Butler County Area Vocational-Technical School Authority School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project)

NEW ISSUE—BOOK-ENTRY ONLY RATINGS: S&P: AA (Stable Outlook) (Insured) S&P: A (Stable Outlook) (Underlying) (See Ratings herein)

In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds (including, in the case of Bonds sold at an original issue discount, the difference between the initial offering price and par) is excluded from gross income for Federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under §57 of the Internal Revenue Code of 1986, as amended (the “Code”) for purposes of Federal individual or corporate alternative minimum taxes. The Bonds, and the interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania. (See “TAX MATTERS” herein.)

The Authority has designated the Bonds as “Qualified Tax-Exempt Obligations” pursuant to §265(b)(3) of the Code (relating to the deductibility of interest expense by certain financial institutions). $7,735,000 Butler County Area Vocational-Technical School Authority School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project)

INITIALLY DATED: December 29, 2015 INTEREST PAYABLE: March 1 and September 1 PRINCIPAL DUE: March 1, as shown herein FIRST INTEREST PAYMENT DATE: March 1, 2016 PAYMENT OF PRINCIPAL AND INTEREST: The School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project), in the aggregate principal amount of $7,735,000 (the “Bonds”), will be registered in the name of Cede & Co. as the owner and nominee of The Depository Trust Company (“DTC”), New York, New York. Beneficial ownership of the Bonds can be acquired, in denominations of $5,000 or any integral multiple thereof, under the book-entry only system maintained by DTC through its brokers and dealers who are, or act through, DTC Participants. Purchasers of the Bonds will not receive physical delivery of Bond certificates, and must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on the Bonds. See “BOOK-ENTRY ONLY SYSTEM” herein. If, under the circumstances described herein, Bonds are ever issued in certificated form, the Bonds will be subject to registration of transfer, exchange and payment as described herein. Interest on the Bonds is payable initially on March 1, 2016 and thereafter semiannually on March 1 and September 1 of each year, until the principal sum thereof is paid. The Bonds are subject to redemption prior to stated maturity as described herein. SECURITY FOR THE BONDS: The principal of and interest on the Bonds will be paid by, or on behalf of, the Butler County Area Vocational-Technical School Authority (the “Authority”) to Wells Fargo Bank, N.A., Pittsburgh, Pennsylvania (the “Trustee”), acting as trustee and sinking fund depository for the Bonds, under the terms of a Trust Indenture, dated as of August 23, 2010, between the Authority and the Trustee as supplemented and amended by a First Supplemental Trust Indenture dated December 29, 2015 (the “First Supplemental Indenture” and, collectively the “Indenture”). For a further description of the amendments to the Indenture effectuated by the delivery of the First Supplemental Indenture, see “Security for the Bonds” herein. The Authority, as lessor, has entered into a Lease Agreement dated as of August 23, 2010 (the “Original Lease”), with the Butler County Area Vocational-Technical School Board (the “Joint Board”), which is the governing body of the Butler County Area Vocational-Technical School (“BCAVTS”), and Butler Area School District, Karns City Area School District, Mars Area School District, Moniteau School District, Seneca Valley School District, Slippery Rock Area School District, and South Butler County School District (the “School Districts”), as lessees as supplemented by a First Supplemental Lease Agreement dated December 29, 2015 (the “First Supplemental Lease” and with the Original Lease, the “Lease”). Under the Lease each of the School Districts (with the exception of Seneca Valley School District , the “Obligated School Districts”) is required to pay to the Joint Board for further credit to the Authority, semiannual lease rentals specified in the Lease, the sum of which shall always equal 100% of the debt service due on the Bonds. Seneca Valley School District had, independently of the Obligated School Districts, paid a onetime capital contribution for its share of the costs of the capital project in lieu of financing such costs under the Lease and having to make periodic lease payments thereunder. The Lease is assigned and pledged under the Indenture to the Trustee as security for the Bonds. The Bonds are special, limited revenue obligations of the Authority, payable solely from the lease rentals payable by the Joint Board and the Obligated School Districts under the Lease. The Obligated School Districts’ payment obligations under the Lease do not constitute debt of the Obligated School Districts. The Obligated School Districts have covenanted to budget and pay the amounts due under the Lease, but payments are subject to annual appropriation by each of the Obligated School Districts. The Obligated School Districts payment obligations under the Lease are, however, subject to enforcement by the Commonwealth of Pennsylvania under the state subsidy intercept provisions of Section 790 of the School Code (see, “Intercept of State Aid for Obligated School District’s Failure to Make Payments Under the Lease”, herein). The Authority and the BCAVTS/Joint Board have no taxing power.

CREDIT ENHANCEMENT: The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. (“AGM”).

CONTINUING DISCLOSURE UNDERTAKING: The Joint Board and the Obligated School Districts, as applicable, have agreed to provide, or cause to be provided, in a timely manner, certain information in accordance with the requirements of Rule 15c2-12, as promulgated under the Securities and Exchange Act of 1934, as amended and interpreted (the "Rule"). (See “CONTINUING DISCLOSURE UNDERTAKING” herein.)

LEGAL APPROVALS: The Bonds are offered when, as and if issued by the Authority and received by the Underwriter, subject to prior sale and subject to the receipt of the approving legal opinion to be issued by Dinsmore & Shohl LLP, Pittsburgh, Pennsylvania, Bond Counsel. Certain additional matters, as requested by Bond Counsel, will be passed upon by Dillon, McCandless, King, Coulter and Graham, LLP, Butler, Pennsylvania, Solicitor to the Authority and to the BCAVTS. The Bonds are expected to be available for delivery on December 29, 2015 in New York, New York. REGISTRATION OF BONDS: Information concerning the Bonds has been furnished to The Depository Trust Company, New York, New York (“DTC”). It is expected that the Bonds will be book-entry only.

Official Statement Dated: December 1, 2015 $7,735,000 Butler County Area Vocational-Technical School Authority School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project)

BOND MATURITY SCHEDULE

Dated: December 29, 2015 Principal Due: March 1, as shown below Interest Due: March 1 and September 1 First Interest Payment: March 1, 2016

Principal Interest Initial Offering Mar. 1 Amounts Rates Yields Prices 2017 $195,000 2.000% 0.870% 101.314% 2018 245,000 2.000 1.230 101.644 2019 250,000 2.000 1.400 101.854 2020 255,000 2.000 1.630 101.485 2021 255,000 2.000 1.860 100.686 2022 265,000 2.000 2.140 99.193 2023 270,000 2.125 2.370 98.391 2024 275,000 2.375 2.540 98.787 2025 285,000 2.625 2.710 99.311 2026 285,000 2.750 2.900 98.684 2027 295,000 3.000 3.000 100.000 2028 305,000 3.000 3.070 99.290 2029 315,000 3.125 3.190 99.302 2030 320,000 3.125 3.270 98.363

2035* 1,785,000 3.500 3.600 98.620

2040* 2,135,000 3.625 3.830 96.783

*Term Bond Butler County Area Vocational-Technical School Authority

MEMBERS OF THE AUTHORITY

Name Position Member School District David H. Tack Chairperson Butler Area School District James Nickel Vice-Chairperson Seneca Valley School District Arthur Bernardi Treasurer Butler Area School District Roy Peffer Secretary Moniteau School District Michael Smith Assistant Secretary Karns City Area School District Gordon Marburger Member Mars Area School District Jacqueline Pfeiffer Member South Butler County School District Dennis Thompson Member Slippery Rock Area School District

Butler County Area Vocational-Technical School

JOINT OPERATING COMMITTEE MEMBERSHIP

Name Position Member School District John Conrad Chairperson Butler Area School District James Nickel Vice-Chairperson Seneca Valley School District Roy Peffer Secretary Moniteau School District Gordon Marburger Treasurer Mars Area School District Carmen Bianco Member Butler Area School District Eric DiTullio Member Seneca Valley School District Bill Halle Member Butler Area School District James Keffalas Member Butler Area School District Jacqueline Pfeiffer Member South Butler County School District Josh Price Member Karns City Area School District Linda Rieck Member South Butler County School District Rev. Michael Scheer Member Slippery Rock Area School District

ADMINISTRATION

Mr. Kurt Speicher Executive Director Ms. Rebekah Davis Business Manager

SOLICITOR Dillon, McCandless, King, Coulter and Graham, LLP Butler, Pennsylvania

BOND COUNSEL Dinsmore & Shohl LLP Pittsburgh, Pennsylvania

TRUSTEE Wells Fargo Bank National Association Pittsburgh, Pennsylvania

FINANCIAL ADVISOR Public Financial Management Inc. Harrisburg, Pennsylvania

UNDERWRITER Janney Montgomery Scott LLC Pittsburgh, Pennsylvania

No dealer, broker or any other person has been authorized by the Authority, the BCAVTS/Joint Board or any of the School Districts, to give any information or make any representation, other than those contained in this Official Statement, and if given or made, such other information and representation must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the Authority, the BCAVTS/Joint Board and the School Districts, and from other sources which are believed to be reliable, but the Authority, the BCAVTS/Joint Board and the School Districts, do not guarantee the accuracy or completeness of information from sources other than the Authority, the BCAVTS/Joint Board and the School Districts. No representation is made by Janney Montgomery Scott LLC, Pittsburgh, Pennsylvania, as the Managing Underwriter (the “Underwriter” or “Managing Underwriter”), as to the accuracy or completeness of the information obtained from the Authority, the BCAVTS/Joint Board and the School Districts, or from sources other than the Authority. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement, nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE MANAGING UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITER HAVS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS A PART OF, THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE BONDS OR THE INDENTURE IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF CERTAIN STATES, IF ANY, IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “Bond Insurance” and “Appendix K - Specimen Municipal Bond Insurance Policy”.

TABLE OF CONTENTS Page

INTRODUCTORY STATEMENT ...... 1 BOND INSURANCE RATING DOWNGRADES AND UPGRADES BY BCAVTS ...... 1 S&P AND/OR MOODY’S ...... 21 THE AUTHORITY ...... 1 RATING ...... 21 PURPOSE OF THE ISSUE ...... 2 UNDERWRITING ...... 21 SOURCES AND USES OF BOND PROCEEDS ...... 2 LEGAL OPINION ...... 22 THE BONDS ...... 2 FINANCIAL ADVISOR ...... 22 ROLE OF TRUSTEE ...... 22 DESCRIPTION; PAYMENT OF PRINCIPAL AND INTEREST ...... 2 MISCELLANEOUS ...... 22 PAYMENT ON THE BONDS ...... 3 APPENDIX A - BUTLER AREA SCHOOL DISTRICT TRANSFER, EXCHANGE AND REGISTRATION ...... 3 BUTLER COUNTY, PENNSYLVANIA DESCRIPTIVE, BOND INSURANCE ...... 4 FINANCIAL AND ECONOMIC INFORMATION BOND INSURANCE POLICY ...... 4 ASSURED GUARANTY MUNICIPAL CORP...... 4 APPENDIX B - KARNS CITY SCHOOL DISTRICT BUTLER BOOK-ENTRY-ONLY SYSTEM ...... 6 COUNTY, PENNSYLVANIA DESCRIPTIVE, FINANCIAL AND DISCONTINUANCE OF BOOK-ENTRY ONLY SYSTEM ...... 8 ECONOMIC INFORMATION REDEMPTION OF BONDS...... 8 MANDATORY REDEMPTION ...... 8 APPENDIX C - MARS AREA SCHOOL DISTRICT OPTIONAL REDEMPTION ...... 9 BUTLER COUNTY, PENNSYLVANIA DESCRIPTIVE, NOTICE OF REDEMPTION ...... 9 FINANCIAL AND ECONOMIC INFORMATION

MANNER OF REDEMPTION ...... 9 SECURITY FOR THE BONDS ...... 9 APPENDIX D - MONITEAU SCHOOL DISTRICT SUMMARY OF CERTAIN PROVISIONS OF THE LEASE AND BUTLER COUNTY, PENNSYLVANIA DESCRIPTIVE, INDENTURE ...... 10 FINANCIAL AND ECONOMIC INFORMATION LEASE ...... 10 INDENTURE ...... 11 APPENDIX E - SLIPPERY ROCK AREA SCHOOL DISTRICT BUTLER COUNTY AREA VOCATIONAL-TECHNICAL BUTLER COUNTY, PENNSYLVANIA DESCRIPTIVE, SCHOOL ...... 12 FINANCIAL AND ECONOMIC INFORMATION ORIGINATION DESCRIPTION ...... 12 SCHOOL FINANCES ...... 13 APPENDIX F - SOUTH BUTLER SCHOOL DISTRICT INTRODUCTION ...... 13 BUTLER COUNTY, PENNSYLVANIA DESCRIPTIVE, FINANCIAL REPORTING ...... 13 FINANCIAL AND ECONOMIC INFORMATION SUMMARY AND DISCUSSION OF FINANCIAL RESULTS ...... 13 FUTURE FINANCING ...... 15 APPENDIX G - BUTLER COUNTY, PENNSYLVANIA LABOR RELATIONS ...... 15 DESCRIPTIVE, FINANCIAL AND ECONOMIC INFORMATION PENSION PROGRAM ...... 15 OTHER POST-EMPLOYMENT BENEFITS (OPEB) ...... 16 APPENDIX H - FORM OF BOND COUNSEL OPINION INFORMATION REGARDING THE OBLIGATED SCHOOL DISTRICTS ...... 16 APPENDIX I - FORM OF CONTINUING DISCLOSURE TAXING POWERS OF THE SCHOOL DISTRICTS ...... 16 CERTIFICATE THE TAXPAYER RELIEF ACT (ACT 1) ...... 16 ACT 24 OF 2001 ...... 17 APPENDIX J - AUDITED FINANCIAL STATEMENTS OF ACT 48 OF 2003 ...... 18 BCAVTS FOR FISCAL YEAR ENDED JUNE 30, 2014 COMMONWEALTH AID TO SCHOOL DISTRICTS ...... 18 LITIGATION ...... 18 TAX EXEMPTION AND OTHER TAX MATTERS ...... 18 APPENDIX K - SPECIMEN MUNICIPAL BOND INSURANCE POLICY STATE TAX MATTERS ...... 18 FEDERAL INCOME TAX MATTERS ...... 18 CONTINUING DISCLOSURE UNDERTAKING ...... 20 EXISTING CONTINUING DISCLOSURE FILING HISTORY ...... 21

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OFFICIAL STATEMENT

$7,735,000 Butler County Area Vocational-Technical School Authority School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project)

INTRODUCTORY STATEMENT

This Official Statement, including the cover page and inside cover page and Appendices, is furnished by the Butler County Area Vocational-Technical School Authority (the “Authority”), in connection with its offering of $7,735,000 aggregate principal amount of School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project) dated as of the Date of Delivery (the “Bonds”), for the benefit of the Butler County Area Vocational-Technical School (“BCAVTS”).

The Bonds are secured by the terms of a Trust Indenture, dated as of August 23, 2010 (the “Original Indenture”), between the Authority and Wells Fargo Bank, N.A., Pittsburgh, Pennsylvania, as trustee (the “Trustee”), as supplemented by a First Supplemental Trust Indenture dated December 29, 2015 (the “First Supplemental Indenture” and with the Original Indenture, the “Indenture”), and are payable solely from the prescribed rental payments (the “Lease Rentals”) due from each of the Obligated School Districts (being all School Districts which are members of the BCAVTS, except Seneca Valley School District) under the terms of a Lease Agreement, dated as of August 23, 2010 (the “Original Lease”), between the Authority, as lessor, and the Butler County Area Vocational-Technical School Board (the “Joint Board”), which is the governing body of BCAVTS, and the Butler Area School District, the Karns City Area School District, the Mars Area School District, the Moniteau School District, the Seneca Valley School District, the Slippery Rock Area School District and the South Butler County School District, all located in Butler County, Pennsylvania (the “School Districts”), as lessees as supplemented by a First Supplemental Lease Agreement dated December __, 2015 (the “First Supplemental Lease” and together with the Original Lease, the “Lease”). The Authority has title to the real estate, buildings and facilities, including the improvements (the “BCAVTS Facilities”), which are being leased by the Authority to the Joint Board and the School Districts pursuant to the Lease.

BCAVTS

BCAVTS was created and is governed by the terms of its Joint Agreement, effective July 1, 1998, (the “Joint Agreement”), signed by each of the seven member School Districts, pursuant to the Pennsylvania Public School Code authorizing the creation of “Area Vocational-Technical Schools” to provide vocational and technical training for secondary students and adults. BCAVTS is governed by its Joint Board, comprised of all members of the Boards of School Directors of all of seven School Districts. The twelve-member Joint Operating Committee of the Joint Board provides the day to day governance of the operations at BCAVTS in conjunction with the administrative personnel employed by BCAVTS, including its Administrative Director and Business Administrator.

The member officers of the Joint Operating Committee Board are set forth below:

The Authority

The Authority is a body corporate and politic incorporated and organized pursuant to the Municipality Authorities Act, as amended and supplemented (the “Act”). Under the Act the Authority is empowered to acquire, hold, construct, improve maintain, operate, finance and lease public school buildings and other school projects acquired, constructed or improved for public school purposes. The Authority has no taxing power.

The governing body of the Authority is a Board consisting of eight (8) members. Each of the School Districts participating in BCAVTS appoints members of the Board of the Authority. Officers of the Authority are appointed by the members. The members of the Authority, their offices, and the School Districts they represent are set forth below:

PURPOSE OF THE ISSUE

Proceeds of the Bonds will be used to (1) currently refund all of the outstanding School Lease Revenue Bonds, Series of 2010 outstanding in the aggregate principal amount of $7,250,000 (the “2010 Bonds”) and (2) to pay the costs and expenses related to the issuance of the Bonds.

The 2010 Bonds will be called for optional redemption, at a redemption price of 100% of principal amount plus accrued interest, pursuant to the optional redemption provisions applicable to the 2010 Bonds on December 29, 2015.

Sources and Uses of Bond Proceeds

The following is a summary of the sources and uses of the proceeds from the issuance of the Bonds.

Source of Funds Bond Proceeds ...... $7,735,000.00 Net Original Issue Discount ...... (101,690.25)

Total Source of Fund ...... $7,633,309.75

Use of Funds Amount Required to Redeem the 2010 Bonds ...... $7,350,466.26 Costs of Issuance(1) ...... 282,843.49

Total Use of Funds ...... $7,633,309.75

(1)Includes total bond discount, legal, financial advisor, municipal bond insurance, printing, rating, trustee, and miscellaneous fees.

THE BONDS

Description; Payment of Principal and Interest

The Bonds will be issued in the aggregate principal amount of $7,735,000, dated the Date of Delivery, will mature on the dates and in the amounts set forth inside the front cover hereof and shall be payable as to interest on March 1 and September 1 of each year commencing March 1, 2016 at the rates set forth inside the cover page hereof. The Bonds will be subject to redemption prior to maturity as described herein.

The Bonds will be issued in fully registered form, and all registered in the name of Cede & Co., as owner and nominee of the Depository Trust Company. Purchases of the Bonds may be made in book-entry only form, in the denomination of $5,000 and integral multiples thereof. Beneficial Owners of Bonds will not receive certificates representing their interest in Bonds purchased. While Cede & Co. is the registered owner, as nominee of DTC, references herein to the registered owners shall mean Cede & Co., and shall not mean the Beneficial Owners of the Bonds. See “Book-Entry Only System” herein.

Wells Fargo Bank, N.A., Pittsburgh, Pennsylvania, as Trustee and paying agent, will pay principal of and interest on the Bonds. While DTC or its nominee, Cede & Co., is the registered owner of the Bonds, such payments will be made directly to it as the registered owner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described below.

Payment on the Bonds

So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of principal of, redemption premium, if any, and interest on the Bonds, when due, are to be made to DTC and all such payments shall be valid and effective to satisfy fully and to discharge the obligations of the City with respect to, and to the extent of, principal, redemption premium, if any, and interest so paid. If the use of the book-entry only system for the Bonds is discontinued for any reason, Bond certificates will be issued to the Beneficial Owners of the Bonds and payment of principal, redemption premium, if any, and interest on the Bonds shall be made as described in the following paragraphs.

Principal of certificated Bonds will be paid to the registered owners thereof or assigns, when due, upon surrender of the Bonds at the designated corporate trust office of the Trustee.

Interest on the Bonds is payable to the registered owner of a Bond from the Interest Payment Date (hereinafter defined) next preceding the date of registration and authentication, unless (a) such Bond is authenticated as of an Interest Payment Date, in which event such Bond shall bear interest from said Interest Payment Date, or (b) such Bond is registered and authenticated after a Record Date (hereinafter defined) and before the next succeeding Interest Payment Date, in which event such Bond shall bear interest from such Interest Payment Date, or (c) such Bond is registered and authenticated on or prior to the Record Date (hereinafter defined) preceding March 1, 2016, in which event such Bond shall bear interest from the dated date of the Bonds or (d) as shown by the records of the Trustee, interest on such Bond shall be in default, in which event such Bond shall bear interest from the date on which interest was last paid on such Bond. Interest shall be paid semiannually on March 1 and September 1 of each year, beginning March 1, 2016 (each an “Interest Payment Date”) until the principal sum is paid. Interest on a certificated Bond is payable by check drawn by or on behalf of the Trustee which shall be mailed to the registered owner whose name and address shall appear by the close of business on the fifteenth (15th) day of the month next preceding each Interest Payment Date (the “Record Date”) on the registration books maintained by the Trustee on behalf of the Authority irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such Interest Payment Date, unless the Authority shall be in default in payment of interest due on such Interest Payment Date. In the event of any such default, such defaulted interest shall be payable to the person in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Trustee to the registered owners of the Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names the Bonds are registered at the close of business on the fifth (5th) day preceding the date of mailing.

Whenever the due date for payment of interest on or principal of the Bonds or the date fixed for redemption of any Bond shall be a Sunday, a legal holiday, or a day on which banking institutions in the Commonwealth are authorized by law to close, then payment of such interest, principal or redemption price need not be made on such date, but may be made on the next succeeding day which is not a Sunday, legal holiday, or a day upon which banks in the Commonwealth are authorized by law to close, with the same force and effect as if made on the due date for payment of principal, interest, or redemption price, and no interest shall accrue thereon for any period after such due date.

Transfer, Exchange and Registration

Subject to the section below entitled “BOOK-ENTRY ONLY SYSTEM”, the Authority and the Trustee shall not be required to issue or register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the fifteenth (15th) day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day of mailing of the applicable notice of redemption or to register the transfer or exchange any portion of any Bond selected for redemption until after the redemption date.

Bonds may be transferred or exchanged by the registered owners thereof upon surrender of Bonds to the Trustee, at its designated corporate trust office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Trustee, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative.

The Trustee shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered Bond or Bonds of authorized denominations of the same series, maturity and interest rate or yield to maturity, applicable.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. (“AGM”) will issue its Municipal Bond Insurance Policy for the Bonds (the “Policy”). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an appendix to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Assured Guaranty Municipal Corp.

AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

AGM’s financial strength is rated “AA” (stable outlook) by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”), “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Current Financial Strength Ratings

On June 29, 2015, S&P issued a credit rating report in which it affirmed AGM’s financial strength rating of “AA” (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take.

On November 13, 2014, KBRA assigned an insurance financial strength rating of “AA+” (stable outlook) to AGM. AGM can give no assurance as to any further ratings action that KBRA may take.

On July 2, 2014, Moody’s issued a rating action report stating that it had affirmed AGM’s insurance financial strength rating of “A2” (stable outlook). On February 18, 2015, Moody’s published a credit opinion under its new financial guarantor ratings methodology maintaining its existing rating and outlook on AGM. AGM can give no assurance as to any further ratings action that Moody’s may take.

For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Capitalization of AGM

At September 30, 2015, AGM’s policyholders’ surplus and contingency reserve were approximately $3,769 million and its net unearned premium reserve was approximately $1,603 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM’s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM’s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference

Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (filed by AGL with the SEC on February 26, 2015);

(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (filed by AGL with the SEC on May 8, 2015);

(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (filed by AGL with the SEC on August 6, 2015); and

(iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 (filed by AGL with the SEC on November 6, 2015).

All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding AGM included herein under the caption “BOND INSURANCE – Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

Miscellaneous Matters

AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “BOND INSURANCE”.

BOOK-ENTRY-ONLY SYSTEM

Portions of the following information concerning The Depository Trust Company (“DTC”) and DTC's book-entry-only system have been obtained from DTC. The Authority (sometimes herein referred to as the “Issuer”), the Technical School, the Financial Advisor, and the Underwriter make no representation as to the accuracy of such information.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for the Securities, in the aggregate principal amount of such issue, 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 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book- entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

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

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit bas 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 Securities 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 Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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

A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to Tender Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to Tender Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to Tender Agent's DTC account.

DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

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

NEITHER THE AUTHORITY NOR THE TRUSTEE SHALL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION BOOKS OF THE TRUSTEE AS BEING A BONDHOLDER WITH RESPECT TO EITHER: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (3) THE DELIVERY OR THE TIMELINESS OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO THE OWNER OF THE BONDS; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.

Neither the Authority nor the Trustee shall have any responsibility or obligation to any DTC Participant or Indirect Participant with respect to:

(i) the accuracy of the records of DTC, its nominee or any DTC Participant or Indirect Participant with respect to any beneficial ownership interest in any Bonds;

(ii) the delivery to any DTC Participant or Indirect Participant or any other Person, other than the registered owner of a Bond, as shown in the Bond Register, of any notice with respect to any Bond, including, without limitation, any notice of redemption;

(iii) the selection by DTC or any DTC Participant or Indirect Participant of any person to receive payment in the event of a partial redemption of Bonds;

(iv) the payment to any DTC Participant or Indirect Participant or any other Person other than the registered owner of a Bond, as shown in the Bond Register, of any amount with respect to the principal of, redemption price, or interest on, any Bond; or

(v) any consent given by DTC as registered owner.

Prior to the discontinuation of the book-entry only system as described herein, the Authority and the Trustee may treat DTC and any successor securities depository to be the absolute owner of the Bonds for all purposes, including, without limitation:

(i) the payment of principal of redemption price or interest on the Bonds;

(ii) giving notices of redemption and other matters with respect to the Bonds;

(iii) registering transfers with respect to the Bonds; and

(iv) the selection of Bonds for redemption. 7

The Beneficial Owners of the Bonds have no right to a securities depository for the Bonds. DTC or any successor securities depository may resign as depository for the Bonds by giving notice to the Trustee and discharging its responsibilities under applicable law. In addition, the Authority, or the Authority at the request of the Technical School, may remove DTC or a successor securities depository for any reason at any time. In such event, the Authority shall (i) appoint a securities depository qualified to act as such under Section 17(a) of the Securities Exchange Act of 1934, notify the prior securities depository of the appointment of such successor depository and transfer separate bond certificates to such successor securities depository or (ii) notify the securities depository of the availability through the securities depository of bond certificates and transfer one or more separate bond certificates to Depository Participants having Bonds credited to their accounts at the securities depository. In such event, such Bonds shall no longer be restricted to being registered in the registration books of the Authority in the name of the securities depository or its nominee, but may be registered in the name of the successor securities depository or its nominee, or in whatever name or names the Depository Participants receiving such Bonds shall designate, in accordance with the provisions of the Indenture.

Discontinuance of Book-Entry Only System

The book-entry only system for registration of the ownership of the Bonds may be discontinued at any time if: (i) DTC determines to resign as securities depository for the Bonds; or (ii) the Authority determines that continuation of the system of book- entry transfers through DTC (or through a successor securities depository) is not in the best interests of the Beneficial Owners. In either such event (unless the Authority appoints a successor securities depository), Bonds will then be delivered in registered certificate form to such persons, and in such maturities and principal amounts, as may be designated by DTC, but without any liability on the part of the Authority, or the Trustee for the accuracy of such designation. Whenever DTC requests the Authority or the Trustee to do so, the Authority or the Trustee shall cooperate with DTC in taking appropriate action after reasonable notice to arrange for another securities depository to maintain custody of certificates evidencing the Bonds.

THE AUTHORITY, BCAVTS AND THE TRUSTEE CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (I) PAYMENTS OF PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS, (II) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS, OR (III) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT.

REDEMPTION OF BONDS

Mandatory Redemption

In the manner and upon the terms and conditions provided in the Resolution, the Bonds stated to mature on March 1, 2035 and March 1, 2040 are subject to annual mandatory sinking fund redemptions in direct order of maturity pursuant to operation of the Sinking Fund in the manner set forth in the Resolution at a redemption price equal to one-hundred percent (100%) of the principal amount thereof, together with accrued interest on March 1 of the following years in the following principals amounts:

Year Amount 2031 $335,000 2032 345,000 2033 355,000 2034 370,000 2035* 380,000

*Final Maturity

Year Amount 2036 $400,000 2037 410,000 2038 430,000 2039 440,000 2040* 455,000

*Final Maturity

Optional Redemption

The Bonds stated to mature on or after March 1, 2022 shall be subject to redemption prior to maturity, at the option of the Authority, as a whole, on March 1, 2021 or on any date thereafter, or from time to time, in part, in any order of maturities, on March 1, 2021 or on any date thereafter, in any such case upon payment of a redemption price of 100% of the principal amount to be redeemed plus interest accrued thereon to the redemption date. In the event that less than all Bonds of any particular maturity are to be redeemed, the Bonds of such maturity to be redeemed shall be drawn by lot.

Notice of Redemption

Notice of any redemption shall be given by depositing a copy of the redemption notice in first class mail not more than sixty (60) days and not less than thirty (30) days prior to the date fixed for redemption addressed to each of the registered owners of Bonds to be redeemed, in whole or in part, at the addresses shown on the registration books kept by the Trustee as of the day such Bonds are selected for redemption. Failure to give such notice of redemption, or any defect therein or in the mailing thereof shall not affect the validity of any proceeding for redemption of other Bonds so called for redemption as to which proper notice has been given.

On the date designated for redemption, notice having been provided as aforesaid, and money for payment of the principal, premium, if any, and accrued interest being held by the Trustee, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and such Bonds or portions thereof so called for redemption shall cease to be entitled to any benefit or security under the Supplemental Indenture, and registered owners of such Bonds or portions thereof so called for redemption shall have no rights with respect thereto, except to receive payment of the principal to be redeemed and accrued interest thereon to the date fixed for redemption, together with the redemption premium, if any.

If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are authorized by law or executive order to close, then the date for payment of the principal, premium, if any, and interest upon such redemption shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption.

Manner of Redemption

If a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing that number of Bonds that is equal to the principal amount thereof divided by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be made only upon surrender of such Bond in exchange for Bonds of authorized denominations in aggregate principal amount equal to the unredeemed portion of the principal amount thereof.

SECURITY FOR THE BONDS

Under the Lease, the Authority leases the BCAVTS Facility, including the Capital Project, to the Joint Board and the School Districts. Previously, the Authority agreed to utilize the proceeds of the 2010Bonds deposited with the Trustee in a Project Fund created under the Indenture to undertake the Project. The sum of the rental payments by the Obligated School Districts, together with funds of BCAVTS available for the purpose, if any, shall at all times equal at least 100% of the principal and interest due on the Bonds in that year. Each Obligated School District has agreed to budget and pay the annual amount of its rental payment as an operating expense, subject to annual appropriation. Seneca Valley School District, which is not an Obligated School District, agreed to pay a onetime capital contribution for its share of the costs of the Capital Project in lieu of financing such costs under the Lease and having to make periodic lease payments thereunder.

The payment allocation of each of the School Districts under the Lease, which are fixed over the term of the Lease, shall be as follows:

District Pro Rata Debt Service Butler ASD 39.6702% Karns City ASD 8.2719% Mars ASD 16.1827% Moniteau SD 8.7288% Seneca Vly SD (1) 0.0000% Slippery Rock ASD 11.7265% South Butler Co SD 15.4199% 100.0000%

(1)Seneca Valley School District made a capital contribution of $3,166,423.78 upon closing of the 2010 Bonds. 9

The rental payments by the Obligated School Districts under the Lease are several, not joint, unsecured contractual obligations of each of the Obligated School Districts, and do not constitute “debt” of the Obligated School Districts under the Pennsylvania Local Government Unit Debt Act. The rental payments are subject to annual appropriations by the Obligated School Districts like other operating expenses incurred on a yearly basis.

THE BONDS DO NOT PLEDGE THE CREDIT OR TAXING POWER OF THE AUTHORITY OR THE CREDIT OR TAXING POWER OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE SCHOOL DISTRICTS. THE AUTHORITY HAS NO TAXING POWER. THE BCAVTS/JOINT BOARD HAS NO TAXING POWER. HOWEVER, IF DEBT SERVICE PAYMENTS ARE NOT APPROPRIATED OR PAID BY THE OBLIGATED SCHOOL DISTRICT, THE COMMONWEALTH MAY WITHOLD OUT OF ANY STATE APPRORIATIONS DUE TO SUCH OBLIGATED SCHOOL DISTRICT, THE AMOUNT DUE FOR ITS DEBT SERVICE OBLIGATION (See “Intercept of State Aid for an Obligated School District’s Failure to Make Payments Under the Lease ” below).

Intercept of State Aid for an Obligated School District’s Failure to Make Payments Under the Lease

Section 790 of the Public School Code of 1949 (the “School Code”), 24 P.S. Section 7-790(7) states that in the event the Board of School Directors of a Pennsylvania school district “fails to pay or provide for the payment of any rental or rentals due any municipality authority or nonprofit corporation for any period in accordance with the terms of any lease entered into under the provisions of this section, the Pennsylvania Department of Education shall notify such Board of School Directors of its obligation and shall withhold out of any State appropriation due such school district an amount equal to the amount of rental or rentals owing by such school to the municipality authority or nonprofit corporation, and shall pay over the amount so withheld to the municipality authority or nonprofit corporation in payment of the rental.”

These withholding provisions are not part of any contract with the Trustee or any holder of the Bonds, and may be amended by future legislation. All public school subsidies in the Commonwealth are subject to appropriation by the General Assembly. Although the Constitution of the Commonwealth provides that “the General Assembly shall provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth”, the General Assembly is not legally obligated to appropriate such subsidies and there can be no assurance that it will do so in the future. The allocation formula pursuant to which the Commonwealth distributes such subsidies to the various school districts throughout the Commonwealth may be amended at any time by the General Assembly. Moreover, the Commonwealth’s ability to make such disbursements will be dependent upon its own financial condition. At various times in the past, the enactment of budget and appropriation laws by the Commonwealth has been delayed, resulting in interim borrowing by school districts pending the authorization and payment of state aid. Consequently, there can be no assurance that financial support from the Commonwealth for schools, either for capital projects or education programs in general will continue at present levels or that money will be payable to a school district if rentals owing by such school district are not paid when due.

The Authority has no taxing power. Neither the general credit of or taxing power of the Commonwealth of Pennsylvania, any of the School Districts or any other political subdivision of the Commonwealth of Pennsylvania is pledged for the payment of principal of, or the interest on, the Bonds; nor shall any of the Bonds be deemed obligations of the Commonwealth of Pennsylvania, any of the School Districts or any other political subdivision of the Commonwealth of Pennsylvania.

SUMMARY OF CERTAIN PROVISIONS OF THE LEASE AND INDENTURE

The following pages contain descriptions of certain provisions of the Indenture and the Lease. The Bonds are secured by the Indenture and are payable from payments due under the Lease. These descriptions are brief summaries and do not purport to be and should not be regarded as complete statements of the terms of either the Lease or the Indenture or as complete synopses thereof. Reference is made to the documents in their entirety, copies of which may be obtained from the Trustee, for the complete statement of the terms and conditions thereof.

Lease

In connection with the issuance of the 2010 Bonds, the Joint Board and the School Districts entered into the Original Lease with the Authority. The Original Lease provided for Lease Rentals by the Joint Board and the Obligated School Districts (except for Seneca Valley School District) to the Authority at the times and in the amounts sufficient to pay the debt service requirements on the 2010 Bonds. The Joint Board and the Obligated School Districts have the right to prepay Lease Rentals to redeem the Bonds pursuant to optional redemption provisions of the Bonds. The First Supplemental Lease is being delivered in order to confirm the amounts of the Lease Rentals payable thereunder to the debt service requirements for the Bonds.

Source of Debt Service Payments: The debt service payments are payable by the Joint Board and the Obligated School Districts on a several, not joint, basis from lease rental payments appropriated by the Obligated School Districts (except for Seneca Valley School District) as set forth in the Lease. The taxing powers of the Obligated School Districts are not pledged as security for the obligation to pay lease rentals under the Lease. Performance of that obligation is subject to annual appropriation of funds by the Obligated School Districts as described herein.

Assignment of Lease: The Lease Rentals shall be paid by the Joint Board directly to the Trustee under an assignment by the Authority to the Trustee of such payments for the benefit and security of the registered Owners of Bonds issued under the Indenture.

Unconditional Obligation: Subject to the appropriation of funds by the Obligated School Districts, the obligation of the Joint Board and the School Districts to pay the Lease Rentals due under the Lease and all other sums payable under the Lease is absolute and unconditional. The Lease Rentals are required to be paid in full directly to the Trustee when due without delay or diminution for any cause whatsoever, including, without limitation thereto, destruction of the BCAVTS Facilities, and without right of set-off for default on the part of the Joint Board or the Obligated School Districts under the Lease.

Maintenance and Repair: The Joint Board covenants under the terms of the Lease to pay the costs to operate, to maintain and repair the BCAVTS Facilities from time to time as may be necessary. It is understood that this provision applies to all repairs major as well as minor, without exception.

Insurance: The Joint Board also covenants in the Lease to maintain adequate insurance on the BCAVTS Facilities in the name of the Joint Board, the Authority and the Trustee as their interest may appear, with any loss payable to the Trustee. The total recovered from time to time in connection with any fire or other causality covered by insurance shall, at the option of the Joint Board be made available by the Trustee to the Authority for the purpose of rebuilding, repairing, or replacing such destroyed or partially destroyed Facilities or to be used toward the purchase or redemption of Bonds. The Joint Board agrees that the BCAVTS shall remain in possession of the BCAVTS Facilities during the period of reconstruction or repair and to continue to pay its Lease Rentals irrespective of the damage.

Compliance with Code: The Joint Board covenants to comply with all applicable provisions of the Code in order to protect the tax-exempt status of the Bonds.

Defaults and Remedies: Under the Lease, the failure of the Joint Board or the Obligated School Districts to make any payments required of it as Lease Rentals or otherwise, or the failure to comply with covenants after written notice, or the occurrence of a default under the Indenture on payment of the Bonds by acceleration, or the failure to carry out the Capital Project to be financed by the proceeds of the Bonds, shall constitute events of default. In the event of any such default, and after due notice as required, the Authority, and/or Trustee as its assignee, may, in addition to any other remedies (i) declare all sums payable under the Lease to be immediately due; or (ii) by legal action enforce call rights of Authority under the Lease; and (iii) in the event of a default in payment, notify the Secretary of the Department of Education of the Commonwealth to commence proceedings for the withholding of any appropriation due the Obligated School Districts under the School Code, as appropriate.

Indenture

The First Supplemental Indenture is being executed and delivered by the Authority and the Trustee in order to provide for the terms and conditions upon which the Authority may deliver the Bonds being offered and sold pursuant to this Official Statement.

Attention of the purchasers of the Bonds is hereby drawn to the fact that the Original Indenture is being amended by the First Supplemental Indenture in order to provide terms and conditions upon which Additional Bonds may be issued pursuant to the Indenture. By purchasing the Bonds, bondholders are thereby consenting to this necessary amendment of the Original Indenture.

Limited Obligation of the Authority: The Bonds are limited obligations of the Authority and are secured by a pledge and assignment to the Trustee of the payments or other revenues or income derived by or for the Authority from or with respect to the Lease and the BCAVTS Facilities leased thereunder and all moneys to be paid over to the Trustee under the provisions of the Indenture. The Authority has no taxing power. Neither the general credit of the Authority, the Commonwealth, the School Districts or any other political subdivision of the Commonwealth is pledged for the payment of the principal of or interest on the Bonds; nor shall the Bonds be deemed to be general obligations of Authority or obligations of the Commonwealth, the School Districts or any other political subdivision thereof.

Pledge and Assignment: The Authority has assigned to the Trustee, in the Indenture, its right, title and interest in all Lease Rentals and other sums payable to it under the Lease except for “Unassigned Issuer Rights” as described below, for the benefit and security of the Registered Owners of the Bonds issued under such Indenture.

Revenue Fund: All Lease Rentals with respect to the Bonds are required to be deposited to the Revenue Fund established with the Trustee, together with any other amounts required to be deposited therein by the Indenture. Moneys in the Revenue Fund are required to be transferred by the Trustee on or before the date of any required or permitted payment of principal of and interest on the Bonds to the Debt Service and Sinking Fund, in the aggregate amount required on such date for the payment of principal and interest on the Bonds next due.

Debt Service and Sinking Fund: The Trustee shall deposit and maintain a Debt Service and Sinking Fund, for the Bonds, into which the Trustee shall make appropriate deposits in respect of the required Debt Service, as defined by the Indenture. The moneys in deposit in the Debt Service and Sinking Fund shall be applied by the Trustee to the payment of principal and interest on the Bonds.

Rebate Fund: The Trustee shall establish a Rebate Fund. Periodically while the Bonds are outstanding and upon retirement of the last Bond, the Authority will determine the sum required to be deposited in the Rebate Fund and direct the Trustee to transfer such sum from the other funds and accounts established under the Indenture. The Authority will direct the Trustee to pay to the United States of America the sums on deposit in the Rebate Fund at the times and in the amount required by the Code and all regulations promulgated thereunder. 11

Investment of Funds: Moneys held in the funds and accounts established by the Indenture shall be wholly or partially deposited and redeposited in Qualified Investments, as defined in the Indenture.

Default and Remedies: The Act which governs the Authority provides remedies to the Bondholders in the event of default or failure on the part of the Authority to fulfill its covenants under the Indenture.

Under the Indenture, in the event of any such event of default (as defined in the Indenture), the Trustee may enforce, and upon the written request of the holders of a majority in principal amount of the Bonds then outstanding accompanied by indemnity as provided in the Indenture and the consent of the Bond Insurer, shall enforce for the benefit of all Bondholders all their rights of entry, of bringing suit, action or proceeding at law or in equity and of having a receiver appointed.

Neither the Trustee nor any receiver, however, may sell, assign, mortgage or otherwise dispose of any assets of the Authority other than its right to receive Lease Rentals. For a more complete statement of rights and remedies of the Bondholders and of the limitations thereon, reference is made to the Indenture.

Modifications and Amendments: Amendments to the Indenture are permitted without consent of Bondholders for certain purposes, including but not limited to, amendments to cure any ambiguity, inconsistency or formal defect or omission, or to conform terms to changes in generally accepted accounting principles; to confer additional rights, remedies, powers, authority or security to the Trustee for the benefit of the Holders, or to subject to the pledge and lien of the Indenture additional revenues, properties or collateral; to confirm any pledge of or lien on the Revenues, to assign additional revenues or to accept additional security or instruments of future assurance; to add to the covenants, agreements and obligations of the Authority other covenants, agreements and obligations to be observed for the protection of the Holders, or to surrender or limit any right, power or authority reserved to or conferred upon the Authority; to facilitate the use of a book entry system to identify the Holder of an interest in the Bonds; to permit the Trustee to comply with any obligations imposed upon it by law; to achieve compliance with any applicable federal securities or tax laws; to make amendments to the provisions relating to arbitrage matters; to make any amendments required to secure or maintain a rating on the Bonds; to permit any other amendment which is not materially adverse to the interests of the Trustee or the Holders and which does not involve a change identified in the Indenture as requiring consents of specific Bondholders; prior to the issuance of the Bonds, to make any other changes consented to by the Bond Insurer, the Trustee and the Joint Board. Certain other modifications may be made to the Indenture, but only with consent of owners of not less than a majority in principal amount or in maturity value of outstanding Bonds issued thereunder in some instances, and only with the unanimous consent of Holders in other instances.

Unassigned Issuer Rights: Under the terms of the Indenture, the Authority has reserved the right to receive payment of any fees, costs and expenses from the Joint Board and its right to indemnification by the Joint Board. Such rights are not assigned to the Trustee.

Defeasance: Whenever all Bonds outstanding under the Indenture and all other sums due thereunder have been paid, or provision shall have been made for payment, then the rights, title and interest of the Trustee under the Indenture shall cease and the Trustee shall release and discharge the lien of the Indenture. Provision for payment of the Bonds may be made by depositing any combination of direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America with the Trustee.

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL

Under the Joint Agreement, effective July 1, 1998, (the “Joint Agreement”), the School Districts established and provided for the method of operation of the School and for the allocation of capital payments between the School Districts to pay or finance capital projects for BCAVTS including debt service and lease rental payments.

The Joint Board constitutes the governing body of the School. The Joint Operating Committee meets regularly to oversee, with the professional administration, the governance of BCAVTS. The purpose of BCAVTS is to provide vocational or technical training and education for secondary school students, and adults within the School Districts and surrounding area.

Origination Description

The Butler County Area Vocational-Technical School began operation in the fall of 1979. It currently serves over 900 students from the following Butler County school districts: Butler Area, Karns City Area, Mars Area, Moniteau, Seneca Valley, Slippery Rock Area, and South Butler County. The Butler County AVTS is a part-time occupational school that provides 15 programs of study. Programs include: Advertising Design, Air Conditioning/Heating/Electrical, Auto Body/Collision Repair, Automotive Technology, Building Construction, Carpentry, Computer Networking and Telecommunications, Cosmetology, Culinary Arts, Graphic Arts, Health Assistant, Heavy Equipment Repair, Machine Technology, Protective Services, and Welding.

Located 30 miles north of Pittsburgh, PA, the Butler County AVTS experiences excellent job placement. Students are also able to pursue post-secondary education due to the availability of many colleges, technical schools, and universities located in western Pennsylvania. Butler County has various favorable economic and social climates including heavy industry, agriculture, tourism, and service orientated operations that result in many people relocating to Butler County.

SCHOOL FINANCES

Introduction

BCAVTS budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by the Director and Business Manager and submitted to the Butler County Area Vocational-Technical School Joint Operating Committee and the School Boards for approval prior to the beginning of the fiscal year on July 1.

Financial Reporting

BCAVTS financial statements are audited annually by an independent certified public accountant, as required by State law.

A copy of the audited financial statements of the BCAVTS for the fiscal year ended June 30, 2014 is included in Appendix J.

Summary and Discussion of Financial Results

Table 1 below shows the BCAVTS General Fund Balance Sheet, Table 2 on the following page shows Changes in Fund Balance and revenues and expenditures for recent years, and the BCAVTS budget for the 2015-16 school year.

TABLE 1 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL GENERAL FUND BALANCE SHEET

Assets 2011 2012 2013 2014 Cash and Cash Equivalents...... $758,361 $652,390 $1,062,143 $716,179 Due from Other Governments ...... 37,459 25,744 34,928 47,326 Other Receivables ...... 460 10,045 7,784 23,847 Total Assets ...... $796,280 $688,179 $1,104,855 $787,352

Liabilities

Due to Agency Fund ...... $3,031 $1,075 $339 $0 Due to Other Governments ...... 400,876 341,293 735,054 355,367 Accounts Payable ...... 109,904 91,195 125,222 165,066 Accrued Salaries and Benefits ...... 177,128 195,199 205,906 202,117 Deferred Revenues ...... 105,341 59,417 38,334 64,802 Total Liabilities ...... $796,280 $688,179 $1,104,855 $787,352

Fund Balance Unassigned ...... $0 $0 $0 $0 Total Fund Balance ...... $0 $0 $0 $0

Total Liabilities and Fund Balance ...... $796,280 $688,179 $1,104,855 $787,352

Source: BCAVTS Audits.

TABLE 2 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES* (Fiscal Years Ending June 30)

Estimated Budgeted REVENUES 2011 2012 2013 2014 2015(1) 2016(2) Local Revenue ...... $2,861,780 $2,893,471 $2,776,241 $2,952,724 $3,184,827 $3,631,146 State Sources ...... 760,372 806,020 906,059 977,947 945,595 1,014,855 Federal Sources ...... 285,792 270,315 286,981 250,086 255,647 265,775 Other Sources ...... 0 0 0 0 106,561 0 TOTAL REVENUE ...... $3,907,944 $3,969,806 $3,969,281 $4,180,757 $4,492,630 $4,911,776

EXPENDITURES

Instruction ...... $2,114,094 $2,172,080 $2,209,886 $2,370,639 $2,439,722 $2,685,306 Support Services ...... 1,762,373 1,766,285 1,724,714 1,779,748 2,020,537 2,169,970 Noninstructional Services ...... 24,002 23,966 23,706 22,895 29,886 26,500 Capital Outlay ...... 0 0 3,500 0 0 0 Debt Service ...... 7,475 7,475 7,475 7,475 2,485 0 Budgetary Reserve ...... 0 0 0 0 0 30,000 TOTAL EXPENDITURES ...... $3,907,944 $3,969,806 $3,969,281 $4,180,757 $4,492,630 $4,911,776 *Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budget as adopted April 9, 2015. Source: BCAVTS Audit Reports and Budget.

TABLE 3 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL DEBT SERVICE REQUIREMENTS*

Series 2015 Year Principal Interest Total 2015-16 $0 40,403 $40,403 2016-17 195,000 234,600 429,600 2017-18 245,000 230,700 475,700 2018-19 250,000 225,800 475,800 2019-20 255,000 220,800 475,800 2020-21 255,000 215,700 470,700 2021-22 265,000 210,600 475,600 2022-23 270,000 205,300 475,300 2023-24 275,000 199,563 474,563 2024-25 285,000 193,031 478,031 2025-26 285,000 185,550 470,550 2026-27 295,000 177,713 472,713 2027-28 305,000 168,863 473,863 2028-29 315,000 159,713 474,713 2029-30 320,000 149,869 469,869 2030-31 335,000 139,869 474,869 2031-32 345,000 128,144 473,144 2032-33 355,000 116,069 471,069 2033-34 370,000 103,644 473,644 2034-35 380,000 90,694 470,694 2035-36 400,000 77,394 477,394 2036-37 410,000 62,894 472,894 2037-38 430,000 48,031 478,031 2038-39 440,000 32,444 472,444 2039-40 455,000 16,494 471,494 Total $7,735,000 3,633,878 $11,368,878 * Totals may not add due to rounding.

Future Financing

BCAVTS does not anticipate issuance of additional (non-refunding) long-term debt in the next 3 years.

LABOR RELATIONS

There are presently 44 employees of the School, including 22 teachers, 3 administrators, and 19 support personnel. The support personnel include secretaries, custodial staff, bookkeepers, clinical assistant, program development/cooperative education coordinator, technology staff, instructional aides, and the support services coordinator/assistant principal.

BCAVTS’s teachers are represented by the Butler County Vo-Tech Education Association, an affiliate of the Pennsylvania State Educational Association / National Education Association, under a contract, which expired June 30, 2014. BCAVTS is currently in negotiations to renew the contract.

Pension Program

Technical schools in Pennsylvania are required to participate in a statewide pension program administered by the State Public School Employees Retirement System (“PSERS”). All of the Technical School's full-time employees and part-time employees who work more than 80 days in a school year, and hourly employees who work over 500 hours a year, participate in the program. However, please note a recent Pennsylvania Supreme Court decision has removed the hourly de minmis requirement for part-time employees regarding participation in the program.

Beginning July 1, 1976, certain revisions were made in the pension program. The Retirement Board, previously under the Department of Education of the Commonwealth, became an independent agency. However, the program is still guaranteed by the Commonwealth. Currently, each party to the program contributes a fixed percentage of the employee's salary. Employees belonging to the Public School Employees Retirement System (“PSERS”) prior to July 22, 1983 contribute 5.25% of their salary, and employees who joined the PSERS on or after July 22, 1983 contribute 6.25% of their salary. On February 17, 2002, Governor Ridge signed Act 9 which created a new membership class that sets the employee contribution rate at 7.50% of the employee’s salary for those employees hired on or after July 1, 2001. Act 9 also provides an option for those employees hired prior to July 1, 2001 to elect a contribution rate of 6.50%, if they were hired before July 22, 1983, or 7.50% if they were hired on or after July 22, 1983. Act 120 of 2010 (“Act 120”) was passed by the General Assembly on September 1 and signed by Governor Rendell on November 23, 2010. The benefit reductions contained in this legislation will only impact individuals who become new members of PSERS on or after July 1, 2011. New members will have the option of selecting one of 2 new classes. The members selecting class T-E will contribute a base rate of 7.5% with “shared risk” contribution levels between 7.5% and 9.5% and a pension multiplier of 2.0%. Members selecting class T-F will contribute a base rate of 10.3% with shared risk contribution levels between 10.3% and 12.3% and a pension multiplier of 2.5%. In accordance with Senate Bill 1042 enacted on July 6, 2010, the employer rate was recertified at 5.64% for fiscal year 2010-11, 8.65% for fiscal year 2011-12 and 12.36% for fiscal year 2012-13. The rate for fiscal year 2013-14 has been set at 16.93% of payroll and the rate for fiscal year 2014-15 has been set at 21.40%. The employer contribution rate for fiscal year 2015-2016 will be 25.84%. The rate applies to salary and wages earned from July 1, 2015, through June 30, 2016. This rate was determined by PSERS’ actuary and reflects the rate caps established by Act 120 of 2010. The rate was certified by the PSERS Board of Trustees at its meeting on December 9, 2014. In addition, the employer contribution rate may change if pension legislation is enacted prior to June 30, 2015. The employer contribution rate for fiscal year 2015-2016 consists of 25% for pension costs and 0.84% for premium assistance payments. Please see the Public School Employee’s Retirement System website indicated below for the most recent projection of employer contribution rates.

BCAVTS and the Commonwealth are responsible for paying a portion of the employer’s share. School entities are initially responsible for paying 100% of the employer share of contributions to PSERS. The Commonwealth reimburses the employer for one-half the payment for employees. BCAVTS contributions are made on a quarterly basis and employee contributions are deducted monthly for each paycheck and remitted quarterly. Recent BCAVTS payments have been as follows:

2009-10 $94,936 2010-11 $102,154 2011-12 $160,312 2012-13 $229,606 2013-14 $319,685 2014-15 $409,948

BCAVTS is current in all payments. The PSERS complete report is available on the PSERS website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

The School District operates a single-employer defined benefit healthcare plan. All employees are eligible for Act 110/43 benefit upon retirement with 30 years of PSERS service or upon superannuation retirement (age 60 with 30 years of service, age 62 with 1 year of service or 35 years of service regardless of age.) Retired employees are allowed to continue coverage for themselves and their dependents in the School District’s group health plan until the retired employee reaches Medicare eligibility. In order to obtain coverage, retired employees must provide payment equal to the premium determined for the purposes of COBRA.

PSERS premium assistance amount is an amount up to $100 per month. To be eligible to receive premium assistance, retiree must have 24.5 years of PSERS service or have retired on or after age 62 with at least 15 years of PSERS service.

Benefits are determined by contractual agreement between the School District and each eligible class of employees. The School District finances the plan on a pay-as-you-go basis and includes a provision for its costs in each year’s annual budget.

The School District’s annual other post-employment benefit cost (expense) is calculated based on the annual required contribution of the employer (ARC), amount actuarially determined in accordance with the parameters of GASB Statement No. 45.

The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal coast each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The School District’s annual OPEB cost for the current year is as follows:

Annual Required Contribution $3,554,541 Interest on net OPEB obligation 178,462 Adjustment to annual required contribution (243,468)

Annual OPEB cost 3,489,535

Contributions made (2,770,457)

Increase in net OPEB obligation 719,078

Net OPEB obligation - beginning of year 3,965,821 Net OPEB obligation - end of year $4,684,899

A-12

The School District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the year ended June 30, 2014 were as follows:

Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2012 $3,420,273 81.6% $3,297,392 6/30/2013 3,500,492 80.9% 3,965,821 6/30/2014 3,489,535 79.4% 4,684,899

As of September 1, 2013, the most recent actuarial valuation date, the plan was 0% funded. The actuarial accrued liability was $33,591,714, and the actuarial value of the assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $33,591,714. The covered payroll was $39,124,393, and the ratio of the UAAL to the covered payroll was 85.9%. Because the plan is unfunded it does not issue a stand-alone financial report.

CONTINUING DISCLOSURE UNDERTAKING

Existing Continuing Disclosure Filing History

The School District has previously entered into Continuing Disclosure Agreements with respect to each one of its previously issued bond issues that are currently outstanding. The School District’s filing history of its annual financial and operating information during the past five (5) years is outlined in the table below.

Fiscal Year Filing Financial Statements Budget Operating Data Deadline Filing EMMA ID Filing EMMA ID Filing EMMA ID Ending [1] Date [2] Date [2] Date [2] 6/30/2010 12/27/2010 12/16/2010 EP423249 12/16/2010 EP423249 12/16/2010 EP423249

6/30/2011 12/27/2011 12/16/2011 ER464629 12/16/2011 ER464629 12/16/2011 ER464629

6/30/2012 12/27/2012 12/18/2012 ER529457 12/18/2012 ER529457 12/18/2012 ER529457

6/30/2013 12/27/2013 12/9/2013 EA484520 12/9/2013 EA484520 12/9/2013 EA484520

6/30/2014 12/27/2014 12/17/2014 ER658764 12/17/2014 ER658764 12/17/2014 ER658764

Notes

[1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

[2] Submission ID is the EMMA Submission ID for each filing. To access a filing, insert the Submission ID to the end of the web address below: http://emma.msrb.org/ContinuingDisclosureView/ContinuingDisclosureDetails.aspx?submissionId=

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2010 through June 30, 2014, the School District filed the annual financial and operating information in a timely fashion.

Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s

Some of the School District’s bond issues that have been outstanding during the past five (5) years have been insured by various bond insurance companies that have received rating downgrades and upgrades by both S&P and Moody’s. This information was publicly available from widely accepted information sources at the time of their respective downgrades or upgrades.

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APPENDIX B

KARNS CITY SCHOOL DISTRICT Butler County, Pennsylvania

Descriptive, Financial and Economic Information

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THE SCHOOL DISTRICT

Introduction

Karns City Area School District, encompassing an area of 125 square miles, is comprised of the Boroughs of Bruin, Chicora, Fairview, Karns City and Petrolia and the Townships of Donegal, Fairview and Parker, all situated in the northeastern corner of Butler County, Pennsylvania. The School District also serves the Townships of Brady’s Bend, Perry and Sugarcreek, which are located in the northwestern corner of Armstrong County, Pennsylvania. The Borough of East Brady and the Township of Brady are located in the southwestern corner of Clarion County. The School District is located approximately 60 miles north of Pittsburgh, Pennsylvania and 90 miles south of Erie, Pennsylvania.

Administration

The School District is a third class school district (school districts within the Commonwealth are classified as first, second, third and fourth class according to population) and operates under and pursuant to the School Code, as amended and supplemented. The School District is governed by a nine member Board of School Directors, comprised of residents of the School District who are elected on a staggered basis for four-year terms of office. The daily operations and management of the School District are overseen by the Superintendent of Schools; budget preparation and control are overseen by the Director of Business Services.

School Facilities

The School District presently operates two elementary schools and a senior high school, all as described in the following table.

TABLE 1 KARNS CITY AREA SCHOOL DISTICT SCHOOL FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2014-15

Building Date Date(s) Grades Capacity Enrollment Elementary: Bruin Elementary ...... 1900 1966 K-6 375 ** Chicora Elementary ...... 1960 1995 K-6 711 497 Sugarcreek Elementary ...... 1953 1994 K-6 543 278

Secondary: Senior High School ...... 1962 1995 7-12 1040 777 **Closed 6/30/2012 Source: School District Officials.

Enrollment Trends

The following Table 2 presents recent trends in school enrollment and projections of enrollment for the next four years, as prepared by the School District's administrative officials.

TABLE 2 KARNS CITY AREA SCHOOL DISTICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School (K-6) (7-12) School (K-6) (7-12) Year Elementary Secondary Total Year Elementary Secondary Total 2010-11 842 767 1,609 2015-16 712 695 1,407 2011-12 812 773 1,585 2016-17 680 679 1,359 2012-13 790 763 1,553 2017-18 652 661 1,313 2013-14 763 770 1,533 2018-19 631 630 1,261 2014-15 775 777 1,552

Source: Actual/Projected Enrollments, School District Officials.

B-1

SCHOOL DISTRICT FINANCES

Introduction

Financial Reporting

The financial statements of the School District are prepared in accordance with accounting principles generally accepted in the United States of America. The School District’s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide and proprietary fund financial statements apply Financial Accounting Standards Board pronouncements and Accounting Principles Board opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The government wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Its financial statements are audited by an independent certified public accountant, as required by Commonwealth law. Cypher & Cypher, Certified Public Accountants, Canonsburg, Pennsylvania, currently serves as the School District Auditor.

B-2

Summary and Discussion of Financial Results

TABLE 3 KARNS CITY AREA SCHOOL DISTICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Fiscal Years Ending June 30)

2011 2012 2013 2014 ASSETS Cash and Cash Equivalents ...... $3,639,405 $5,704,238 $4,146,250 $7,221,771 Investments ...... 1,438,705 0 2,203,822 0 Taxes Receivable ...... 118,280 126,207 146,630 64,024 Due from Other Government ...... 357,819 512,312 451,471 286,139 State Revenue Receivable ...... 0 0 356,439 Prepaid Expenses/Expenditures ...... 164,548 172,901 182,703 200,107 TOTAL ASSETS ...... $5,718,757 $6,515,658 $7,130,876 $8,128,480

LIABILITIES Due to Other Funds ...... $0 $0 $0 $64,290 Accounts Payable ...... 99,572 108,985 108,362 243,819 Accrued Salaries and Benefits ...... 1,443,498 1,501,460 1,638,385 2,199,585 Other Current Liabilities ...... 0 0 0 TOTAL LIABILITIES ...... $1,543,070 $1,610,445 $1,746,747 $2,507,694

FUND EQUITIES Nonspendable Fund Balance ...... $164,548 $172,901 $182,703 $200,107 Committed Fund Balance ...... 3,405,000 0 0 Assigned Fund Balance ...... 3,405,000 4,175,571 4,160,288 Unassigned Fund Balance ...... 606,139 1,327,312 1,025,855 1,260,391 TOTAL FUND EQUITIES ...... $4,175,687 $4,905,213 $5,384,129 $5,620,786

TOTAL LIABILITIES AND FUND EQUITIES ...... $5,718,757 $6,515,658 $7,130,876 $8,128,480

Source: School District Annual Financial Reports.

B-3

TABLE 4 KARNS CITY AREA SCHOOL DISTICT SUMMARY OF CHANGES IN FUND BALANCE* (Fiscal Years ending June 30)

Actual Estimated Budget 2011 2012 2013 2014 2015(1) 2016(2) Beginning Fund Balance $3,254,992 $4,175,687 $4,905,213 $5,384,129 $5,620,785 $5,756,861 Revenues over (under) Expenditure 920,695 729,527 478,916 236,656 136,076 (4,200,288) Prior Period Adjustment Fund Transfers 0 0 0 0 Ending Fund Balance $4,175,687 $4,905,214 $5,384,129 $5,620,785 $5,756,861 $1,556,573

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 15, 2015. Source: School District Annual Financial Reports and Budget.

Revenue Sources

The School District received $21,499,905 (estimated) in total revenue for its 2014-15 fiscal year and budgeted revenue of $22,569,214 for its 2015-16 fiscal year. Local revenue sources increased as a share of total revenue in the past five years, from 28.5% in 2010-11 to an estimated 32.3% in 2014-15. Revenue from Commonwealth sources increased as a share of total revenue in the past five years, from 61.5% in 2010-11 to an estimated 67.7% in 2014-15. Federal and other sources decreased as a share of total revenue in the past five years, from 10.0% in 2010-11 to an estimated 0.0% in 2014-15.

B-4

TABLE 5 KARNS CITY AREA SCHOOL DISTICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (For years ending June 30)

Estimated Budget REVENUE: 2011 2012 2013 2014 2015(1) 2016(1) Local Sources: Real Estate Taxes (Current) $4,057,926 $4,113,818 $4,401,607 $4,549,570 $4,863,944 $5,122,298 Public Utility Realty Tax 7,513 7,341 7,185 6,905 7,459 7,459 Payments in Lieu of Current Taxes/ State & Local 6,645 6,645 6,645 6,645 6,645 6,644 Per Capita (Sec. 679) Tax 26,779 26,800 26,522 25,414 24,426 25,580 Total Act 511 Taxes 782,324 930,751 1,107,697 962,886 972,584 963,580 Delinquent Taxes 400,044 361,393 356,102 350,616 441,940 370,000 Earnings on Investments 11,898 4,781 1,510 6,246 12,744 10,000 Revenue from Student Activities 16,860 32,905 32,305 34,996 41,850 35,000 Federal Rev. Rcvd. from Other PA Public Schools 602,356 0 627,436 0 0 520,000 Federal IDEA Pass Through Revenue 11,846 0 0 575,462 477,151 0 Rentals 21,529 491,861 5,801 6,104 7,564 5,800 Contributions and Donations from Private Sources 5,299 10,400 2,020 3,371 2,499 0 Tuition 7,985 2,500 21,445 19,133 18,983 20,000 Receipts from Other LEAS in PA - Education 20,414 20,070 26 0 0 0 Refunds of Prior Years' Expenditures 9,665 0 0 133 48,220 0 All Other Local Revenues Not Specified 2,382 -238 0 0 14,585 0 Total Local Sources $5,991,463 $6,009,027 $6,596,302 $6,547,482 $6,940,595 $7,086,361 State Sources: Basic Instructional Subsidy $8,091,513 $9,271,554 $9,268,461 $9,397,836 $9,397,819 $9,996,706 Charter Schools 134,027 0 0 0 0 Tuition-Orphans & Children in Private Homes 0 72,314 43,037 29,740 17,038 35,000 Special Education 1,120,020 1,120,020 1,120,020 1,120,020 1,134,582 1,200,006 Transportation 1,264,678 1,248,648 1,291,232 1,248,998 1,188,895 1,179,230 Rentals and Sinking Fund Payments 575,727 557,503 559,520 557,382 585,968 558,145 Health Services 30,700 29,337 28,862 28,618 0 27,500 State Property Tax Reduction Allocation 594,062 594,038 594,019 594,106 593,805 593,761 PA Accountability Grant 333,646 131,085 131,085 131,085 250,261 0 Revenue from Social Security 432,624 415,284 412,919 437,128 441,433 433,697 Revenue from Retirement Contributions 329,363 477,240 687,851 963,089 941,916 1,418,808 Other Sources 5,280 2,415 0 7,350 1,000 0 Total State Sources $12,911,639 $13,919,438 $14,137,006 $14,515,352 $14,552,716 $15,442,853 Federal Sources: Total Federal Sources $1,898,281 $117,081 $3,070 $76,042 $6,594 $40,000 Other Sources: Total Other Sources $199,213 $0 $0 $7,463 $0 $0 TOTAL REVENUE $21,000,596 $20,045,546 $20,736,378 $21,146,339 $21,499,905 $22,569,214

EXPENDITURES: Instruction $12,057,527 $11,796,174 $12,256,817 $12,519,944 $12,935,281 $14,119,611 Pupil Personnel 481,625 522,455 614,482 658,940 670,714 752,026 Instructional Staff 479,711 364,291 266,115 277,980 422,311 938,680 Administration 1,293,829 1,237,263 1,350,004 1,354,752 1,380,990 1,576,835 Pupil Health 261,321 277,668 302,455 275,243 251,490 318,809 Business 134,473 145,795 170,177 178,962 203,161 277,492 Operation and Maintenance 1,858,056 1,611,926 1,775,924 1,969,121 2,002,976 2,377,568 Student Transportation 1,712,346 1,806,210 1,823,274 1,883,164 1,720,129 2,006,000 Other Support 13,943 14,020 13,906 13,753 13,724 15,000 Operation of Noninstructional Services 411,919 386,372 400,142 438,127 617,039 510,757 Fac., Acq., Construction & Improvements 86,384 62,809 232,405 244,431 84,248 159,000 Debt Service 1,259,385 1,064,195 1,019,898 1,019,401 1,060,115 1,080,000 Refund of Prior Receipts 269 200 0 656 0 0 Fund Transfers 29,111 26,641 31,862 75,209 0 43,185 Other Expenditures/Financing Uses 2 0 1 0 1,650 2,594,539 TOTAL EXPENDITURES $20,079,901 $19,316,019 $20,257,462 $20,909,683 $21,363,828 $26,769,502 SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES $920,695 $729,527 $478,916 $236,656 $136,076 ($4,200,288)

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 15, 2015. Source: School District Annual Financial Reports and Budget.

B-5

Tax Levy Trends

Table 6 which follows shows the recent trend of tax rates levied by the School District. Table 7 shows the comparative trend of real property tax rates for the municipalities served by the School District and Butler County, Armstrong County and Clarion County.

TABLE 6

KARNS CITY AREA SCHOOL DISTICT TAX RATES

Armstrong County Butler County Clarion County Real Estate Wage & Income Local Real Estate Real Estate Real Estate Per Capita Transfer Tax Tax Services Tax (Mills) (Mills) (Mills) ($)(1) (%) (%) ($) 2011 -12 35.52 77.24 41.60 10.00 1.00 0.50 5.00 2012-13 39.23 80.80 36.76 10.00 1.00 0.50 5.00 2013-14 40.28 82.48 38.35 10.00 1.00 0.50 5.00 2014-15 41.44 84.66 42.28 10.00 1.00 0.50 5.00 2015-16 42.29 87.10 42.39 10.00 1.00 0.50 5.00 (1)$5.00 under Act 511 and $5.00 under Section 679 of the Public School Code. Source: School District Officials.

TABLE 7 KARNS CITY AREA SCHOOL DISTICT COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2011 2012 2013 2014 2015 Butler County ...... 23.6280 24.6280 24.6280 24.6280 24.6280 Karns City Borough ...... 9.0600 9.0600 9.0600 9.0600 9.0600 Chicora Borough ...... 6.7500 6.7500 6.7500 6.7500 6.7500 Bruin Borough ...... 13.8800 13.8800 13.8800 13.8800 13.8800 Fairview Borough ...... 9.0000 9.0000 9.0000 9.0000 9.0000 Petrolia Borough ...... 9.5000 9.5000 9.5000 9.5000 9.5000 Fairview Township ...... 4.7500 4.7500 4.7500 4.7500 4.7500 Parker Township ...... 7.1300 7.1300 7.1300 7.1300 8.1300 Donegal Township ...... 2.2500 2.2500 2.2500 2.2500 2.2500

Armstrong County ...... 15.5000 15.5000 17.5000 17.5000 17.5000 Brady's Bend Township ...... 2.6600 4.0000 4.0000 4.0000 4.0000 Sugarcreek Township ...... 2.0000 4.0000 4.0000 4.0000 4.0000 Perry Township ...... 7.0000 4.0000 4.0000 5.0000 7.0000

Clarion County...... 21.0000 21.0000 22.0000 22.0000 22.0000 Brady Township...... 2.0250 2.0250 3.0250 3.0250 3.0250 East Brady Borough ...... 17.0000 17.0000 17.0000 17.0000 20.0000

Source: School District Officials.

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Real Property Tax

The real property tax (excluding delinquent collections) produced an estimated $4,863,944 in 2014-15, approximately 22.6% of overall revenue. The tax is levied on July 1 of each year. Taxpayers who remit prior to October 1 receive a 2% discount, and those who remit after November 30 are assessed a 10% penalty.

TABLE 8 KARNS CITY AREA SCHOOL DISTICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Value Value Ratio 2010 -11 ...... $394,967,532 $89,226,956 22.59% 2011-12 ...... 399,365,206 90,164,407 22.58% 2012-13 ...... 411,496,898 90,796,962 22.07% 2013-14 ...... 415,426,352 91,511,355 22.03% 2014-15 ...... 453,141,392 93,597,139 20.66%

Compound Average Annual Percentage Change ...... 2.79% 0.96%

Source: Pennsylvania State Tax Equalization Board.

TABLE 9 KARNS CITY AREA SCHOOL DISTICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2013 2013 2014 2014 Market Assessed Market Assessed Value Value Value Value School District ...... $415,426,352 $91,511,355 $453,141,392 $93,597,139

Butler County ...... 11,837,083,626 1,700,924,919 12,877,455,786 1,724,861,456 Karns City Borough ...... 6,800,219 1,369,994 7,025,593 1,374,854 Chicora Borough ...... 28,384,525 5,395,920 28,807,147 5,376,337 Bruin Borough ...... 9,393,962 2,120,012 8,943,670 2,134,732 Fairview Borough ...... 4,323,900 723,489 4,642,597 723,489 Petrolia Borough ...... 7,443,209 1,454,422 8,504,346 1,443,912 Fairview Township ...... 93,762,628 14,322,958 105,900,180 14,406,062 Parker Township ...... 28,975,415 4,956,788 29,708,122 4,966,248 Donegal Township ...... 92,476,714 14,361,807 100,131,822 14,510,033

Armstrong County ...... 2,614,920,016 953,968,486 2,739,292,214 975,946,692 Brady's Bend Township ...... 37,542,472 12,903,946 40,445,629 13,433,412 Sugarcreek Township ...... 54,473,145 18,722,021 62,627,243 19,531,201 Perry Township ...... 29,642,937 8,163,294 31,056,294 8,409,067

Clarion County...... 1,581,777,981 401,266,142 1,580,371,836 403,880,889 Brady Township...... 2,970,224 752,365 3,666,333 785,298 East Brady Borough ...... 19,237,001 6,264,339 21,682,416 6,502,494 Source: Pennsylvania State Tax Equalization Board.

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TABLE 10 KARNS CITY AREA SCHOOL DISTICT ASSESSMENT BY LAND USE

2010 2011 2012 2013 2014 Residential ...... $59,909,052 $59,457,958 $59,831,373 $60,362,044 $61,250,884 Lots ...... 1,547,404 1,778,864 1,820,667 $1,895,038 1,627,350 Industrial ...... 1,411,531 1,426,441 1,426,441 1,426,441 1,433,756 Commercial ...... 6,575,173 7,598,444 7,552,982 7,577,824 7,376,240 Agriculture ...... 15,703,209 16,171,264 16,485,068 16,627,613 17,667,028 Minerals ...... 748,471 770,549 730,417 727,828 775,197 Land ...... 3,332,116 2,960,887 2,950,014 2,894,567 3,466,684 Total ...... $89,226,956 $90,164,407 $90,796,962 $91,511,355 $93,597,139

Source: Pennsylvania State Tax Equalization Board.

TABLE 11 KARNS CITY AREA SCHOOL DISTICT REAL PROPERTY TAX COLLECTION DATA

Gross Current Current Year Total Total School Adjusted Collections Collections Collections Collections Year Levy Amount As a Percent Amount(1) As a Percent 2010-11 ...... $4,213,711 $4,057,926 96.30% $4,457,970 105.80% 2011-12 ...... 4,483,204 4,113,818 91.76% 4,546,528 101.41% 2012-13 ...... 4,799,411 4,401,607 91.71% 4,757,709 99.13% 2013-14 ...... 4,976,784 4,549,570 91.42% 4,900,186 98.46% 2014-15 ...... 5,242,634 4,863,944 92.78% 5,301,319 101.12% (1)Includes delinquent real estate only. Note: Beginning in 2008-09 the amount of the Adjusted Levy is reduced by the amount of the Homestead/Farmstead Exemptions. The Adjusted levy shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth. Source: School District Officials.

TABLE 12 KARNS CITY AREA SCHOOL DISTICT TEN LARGEST REAL PROPERTY TAXPAYERS, 2015-16

2015 Assessed

Owner Property/Business Value Chicora Medical Center Lot Commercial Building $808,664 Sonneborn Inc Industrial Building 397,741 Specialty Acquisition Inc Industrial Building 328,666 Calumet Penreco LLC Industrial Building 219,006 AHT Inc Industrial Building 164,051 Sonneborn Inc Industrial Building 157,797 Realty Income Properties Lot Commercial Building 141,890 Chicora Commons Apartment Building 141,480 Chicora DPP V LLC Lot House Under 10 Acres 120,260 Calumet Penreco LLC Lot Commercial Building 106,399 $2,585,954

Source: School District Officials.

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Other Taxes

Under Act 511, the School District collected an estimated $972,584 other taxes in 2014-15. Among the taxes authorized by Act 511, the Earned Income Tax, Local Services Tax, Per Capita Taxes, and Real Estate Transfer Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property was $5,437,697.

Per Capita Taxes. A tax of $10.00 ($5.00 under Act 511 and $5.00 under the School Code) is levied on each resident over 18 years old and the School District yielded an estimated $48,853 in 2014-15 or less than one percent of the School District’s total revenue.

Earned Income Tax. A tax of 0.5% is levied on the earned income of residents. In 2014-15 the collected portion of this tax was and estimated $911,716 or 7.2 percent of the School District’s total revenue.

Real Estate Transfer. A tax of one percent of the value of real estate transfers yielded an estimated $88,522 in 2014-15 or less than one percent of the School District’s total revenue.

Local Services Tax (formerly aka Occupational Privilege Tax and Emergency and Municipal Services Tax). A tax of $52.00 is levied on each person with an occupation (shared with those participating municipalities). In 2014-15 the School District’s share of the collected portion of this tax yielded and estimated $11,552 or less than one percent of the School District’s total revenue.

DEBT AND DEBT LIMITS

Debt Statement

Table 13 shows the outstanding debt of the School District as of August 1, 2015, including the issuance of the Bonds.

TABLE 13 KARNS CITY AREA SCHOOL DISTICT DEBT STATEMENT* (As of August 1, 2015)

Gross

NONELECTORAL DEBT Outstanding General Obligation Bonds, Series B of 1995 (last maturity 2017) ...... $417,274 TOTAL NONELECTORAL DEBT ...... $417,274

TOTAL LEASE RENTAL DEBT ...... $0

TOTAL PRINCIPAL OF DIRECT DEBT ...... $417,274

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Debt Limit and Remaining Borrowing Capacity

Total Revenues for 2012-13...... $20,176,859 Total Revenues for 2013-14...... 20,581,493 Total Revenues for 2014-15 (est.) ...... 22,011,069 Total ...... $62,769,421

Annual Arithmetic Average (Borrowing Base)...... $20,923,140

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $47,077,066 $417,274 $46,659,792

*Does not reflect credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by Commonwealth aid.

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Future Financing

The School District does not currently anticipate issuing additional long-term debt.

LABOR RELATIONS

School District Employees

There are two unions representing employees of the School District. The Karns City Area Education Association represents teachers and guidance counselors and has a total membership of 113. The current contract expires June 30, 2019.

The Karns City Area Education Service Personnel Association represents maintenance, cafeteria, secretaries, clerks, nurse technicians, paraprofessionals and noontime supervisors, and has a total membership of 82. The current contract expires June 30, 2020.

The union has not engaged in any work stoppages in the School District.

Pension Program

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2010-11 $558,323 2011-12 $793,010 2012-13 $1,038,111 2013-14 $1,392,006 2014-15 $1,941,786 2015-16 (budgeted) $2,579,625

The School District is current in all payments. The PSERS complete report is available on the PSERS website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

The District maintains a single-employer defined benefit healthcare plan. The plan provides health insurance for eligible retirees and their spouses through the District's health insurance plan.

Funding Policy. The contribution requirements of plan members and the District are established and may be amended by the Board of School Directors. The Annual Required Contribution for the year ended June 30, 2014 was not made by the District.

Funded Status and Funding Progress. As of July 11 2011, the actuarial accrued liability for benefits was $5,086,142, all of which was unfunded. The covered payroll was $8,152,620 and the ratio of the unfunded actuarial accrued liability to the covered payroll was 62.39%. The District has set aside funds in an internal service fund for retirement obligations totaling $1,101,828.

CONTINUING DISCLOSURE UNDERTAKING

Existing Continuing Disclosure Filing History

Fiscal Year Filing Financial Statements Budget Operating Data Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2] 6/30/2010 12/27/2010 2/21/2011 EP432533 11/12/2015 ES605010 2/21/2011 EP432533

6/30/2011 12/27/2011 2/15/2012 ER492153 11/12/2015 ES605010 Not Required

6/30/2012 12/27/2012 3/1/2013 ER539672 11/12/2015 ES605010 Not Required

6/30/2013 12/27/2013 11/12/2015 ES605023 11/12/2015 ES605014 Not Required

6/30/2014 12/27/2014 11/12/2015 ES605023 11/12/2015 ES605014 Not Required

Notes [1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2010, the School District filed audited financial statements and operating data on February 21, 2011 and the budget on November 12, 2015.

For fiscal year ending June 30, 2011, the School District filed the audited financial statements on February 15, 2012 and the budget on November 12, 2015.

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For fiscal year ending June 30, 2012, the School District filed the audited financial statements on March 1, 2013 and the budget on November 12, 2015.

For fiscal year ending June 30, 2013, the School District filed the audited financial statements and budget on November 12, 2015.

For fiscal year ending June 30, 2014, the School District filed the audited financial statements and budget on November 12, 2015.

Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s

Future Continuing Disclosure Compliance

The School District has conducted a thorough review of its continuing disclosure obligations and submissions. Upon discovering any inadvertent omissions with respect to these filings, the School District, to the best of its knowledge, has attempted to bring its continuing disclosure filings up to date.

In an effort to augment the School District’s procedures and policies to maintain future compliance, the School District has taken additional steps intended to assure future compliance with its Continuing Disclosure Agreements. These steps include implementing the MSRB’s EMMA’s internal notification system whereby the School District will receive timely email reminders a month in advance for all of the School District’s annual disclosure filings and coordinating with the School District’s financial advisor to ensure all disclosure obligations have been made on a timely basis and in all material respects.

A member of the School District’s business office will be responsible for ensuring ongoing continuing disclosure compliance. Members of the School District’s business office will make an effort to participate in any ongoing continuing education regarding continuing disclosure undertaking if offered by local groups or affiliated organizations such as MSRB, PASBO or GFOA. The School District may communicate with its financial advisor, underwriter(s), bond counsel, or solicitor regarding any questions or concerns regarding ongoing continuing disclosure compliance. The School District may also communicate with its local auditor and advise of the School District’s need for financial statements in a timely manner. In the event audited financial statements are not available by the filing deadline, the School District will file to EMMA, if available, its State Form PDE-2057 Annual Financial Report as an interim filing until such audited financial statements are available. Some of the operating data requirements may be found contained within the School District’s financial statements or budget filing and may not be filed explicitly by themselves.

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APPENDIX C

MARS AREA SCHOOL DISTRICT Butler County, Pennsylvania

Descriptive, Financial and Economic Information

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THE SCHOOL DISTRICT

Introduction

The Mars Area School District, Butler County, Pennsylvania (the “School District”) is located approximately 15 miles north of the City of Pittsburgh, Pennsylvania and 8 miles southwest of the City of Butler, Pennsylvania. The School District is located in the southwestern portion of Butler County, Pennsylvania and is bordered to the north by Butler Area School District, to the south by Allegheny County border, the east by the South Butler County School District, and to the west by the Seneca Valley School District. The School District is comprised of the Townships of Adams and Middlesex and the Boroughs of Mars and Valencia (collectively, the “Component Municipalities”). The Component Municipalities of the School District encompass a combined land area of 47.20 square miles, which represents slightly less than 6% of the total land area of Butler County of 789 square miles.

Administration

The School District is governed by a nine member Board of School Directors (the “School Board”), elected for four-year terms. The superintendent is the chief administrative officer of the School District, with overall responsibility for all aspects of operations, including education and finance. The business manager is responsible for budget and financial operations. Both of these officials are selected by the School Board.

School Facilities

The School District presently operates three elementary schools, one middle school and one high school, all as described on the following table. TABLE 1

MARS AREA SCHOOL DISTRICT SCHOOL FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2014-15 Building Date Date(s) Grades Capacity Enrollment Elementary: Mars Primary Center 1951; 1957 1970, 1984 K- 1 795 440 1992, 1994 Mars Elementary School 2000 2011 2- 4 1759 736 Mars Centennial School 2007 2011 5-6 1503 529

Secondary: Mars Area Middle School 1971 1994, 2002 7- 8 990 511 Mars Area Senior High School 1960 1985, 1986, 1992 9-12 1,443 1,049 1999, 2004, 2010

Source: School District Officials.

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Enrollment Trends

The following Table 2 presents recent trends in school enrollment for and projections of enrollment for the next five years.

TABLE 2 MARS AREA SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School School Year Elementary Secondary Total Year Elementary Secondary Total 2010-11 1,672 1,490 3,162 2015-16 1,838 1,644 3,482 2011-12 1,687 1,474 3,161 2016-17 1,828 1,684 3,512 2012-13 1,655 1,582 3,237 2017-18 1,836 1,696 3,532 2013-14 1,707 1,570 3,277 2018-19 1,789 1,732 3,521 2014-15 1,705 1,560 3,265 2019-20 1,731 1,824 3,555

Source: School District officials.

SCHOOL DISTRICT FINANCES

Introduction

The School District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by the Superintendent and Business Manager and submitted to the School Board for approval prior to the beginning of the fiscal year on July 1.

Financial Reporting

The School District has organized its accounts on the basis of funds or groups of funds, each of which is a separate accounting entity. It maintains a General Fund for instructional, operation and administrative expenses, a Food Service Fund, and various school activity funds. Federal funds are appropriated by the School Board during the fiscal year and grant commitments and project approvals are received. The School District keeps the books and prepares the financial reports for the General Fund according to a modified accrual basis of accounting. Major accrual items are payrolls, payroll taxes and pension fund contributions payable, loans receivable from other funds, and revenues receivable from other governmental units. Taxes are credited when received. The School District financial statements are audited annually by independent certified public accountants, as required by State law. The firm of Hosack, Specht, Muetzel & Wood LLP, Pittsburgh, Pennsylvania, serves as the School District Auditor.

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Summary and Discussion of Financial Results

TABLE 3 MARS AREA SCHOOL DISTRICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Years ending June 30)

ASSETS 2011 2012 2013 2014 Cash and Investments ...... $6,410,072 $6,688,056 $8,680,532 $8,866,772 Taxes Receivable ...... 1,157,651 1,423,228 1,301,701 931,734 Interfund Receivable ...... 33,571 0 739,266 663,000 Intergovernmental Receivable ...... 791,006 996,453 0 1,001,729 Other Receivables ...... 54,146 39,129 18,931 6,991 Other Current Assets ...... 0 11,612 900 4,621 TOTAL ASSETS ...... $8,446,446 $9,158,478 $10,741,330 $11,474,847

LIABILITIES Interfund Payables ...... $18,610 $271,834 $103,464 $84,252 Accounts Payables ...... 1,169,054 1,321,297 1,778,581 1,948,306 Accrued Salaries and Benefits ...... 1,229,013 1,229,913 1,339,417 1,619,429 Payroll Deductions and Withholdings ..... 0 0 0 Deferred Revenue ...... 277,220 417,400 431,054 426,259 Other ...... 24,164 43,728 101,628 30,487 TOTAL LIABILITIES ...... $2,718,061 $3,284,172 $3,754,144 $4,108,733

FUND EQUITIES Committed Fund Balance ...... $2,000,000 $0 $0 $0 Assigned Fund Balance ...... $15,685 $2,007,298 $2,007,260 $2,006,942 Unassigned Fund Balance ...... 3,712,700 3,867,008 4,979,926 5,359,172 TOTAL FUND EQUITIES ...... $5,728,385 $5,874,306 $6,987,186 $7,366,114

TOTAL LIABILITIES AND FUND EQUITIES ...... $8,446,446 $9,158,478 $10,741,330 $11,474,847

Source: School District Annual Financial Reports

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TABLE 4 MARS AREA SCHOOL DISTRICT GENERAL FUND SUMMARY OF CHANGES IN FUND BALANCE*

Actual Estimated Budgeted 2011 2012 2013 2014 2015(1) 2016(2) Beginning Fund Balance ...... $5,507,113 $5,728,386 $5,874,306 $6,987,187 $7,366,118 $7,222,118 Surplus (Deficit) of Revenue over Expenditures ...... 221,273 145,918 1,112,880 378,931 (144,000) (1,760,283) Other ...... 0 2 0 0 0 0 Ending Fund Balance ...... $5,728,386 $5,874,306 $6,987,186 $7,366,118 $7,222,118 $5,461,835

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 9, 2015. Source: School District Annual Financial Reports and Budget.

Revenue

The School District received $42,057,000 (estimated) in total revenue for its 2014-15 fiscal year and budgeted revenue of $43,533,077 for its 2015-16 fiscal year. Local revenue sources increased as a share of total revenue in the past five years, from 70.1% in 2010-11 to an estimated 71.8% in 2014-15. Revenue from Commonwealth sources increased as a share of total revenue in the past five years, from 26.9% in 2010-11 to an estimated 28.1% in 2014-15. Federal and other sources decreased as a share of total revenue in the past five years, from 3.0% in 2010-11 to an estimated 0.0% in 2014-15.

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TABLE 5 MARS AREA SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (For years ending June 30)

Actual Estimated Budget REVENUE: 2011 2012 2013 2014 2015(1) 2016(2) Local Sources: Real Estate Taxes $19,879,921 $20,494,763 $21,245,244 $21,542,938 $22,334,000 $23,046,000 Interim Taxes 281,515 278,623 331,141 354,932 372,000 350,000 Public Utility Realty Tax 33,486 33,360 34,110 32,486 34,000 35,000 Payment in Lieu of Taxes 17,000 7,500 5,000 358,006 335,000 328,000 Total Act 511 Taxes 3,921,115 4,030,640 5,102,435 5,302,771 5,748,000 5,780,000 Delinquency on Taxes Levied 850,647 755,315 690,440 680,801 432,000 665,000 Earnings from Investments 46,362 23,432 16,805 21,455 15,000 17,000 Revenue from Local Governments 4,000 2,502 0 0 0 0 Revenue from Student Activities 86,873 202,163 241,588 291,761 87,000 282,000 Federal Revenue Received 407,534 447,496 431,737 471,095 504,000 475,000 Rentals 130,960 134,757 122,750 110,357 105,000 105,000 Tuition 11,821 23,887 41,607 61,517 23,000 25,000 Receipts from Other LEAS in PA 18,988 25,853 19,863 3,070 0 0 Refunds from Prior Years 21,607 41,139 0 30,855 0 0 All Other Local Revs. Not Specified 6,654 64,936 7,850 22,887 222,000 50,000 Total Local Sources $25,718,483 $26,566,366 $28,290,572 $29,284,932 $30,211,000 $31,158,000 State Sources: Basic Instructional Subsidy $4,869,020 $5,598,302 $5,598,079 $5,709,858 $5,699,000 $5,709,000 Charter Schools 126,974 0 0 0 Tuition for Children in Prvt.Homes 5,082 22,110 46,944 32,745 10,000 6,000 Special Education 1,182,810 1,187,043 1,185,764 1,158,757 1,156,000 1,160,000 Transportation 910,101 998,844 979,952 994,458 984,000 985,000 Rental and Sinking Fund Payments 1,002,954 854,618 884,395 885,313 875,000 860,000 Health Services 62,226 63,049 62,752 63,229 63,000 63,000 State Property Tax Reduc. Allocation 321,687 321,697 321,710 321,734 322,000 0 Supplemental Reimbursements 34,247 0 0 0 0 0 Extra Grants/PA Accountability Grants 213,617 83,927 83,927 83,927 186,000 0 Classrooms for the Future 25,000 0 0 0 0 0 Revenue for Social Security 637,136 612,383 606,054 630,749 676,000 710,000 Revenue for Retirement 463,610 687,891 969,863 1,397,228 1,860,000 2,353,600 Other 0 0 0 0 0 0 Total State Sources $9,854,464 $10,429,866 $10,739,439 $11,277,997 $11,831,000 $12,360,077 Total Federal Sources $1,091,361 $144,011 $90,577 $75,423 $15,000 $15,000 Other Sources $0 $0 $0 $0 $0 $0 TOTAL REVENUE $36,664,308 $37,140,242 $39,120,588 $40,638,353 $42,057,000 $43,533,077

EXPENDITURES: Instruction $18,925,920 $19,299,521 $19,604,998 $20,885,996 $21,893,259 $24,135,000 Pupil Personnel Services 806,159 823,045 769,470 860,907 902,426 1,137,200 Instructional Staff 1,469,819 1,341,714 1,999,505 2,339,045 2,451,849 2,417,000 Administration 2,110,260 2,163,614 2,213,357 2,197,590 2,303,572 2,379,400 Pupil Health Services 335,926 298,382 273,951 357,717 374,968 447,260 Business 376,988 349,422 360,065 435,190 456,178 553,600 Operation & Maintenance- Plant Svcs. 4,116,866 4,172,061 3,822,093 4,118,495 4,317,116 0 Student Transportation 2,286,012 2,325,393 2,309,647 2,367,997 2,482,198 2,630,000 Other Support Services 57,507 55,447 58,157 57,212 59,971 59,300 Non-Instructional Services 925,226 879,423 994,833 1,177,914 1,234,721 1,336,600 Debt Service 2,708 0 0 0 0 0 Refund of Prior Year Receipts 0 10,993 2,631 9,095 9,534 0 Fund Transfers 5,029,642 5,275,310 5,599,000 5,452,264 5,715,208 5,510,000 Budgetary Reserve 0 0 0 0 0 50,000 TOTAL EXPENDITURES $36,443,033 $36,994,325 $38,007,707 $40,259,422 $42,201,000 $45,293,360 SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES $221,273 $145,918 $1,112,880 $378,931 ($144,000) ($1,760,283)

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 9, 2015. Source: School District Annual Financial Reports and Budget.

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Tax Levy Trends

Table 6 which follows shows the recent trend of tax rates levied by the School District. Table 7 shows the comparative trend of real property tax rates for the School District, two townships and two boroughs located in the School District, and for Butler County.

TABLE 6 MARS AREA SCHOOL DISTRICT TAX RATES

Real Estate Wage and Local Services Real Estate Transfer Income Tax (mills) (%) (%) ($) 2011 -12 ...... 99.000 0.500 0.500 10.00 2012-13 ...... 99.000 0.500 0.500 10.00 2013-14 ...... 99.000 0.500 0.500 10.00 2014-15 ...... 99.000 0.500 0.500 10.00 2015-16 ...... 99.000 0.500 0.500 10.00 Source: Department of Community and Economic Development- Municipal Statistics

TABLE 7 MARS AREA SCHOOL DISTRICT COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2011 2012 2013 2014 2015 School District ...... 99.000 99.000 99.000 99.000 99.000 Adams Township ...... 3.750 3.750 3.750 3.750 3.750 Mars Borough ...... 16.880 16.880 16.880 16.880 16.880 Middlesex Township...... 12.000 12.000 12.000 12.000 12.000 Valencia Borough ...... 7.750 7.750 7.750 7.500 7.500 Butler County ...... 23.6280 24.6280 24.6280 24.6280 24.6280 Source: Source: Department of Community and Economic Development- Municipal Statistics

Real Property Tax

The real property tax (excluding delinquent collections) produced an estimated $22,706,000 in 2014-15, approximately 54.0% of overall revenue. The tax is levied on July 1 of each year. Taxpayers who remit within 60 days receive a 2 percent discount, and those who remit subsequent to 120 days after July 1 are assessed a 10 percent penalty. Eligible property taxpayers could opt into the installment method of payment for their school taxes. Installment payments are based upon three (3) payments of the base tax amount. The due dates for installment payments are August 15, September 15, and October 15.

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TABLE 8 MARS AREA SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Value Value Ratio 2010 -11 ...... $1,609,687,424 $209,631,055 13.02% 2011-12 ...... 1,661,263,028 215,831,562 12.99% 2012-13 ...... 1,777,341,631 223,077,050 12.55% 2013-14 ...... 1,839,184,174 230,216,072 12.52% 2014-15 ...... 2,047,747,360 238,306,332 11.64% Compound Average Annual Percentage Change ...... 4.93% 2.60% (1)Reflects percent of 1969 Market Value increase from 75% to 100%. Source: Pennsylvania State Tax Equalization Board.

TABLE 9 MARS AREA SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2013 2013 2014 2014 Market Assessed Market Assessed Value Value Value Value School District ...... $1,839,184,174 $230,216,072 $2,047,747,360 $238,306,332 Adams Township ...... 1,367,061,882 164,259,143 1,520,370,874 170,683,399 Mars Borough ...... 63,724,514 8,211,467 66,349,124 8,220,347 Middlesex Township ...... 372,353,671 52,584,723 419,962,304 54,163,087 Valencia Borough ...... 36,044,108 5,160,739 41,065,058 5,239,499 Butler County ...... 11,837,083,626 1,700,924,919 12,877,455,786 1,724,861,456 Source: Pennsylvania State Tax Equalization Board.

TABLE 10 MARS AREA SCHOOL DISTRICT ASSESSMENT BY LAND USE

2010 2011 2012 2013 2014 Residential ...... $175,804,154 $180,996,854 $187,643,731 $194,397,523 $201,006,733 Lots ...... 1,539,296 1,609,716 1,578,937 1,503,324 1,619,919 Industrial ...... 1,315,672 1,315,672 1,315,672 1,315,672 1,315,672 Commercial ...... 19,410,781 20,424,325 20,876,545 21,299,598 22,539,628 Agriculture ...... 10,673,224 10,626,757 10,806,287 10,835,297 10,908,827 Land ...... 874,158 819,518 789,288 775,098 815,683 Mineral ...... 13,770 38,720 66,590 89,560 99,870 Total ...... $209,631,055 $215,831,562 $223,077,050 $230,216,072 $238,306,332

Source: Pennsylvania State Tax Equalization Board.

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TABLE 11 MARS AREA SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA

Current Year Current Year and Percent Total Assessed Adjusted Collections Delinquent Current Collections Year Value Levy(1) June-July Collections Collections as Percent 2010-11 ...... $210,854,212 $20,552,880 $19,879,921 $20,438,375 96.73% 99.44% 2011-12 ...... 215,103,235 21,295,220 20,494,774 20,963,202 96.24% 98.44% 2012-13 ...... 225,969,697 22,049,000 21,245,244 21,732,598 96.35% 98.57% 2013-14 ...... 229,100,562 22,358,956 21,542,938 22,040,390 96.35% 98.58% 2014-15 ...... 237,629,072 23,525,278 22,334,000 22,766,000 94.94% 96.77% (1)Flat billing plus penalties, less discounts, rebates and exonerations. Note: Beginning in 2008-09 the amount of the Adjusted Levy is reduced by the amount of the Homestead/Farmstead Exemptions. The Adjusted levy shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth. Source: School District officials.

The ten largest real property taxpayers, together with 2015 assessed values, are shown on Table 12, which follows. The aggregate assessed value of these ten taxpayers totals approximately 3.0 percent of total assessed value.

TABLE 12 MARS AREA SCHOOL DISTRICT TEN LARGEST REAL PROPERTY TAXPAYERS, 2015

2015 Company Name Property Type Assessment Adams Pointe I LP Apartment Complex $1,190,034 Adams Point II LP Apartment Complex 891,094 One Adams Place Commercial Building 890,040 Treesdale Country Club Golf Course 855,960 Ibis Tec Properties Commercial Building 771,030 Chen Family LTD Partners Commercial Building 632,150 PG Multi 16 LP Commercial Building 558,111 HCRI PA Properties Personal Care Home 547,370 Concordia of Cranberry Personal Care Home 466,780 Mars Evans City Self Storage Lot Commercial Building 374,240 Total $7,176,809

The school district entered into a ten year Payment in Lieu of Taxation Agreement with St Barnabas Land Trust effective with the 2013-14 year where the district will receive a percentage of the total assessed value times the district millage rate annually; 87% 2013/14; 76% 2014/15; 68% 2015/16; 60% 2016/17 thru 2022/23. The assessed value of the St Barnabas Land Trust property for the 2013/14 year was $4,098,530. The effect on the district budget of the reduction of real estate tax revenue due to this agreement was offset by the continued increase in total taxable assessed value due to new construction in the school district. Source: School District officials.

Other Taxes

Under Act 511, the School District collected an estimated $5,748,000 in other taxes in 2014-15. Among the taxes authorized by Act 511, the Real Estate Transfer, Earned Income, and Local Services (formerly Emergency and Municipal Services) taxes are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property, was $24,572,968.

Real Estate Transfer. The School District levies a tax of one- percent (subject to sharing) of the value of real estate transfers. In 2014-15 the School District’s portion of this tax yielded an estimated $1,098,000 or 2.6 percent of the School District’s total revenue.

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Earned Income Tax. A tax of one percent (subject to sharing) is levied on the earned income of residents. In 2014-15 the collected portion of this tax was an estimated $4,585,000 or 10.9 percent of School District total revenue.

Local Services Tax (formerly Emergency and Municipal Services Tax). A tax of $10.00 is levied on each person working within the school district boundaries. In 2014-15 the collected portion of this tax yielded an estimated $65,000 or less than one percent of the total revenue.

DEBT AND DEBT LIMITS

Debt Statement

Table 13 which follows shows the debt of the School District as of December 1, 2015, including the issuance of the Bonds.

TABLE 13 MARS AREA SCHOOL DISTRICT DEBT STATEMENT (As of December 1, 2015)*

Gross NONELECTORAL DEBT Outstanding General Obligation Bonds, Series of 2015 ...... $9,815,000 General Obligation Bonds, Series E of 2014 ...... 1,665,000 General Obligation Bonds, Series C of 2014 ...... 3,445,000 General Obligation Bonds, Series A of 2014 ...... 9,220,000 General Obligation Note, Series of 2014 ...... 13,780,000 General Obligation Bonds, Series of 2012 ...... 7,730,000 General Obligation Bonds, Series B of 2011 ...... 1,415,000 General Obligation Note, Series F of 2009 ...... 109,264 General Obligation Note, Series E of 2009 ...... 100,000 General Obligation Note, Series D of 2009 ...... 1,231,760 General Obligation Note, Series C of 2009...... 1,200,000 General Obligation Note, Series B of 2009...... 2,258,226 General Obligation Note, Series A of 2009 ...... 2,200,000 General Obligation Bonds, Series of 2008 ...... 15,565,000 General Obligation Bonds, Series B of 1994 ...... 1,815,320 General Obligation Bonds, Series AA of 1992 ...... 1,228,544 Subtotal ...... $72,778,114 Less: Debt Deemed Self-Liquidating, Subsidized Debt, and Principal Treated as Cost of a Refunding under the Debt Act ...... ($3,500,000) TOTAL NONELECTORAL DEBT ...... $69,293,114

LEASE RENTAL DEBT ...... $0

TOTAL PRINCIPAL OF DIRECT DEBT ...... $69,293,114

* Does reflect estimated credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by Commonwealth Aid.

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OUTSTANDING INTEREST RATE SWAP AGREEMENTS AS OF AUGUST 1, 2015

2002A Basis Swap

On January 12th, 2005, the School District entered into an IRMA, as defined in the Debt Act, hereinafter referred to as the “2002A Basis Swap”, with Wells Fargo Bank N.A., formerly Wachovia Bank, N.A. (the “2002A Basis Swap Counterparty”). Under the terms of the 2002A Basis Swap, the School District pays to the 2002A Basis Swap Counterparty a variable rate equal to SIFMA and the 2002A Basis Swap Counterparty pays to the School District a variable rate equal to 64^ of 1 month USD- LIBOR plus a spread of 0.30%. The School District received an upfront premium of $620,039 on January 27, 2005 as a result of entering into the 2002A Basis Swap and has been exchanging cash flows with the 2002A Basis Swap Counterparty since its effective date on January 15, 2005.

The 2002A Basis Swap was intended by the School District to manage interest rates and costs associated with the 2002A Bonds. The 2002A Basis Swap had a beginning notional amount of $13,015,000, and was structured to coincide with the amortization of the 2002A Bonds, with a termination date of March 1, 2033, which matched the final maturity date of the 2002A Bonds.

On March 9, 2012, the School District refunded and retired the 2002A Bonds with a portion of the proceeds of its General Obligation Notes, Series of 2012 (“2012 Notes”) in the principal amount of $13,030,000. A portion of the proceeds of the 2012 Notes was also used to pay related costs, including the costs of issuing the 2012 Notes. The 2012 Notes have a final maturity of March 1, 2013 (the "2012 Notes Maturity Date").

On March 1, 2013, the School District paid off the 2012 Notes with a portion of the proceeds of its General Obligation Bonds, Series of 2013 (the “2013 Bonds”) in the principal amount of $13,100,000. A portion of the proceeds of the 2013 Bonds was also used to pay related costs, including the costs of issuing the 2013 Bonds. The 2013 Bonds have a final maturity of February 28, 2014 (the "2013 Bonds Maturity Date").

On February 28, 2014, the School District paid off the 2013 Bonds with a portion of the proceeds from its long term fixed rate General Obligation Notes, Series of 2014 (the “2014 Notes”). The 2002A Basis Swap remains outstanding and has been transferred to the 2014 Notes. In addition, a portion of the proceeds of the 2014 Notes were used to pay a portion of the funds required to terminate the related qualified interest rate management agreement, heretofore known as the 2012 Swaption. The 2014 Notes have a final maturity of March 1, 2033 (the “2014 Notes Maturity Date”).

Through an amendment to the Confirmation and Schedule to the Master Agreement of the 2002A Basis Swap in the "Related Bonds" section, the 2002A Basis Swap will now be related to the 2014 Notes until the termination date of the 2002A Basis Swap and final maturity of the 2014 Notes on March 1, 2033

2004 Basis Swap

On January 12, 2005, the District entered into an IRMA, as defined in the Debt Act, hereinafter referred to as the “2004 Basis Swap”, with Wells Fargo Bank, N.A., formerly Wachovia Bank, N.A. (the “2004 Basis Swap Counterparty”). Under the terms of the 2004 Basis Swap, the School District pays to the 2004 Basis Swap Counterparty a variable rate equal to SIFMA and the 2004 Basis Swap Counterparty pays to the School District a variable rate of 64% of 1 Month USD-LIBOR plus a spread of 0.30%. The School District received an upfront premium of $400,461 on January 27, 2005 as a result of entering into the 2004 Basis Swap and has been exchanging cash flows with the 2004 Basis Swap Counterparty since its effective date on January 15, 2005.

The 2004 Basis Swap was intended by the School District to manage interest rates and costs associated with the School District’s General Obligation Bonds, Series of 2004 (the “2004 Bonds”). The 2004 Basis Swap had a beginning notional amount of $7,500,000, and was structured to coincide with the amortization of the 2004 Bonds, with a termination date of September 1, 2034, which matches the final maturity dates of the 2004 Bonds.

On March 2, 2012, the School District refunded and retired the 2004 Bonds with a portion of the proceeds of its General Obligation Bonds, Series of 2012 (the “2012 Bonds”), issued in the principal amount of $7,750,000. A portion of the proceeds of the 2012 Bonds were also be used to pay related costs, including the costs of issuing the 2012 Bonds. The 2012 Bonds have a final maturity of September 1, 2034, which is the same final maturity of the 2004 Bonds and were structured to match or exceed the notional amortization of the 2004 Basis Swap.

Through an amendment to the Confirmation of the 2004 Basis Swap in the "Related Bonds" section, the 2004 Basis Swap is now related to the 2012 Bonds until the termination date of the 2004 Basis Swap and final maturity of the 2012 Bonds on September 1, 2034.

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Notes

[1] On October 21, 2008, the District adopted a parameters resolution to suspend or terminate, at the discretion of the Swap Advisor, the above noted Swaps. As of August 1, 2015, these swaps still remain outstanding.

CURRENT ESTIMATED SWAP VALUES AS OF OCTOBER 26, 2015

Product Associated Bonds Client Pays Client Receives Maturity Date MTM Value[1] Basis Swap Series of 2012 Bonds SIFMA 64% of LIBOR + 0.30% 9/1/2034 ($232,102.04) Basis Swap Series of 2014 Notes[2] SIFMA 64% of LIBOR + 0.30% 3/1/2033 ($233,444.99) Total

[1] Estimated values as of August 1, 2015.

Debt Limit and Remaining Borrowing Capacity

The statutory borrowing limit of the School District under the Debt Act is computed as a percentage of the School District's "Borrowing Base". The "Borrowing Base" is defined as the annual arithmetic average of "Total Revenues" (as defined by the Debt Act), for the three full fiscal years ended next preceding the date of incurring debt. The School District calculates its present borrowing base and borrowing capacity as follows:

Total Revenues for 2012-13...... $38,145,415 Total Revenues for 2013-14...... 39,539,355 Total Revenues for 2014-15 (est.) ...... 41,182,000

Total ...... $118,866,770

Annual Arithmetic average (Borrowing Base) ...... $39,622,257

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $89,150,078 $69,293,114 $19,856,964

*Does not reflect estimated credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by Commonwealth Aid.

Future Financing

There are no further capital improvement projects presently contemplated by the School District that would require the incurrence of additional bonded indebtedness.

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LABOR RELATIONS

School District Employees

There are presently 330 employees of the School District, including 211 teachers and administrators and 95 support personnel including secretaries, maintenance staff, custodial staff, cafeteria staff, transportation and teacher aides.

The School District's teachers are represented by the Mars Area Education Association, (the "Association"), an affiliate of the Pennsylvania State Education Association (PSEA), under a contract with the School District which expires on June 30, 2017.

The Maintenance and Custodial employees are represented by the Mars Area Association of School Service Personnel, which represents food service workers, teacher assistants, secretary/clerks and custodians. The expiration date of this collective bargaining agreement was June 30, 2015.

Pension Program

Beginning July 1, 1976, certain revisions were made in the pension program. The Retirement Board, previously under the Department of Education of the Commonwealth, became an independent agency. However, the program is still guaranteed by the Commonwealth. Currently, each party to the program contributes a fixed percentage of the employee's salary. Employees belonging to the Public School Employees Retirement System (“PSERS”) prior to July 22, 1983 contribute 5.25% of their salary, and employees who joined the PSERS on or after July 22, 1983 contribute 6.25% of their salary. On February 17, 2002, Governor Ridge signed Act 9 which created a new membership class that sets the employee contribution rate at 7.50% of the employee’s salary for those employees hired on or after July 1, 2001. Act 9 also provides an option for those employees hired prior to July 1, 2001 to elect a contribution rate of 6.50%, if they were hired before July 22, 1983, or 7.50% if they were hired on or after July 22, 1983. Act 120 of 2010 (“Act 120”) was passed by the General Assembly on September 1 and signed by Governor Rendell on November 23, 2010. The benefit reductions contained in this legislation will only impact individuals who become new members of PSERS on or after July 1, 2011. New members will have the option of selecting one of 2 new classes. The members selecting class T-E will contribute a base rate of 7.5% with “shared risk” contribution levels between 7.5% and 9.5% and a pension multiplier of 2.0%. Members selecting class T-F will contribute a base rate of 10.3% with shared risk contribution levels between 10.3% and 12.3% and a pension multiplier of 2.5%. In accordance with Senate Bill 1042 enacted on July 6, 2010, the employer rate was recertified at 5.64% for fiscal year 2010-11, 8.65% for fiscal year 2011-12 and 12.36% for fiscal year 2012-13. The rate for fiscal year 2013-14 has been set at 16.93% of payroll and the rate for fiscal year 2014-15 has been set at 21.40%. The employer contribution rate for fiscal year 2015-2016 will be 25.84%. The rate applies to salary and wages earned from July 1, 2015, through June 30, 2016. This rate was determined by PSERS’ actuary and reflects the rate caps established by Act 120 of 2010. The rate was certified by the PSERS Board of Trustees at its meeting on December 9, 2014. The employer contribution rate for fiscal year 2015-2016 consists of 25% for pension costs and 0.84% for premium assistance payments. Please see the Public School Employee’s Retirement System website indicated below for the most recent projection of employer contribution rates.

2011-12 $1,377,987 2012-13 $1,946,740 2013-14 $2,731,924 2014-15(est.) $3,720,000 2015-16 (budgeted) $4,715,000

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The School District is current in all payments. The PSERS complete report is available on the PSERS website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

Plan Description

Mars Area School District administers a single-employer defined benefit healthcare plan (the Supplemental Health Plan"). The plan provides medical and pharmacy for two groups of employees: teachers; and support staff. The benefits provided are for the eligible retirees and their spouses through the School District group health insurance plan which covers both active and retired members. Benefit provisions are mostly established through negotiations between the School District and union or group representing the employees. The plan does not issue a publicly available financial report.

Funding Policy

The eligibility and the benefits for each group is as follows:

1) Eligibility for Healthcare Coverage

Professional Staff: Eligible for incentive upon retirement after reaching age 52 with 20 years of PSERS service and the completion of 15 years with the School District, and retirement under PSERS superannuation or early retirement.

Support Staff: Eligible for incentive upon retirement after reaching age 52 with 20 years of PSERS service and the completion of 15 years with the School District, and retirement under PSERS superannuation or early retirement.

2) Duration of Healthcare Benefits

Teachers: Retiree coverage may continue until age 65, death or qualification for Medicare, if earlier. Spouse coverage may continue until age 65, death, qualification for Medicare or cessation of retiree coverage, if earlier.

Support Staff: Retiree coverage may continue until age 65, death or qualification for Medicare, if earlier. Spouse coverage may continue until age 65, death, qualification for Medicare or cessation of retiree coverage, if earlier.

3) Participant Contributions for Healthcare Coverage

Professional Staff: During the incentive, the retiree contributes the PSERS premium assistance amount plus an additional $20 per month premium co-share for up to 8 years. When the premium exceeds twice the premium at retirement, the retiree also contributes the amount that exceeds twice the premium at retirement. During the incentive, the spouse contributes an additional $10 per month premium for up to 8 years. When the premium exceeds twice the premium at retirement, the spouse contributes the amount that exceeds twice the premium at retirement. Under Act 110/43, the retiree and spouse pay the full premium amount.

Support Staff: During the incentive, the retiree contributes the PSERS premium assistance amount plus an additional $20 per month premium for up to 5 years. When the premium exceeds twice the premium at retirement, the retiree also contributes the amount that exceeds twice the premium at retirement. During the incentive, the spouse contributes an additional $10 per month for up to 5 years. When the premium exceeds twice the premium at retirement, the spouse contributes the amount that exceeds twice the premium at retirement. Under Act 110/43, the retiree and spouse pay the full premium amount.

For the year ended June 30, 2014, the School District contributed $314,812 and the retiree contributed $47,832. The plan is financed on a pay-as-you-go basis.

Annual OPEB Cost and Net OPEB Obligation

The School District's annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (funding excess) over a period not to exceed thirty years. The following table shows the components of the School District's annual OPEB cost for the year, the amount actually contributed to the plan and changes in the School District's net OPEB obligation.

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Annual Required Contribution $1,048,786 Interest on Net OPEB Obligation 0 Adjustment to Annual Required Contribution (49,938)

Annual OPEB Cost (Expense) 998,848 Contributions Made 570,700

Increase in OPEB Obligation 428,148

Net OPEB Obligation - Beginning of Year 1,881,647 Net OPEB Obligation - End of Year $2,309,795

The School District's OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the years ended June 30, 2014, 2013 and 2012, is as follows.

Fiscal Percentage of Net Year Annual Annual OPEB OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2014 $998,848 57.1% $2,309,795 6/30/2013 963,667 62.5% 1,881,647 6/30/2012 936,697 63.4% 1,520,080

Funded Status and Funding Progress

As of July 1, 2012, the actuarial accrued liability for benefits was $8,493,000, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was approximately $15,735,000 and the ratio of unfunded actuarial accrued liability to the covered payroll was 54.0%.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Multi-year information will be presented in future years.

CONTINUING DISCLOSURE UNDERTAKING

Existing Continuing Disclosure Filing History

Fiscal Year Filing Financial Statements Budget Operating Data Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2] 6/30/2010 12/27/2010 2/8/2011 EP422741 12/16/2010 EP422741 Various[5] ER661986

6/30/2011 12/27/2011 2/16/2012 ER460679 12/9/2011 ER460679 Various[6] ER460679

6/30/2012 12/27/2012 2/14/2013 EA430123 12/20/2012 EA430123 Various[7] EA430123 [3] 6/30/2013 12/27/2013 12/5/2013 EP632359 11/11/2014 EP632359 Various[8] EP632359 [4] 6/30/2014 12/27/2014 12/22/2014 ER661986 12/22/2014 ER661986 12/18/2014 [9]

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Notes

[1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

[3] Filing of School District’s PDE-2057 Annual Financial Report. Audited financial statements posted January 30, 2014 (EMMA ID EP632359).

[4] Filing of School District’s PDE-2057 Annual Financial Report. Audited financial statements posted February 12, 2015 (EMMA ID ER661986).

[5] Included in various EMMA filings. The bonded indebtedness and tax collection data was included in the audited financial statements posted to EMMA on February 8, 2011. The enrollment, top taxpayers, market value and assess value and tax rates were posted October 15, 2014.

[6] Included in various EMMA filings. The bonded indebtedness and tax collection data was included in the audited financial statements posted to EMMA on February 16, 2012. The enrollment, top taxpayers, market value and assess value and tax rates were posted December 9, 2011.

[7] Included in various EMMA filings. The bonded indebtedness and tax collection data was included in the audited financial statements posted to EMMA on February 14, 2013. The enrollment, top taxpayers, market value and assess value and tax rates were posted December 20, 2012.

[8] Included in various EMMA filings. The bonded indebtedness and tax collection data was included in the audited financial statements posted to EMMA on January 30, 2014. The enrollment, top taxpayers, market value and assess value and tax rates were posted December 5, 2013.

[9] Included in a publically available Official Statement of the School District, General Obligation Bonds, Series of 2015 posted to EMMA on December 18, 2014. A Notice of Reference to Other Submitted Documents was filed by the School District on November 5, 2015 (EMMA ID ER661986).

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2010, the School District filed its audited financial statements on February 8, 2011, the budget report on December 16, 2010, a portion of the operating data on February 8, 2011 and the remaining operating data on October 15, 2014.

For fiscal year ending June 30, 2011, the School District filed its audited financial statements on February 16, 2012, the budget report on December 9, 2011, a portion of the operating data on December 9, 2011 and the remaining operating data on February 16, 2012.

For fiscal year ending June 30, 2012, the School District filed its audited financial statements on February 14, 2013, the budget report on December 20, 2012, a portion of the operating data on December 20, 2012 and the remaining operating data on February 14, 2013.

For fiscal year ending June 30, 2013, the School District filed an interim filing of its PDE-2057 Annual Financial Report on December 5, 2013, its audited financial statements on January 30, 2014, the budget report on November 11, 2014, a portion of the operating data on December 5, 2013 and the remaining operating data on January 30, 2014.

For fiscal year ending June 30, 2014, the School District filed an interim filing of its PDE-2057 Annual Financial Report on December 22, 2014, its audited financial statements on February 12, 2015, the budget report on December 22, 2014, and the operating data was contained in an Official Statement filed to EMMA on December 18, 2014 and a Notice of Reference to Other Submitted Documents was filed to EMMA on November 5, 2015.

Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s

Future Continuing Disclosure Compliance

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APPENDIX D

MONITEAU SCHOOL DISTRICT Butler County, Pennsylvania

Descriptive, Financial and Economic Information

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

THE SCHOOL DISTRICT

Introduction

The School District is comprised of the Townships of Cherry, Clay, Concord, Marion, Venango and Washington and the Boroughs of Cherry Valley, Eau Claire, and West Sunbury. The School District is located in the north-central portion of Butler County, Pennsylvania, (the “County”), approximately 42 miles north of the City of Pittsburgh, Pennsylvania. The School District encompasses a combined land area of 200 square miles, serving a 2010 U.S. Census population of 9,295.

Administration

School Facilities

The School District is currently organized on the following grade level structure: K-6 and 7-12. The School District operates one elementary and one Junior/Senior High School. The following table depicts the component elements of the existing physical plant of the School District.

TABLE 1 MONITEAU SCHOOL DISTRICT SCHOOL FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2014-15

Building Date Date(s) Grades Capacity Enrollment Elementary: Dassa McKinnney ...... 1966 2004 K-6 1225 713

Secondary: Moniteau Junior/Senior High School ...... 1958 1981/2007 7-12 1144 705

Source: School District Officials.

Enrollment Trends

The following Table 2 presents recent trends in school enrollment and projections of enrollment for the next five years, as prepared by the School District's administrative officials.

TABLE 2 MONITEAU SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School School

Year Elementary Secondary Total Year Elementary Secondary Total 2010-11 758 731 1,489 2015-16 658 658 1,316 2011-12 736 719 1,455 2016-17 612 654 1,266 2012-13 720 686 1,406 2017-18 586 620 1,206 2013-14 711 636 1,347 2018-19 547 617 1,164 2014-15 713 705 1,418 2019-20 511 600 1,111

Source: Actual/Projected Enrollments, School District Officials.

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SCHOOL DISTRICT FINANCES

Introduction

Financial Reporting

The financial statements of the School District are prepared in accordance with accounting principles generally accepted in the United States of America. The School District’s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide and proprietary fund financial statements apply Financial Accounting Standards Board pronouncements and Accounting Principles Board opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The government wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Its financial statements are audited by an independent certified public accountant, as required by Commonwealth law. Mark C. Turnley, Certified Public Accountants, Ambridge, Pennsylvania, currently serves as the School District Auditor.

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Summary and Discussion of Financial Results

A summary of the General Fund balance sheet and changes in fund balances is presented in Table 3 and 4 which follow. Table 5 shows audited revenue and expenditures for 2001 through 2014, along with estimated revenues and expenditures for 2014-15 and the budget amounts for 2015-16. The budget for 2015-16 projects revenue of $19,837,403 and expenditures of $20,388,010.

TABLE 3 MONITEAU SCHOOL DISTRICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Fiscal Years Ending June 30)

2011 2012 2013 2014 ASSETS Cash and Cash Equivalents ...... $4,608,208 $6,055,676 $5,914,813 $6,912,865 Investments ...... 8 133,328 63,542 63,554 Taxes Receivable ...... 518,512 511,399 473,299 489,792 Due from Other Funds ...... 0 0 4,759 20,092 Due from Other Government ...... 1,503,890 625,886 722,621 738,409 Other Receivables ...... 68,294 76,917 39,752 49,560 Prepaid Expenses/Expenditures ...... 154,933 153,446 150,404 0 TOTAL ASSETS ...... $6,853,845 $7,556,652 $7,369,190 $8,274,272 LIABILITIES Due to Other Funds ...... $15,991 $5,036 $0 $0 Accounts Payable ...... 669,981 835,438 665,870 1,270,470 Accrued Salaries and Benefits ...... 1,032,960 961,770 1,021,143 1,056,434 Payroll Deductions and Withholdings ...... 71,452 66,380 538,125 740,590 Deferred Revenues ...... 384,907 498,149 402,221 0 Other Current Liabilities ...... 0 0 0 0 TOTAL LIABILITIES ...... $2,175,291 $2,366,773 $2,627,359 $3,067,494 Deferred Inflows of Resources ...... $0 $0 $0 $371,376 FUND EQUITIES Nonspendable Fund Balance ...... $0 $153,446 $150,404 $0 Assigned Fund Balance ...... 3,379,750 3,693,195 3,206,674 3,402,203 Unassigned Fund Balance ...... 1,298,804 1,343,238 1,384,753 1,433,199 TOTAL FUND EQUITIES ...... $4,678,554 $5,189,879 $4,741,831 $4,835,402 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND EQUITIES ...... $6,853,845 $7,556,652 $7,369,190 $8,274,272

Source: School District Annual Financial Reports.

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TABLE 4 MONITEAU SCHOOL DISTRICT SUMMARY OF CHANGES IN FUND BALANCE* (Fiscal Years ending June 30)

Actual Estimated Budget 2011 2012 2013 2014 2015(1) 2016(2) Beginning Fund Balance $3,758,644 $4,678,554 $5,189,879 $4,741,831 $4,835,403 $4,926,002 Revenues over (under) Expenditure 919,910 511,325 (448,048) 93,572 90,599 (550,607) Ending Fund Balance $4,678,554 $5,189,879 $4,741,831 $4,835,403 $4,926,002 $4,375,395

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 22, 2015. Source: School District Annual Financial Reports and Budget.

Revenue Sources

The School District received $19,220,657 (estimated) in total revenue for its 2014-15 fiscal year and budgeted revenue of $19,837,403 for its 2015-16 fiscal year. Local revenue sources increased as a share of total revenue in the past five years, from 32.8% in 2010-11 to 34.3% in 2014-15. Revenue from Commonwealth sources increased as a share of total revenue in the past five years, from 59.0% in 2010-11 to 65.5% in 2014-15. Federal and other sources decreased as a share of total revenue in the past five years, from 8.2% in 2010-11 to 0.2% in 2014-15.

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TABLE 5 MONITEAU SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES* (For years ending June 30)

Actual Estimated Budget REVENUE: 2011 2012 2013 2014 2015(1) 2016(1) Local Sources: Real Estate Taxes (Current) ...... $4,061,082 $4,151,781 $4,340,292 $4,413,090 $4,540,397 $4,588,540 Public Utility Realty Tax ...... 7,594 7,277 7,345 7,013 7,357 7,600 Payments in Lieu of Current Taxes/ State & Local 8,062 8,062 8,062 8,062 8,062 8,000 Per Capita (Sec. 679) Tax ...... 27,544 27,417 27,417 27,417 26,500 25,500 Total Act 511 Taxes ...... 828,521 855,702 984,775 916,996 928,107 945,500 Delinquent Taxes ...... 451,995 482,827 458,975 427,423 558,605 576,955 Earnings on Investments ...... 7,954 18,948 14,966 11,980 12,235 15,000 Revenue from Student Activities ...... 33,822 66,484 32,008 25,357 30,068 52,900 State Rev. Rcvd. from Other PA Public Schools 0 5,988 3,435 0 0 0 Federal Rev. Rcvd. from Other PA Public Schools 391,665 326,481 296,226 265,656 277,489 0 Federal IDEA Pass Through Revenue ...... 457,825 288,796 254,932 192,233 192,233 453,241 Rentals ...... 4,025 0 257,216 6,573 5,917 0 Contributions and Donations from Private Sources 0 0 13,000 500 1,986 3,000 Tuition ...... 1,050 1,125 1,050 28,620 444 0 Receipts from Other LEAS in PA – Education... 63,736 40,974 13,124 0 0 0 Refunds of Prior Years' Expenditures ...... 745 0 0 8,921 0 All Other Local Revenues Not Specified ...... 8,176 13,383 6,300 8,142 0 30,000 Total Local Sources ...... $6,353,796 $6,295,245 $6,719,123 $6,339,062 $6,598,321 $6,706,236 State Sources: Basic Instructional Subsidy ...... $6,638,834 $7,460,791 $7,386,859 $7,494,629 $7,494,629 $7,494,595 Charter Schools ...... 112,341 0 0 0 0 0 Vocational Education ...... 37,737 54,071 36,597 47,354 42,398 $45,156 Driver Education ...... 1,960 490 0 0 0 0 Tuition-Orphans & Children in Private Homes .. 0 3,493 0 18,203 19,028 0 Special Education ...... 1,013,062 1,013,207 1,009,512 1,009,512 1,024,584 1,013,088 Educational Assistance Progam (Tutoring) ...... 100,465 0 0 0 0 0 Transportation ...... 1,433,617 1,461,732 1,419,632 1,372,514 1,337,663 1,492,987 Rentals and Sinking Fund Payments ...... 470,529 430,946 501,959 506,518 493,862 441,427 Health Services ...... 30,186 27,639 27,541 26,950 24,500 34,300 State Property Tax Reduction Allocation ...... 604,680 604,042 603,999 604,097 604,112 604,054 PA Accountability Grant ...... 318,993 125,328 125,328 125,328 228,188 228,188 Additional grants not listed elsewhere...... 5,144 76 106 2,631 0 0 Revenue from Social Security ...... 374,877 347,944 367,420 360,217 370,168 385,454 Revenue from Retirement Contributions ...... 269,972 389,750 589,139 789,946 951,883 1,313,680 Other Sources ...... 0 0 0 0 0 0 Total State Sources ...... $11,412,397 $11,919,509 $12,068,092 $12,357,900 $12,591,015 $13,052,929 Federal Sources: Total Federal Sources ...... $1,504,571 $68,184 $112,449 $84,554 $31,321 $43,823 Other Sources: Total Other Sources ...... $77,353 $28,152 $35,667 $130,641 $0 $34,415 TOTAL REVENUE ...... $19,348,117 $18,311,090 $18,935,331 $18,912,157 $19,220,657 $19,837,403 EXPENDITURES: Instruction ...... $10,131,910 $9,468,928 $10,039,491 $10,055,677 $10,676,180 $10,795,826 Pupil Personnel ...... 391,039 436,973 450,717 441,476 384,266 506,090 Instructional Staff ...... 352,725 425,706 454,698 393,189 345,505 445,268 Administration ...... 920,830 995,167 1,088,453 1,065,536 938,299 1,185,908 Pupil Health ...... 180,912 181,024 192,641 196,359 174,880 220,745 Business ...... 233,237 256,708 300,002 266,723 246,769 319,289 Operation and Maintenance ...... 1,820,365 1,758,383 1,896,171 2,037,500 1,616,008 2,369,107 Student Transportation ...... 1,973,565 1,861,434 1,904,523 1,832,468 1,959,036 1,896,530 Central Support ...... 141,205 144,896 171,370 164,566 140,628 189,259 Other Support ...... 14,762 14,052 14,076 13,828 13,524 13,709 Operation of Noninstructional Services...... 1,012,266 1,081,728 1,068,920 924,754 1,252,896 1,149,436 Fac., Acq., Construction & Improvements ...... 0 0 11,100 41,950 0 0 Debt Service ...... 1,251,972 1,174,766 1,791,217 1,381,857 1,378,438 1,196,843 Refund of Prior Receipts ...... 3,419 0 0 2,702 3,629 0 Other Expenditures/Financing Uses ...... 0 0 0 0 0 100,000 TOTAL EXPENDITURES ...... $18,428,207 $17,799,765 $19,383,379 $18,818,585 $19,130,058 $20,388,010 SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES ...... $919,910 $511,325 ($448,048) $93,572 $90,599 ($550,607)

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 24, 2013. Source: School District Annual Financial Reports and Budget.

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Tax Levy Trends

TABLE 6

MONITEAU SCHOOL DISTRICT TAX RATES

Real Estate Wage & Income Local Real Estate Per Capita Transfer Tax Tax Services Tax (Mills) ($)(1) (%) (%) ($) 2011 -12 ...... 81.60 10.00 1.00 0.50 10.00 2012-13 ...... 83.64 10.00 1.00 0.50 10.00 2013-14 ...... 84.64 10.00 1.00 0.50 10.00 2014-15 ...... 84.64 10.00 1.00 0.50 10.00 2015-16 ...... 86.92 10.00 1.00 0.50 10.00 (1)$5.00 under Act 511 and $5.00 under Section 679 of the Public School Code. Source: School District Officials.

TABLE 7 MONITEAU SCHOOL DISTRICT COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2011 2012 2013 2014 2015 School District ...... 81.6000 81.6000 83.6400 84.6400 84.6400 Cherry Township ...... 6.0000 6.0000 6.0000 6.0000 6.0000 Cherry Valley Borough ...... 1.0500 1.0500 1.0500 1.0500 1.0500 Clay Township ...... 5.6200 5.6200 5.6200 5.6200 5.6200 Concord Township ...... 7.5000 8.5000 8.5000 8.5000 8.5000 Eau Claire Borough ...... 11.0000 11.0000 11.0000 11.0000 11.0000 Marion Township...... 7.1300 7.1300 7.1300 7.1300 7.1300 Venango Township ...... 6.4000 6.4000 6.4000 6.4000 6.4000 Washington Township ...... 1.7500 1.7500 1.7500 1.7500 1.7500 West Sunbury Borough ...... 8.0000 8.0000 8.0000 8.0000 8.0000 Butler County ...... 23.6280 23.6280 24.6280 24.6280 24.6280

Source: School District Officials.

Real Property Tax

The real property tax (excluding delinquent collections) produced an estimated $4,540,397 in 2014-15, approximately 23.6% of overall revenue.

Real estate tax notices are generally mailed to all owners of property located within the School District on or before August 1 of each year. Taxes are payable at a 2% discount during the months of August and September and at face during October and November. Beginning December 1, a 10% penalty is added to the face amount outstanding. Generally, the books of the Municipal Tax Collectors are closed out at the end of December of each year. Effective January 1, all information relating to uncollected taxes is then provided to the Butler County Tax Claims Bureau, which then pursues the collection of the property taxes that are considered delinquent.

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TABLE 8 MONITEAU SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Value Value Ratio 2010 -11 ...... $397,900,188 $63,044,651 15.84% 2011-12 ...... 401,557,311 63,600,774 15.84% 2012-13 ...... 405,532,389 63,999,099 15.78% 2013-14 ...... 408,176,881 64,480,807 15.80% 2014-15 ...... 442,064,466 65,947,593 14.92%

Compound Average Annual Percentage Change ...... 2.13% 0.90%

Source: Pennsylvania State Tax Equalization Board.

TABLE 9 MONITEAU SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2013 2013 2014 2014 Market Assessed Market Assessed Value Value Value Value School District ...... $408,176,881 $64,480,807 $442,064,466 $65,947,593 Cherry Township ...... 59,564,777 9,455,240 68,219,739 10,421,868 Cherry Valley Borough ...... 4,039,452 709,350 4,776,949 709,850 Clay Township ...... 110,139,786 18,115,347 112,606,194 18,294,322 Concord Township ...... 62,178,849 10,322,442 64,188,310 10,319,247 Eau Claire Borough ...... 9,048,898 2,004,133 10,147,721 2,007,743 Marion Township...... 59,685,819 8,010,577 61,087,727 8,140,995 Venango Township ...... 37,494,585 6,098,551 50,336,430 6,192,933 Washington Township ...... 59,795,704 8,823,058 64,141,300 8,916,666 West Sunbury Borough ...... 6,229,011 942,109 6,560,097 943,969 Butler County ...... 11,837,083,626 1,700,924,919 12,877,455,786 1,724,861,456 Source: Pennsylvania State Tax Equalization Board.

TABLE 10 MONITEAU SCHOOL DISTRICT ASSESSMENT BY LAND USE

2010 2011 2012 2013 2014 Residential ...... $36,545,462 $36,937,314 $37,031,222 $37,322,909 $37,636,393 Lots ...... 1,260,267 1,262,517 1,266,637 1,269,717 1,255,327 Industrial ...... 0 0 0 0 0 Commercial ...... 3,332,764 3,321,674 3,347,334 3,478,277 4,338,337 Agriculture ...... 19,511,841 19,626,532 19,861,543 19,880,641 20,141,963 Minerals ...... 140,446 203,346 257,700 266,370 282,670 Land ...... 2,253,871 2,249,391 2,234,663 2,262,893 2,292,903 Total ...... $63,044,651 $63,600,774 $63,999,099 $64,480,807 $65,947,593

Source: Pennsylvania State Tax Equalization Board.

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TABLE 11 MONITEAU SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA

Gross Current Current Year Total Total School Adjusted Collections Collections Collections Collections Year Levy Amount As a Percent Amount(1) As a Percent 2010-11 ...... $4,536,169 $4,113,895 90.69% $4,504,634 99.30% 2011-12 ...... 4,624,145 4,207,375 90.99% 4,625,152 100.02% 2012-13 ...... 4,781,181 4,397,789 91.98% 4,817,991 100.77% 2013-14 ...... 4,879,475 4,475,817 91.73% 4,808,926 98.55% 2014-15 ...... 4,984,366 4,540,397 91.09% 4,978,408 99.88% (1)Includes delinquent real estate only. Note: Beginning in 2008-09 the amount of the Adjusted Levy is reduced by the amount of the Homestead/Farmstead Exemptions. The Adjusted levy shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth. Source: School District Officials.

TABLE 12 MONITEAU SCHOOL DISTRICT TEN LARGEST REAL PROPERTY TAXPAYERS, 2015-16

2015 Assessed Owner Property/Business Value National Storage Co Underground Storage Facility $1,547,720 Northwest Sanitary Sanitary Waste Disposal Facility 190,840 McCormick Co J S Manufacturer Specialty Carbons 154,666 Hunter Realty Corp. Commercial Real Estate Holding 132,569 Butler, Richard J. & Jackie L. Residential 117,470 Schneider, Harold & Rose Residential 108,990 Schneider, Harold & Rose E. Residential 97,090 Automotive Excellence Inc. Automotive Repair 94,610 Tenney, Stephen & Barbara Residential 87,270 Greenberger, Robert & Judith Residential 82,218 $2,613,443

Source: School District Officials.

Other Taxes

Under Act 511, the School District collected an estimated $928,117 other taxes in 2014-15. Among the taxes authorized by Act 511, the Earned Income Tax, Local Services Tax, Per Capita Taxes, and Real Estate Transfer Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property was $5,304,774.

Per Capita Taxes. A tax of $10.00 ($5.00 under Act 511 and $5.00 under the School Code) is levied on each resident over 18 years old and the School District yielded an estimated $26,500 in 2014-15 or less than one percent of the School District’s total revenue.

Earned Income Tax. A tax of 0.5% is levied on the earned income of residents. In 2014-15 the collected portion of this tax was an estimated $812,366 or 4.2 percent of the School District’s total revenue.

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Real Estate Transfer. A tax of one percent of the value of real estate transfers yielded an estimated $62,793 in 2014-15 or less than one percent of the School District’s total revenue.

Local Services Tax (formerly aka Occupational Privilege Tax and Emergency and Municipal Services Tax). A tax of $52.00 is levied on each person with an occupation (shared with those participating municipalities). In 2014-15 the School District’s share of the collected portion of this tax yielded an estimated $26,458 or less than one percent of the School District’s total revenue.

DEBT AND DEBT LIMITS

Debt Statement

Table 13 shows the outstanding debt of the School District as of December 1, 2015, including the issuance of the Bonds.

TABLE 13 MONITEAU SCHOOL DISTRICT DEBT STATEMENT* (As of December 1, 2015)

Gross NONELECTORAL DEBT Outstanding General Obligation Bonds, Series of 2015 (last maturity 2026) ...... $7,955,000 General Obligation Bonds, Series B of 2010 (last maturity 2017) ...... 310,000 General Obligation Bonds, Series A of 2010 (last maturity 2020) ...... 2,525,000 TOTAL NONELECTORAL DEBT ...... $10,790,000

TOTAL LEASE RENTAL DEBT ...... $0

TOTAL PRINCIPAL OF DIRECT DEBT ...... $10,790,000

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Debt Limit and Remaining Borrowing Capacity

Total Revenues for 2012-13...... $18,301,638 Total Revenues for 2013-14...... 18,141,231 Total Revenues for 2014-15 (est.) ...... 18,726,795 Total ...... $55,169,664

Annual Arithmetic Average (Borrowing Base)...... $18,389,888

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $ 41,377,248 $10,790,000 $30,587,248

* Does not reflect credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by Commonwealth aid.

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Future Financing

The School District does not currently anticipate issuing additional long-term debt in the foreseeable future.

LABOR RELATIONS

School District Employees

There are approximately 165 employees of the School District, including 97 teachers, 11 administrators and 43 full-time support personnel including secretaries and maintenance staff and 14 part time food service support personnel.

The teaching staff of the School District is represented by the Moniteau Education Association under a contract which expires on June 30, 2017. the Moniteau Educational Support Personnel Association represents custodians, cleaning personnel and part-time secretaries. The current contract expires on June 30, 2016. Both are affiliated with the Pennsylvania State Education Association.

Pension Program

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2010-11 $407,257 2011-12 $618,639 2012-13 $907,436 2013-14 $1,275,863 2014-15 $1,589,429 2015-16 (budgeted) $1,983,601

The School District is current in all payments. The PSERS complete report is available on the PSERS website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

The collective bargaining agreement between the District and the Moniteau Education Association (MEA) during the period July 1, 1995 through June 30, 2000 entitles eligible employees to health insurance, prescription and dental benefits to age 65. During the term of the current collective bargaining agreement (July 1, 2010 to June 30, 2014), eligible employees with twenty (20) years of employment as defined by the PSERS (Note 10), ten (10) of which are with the Moniteau School District, are entitled to choose between a cash incentive payment or health care benefits. The cash incentive payment is in lieu of health care benefits and is calculated based on a formula as described in the agreement. As an alternative option to the cash incentive payment, eligible retired employees and their spouses can elect to receive ten (10) years of managed health care coverage through the District.

The contribution requirements of plan members and the School District are established and may be amended by the Moniteau Board of Education. The plan is funded on a pay-as-you-go basis, i.e. premiums are paid to fund the health care benefits provided to current retirees. There are no assets that have been segregated and restricted to provide for retiree medical benefits. During the 2013-2014 fiscal year, the Moniteau School District paid premiums of approximately $700,599 for 46 participants. Total retiree contributions made by plan members were $99,213 for the year ended June 30, 2014.

The District’s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following show the components of the Moniteau School District’s annual OPEB cost for the year, the amount actually contributed to the plan and changes in the Moniteau School District’s net OPEB obligation:

Annual required contribution...... $1,409,264 Estimated interest on net OPEB obligation ...... 115,545 Estimated adjustment to annual required contribution ...... (389,284) Annual OPEB cost (expense) ...... 1,135,525 Contributions made (estimate) ...... (753,975) Increase in net OPEB obligation ...... 381,550 Net OPEB obligation at July 1, 2013...... 2,567,676 Net OPEB obligation at June 30, 2014 ...... $2,949,226

The Net OPEB liability of $2,949,226 is reflected as part of Noncurrent Liabilities in the government-wide financial statement of net position.

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(UAAL) Unfunded UAAL as a Actuarial Actuarial Actuarial Actuarial % of Valuation Value of Accrued Accrued Funded Covered Covered Date Assets Liability Liability Ratio Payroll Payroll 7/1/2011 $0 $7,442,731 $7,442,731 0% $6,893,252 107.90% 7/1/2008 $0 $8,580,292 $8,580,292 0% $7,234,107 118.60%

Schedule of Employer’s Contributions

Fiscal Year Annual OPEB Percentage Net OPEB Ended Cost Contributed Obligation 2014 $1,135,525 66.40% $2,949,226 2012 $1,215,452 67.80% $2,207,416 2010 $1,446,366 46.80% $1,812,506

CONTINUING DISCLOSURE UNDERTAKING

Existing Continuing Disclosure Filing History

Fiscal Year Filing Financial Statements Budget Operating Data Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2] 6/30/2010 12/31/2010 1/6/2015 ER669747 11/12/2015 ES604908 1/6/2015 ER669732

6/30/2011 12/31/2011 4/18/2012 ER497200 4/18/2012 ER497200 1/6/2015 ER669732

6/30/2012 12/31/2012 4/4/2013 EP609700 7/3/2014 ER634299 1/6/2015 ER669732

6/30/2013 12/31/2013 7/3/2014 ER634299 3/31/2015 EP683061 1/6/2015 ER669732

6/30/2014 12/31/2014 3/31/2015 EP683061 11/12/2015 ES604911 1/6/2015 ER669732

Notes [1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2010, the School District filed the audited financial statements and operating data on January 6, 2015 and the budget report on November 12, 2015.

For fiscal year ending June 30, 2011, the School District filed the audited financial statements and budget report on April 18, 2012 and the operating data on January 6, 2015.

For fiscal year ending June 30, 2012, the School District filed the audited financial statements on April 4, 2013, the budget report on July 3, 2014 and the operating data on January 1, 2015.

For fiscal year ending June 30, 2013, the School District filed the audited financial statements on July 3, 2014, the budget report on March 31, 2015 and the operating data on January 6, 2015.

For fiscal year ending June 30, 2014, the School District filed the audited financial statements on March 31, 2015, the operating data on January 6, 2015 and the budget report on November 12, 2015.

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Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s

Future Continuing Disclosure Compliance

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APPENDIX E

SLIPPERY ROCK AREA SCHOOL DISTRICT Butler County, Pennsylvania

Descriptive, Financial and Economic Information

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THE SCHOOL DISTRICT

Introduction

The School District (138.6 square miles) is coterminous with the Boroughs of Harrisville, Slippery Rock, West Liberty, Portersville and Prospect and the Townships of Mercer, Slippery Rock, Brady, Franklin, Muddycreek and Worth, all located in Butler County. The central point of the District is approximately 13 miles northwest of Butler (the county seat of Butler County), 15 miles east of New Castle, Pennsylvania (the county seat of Lawrence County), 30 miles east of Youngstown, Ohio and 45 miles north of the City of Pittsburgh.

Administration

School Facilities

The School District presently operates two elementary schools, one middle school and one high school all described in the following table.

TABLE 1 SLIPPERY ROCK AREA SCHOOL DISTRICT SCHOOL FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2014-15

Building Date Date(s) Grades Capacity Enrollment Elementary: Slippery Rock Area Elementary ...... 1963 1997 K-5 624 464 Moraine Elementary ...... 1962 1990 K-5 750 420

Secondary: Slippery Rock Area Middle ...... 1972 2002 6-8 980 502 Slippery Rock Area High ...... 1958 2005 9-12 910 631 Source: School District Officials.

Enrollment Trends

The following Table 2 presents recent trends in school enrollment and projections of enrollment for the next five years, as prepared by the School District's administrative officials.

TABLE 2 SLIPPERY ROCK AREA SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School School

Year Elementary Secondary Total Year Elementary Secondary Total 2010-11 1,142 1,078 2,220 2015-16 1,034 987 2,021 2011-12 1,125 1,071 2,196 2016-17 1,038 984 2,022 2012-13 1,118 1,000 2,118 2017-18 1,050 952 2,002 2013-14 1,088 967 2,055 2018-19 1,052 940 1,992 2014-15 1,050 1,007 2,057 2019-20 1,060 930 1,990 Source: Actual/Projected Enrollments, School District Officials..

E-1

SCHOOL DISTRICT FINANCES

Introduction

The School District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education (“PDE”). An annual operating budget is prepared by the Superintendent and Business Manager and submitted to the School Board for approval prior to the beginning of each fiscal year on July 1.

Financial Reporting

The financial statements of the School District are prepared in accordance with accounting principles generally accepted in the United States of America. The School District’s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide and proprietary fund financial statements apply Financial Accounting Standards Board pronouncements and Accounting Principles Board opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The government wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Its financial statements are audited by an independent certified public accountant, as required by Commonwealth law. Stillwaggon & McGill, LLC, Certified Public Accountants, Grove City, Pennsylvania, currently serves as the School District Auditor.

E-2

Summary and Discussion of Financial Results

TABLE 3 SLIPPERY ROCK AREA SCHOOL DISTRICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Fiscal Years Ending June 30)

2011 2012 2013 2014 ASSETS Cash and Cash Equivalents ...... $8,038,577 $9,712,273 $9,392,782 $10,621,690 Taxes Receivable ...... 814,130 1,202,075 1,363,200 1,410,224 Due from Other Funds ...... 20,020 16,750 31,607 46,147 Due from Other Government ...... 480,293 194,153 292,516 306,953 State Revenue Receivable ...... 0 1,935 0 0 Other Receivables ...... 395,550 477,792 517,214 427,535 Prepaid Expenses/Expenditures ...... 0 0 0 0 TOTAL ASSETS ...... $9,748,570 $11,604,978 $11,597,320 $12,812,549

LIABILITIES Due to Other Funds ...... $0 $0 $0 $2,714,000 Accounts Payable...... 1,178,409 1,877,411 1,513,211 1,253,380 Accrued Salaries and Benefits ...... 2,354,184 2,704,554 2,758,058 3,089,067 Deferred Revenues...... 534,610 919,495 1,051,584 0 Other Current Liabilities ...... 0 0 0 0 TOTAL LIABILITIES ...... $4,067,203 $5,501,460 $5,322,853 $7,056,447

Deferred Inflows of Resources ...... $0 $0 $0 $1,212,681

FUND EQUITIES Assigned Fund Balance ...... $3,500,359 $3,736,381 $4,734,000 $0 Unassigned Fund Balance ...... 2,181,008 2,367,137 1,540,467 4,543,421 TOTAL FUND EQUITIES ...... $5,681,367 $6,103,518 $6,274,467 $4,543,421

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND EQUITIES ...... $9,748,570 $11,604,978 $11,597,320 $12,812,549

Source: School District Annual Financial Reports.

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TABLE 4 SLIPPERY ROCK AREA SCHOOL DISTRICT SUMMARY OF CHANGES IN FUND BALANCE* (Fiscal Years ending June 30)

Actual Estimated Budget 2011 2012 2013 2014 2015(1) 2016(2) Beginning Fund Balance $3,780,389 $5,681,367 $6,103,518 $6,068,389 $4,543,421 $4,567,921 Revenues over (under) Expenditure 1,900,978 422,151 (35,129) (1,731,045) 24,500 (692,868) Prior Period Adjustment 206,077 Fund Transfers 0 0 0 0 Ending Fund Balance $5,681,367 $6,103,518 $6,068,389 $4,543,421 $4,567,921 $3,875,053

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 22, 2015. Source: School District Annual Financial Reports and Budget.

Revenue Sources

The School District received $28,610,300 (estimated) in total revenue for its 2014-15 fiscal year and budgeted revenue of $29,726,768 for its 2015-16 fiscal year. Local revenue sources increased as a share of total revenue in the past five years, from 51.4% in 2010-11 to an estimated 52.4% in 2014-15. Revenue from Commonwealth sources increased as a share of total revenue in the past five years, from 42.6% in 2010-11 to an estimated 47.6% in 2014-15. Federal and other sources decreased as a share of total revenue in the past five years, from 5.9% in 2010-11 to an estimated 0.0% in 2014-15.

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TABLE 5 SLIPPERY ROCK AREA SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (For years ending June 30)

Actual Estimated Budget REVENUE: 2011 2012 2013 2014 2015(1) 2016(1) Local Sources: Real Estate Taxes (Current) ...... $10,356,151 $10,645,602 $10,865,983 $11,096,311 $11,084,000 $11,717,176 Interim Real Estate Taxes ...... 57,266 28,128 29,984 33,747 200,000 35,000 Public Utility Realty Tax ...... 17,347 16,867 18,666 16,576 17,500 17,500 Payments in Lieu of Current Taxes/ State & Local 4,629 23,401 16,075 0 4,000 4,630 Per Capita (Sec. 679) Tax ...... 43,286 43,158 43,059 43,074 43,500 43,400 Total Act 511 Taxes ...... 1,616,493 1,725,324 2,082,266 1,912,960 1,958,000 2,008,400 Delinquent Taxes ...... 1,570,670 599,428 818,212 649,054 788,000 780,000 Earnings on Investments ...... 3,508 8,967 24,202 24,614 40,000 40,000 Revenue from Student Activities ...... 4,834 23,426 39,740 4,212 0 0 Federal Rev. Rcvd. from Other PA Public Schools 580,027 542,955 411,074 359,147 676,000 665,214 Federal IDEA Pass Through Revenue ...... 554,679 280,828 305,256 309,107 8,000 0 Rentals ...... 0 0 1,000 4,675 15,000 0 Tuition ...... 7,560 7,760 4,720 7,330 10,000 0 Receipts from Other LEAS in PA – Education... 30 0 0 0 0 0 Refunds of Prior Years' Expenditures ...... 0 0 0 110,781 0 0 All Other Local Revenues Not Specified ...... 143,994 133,899 163,968 165,914 150,000 170,000 Total Local Sources ...... $14,960,474 $14,079,743 $14,824,205 $14,737,502 $14,994,000 $15,481,320 State Sources: Basic Instructional Subsidy ...... $7,187,881 $7,972,634 $7,972,634 $8,110,100 $8,200,000 $8,475,000 Charter Schools ...... 131,784 0 0 0 0 0 Tuition-Orphans & Children in Private Homes .. 39,812 19,352 8,945 18,626 30,000 30,000 Special Education ...... 1,412,518 1,412,518 1,412,518 1,412,518 1,412,000 1,552,057 Transportation ...... 1,248,601 1,276,443 1,244,937 1,303,432 1,301,000 1,300,000 Rentals and Sinking Fund Payments ...... 527,878 520,883 517,990 511,693 61,800 Health Services ...... 46,353 44,874 43,842 42,520 46,000 46,000 State Property Tax Reduction Allocation ...... 656,451 656,414 655,568 655,699 655,000 655,664 PA Accountability Grant ...... 356,021 139,876 139,876 139,876 140,000 Revenue from Social Security ...... 480,020 459,201 470,199 439,679 480,500 489,213 Revenue from Retirement Contributions ...... 309,752 650,263 763,272 974,683 1,290,000 1,594,914 Other Sources ...... 7,268 2,800 2,870 2,380 102,600 Total State Sources ...... $12,404,337 $13,155,258 $13,232,651 $13,611,206 $13,616,300 $14,245,448 Federal Sources: Total Federal Sources ...... $1,583,658 $9,134 $0 $0 $0 $0 Other Sources: Total Other Sources ...... $147,480 $0 $0 $24,777 $0 $0 TOTAL REVENUE ...... $29,095,949 $27,244,135 $28,056,856 $28,373,485 $28,610,300 $29,726,768 EXPENDITURES: Instruction ...... $16,816,118 $16,832,728 $17,644,796 $17,041,765 $18,111,000 $18,940,872 Pupil Personnel ...... 726,050 671,666 691,484 641,651 730,000 868,874 Instructional Staff ...... 558,141 539,502 497,702 551,960 875,000 691,018 Administration ...... 1,710,284 1,638,201 1,588,618 1,607,642 1,730,000 2,022,371 Pupil Health ...... 310,860 309,935 350,905 301,237 325,000 354,128 Business ...... 398,610 420,972 428,236 446,553 510,000 519,848 Operation and Maintenance ...... 2,138,952 2,060,811 2,479,052 2,339,188 2,211,000 2,217,250 Student Transportation ...... 1,385,910 1,380,209 1,391,434 1,424,464 1,550,000 1,641,880 Central Support ...... 137,092 156,196 126,045 153,249 210,000 221,287 Other Support ...... 76,425 56,858 58,861 87,584 115,000 107,825 Operation of Noninstructional Services...... 673,439 650,554 676,234 687,847 457,000 546,560 Debt Service ...... 2,092,626 2,094,591 2,147,956 2,099,546 1,761,800 1,695,223 Refund of Prior Receipts ...... 2,964 2,777 877 0 0 0 Fund Transfers ...... 167,500 6,984 9,785 2,721,844 0 292,500 Other Expenditures/Financing Uses ...... 0 0 0 0 0 300,000 TOTAL EXPENDITURES ...... $27,194,971 $26,821,984 $28,091,985 $30,104,530 $28,585,800 $30,419,636 SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES ...... $1,900,978 $422,151 ($35,129) ($1,731,045) $24,500 ($692,868)

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted June 22, 2015. Source: School District Annual Financial Reports and Budget.

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Tax Levy Trends

TABLE 6

SLIPPERY ROCK AREA SCHOOL DISTRICT TAX RATES

Real Estate Wage & Income Real Estate Per Capita Transfer Tax Tax (Mills) ($)(1) (%)(2) (%)(2) 2011 -12 ...... 89.15 10.00 1.00 1.00 2012-13 ...... 89.15 10.00 1.00 1.00 2013-14 ...... 92.77 10.00 1.00 1.00 2014-15 ...... 92.77 10.00 1.00 1.00 2015-16 ...... 95.66 10.00 1.00 1.00 (1)$5.00 under Act 511 and $5.00 under Section 679 of the Public School Code. (2)Subject to sharing with municipality providing they levy the tax. Source: School District Officials.

TABLE 7 SLIPPERY ROCK AREA SCHOOL DISTRICT COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2011 2012 2013 2014 2015 School District ...... 89.1500 89.1500 89.1500 92.7700 92.7700 Brady Township...... 3.1500 3.1500 3.1500 3.1500 6.1500 Franklin Township ...... 3.7500 3.7500 3.7500 3.7500 3.7500 Harrisville Borough ...... 10.5000 10.5000 10.5000 10.5000 10.5000 Mercer Township ...... 6.6000 6.6000 6.6000 6.6000 6.6000 Muddycreek Township ...... 5.0000 5.0000 5.0000 5.0000 5.0000 Portersville Borough ...... 3.0000 4.0000 4.0000 4.0000 4.0000 Prospect Borough...... 1.6900 7.5000 7.5000 7.5000 7.5000 Slippery Rock Borough ...... 19.8700 19.8750 21.8750 21.8750 21.8750 Slippery Rock Township ...... 2.2500 2.2500 2.2500 2.2500 2.2500 West Liberty Borough ...... 7.5000 7.5000 7.5000 7.5000 7.5000 Worth Township ...... 3.8000 3.8000 3.8000 3.8000 3.8000 Butler County ...... 23.6280 24.6280 24.6280 24.6280 24.6280

Source: School District Officials.

Real Property Tax

The real property tax (excluding delinquent collections) produced an estimated $11,284,000 in 2014-15, approximately 39.4% of overall revenue. The tax is levied on August 1 of each year. Taxpayers who remit prior to October 1 receive a 2% discount, and those who remit after November 30 are assessed a 10% penalty.

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TABLE 8 SLIPPERY ROCK AREA SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Value Value Ratio 2010 -11 ...... $866,533,293 $135,090,070 15.59% 2011-12 ...... 878,790,974 137,243,691 15.62% 2012-13 ...... 899,506,286 138,609,613 15.41% 2013-14 ...... 906,203,868 139,535,641 15.40% 2014-15 ...... 956,043,354 140,353,599 14.68%

Compound Average Annual Percentage Change ...... 1.99% 0.77% Source: Pennsylvania State Tax Equalization Board.

TABLE 9 SLIPPERY ROCK AREA SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2013 2013 2014 2014 Market Assessed Market Assessed Value Value Value Value School District ...... $906,203,868 $139,535,641 $956,043,354 $140,353,599 Brady Township...... 57,339,911 8,332,155 59,306,431 8,379,169 Franklin Township ...... 155,368,241 24,067,549 164,644,787 24,393,489 Harrisville Borough ...... 29,194,048 5,142,321 28,168,388 5,149,176 Mercer Township ...... 43,690,867 7,750,837 44,426,931 7,811,117 Muddycreek Township ...... 129,717,841 17,493,095 137,181,451 17,538,412 Portersville Borough ...... 12,793,725 2,124,600 12,074,200 2,116,620 Prospect Borough...... 50,767,940 7,638,964 56,730,586 7,660,370 Slippery Rock Borough ...... 118,271,281 19,531,373 124,700,615 19,678,763 Slippery Rock Township ...... 209,965,988 33,190,333 225,473,401 33,227,943 West Liberty Borough ...... 14,336,977 2,391,192 15,342,885 2,413,012 Worth Township ...... 84,757,049 11,873,222 87,993,681 11,985,528 Butler County ...... 11,837,083,626 1,700,924,919 12,877,455,786 1,724,861,456 Source: Pennsylvania State Tax Equalization Board.

TABLE 10 SLIPPERY ROCK AREA SCHOOL DISTRICT ASSESSMENT BY LAND USE

2010 2011 2012 2013 2014 Residential ...... $89,463,074 $90,643,852 $91,145,055 $91,817,279 $92,397,445 Lots ...... $2,274,033 2,234,643 2,203,034 2,184,574 2,143,405 Industrial ...... 690,571 690,571 690,571 690,571 690,571 Commercial ...... 23,260,344 24,083,681 24,811,213 24,884,673 24,890,713 Agriculture ...... 17,830,843 18,068,479 18,214,214 18,372,818 18,631,959 Minerals ...... 7,520 8,900 14,320 31,090 45,140 Land ...... 1,563,685 1,513,565 1,531,206 1,554,636 1,554,366 Total ...... $135,090,070 $137,243,691 $138,609,613 $139,535,641 $140,353,599

Source: Pennsylvania State Tax Equalization Board.

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TABLE 11 SLIPPERY ROCK AREA SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA

Gross Current Current Year Total Total School Adjusted Collections Collections Collections Collections Year Levy Amount As a Percent Amount(1) As a Percent 2010-11 ...... $11,756,511 $10,356,151 88.09% $11,926,821 101.45% 2011-12 ...... 12,282,239 10,645,602 86.67% 11,245,030 91.56% 2012-13 ...... 12,382,958 10,865,983 87.75% 11,684,195 94.36% 2013-14 ...... 12,469,484 11,096,319 88.99% 11,745,373 94.19% 2014-15 ...... 13,066,086 11,498,156 88.00% 12,282,121 94.00% (1)Includes delinquent real estate only. Note: Beginning in 2008-09 the amount of the Adjusted Levy is reduced by the amount of the Homestead/Farmstead Exemptions. The Adjusted levy shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth. Source: School District Officials.

TABLE 12 SLIPPERY ROCK AREA SCHOOL DISTRICT TEN LARGEST REAL PROPERTY TAXPAYERS, 2015-16

2015-16

Assessed Owner Property/Business Value OCG Slippery Rock LP Apartments / Student Housing $2,853,760 Campus Crest Slippery Rock LLC Apartments / Student Housing 2,754,110 Slippery Rock Real Estate Development Apartments / Student Housing 1,754,940 Stone Crest Development LP Apartments / Student Housing 911,400 Grandview Development Group LP Apartments / Student Housing 732,740 Slippery Rock Hotel Properties LP Hotel 604,640 Stoneworth Apartments LLC Apartments / Student Housing 510,620 Transitions Healthcare Autumn Grove Senior Housing 476,290 Wea Ltd Partnership Manufacturing 456,266 RVRE LP Apartments / Student Housing 441,910 $11,496,676

Source: School District Officials.

Other Taxes

Under Act 511, the School District collected an estimated $1,958,000 other taxes in 2014-15. Among the taxes authorized by Act 511, the Earned Income Tax, Per Capita Taxes, and Real Estate Transfer Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property was $11,472,520.

Per Capita Taxes. A tax of $10.00 ($5.00 under Act 511 and $5.00 under the School Code) is levied on each resident over 18 years old and the School District yielded an estimated $43,000 in 2014-15 or less than one percent of the School District’s total revenue.

Earned Income Tax. A tax of 1.0% (subject to sharing) is levied on the earned income of residents. In 2014-15 the collected portion of this tax was and estimated $1,750,000 or 6.1 percent of the School District’s total revenue.

Real Estate Transfer. A tax of one percent (subject to sharing) of the value of real estate transfers yielded an estimated $165,000 in 2014-15 or less than one percent of the School District’s total revenue.

E-8

DEBT AND DEBT LIMITS

Debt Statement

Table 13 shows the outstanding debt of the School District as of December 1, 2015, including the issuance of the Bonds.

TABLE 13 SLIPPERY ROCK AREA SCHOOL DISTRICT DEBT STATEMENT* (As of December 1, 2015)

Gross

NONELECTORAL DEBT Outstanding General Obligation Notes, Series of 2013 (last maturity 2018) ...... $3,671,945 TOTAL NONELECTORAL DEBT ...... $3,671,945

TOTAL LEASE RENTAL DEBT ...... $0

TOTAL PRINCIPAL OF DIRECT DEBT ...... $3,671,945

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Debt Limit and Remaining Borrowing Capacity

Total Revenues for 2012-13...... $27,538,866 Total Revenues for 2013-14...... 27,837,015 Total Revenues for 2014-15 (est.) ...... 28,548,500 Total ...... $83,924,381

Annual Arithmetic Average (Borrowing Base)...... $27,974,794

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $62,943,286 $3,671,945 $59,271,341

*Does not reflect credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by Commonwealth aid.

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Future Financing

The School District does not currently anticipate issuing additional long-term debt.

LABOR RELATIONS

School District Employees

There are approximately 233 employees of the School District, including 152 teachers, 9 administrators and 72 full- time support personnel including managers, secretaries, maintenance staff, cafeteria staff and teachers' aides.

The School District's teachers are represented by the Slippery Rock Area Education Association, an affiliate of the Pennsylvania State Education Association (PSEA), under a contract which expires on June 30, 2016. The School District's clerical personnel, including aides, are represented by the Pennsylvania School Service Personnel Association, under a contract with the School District which expires June 30, 2018. The cafeteria employees are nonunionized. Custodial and maintenance services are provided by Aramark Facility Services through June 30, 2017.

Pension Program

E-11

2010-11 $692,445 2011-12 $926,687 2012-13 $1,274,877 2013-14 $1,855,682 2014-15 $2,400,317 2015-16 (budgeted) $2,981,000

The School District is current in all payments. The PSERS complete report is available on the PSERS website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

The Board of School Directors is contractually obligated to permit any professional employee who retires with a minimum of 25 years of employment in Pennsylvania public schools and has 20 years of employment with the District to continue group insurance coverage to age 65. These professional employees are provided with post-retirement health care and dental benefits, in accordance with the collective bargaining agreement between the District and the Slippery Rock Education Association. Coverage is limited to the eligible employee and spouse but the District's cost is limited to the premium for employee/spouse coverage and terminates upon eligibility for Medicare. The District will pay for such coverage for a period not to exceed seven years. A bi-annual actuarial valuation is made to determine whether the contributions are sufficient to meet the plan obligations. The latest actuarial valuation was made July 1, 2007. The post-retirement plan does not issue stand-alone financial reports.

The contribution requirements of plan members and the District are established and may be amended by the District. The District determines the required contribution using the level dollar method of amortization.

Membership in the plan consisted of the following at July 1, 2007, the date of the last actuarial valuation.

Retirees and beneficiaries receiving benefits 22 Active plan members 252 274

The District's annual other post-employment benefit (OPEB) cost (expenses) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The actuarial accrued liability as of July 1, 2007 is estimated to be $5,491,385. The District's contributions represent payments made for premiums for insured individuals.

The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation was as follows:

Percentage of Fiscal Year Annual OPEB Employer Annual OPEB Net OPEB Ending Cost Contributions Cost Contributed Obligation 6/30/2014 $813,476 $731,016 89.9% $82,460 6/30/2013 763,827 582,008 76.2% 181,819 6/30/2012 717,209 539,983 75.3% 177,226 6/30/2011 673,435 439,856 65.3% 233,579 6/30/2010 626,452 331,298 52.9% 295,154 6/30/2009 542,089 222,443 41.0% 319,646 Accumulated net OPEB obligation $1,289,884

E-12

After evaluating various funding alternatives, the District chose to fund its OPEB obligations through a thirty-year level percent funding arrangement. That arrangement indicated an annual required contribution of $813,476.

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

CONTINUING DISCLOSURE UNDERTAKING

Existing Continuing Disclosure Filing History

Fiscal Year Filing Financial Statements Budget Operating Data Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2] 6/30/2010 12/31/2010 3/21/2011 EP443371 3/21/2011 EP443371 3/21/2011 EP443371

6/30/2011 12/31/2011 2/29/2012 EP507887 2/29/2012 EP507887 2/29/2012 EP507887

6/30/2012 12/31/2012 2/7/2013 EA440962 11/12/2015 ES605264 2/7/2013 EA440962

6/30/2013 12/31/2013 1/22/2014 EA487498 1/22/2014 EA487498 1/22/2014 EA487498

6/30/2014 12/31/2014 1/22/2015 EA566112 1/22/2015 EA566135 1/22/2015 EA566107

Notes [1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2010, the School District filed the audited financial statements, budget and operating data on March 21, 2011.

For fiscal year ending June 30, 2011, the School District filed the audited financial statements, budget and operating data on February 29, 2012.

For fiscal year ending June 30, 2012, the School District filed the audited financial statements and operating data on February 7, 2013 and the budget report on November 12, 2015.

For fiscal year ending June 30, 2013, the School District filed the audited financial statements, budget and operating data on January 22, 2014.

For fiscal year ending June 30, 2014, the School District filed the audited financial statements, budget and operating data on January 22, 2015.

E-13

Future Continuing Disclosure Compliance

E-14

APPENDIX F

SOUTH BUTLER SCHOOL DISTRICT Butler County, Pennsylvania

Descriptive, Financial and Economic Information

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

THE SCHOOL DISTRICT

Introduction

South Butler County School District, located in a portion of Butler County, Pennsylvania (the “School District”) is comprised of the Townships of Clinton, Jefferson, Penn and Winfield, along with the Borough of Saxonburg.

The School District is located in the southeast corner of Butler County, approximately 40 miles north of the City of Pittsburgh and 90 miles south of the City of Erie. The School District is bordered on the east by Armstrong County and on the south by Allegheny County. The School District encompasses a combined land area of 96.7 square miles, serving a 2010 U.S. census population of 18,499.

Administration

School Facilities

The School District is currently organized on the following grade level structure: K-3, 4-5, 6-8 and 9-12. The School District operates two elementary and two secondary school building facilities. The following table depicts the component elements of the existing physical plant of the School District.

TABLE 1 SOUTH BUTLER COUNTY SCHOOL DISTRICT SCHOOL FACILITIES

Original Addition/ Rated Construction Renovation Pupil 2014-15

Building Date Date(s) Grades Capacity Enrollment Elementary: South Butler Primary ...... 2002 K-3 900 845

South Butler Intermediate Elementary ...... 1971 2002 4-5 450 343

Secondary: Knoch Middle ...... 1996 1996 6-8 1,300 608 Knoch Senior High ...... 1958 1963, 1996 9-12 900 958 Source: School District Officials.

Enrollment Trends

The following Table 2 presents recent trends in school enrollment and projections of enrollment for the next four years, as prepared by the School District's administrative officials.

TABLE 2 SOUTH BUTLER COUNTY SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School (K-5) (6-12) School (K-5) (6-12) Year Elementary Secondary Total Year Elementary Secondary Total 2010-11 1,049 1,611 2,660 2015-16 914 1,539 2,453 2011-12 1,036 1,600 2,636 2016-17 915 1,466 2,381 2012-13 1,022 1,587 2,609 2017-18 861 1,463 2,324 2013-14 971 1,589 2,560 2018-19 845 1,437 2,282 2014-15 960 1,566 2,526 Source: Actual/Projected Enrollments, School District Officials.

F-1

SCHOOL DISTRICT FINANCES

Introduction

Financial Reporting

The financial statements of the School District are prepared in accordance with accounting principles generally accepted in the United States of America. The School District’s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide and proprietary fund financial statements apply Financial Accounting Standards Board pronouncements and Accounting Principles Board opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The government wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Its financial statements are audited by an independent certified public accountant, as required by Commonwealth law. Mark C. Turnley, Certified Public Accountant, Rochester, Pennsylvania, currently serves as the School District Auditor.

F-2

Summary and Discussion of Financial Results

A summary of the General Fund balance sheet and changes in fund balances is presented in Table 3 and 4 which follow. Table 5 shows audited revenue and expenditures for 2011 through 2014, estimated revenues and expenditures for 2014-15 and the budget amounts for 2015-16. The budget for 2015-16 projects revenue of $34,036,357 and expenditures of $35,481,857.

TABLE 3 SOUTH BUTLER COUNTY SCHOOL DISTRICT SUMMARY OF COMPARATIVE GENERAL FUND BALANCE SHEET (Fiscal Years Ending June 30)

2011 2012 2013 2014 ASSETS Cash and Cash Equivalents...... $3,447,633 $3,935,942 $6,027,287 $3,031,920 Investments ...... 0 0 0 2,804,166 Taxes Receivable ...... 733,798 753,928 607,202 616,720 Due from Other Funds ...... 21,231 14,801 105,431 105,431 Due from Other Government ...... 3,168,780 2,682,015 994,884 1,228,846 Other Receivables ...... 42,800 8,327 23,014 53,985 Inventories ...... 176,895 162,880 144,468 150,152 Prepaid Expenses/Expenditures ...... 8,733 24,794 79,114 40,478 TOTAL ASSETS ...... $7,599,870 $7,582,687 $7,981,400 $8,031,698

LI ABILITIES Due to Other Funds ...... $140,298 $0 $90,933 $113,123 Due to Other Governments ...... 0 0 0 0 Accounts Payable ...... 988,524 518,896 449,884 433,888 Accrued Salaries and Benefits ...... 921,918 1,053,598 1,219,443 1,406,838 Payroll Deductions and Withholdings ...... 145,423 160,049 196,899 195,356 Deferred Revenues ...... 459,409 560,891 537,840 0 Other Current Liabilities ...... 0 0 0 14,120 TOTAL LIABILITIES...... $2,655,572 $2,293,434 $2,494,999 $2,163,325

Deferred Inflows of Resources ...... $0 $0 $0 $512,239

FUND EQUITIES Nonspendable Fund Balance ...... $185,628 $187,674 $223,582 $190,630 Assigned Fund Balance ...... 2,698,739 2,605,022 4,281,734 0 Unassigned Fund Balance ...... 2,059,931 2,496,557 981,085 5,165,404 TOTAL FUND EQUITIES ...... $4,944,298 $5,289,253 $5,486,401 $5,356,034

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND EQUITIES ...... $7,599,870 $7,582,687 $7,981,400 $7,519,359

Source: School District Annual Financial Reports.

F-3

TABLE 4 SOUTH BUTLER COUNTY SCHOOL DISTRICT SUMMARY OF CHANGES IN FUND BALANCE* (Fiscal Years ending June 30)

Actual Estimated Budget 2011 2012 2013 2014 2015(1) 2016(2) Beginning Fund Balance $4,485,104 (3) $4,944,298 $5,279,876 (3) $5,486,401 $5,356,034 $5,529,722 Revenues over (under) Expenditure 459,193 344,955 206,525 (130,368) 173,688 (1,445,500) Ending Fund Balance $4,944,298 $5,289,253 $5,486,401 $5,356,034 $5,529,722 $4,084,222

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (1)Budgeted, as adopted May 21, 2015. (3)Restatement. Source: School District Annual Financial Reports and Budget.

Revenue Sources

The School District received $34,162,178 (estimated) in total revenue for its 2014-15 fiscal year and budgeted revenue of $34,036,357 for its 2015-16 fiscal year. Local revenue sources increased as a share of total revenue in the past five years, from 54.8% in 2010-11 to an estimated 56.8% in 2014-15. Revenue from Commonwealth sources increased as a share of total revenue in the past five years, from 39.1% in 2010-11 to an estimated 41.6% in 2014-15. Federal and other sources decreased as a share of total revenue in the past five years, from 6.2% in 2010-11 to an estimated 1.6% in 2014-15.

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TABLE 5 SOUTH BUTLER COUNTY SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (For years ending June 30)

Estimated Budget REVENUE: 2011 2012 2013 2014 2015(1) 2016(2) Local Sources: Real Estate Taxes (Current) $13,125,204 $14,081,581 $14,710,829 $14,839,205 $14,903,553 $14,965,073 Interim Real Estate Taxes 389,194 75,415 59,393 43,513 44,602 50,000 Public Utility Realty Tax 22,622 22,250 22,564 21,692 22,697 23,000 Payments in Lieu of Current Taxes/ State & Local 172,177 136,376 136,376 136,376 136,376 136,698 Per Capita (Sec. 679) Tax 55,313 54,913 55,136 55,256 55,528 55,750 Total Act 511 Taxes 1,916,397 2,012,738 2,365,044 2,531,975 55,528 2,645,750 Delinquent Taxes 1,007,215 841,627 737,388 592,632 661,488 663,550 Earnings on Investments 11,853 2,342 5,198 50,360 56,461 52,030 Revenue from Student Activities 71,435 79,841 104,790 111,680 39,020 169,000 State Rev. Rcvd. from Other PA Public Schools 25,000 0 0 0 0 0 Federal Rev. Rcvd. from Other PA Public Schools 378,035 0 0 0 392,781 0 Federal IDEA Pass Through Revenue 74,126 411,792 382,958 376,660 0 380,000 Rentals 24,548 662,024 57,991 11,614 17,141 12,000 Contributions and Donations from Private Sources 7,012 0 21,155 34,003 118,670 0 Tuition 8,375 8,125 7,750 9,250 9,000 50,000 Receipts from Other LEAS in PA - Education 5,699 7,853 18,581 18,852 18,400 28,000 Refunds of Prior Years' Expenditures 62,586 80,711 61,412 31,000 77,669 0 All Other Local Revenues Not Specified 233,138 126,026 142,510 136,889 2,794,420 158,000 Total Local Sources $17,589,930 $18,603,612 $18,889,075 $19,000,957 $19,403,333 $19,388,851 State Sources: Basic Instructional Subsidy $6,547,071 $7,238,729 $7,237,497 $7,381,767 $7,323,048 $7,758,180 Charter Schools 139,210 0 0 0 0 0 Tuition-Orphans & Children in Private Homes 40,411 33,110 22,620 44,925 36,439 0 Special Education 1,430,756 1,430,756 1,430,728 1,430,737 1,445,153 1,515,089 Transportation 1,937,014 1,844,210 1,706,147 1,654,772 1,695,223 1,600,000 Rentals and Sinking Fund Payments 523,391 596,428 583,675 573,484 585,426 493,000 Health Services 56,385 54,826 54,998 54,159 51,420 55,000 State Property Tax Reduction Allocation 594,861 594,828 594,806 594,902 595,036 594,927 Safe Schools 0 0 0 23,600 20,863 0 PA Accountability Grant 328,397 129,023 129,023 129,023 263,402 0 Revenue from Social Security 532,389 539,544 525,687 493,080 509,266 530,802 Revenue from Retirement Contributions 415,511 632,222 881,427 995,374 1,683,802 1,765,508 Other Sources 12,660 2,000 0 0 2,000 0 Total State Sources $12,558,056 $13,095,677 $13,166,608 $13,375,822 $14,211,078 $14,312,506 Federal Sources: Total Federal Sources $1,978,582 $460,635 $391,285 $333,876 $321,266 $335,000 Other Sources: Total Other Sources $0 $2,260 $0 $0 $226,500 $0 TOTAL REVENUE $32,126,567 $32,162,184 $32,446,968 $32,710,654 $34,162,178 $34,036,357

EXPENDITURE S: Instruction $17,017,267 $16,808,608 $17,486,212 $17,903,780 $18,246,193 $18,722,989 Pupil Personnel 827,951 1,023,520 976,715 805,147 792,814 895,165 Instructional Staff 1,182,297 1,027,114 1,125,028 1,488,862 1,560,181 1,365,434 Administration 1,977,715 2,107,305 2,174,123 2,139,187 2,113,212 2,252,075 Pupil Health 294,335 319,630 339,862 358,046 311,974 311,647 Business 408,340 433,903 569,277 420,729 398,644 442,417 Operation and Maintenance 2,757,549 2,582,406 2,700,465 2,817,457 2,882,857 2,955,505 Student Transportation 2,695,934 2,656,776 2,724,131 2,645,302 2,548,140 2,901,430 Central Support 241,067 236,790 243,141 279,169 264,116 266,848 Other Support 40,413 38,346 37,381 39,899 0 38,114 Operation of Noninstructional Services 787,312 860,024 903,937 920,350 970,015 972,255 Debt Service 2,526,196 2,933,434 2,913,012 2,945,246 2,951,234 2,458,478 Refund of Prior Receipts 0 38,463 3,969 7,848 0 0 Fund Transfers 911,000 750,910 43,190 70,000 949,109 1,699,500 Other Expenditures/Financing Uses 0 0 0 0 0 200,000 TOTAL EXPENDITURES $31,667,375 $31,817,229 $32,240,443 $32,841,022 $33,988,490 $35,481,857 SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES $459,193 $344,955 $206,525 ($130,368) $173,688 ($1,445,500)

*Totals may not add due to rounding. (1)Estimated, subject to change and final audit. (2)Budgeted, as adopted May 21, 2015. Source: School District Annual Financial Reports and Budget.

F-5

Tax Levy Trends

TABLE 6

SOUTH BUTLER COUNTY SCHOOL DISTRICT TAX RATES

Real Estate Wage & Income Local Real Estate Per Capita Transfer Tax Tax Services Tax (Mills) ($)(1) (%) (%) ($) 2011 -12 91.275 10.00 0.50 0.50 5.00 2012-13 93.275 10.00 0.50 0.50 5.00 2013-14 93.275 10.00 0.50 0.50 5.00 2014-15 93.275 10.00 0.50 0.50 5.00 2015-16 93.275 10.00 0.50 0.50 5.00

(1)$5.00 under Act 511 and $5.00 under Section 679 of the Public School Code. Source: School District Officials.

TABLE 7 SOUTH BUTLER COUNTY SCHOOL DISTRICT COMPARATIVE REAL PROPERTY TAX RATES (Mills on Assessed Value)

2011 2012 2013 2014 2015 School District ...... 87.6750 91.2750 93.2750 93.2750 93.2750 Clinton Township ...... 4.1300 4.1300 4.1300 4.1300 4.1300 Jefferson Township ...... 1.0000 1.0000 1.0000 1.0000 1.0000 Penn Township ...... 4.9100 5.9400 5.9400 5.9400 5.9400 Saxonburg Borough ...... 18.6600 18.6600 20.6600 20.6600 20.6600 Winfield Township ...... 2.0000 3.0000 3.0000 3.0000 3.0000 Butler County ...... 23.6280 23.6280 24.6280 24.6280 24.6280

Source: School District Officials.

Real Property Tax

The real property tax (excluding delinquent collections) produced an estimated $14,948,154 in 2014-15, approximately 43.8% of overall revenue. The tax is levied on July 1 of each year. Taxpayers who remit prior to October 1 receive a 2% discount, and those who remit after November 30 are assessed a 10% penalty.

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TABLE 8 SOUTH BUTLER COUNTY SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Value Value Ratio 2010 -11 ...... $1,115,246,609 $163,988,714 14.70% 2011-12 ...... 1,158,591,141 169,541,030 14.63% 2012-13 ...... 1,168,869,473 171,495,875 14.67% 2013-14 ...... 1,180,387,100 172,945,080 14.65% 2014-15 ...... 1,223,199,749 173,953,716 14.22%

C ompound Average Annual Percentage Change 1.87% 1.19% Source: Pennsylvania State Tax Equalization Board.

TABLE 9 SOUTH BUTLER COUNTY SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2013 2013 2014 2014 Market Assessed Market Assessed Value Value Value Value School District ...... $1,180,387,100 $172,945,080 $1,223,199,749 $173,953,716 Clinton Township ...... 273,368,562 37,433,088 270,158,453 37,913,024 Jefferson Township ...... 284,587,641 41,563,117 293,912,856 41,745,999 Penn Township ...... 355,340,044 54,126,505 373,620,769 54,382,535 Saxonburg Borough ...... 79,408,074 12,820,435 82,529,299 12,805,613 Winfield Township ...... 187,682,779 27,001,935 202,978,371 27,106,545 Butler County ...... 11,837,083,626 1,700,924,919 12,877,455,786 1,724,861,456 Source: Pennsylvania State Tax Equalization Board.

TABLE 10 SOUTH BUTLER COUNTY SCHOOL DISTRICT ASSESSMENT BY LAND USE

2010 2011 2012 2013 2014 Residential ...... $115,781,544 $116,847,001 $118,273,605 $119,078,300 $119,929,968 Trailers...... $2,351,280 $2,275,592 $2,140,842 $2,128,172 $2,106,664 Lots ...... 2,202,738 2,179,534 2,131,368 2,122,728 2,123,140 Industrial...... 1,685,426 1,159,792 1,265,973 1,265,973 1,273,263 Commercial ...... 17,981,479 23,125,657 23,401,487 23,732,597 23,764,459 Agriculture ...... 21,999,658 21,935,295 22,235,331 22,541,661 22,685,123 Minerals ...... 43,140 44,870 64,420 76,190 91,640 Land ...... 1,943,449 1,973,289 1,982,849 1,999,459 1,979,459 Total ...... $163,988,714 $169,541,030 $171,495,875 $172,945,080 $173,953,716

Source: Pennsylvania State Tax Equalization Board.

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TABLE 11 SOUTH BUTLER COUNTY SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA

Gross Current Current Year Total Total School Adjusted Collections Collections Collections Collections Year Levy Amount As a Percent Amount(1) As a Percent 2010-11 $13,870,458 $13,125,204 94.63% $14,073,928 101.47% 2011-12 14,969,288 14,081,581 94.07% 14,762,278 98.62% 2012-13 15,453,001 14,710,829 95.20% 15,353,930 99.36% 2013-14 15,560,060 14,839,205 95.37% 15,367,946 98.77% 2014-15 15,824,178 14,903,553 94.18% 15,438,830 97.56% (1)Includes delinquent real estate only. Note: Beginning in 2008-09 the amount of the Adjusted Levy is reduced by the amount of the Homestead/Farmstead Exemptions. The Adjusted levy shown excludes the amount payable from the Property Tax and Rent Rebate Program funded pursuant to Act 1 of the Commonwealth. Source: School District Officials.

TABLE 12 SOUTH BUTLER COUNTY SCHOOL DISTRICT TEN LARGEST REAL PROPERTY TAXPAYERS, 2015-16

2015 Assessed

Owner Property/Business Value ALDI, Inc Grocery store warehouse facility $2,856,090 Penn United Technology Tool & Die/Manufacturing 2,282,597 II-VI Industrial Manufacturing 1,506,280 MEDRAD, Inc. Manufacturing 1,146,731 Verbuck LLC Manufacturing 1,127,801 Cygnus Real Estate LLC Manufacturing 715,764 Diehl Realty Auto Dealership 608,243 Gulf Coast Partners Warehouse 526,500 Saxonburg Nominee LP Personal Care Facility 493,670 Armstrong Cement Industrial Manufacturing 414,188 $11,677,864

Source: School District Officials.

Other Taxes

Under Act 511, the School District collected an estimated $2,588,738 other taxes in 2014-15. Among the taxes authorized by Act 511, the Earned Income Tax, Local Services Tax, Per Capita Taxes, and Real Estate Transfer Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property was $14,678,397.

Per Capita Taxes. A tax of $10.00 ($5.00 under Act 511 and $5.00 under the School Code) is levied on each resident over 18 years old and the School District yielded an estimated $55,528 in 2014-15 or less than one percent of the School District’s total revenue.

Earned Income Tax. A tax of 0.5% is levied on the earned income of residents. In 2014-15 the collected portion of this tax was an estimated $2,292,072 or 6.7 percent of the School District’s total revenue.

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Real Estate Transfer. A tax of one-half percent of the value of real estate transfers yielded an estimated $262,477 in 2014-15 or less than one percent of the School District’s total revenue.

Local Services Tax (formerly aka Occupational Privilege Tax and Emergency and Municipal Services Tax). A tax of $5.00 is levied on each person with an occupation. In 2014-15 the School District’s share of the collected portion of this tax yielded an estimated $34,189 or less than one percent of the School District’s total revenue.

DEBT AND DEBT LIMITS

Debt Statement

Table 13 shows the outstanding debt of the School District as of December 1, 2015.

TABLE 13 SOUTH BUTLER COUNTY SCHOOL DISTRICT DEBT STATEMENT* (As of December 1, 2015)

Gross

NONELECTORAL DEBT Outstanding General Obligation Notes, Series of 2015 (last maturity 2020) ...... $8,315,000 General Obligation Bonds, Series of 2006 (last maturity 2017) ...... 3,195,000 TOTAL NONELECTORAL DEBT ...... $11,510,000

TOTAL LEASE RENTAL DEBT ...... $0

TOTAL PRINCIPAL OF DIRECT DEBT ...... $11,510,000

Outstanding Interest Rate Swap Agreement

The Butler County General Authority, on behalf of the School District, entered into a forward starting swap transaction on July 25, 2005 effective on the Series of 2001 call date of October 1, 2006. The School District entered into this swap in connection with the aforementioned $15,070,000 Series of 2006 Auction Rate Bonds. The objective of the interest rate swap was to mitigate future interest rate risk and to lower debt service. The notional maturity schedule of the swap corresponds to the principal amortization schedule of the District’s Series 2006 Bonds with a final maturity of 2017. As previously mentioned herein, the bonds were tendered and remarketed on February 1, 2013 in order to replace the Auction Rate Mode with the Bank Mode and to terminate the Insurance Policy and a Standby Bond Purchase Agreement between the School District and Dexia Credit Local.

Fair Value: The fair market value of the swap, as of June 30, 2014, is calculated to be $323,358, using generally accepted pricing practices, given market conditions as of such date (the School District would pay this amount if the swap was terminated). This amount is reflected as a deferred outflow and corresponding deferred inflow of resources on the statement of net position.

Basis Risk: Under the swap, the School District receives 67% of 1 Month LIBOR plus .15% in exchange for a fixed rate of 3.432%. As a result of the aforementioned remarketing of the 2006 Bonds, the 2006 Bonds now have a variable rate interest rate of 75% of 1 Month LIBOR plus 0.585%. As a result of this remarketing, the basis risk has been mitigated because both the swap receipt and the bond payment are based on LIBOR.

Tax Risk: Since both the variable rates on the bond and swap are based on 1 Month LIBOR, there are no anticipated short-term tax events that would impact the ratio between rate received on the swap and the rate paid on the 2006 Bonds.

Counterparty Risk: Bank of America, N.A. (the Counterparty per the trade confirm) is currently rated “A2” by Moody’s, “A” by Standard & Poor’s and “A” by Fitch.

Termination Risk: The School District or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract.

Rollover Risk: The School District’s exposure to rollover risk is minimal since there is no mandatory tender date on the 2006 Bonds as the variable rate is valid until the maturity date of the 2006 Bonds.

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Credit Risk: The School District is currently rated “A+” by Standard & Poor’s. Bank of America, N.A. (the Counterparty per the trade confirmation) is currently rated “A2” by Moody’s, “A” by Standard & Poor’s and “A” by Fitch.

Debt Limit and Remaining Borrowing Capacity

Total Revenues for 2012-13 ...... $31,863,293 Total Revenues for 2013-14 ...... 32,137,171 Total Revenues for 2014-15 (est.) ...... 33,350,251 Total ...... $97,350,715

Annual Arithmetic Average (Borrowing Base)...... $32,450,238

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $73,013,036 $11,510,000 $61,503,036

* Does not reflect credits against gross indebtedness that may be claimed for a portion of principal of debt estimated to be reimbursed by Commonwealth aid.

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Future Financing

The School District does not currently anticipate issuing additional long-term debt in the next 2-3 years.

LABOR RELATIONS

School District Employees

There are presently approximately 270 full-time employees of the School District, including 185 teachers and administrators, and 85 full-time support personnel including secretaries, maintenance staff, and cafeteria staff.

The professional employees are represented by the South Butler County Education Association (the "Association”), affiliated with the Pennsylvania State Education Association and the National Education Association, under a contract with the School District which expired June 30, 2014. The professional employees continue to work under the expired contract until a new agreement can be reached. The Association is the representative bargaining unit. Professional employees have a right to strike under Act No. 195 of July 23, 1970 if bargaining and mediation do not result in agreement on a new contract and in 2009, the School District's teachers struck for approximately 12 days.

The South Butler County Educational Support Personal PSEA/NEA represents the secretaries and aides for the School District. The expiration date of the current collective bargaining agreement was June 30, 2014. The secretaries and aides continue to work under the expired contract until a new agreement can be reached.

The Service Employees International Union Local 585 AFL/CIO represents the maintenance/custodial personnel for the School District. The expiration date of the current collective bargaining agreement is June 30, 2015.

Pension Program

Beginning July 1, 1976, certain revisions were made in the pension program. The Retirement Board, previously under the Department of Education of the Commonwealth, became an independent agency. However, the program is still guaranteed by the Commonwealth. Currently, each party to the program contributes a fixed percentage of the employee's salary. Employees belonging to the Public School Employees Retirement System (“PSERS”) prior to July 22, 1983 contribute 5.25% of their salary, and employees who joined the PSERS on or after July 22, 1983 contribute 6.25% of their salary. On February 17, 2002, Governor Ridge signed Act 9 which created a new membership class that sets the employee contribution rate at 7.50% of the employee’s salary for those employees hired on or after July 1, 2001. Act 9 also provides an option for those employees hired prior to July 1, 2001 to elect a contribution rate of 6.50%, if they were hired before July 22, 1983, or 7.50% if they were hired on or after July 22, 1983. Act 120 of 2010 was passed by the General Assembly on September 1 and signed by Governor Rendell on November 23, 2010. The benefit reductions contained in this legislation will only impact individuals who become new members of PSERS on or after July 1, 2011. New members will have the option of selecting one of 2 new classes. The members selecting class T-E will contribute a base rate of 7.5% with “shared risk” contribution levels between 7.5% and 9.5% and a pension multiplier of 2.0%. Members selecting class T-F will contribute a base rate of 10.3% with shared risk contribution levels between 10.3% and 12.3% and a pension multiplier of 2.5%. In accordance with Senate Bill 1042 enacted on July 6, 2010, the employer rate was recertified at 5.64% for fiscal year 2010-11, 8.65% for fiscal year 2011-12 and 12.36% for fiscal year 2012-13. The rate for fiscal year 2013-14 has been set at 16.93% of payroll and the rate for fiscal year 2014-15 has been set at 21.40%. The employer contribution rate for fiscal year 2015-2016 will be 25.84%. The rate applies to salary and wages earned from July 1, 2015, through June 30, 2016. This rate was determined by PSERS’ actuary and reflects the rate caps established by Act 120 of 2010. The rate was certified by the PSERS Board of Trustees at its meeting on December 9, 2014. In addition, the employer contribution rate may change if pension legislation is enacted prior to June 30, 2015. The employer contribution rate for fiscal year 2015-2016 consists of 25% for pension costs and 0.84% for premium assistance payments.

If these statutory provisions are not again amended by the General Assembly, Commonwealth and school district contribution rates and costs are projected to grow by a factor of three over the next four years, rising from $1.5 billion in fiscal year 2014 to over S4.3 billion in fiscal year 2017. Various bills and plans to amend the existing statutes have been discussed, proposed or introduced in the General Assembly, but not enacted. Such proposals have included proposals to provide for future employees a defined contribution plan (similar to 401(k) plans utilized in the private sector) and to again defer the escalation of the increased employer contribution rates.

F-11

2010-11 $ 376,469 2011-12 $ 600,294 2012-13 $ 877,620 2013-14 $ 1,416,626 2014-15 (est.) $ 1,683,802 2015-16 (budgeted) $ 1,765,508

The School District is current in all payments. The PSERS complete report is available on the PSERS website on the Internet: www.psers.state.pa.us.

Source: PSERS – Financial Highlights.

Other Post-Employment Benefits

The School District provides post-retirement healthcare benefits for eligible employees, and their spouse, who elect early retirement, until the employee reaches age 65. The early retirement program was established by the authority of the South Butler County School District Board of Education. The program entitles eligible employees to health insurance, prescription and dental benefits.

In addition to the aforementioned benefits, the terms of the collective bargaining agreements between the South Butler County School District and its employees provide for severance pay and early retirement incentives for eligible district employees upon retirement, who meet specified criteria as described in the agreements.

The plan is unfunded and does not issue a publicly available financial report. These benefits are accounted for in accordance with GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.

The contribution requirements of plan members and the School District are established and may be amended by the South Butler County Board of Education. The plan is funded on a pay-as-you-go basis, i.e. premiums are paid to fund the health care benefits provided to current retirees. There are no assets that have been segregated and restricted to provide for retiree medical benefits. During the 2013-2014 fiscal year the South Butler County School District paid premiums of approximately $396,717 (net of PSERS contribution) for 39 participants.

The District’s annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation is as follows:

Fiscal Annual Year OPEB Percentage Net OPEB Ended Cost Contributed Obligation 6/30/2014 925,000 54.4 1,249,734 6/30/2013 878,000 55 827,747 6/30/2012 858,000 79.2 432,334 6/30/2011 821,000 91.3 254,018 6/30/2010 892,000 87.9 182,000

______Source: School District Audit Report.

F-12

CONTINUING DISCLOSURE UNDERTAKING

Existing Continuing Disclosure Filing History

Fiscal Year Filing Financial Statements Budget Operating Data Ending Deadline [1] Filing Date EMMA ID [2] Filing Date EMMA ID [2] Filing Date EMMA ID [2] 6/30/2010 12/27/2010 9/21/2011 ER437620 5/11/2015 ER700025 5/13/2015 ER701352

6/30/2011 12/27/2011 5/11/2015 ER700013 5/11/2015 ER700027 5/13/2015 ER701352 [3] 6/30/2012 12/27/2012 12/27/2012 EP592973 12/27/2012 EP592973 5/13/2015 ER701352 [4] 6/30/2013 12/27/2013 12/20/2013 ER595769 12/20/2013 ER595773 5/13/2015 ER701352 [5] 6/30/2014 12/27/2014 12/31/2014 ER667404 5/11/2015 ER700029 5/13/2015 ER701352

Notes

[1] For these purposes, assumes the shortest filing deadline of the School District’s previous Continuing Disclosure Agreements

[3] Filing of the District’s PDE-2057 Annual Financial Report. Audited Financial Statements posted on 2/14/2013 under EMMA ID EA443953.

[4] Filing of the District’s PDE-2057 Annual Financial Report. Audited Financial Statements posted on 2/7/2014 under EMMA ID EA492178.

[5] Filing of the District’s PDE-2057 Annual Financial Report. Audited Financial Statements posted on 5/11/2015 under EMMA ID ER700015.

Based on the information above, the School District’s annual financial and operating filing history over the past five (5) years can be summarized as follows:

For fiscal year ending June 30, 2010, the School District filed the audited financial statements on September 21, 2011, the budget report on May 11, 2015 and the operating data on May 13, 2015.

For fiscal year ending June 30, 2011, the School District filed the audited financial statements and the budget report on May 11, 2015 and the operating data on May 13, 2015.

For fiscal year ending June 30, 2012, the School District filed its PDE-2057 Annual Financial Report and budget report on December 27, 2012. The audited financial statements were filed on February 14, 2013 and the operating data on May 13, 2015.

For fiscal year ending June 30, 2013, the School District filed its PDE-2057 Annual Financial Report and budget report on December 20, 2013. The audited financial statements were filed on February 7, 2014 and the operating data on May 13, 2015.

For fiscal year ending June 30, 2014, the School District filed its PDE-2057 Annual Financial Report on December 31, 2014. The audited financial statements and budget were filed on May 11, 2015 and the operating data on May 13, 2015.

Failure to Provide Annual Financial Information

As outlined in the table above, the School District failed to provide certain annual financial information in a timely manner during the past (5) five years. The School District filed a “Failure to Provide Annual Financial Information” notice to EMMA on May 11, 2015.

Bond Insurance Rating Downgrades and Upgrades by S&P and/or Moody’s

Future Continuing Disclosure Compliance

F-14

APPENDIX G

BUTLER COUNTY, PENNSYLVANIA

Descriptive, Financial and Economic Information

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Introduction

The County of Butler was created in 1800 from part of Allegheny County and became the 28th county in Pennsylvania. It has a land area of approximately 789 square miles and a population in excess of 180,000. The County seat is the City of Butler. There are fifty-seven (57) political subdivisions, consisting of thirty-three (33) townships, twenty-three (23) boroughs and (1) third-class city.

Population

Table A-1 below shows recent population trends for the County and the Commonwealth of Pennsylvania. The County’s population increased between 2000 and 2010. Table A-2 shows 2010 age composition and average number of persons per household in the County and for the Commonwealth.

TABLE A-1

RECENT POPULATION TRENDS

Compound Average Annual Percentage Change

2000 2010 2000-2010 Butler County ...... 174,083 183,862 0.55% Pennsylvania ...... 12,281,054 12,702,379 0.34%

Source: U.S. Bureau of the Census, Decennial Census and Pennsylvania State Data Center, 2000 & 2010 General Population and Housing Characteristics: Pennsylvania.

TABLE A-2

AGE COMPOSITION

0-17 18-64 65+ Years Years Years Household Butler County ...... 22.4% 62.4% 15.1% 2.98 Pennsylvania ...... 22.0% 62.6% 15.4% 2.45

Source: U.S. Bureau of the Census, 2010 Census Summary File 1.

G-1

Employment

Overall employment data is not compiled for the County but is compiled for the Pittsburgh Metropolitan Area (an area which includes the County).

TABLE A-3

Pittsburgh Metropolitan Statistical Area (Allegheny, Armstrong, Beaver, Butler, Fayette, Washington, and Westmoreland Counties) August 2015

Industry Employment ESTABLISHMENT DATA Aug 2015 Jul 2015 Jun 2015 Aug 2014 Jul 2015 Aug 2014 Total Nonfarm 1,184,300 1,192,800 1,200,000 1,157,700 -8,500 26,600 Total Private 1,075,800 1,083,100 1,083,100 1,049,000 -7,300 26,800 Goods Producing 163,400 163,500 162,200 159,600 -100 3,800 Natural Resources and Mining 13,300 13,200 13,000 12,200 100 1,100 Construction 61,700 61,600 60,100 58,100 100 3,600 Specialty trade contractors 36,600 36,300 35,500 33,700 300 2,900 Manufacturing 88,400 88,700 89,100 89,300 -300 -900 Durable Goods 64,900 65,200 65,500 65,500 -300 -600 Primary metal mfg. 12,400 12,400 12,500 12,500 0 -100 Iron and steel mills and ferroalloy mfg. 6,800 6,800 6,800 6,800 0 0 Non-Durable Goods 23,500 23,500 23,600 23,800 0 -300 SERVICE-PROVIDING 1,020,900 1,029,300 1,037,800 998,100 -8,400 22,800 PRIVATE SERVICE-PROVIDING 912,400 919,600 920,900 889,400 -7,200 23,000 Trade, Transportation, and Utilities 219,500 220,800 223,200 213,400 -1,300 6,100 Wholesale Trade 47,400 47,600 47,400 45,700 -200 1,700 Retail Trade 128,600 129,900 130,600 126,800 -1,300 1,800 Building material and supplies dealers 8,100 8,600 8,800 8,000 -500 100 Food and beverage stores 24,000 24,100 24,200 24,500 -100 -500 Clothing and clothing accessories stores 11,600 11,600 11,400 11,600 0 0 General merchandise stores 23,500 23,600 23,700 24,000 -100 -500 Department stores 10,600 10,600 10,700 11,200 0 -600 Transportation, Warehousing and Utilities 43,500 43,300 45,200 40,900 200 2,600 Utilities 5,800 5,800 5,900 5,400 0 400 Transportation and Warehousing 37,700 37,500 39,300 35,500 200 2,200 Trucking, couriers & messengers, & warehousing 22,500 22,300 22,300 21,600 200 900 Information 18,300 18,400 18,400 18,200 -100 100 Financial Activities 72,200 73,000 71,200 71,600 -800 600 Finance and Insurance 56,700 57,200 56,800 57,200 -500 -500 Credit intermediation and related activities 27,700 27,800 27,700 28,100 -100 -400 Depository credit intermediation 24,400 24,500 24,400 24,800 -100 -400 Insurance carriers and related activities 22,800 22,800 22,700 22,400 0 400 Professional and Business Services 179,500 180,900 180,200 178,500 -1,400 1,000 Professional and technical services 84,300 84,400 84,100 80,000 -100 4,300 Architectural and engineering services 19,400 19,400 19,400 19,100 0 300 Scientific research and development services 7,400 7,400 7,400 7,200 0 200 Management of companies and enterprises 39,700 40,000 40,200 39,800 -300 -100 Administrative and waste services 55,500 56,500 55,900 58,700 -1,000 -3,200 Administrative and support services 51,300 52,600 51,800 55,000 -1,300 -3,700 Employment services 17,900 17,900 17,800 17,900 0 0 Educational and Health Services 241,200 242,100 245,700 233,300 -900 7,900 Educational services 46,300 47,300 48,100 43,300 -1,000 3,000 Colleges and universities 33,000 33,000 32,800 31,400 0 1,600

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Health care and social assistance 194,900 194,800 197,600 190,000 100 4,900 Ambulatory health care services 71,600 71,000 71,800 67,500 600 4,100 Offices of physicians 25,900 25,900 26,200 25,500 0 400 Hospitals 54,900 55,000 55,800 54,800 -100 100 General medical and surgical hospitals 49,300 49,500 50,100 49,300 -200 0 Nursing and residential care facilities 37,200 37,300 38,000 37,300 -100 -100 Social assistance 31,200 31,500 32,000 30,400 -300 800 Leisure and Hospitality 130,000 131,300 129,700 122,100 -1,300 7,900 Accommodation and food service 102,600 102,700 101,900 96,500 -100 6,100 Food services and drinking places 93,600 93,500 93,700 87,100 100 6,500 Full time service restaurants 46,100 46,200 46,600 44,300 -100 1,800 Limited-service eating places 35,700 35,400 34,900 32,200 300 3,500 Other Services 51,700 53,100 52,500 52,300 -1,400 -600 Government 108,500 109,700 116,900 108,700 -1,200 -200 Federal Government 17,700 17,800 17,700 17,500 -100 200 State Government 14,100 14,400 14,300 13,700 -300 400 Local Government 76,700 77,500 84,900 77,500 -800 -800 Local government educational services 41,200 41,400 49,200 42,100 -200 -900 Other Local Government 35,500 36,100 35,700 35,400 -600 100

Data benchmarked to March 2014

Source: Pennsylvania State Employment Service.

Major Employers

Major employers located within Butler County include:

Owner Number of Employees Westinghouse Electric Co. 3,400 U.S. Government 2,212 Butler Health System 2,013 Slippery Rock University 1,500 Commonwealth of PA 1,425 AK Steel Corp. 1,360 Lutheran Seniorlife 1,100 Butler County Community College 971 Butler Area School District 938 US Investigations Service 916 MSA (Mine Safety Appliances) 900 Wal-Mart Stores 900 County of Butler 890 Seneca Valley School District 850 Concordia Lutheran Ministries 703

Source: Pittsburgh Business Times, 2014 Book of Lists

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Table A-4 shows recent trends in labor force, employment, and unemployment for Butler County. The unemployment rate for the County has been lower than the State.

TABLE A-4

RECENT TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT* (BUTLER COUNTY)

Compound Average Annual % 2010 2011 2012 2013 2014 2015(1) Rate Butler County Civilian Labor Force (000) 95.8 96.6 98.0 97.9 96.9 99.1 0.68% Employment (000) 88.7 90.2 91.7 91.8 92.0 94.2 1.21% Unemployment (000) 7.1 6.4 6.3 6.1 4.9 4.9 -7.15% Unemployment Rate 7.4 6.7 6.5 6.2 5.0 5.0

Pennsylvania Civilian Labor Force (000) 6,381.0 6,395.0 6,465.0 6,442.0 6,378.0 6,444.0 0.20% Employment (000) 5,841.0 5,888.0 5,957.0 5,964.0 6,009.0 6,089.0 0.84% Unemployment (000) 540.0 507.0 508.0 478.0 370.0 355.0 -8.05% Unemployment Rate 8.5 7.9 7.9 7.4 5.8 5.5 (1)As of August 2015. Source: Department of Labor & Industry, Pennsylvania State Employment Service.

Income

The data on Table A-5 show recent trends in per capita income for the County and the Commonwealth over the 2000- 2010 period.

TABLE A-5

RECENT TRENDS IN PER CAPITA INCOME*

Compound Average Annual Percentage Change 2000 2010 2000-2010 Butler County ...... 20,794 28,446 3.18% Pennsylvania ...... 20,880 26,678 2.48%

*Income is defined by the Bureau of the Census as the sum of wage and salary income, non-farm self-employment income, net self-employment income, Social Security and Railroad retirement income, public assistance income, interest, dividends, pensions, etc. before deductions for personal income taxes, Social Security, etc. Source: Pennsylvania State Data Center and U.S. Census Bureau, 2006-2010 American Community Survey.

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Commercial Activity

Table A-6 shows 2010 through 2014 trends for retail sales in Butler County, the MSA and the State.

TABLE A-6

TOTAL RETAIL SALES (000)

2010 2011 2012 2013 2014 Butler County ...... $2,787,230 $3,019,562 $3,018,526 $2,907,477 $2,909,842 MSA ...... 32,535,980 35,375,721 35,361,907 36,355,621 36,310,431 Pennsylvania ...... 174,483,292 188,193,104 188,149,727 187,412,600 199,975,257

Source: Sales and Marketing Management Magazine.

Educational Institutions

Slippery Rock University, with an enrollment of over 8,000 students, is located in Slippery Rock Borough in the northwestern section of the County.

The Butler County Community College opened in 1966. Several major universities and colleges are within the region surrounding the County. These include Carnegie Mellon University, the University of Pittsburgh and Duquesne University.

Other colleges and universities include Chatham College, Geneva College, Grove City College, Point Park University, Robert Morris University, La Roche College, Carlow University, Clarion University, Indiana University of Pennsylvania, and several satellite campuses of Penn State University.

Medical Facilities

The Butler Memorial Hospital, a 350 bed acute-care general hospital, serves the County. UPMC, in Cranberry Township, serves residents in the southwestern section of the County.

The 424 bed Butler Veterans Administration Hospital is located just outside the City of Butler. The county operates Sunnyview Nursing and Rehabilitation Center, a 220 bed skilled nursing care facility, located in Butler Township. Other long- term health care facilities include St. John Specialty Care Center in Mars and Concordia Lutheran Ministries in Cabot.

Transportation

Several major highways traverse the County. Interstate 80 (east-west) runs along the northern border of the County, and Interstate 79 (north-south) runs through the western sections; the Pennsylvania Turnpike (Interstate 76) (east-west) runs along the southern border of the County. Several major roads which connect with the interstate highway run in all directions from the City of Butler.

Railroads serving the County include the Buffalo and Pittsburgh, the Bessemer and Lake Erie, Norfolk Southern, and the CSX Railroad.

The Pittsburgh International Airport provides commercial air service. The airport is less than a one-hour drive for most County residents. Local airports include the Butler County Airport, Zelienople Municipal Airport, Butler Farm Show (Roe) Airport, and Lakehill Airport.

Numerous motor freight carriers doing business in the County provide commercial trucking service. The County has access to the nation’s largest inland waterway through the Allegheny River port in Freeport, Armstrong County. Freeport sits at the southeastern point of the County.

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APPENDIX H

FORM OF BOND COUNSEL OPINION

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FORM OF OPINION OF BOND COUNSEL

The form of the approving legal opinion of Dinsmore & Shohl LLP, Bond Counsel, is set forth below. The actual opinion will be delivered on the date of delivery of the Bonds and may vary from the form set forth to reflect circumstances both factual and legal at the time of such delivery. Bond Counsel has no duty, and has assumed no obligation, to revise, update or supplement its opinion to address or reflect a change or changes in such circumstances subsequent to the date of delivery of the Bonds, whether or not it has notice or obtains knowledge of the same, and whether or not this Official Statement shall be recirculated. The approving legal opinion of Bond Counsel represents its considered professional judgment, following a comparison of relevant factual certifications to applicable law. Such opinion is not a guarantee of a particular result, nor is such opinion binding on any administrative or judicial tribunal.

We have acted as Bond Counsel in connection with the issuance by the Butler County Area Vocational-Technical School Authority (the "Authority") of $7,735,000, aggregate principal amount, of the Authority's School Lease Revenue Bonds, Series of 2015 (Butler County Area Vocational-Technical School Project) (the "Bonds"), being issued under the provisions of the Municipality Authorities Act, as amended (the "Act"), of the Commonwealth of Pennsylvania (the "Commonwealth"), and pursuant to a Trust Indenture, dated as of August 23, 2010, as supplemented by a First Supplemental Trust Indenture (the “First Supplemental Indenture”) dated as of December 29, 2015 (collectively, the "Indenture") between the Authority and Wells Fargo Bank, National Association, as trustee (the ''Trustee'').

The Bonds are being issued to (a) refund the Authority’s School Lease Revenue Bonds, Series of 2010, the proceeds of which were used to finance the construction of additions and improvements to a vocational-technical school building and facilities occupied by the Butler County Area Vocational- Technical School (the "School"), located in Butler, Pennsylvania, and to pay the costs and expenses of the financing; and (collectively, the “2010 Project”) (b) to pay the costs of issuing the Bonds (collectively, the "Project").

The proceeds of the Bonds are being provided by the Authority to the School's governing body, the Butler County Area Vocational-Technical School Board (the "Joint Board"), pursuant to a Lease Agreement dated as of August 23, 2010, , as supplemented by a First Supplemental Lease Agreement (the “First Supplemental Lease”) dated as of December 29, 2015 between the Authority, as lessor, and the Joint Board and each of the Butler Area School District, Karns City Area School District, Mars Area School District, Moniteau School District, Seneca Valley School District, Slippery Rock Area School District and South Butler County School District, each located in Butler County, Pennsylvania (collectively, the "Participating Districts"), as lessees (collectively, the "Lease”). In consideration of the possession of the school building and the prior improvements made thereto, the Joint Board and the Participating School Districts have agreed to certain payments and/or repayments to the Authority under the Lease. In the case of the Seneca Valley School District, such payment was evidenced by a one-time capital contribution, representing its share of the capital costs of the 2010 Project. In the case of each of the other Participating School Districts except Seneca Valley School District (such remaining six School Districts, the “Obligated School Districts”), such repayment shall be evidenced by their agreement, under the Lease, to make specified lease rental payments to the Authority in the amounts and on the dates required to pay the principal of and interest due on the Bonds.

Under the Indenture, the Authority has pledged and assigned to the Trustee as security for the payment of the Bonds all revenues of the Authority derived from, and all right, title and interest of the Authority in and to, the Lease (except certain rights to indemnification and to the payment of the Authority's fees and expenses thereunder).

H-1 As Bond Counsel to the Authority, we have examined certified copies of the proceedings of the Authority relative to the issuance of the Bonds, executed counterparts of the Indenture and of the Lease, the executed Bonds, a non-arbitrage certificate executed by the Authority and usual closing certificates and documents, together with such statutes and other materials as we have deemed necessary and appropriate to render the opinion set forth herein. In rendering such opinion, we have examined and relied upon the opinions of the solicitors to the Joint Board and each of the Participating School Districts with respect to the due execution and delivery of the Lease. We have also examined a specimen of the executed Bonds in order to ensure that all Bonds will be issued in registered form as required by the Indenture.

We have also relied upon covenants of the Authority, the Joint Board and the Participating School Districts set forth in the Indenture and the Lease, respectively, wherein the Authority and the Joint Board agree to comply with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations in effect thereunder, in order to preserve the exclusion from gross income for federal income tax purposes of interest on 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 such facts by independent investigation.

Based upon the foregoing, we are of the opinion that:

1. The Authority is a body corporate and politic, is validly existing under the laws of the Commonwealth and has the corporate power and lawful authority (a) to execute and deliver the First Supplemental Indenture and the First Supplemental Lease, and (b) to issue and deliver the Bonds.

2. Each of the First Supplemental Indenture and the First Supplemental Lease has been duly executed and delivered by the Authority and, assuming due authorization, execution and delivery of the First Supplemental Indenture by the Trustee and of the First Supplemental Lease by the Joint Board and the Participating School Districts, each is a legal, valid and binding obligation of the Authority enforceable against it in accordance with its terms.

3. The issuance and sale of the Bonds have been duly authorized by the Authority and the Bonds have been duly executed and delivered by the Authority. Assuming their due authentication by the Trustee, the Bonds are valid, binding and enforceable obligations of the Authority and are entitled to the benefit and security of the Indenture, to the extent indicated therein.

4. The Indenture creates the valid pledge it purports to create in respect of the revenues of the Authority payable by the Joint Board and the Obligated School Districts in respect of the Bonds under the Lease.

5. Under the laws of the Commonwealth as presently enacted and construed, the Bonds are exempt from personal property taxes in the Commonwealth and interest on the Bonds is exempt from the Commonwealth's Personal Income Tax and the Commonwealth's Corporate Net Income Tax.

6. Under present statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for purposes of federal income taxation and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although it should be noted that in the case of corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. The opinions expressed in the preceding sentence are subject to the condition that the Authority and

H-2 the Joint Board comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes, as the Authority and the Joint Board have covenanted to do in the Indenture, in the Lease and other aforementioned documents. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income retroactive to the date of issuance of the Bonds.

We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

It is to be understood that rights of holders of the Bonds and the enforceability thereof and of the other documents mentioned herein may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

In rendering the foregoing opinions, we advise you that the Bonds do not pledge the general credit of the Authority or the general credit or taxing power of the Commonwealth or of any political subdivision thereof, including the Participating School Districts, nor shall the Bonds be deemed obligations of the Commonwealth or of any political subdivision thereof including the Participating School Districts.

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APPENDIX I

FORM OF CONTINUING DISCLOSURE CERTIFICATE

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FORM OF

CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered this 29th day of December, 2015 by the Joint Operating Committee (the "JOC") of the Butler County Area Vocational-Technical School Board (the "Joint Board") of the Butler County Area Vocational- Technical School ("BCAVTS") as disclosure agent on behalf of each of the Joint Board and the Obligated School Districts (hereafter defined) in connection with the issuance of the Butler County Area Vocational-Technical School Authority (the "Authority") School Lease Revenue Bonds (Butler County Area Vocational-Technical School Project), Series of 2015 (the "Bonds"). The Bonds are secured by payments to the Authority by the Joint Board and each of BCAVTS' seven participating districts under the terms of a of Lease Agreement, dated as of August 23, 2010, as supplemented by First Supplemental Lease Agreement dated as of the date of delivery of the Bonds, by and among the Authority, the Joint Board, the Butler Area School District, Karns City Area School District, Mars Area School District, Moniteau School District, Seneca Valley School District, Slippery Rock Area School District, and South Butler County School District. For the purposes of this Disclosure Certificate, the Butler Area School District, Karns City Area School District, Mars Area School District, Moniteau School District, Slippery Rock Area School District, and South Butler County School District shall be collectively referred to as the Obligated School Districts.

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the JOC, on behalf of the Joint Board and the Obligated School Districts, for the benefit of the holders or beneficial owners of the Bonds and in order to assist the Underwriter (hereinafter defined) in complying with the Rule (hereinafter defined).

SECTION 2. Definitions. Unless otherwise defined in this Certificate, the following capitalized terms shall have the following meanings:

"Annual Report" shall mean any Annual Report provided by the JOC pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Business Day" shall mean a day other than a Saturday, a Sunday, or a day on which the New York Stock Exchange is closed or a day on which banks located in the Commonwealth of Pennsylvania are authorized by law to be closed.

“MSRB” shall mean the Municipal Securities Rulemaking Board.

"Official Statement" shall mean the final official statement relating to the Bonds prepared by or on behalf of the Authority and distributed in connection with the offering and sale of the Bonds by the Underwriter.

“Rule” shall mean Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

"Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

SECTION 3. Provision of Annual Reports. (a) The JOC on behalf of the Joint Board and each of the Obligated School Districts, shall, within 180 days following the close of each of the Obligated School Districts' fiscal years, beginning with their fiscal year ending June 30, 2015, provide to the MSRB, in

I-1 electronic format via the Electronic Municipal Markets Access System (“EMMA”) as prescribed by the MSRB, an Annual Report that 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 BCAVTS and the Obligated School Districts may be submitted separately from the balance of the Annual Report.

(b) If the JOC is unable to provide an Annual Report to the MSRB within the time set forth in subsection (a) immediately above, the JOC will send a notice to the MSRB advising it of such fact and, if appropriate, the date by which the JOC expects to file the Annual Report.

SECTION 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following financial information and operating data with respect to BCAVTS and each of the Obligated School Districts:

• the financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units and audited in accordance with generally accepted auditing standards; and

• a summary of the budget for the current fiscal year.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of BCAVTS or the Obligated School Districts, or related public entities which have been submitted to the MSRB or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The JOC shall clearly identify each other document so incorporated by reference.

SECTION 5. Reporting of Material Events. The JOC shall, in a timely manner, file with the MSRB, in electronic format via EMMA as prescribed by the MSRB, notice of the occurrence of any of the following events with respect to the Bonds, if material:

(a) principal and interest payment delinquencies; (b) non-payment related defaults, if material; (c) unscheduled draws on debt service reserves reflecting financial difficulties; (d) unscheduled draws on credit enhancements reflecting financial difficulties; (e) substitution of credit or liquidity providers, or their failure to perform; (f) 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) or other similar events affecting the tax-exempt status of the security; (g) modifications to the rights of security holders, if material; (h) bond calls, except for mandatory scheduled redemptions not otherwise contingent upon the occurrence of an event; (i) tender offers and defeasances;

I-2 (j) release, substitution or sale of property securing repayment of the securities, if material; (k) rating changes; (l) bankruptcy, insolvency, receivership or similar event, such as determination of distressed status, affecting the Issuer; (m) the consummation of a merger, consolidation, or acquisition of the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(n) the appointment of a successor or additional trustee or the change of name of a trustee, if material.

The JOC may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if, in the judgment of the JOC such other event is material with respect to the Bonds, but the JOC does not undertake to commit to provide any such notice of the occurrence of any material event except those events listed above.

SECTION 6. Dissemination Agent. The JOC may, at any time and from time to time, appoint or engage another person (the "Dissemination Agent") to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge such Dissemination Agent, with or without appointing a successor, and without notice to holders or beneficial owners of the Bonds.

SECTION 7. Submission of Information. All documents provided to the MSRB pursuant to the terms of this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB, and shall be made in electronic format or in any other format which meets any applicable requires or guidelines of the Securities and Exchange Commission and of the MSRB. Unless otherwise prescribed by the MSRB, such submission to the MSRB shall be made via EMMA.

SECTION 8. Termination of Disclosure Obligation. The obligations under this Disclosure Certificate shall terminate upon the prior redemption or payment in full of all of the Bonds.

SECTION 9. Amendment. The JOC reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information, to the extent necessary or appropriate as the result of a change in legal requirements or change in the nature of BCAVTS or any of the Obligated School Districts; provided that the JOC covenants that any such modification will be done in a manner consistent with the Rule.

SECTION 10. Default. In the event of a failure of the JOC to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Joint Board or the Obligated School Districts to comply with its respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default with respect to the Bonds, and the sole remedy under this Disclosure Certificate in the event of any failure of the JOC or the Obligated School Districts to comply with this Disclosure Certificate shall be an action to compel performance.

I-3 SECTION 11. Notices. All notices and other communications to the JOC, Joint Board and Obligated School Districts with respect to this Disclosure Certificate shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by recognized national or regional courier service, or by other messenger, for delivery to the intended addressee) or when deposited in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

Joint Operating Committee of the Butler County Area Vocational-Technical School Board 210 Campus Lane Butler, PA 16001 Attention: Administrative Director (724) 282-0735 X202 (724) 282-7448

SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 13. Controlling Law. This Disclosure Certificate and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania and the Rule.

I-4 IN WITNESS WHEREOF, the Joint Operating Committee of the County Board of School Directors of Butler County on behalf of the Butler County Area Vocational-Technical School and each of the Obligated School Districts causes this Continuing Disclosure Certificate to be executed on its behalf all as of the date first above written.

JOINT OPERATING COMMITTEE OF THE BUTLER COUNTY AREA VOCATIONAL- TECHNICAL SCHOOL BOARD

______Chairman

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APPENDIX J

AUDITED FINANCIAL STATEMENTS OF BCAVTS FOR FISCAL YEAR ENDED JUNE 30, 2014

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BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL

~ ~ ~ ~ ~

FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2014

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BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL BUTLER COUNTY, PENNSYLVANIA

FINANCIAL STATEMENTS

AND

WITH REPORT BY CERTIFIED PUBLIC ACCOUNTANT

FOR THE YEAR ENDED JUNE 30, 2014

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL BUTLER COUNTY, PENNSYLVANIA TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITOR'S REPORT ...... i-ii

MANAGEMENT’S DISCUSSION AND ANALYSIS ...... iii-xix

EXHIBIT A – STATEMENT OF NET POSITION ...... 1

EXHIBIT B – STATEMENT OF ACTIVITIES ...... 2

EXHIBIT C – BALANCE SHEET – Governmental Funds ...... 3

EXHIBIT D – RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION ...... 4

EXHIBIT E - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN IN FUND BALANCE- Governmental Funds ...... 5

EXHIBIT F – RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES ...... 6

EXHIBIT G - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN IN FUND BALANCE, BUDGET AND ACTUAL – General Fund ...... 7

EXHIBIT H– STATEMENT OF NET POSITION – Fiduciary Funds ...... 8

NOTES TO THE FINANCIAL STATEMENTS ...... 9-23 Mark C. Turnley

Certified Public Accountant 293 Pinney Street Rochester, Pennsylvania 15074 (724) 371-0887 FAX (724) 709-8596

To the Management and Board of Directors Butler County Area Vocational-Technical School

Independent Auditor's Report

Report on Financial Statements

I have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Butler County Area Vocational-Technical School as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Butler County Area Vocational-Technical School’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

My responsibility is to express opinions on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 Butler County Area Vocational-Technical School’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 Butler County Area Vocational-Technical School’s internal control. Accordingly, I 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.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions.

American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants

Opinion

In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Butler County Area Vocational-Technical School as of June 30, 2014, and the respective changes in financial position and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages iii-xix 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. I 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 my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I 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.

Mark C. Turnley, CPA

February 5, 2015 Rochester, Pennsylvania

ii Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

The discussion and analysis of Butler County Area Vocational-Technical School’s financial performance provides an overall review of the area vocational-technical school’s (AVTS) financial activities for the fiscal year ended June 30, 2014. The intent of this discussion and analysis is to look at the AVTS financial performance as a whole; readers should also review the basic financial statements and notes to the basic financial statements to enhance their understanding of the School’s financial performance.

The Management Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments issued June 1999.

Joint Venture

The Butler County Area Vocational-Technical School is a joint venture of seven public school districts in Butler County, Pennsylvania organized under the Public School Code of Pennsylvania. The school provides vocational and technical training programs for high school students who are residents of the participating school districts and out-of-school youths and adults. Each school district is responsible for a share of the operating budget based on student enrollment using a formula described within the Articles of Agreement. The participating districts include: Butler Area School District, Karns City Area School District, Mars Area School District, Moniteau School District, Seneca Valley School District, Slippery Rock Area School District, and South Butler County School District. The Adult Education Program for out-of- school youths and adults receives no school district funding and operates on student paid tuition and federal and state grants that become available.

Mission Statement

The mission of the Butler County Area Vocational-Technical School is empowering students with the skills necessary for continuous development, education, and employment.

Our Vision

The Butler County Area Vocational-Technical School, while continuing to serve our existing students, will serve the career preparation needs of new groups of students. We expect to serve more students who will pursue postsecondary education, as well as those who have yet to decide on their career or educational plans. Students will come to our school because we offer programs that help them pursue their career paths, lead them to respected occupations, and emphasize the needs for lifelong learning.

We also expect to serve as the hub for career development of all students in our service area. It is imperative that students at all grade levels participate in a coordinated career development program so that they make informed career decisions. In support of this career development program and our overall mission, we will work to convince students, their parents and the public that career and technical education is good for everyone.

iii Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

System Wide Quality Objectives:

• To prepare students for gainful employment and further education through the delivery of relevant, quality curricula and effective instructional practices.

• To effectively establish unity of purpose and direction that supports the mission of the AVTS.

• To manage a process system that provides the framework to effectively and efficiently achieve our objectives, while encouraging continuous improvement.

• To access and utilize accurate, valid and reliable data and facts to make informed decisions that contribute to the overall quality of the organization.

• To enhance relationships with sponsoring school districts and the community to expand quality learning opportunities.

• To build relationships which enhance quality through the use of appropriate expertise and effectual resources.

• To effectively and efficiently manage and utilize essential resources which support the achievement of the quality objectives and the fulfillment of the mission.

FINANCIAL HIGHLIGHTS

District Contributions:

The largest source of revenue comes from the participating school districts to support the secondary education programs and totaled $2,891,315 for the 2013-2014 school year ($2,722,487 for the 2012-2013 school year). This amount is based on a funding formula that is agreed upon by all the districts as part of the Articles of Agreement. The Articles of Agreement, which became effective on July 1, 1998, provide a funding formula whereby the operating expenses are pro-rated among the member districts in proportion to the average daily membership (ADM) of students attending the AVTS from each member district. For the 2013-2014 school year, an average of the ADMs from the 2010-2011, 2011-2012 and 2012-2013 school years was used. For capital expenses, a formula of assessed valuations and eleventh and twelfth grade home school enrollments is utilized.

Total contributions from participating school districts represent approximately 69% of the secondary program’s revenue for the 2013-2014 and 2012-2013 school years.

Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FINANCIAL STATEMENTS

The financial statements consist of the following sections: basic financial statements and required supplementary information that provide additional information regarding the AVTS. Within this Financial Section are the Management Discussion and Analysis and a series of financial statements and notes to those statements. These statements are organized so that the reader can understand Butler County Area Vocational-Technical School as an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial activities.

Figure A-1 shows how the required parts of the Financial Section are arranged and related to one another: Figure A-1 Required components of Butler County Area Vocational-Technical School’s Financial Report

Management Basic Required Discussion Financial Supplementary and Analysis Statements Information

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

◄ ► Summary Detail

Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FINANCIAL STATEMENTS (Continued)

The first two statements are government-wide financial statements - the Statement of Net Position and the Statement of Activities. These provide both long-term and short-term information about the AVTS overall financial status.

The remaining statements are fund financial statements that focus on individual parts of the AVTS operations in more detail than the government-wide statements. The governmental funds statements tell how general AVTS services were financed in the short term as well as what remains for future spending. Fiduciary fund statements provide information about financial relationships where the AVTS acts solely as a trustee or agent for the benefit of others, to whom the resources in question belong.

The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data.

Figure A-2 summarizes the major features of the AVTS financial statements, including the portion of the AVTS they cover and the types of information they contain. The remainder of this overview section of management discussion and analysis explains the structure and contents of each of the statements.

vi Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FINANCIAL STATEMENTS (Continued)

Figure A-2 Major Features of Butler County AVTS’s Government-wide and Fund Financial Statements

Fund Statements

Government-wide Statements Government Funds Fiduciary Funds Scope Entire AVTS The activities of the Instances in which (except fiduciary AVTS that are not the AVTS is the funds) proprietary or trustee or agent to fiduciary, such as someone else’s education, resources – administration, and Scholarship Funds community services Required financial Statement of net Balance Sheet Statement of statements position Statement of fiduciary net position Statement of revenues, Statement of changes activities expenditures, and in fiduciary net changes in fund position balance

Accounting basis and Accrual accounting Modified accrual Accrual accounting measurement focus and economic accounting and and economic resources focus current financial resources focus resources focus Type of All assets and Only assets expected All assets and asset/liability liabilities, both to be used up and liabilities, both information financial and capital, liabilities that come short-term and and short-term and due during the year long-term long-term or soon thereafter, no capital assets included Type of inflow- All revenues and Revenues for which All revenues and outflow information expenses during cash is received expenses during year, regardless of during or soon after year, regardless of when cash is the end of year, when cash is received or paid expenditures when received or paid goods or services have been received and payment is due during the year or soon thereafter

vii Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

OVERVIEW OF FINANCIAL STATEMENTS

Government-wide Statements

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

The two government-wide statements report the AVTS net position and how they have changed. Net position, the difference between the AVTS assets and liabilities, are one way to measure the AVTS financial health of position.

Over time, increases or decreases in the AVTS net position are an indication of whether its financial health is improving or deteriorating, respectively.

To assess the overall health of the AVTS, you need to consider additional non-financial factors, such as changes in the member school district contributions and the projected enrollment and success of the students.

The government-wide financial statements of the AVTS reflect Governmental Activities. All of the AVTS basic services are included here, such as instruction, administration and community services. Participating school district contributions, state and federal subsidies and grants finance most of these activities.

Fund Financial Statements

The AVTS fund financial statements provide detailed information about the most significant funds - not the AVTS as a whole. Some funds are required by state law and by bond requirements.

Governmental funds - Most of the AVTS activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets than can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the AVTS operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources than can be spent in the near future to finance the AVTS programs. The relationship (or differences) between governmental activities (reports in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the financial statements.

viii Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

OVERVIEW OF FINANCIAL STATEMENTS (Continued)

Fiduciary funds – The AVTS is the trustee, or fiduciary, for assets that belong to others, such as the student activity funds and payroll fund. The AVTS is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The AVTS excludes these activities from the AVTS’ other financial statements because the AVTS cannot use these assets to finance its operation.

FINANCIAL ANALYSIS OF THE AVTS AS A WHOLE

The AVTS total net position was $11,865,165 at June 30, 2014. A comparison of the components of net position for the fiscal years ended June 30, 2014 and 2013 is as follows:

6/30/2014 6/30/2013 Current Assets $ 787,352 $ 1,104,855 Capital Assets 12,174,765 12,599,928 Total Assets $ 12,962,117 $ 13,704,783

Current Liabilities $ 789,812 $ 1,118,935 Long-Term Liabilities 307,140 223,062 Total Liabilities $ 1,096,952 $ 1,341,997

Net Position: Net Investment in Capital Assets $ 12,172,305 $ 12,583,393 Unrestricted (Deficit) (307,140) (220,607) Total Net Position $ 11,865,165 $ 12,362,786

Most of the AVTS net position is invested in capital assets (buildings, land, and equipment). The remaining net position is unrestricted. The decrease in current assets and current liabilities is directly related to cash which was used mainly to refund member school districts their proportionate share of revenues in excess of expenditures for the 2011-2012 and 2012-2013 fiscal years. The decrease in capital assets, and corresponding decrease in net investment in capital assets is related to excess of depreciation excess over capital outlays for the 2013-2014 fiscal year. The deficit balance for unrestricted net position is a result of the recognition of contractual obligations for accumulated sick and vacation days, as well as retiree health care benefits.

The results of this year’s operations as a whole are reported in the Statement of Activities. All expenses are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to specific expense categories are represented to determine the final amount of the AVTS activities that are supported by other general revenues. The largest general revenue category is the contributions from the participating school districts.

Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FINANCIAL ANALYSIS OF THE AVTS AS A WHOLE (Continued)

The following information comparing the revenues and expenses of the Vo-Tech for the fiscal years ended June 30, 2014 and 2013 are taken from the Statement of Activities, rearranged slightly, so that you can see our total revenues for the year.

6/30/2014 6/30/2013 Program revenues: Charges for services $ 60,666 $ 53,328 Operating grants and contributions 1,228,033 1,193,041

General revenues: Receipts from member school districts 2,891,315 2,722,487 Investment earnings 443 426 Contributions 300 - Loss on Disposition of Assets (12,016) - Total revenues $ 4,168,741 $ 3,969,282

Expenses Instruction $ 2,870,699 $ 2,672,365 Instructional student support 488,108 649,112 Administrative & financial support 677,576 467,647 Operation & maintenance of plant 606,783 615,022 Student activities 22,895 23,707 Interest 301 631 Total expenses 4,666,362 4,428,484 Increase (decrease) in net position $ (497,621) $ (459,202)

The following analysis shows the AVTS’s six largest functions – instructional programs, instructional student support, administrative, operation and maintenance of plant, student activities, as well as each program’s net cost (total cost less revenues generated by the activities). This analysis also shows the net costs offset by the member district contributions and other miscellaneous revenues to show the excess revenues available under the full accrual basis of accounting.

Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FINANCIAL ANALYSIS OF THE AVTS AS A WHOLE (Continued)

-----June 30, 2014 ------June 30, 2013 ----- TOTAL COST NET COST TOTAL COST NET COST OF SERVICE OF SERVICE OF SERVICE OF SERVICE EXPENSES Instruction $ 2,870,699 $ 1,695,424 $ 2,672,365 $ 1,514,888 Instructional Student Support 488,108 457,653 649,112 610,186 Administrative and Financial Support 677,576 628,947 467,647 440,209 Operation Maintenance of Plant 606,783 572,443 615,022 592,494 Student Activities 22,895 22,895 23,707 23,707 Other 301 301 631 631 TOTAL EXPENSES $ 4,666,362 $ 3,377,663 $ 4,428,484 $ 3,182,115

Less: District Support 2,891,315 2,722,487 Loss on Disposal of Fixed Assets (12,016) - Other General Support 743 426 TOTAL EXCESS REVENUES $ (497,621) $ (459,202)

FUND FINANCIAL STATEMENT COMPARISON

The following schedule compares the financial activity of the General Fund for the past two fiscal years: Actual Actual Increase/ 6/30/2014 6/30/2013 Decrease REVENUES Local Sources $ 2,952,724 $ 2,776,241 $ 176,483 State Sources 977,947 906,059 71,888 Federal Sources 250,086 286,982 (36,896) TOTAL REVENUES $ 4,180,757 $ 3,969,282 $ 211,475

EXPENDITURES Vocational Programs $ 2,330,073 $ 2,171,389 $ 158,684 Adult Education Programs 40,566 38,497 2,069 Pupil Personnel Services 320,680 350,492 (29,812) Instructional Staff Services 175,368 293,620 (118,252) Administrative Services 456,221 283,178 173,043 Business Services 215,902 181,157 34,745 Oper. & Mtce. Of Plant Services 605,888 611,080 (5,192) Central Services 5,689 5,187 502 Student Activities 22,895 23,707 (812) Capital Outlay - 3,500 (3,500) Debt Service 7,475 7,475 - TOTAL EXPENDITURES $ 4,180,757 $ 3,969,282 $ 211,475

Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FUND FINANCIAL STATEMENT COMPARISON (Continued)

Revenues

The increase in Local Sources Revenue is largely attributed to the increase in operating payments made by the participating school districts from the 2012-2013 school year to the 2013- 2014 school year. From 2012-2013 to 2013-2014, receipts from member districts increased $168,828. As all other account serial numbers were level-funded from 2012-2013 to 2013-2014, the only budgeted increases were to salaries and benefits. In addition to the increase in operating payments made by the participating school districts, tuition from non-participating districts also increased by $4,637. Although 2013-2014 Local Sources Revenue reflected a decrease in Adult Education revenue, Other Revenues increased largely due to an increase in room rentals.

Several contributing factors caused State Sources Revenue to increase in the 2013-2014 school year. Vocational Education funding decreased by approximately $25,400; however, State Sources Revenue increased overall largely due to the receipt of equipment and supplemental grants. Although the Vo-Tech was not eligible to receive equipment grant funds in 2012-2013 due to insufficient funds in the Vo-Tech’s operating account, in 2013-2014, equipment grant funds equated to $15,267. Introduced in 2013-2014 was a new equipment grant. This is known as the Supplemental Equipment Grant and funds for the 2013-2014 school year were $37,757. Although Social Security funds received were slightly increased from the prior year, a more significant increase occurred in retirement funds received. In 2012-2013, the retirement funds received were $117,823, whereas in 2013-2014, retirement funds received were $161,570. The retirement revenue increase was the result of the employer retirement contribution rate also increasing. In 2012-2013, the employer contribution rate was 12.36%, whereas in 2013-2014, the employer contribution rate increased to 16.93%.

Federal Sources Revenue decreased $36,896 from 2012-2013 to 2013-2014. This decrease was the result of Perkins funding decreasing from $286,982 in 2012-2013 to $250,086 in 2013-2014.

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Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FUND FINANCIAL STATEMENT COMPARISON (Continued)

Expenditures

Total expenditures in the 2012-2013 school year were $3,969,282, whereas in the 2013- 2014 school year, total expenditures increased by $211,475 to a total of $4,180,757. It is important to note that for employee benefits in all function categories, the Butler County AVTS budgeted for an 8% increase to Medical PPO Trust Deposit rates (as recommended by Reschini in the Act I Index); however, actual premiums for the Midwestern Consortium remained unchanged from 2012-2013 to 2013-2014. Another factor is the retirement employer contribution rate increased from 12.36% in 2012-2013 to 16.93% in 2013-2014. Lastly, contracted employees received the contracted salary increases in addition to all employees not covered under the teachers’ contract receiving a 2% increase for 2013-2014 salaries. With these contributing factors in mind, further explanations for specific function categories are noted below.

The Vocational Education Programs reflects an increase of $158,684. Salaries increased from $1,073,836 to $1,125,960 and benefits increased by $113,333. Reasons for salaries and benefits increases are noted above. Actual expenditures for supplies and equipment increased by a total of approximately $6,400; however, all other object funds decreased by a total of approximately $13,000.

Adult Education expenses varied slightly from 2012-2013 to 2013-2014. While salaries, employee benefits, and most other object funds remained relatively consistent, supplies and equipment incurred the most significant changes in Adult Ed expenses. Although supplies decreased by approximately $9,400 from 2012-2013 to 2013-2014, equipment increased by almost $11,000. Welding and HVAC were the two courses that factored in to most of the changes. Although these two courses had more supply purchases in 2012-2013, HVAC purchased a significant amount of equipment in 2013-2014. It is to be noted, however, that HVAC attendance increased from 36 students in 2012-2013 to 52 students in 2013-2014.

The Support Services – Pupil Personnel function decreased from $350,492 in 2012-2013 to $320,680 in 2013-2014. The approximately $30,000 decrease is the result of the Cooperative Education Recruiter-Coordinator retiring at the end of the 2012-2013 school year.

Although Instructional Staff Services reflects a decrease of $118,252, it is important to note that the 2012-2013 numbers include both the Principal and Technology Support functions; however, the Support Services-Principal function was reassigned to a different function category starting with the 2013-2014 school year. For this reason, although the Instructional Staff Services function reflects a decrease, Administrative Services shows an increase. Separating this information, it should be noted that Technology Support Services increased by approximately $16,515. Approximately $13,000 of this increase is due to salaries and benefits increasing.

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Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

FUND FINANCIAL STATEMENT COMPARISON (Continued)

Administrative Services shows an increase of $173,043. As mentioned on the previous page, a significant amount of this increase (approximately $146,000 of expenses in 2013-2014) is due to reassigning the Principal’s function category. In separating the information, Support Services-Administration increased by $27,000. Salaries and benefits contributed to $14,000 of the increase, and an approximate $8,000 increase was the result of increases to Purchased Professional and Technical Services. These services include solicitor services. The increase for solicitor services was due to the beginning of contract negotiations with the Butler County Vo- Tech Education Association, PSEA/NEA as the teachers’ contract expired June 30, 2014. The Principal function increased approximately $11,000. Salaries and benefits attributed to approximately $8,700 of the increase.

Business Services increased from $181,157 in 2012-2013 to $215,902 in 2013-2014. $25,000 of the $35,000 increase was in salaries and benefits. GASB 45 Actuary Services as well as the Wells Fargo Arbitrage Rebate Services attributed to an additional $5,250 in 2013-2014 for Purchased Professional and Technical Services. Equipment increased $3,500 due to the purchase of two computers and one replacement printer.

Operation and Maintenance of Plant Services decreased $5,192 from 2012-2013 to 2013- 2014. Although salaries and benefits increased by approximately $7,000, supplies decreased by $13,000. In addition, although heating fuel increased $11,000, purchased property services, other purchased services, and equipment decreased by a total of approximately $9,000.

Central Services and Student Activities had total expenditures that remained relatively consistent from 2012-2013 to 2013-2014.

Lastly, the $3,500 expense noted in Existing Building Improvement Services was for parking lots repairs during the 2012-2013 school year.

GENERAL FUND BUDGET

During the fiscal year, the Joint Operating Committee (JOC) authorizes revisions to the original budget to accommodate differences from the original budget to the actual expenditures of the AVTS. A schedule showing the AVTS original and final budget amounts compared with amounts actually paid and received is provided in Exhibit G.

The Budgetary Reserve includes amounts that may be transferred into expenditure accounts for planned expenditures, upon approval of the JOC. These amounts will only be appropriated into expenditure categories when the expenditure is necessary for the operation of the AVTS.

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Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2014, the AVTS had $12,174,765 invested in a broad range of capital assets, including land, buildings and furniture and equipment (net of depreciation). This amount represents a net decrease (including additions, deletions and depreciation) of $425,163 from June 30, 2013. Capital additions consisted mainly of technology and other equipment related to the vocational education programs.

The following schedule compares the fixed assets (net of depreciation) of the Vo-Tech for the past two fiscal years:

6/30/14 6/30/13 Land $ 65,909 $ 66,083 Building and Improvements 10,511,212 10,830,427 Furniture and Equipment 1,597,644 1,703,418 $ 12,174,765 $ 12,599,928

Debt Administration

Note Obligation – In October of 2004, the Vo-Tech issued a general obligation note in the amount of $59,500 to NexTier Bank (formerly known as Citizens National Bank) to finance the PA Act 57 Guaranteed Energy Savings Project. The terms of the loan call for monthly principal and interest payments of $622.89 over a period of 10 years at an interest rate of 4.65%. As of June 30, 2014 the remaining balance on this note is $2,460.

Lease Purchase Obligation – In January of 2010, the AVTS entered into a lease, with purchase buyout option, for a 2010 Ford Expedition with the Ford Credit Department. The terms of the lease call for 5 annual payments of $7,406.30 with a lease-end buyout amount of $1.00. The final lease payment was made on January 9, 2014. According to the Ford Credit Municipal Finance Department, the $1.00 buyout was waived because the account was in good standing. Therefore, as of June 30, 2014, there was no amount due on this obligation.

Other obligations include accrued vacation pay and sick leave for specific employees of the AVTS and health benefits for retirees (net OPEB obligation) as provided for in the AVTS collective bargaining agreement and other agreements. Detailed information regarding these obligations is located in the notes to the financial statements.

Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

NEXT YEAR’S GENERAL FUND BUDGET – 2014-2015

As required by the Articles of Agreement, the 2014-2015 Butler County AVTS Budget received an affirmative vote of two-thirds of the participating school districts and a majority vote of all the school directors of the participating districts. As approved, the operating budget increased from $4,461,200 in 2013-2014 to $4,635,192 in 2014-2015. Although the operating budget reflected a 3.9001% increase, participating school districts’ operating budget payments increased by 3.2015%.

Revenues

Revenues for the 2014-2015 school year were projected to be $577,505, an increase from the 2013-2014 budget of approximately $20,000. State Vocational Education estimates increased from $635,000 in 2013-2014 to $685,000 in 2014-2015. The reason for increasing State Vocational Education funds by $50,000 was due to examining the 2013-2014 Estimated Secondary Career and Tech Ed Subsidy CTC Allocations provided by PDE in July of 2013. The 2013-2014 Estimated State Funds were projected to be $690,561; therefore, the 2014-2015 budget reflected an increase to the 2014-2015 Estimated Sate funds to total $685,000. Social Security revenue was budgeted to increase slightly to $82,258, and interest received remained relatively consistent from the prior year at $400. Also included in anticipated revenues for the 2014-2015 school year was Adult Education revenue at $16,326 and Perkins at $255,274. Although Adult Education provided no significant changes from the prior year, Perkins revenue decreased by approximately $36,000. The most significant change in revenue estimates was in the retirement revenue. In the 2013-2014 budget, retirement revenue was estimated to be $170,380, whereas in the 2014-2015 budget, retirement revenue was estimated to be $223,247. Retirement revenue increased as a result of retirement expenses also increasing. Retirement expenses increased due to the increase in employer contribution rates increasing from 16.93% in 2013-2014 to 21.40% in 2014-2015. The state reimburses approximately 50% of retirement costs; therefore, due to the increase in retirement costs, there is an associated increase in retirement costs reimbursements.

Expenditures

The agreement between the Butler County Area Vocational-Technical School and the Butler County Vo-Tech Education Association, PSEA/NEA, was ratified on June 18, 2009 for a 5-year period from July 1, 2009 to June 30, 2014. At the time of the 2014-2015 budget approval, the expiring contract had not been renewed; therefore, estimates were required for instructional salaries, benefits, and retiree benefits.

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Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

NEXT YEAR’S GENERAL FUND BUDGET – 2014-2015 (Continued)

Salaries and benefits contributed to approximately 76% of the total 2014-2015 operating budget. Salaries for employees not covered under the teachers’ contract were budgeted to increase by 3%. The increase for employees covered under the teachers’ contract was budgeted to be 3% of the 2013-2014 contracted increase of $2,300. Regarding benefits, employees not covered under the teachers’ contract were budgeted to move to a Qualified High Deductible Plan with Health Savings Account effective July 1, 2014. Employees covered under the teachers’ contract were budgeted to remain on the current Butler County AVTS PPO Plan with a projected premium increase to this plan of 11%. For all employees, the retirement employer contribution rate was figured at 21.40%.

Purchased Professional and Technical Services decreased from the 2013-2014 budget by $9,000. Insignificant changes occurred in this object category for most functions; however, there were three functions that contributed to a majority of the $9,000 decrease. After reviewing the prior three years (school years 2010-2011 through 2012-2013) total expenses and three-year average, the 2014-2015 budget was decreased to reflect a $2,000 decrease in Support Services – Pupil Personnel, a $4,000 decrease in Support Services-Administration, and a $3,500 decrease in Support Services-Business.

Purchased Property Services increased $7,713 in 2014-2015. The largest contributing factor was the addition of three new leased vehicles to Vehicle Operation and Maintenance Services.

Other Purchased Services decreased to $163,019 in the 2014-2015 school year. Travel, advertising, mailings, and contracted services are the most common expenses in this object category. Although most function categories decreased by a total of approximately $17,500, insurances such as general liability and automobile contributed to an approximate increase of $12,000 in Operation and Maintenance of Plant.

Supplies represent nearly 11% of the 2014-2015 budget. Total projected expenses for supplies were $498,314 in 2013-2014 and $500,492 in 2014-2015. This represents a budgeted increase of nearly $2,000. Although most function categories reflected a decrease, supplies for Vocational Education Programs were budgeted to increase approximately $20,000. It is to be noted that supply expenses in the General Fund were budgeted to decrease; however, this decrease was offset by a budgeted increase to Perkins supplies.

Equipment expenses were projected to decrease from $225,630 in the 2013-2014 budget to $210,958 in the 2014-2015 budget. The most significant increases were in Technology Support Services, Operation and Maintenance of Plant, and Existing Site/Building Improvement Services; however, these increases were offset by a decrease in Vocational Education Programs. Although Vocational Education Programs equipment in the General Fund was budgeted to slightly increase, Perkins equipment expenditures were budgeted to decrease approximately $68,000.

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Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

NEXT YEAR’S GENERAL FUND BUDGET – 2014-2015 (Continued)

Lastly, the Debt Service estimates remained relatively consistent at $7,700, and the Budgetary Reserve remained at $30,000. It is to be noted that although the Budgetary Reserve is not billed to the participating school districts, it remains as a line item in the operating budget for emergency purposes only.

The following schedule provides a summary of the Vo-Tech’s 2014-2015 budget:

General Fund Funding Sources-Revenue Local Source $ 400 Districts-Operating Contributions 3,372,687 Adult Education 16,326 State Sources 990,505 Federal Sources 255,274

Total Funding Sources Revenue $ 4,635,192

Expenditures Vocational Education $ 2,516,080 Adult Education 16,326 Pupil Personnel Support Services 326,374 Instructional Staff Support Services 281,901 Administration Support Services 481,419 Business Support Services 225,227 Operation and Maintenance 712,165 Central Support Services 5,500 Student Activities 24,500 Existing Site Improvement Services 5,000 Existing Building Improvement Services 3,000 Debt Service 7,700 Bugetary Reserve 30,000

Total Expenditure $ 4,635,192

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Butler County Area Vocational-Technical School Management’s Discussion and Analysis (MD&A) June 30, 2014

CONTACTING THE AVTS FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the AVTS finances and to show the Joint Operating Committee’s accountability for the money it receives. If you have questions about this report or wish to request additional financial information, please contact Mrs. Rebekah Davis, Business Manager, 210 Campus Lane, Butler, PA 16001. Telephone: 724-282-0735. E-mail: [email protected]

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EXHIBIT A

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL STATEMENT OF NET POSITION JUNE 30, 2014

Governmental Activities ASSETS Current Assets: Cash and Cash Equivalents $ 716,179 Due From Other Governments 47,326 Due From Other Funds 23,623 Other Receivables 224 Total Current Assets $ 787,352

Noncurrent Assets: Land $ 65,909 Building & Building Improvements (net) 10,511,212 Furniture & Equipment (net) 1,597,644 Total Noncurrent Assets $ 12,174,765 TOTAL ASSETS $ 12,962,117

LIABILITIES Current Liabilities: Due to Other Governments $ 355,367 Accounts Payable 165,066 Current Portion of Long-Term Debt 2,460 Accrued Salaries and Benefits 202,117 Other Current Liabilities 64,802 Total Current Liabilities $ 789,812

Noncurrent Liabilities: Compensated Absences $ 15,402 Net OPEB Obligation 291,738 Total Noncurrent Liabilities $ 307,140 TOTAL LIABILITIES $ 1,096,952

NET POSITION Net Investment in Capital Assets $ 12,172,305 Unrestricted (Deficit) (307,140) TOTAL NET POSITION $ 11,865,165 TOTAL LIABILITIES AND NET POSITION $ 12,962,117

The accompanying notes are an integral part of these financial statements 1 EXHIBIT B

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014

Net (Expense) Revenue and Changes Program Revenues in Net Position Operating Capital Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Activities Governmental Activities: Instruction $ 2,870,699 $ 46,716 $ 1,128,559 $ - $ (1,695,424) Instructional Student Support 488,108 - 30,455 - (457,653) Administrative and Financial Support Services 677,576 - 48,629 - (628,947) Operation and Maintenance of Plant Services 606,783 13,950 20,390 - (572,443) Student Activities 22,895 - - - (22,895) Interest on Long-Term Debt 301 - - - (301) Total Governmental Activities $ 4,666,362 $ 60,666 $ 1,228,033 $ - $ (3,377,663)

Total Primary Government $ 4,666,362 $ 60,666 $ 1,228,033 $ - $ (3,377,663)

General Revenues: Receipts from Member School Districts $ 2,891,315 Loss on Disposal of Fixed Assets (12,016) Contributions 300 Investment Earnings 443 Total General Revenues $ 2,880,042 Change in Net Position $ (497,621) Net Position — July 1, 2013 12,362,786 Net Position — June 30, 2014 $ 11,865,165

The accompanying notes are an integral part of these financial statements 2 EXHIBIT C

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2014

GENERAL FUND ASSETS: Cash and Cash Equivalents $ 716,179 Due From Other Governments 47,326 Due From Agency Fund 23,623 Other Receivables 224 TOTAL ASSETS $ 787,352

LIABILITIES AND FUND BALANCE

LIABILITIES: Due To Other Governments $ 355,367 Accounts Payable 165,066 Accrued Salaries and Benefits 202,117 Deferred Revenues 64,802 TOTAL LIABILITIES $ 787,352

FUND BALANCE: Unassigned $ - TOTAL FUND BALANCE $ -

TOTAL LIABILITIES AND FUND BALANCE $ 787,352

The accompanying notes are an integral part of these financial statements 3 EXHIBIT D

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2014

TOTAL FUND BALANCE - GOVERNMENTAL FUNDS $ -

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 as assets in governmental funds. The cost of assets is $18,400,109, and the accumulated depreciation is $6,225,344 12,174,765

Long-term liabilities are not due and payable in the current period, and therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at year-end consist of:

Note Payable $ 2,460 Accrued Compensated Absences 15,402 Net OPEB Obligation 291,738 (309,600)

TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES $ 11,865,165

The accompanying notes are an integral part of these financial statements 4 EXHIBIT E

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2014

GENERAL FUND REVENUES

Local Sources $ 2,952,724 State Sources 977,947 Federal Sources 250,086 TOTAL REVENUES $ 4,180,757

EXPENDITURES

Instruction $ 2,370,639 Support Services 1,779,748 Noninstructional Services 22,895 Debt Service 7,475 TOTAL EXPENDITURES $ 4,180,757

NET CHANGE IN FUND BALANCE $ -

FUND BALANCE - JULY 1, 2013 -

FUND BALANCE - JUNE 30, 2014 $ -

The accompanying notes are an integral part of these financial statements 5 EXHIBIT F

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL RECONCILIATION OF THE GOVERNMENT FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014

TOTAL NET CHANGE IN FUND BALANCE - GOVERNMENTAL FUNDS $ -

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

Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation expense ($601,562) exceeded capital outlays ($188,415) during the fiscal year. (413,147)

Repayment of note and lease obligation principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position 14,076

Governmental funds only report the disposal of assets to the extent proceeds are received from the sale. In the statement of activities, a gain or loss is reported for each disposal. This is the amount of the loss on the disposal of fixed assets. (12,016)

In the statement of activities, certain operating expenses - compensated absences and retiree benefits - are measured by the amounts earned during the year. In the governmental funds however, expenditures for these items are measured by the amount of financial resources used (paid). This number represents the amount of benefits paid in excess of the amount earned. (86,534)

CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ (497,621)

The accompanying notes are an integral part of these financial statements 6 EXHIBIT G

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE, BUDGET AND ACTUAL GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2014

Variance with Budgeted Amounts Actual Final Budget Positive Original Final (Budgetary Basis) (Negative) REVENUES

Local Sources $ 3,285,748 $ 3,285,748 $ 2,952,724 $ (333,024) State Sources 884,226 884,226 977,947 93,721 Federal Sources 291,226 291,226 250,086 (41,140) TOTAL REVENUES $ 4,461,200 $ 4,461,200 $ 4,180,757 $ (280,443)

EXPENDITURES

Vocational Programs $ 2,447,850 $ 2,450,650 $ 2,330,073 $ 120,577 Adult Education Programs 16,256 16,256 40,566 (24,310) Pupil Personnel Services 390,292 392,992 320,680 72,312 Instructional Staff Services 193,638 185,838 175,368 10,470 Administrative Services 467,814 468,914 456,221 12,693 Business Services 215,274 216,474 215,902 572 Operation & Maintenance of Plant Services 656,631 656,631 605,888 50,743 Central Services 8,100 8,100 5,689 2,411 Student Activities 27,300 27,300 22,895 4,405 Capital Outlay - - - - Debt Service 8,045 8,045 7,475 570 Budgetary Reserve 30,000 30,000 - 30,000 TOTAL EXPENDITURES $ 4,461,200 $ 4,461,200 $ 4,180,757 $ 280,443

NET CHANGE IN FUND BALANCE $ - $ - $ - $ -

FUND BALANCE - JULY 1, 2013 - - - -

FUND BALANCE - JUNE 30, 2014 $ - $ - $ - $ -

The accompanying notes are an integral part of these financial statements 7 EXHIBIT H

BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL STATEMENT OF NET POSITION FIDUCIARY FUNDS JUNE 30, 2014

AGENCY ACTIVITY FUND FUNDS

ASSETS Cash and Cash Equivalents $ 24,042 $ 18,798 TOTAL ASSETS $ 24,042 $ 18,798

LIABILITIES Payroll Tax Liabilities $ 419 $ - Due to General Fund 23,623 - Other Current Liabilities - 18,798 TOTAL LIABILITIES $ 24,042 $ 18,798

The accompanying notes are an integral part of these financial statements 8 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Butler County Area Vocational-Technical School (Vo-Tech) is a joint school system established to provide vocational programs in secondary vocational education, secondary academic education, adult vocational education, adult basic education and general education degree programming for the following member school districts:

Butler Seneca Valley Karns City Slippery Rock Mars South Butler Moniteau

The Board of Joint School Directors of the Butler County Area Vocational-Technical School is comprised of representatives from each of the member school districts based on the level of operating contributions. Board members, in conjunction with the Superintendent of Record and Director of Vocational Education, have complete authority over the operations and administration of the school's activities. Butler County Area Vocational-Technical School has no power to levy taxes. Revenues which finance the cost of basic instruction are derived mainly from its' member school districts. Each member's share of the basic instructional subsidy is based upon the average daily membership of students attending from that district in relation to the total students enrolled in the Butler County Area Vocational-Technical School Program.

The financial statements of the Vo-Tech have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). During the 2013-2014 year, the Vo-Tech adopted the provisions of Government Accounting Standards Board (GASB) No. 65, ‘Items Previously Reported as Assets and Liabilities’ and GASB No. 66, ‘Technical Corrections, an Amendment of GASB Statements No. 10 and 62.’ The most significant of the Vo-Tech’s accounting policies are as follows:

REPORTING ENTITY

A reporting entity is comprised of the primary government, component units and other organizations that are included to ensure the financial statements are not misleading. The primary government of the Butler County Area Vocational-Technical School consists of all funds, departments, boards and agencies that are not legally separate from the Vo-Tech. As defined by GASB Statement No. 14, component units are legally separate entities that are included in the Vo-Tech’s reporting entity because of the significance of their operating or financial relationships with the Vo-Tech. Based on the application of these criteria, the Butler County Area Vocational-Technical School has no component units.

The Vo-Tech is associated with the following public entity risk pool (Note 12):

 Mid-Western Health Combine Insurance Consortium

BASIS OF PRESENTATION

GOVERNMENT-WIDE FINANCIAL STATEMENTS – The statement of net position (Exhibit A) and the statement of activities (Exhibit B) display information about the Vo-Tech as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between those activities of the Vo-Tech that are governmental and those that are considered business-type activities. The Vo-Tech does not currently have any business-type activities.

9 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

BASIS OF PRESENTATION (Continued)

The government-wide statements are prepared using the economic resources measurement focus. That is the same approach used in the preparation of the proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements therefore include a reconciliation (Exhibit D and F) with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds.

The government-wide statement of activities (Exhibit B) presents a comparison between direct expenses and program revenues for each function of the Vo-Tech’s governmental activities. Direct expenses are those that are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, and grants, subsidies and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the Vo-Tech. The comparison of direct expenses with program revenues identifies the extent to which the government function is self-financing or draws from the general revenues of the Vo-Tech.

FUND FINANCIAL STATEMENTS – Fund financial statements (Exhibits C-H) report detailed information about the Vo-Tech. Under Governmental Accounting Standards Board (GASB) Statement No. 34, the focus of the fund financial statements is on major funds. Major funds represent the Vo-Tech’s most important funds and are determined based on percentages of assets, liabilities, revenues, and expenditures/expenses. For Pennsylvania Vocational-Technical schools, the General Fund is always considered a major fund. Each major fund is presented in a separate column. Non-major funds are segregated and presented in a single column. The Vo-Tech does not have any non-major funds. Fiduciary funds are reported by fund type.

The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. The financial statements for governmental funds are a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures and changes in fund balances, which reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources.

Fiduciary funds are reported using the economic resources measurement focus.

FUND ACCOUNTING

The Butler County Area Vocational Technical School uses funds to report on its financial position and the results of its operations during the year. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain Vo-Tech functions or activities. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. Funds are classified into three categories: governmental, proprietary and fiduciary. Fund categories are defined as follows:

Governmental Funds – Governmental funds focus on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following is a description of the Vo-Tech’s only governmental fund:

10 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

FUND ACCOUNTING (Continued)

GENERAL FUND (Major Fund) - The general fund is used to account for all financial resources not required to be accounted for in some other fund. The general fund balance is available for any purpose provided it is expended according to the Commonwealth of Pennsylvania Public School Code.

Proprietary Funds - used to account for activities similar to those found in the private sector, where the determination of net income is necessary and useful to sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies within the Vo-Tech (internal service funds). The Vo-Tech does not operate any propriety fund activities.

Fiduciary Funds – Fiduciary fund reporting focuses on net position and changes in net position. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the Vo- Tech under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the Vo-Tech’s own programs. The Vo-Tech does not currently administer any trust funds. Agency funds are custodial in nature and do not involve measuring income or any other results from operations. The Vo-Tech’s Agency Funds are comprised of the various student organization activity accounts administered by the Vo-Tech on behalf of the various student organizations, and the Vo-Tech’s payroll fund.

BASIS OF ACCOUNTING

The basis of accounting determines when transactions are recorded in the financial records and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Government funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting.

Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the Vo-Tech, available means expected to be received within sixty days of fiscal year-end.

Revenue resulting from non-exchange transactions, in which the Vo-Tech receives value without directly giving equal value in return, includes mainly, grants. Revenues from grants are recognized in the fiscal year in which all eligibility requirements have been satisfied. On a modified accrual basis, revenue from non- exchange transactions must also be ‘available’ before it can be recognized.

The management of the Butler County Area Vocational-Technical School has determined that the revenues most susceptible to accrual (measurable and available) at June 30, 2014 under the modified accrual basis are federal and state subsidies, and other miscellaneous revenues, earned during fiscal year 2013-2014 but received subsequent to June 30, 2014.

11 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

BASIS OF ACCOUNTING (Continued)

The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. The primary expenditures deemed susceptible to accrual at June 30, 2014 under the modified accrual basis are 1) salaries budgeted and pertaining to the 2013-2014 fiscal year, but which were paid in July and August of 2014 in accordance with labor agreements and 2) utility costs and purchase orders for supplies and operations obligated prior to June 30, 2014.

On the accrual basis of accounting, expenses are recognized at the time they are incurred.

Allocations of cost, such as depreciation, are not recognized in governmental funds but are included as part of expenses in the government-wide statement of activities.

BUDGETS

On April 4, 2013, the Butler County Area Vocational-Technical School adopted its fiscal year June 30, 2014 annual budget for the general fund totaling $4,461,200 in accordance with the provisions of the Pennsylvania School Code. The budget is prepared utilizing the modified accrual method of accounting. Budgetary transfers among various expenditure line items can be performed by the Vo-Tech, as approved by the Board of Directors, only during the last nine months of the fiscal year. The original and adjusted budgetary amounts are reflected in these financial statements (Exhibit G). All annual appropriations of the general fund lapse at fiscal year end.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include amounts in demand deposit accounts and any other highly liquid, short- term investments, with original maturity terms of less than three months.

SHORT-TERM INTERFUND RECEIVABLES/PAYABLES

During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as 'due from/to other funds' on the governmental funds balance sheet. For the purposes of the government-wide statement of net assets, governmental interfund receivables and payables have been eliminated. The $23,623 due from the Agency Fund represents monies on hand in the payroll account.

INVENTORIES

The cost of instructional and maintenance supplies purchased by the general fund is recorded as an expenditure in the governmental funds and an expense in the government-wide statement of activities at the time of purchase. The Vo-Tech does not inventory these items.

12 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

CAPITAL ASSETS AND DEPRECIATION

Capital assets are reported on the government-wide statement of net assets. All capital assets are recorded at cost (or estimated historical cost). Donated fixed assets are recorded at fair value at the time of receipt. The Vo-Tech maintains a capitalization threshold of $1,500. The cost of infrastructure is included as part of site improvements in the government-wide statement of net assets. Routine repair and maintenance costs that do not add to the value of the asset or extend its useful life are charged as an expense in the government-wide statement of activities.

All reported capital assets, except land, are depreciated using the straight-line method over the following useful lives:

GOVERNMENTAL CATEGORY ACTIVITIES

Site Improvements 20 years Buildings and Improvements 20-50 Years Furniture and Equipment 5-20 years Vehicles 8 Years Textbooks 6 Years

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. Capital assets purchased by governmental funds are recorded as expenditures in the fund financial statements (Exhibit E). The results of capitalizing fixed assets net of depreciation on the government-wide statement of net position and statement of activities, as opposed to recording these same assets as an expenditure in the fund financial statements, is reflected in the required reconciliations of fund balance to net position (Exhibit D) and the changes in fund balances to the changes in net position (Exhibit F).

COMPENSATED ABSENCES

The Butler County Area Vocational-Technical School reports compensated absences in accordance with the provisions of GASB Statement No. 16, ‘Accounting for Compensated Absences’. Sick leave benefits are accrued as a liability for teachers who have 10 years of teaching experience with the Vo-Tech at age 62, or 20 years of total teaching experience and membership in the Pennsylvania Public School Retirement System (PSERS) regardless of age, at the rate of $30 per day. Eligible custodians are reimbursed at the rate of $30 per day, to a maximum of 181 days. Administrators are reimbursed for unused sick days at the rate of $35 per day. Accumulated unused vacation days are reimbursed at the employees’ per diem rate.

The entire compensated absences liability of $15,402 is shown as a non-current liability in the government- wide statement of net assets. For governmental fund financial statements, compensated absences are recorded as an expenditure when paid rather than accrued when earned as the likelihood of payment in the immediate fiscal year with available expendable resources is not assured.

13 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ACCRUED LIABILITIES AND LONG-TERM OBLIGATIONS

All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements. In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, the non-current portion of compensated absences and retiree health benefits that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they will be paid with current, expendable, available financial resources. In general, liabilities that mature or come due for payment within 60 days of the end of the fiscal year-end, are considered to be paid with current available financial resources. Other long-term obligations that will be paid from governmental funds are not recognized as a liability in the fund financial statements when due. The Vo- Tech’s General Fund is typically used to liquidate long-term liability obligations.

The results of recognizing these long-term obligations as liabilities on the government-wide statement of net position and statement of activities, as opposed to recording these same obligations as an expenditure in the fund financial statements only when paid, is reflected in the required reconciliations of fund balance to net position (Exhibit D) and the changes in fund balances to the changes in net position (Exhibit F).

UNEARNED REVENUE

Unearned revenue arises when the Vo-Tech receives resources before it has legal claim to them. This occurs when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the Vo-Tech has a legal claim to the resources, the unearned revenue liability is removed and revenue is recognized.

DEFERRED INFLOW OF RESOURCES

In addition to assets and liabilities, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred outflows and/or inflows of resources. These separate financial statement elements represent a decrease and/or increase in net position that applies to a future period and so will not be recognized as an outflow and/or inflow of resources (expense/expenditure or income/revenue) in the current period.

NET POSITION

Net Position is classified into three categories according to external donor or legal restrictions or availability of assets to satisfy Vo-Tech obligations. Net Position is classified as follows:

 Net Investment in Capital Assets – This component of net position consists of capital assets net of accumulated depreciation, and reduced by the outstanding balances of debt that is attributable to the acquisition, construction and improvement of the capital assets, plus deferred outflows of resources less deferred inflows of resources related to those assets.

 Restricted Net Position – This component of net position consists of restricted assets reduced by liabilities and deferred inflows related to those assets.

 Unrestricted – Consists of all other net position that does not meet the definition of ‘restricted’ or ‘net investment in capital assets’.

14 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

NET POSITION (Continued)

The Vo-Tech applies restricted resources first, when available, before using unrestricted resources, to pay expenditures that can be paid from either source.

FUND EQUITY

Governmental Accounting Standards Board (GASB) Statement 54 “Fund Balance Reporting and Governmental Fund Type Definitions” provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balance more transparent. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used:

 Nonspendable fund balance – amounts that are not in a spendable form (such as inventory) or are required to be maintained intact

 Restricted fund balance – amounts constrained to specific purposes by their providers (such as grantors, bondholders, and high levels of government), through constitutional provisions, or by enabling legislation

 Committed fund balance – amounts constrained to specific purposes by the School District itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the Vo-Tech takes the same highest level action to remove or change the constraint.

 Assigned fund balance – amounts the Vo-Tech intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority

 Unassigned fund balance – amounts that are available for any purpose

The Vo-Tech has not formally adopted the provisions of this new GASB Statement as part of a ‘fund balance policy’ as the Vo-Tech does not traditionally maintain a fund balance subject to these classifications. However, the Vo-Tech utilizes the required terminology on its governmental funds balance sheet (Exhibit C) to reflect the $0 fund balance as ‘Unassigned’.

ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires the District's management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

15 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 2 - CASH DEPOSITS

The Butler County Area Vocational-Technical School had the following bank deposit balances and carrying values on its cash and cash equivalents at June 30, 2014:

BANK CARRYING BALANCE VALUE General Fund $ 953,560 $ 716,179 Agency Funds 46,327 42,840 $ 999,887 $ 759,019

The difference between the bank balance and carrying value represents year-end reconciling items such as deposits in transit and outstanding checks, and petty cash. The Federal Deposit Insurance Corporation (FDIC) coverage threshold for government accounts is $250,000 per official custodian. This coverage includes checking and savings accounts, money market deposits accounts, and certificates of deposit.

Custodial Credit Risk:

Custodial credit risk is the risk that in the event of a bank failure, the Vo-Tech’s deposits may not be returned to it. The Vo-Tech does not have a policy for custodial credit risk. As of June 30, 2014, $749,887 of the Vo-Tech’s bank balance total is exposed to custodial credit risk as this amount represents non FDIC insured deposits collateralized with securities held by the pledging financial institution or by its trust department or agent, but not in the Authority's name. In accordance with Act Number 72-1971 Session of the Commonwealth of Pennsylvania, the aforementioned deposits, in excess of $250,000, are collateralized by securities pledged to a pooled public funds account with the Federal Reserve System.

NOTE 3 – DUE FROM OTHER GOVERNMENTS

The amount of ‘due from other governments’, as reflected on the government-wide statement of net position and the governmental funds balance sheet, represents retirement and social security subsidies totaling $47,326.

NOTE 4 – OTHER RECEIVABLES

Other receivables of the General Fund totaling $224, as reflected on the government-wide statement of net position and the governmental funds balance sheet, are stated at net realizable value. This amount is comprised of miscellaneous rebates and employee reimbursements due the Vo-Tech.

NOTE 5 - DUE TO OTHER GOVERNMENTS

Due to other governments, as reflected on the government-wide statement of net position and the governmental funds balance sheet, represents 1) the excess of advance payments received from member districts over actual 2013-2014 operating costs totaling $347,677, 2) sales tax collected of $244 due the Commonwealth of Pennsylvania Department of Revenue and 3) Grant funds due back to the Department of Education totaling $7,446.

16 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 6 – OTHER CURRENT LIABILITIES

The other current liabilities balance of $64,802, as reflected on the government-wide statement of net position and the governmental funds balance sheet, represents 1) 2013-2014 adult education income in excess of related expenses totaling $43,637, 2) student project account of $6,262, 3) unearned grant revenue of $160, 4) auction proceeds of $14,171, and 5) miscellaneous of $572, all authorized to be carried over to the 2014-2015 fiscal year.

NOTE 7 - CAPITAL ASSETS

A summary of the governmental fixed asset activity for the 2013-2014 fiscal year was as follows:

Balance Balance 7/1/2013 Additions Deductions 6/30/2014 Governmental Activities Land $ 62,671 $ - $ - $ 62,671 Site Improvements 103,184 - - 103,184 Buildings and Improvements 14,139,575 2,162 - 14,141,737 Furniture and Equipment 4,057,425 186,253 151,158 4,092,520 $ 18,362,855 $ 188,415 $ 151,158 $ 18,400,112 Less: Accumulated depreciation Site Improvements $ (99,771) $ (175) - $ (99,946) Buildings and Improvements (3,309,148) (321,377) - (3,630,525) Furniture and Equipment (2,354,008) (280,010) (139,142) (2,494,876) $ (5,762,927) $ (601,562) $ (139,142) $ (6,225,347) Governmental Activities Capital Assets, Net $ 12,599,928 $ (413,147) $ 12,016 $ 12,174,765

Depreciation expense was charged to governmental functions as follows:

Instruction $ 574,077 Instructional Student Support 7,193 Administrative and Financial Support Services 317 Operation and Maintenance of Plant Services 19,975 $ 601,562

NOTE 8 - LONG-TERM LIABILITIES

NOTE PAYABLE

On October 8, 2004, the Butler County Area Vocational-Technical School issued a general obligation note to Citizen’s National Bank for $59,500 to finance the PA Act 57 Guaranteed Energy Savings Project. The terms of the note call for the payment of principal and interest of $622.89 per month for a period of 10 years at an interest rate of 4.65%. The final principal payment of $2,460, plus interest of $24, is due on this note during the 2014-2015 fiscal year

17 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 8 - LONG-TERM LIABILITIES (Continued)

The following represents the changes in the Vo-Tech's long-term liabilities during the 2013-2014 fiscal year:

Balance Balance Due Within 7/1/2013 Additions Reductions 6/30/2014 One Year Lease Purchase Obligations $ 6,902 $ - $ 6,902 $ - $ - General Obligation Note 9,634 - 7,174 2,460 2,460 Compensated Absences 16,904 268 1,770 15,402 - Net OPEB Obligation 203,702 88,036 - 291,738 - $ 237,142 $ 88,304 $ 15,846 $ 309,600 $ 2,460

NOTE 9 - PENSION PLAN

The Butler County Area Vocational-Technical School participates in the Public School Employees’ Retirement System (PSERS). PSERS is a component unit of the Commonwealth of Pennsylvania. A brief description of the plan, summary of the plan’s provisions, are as follows:

PLAN DESCRIPTION

Name of Plan: Public School Employees’ Retirement System (the System)

Type of Plan: Governmental cost-sharing multiple-employer defined-benefit plan

Benefits: Retirement and disability, legislatively mandated ad hoc cost-of living adjustments, healthcare insurance premium assistance to qualifying annuitants

Authority: The Public School Employees’ Retirement Code (Act No. 96 of October 2. 1975, as amended) (24 Pa. C.S. 8101-8535)

Annual Financial Report: The System issues a Comprehensive Annual Financial Report (CAFR) that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to Beth Girman, Office of Financial Management, Public School Employees’ Retirement System, 5 N 5th Street, Harrisburg PA 17101-1905 or by emailing Beth at [email protected]. The CAFR is also available on the Publications page of the PSERS website, www.psers.state.pa.us.

FUNDING POLICY

Authority: The contribution policy is established in the Public School Employees’ Retirement Code and requires contributions by active members, employers, and the Commonwealth.

18 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 9 - PENSION PLAN (Continued)

FUNDING POLICY

Contribution Rates:

Member Contributions - Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class TC) or at 6.50% (Membership Class TD) of the member’s qualifying compensation. Members who joined the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, contribute at 6.25% (Membership Class TC) or at 7.50% (Membership Class TD) of the member’s qualifying compensation. Members who joined the System after June 30, 2001 and before July 1, 2011, contribute at 7.50% (automatic Membership Class TD). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with service rendered on or after January 1, 2002.

Members who joined the System after June 30, 2011, automatically contribute at the Membership Class T-E rate of 7.50% (base rate) of the member’s qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.30% (base rate) of the member’s qualifying compensation. Membership Class T-E and Class T-F are affected by a “shared risk” provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate between 7.50% and 9.50% and Membership Class T-F contribution rate to fluctuate between 10.30% and 12.30%.

Employer Contributions - Contributions required of employers are based upon an actuarial valuation. For fiscal year ended June 30, 2014, the rate of employer’s contribution was 16.93% of covered payroll. The 16.93% is comprised of a pension contribution rate of 16.00% for pension benefits and .93% for healthcare insurance premium assistance.

The Butler County Area Vocational Technical School pension expense and employee contributions to PSERS, as well as, total covered (pension eligible) payroll for the three most recent fiscal years is as follows: DISTRICT EMPLOYEE COVERED YEAR EXPENSE CONTRIBUTIONS PAYROLL 2013-2014 $ 319,685 $ 144,829 $ 1,942,808 2012-2013 229,606 142,903 1,917,721 2011-2012 160,312 142,503 1,914,357

NOTE 10 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION

FUNDING POLICY

The Butler County Area Vocational-Technical School provides early retirement health care benefits for employees who have completed 10 years of service at the Butler County Area Vocational-Technical School and 20 years of service in the PSERS (Note 9) regardless of age. This program was established by the authority of the agreement between the Butler County Area Vocational-Technical School and the Butler County Area Vocational-Technical School Education Association. The program entitles eligible employees to health care benefits during the period between retirement and attaining Medicare age, not to exceed ten years in total. The plan is unfunded and no financial report is prepared. These benefits are accounting for in accordance with GASB Statement No. 45, Accounting and Financial Reporting by Employers for Post- Employment Benefits Other Than Pensions.

19 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 10 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued)

ANNUAL OPEB COST AND NET OPEB OBLIGATION

The Vo-Tech’s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.

The following shows the components of the Vo-Tech’s annual OPEB cost for the year, the amount actually contributed to the plan and changes in the Vo-Tech’s net OPEB obligation:

Annual required contribution $ 176,042 Interest on net OPEB obligation 9,167 Adjustment to annual required contribution (12,506) Annual OPEB cost (expense) 172,703 Contributions made (estimate) (84,667) Increase in net OPEB obligation 88,036 Net OPEB obligation at July 1, 2013 203,702 Net OPEB obligation at June 30, 2014 $ 291,738

The Net OPEB liability of $291,738 is reflected as part of Noncurrent Liabilities in the government-wide financial statement of net position (Exhibit A).

FUNDED STATUS AND FUNDING PROGRESS

(A) (B) (B-A) (A/B) (C) (B-A)/C (UAAL) UNFUNDED UAAL AS A ACTUARIAL ACTUARIAL ACTUARIAL ACTUARIAL % OF VALUATION VALUE OF ACCRUED ACCRUED FUNDED COVERED COVERED DATE ASSETS LIABILITY LIABILITY RATIO PAYROLL PAYROLL

7/1/12 $ - $ 1,501,564 $ 1,501,564 0% $ 1,738,032 86.39%

20 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 10 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued)

SCHEDULE OF EMPLOYER'S CONTRIBUTIONS:

FISCAL YEAR ANNUAL OPEB PERCENTAGE NET OPEB ENDED COST CONTRIBUTED OBLIGATION

6/30/2014 $ 172,703 49.0% * $ 291,738 6/30/2013 174,231 46.5% * 203,702 * Estimated

ACTUARIAL METHODS AND ASSUMPTIONS

The July 1, 2012 actuarial valuation report utilized the Entry Age Normal Cost Method with an assumed 4.5% rate of interest. Actuarial Accrued Liability amortized as a level dollar amount over 30 years. The health care cost trend rate is 7.5% decreasing by .5% per year to 5.5% in 2016.

NOTE 11 – OPERATING LEASE

The Butler County Area Vocational-Technical School entered into an operating lease for mailing system equipment with Pitney Bowes on December 30, 2010. The terms of the lease agreement call for the monthly payment of $170.73 for a period of 5 years. Mailing equipment lease expense totaled $2,049 for the 2013-2014 fiscal year. A summary of the remaining operating lease rental payments to be made as of June 30, 2014 is as follows:

YEAR-END AMOUNT 2014-2015 $ 2,049 2015-2016 1,195 $ 3,244

NOTE 12 - RISK MANAGEMENT

GENERAL INSURANCE CLAIMS

The Butler County Area Vocational-Technical School is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets, errors and omissions; injuries to employees; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. Settled claims for these risks have not exceeded commercial insurance coverage for the past three years.

HEALTH INSURANCE

The Butler County Area Vocational-Technical School is a member of the Midwestern Health Combine. The Consortium is a public entity risk pool designed to administer health and medical insurance risks on a pooled risk basis. The Consortium elected to finance these health care benefits using a self-insured approach known as an Administrative Service Contract (ASC) arrangement.

21 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 12 - RISK MANAGEMENT (Continued)

Under this arrangement, the consortium contracts for an insurer (Highmark Blue Cross/Blue Shield) to settle the payment for benefits at their provider discounted contract amounts plus a fee for administration rather than paying for benefits at non-discounted claims rates.

The Reschini Group performs billing and collection services for the Consortium’s deposit (medical) and premium (supplemental) amounts. Billing administration is provided through Crown Benefits Administration who also monitors and submits to Highmark all enrollment and eligibility changes for all coverages.

Contributions from participating members are determined annually in advance by the Consortium’s operating committee. These contributions are based on amounts required to fund anticipated benefits and claims, as well as operational costs. The monthly payments of each member are determined by the terms of the medical benefit chosen by such members.

Participating members are permitted to withdraw from the Consortium, and are entitled to a vested interest in the Consortium fund balance after settlement of all claims related to that member over a period of 12 months from the date of withdrawal. As of June 30, 2014, the Consortium net assets reflected a deficit balance of $385,251.

NOTE 13 - CONTINGENCIES

The Butler County Area Vocational-Technical School state and federally funded programs are subject to audit by various governmental agencies. The Vo-Tech is potentially liable for any expenditure disallowed by the results of these audits. Management is not aware of any items of noncompliance which would result in the disallowance of program expenditures.

NOTE 14 – PENDING GASB PRONOUNCEMENTS

In June 2012, GASB issued Statement No. 68, ‘Accounting and Financial Reporting for Pensions’, which amends GASB Statement No. 27. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities.

In November of 2013, GASB issued Statement No. 71, ‘Pension Transition for Contributions Made Subsequent to Measurement Date – an Amendment to GASB 68’. The primary objective of this Statement is to address an issue regarding application of the transition provisions of GASB 68.

The provisions of these Statements are effective for the Butler County Area Vocational-Technical School’s June 30, 2015 financial statements. The effects of implementing GASB Statements No. 68 and 71 on the Vo-Tech’s financial statements have not yet been determined.

22 BUTLER COUNTY AREA VOCATIONAL-TECHNICAL SCHOOL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014

NOTE 15 – SUBSEQUENT EVENTS

In February of 2015, the Vo-Tech entered into a lease agreement with the Ford Motor Credit Company for the purchase of a 2015 Ford F550 Dump Truck and two (2) 2015 Ford Transit XL Wagons totaling $101,838. The terms of the lease agreement call for five (5) annual payments of $22,882.37 commencing on January 30, 2015 scheduled to mature on January 30, 2019 at an interest rate of 5.95%. The vehicles serve as collateral on the lease agreement.

Management has determined that there are no additional events subsequent to June 30, 2014 through the date of the ‘Independent Auditor’s Report’ date, which is the date the financial statements were available to be issued, that require additional disclosure in the financial statements.

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APPENDIX K

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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MUNICIPAL BOND INSURANCE POLICY

ISSUER: Policy No: -N

BONDS: $ in aggregate principal amount of Effective Date: Premium: $

ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the Page 2 of 2 Policy No. -N

United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy.

This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer.

ASSURED GUARANTY MUNICIPAL CORP.

By Authorized Officer

A subsidiary of Assured Guaranty Municipal Holdings Inc. 31 West 52nd Street, New York, N.Y. 10019 (212) 974-0100

Form 500NY (5/90)