Mort Corp 05/07/2020 30,000,000.00 30,123,300.00 29,987,400.00 0.375 Aaa AA 0.112 05/05/2023 3136G4GS6 14978 Federal National Mortgage Assn 11/30/2016 10,000,000.00 10,041,200.00 10,000,000.00 1.430 Aaa AA 1.430 11/30/2020 3135G0N82 15011 Federal National Mortgage Assn 12/09/2016 10,000,000.00 10,114,700.00 9,727,200.00 1.250 Aaa AA 1.862 08/17/2021 3135G0S38 15191 Federal National Mortgage Assn 06/22/2017 15,000,000.00 15,396,450.00 15,117,000.00 2.000 Aaa AA 1.820 01/05/2022 3135G0T78 15304 Federal National Mortgage Assn 12/12/2017 10,000,000.00 10,401,000.00 9,901,300.00 2.000 Aaa AA 2.217 10/05/2022 3135G0U27 15377 Federal National Mortgage Assn 04/13/2018 20,000,000.00 20,325,200.00 19,970,200.00 2.500 Aaa AA 2.552 04/13/2021 3135G0U43 15440 Federal National Mortgage Assn 11/28/2018 10,000,000.00 10,819,700.00 9,942,300.00 2.875 Aaa AA 3.005 09/12/2023 3135G0S38 15509 Federal National Mortgage Assn 04/08/2019 10,000,000.00 10,264,300.00 9,913,500.00 2.000 Aaa AA 2.327 01/05/2022 3135G0V59 15517 Federal National Mortgage Assn 04/12/2019 10,000,000.00 10,359,300.00 9,967,200.00 2.250 Aaa AA 2.364 04/12/2022 3135G0V59 15518 Federal National Mortgage Assn 04/12/2019 10,000,000.00 10,359,300.00 9,967,200.00 2.250 Aaa AA 2.364 04/12/2022 3135G0W33 15554 Federal National Mortgage Assn 09/06/2019 5,000,000.00 5,126,250.00 4,982,600.00 1.375 Aaa AA 1.494 09/06/2022 3135G0W33 15555 Federal National Mortgage Assn 09/06/2019 5,000,000.00 5,126,250.00 4,982,600.00 1.375 Aaa AA 1.494 09/06/2022 3135G04Q3 15682 Federal National Mortgage Assn 05/22/2020 10,000,000.00 10,005,700.00 9,969,900.00 0.250 Aaa AA 0.351 05/22/2023 880591EN8 15457 Tennessee Valley Authority 12/13/2018 15,000,000.00 15,471,300.00 14,471,550.00 1.875 Aaa AA 2.893 08/15/2022 880591EN8 15624 Tennessee Valley Authority 02/03/2020 10,000,000.00 10,314,200.00 10,117,300.00 1.875 Aaa AA 1.402 08/15/2022 880591EN8 15639 Tennessee Valley Authority 03/25/2020 20,000,000.00 20,628,400.00 20,538,600.00 1.875 Aaa AA 0.736 08/15/2022 880591ER9 15654 Tennessee Valley Authority 04/15/2020 10,000,000.00 10,952,300.00 10,927,800.00 2.875 Aaa AA 0.736 09/15/2024

Subtotal and Average 1,060,531,934.59 991,084,000.00 1,023,415,728.90 998,469,047.49 1.781 Federal Agency Issues - Discount 313384A82 15692 Federal Home Loan Bank 06/16/2020 15,000,000.00 14,999,941.65 14,996,979.17 0.145 Aaa AA 0.147 08/05/2020

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

5 Treasurer's Pooled Cash

Portfolio Management Page 4 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Federal Agency Issues - Discount 313384A82 15693 Federal Home Loan Bank 06/17/2020 20,000,000.00 19,999,922.20 19,996,188.89 0.140 Aaa AA 0.142 08/05/2020 313384B57 15694 Federal Home Loan Bank 06/17/2020 30,000,000.00 29,999,591.70 29,993,700.00 0.140 Aaa AA 0.142 08/10/2020 313384A82 15697 Federal Home Loan Bank 06/19/2020 5,000,000.00 4,999,980.55 4,999,281.94 0.110 Aaa AA 0.112 08/05/2020 313384G45 15699 Federal Home Loan Bank 06/19/2020 25,000,000.00 24,997,125.00 24,990,520.83 0.150 Aaa AA 0.152 09/18/2020 313384C49 15702 Federal Home Loan Bank 06/23/2020 15,000,000.00 14,999,591.70 14,997,937.50 0.090 Aaa AA 0.091 08/17/2020 313384J59 15703 Federal Home Loan Bank 06/23/2020 25,000,000.00 24,996,062.50 24,990,611.11 0.130 Aaa AA 0.132 10/05/2020 313384H85 15704 Federal Home Loan Bank 06/23/2020 15,000,000.00 14,997,825.00 14,994,637.50 0.130 Aaa AA 0.132 09/30/2020 313384E21 15705 Federal Home Loan Bank 06/24/2020 25,000,000.00 24,994,333.33 24,994,333.33 0.120 Aaa AA 0.122 08/31/2020 313384E21 15706 Federal Home Loan Bank 06/26/2020 30,000,000.00 29,993,400.00 29,993,400.00 0.120 Aaa AA 0.122 08/31/2020 313384F20 15707 Federal Home Loan Bank 06/29/2020 10,000,000.00 9,999,100.00 9,997,830.56 0.110 Aaa AA 0.112 09/08/2020 313384E21 15708 Federal Home Loan Bank 06/30/2020 10,000,000.00 9,998,105.56 9,998,105.56 0.110 Aaa AA 0.112 08/31/2020 313384E62 15709 Federal Home Loan Bank 07/15/2020 35,000,000.00 34,996,033.33 34,996,033.33 0.080 Aaa AA 0.081 09/04/2020 313384436 15712 Federal Home Loan Bank 07/15/2020 15,000,000.00 14,997,300.00 14,997,300.00 0.090 Aaa AA 0.091 09/25/2020 313384M97 15714 Federal Home Loan Bank 07/16/2020 10,000,000.00 9,997,725.00 9,996,972.22 0.100 Aaa AA 0.101 11/02/2020 313384L49 15715 Federal Home Loan Bank 07/20/2020 10,000,000.00 9,998,050.00 9,997,444.44 0.100 Aaa AA 0.101 10/20/2020 313384N47 15717 Federal Home Loan Bank 07/22/2020 32,000,000.00 31,992,480.00 31,990,577.78 0.100 Aaa AA 0.101 11/05/2020 313384M97 15722 Federal Home Loan Bank 07/28/2020 20,000,000.00 19,995,450.00 19,994,611.11 0.100 Aaa AA 0.101 11/02/2020 313385CJ3 15724 Federal Home Loan Bank 07/29/2020 50,000,000.00 49,971,250.00 49,967,611.11 0.110 Aaa AA 0.114 02/26/2021 313396E66 15698 Federal Home Loan Mort Corp 06/19/2020 25,000,000.00 24,993,583.33 24,993,583.33 0.120 Aaa AA 0.122 09/04/2020

Subtotal and Average 371,690,575.67 422,000,000.00 421,916,850.85 421,877,659.71 0.117 Medium Term Notes 30/360 037833AR1 14956 Apple 10/31/2016 10,000,000.00 10,194,200.00 10,489,200.00 2.850 Aa AA 1.719 05/06/2021 037833AR1 15028 Apple 12/16/2016 10,000,000.00 10,194,200.00 10,253,500.00 2.850 Aa AA 2.240 05/06/2021 037833BS8 15288 Apple 12/05/2017 10,000,000.00 10,083,400.00 10,021,000.00 2.250 Aa AA 2.182 02/23/2021 037833DE7 15356 Apple 04/03/2018 10,000,000.00 10,485,800.00 9,724,200.00 2.400 Aa AA 3.023 01/13/2023 037833DE7 15399 Apple 06/28/2018 14,000,000.00 14,680,120.00 13,519,520.00 2.400 Aa AA 3.218 01/13/2023 037833CQ1 15498 Apple 03/29/2019 15,000,000.00 15,507,150.00 14,956,350.00 2.300 Aa AA 2.397 05/11/2022 037833AR1 15551 Apple 08/28/2019 10,000,000.00 10,194,200.00 10,176,700.00 2.850 Aa AA 1.782 05/06/2021 084670BJ6 15402 Berkshire Hathaway 06/29/2018 13,094,000.00 14,001,937.96 13,006,663.02 3.000 Aa AA 3.156 02/11/2023 084670BJ6 15446 Berkshire Hathaway 12/04/2018 8,460,000.00 9,046,616.40 8,324,809.20 3.000 Aa AA 3.412 02/11/2023 084670BR8 15579 Berkshire Hathaway 10/30/2019 11,339,000.00 12,017,185.59 11,650,142.16 2.750 Aa AA 1.906 03/15/2023 19416QEL0 15539 Colgate-Palmolive 07/08/2019 8,340,000.00 8,713,131.60 8,439,996.60 2.250 Aa AA 1.879 11/15/2022 166764AY6 15111 Chevron Corp 04/03/2017 10,277,000.00 10,321,602.18 10,381,517.09 2.419 Aa AA 2.125 11/17/2020 166764BK5 15484 Chevron Corp 02/01/2019 10,000,000.00 10,575,500.00 9,839,500.00 2.566 Aa AA 2.966 05/16/2023

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

6 Treasurer's Pooled Cash

Portfolio Management Page 5 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Medium Term Notes 30/360 166764BK5 15501 Chevron Corp 04/01/2019 10,000,000.00 10,575,500.00 10,042,400.00 2.566 Aa AA 2.457 05/16/2023 166764AH3 15524 Chevron Corp 05/23/2019 10,000,000.00 10,746,500.00 10,216,000.00 3.191 Aa AA 2.630 06/24/2023 166764AH3 15528 Chevron Corp 06/21/2019 5,000,000.00 5,373,250.00 5,179,000.00 3.191 Aa AA 2.252 06/24/2023 166764BK5 15552 Chevron Corp 08/29/2019 5,000,000.00 5,287,750.00 5,145,500.00 2.566 Aa AA 1.753 05/16/2023 166764BK5 15567 Chevron Corp 10/10/2019 2,000,000.00 2,115,100.00 2,061,000.00 2.566 Aa AA 1.689 05/16/2023 166764BK5 15568 Chevron Corp 10/10/2019 8,145,000.00 8,613,744.75 8,393,422.50 2.566 Aa AA 1.689 05/16/2023 166764BK5 15596 Chevron Corp 12/11/2019 15,000,000.00 15,863,250.00 15,321,450.00 2.566 Aa AA 1.917 05/16/2023 4042Q0WY1 15519 HSBC Bank USA 04/16/2019 10,000,000.00 10,152,268.00 10,000,000.00 2.800 Aa A 2.801 07/17/2023 4042Q0WX3 15520 HSBC Bank USA 04/16/2019 10,000,000.00 10,140,673.00 10,000,000.00 2.625 Aa A 2.625 07/18/2022 478160CD4 15352 Johnson & Johnson 03/28/2018 18,135,000.00 18,710,604.90 17,732,765.70 2.250 Aaa AAA 2.850 03/03/2022 191216BT6 14494 Coca Cola 11/03/2015 10,000,000.00 10,037,400.00 9,955,100.00 1.875 A A 1.970 10/27/2020 191216BY5 15144 Coca Cola 04/24/2017 16,063,000.00 16,303,302.48 15,823,821.93 1.550 A A 1.908 09/01/2021 191216CF5 15200 Coca Cola 06/29/2017 10,000,000.00 10,354,400.00 10,051,900.00 2.200 A A 2.088 05/25/2022 191216BY5 15379 Coca Cola 04/17/2018 7,607,000.00 7,720,800.72 7,299,905.41 1.550 A A 2.813 09/01/2021 594918BP8 15426 Microsoft Corp 10/18/2018 14,610,000.00 14,793,209.40 14,013,327.60 1.550 Aaa AAA 3.080 08/08/2021 594918BP8 15427 Microsoft Corp 10/18/2018 1,718,000.00 1,739,543.72 1,647,390.20 1.550 Aaa AAA 3.090 08/08/2021 594918BP8 15428 Microsoft Corp 10/18/2018 5,000,000.00 5,062,700.00 4,795,800.00 1.550 Aaa AAA 3.080 08/08/2021 594918BP8 15451 Microsoft Corp 12/10/2018 7,778,000.00 7,875,536.12 7,494,647.46 1.550 Aaa AAA 2.984 08/08/2021 594918BQ6 15483 Microsoft Corp 01/29/2019 11,683,000.00 12,254,882.85 11,296,526.36 2.000 Aaa AAA 2.783 08/08/2023 594918BQ6 15527 Microsoft Corp 06/21/2019 5,000,000.00 5,244,750.00 4,970,700.00 2.000 Aaa AAA 2.149 08/08/2023 594918BX1 15621 Microsoft Corp 01/27/2020 10,000,000.00 10,835,300.00 10,436,200.00 2.875 Aaa AAA 1.748 02/06/2024 66989HAM0 15187 Novartis 06/21/2017 10,000,000.00 10,370,300.00 10,125,400.00 2.400 Aa AA 2.129 05/17/2022 66989HAM0 15201 Novartis 06/30/2017 16,980,000.00 17,608,769.40 17,112,444.00 2.400 Aa AA 2.230 05/17/2022 66989HAM0 15590 Novartis 12/10/2019 10,000,000.00 10,370,300.00 10,139,200.00 2.400 Aa AA 1.813 05/17/2022 742718EN5 15385 Proctor & Gamble 04/23/2018 10,000,000.00 10,080,400.00 9,743,971.94 1.850 Aa AA 2.815 02/02/2021 742718EQ8 15401 Proctor & Gamble 06/29/2018 9,127,000.00 9,292,198.70 8,785,193.85 1.700 Aa AA 2.882 11/03/2021 742718DY2 15406 Proctor & Gamble 07/18/2018 20,000,000.00 20,639,400.00 19,528,000.00 2.300 Aa AA 3.006 02/06/2022 742718EU9 15408 Proctor & Gamble 08/16/2018 4,997,000.00 5,195,330.93 4,842,192.94 2.150 Aa AA 2.980 08/11/2022 742718EU9 15410 Proctor & Gamble 08/23/2018 5,686,000.00 5,911,677.34 5,515,021.98 2.150 Aa AA 2.959 08/11/2022 89233P4S2 15301 Toyota Motors Credit Corp 12/11/2017 10,196,000.00 10,371,982.96 10,789,101.32 4.250 A A 2.285 01/11/2021 89236TCZ6 15341 Toyota Motors Credit Corp 03/06/2018 9,289,000.00 9,394,244.37 9,035,503.19 1.900 A A 2.829 04/08/2021 89236TDP7 15411 Toyota Motors Credit Corp 08/29/2018 10,000,000.00 10,322,500.00 9,834,800.00 2.600 A A 3.120 01/11/2022 89233P5T9 15414 Toyota Motors Credit Corp 09/07/2018 5,729,000.00 5,970,420.06 5,757,759.58 3.300 A A 3.140 01/12/2022 89236TDP7 15542 Toyota Motors Credit Corp 07/10/2019 5,424,000.00 5,598,924.00 5,472,599.04 2.600 A A 2.230 01/11/2022 89236TFQ3 15557 Toyota Motors Credit Corp 09/25/2019 4,055,000.00 4,106,052.45 4,119,474.50 3.050 A A 1.793 01/08/2021 89236TFQ3 15558 Toyota Motors Credit Corp 09/25/2019 2,785,000.00 2,820,063.15 2,828,167.50 3.050 A A 1.824 01/08/2021

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

7 Treasurer's Pooled Cash

Portfolio Management Page 6 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Medium Term Notes 30/360 89236TDP7 15563 Toyota Motors Credit Corp 09/30/2019 10,000,000.00 10,322,500.00 10,152,800.00 2.600 A A 1.911 01/11/2022 89236TGM1 15569 Toyota Motors Credit Corp 10/15/2019 10,000,000.00 10,343,300.00 10,000,000.00 1.875 A A 1.963 07/31/2024 89233P7F7 15610 Toyota Motors Credit Corp 01/09/2020 10,000,000.00 10,498,600.00 10,233,000.00 2.625 A A 1.824 01/10/2023 90331HNL3 15333 US Bank 01/25/2018 7,500,000.00 7,947,150.00 7,499,625.00 2.850 A AA 2.851 01/23/2023 90331HNL3 15334 US Bank 01/25/2018 10,000,000.00 10,596,200.00 9,998,100.00 2.850 A AA 2.854 01/23/2023 90331HNV1 15481 US Bank 01/22/2019 10,000,000.00 10,883,800.00 10,034,700.00 3.400 A AA 3.316 07/24/2023 90331HNV1 15482 US Bank 01/22/2019 10,000,000.00 10,883,800.00 10,034,700.00 3.400 A AA 3.316 07/24/2023 90331HPC1 15529 US Bank 06/21/2019 2,850,000.00 2,964,456.00 2,876,790.00 2.650 A AA 2.315 05/23/2022 90331HPC1 15530 US Bank 06/21/2019 7,150,000.00 7,437,144.00 7,217,210.00 2.650 A AA 2.315 05/23/2022 90331HPC1 15589 US Bank 12/10/2019 10,000,000.00 10,401,600.00 10,194,200.00 2.650 A AA 1.836 05/23/2022 90331HPF4 15591 US Bank 12/10/2019 3,000,000.00 3,115,470.00 3,001,860.00 1.950 A AA 1.929 01/09/2023 90331HPF4 15595 US Bank 12/12/2019 10,250,000.00 10,644,522.50 10,245,900.00 1.950 A AA 1.964 01/09/2023 92826CAG7 15541 VISA INC 07/08/2019 10,000,000.00 10,387,100.00 10,043,000.00 2.150 Aa AA 2.010 09/15/2022 94988J5R4 15443 Wells Fargo Bank 11/30/2018 15,000,000.00 16,301,700.00 14,788,050.00 3.550 Aa A 3.880 08/14/2023 94988J5R4 15488 Wells Fargo Bank 03/18/2019 10,000,000.00 10,867,800.00 10,181,900.00 3.550 Aa A 3.105 08/14/2023 94988J5R4 15502 Wells Fargo Bank 04/01/2019 10,000,000.00 10,867,800.00 10,292,700.00 3.550 Aa A 2.832 08/14/2023 94988J5R4 15503 Wells Fargo Bank 04/01/2019 5,000,000.00 5,433,900.00 5,145,750.00 3.550 Aa A 2.835 08/14/2023 94988J5N3 15611 Wells Fargo Bank 01/14/2020 19,294,000.00 19,506,426.94 19,450,281.40 2.600 Aa A 1.781 01/15/2021 931142EK5 15486 Wal-Mart Stores 03/05/2019 11,500,000.00 12,488,770.00 11,722,812.50 3.400 Aa AA 2.917 06/26/2023 931142EK5 15487 Wal-Mart Stores 03/05/2019 10,000,000.00 10,859,800.00 10,197,700.00 3.400 Aa AA 2.908 06/26/2023 931142EL3 15581 Wal-Mart Stores 10/30/2019 10,000,000.00 10,909,600.00 10,404,900.00 2.850 Aa AA 1.942 07/08/2024 931142EK5 15600 Wal-Mart Stores 12/18/2019 10,000,000.00 10,859,800.00 10,511,000.00 3.400 Aa AA 1.893 06/26/2023 30231GAV4 15342 Exxon-Mobil 03/07/2018 10,000,000.00 10,094,700.00 9,851,600.00 2.222 Aa AA 2.748 03/01/2021 30231GBB7 15550 Exxon-Mobil 08/23/2019 10,000,000.00 10,327,600.00 10,054,100.00 1.902 Aa AA 1.715 08/16/2022 30231GBB7 15574 Exxon-Mobil 10/28/2019 10,000,000.00 10,327,600.00 10,056,600.00 1.902 Aa AA 1.694 08/16/2022

Subtotal and Average 710,478,063.97 709,061,000.00 739,139,212.47 710,478,063.97 2.461 FDIC Insured Cash Sweep ICS 15628 ICS 02/14/2020 15,053,934.95 15,053,934.95 15,053,934.95 0.180 0.180

Subtotal and Average 15,053,058.60 15,053,934.95 15,053,934.95 15,053,934.95 0.180 CAMP CAMP 14800 CAMP 07/01/2019 295,433,675.01 295,433,675.01 295,433,675.01 0.300 AAA 0.300

Subtotal and Average 196,301,815.31 295,433,675.01 295,433,675.01 295,433,675.01 0.300

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

8 Treasurer's Pooled Cash

Portfolio Management Page 7 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date CALTRUST CALTRUST 15476 CalTRUST 07/01/2019 11,549,295.32 11,549,295.32 11,549,295.32 0.270 AAA 0.270

Subtotal and Average 72,509,511.02 11,549,295.32 11,549,295.32 11,549,295.32 0.270 Treasury Securities - Coupon 912828T67 15204 U S Treasury Note 06/29/2017 20,000,000.00 20,278,200.00 19,587,500.00 1.250 Aaa AA 1.746 10/31/2021 912828P87 15233 U S Treasury Note 08/25/2017 10,000,000.00 10,057,000.00 9,847,656.25 1.125 Aaa AA 1.572 02/28/2021 912828T67 15257 U S Treasury Note 09/29/2017 10,000,000.00 10,139,100.00 9,790,625.00 1.250 Aaa AA 1.783 10/31/2021 912828R77 15261 U S Treasury Note 10/05/2017 10,000,000.00 10,103,100.00 9,866,406.25 1.375 Aaa AA 1.754 05/31/2021 912828S76 15262 U S Treasury Note 10/05/2017 10,000,000.00 10,098,400.00 9,761,328.13 1.125 Aaa AA 1.774 07/31/2021 912828N89 15284 U S Treasury Note 11/30/2017 10,000,000.00 10,060,900.00 9,833,593.75 1.375 Aaa AA 1.919 01/31/2021 912828P87 15285 U S Treasury Note 11/30/2017 20,000,000.00 20,114,000.00 19,495,312.50 1.125 Aaa AA 1.930 02/28/2021 912828L32 15287 U S Treasury Note 12/04/2017 20,000,000.00 20,019,200.00 19,752,343.75 1.375 Aaa AA 1.841 08/31/2020 912828L32 15307 U S Treasury Note 12/14/2017 20,000,000.00 20,019,200.00 19,739,062.50 1.375 Aaa AA 1.871 08/31/2020 912828L32 15308 U S Treasury Note 12/19/2017 15,000,000.00 15,014,400.00 14,793,750.00 1.375 Aaa AA 1.900 08/31/2020 912828T67 15311 U S Treasury Note 12/20/2017 10,000,000.00 10,139,100.00 9,683,203.13 1.250 Aaa AA 2.108 10/31/2021 912828R77 15312 U S Treasury Note 12/20/2017 15,000,000.00 15,154,650.00 14,658,984.38 1.375 Aaa AA 2.062 05/31/2021 912828R77 15318 U S Treasury Note 01/04/2018 10,000,000.00 10,103,100.00 9,767,968.75 1.375 Aaa AA 2.085 05/31/2021 912828S76 15319 U S Treasury Note 01/04/2018 10,000,000.00 10,098,400.00 9,665,625.00 1.125 Aaa AA 2.101 07/31/2021 912828XR6 15339 U S Treasury Note 02/02/2018 10,000,000.00 10,297,300.00 9,693,750.00 1.750 Aaa AA 2.501 05/31/2022 912828F21 15371 U S Treasury Note 04/10/2018 11,000,000.00 11,253,110.00 10,862,500.00 2.125 Aaa AA 2.503 09/30/2021 912828WY2 15372 U S Treasury Note 04/10/2018 10,000,000.00 10,209,800.00 9,926,562.50 2.250 Aaa AA 2.482 07/31/2021 9128284S6 15393 U S Treasury Note 06/15/2018 10,000,000.00 10,741,400.00 9,986,718.75 2.750 Aaa AA 2.779 05/31/2023 912828NT3 15452 U S Treasury Note 12/10/2018 10,000,000.00 10,008,300.00 9,977,734.38 2.625 Aaa AA 2.760 08/15/2020 912828U57 15491 U S Treasury Note 03/26/2019 10,000,000.00 10,660,900.00 9,955,468.75 2.125 Aaa AA 2.225 11/30/2023 912828XG0 15495 U S Treasury Note 03/28/2019 10,000,000.00 10,382,000.00 9,994,140.63 2.125 Aaa AA 2.143 06/30/2022 912828Y20 15505 U S Treasury Note 04/03/2019 10,000,000.00 10,237,100.00 10,071,875.00 2.625 Aaa AA 2.299 07/15/2021 9128286C9 15522 U S Treasury Note 04/16/2019 15,000,000.00 15,544,950.00 15,049,804.69 2.500 Aaa AA 2.378 02/15/2022 9128287C8 15556 U S Treasury Note 09/25/2019 10,000,000.00 10,317,200.00 10,042,187.50 1.750 Aaa AA 1.595 07/15/2022 9128285K2 15564 U S Treasury Note 09/30/2019 10,000,000.00 10,886,700.00 10,509,765.63 2.875 Aaa AA 1.581 10/31/2023 9128285K2 15565 U S Treasury Note 09/30/2019 10,000,000.00 10,886,700.00 10,509,375.00 2.875 Aaa AA 1.582 10/31/2023 912828S92 15566 U S Treasury Note 10/09/2019 10,000,000.00 10,337,100.00 9,951,171.88 1.250 Aaa AA 1.382 07/31/2023 9128287C8 15592 U S Treasury Note 12/10/2019 10,000,000.00 10,317,200.00 10,028,125.00 1.750 Aaa AA 1.639 07/15/2022 912828UN8 15603 U S Treasury Note 12/19/2019 20,000,000.00 20,950,800.00 20,201,562.50 2.000 Aaa AA 1.671 02/15/2023 9128284W7 15605 U S Treasury Note 12/24/2019 40,000,000.00 41,081,200.00 40,707,812.50 2.750 Aaa AA 1.654 08/15/2021 912828TY6 15608 U S Treasury Note 01/08/2020 10,000,000.00 10,343,800.00 10,020,703.13 1.625 Aaa AA 1.550 11/15/2022

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

9 Treasurer's Pooled Cash

Portfolio Management Page 8 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM Maturity CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365 Date Treasury Securities - Coupon 912828M49 15609 U S Treasury Note 01/09/2020 15,000,000.00 15,590,100.00 15,114,843.75 1.875 Aaa AA 1.595 10/31/2022 912828YK0 15612 U S Treasury Note 01/14/2020 10,000,000.00 10,276,200.00 9,940,625.00 1.375 Aaa AA 1.596 10/15/2022 912828Z29 15616 U S Treasury Note 01/23/2020 10,000,000.00 10,337,900.00 9,991,406.25 1.500 Aaa AA 1.530 01/15/2023 912828UN8 15617 U S Treasury Note 01/23/2020 20,000,000.00 20,950,800.00 20,307,812.50 2.000 Aaa AA 1.484 02/15/2023 912828T26 15623 U S Treasury Note 01/30/2020 10,000,000.00 10,393,800.00 10,003,906.25 1.375 Aaa AA 1.364 09/30/2023

Subtotal and Average 502,364,497.27 471,000,000.00 483,403,110.00 469,091,210.98 1.876 Municipal Bonds 13063DDF2 15323 California State Controller 01/08/2018 10,000,000.00 10,437,600.00 10,004,600.00 2.500 Aa AA 2.489 10/01/2022 13063DAC2 15378 California State Controller 04/17/2018 5,000,000.00 5,075,200.00 4,989,350.00 2.625 Aa AA 2.700 04/01/2021 13063DGA0 15386 California State Controller 04/25/2018 6,000,000.00 6,097,140.00 6,000,240.00 2.800 Aa AA 2.867 04/01/2021 13063DGN2 15416 State of California 09/18/2018 21,000,000.00 22,796,760.00 21,329,700.00 3.400 Aa AA 3.051 08/01/2023 13063DRH3 15571 State of California 10/24/2019 10,000,000.00 10,437,600.00 10,205,000.00 2.500 Aa AA 1.822 10/01/2022 13063DRH3 15572 State of California 10/24/2019 10,000,000.00 10,437,600.00 10,219,400.00 2.500 Aa AA 1.770 10/01/2022 13063BJA1 15655 State of California 04/16/2020 6,110,000.00 6,510,571.60 6,548,148.10 5.700 Aaa AA 1.001 11/01/2021

Subtotal and Average 69,296,438.10 68,110,000.00 71,792,471.60 69,296,438.10 2.365 Supranationals 4581X0DB1 15384 INTER AMERICAN DEV BANK 04/19/2018 10,000,000.00 10,170,858.00 9,987,060.00 2.625 Aaa AAA 2.670 04/19/2021 4581X0DA3 15490 INTER AMERICAN DEV BANK 03/27/2019 10,000,000.00 10,554,849.00 10,077,000.00 2.500 Aaa AAA 2.287 01/18/2023 4581X0CC0 15507 INTER AMERICAN DEV BANK 04/05/2019 6,175,000.00 6,711,175.25 6,331,227.50 3.000 Aaa AAA 2.403 10/04/2023 4581X0CC0 15534 INTER AMERICAN DEV BANK 06/28/2019 15,000,000.00 16,302,450.00 15,706,200.00 3.000 Aaa AAA 1.847 10/04/2023 4581X0CZ9 15651 INTER AMERICAN DEV BANK 04/09/2020 8,300,000.00 8,560,722.92 8,531,570.00 1.750 Aaa AAA 0.592 09/14/2022 45905UXS8 14951 International Bank for Reconst 10/27/2016 10,000,000.00 10,030,000.00 9,920,600.00 1.200 Aaa AAA 1.400 12/01/2020 45905UC36 15045 International Bank for Reconst 12/28/2016 10,000,000.00 10,197,730.00 10,000,000.00 2.000 Aaa AAA 2.000 09/28/2021 45905UF74 15138 International Bank for Reconst 04/19/2017 10,000,000.00 10,034,500.00 10,000,000.00 1.770 Aaa AAA 1.770 10/19/2020 459058EW9 15239 International Bank for Reconst 08/30/2017 10,000,000.00 10,082,189.00 9,985,000.00 1.625 Aaa AAA 1.669 03/09/2021 459058GL1 15448 International Bank for Reconst 12/05/2018 15,000,000.00 16,303,615.50 15,022,200.00 3.000 Aaa AAA 2.966 09/27/2023 459058GL1 15504 International Bank for Reconst 04/02/2019 10,000,000.00 10,869,077.00 10,321,700.00 3.000 Aaa AAA 2.242 09/27/2023 459058DY6 15601 International Bank for Reconst 12/18/2019 10,000,000.00 10,213,000.00 9,984,400.00 1.626 Aaa AAA 1.699 02/10/2022 459058GU1 15619 International Bank for Reconst 01/24/2020 20,000,000.00 20,702,962.00 20,265,600.00 2.125 Aaa AAA 1.567 07/01/2022 45905VLH77 15649 International Finance Corp 04/08/2020 11,003,000.00 11,415,062.35 11,415,062.35 2.000 Aaa AAA 0.517 10/24/2022 45950KCP3 15671 International Finance Corp 05/01/2020 15,028,000.00 16,183,587.08 16,226,483.00 2.875 Aaa AAA 0.400 07/31/2023

Subtotal and Average 173,774,102.85 170,506,000.00 178,331,778.10 173,774,102.85 1.704

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0

10 Treasurer's Pooled Cash

Portfolio Management Page 9 Portfolio Details - Investments July 31, 2020

Average Purchase Stated YTM CUSIP Investment # Issuer Balance Date Par Value Market Value Book Value Rate Moody's S&P 365

Total and Average 3,593,846,865.97 3,561,205,348.59 3,647,414,548.01 3,571,207,923.23 1.489

Portfolio KERN CP Run Date: 08/13/2020 - 11:31 PM (PRF_PM2) 7.3.0