Methacton School District (Montgomery County, Pennsylvania) General Obligation Bonds, Series of 2019

This Preliminary Official Statement and the information contained herein are subject to completion, amendment or other change without notice. The Bonds may not be sold nor may offers to buy be accepted prior to the time the Preliminary Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of any such jurisdiction Advisor to the School District Financial in connection with as the Bonds. serves It is Pennsylvania, expected that Harrisburg,the Bonds will of be available for LLC, delivery through Advisors DTC, Financial on or PFM about July __, 2019. Underwriter. the for Pennsylvania, Reading, P.C.,of Lee, & Stevens by and other legal matters will be passed upon for the School District by Sweet, Stevens, Katz & Williams, LLP, of New Britain, Pennsylvania, School District Solicitor Eckert Seamans Cherin & Mellott, LLC, of Harrisburg, Pennsylvania, Bond Counsel to the School District, to be furnished upon delivery of the Bonds. Certain of theSchoolDistrict,andpayingcostsexpensesassociatedwithissuingBonds. School High WoodlandMethacton the and School, School, WorcesterSchool Elementary Elementary Intermediate Upper Arcola Skyview School, Elementary person(s) inwhosename(s)suchBondisregisteredasoftheRecordDatewithrespecttoparticularinterestpaymentdate (See “ the Paying Agent may designate (or any successor paying agent at its designated office(s)), and interest on such Bond will be payable by check and mailed to the Buffalo, New in as office offices trust Paying its corporate the of its to other at Bond any Agent such at of or Harrisburg,surrender Pennsylvania, or upon York the of use any,if premium, redemption and of principal the discontinued, ever is Bonds the for System Only Book-Entry the due, when payable, be will Bonds the of each on If Bonds. the of Owners Beneficial the to disbursement subsequent for Participants DTC to payments such remit turn in will DTC and Agent, Bonds, payments of the principal of, redemption premium, if any, and interest on the Bonds, when due for payment, will be made directly to DTC by the Paying the of owner registered the is DTC, for nominee as Co., & Cede as long So Bonds. the for depository fund sinking and agent paying “Paying as (the Agent”), and TradersManufacturers for.appointed provided has or TrustDistrict made School Company duly The been has price redemption the of payment if thereof, maturity date of such Bond or, if such Bond is subject to redemption prior to maturity and has been duly called for redemption, until the date fixed for redemption law. by provided limits the within District, School the within property real taxable all on tax (See valorem power ad taxing annual which power, an taxing levy and to credit faith, power full the its includes pledged presently has irrevocably District School the payment and appropriation budgeting, such for and sinking related the from Bonds, paid the in stated be manner the in to and place the cause at dates, the on or thereon interest the pay and Bond every punctually of principal the and funds or revenues its duly of other any will or fund and year such for Bonds the on service debt the of amount the year, such each in revenues general its from appropriate will and year, each in budget its in provide will it that covenanted has District School The revenues. general other and will besubjecttoregistrationoftransfer, exchangeandpaymentasdescribedherein. such Bond. See “BOOK-ENTRY ONLY SYSTEM” herein. If, under the circumstances described herein, Bonds are ever issued in certificated form, the Bonds on interest and of principal of payment receive to Participant DTC a through, acts or is, who dealer a or broker a with account an maintain must purchaser that The of nominee and DTC Participants. The purchasers owner of the Bonds will not receive physical delivery of the Bonds. For so registered long as any purchaser is the beneficial owner of a Bond, the as Co., & Cede of name the in Depository registered Trust Company be (“DTC”), New will York, and New York,thereof, multiple under its book-entry integral only system maintained through any its brokers and or dealers who are, $5,000 or act through, of denominations Interest Due: Dated: (relating toexpensesandinterest relating totax-exemptincomeofcertainfinancialinstitutions). See “TAX MATTERS” herein. alternative from Pennsylvaniapersonalincometaxandcorporatenettax,theBondsare federal exemptfrom personalproperty taxesinPennsylvania. the computing of purposes for item preference specific a be not minimum taxonindividuals.UnderlawsoftheCommonwealthPennsylvania,asenactedandconstrueddatehereof, interestwill ontheBondsisexempt Bonds the on Interest amended. as 1986, of Code Revenue Internal gross incomeoftheholdersthereof forfederalincometaxpurposes,assumingcontinuingcompliancebytheSchoolDistrictwithrequirements ofthe NEW ISSUE-BOOK-ENTRY ONLY *Estimated, subject tochange. Dated: “THE BONDS-Security” The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of School, Elementary Eagleville School, Elementary the Arrowhead to additions and renovations alterations, towards used be will Bonds the of Proceeds The Bondsaresubjecttoredemptionpriormaturityasmorefullydescribed herein. Interest on each of the Bonds is payable initially on September 15, 2019, and thereafter semiannually on March 15 and September 15 of each year until the tax its from payable District”), “School (the Pennsylvania County, Montgomery District, School Methacton the of obligations general are Bonds The in form registered in issued be will $4,700,000* of amount principal aggregate the in “Bonds”), (the 2019 of Series Bonds, Obligation General The The Bonds are “qualified tax-exempt obligations”, for purposes and effect contemplated by Section 265 of the Internal Revenue Code of 1986, as amended In theopinionofBondCounsel,underexistingstatutes,regulations, rulingsandcourtdecisions,interest ontheBondswillnotbeincludiblein DateofDelivery March15andSeptember and PRELIMINARY OFFICIAL STATEMENT DATED JUNE19, 2019 MATURITIES, AMOUNTS, RATES, INITIAL OFFERING YIELD AND CUSIPS “TAXING POWERSOF THE SCHOOL DISTRICT” Methacton SchoolDistrict General ObligationBonds,Seriesof2019 (Montgomery County, Pennsylvania) See InsideFront Cover $4,700,000*

infra Principal Due: ). First Interest Payment: September15(asshownoninsidecover) RATING

: Moody’s: Aa2 (Underlying) THE BONDS (See “RATING” herein) September15,2019 ,” infra ).

$4,700,000* Methacton School District (Montgomery County, Pennsylvania) General Obligation Bonds, Series of 2019

Dated: Date of Delivery Principal Due: September 15 (as shown below)

Interest Due: March 15 and September 15 First Interest Payment: September 15, 2019

Year of Maturity Principal Maturity Interest Initial Offering (September 15) Amount Rate Yields CUSIP No.(1) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

(1)The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated with the School District or the Underwriter, and such parties are not responsible for the selection or use of the CUSIP numbers. The CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited to, the refunding or defeasance of such issue or the use of secondary market financial products. Neither the School District nor the Underwriter has agreed to, and there is no duty or obligation to, update this Preliminary Official Statement to reflect any change or correction in the CUSIP numbers set forth above.

*Estimated, subject to change.

METHACTON SCHOOL DISTRICT Montgomery County, Pennsylvania

BOARD OF SCHOOL DIRECTORS

Kim Aubrey-Larcinese ...... President Elizabeth Drummond ...... Vice-President Jen Cancro ...... Member Brian Earnshaw ...... Member Mary K. Hull ...... Member Ralph Navarrete ...... Member Andrea Rees ...... Member Michael K. Ryan ...... Member Paul Winters ...... Member Danielle Penza ...... Treasurer* Mary Mandia ...... Secretary*

*Non-voting Member

SUPERINTENDENT DR. DAVID A. ZERBE

DIRECTOR OF BUSINESS SERVICES TIMOTHY BRICKER

SCHOOL DISTRICT SOLICITOR SWEET, STEVENS, KATZ & WILLIAMS, LLP New Britain, Pennsylvania

BOND COUNSEL ECKERT SEAMANS CHERIN & MELLOTT, LLC Harrisburg, Pennsylvania

FINANCIAL ADVISOR PFM FINANCIAL ADVISORS LLC Harrisburg, Pennsylvania

PAYING AGENT MANUFACTURERS AND TRADERS TRUST COMPANY Buffalo, New York or Harrisburg, Pennsylvania

UNDERWRITER RBC CAPITAL MARKETS, LLC Philadelphia, Pennsylvania

LIMITED SCOPE UNDERWRITER’S COUNSEL STEVENS & LEE, P.C. Reading, Pennsylvania

SCHOOL DISTRICT ADDRESS 1001 Kriebel Mill Road Eagleville, Pennsylvania 19403-1047

No dealer, broker, salesman or other person has been authorized by the School District to give information or to make any representations, other than those contained in this Preliminary Official Statement, and if given or made, such other information or representations must not be relied upon. This Preliminary Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds 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 School District and from other sources which are believed to be reliable but the School District does not guarantee the accuracy or completeness of information from sources other than the School District. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Preliminary 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 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 PRELIMINARY OFFICIAL STATEMENT: THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS PRELIMINARY OFFICIAL STATEMENT PURSUANT TO ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS, 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 RESOLUTION 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 RESOLUTION 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 PRELIMINARY OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

TABLE OF CONTENTS Page Page Debt Limit and Remaining Borrowing Capacity ...... 22 INTRODUCTION ...... 1 Debt Service Requirements ...... 23 PURPOSE OF THE ISSUE ...... 1 Future Financing ...... 24 Sources and Uses of Bond Proceeds ...... 1 LABOR RELATIONS ...... 24 THE BONDS ...... 2 School District Employees ...... 24 Pension Program ...... 24 Description ...... 2 Other Post-Employment Benefits ...... 25 Payment of Principal and Interest ...... 2 Transfer, Exchange and Registration of Bonds ...... 2 LITIGATION ...... 25 Commonwealth Enforcement of Debt Service Payments ...... 3 DEFAULTS AND REMEDIES ...... 25 Pennsylvania Budget Adoption ...... 3 Act 85 of 2016 ...... 3 TAX MATTERS ...... 26 Security ...... 4 Federal ...... 26 BOOK-ENTRY ONLY SYSTEM ...... 4 Pennsylvania ...... 26 Other ...... 26 REDEMPTION OF BONDS ...... 6 CONTINUING DISCLOSURE UNDERTAKING ...... 27 Mandatory Redemption ...... 6 Optional Redemption ...... 6 Continuing Disclosure Filing History ...... 27 Notice of Redemption ...... 7 Manner of Redemption ...... 7 RATING ...... 27 UNDERWRITING ...... 27 THE SCHOOL DISTRICT ...... 8 Introduction ...... 8 LEGAL OPINION ...... 28 Administration ...... 8 FINANCIAL ADVISOR ...... 28 School Facilities ...... 8 Enrollment Trends ...... 9 MISCELLANEOUS ...... 28 SCHOOL DISTRICT FINANCES ...... 9 APPENDIX A - DEMOGRAPHIC AND ECONOMIC INFORMATION RELATING TO THE METHACTON SCHOOL DISTRICT Budgeting Process in School Districts under The Taxpayer Relief Act (Act 1) ...... 9 Population ...... A-1 Summary and Discussion of Financial Results ...... 11 Employment ...... A-2 Major Employers ...... A-3 TAXING POWERS OF THE SCHOOL DISTRICT ...... 13 Income ...... A-4 In General ...... 13 Commercial Activity ...... A-4 The Taxpayer Relief Act (Act 1) ...... 14 Educational Institutions ...... A-4 Status of the Bonds Under Act 1 ...... 15 Medical Facilities ...... A-4 Act 130 of 2008 ...... 15 Transportation Facilities ...... A-4 Act 48 of 2003 – Limitation on Fund Balances ...... 15 Utilities ...... A-4 Tax Levy Trends ...... 16 APPENDIX B - PROPOSED TEXT OF BOND COUNSEL OPINION Real Property Tax ...... 17 Other Taxes ...... 18 APPENDIX C - FORM OF CONTINUING DISCLOSURE CERTIFICATE COMMONWEALTH AID TO SCHOOL DISTRICTS ...... 19 Debt Statement ...... 20 APPENDIX D - FINANCIAL STATEMENTS AND SINGLE AUDIT FOR THE YEAR ENDING JUNE 30, 2018

PRELIMINARY OFFICIAL STATEMENT

$4,700,000* Methacton School District (Montgomery County, Pennsylvania)

General Obligation Bonds, Series of 2019

INTRODUCTION

This Preliminary Official Statement, including the cover and inside cover pages hereof and Appendices hereto, is furnished by Methacton School District (the “School District”), a public school district located in Montgomery County, Pennsylvania, in connection with the offering of $4,700,000* aggregate principal amount of General Obligation Bonds, Series of 2019 (the “Bonds”) dated the delivery (the “Delivery Date”). The Bonds are being issued pursuant to a Resolution of the Board of School Directors of the School District adopted on May 22, 2019 (the “Resolution”), and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania (the “Commonwealth” or “State”), 53 Pa. C.S. Chs. 80-82 (the “Debt Act”).

PURPOSE OF THE ISSUE

Proceeds of the Bonds will be used towards alterations, renovations and additions to the Arrowhead Elementary School, Eagleville Elementary School, Woodland Elementary School, Worcester Elementary School, Skyview Upper Elementary School, Arcola Intermediate School and the Methacton High School of the School District, and paying the costs and expenses associated with issuing the Bonds.

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 Total Bond Proceeds ...... Net Original Issue Premium/(Discount) ...... Total Source of Funds ......

Use of Funds Construction Fund Deposit ...... Costs of Issuance(1) ...... Total Use of Funds ......

(1)Includes legal, financial advisor, printing, rating, underwriter’s discount, CUSIP, paying agent, and miscellaneous costs.

*Estimated, subject to change.

THE BONDS

Description

The Bonds will be issued in registered form, without coupons, in denominations of $5,000 principal amount and integral multiples thereof, will be in the aggregate principal amount of $4,700,000* and will be dated as of the dated date, and will bear interest at the rates and mature in the amounts and on the dates set forth on the inside cover of this Preliminary Official Statement. Interest on each of the Bonds will be payable initially on September 15, 2019, and thereafter semiannually on March 15 and September 15 of each year until the maturity date of such Bond, or if such Bond is subject to redemption prior to maturity and has been duly called for redemption, until the date fixed for redemption thereof, if payment of the redemption price has been duly made or provided for.

When issued, the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York. Purchasers of the Bonds (the “Beneficial Owners”) will not receive any physical delivery of Bond certificates, and beneficial ownership of the Bonds will be evidenced only by book entries. See “BOOK – ENTRY ONLY SYSTEM” herein.

Payment of Principal and Interest

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 School District 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:

The principal of certificated Bonds, when due upon maturity or upon any earlier redemption, will be paid to the registered owners of the Bonds, or registered assigns, upon surrender of the Bonds to Manufacturers and Traders Trust Company (the “Paying Agent”), acting as paying agent and sinking fund depository for the Bonds, at its corporate trust office in Harrisburg, Pennsylvania, or at any other of its offices as the Paying Agent may designate (or to any successor paying agent at its designated office(s)).

Interest on the Bonds will be payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and authentication of such Bond, unless: (a) such Bond is registered and 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 preceding September 15, 2019, in which event such Bond shall bear interest from the Dated Date, or (d) as shown by the records of the Paying Agent, interest on such Bond shall be in default, in which event such Bond shall bear interest from the date to which interest was last paid on such Bond. Interest on each Bond will be payable by check drawn on the Paying Agent, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the 15th day (whether or not a day on which the Paying Agent is open for business) next preceding each interest payment date (the “Record Date”), on the registration books maintained by the Paying Agent, irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such interest payment date, unless the School District 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 Paying Agent to the registered owners of such Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names such Bonds are registered at the close of business on the fifth (5th) day preceding the date of mailing.

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

Transfer, Exchange and Registration of Bonds

Subject to the provisions described below under “Book-Entry Only System,” each of the Bonds is transferable or exchangeable by the registered owner thereof upon surrender of such Bond to the Paying Agent, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent 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 of authorized denominations of the same series, maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The School District and the Paying Agent may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the School District and the Paying Agent shall not be affected by any notice to the contrary.

*Estimated, subject to change.

The School District and the Paying Agent shall not be required (a) to 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 on which the applicable notice of redemption is mailed or (b) to register the transfer of or exchange any portion of any Bond selected for redemption until after the redemption date. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity and interest rate.

Commonwealth Enforcement of Debt Service Payments

Section 633 of the Pennsylvania Public School Code of 1949, as amended by Act 154 of 1998 (the “Public School Code”), presently provides that in all cases where the board of school directors of any school district fails to pay or to provide for the payment of any indebtedness at date of maturity or date of mandatory redemption or on any sinking fund deposit date, or any interest due on such indebtedness on any interest payment date or on any sinking fund deposit date, in accordance with the schedule under which the bonds were issued, the Secretary of Education shall notify such board of school directors of its obligation and shall withhold out of any Commonwealth appropriation due such school district an amount equal to the sum of the principal amount maturing or subject to mandatory redemption and interest owing by such school district, or sinking fund deposit due by such school district, and shall pay over the amount so withheld to the bank or other person acting as sinking fund depositary for such bond issue. These withholding provisions are not part of any contract with the holders of the Bonds, and may be amended or repealed by future legislation.

The effectiveness of Section 633 of the Public School Code may be limited by the application of other withholding provisions contained in the Public School Code, such as provisions for withholding and paying over of appropriations for payment of unpaid teachers’ salaries. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the enforcement of creditors’ rights generally. See “Pennsylvania Budget Adoption” hereinafter.

Pennsylvania Budget Adoption

Over the past several years the Commonwealth of Pennsylvania has, from time to time, started its fiscal year without a fully adopted state budget. In the state’s 2015-16 fiscal year, a final budget was not enacted until 270 days following the beginning of the fiscal year on March 27, 2016 when the Governor failed to sign or veto the state budget that was adopted by the General Assembly on March 17, 2016.

For the 2016-17 fiscal year, the state budget became law, known as Act 16A of 2016, on July 12, 2016 when the Governor failed to sign or veto the state budget that was adopted by the General Assembly on July 1, 2016. On July 13, 2016, the General Assembly adopted and Governor signed into law additional tax and revenue package, known as Act 85 of 2016, which was needed to balance the 2016-17 state budget.

For the 2017-18 fiscal year, the state budget became law, known as Act 1A of 2017, on July 11, 2017 when the Governor failed to sign or veto the state budget that was adopted by the General Assembly on June 30, 2017. Act 1A of 2017 did not have any accompanying legislation regarding the potential revenue that would be needed to fund the balance of the 2017-18 Budget at the time of its enactment. On October 25, 2017, the General Assembly adopted House Bill 542 which contained the necessary revenue to fund the balance of the previously adopted Act 1A of 2017. On October 30, 2017 the Governor approved and signed House Bill 542 and it became known as Act 43 of 2017.

The budget for the 2018-19 fiscal year was adopted on a timely basis.

During a state budget impasse, school districts in Pennsylvania cannot be certain that state subsidies and revenues owed them from the Commonwealth will become available. This includes many of the major state subsidies, and overall revenues, that a Pennsylvania school district receives including basic education funding, special education funding, PlanCon reimbursements, and certain block grants, among many others. Future budget impasses may affect the timeliness or amount of payments by the Commonwealth under the withholding provisions of Section 633 of the Public School Code, however recent legislation included in Act 85 of 2016 has attempted to address the timeliness of the withholding provisions of Section 633 of the Public School Code during any future budget impasses. See “Act 85 of 2016” hereinafter.

Act 85 of 2016

On July 13, 2016, the Governor of the Commonwealth signed into law Act No. 85 of 2016, (P.L. 664, No. 85) (“Act 85 of 2016”), an amendment to the Act of April 9, 1929 (P.L. 343, No. 176), known as the Fiscal Code (“Fiscal Code”). Act 85 of 2016 adds to the Fiscal Code Article XVII-E.4, entitled “School District Intercepts for the Payment of Debt Service During Budget Impasse”, which provides for intercept of subsidy payments by the Pennsylvania Department of Education (“PDE”) to a school district subject to an intercept statute or an intercept agreement in the event of a Commonwealth budget impasse in any fiscal year.

Act 85 of 2016 includes in the definition of “intercept statutes” Section 633 of the Public School Code. The School District's general obligation bonds, including the Bonds, are subject to Section 633 of the Public School Code.

Act 85 of 2016 provides that the amounts that may be necessary for PDE to comply with the provisions of the applicable intercept statute or intercept agreement “shall be appropriated” to PDE from the General Fund of the Commonwealth after PDE submits justification to the majority and minority chairs of the appropriations committees of the Pennsylvania Senate and House of Representatives allowing ten (10) calendar days for their review and comment, if, in any fiscal year:

(1) annual appropriations for payment of Commonwealth money to school districts have not been enacted by July 1 and continue not to be enacted when a payment is due;

(2) the conditions under which PDE is required to comply with an intercept statute or intercept agreement have occurred, thereby requiring PDE to withhold payments which would otherwise be due to school districts; and

(3) the Secretary of PDE, in consultation with the Secretary of the Budget, determines that there are no payments or allocations due to be paid to the applicable school districts from which PDE may withhold money as required by the applicable intercept statute or intercept agreement.

The necessary amounts shall be appropriated and paid to the paying agent on the day the scheduled payment for principal and interest is due on the expiration of the tenth (10th) day following submission of the justification described above to the majority and minority chairs of the appropriations committees, who may comment on the justification but cannot prevent the effectiveness of the appropriation.

The total of all intercept payments under Article XVII-E.4 for a school district may not exceed 50% of the total nonfederal general fund subsidy payments made to that school district in the prior fiscal year.

Act 85 of 2016 requires that each school district with bonds or notes subject to an intercept statute or intercept agreement must deliver to PDE, in such format as PDE may direct, a copy of the final Official Statement for the relevant bonds or notes or the loan documents relating to the obligations, within thirty (30) days of receipt of the proceeds of the obligations. The School District intends on submitting this information with respect to the Bonds to PDE within the prescribed timeframe following the issuance of the Bonds. Act 85 of 2016 provides that any obligation for which PDE does not receive the required documents shall not be subject to the applicable intercept statute or intercept agreement.

The provisions of Act 85 of 2016 are not part of any contract with the holders of the Bonds and may be amended or repealed by future legislation.

Security

The Bonds will be general obligations of the School District, payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget for each year, and will appropriate from its general revenues in each such year, the amount of the debt service on the Bonds for such year, and will duly and punctually pay or cause to be paid from its Sinking Fund, as hereinafter defined, or any other of its revenues or funds, the principal of each of the Bonds and the interest thereon at the dates and place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and taxing power, which taxing power presently includes the power to levy an ad valorem tax on all taxable real property within the School District, within the limits provided by law (see “Taxing Powers of the School District” herein). The Act presently provides for enforcement of debt service payments as hereinafter described (see “Defaults and Remedies” herein), and the Public School Code presently provides for the withholding and application of subsidies in the event of failure to pay debt service (see “Commonwealth Enforcement of Debt Service Payments” herein).

Sinking Fund

A sinking fund for the payment of debt service on the Bonds, designated “General Obligation Bonds, Series of 2019 - Sinking Fund” (the “Sinking Funds”), created under the Resolution shall be held by the Paying Agent as sinking fund depository. The School District shall deposit in the Sinking Fund a sufficient sum not later than the date when interest and/or principal is to become due on the Bonds so that on each payment date the Sinking Fund will contain an amount which, together with any other funds available therein, is sufficient to pay in full interest and/or principal then due on the Bonds.

The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and funds deposited therein will be invested by the Paying Agent in such securities or shall be deposited in such funds or accounts as are authorized by law, upon direction of the School District. Such deposits and securities shall be in the name of the School District, but subject to withdrawal or collection only by the Paying Agent, as sinking fund depository, and such deposits and securities, together with the interest thereon, shall be a part of the Sinking Fund.

The Paying Agent, as sinking fund depository, is authorized without further order from the School District to pay from the Sinking Fund the principal of and interest on the Bonds, as and when due and payable.

BOOK-ENTRY ONLY SYSTEM

The information in this section has been obtained from materials provided by DTC for such purpose. The School District (herein referred to as the “Issuer”) and the Underwriter do not guaranty the accuracy or completeness of such information, and such information is not to be construed as a representation of the School District or the Underwriter.

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

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly- owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income 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 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

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

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent and request that copies of notices be provided directly to them.

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

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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

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

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

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 the Issuer takes no responsibility for the accuracy thereof.

NEITHER THE ISSUER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY TO ANY BENEFICIAL OWNER BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER AND NOTEHOLDER.

The Issuer and the Paying Agent cannot give any assurances that DTC or the Participants will distribute payments of the principal or redemption price of and interest on the Bonds paid to DTC or its nominee, as the registered owner of the Bonds, or any redemption or other notices, to the Beneficial Owners or that they will do so on a timely basis, or that DTC will serve and act in the manner described in this Preliminary Official Statement.

REDEMPTION OF BONDS

Mandatory Redemption

The Bonds stated to mature on September 15, ___, are subject to mandatory sinking fund redemptions prior to maturity as required by the Resolution, in the amounts and on September 15 of the years shown below, from money deposited in the Mandatory Sinking Fund created pursuant to the Resolution, upon payment of 100% of the principal amount thereof together with interest accrued to the date fixed for redemption.

Bonds stated to mature September 15, 20__:

*Final Maturity

In lieu of such Mandatory Redemption, the Paying Agent, on behalf of the School District, may purchase from money in the Sinking Fund, at a price not to exceed the principal amount plus accrued interest, or the School District may tender to the Paying Agent, all or part of the Bonds subject to being drawn for redemption in any such year.

In the case of any prior, optional redemption in part of a Bond that is subject to future mandatory redemption, the School District shall be entitled to designate whether the principal amount of such Bond redeemed upon optional redemption shall be credited against the principal amount of such Bond to be paid by the School District at the stated maturity of such Bond or credited against the principal amount of such Bond scheduled to be called for mandatory sinking fund redemption on any particular date or dates, in each case in an integral multiple of $5,000 principal amount.

Optional Redemption

The Bonds stated to mature after September 15, 20__ are subject to redemption prior to maturity, at the option of the School District, as a whole or, from time to time, in part, on ______, or on any date thereafter, upon payment of a redemption price of 100% of the principal amount thereof plus accrued interest to the date fixed for redemption. If less than all Bonds of any maturity are to be redeemed, the Bonds of such maturity to be redeemed shall be drawn by lot by the Paying Agent.

Notice of Redemption

So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, however, the School District and the Paying Agent shall send redemption notices only to Cede & Co. See “BOOK-ENTRY ONLY SYSTEM” herein for further information regarding conveyance of notices to Beneficial Owners.

Notice of any redemption shall be given by depositing a copy of the redemption notice in first class mail 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; provided, however, that failure to give such notice by mailing, 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 and accrued interest being held by the Paying Agent, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Resolution, and registered owners of such Bonds or portions thereof so called for redemption shall have no rights with respect to such Bonds, except to receive payment of the principal of and accrued interest on such Bonds to the date fixed for redemption.

If at the time of mailing the notice of redemption the School District has not deposited with the Paying Agent money sufficient to redeem all the Bonds called for redemption, such notice may state that it is conditional, that it is subject to the deposit of the redemption money with the Paying Agent no later than the opening of business on the redemption date, and such notice shall be of no effect unless such money is so deposited.

Manner of Redemption

So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payment of the redemption price shall be made to Cede & Co. in accordance with the existing arrangements by and among the School District, the Paying Agent and DTC and, if less than all Bonds of any particular maturity are to be redeemed, the amount of the interest of each DTC Participant, Indirect Participant and Beneficial Owner in such Bonds to be redeemed shall be determined by the governing arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. See “BOOK-ENTRY ONLY SYSTEM” herein for further information regarding redemption of Bonds registered in the name of Cede & Co.

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 the 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 a certificated Bond in exchange for a Bond or Bonds of authorized denominations in aggregate principal amount equal to the unredeemed portion of the principal amount thereof.

If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth of Pennsylvania are authorized or required 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 or required to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption.

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THE SCHOOL DISTRICT

Introduction

The School District is located in Montgomery County, Pennsylvania, and consists of the Township of Lower Providence and the Township of Worcester. The School District was formed July 1, 1969, as a result of Act 150 of the 1968 Pennsylvania Legislature which required the consolidation of school districts. Two school districts formerly served the area: the Lower Providence School District and the Worcester School District. These two school districts formed a jointure, Lower Providence-Worcester Joint System, before the consolidation.

The School District occupies approximately 32 square miles in the south central portion of Montgomery County. The School District is bounded on the south by Valley Forge National Park and Chester County; on the west by Upper Providence Township, the Borough of Collegeville, Skippack Township and Towamencin Township; on the north by Towamencin Township and Upper Gwynedd Township; and on the east by Whitpain Township, East Norriton Township, and West Norriton Township.

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 administrator is responsible for budget and financial operations. Both of these officials are selected by the School Board.

School Facilities

The School District presently owns five elementary schools, one junior-senior high school complex, and an intermediate school, all as described in the following table. Students in grades 10-12 also attend the North Montco Area Vocational Technical School.

TABLE 1 METHACTON SCHOOL DISTRICT SCHOOL FACILITIES

Original Addition Number Rated Construction Renovation Modular of Pupil 2018 -19 Buildings Date Date Classrooms Grades Classrooms Capacity Enrollment Elementary: Audubon(1)...... 1928 1980/1995 5 K-4 20 550 0 Eagleville ...... 2002 ------K-4 20 550 409 Woodland ...... 1968 2009 3 K-4 20 550 464 Arrowhead...... 1975 --- 6 K-4 19 525 397 Worcester ...... 1999 ------K-4 20 550 418 Skyview Upper ...... 2010 ------5-6 64 950 775

Secondary: Methacton Senior High 1961 2000/2004 1 9-12 93 2,230 1,577 Arcola Intermediate .... 1973 1994/1995/2002/2010 --- 7-8 79 1,878 756

(1)Building was closed and the School District is discussing future options. Source: School District officials.

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Enrollment Trends

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

TABLE 2 METHACTON SCHOOL DISTRICT ENROLLMENT TRENDS

Actual Enrollments Projected Enrollments School School Year Elementary Secondary Total Year Elementary Secondary Total 2014-15 2,535 2,439 4,974 2019-20 2,392 2,291 4,683 2015-16 2,499 2,365 4,864 2020-21 2,373 2,299 4,672 2016-17 2,459 2,387 4,846 2021-22 2,337 2,308 4,645 2017-18 2,435 2,389 4,824 2022-23 2,301 2,228 4,529 2018-19 2,471 2,341 4,812 2023-24 2,306 2,202 4,508 Source: Actual enrollments as provided by School District officials. Projected enrollments are in accordance with the PA Department of Education Enrollment Projections.

SCHOOL DISTRICT FINANCES

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). The School District’s financial statements are audited annually by an independent certified public accountant, as required by Commonwealth law. The firm of Mallie LLP of Oaks, Pennsylvania, serves as School District auditor.

The School District's auditor has not been engaged to perform, and has not performed, since the date of its report included in an Appendix to this Preliminary Official Statement, any procedure on the financial statements addressed in that report. Such auditor also has not performed any procedures relating to this Preliminary Official Statement.

Budgeting Process in School Districts under The Taxpayer Relief Act (Act 1)

In General. School districts budget and expend funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by school district administrative officials on a uniform form furnished by such Department and submitted to the board of school directors for approval prior to the beginning of the fiscal year on July 1.

Procedures for Adoption of the Annual Budget. Under The Taxpayer Relief Act (Act 1), all school districts of the first class A, second class, third class and fourth class (except as described below) must adopt a preliminary budget proposal (which must include estimated revenues and expenditures and proposed tax rates) no later than 90 days prior to the date of the election immediately preceding the fiscal year. The preliminary budget proposal must be printed and made available for public inspection at least 20 days prior to its adoption; the board of school directors may hold a public hearing on the budget; and the board must give at least 10 days’ public notice of its intent to adopt the final budget.

If the adopted preliminary budget includes an increase in the rate of any tax levy, the preliminary budget must be submitted to the Pennsylvania Department of Education (PDE) no later than 85 days prior to the date of the election immediately preceding the fiscal year. PDE is to compare the proposed percentage increase in the rate of any tax with the school district’s Index (see “The Taxpayer Relief Act (Act 1)” herein) and within 10 days, but not later than 75 days prior to the upcoming election, inform the school district whether the proposed percentage increase is less than or equal to the Index. If PDE determines that a proposed tax increase will exceed the Index, the school district must reduce the proposed tax increase, seek voter approval for the tax increase at the upcoming election, or seek approval to utilize one of the referendum exceptions authorized under The Taxpayer Relief Act.

With respect to the utilization of any of the Taxpayer Relief Act referendum exceptions for which PDE approval is required (see “The Taxpayer Relief Act (Act 1)” herein), the school district must publish notice of its intent to seek PDE approval not less than one week before submitting its request for approval to PDE and, if PDE determines to schedule a public hearing on the request, a notice of the date, time and place of such hearing. PDE is required by the Taxpayer Relief Act to rule on the school district’s request and inform the school district of its decision no later than 55 days prior to the upcoming election so that, if PDE denies the school district’s request, the school district may submit a referendum question to the local election officials at least 50 days before the upcoming election, if it so chooses.

If a school district seeks voter approval to increase taxes at a rate higher than the applicable Index, whether or not it first seeks approval to utilize one of the referendum exceptions available under The Taxpayer Relief Act (Act 1), and the referendum question is not approved by a majority of the voters voting on the question, the board of school directors may not approve an increase in the tax rate greater than the applicable Index.

Simplified Procedures in Certain Cases. The above budgetary procedures will not apply to a school district if the board of school directors adopts a resolution no later than 110 days prior to the election immediately preceding the upcoming fiscal year declaring that it will not increase any tax at a rate that exceeds the Index and that a tax increase at or below the rate of the Index will be sufficient to balance its budget. In that case, The Taxpayer Relief Act (Act 1) requires only that the proposed annual budget be prepared at least 30 days, and made available for public inspection at least 20 days, prior to its adoption, and that at least ten (10) days’ public notice be given of the board’s intent to adopt the annual budget. No referendum exceptions are available to a school district adopting such a resolution.

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Summary and Discussion of Financial Results

The School District staff prepares annual fund balance analyses for discussion and approval by the Board. The Board’s objective is to provide sufficient funds to pay current expenditures and to maintain a fund balance that will provide financial stability.

A summary of general fund balance sheet and changes in fund balances is presented in Tables 3 and 4. Table 5 shows revenues and expenditures for the past 5 audited years and the 2018-19 Budget as adopted June 19, 2018.

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

ASSETS 2014 2015 2016 2017 2018 Cash and Cash Equivalents ...... $10,721,801 $14,753,162 $13,380,595 $16,149,786 $20,047,240 Taxes Receivable...... 2,807,787 2,988,682 2,367,041 1,945,945 2,235,442 Interfund Receivables ...... 481,595 361,304 1,664,933 495,485 375,087 Intergovernmental Receivables ...... 1,699,967 1,782,519 2,455,989 2,998,128 3,212,115 Other Receivables ...... 339,611 1,111,940 801,607 757,303 126,971 Prepaid Expenses...... 155,945 558 829,280 1,265,558 1,496,355 TOTAL ASSETS...... $16,206,706 $20,998,165 $21,499,445 $23,612,205 $27,493,210

LIABILITIES Due to Other Funds ...... $0 $100,000 $0 $2,613 $3,792 Accounts Payable ...... 424,218 1,278,781 1,497,359 1,589,361 1,686,461 Accrued Salaries and Benefits ...... 4,236,105 4,321,670 3,530,033 3,707,467 3,600,394 Payroll Deducts & Withholdings ...... 2,604,053 2,951,626 3,783,246 4,298,273 4,735,997 Deferred Revenues ...... 0 69,176 69,248 83,120 80,783 Curr. Port. of Long-Term Debt ...... 129,071 122,417 126,006 122,191 140,097 Compensated Absences ...... 0 0 0 Other Liabilities...... 1,756,138 2,342,401 2,946,070 3,409,348 4,108,862 TOTAL LIABILITIES ...... $9,149,585 $11,186,071 $11,951,962 $13,212,373 $14,356,386

Deferred Inflows of Resources ...... $1,819,558 $2,189,094 $1,707,084 $1,441,370 $1,593,458

FUND EQUITIES Nonspendable Fund Balance ...... $637,540 $241,356 $949,678 $1,265,558 $1,496,355 Assigned Fund Balance ...... 0 0 0 374,821 2,389,141 Unassigned Fund Balance ...... 4,600,023 7,381,644 6,890,721 7,318,083 7,657,870 TOTAL FUND EQUITIES ...... $5,237,563 $7,623,000 $7,840,399 $8,958,462 $11,543,366

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND EQUITIES ...... $16,206,706 $20,998,165 $21,499,445 $23,612,205 $27,493,210

Source: School District Annual Financial Reports.

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

Actual Budgeted 2014 2015 2016 2017 2018 2019 Beginning Fund Balance $4,922,420 $5,237,563 $7,623,000 $7,840,399 $8,958,462 $11,543,367 Surplus (Deficit) of Revenue over Expenditures 315,140 2,385,437 217,399 1,118,064 2,584,905 0 Prior Period Adjustments 3 0 Ending General Fund Balance $5,237,563 $7,623,000 $7,840,399 $8,958,463 $11,543,367 $11,543,367

*Totals may not add due to rounding. (1)Budget, as adopted June 19, 2018. Source: School District Annual Financial Reports and Budget.

The School District received $106,751,701 in revenue in 2017-18 and has budgeted revenue of $109,398,167 in 2018-19. Local sources decreased as a share of total revenue in the past five years from 79.7 percent in 2013-14 to 78.2 percent in 2017-18. Revenue from Commonwealth sources increased as a share of total revenue from 18.9 percent to 21.1 percent over this period. Revenue from federal and other sources decreased as a share of total revenue from 1.4 percent to 0.7 percent during the period.

TABLE 5 METHACTON SCHOOL DISTRICT SUMMARY OF SCHOOL DISTRICT GENERAL FUND REVENUES AND EXPENDITURES* (For years ending June 30) REVENUE: Actual Budgeted Local Sources: 2014 2015 2016 2017 2018 2019(1) Real Estate Taxes (Current) $64,023,533 $66,144,502 $66,198,578 $68,721,766 $71,389,125 $72,799,305 Interim Real Estate Taxes 155,157 299,668 389,542 641,025 420,116 350,000 Payment in Lieu of Taxes 81,295 62,138 56,419 56,216 58,461 55,000 Total Act 511 Taxes 7,442,588 8,154,955 7,996,155 8,224,801 8,218,340 8,247,000 Per Capita (Sec. 679) Tax 93,145 94,647 88,795 89,357 93,691 90,000 Public Utility Tax 88,680 91,128 85,662 85,786 78,382 85,000 Delinquencies Taxes 1,904,073 1,685,375 1,432,323 1,636,034 1,164,030 1,345,000 Earnings on Investments 39,814 66,410 61,466 148,215 422,091 449,463 Federal/Other Local Government Units 813,095 896,670 888,082 908,649 864,584 915,000 Revenues from District Activities 0 163,208 0 225,590 214,474 160,000 Rentals 107,593 129,915 113,762 75,186 106,210 71,000 Contributions & Donations 20,143 5,427 1,379 748 446.09 0 E-Rate Reimbursement - Refund-Prior Years' Expenditures 72,362 0 0 0 0 0 Receipts from Other LEAS in PA-Education 282,500 371,359 340,650 339,430 950 0 Refund of Prior Year Expenditure 0 835,588 164,239 165,168 107,723 0 Tuition 236,380 181,913 236,420 222,752 263,084 545,000 Miscellaneous Income 95,099 62,486 168,409 56,345 38,680 0 Other Sources 186,457 13,533 221,874 15,562 24,604 230,000 Total Local Sources $75,641,915 $79,258,923 $78,443,755 $81,612,630 $83,464,990 $85,341,768 State Sources: Instructional Subsidy $6,401,350 $6,401,295 $6,526,696 $6,692,150 $6,770,246 $6,766,093 Tuition for Orphans and Children 46,014 50,586 40,280 58,833 75,121 50,000 Special Education 2,368,711 2,521,848 2,545,130 2,577,612 2,600,040 2,465,613 Transportation 1,406,351 1,276,628 1,725,994 1,995,238 1,912,597 2,000,000 Rentals and Sinking Fund Payments 406,640 425,844 161,538 883,289 485,382 468,194 Health Services 92,447 91,146 89,886 87,945 87,764 90,000 State Property Tax Reduction Allocation 1,822,299 1,922,482 1,946,884 1,956,793 2,008,490 2,063,532 Revenue for Social Security Payments 1,596,775 1,510,799 1,514,935 1,532,184 1,499,629 1,715,403 Revenue for Retirement Contributions 3,757,890 4,512,801 5,466,910 6,462,933 6,885,822 7,476,402 PA Accountability Grant 95,579 0 0 0 0 0 Extra Grants/Technology Grants 0 0 238,330 267,328 252,829 250,000 Other Sources 0 197,459 0 0 0 0 Total State Sources $17,994,055 $18,910,889 $20,256,584 $22,514,306 $22,577,921 $23,345,237 Total Federal Sources $567,897 $360,462 $373,809 $666,223 $690,370 $711,162 Total Other Sources $760,450 $1,813,487 $44,049 $17,584 $18,419 $0 TOTAL REVENUE $94,964,316 $100,343,760 $99,118,197 $104,810,743 $106,751,701 $109,398,167

EXPENDITURES: Total Instruction $53,342,005 $55,214,875 $54,915,989 $59,273,739 $59,399,032 $62,464,681 Pupil Personnel 3,276,384 3,811,950 4,033,114 4,351,407 4,514,624 4,604,870 Instructional Staff 1,795,677 2,093,377 2,048,596 2,491,302 2,546,789 2,821,763 Administration 5,220,746 5,903,820 6,120,325 6,384,631 6,230,605 6,321,128 Pupil Health 962,055 1,121,153 1,705,614 1,653,981 1,640,388 1,778,505 Business 1,218,144 1,084,673 1,143,828 969,237 1,004,175 1,022,057 Operation and Maintenance 7,965,868 7,859,582 7,842,512 8,192,355 8,450,311 8,812,449 Student Transportation 7,627,234 6,863,088 6,675,910 6,998,089 7,201,158 7,749,354 Central & Other Support Services 1,709,897 1,642,254 1,776,108 2,031,647 1,749,240 2,141,954 Other Support 76,195 76,507 76,855 74,740 74,270 79,770 Noninstructional Services 1,398,870 1,382,350 1,381,800 1,392,354 1,461,122 1,526,323 Debt Service 9,969,645 10,804,695 9,980,146 9,579,201 9,695,081 9,875,313 Fund Transfers 0 100,000 1,200,000 300,000 200,000 200,000 Refund of Prior Year Receipts 86,456 0 0 0 0 0 Budgetary Reserve 0 0 0 0 0 TOTAL EXPENDITURES $94,649,176 $97,958,323 $98,900,799 $103,692,680 $104,166,795 $109,398,167

SURPLUS (DEFICIT) OF REVENUES OVER EXPENDITURES $315,140 $2,385,437 $217,399 $1,118,064 $2,584,907 $0

*Totals may not add due to rounding. (1)Budget, as adopted June 19, 2018. Source: School District Annual Financial Reports and Budget.

TAXING POWERS OF THE SCHOOL DISTRICT

In General

Subject to certain limitations imposed by the Taxpayer Relief Act, Act No. 1 of the Special Session of 2006, as amended (see “The Taxpayer Relief Act (Act 1)” herein), the School District is empowered by the School Code and other statutes to levy the following taxes:

1. A basic annual tax on all real property taxable for school purposes, not to exceed 25 mills on each dollar of assessed valuation, to be used for general school purposes.

2. An unlimited ad valorem tax on the property taxable for school purposes to provide funds:

a. for minimum salaries and increments of the teaching and supervisory staff;

b. to pay rentals due any municipality authority or non-profit corporation or due the State Public School Building Authority;

c. to pay interest and principal on any indebtedness incurred pursuant to the Local Government Unit Debt Act, or any prior or subsequent act governing the incurrence of indebtedness of the school district; and

d. to pay for the amortization of a Bond issue which provided a school building prior to the first Monday of July, 1959.

3. An annual per capita tax on each resident or inhabitant over 18 years of age of not more than $5.00.

4. Additional taxes subject to division with other political subdivisions authorized to levy similar taxes on the same person, subject, business, transaction or privilege, under Act No. 511, enacted December 31, 1965, as amended (“The Local Tax Enabling Act”). These taxes, which may include, among others, an additional per capita tax, a wage and other earned income tax, a real estate transfer taxes, a gross receipts tax, a local services tax and an occupation tax, shall not exceed, in the aggregate, an amount equal to the product of the market valuation of real estate in the School District (as certified by the State Tax Equalization Board of the Commonwealth – “STEB”) multiplied by twelve mills. All local taxing authorities are required by the Local Tax Enabling Act to exempt disabled veterans and members of the armed forces reserve who are called to active duty at any time during the tax year from any local services tax and to exempt from any local services tax levied at a rate in excess of $10 those persons whose total income and net profits from all sources within the political subdivision is less than $12,000 for the tax year. The Local Tax Enabling Act also authorizes, but does not require, taxing authorities to exempt from per capita, occupation, and earned income taxes and any local services tax levied at a rate of $10 or less per year, any person whose total income from all sources is less than $12,000 per year.

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The Taxpayer Relief Act (Act 1)

Under Pennsylvania Act No. 1 of the Special Session of 2006, as amended by Act 25 of 2011 (“The Taxpayer Tax Relief Act” or “Act 1”), a school district may not, in fiscal year 2007-2008 or in any subsequent fiscal year, levy any tax for the support of the public schools which was not levied in the 2006-2007 fiscal year, raise the rate of any earned income and net profits tax if already imposed under the authority of the Local Tax Enabling Act (Act 511), or increase the rate of any tax for school purposes by more than the Index (defined below), unless in each case either (a) such increase is approved by the voters in the school district at a public referendum or (b) one of the exceptions summarized below is applicable and the use of such exception is approved by the Pennsylvania Department of Education (PDE):

1. to pay interest and principal on indebtedness incurred (i) prior to September 4, 2004, in the case of a school district which had elected to become subject to the provisions of the prior Homeowner Tax Relief Act, Act 72 of 2004, or (ii) prior to June 27, 2006, in the case of a school district which had not elected to become subject to Act 72 of 2004; to pay interest and principal on any indebtedness approved by the voters at referendum (electoral debt); and to pay interest and principal on debt refunding or refinancing debt for which one of the above exceptions is permitted, as long as the refunding or refinancing incurs no additional debt other than for costs and expenses related to the refunding or refinancing and the funding of appropriate debt service reserves;

2. to pay costs incurred in providing special education programs and services to students with disabilities, under specified circumstances; and

3. to make payments into the State Public School Employees’ Retirement System when the increase in the estimated payments between the current year and the upcoming year is greater than the Index, as determined by PDE in accordance with the provisions of Act 1.

Any revenue derived from an increase in the rate of any tax allowed under the exception numbered 1 above may not exceed the anticipated dollar amount of the expenditure, and any revenue derived from an increase in the rate of any tax allowed pursuant to any other exception enumerated above may not exceed the rate increase required, as determined by PDE. If a school district’s petition or request to increase taxes by more than the Index pursuant to one or more of the allowable exceptions is not approved, the school district may submit the proposed tax increase to a referendum.

The Index (to be determined and reported by PDE by September of each year for application to the following fiscal year) is the average of the percentage increase in the statewide average weekly wage, as determined by the State Department of Labor and Industry for the preceding calendar year, and the employment cost index for elementary and secondary schools, as reported by the federal Bureau of Labor Statistics for the preceding 12-month period beginning July 1 and ending June 30. If and when a school district has a Market Value/Income Aid Ratio greater than 0.40 for the prior school year, however, the Index is adjusted upward by multiplying the unadjusted Index by the sum of 0.75 and such Aid Ratio.

The Index applicable to the School District for the next, current and previous fiscal years (not including exceptions) is as follows:

Fiscal Year Index % 2019-20 2.3 2018-19 2.4 2017-18 2.5 2016-17 2.4 2015-16 1.9 2014-15 2.1 2013-14 1.7

Source: Pennsylvania Department of Education website.

In accordance with the Act, the School District put a referendum question on the ballot at the May 15, 2007 primary election seeking voter approval allowing the school district to levy (or increase the rate of) earned income and net profits tax (“EIT”) or a personal income tax (“PIT”) and use the proceeds to reduce local real estate taxes by a homestead and farmstead exclusion.

The electors in the School District did not approve the referendum question on the May 15, 2007 primary election.

A board of school directors may submit, but is not required to submit, a further referendum question to the voters at a municipal election in any later year seeking approval to levy or increase the rate of an EIT or a PIT for the purpose of funding homestead and farmstead exclusions, but the proposed rate of the EIT or PIT shall not exceed the rate which is required to provide the maximum homestead and farmstead exclusions allowable under law.

This summary is not intended to be an exhaustive discussion of the provisions of Act 1 nor a legal interpretation of any provisions of Act 1, and a prospective purchaser of the Bonds should review the full text of Act 1 as a part of any decision to purchase the Bonds.

Status of the Bonds Under Act 1

No exceptions to the Act 1 taxing limits are expected to apply to the Bonds.

Act 130 of 2008

Act 130 of 2008 of the Commonwealth amended the Local Tax Enabling Act so as to authorize school districts levying an occupation tax to replace that occupation tax with an increased earned income tax or, if the school district has implemented a personal income tax in accordance with the Taxpayer Relief Act, an increased personal income tax, in a revenue neutral manner. To so replace an occupation tax, the board of school directors must first hold at least one public hearing on the matter and then place a binding referendum question on the ballot at a general or municipal election for approval by the voters.

The School District has not scheduled a public hearing or taken other action to conduct a referendum under Act 130 of 2008.

SET FORTH ABOVE IS A SUMMARY OF PORTIONS OF ACT 130. THIS SUMMARY IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF THE PROVISIONS OF ACT 130 NOR A LEGAL INTERPRETATION OF ANY PROVISION OF ACT 130. A PROSPECTIVE PURCHASER OF THE BONDS SHOULD REVIEW THE FULL TEXT OF ACT 130 AS A PART OF ANY DECISION TO PURCHASE THE BONDS.

Act 48 of 2003 – Limitation on Fund Balances

Pennsylvania Act No. 2003-48 (enacted December 23, 2003) prohibits a school district from increasing real property taxes for the school year 2005-2006 or any subsequent school year, unless the school district has adopted a budget for such school year that includes an estimated ending unreserved undesignated fund balance which is not more than a specified percentage of the total budgeted expenditures, as set forth below:

Estimated Ending Unreserved Undesignated Fund Balance Total Budgeted Expenditures as a Percentage of Total Budgeted Expenditures Less than or equal to $11,999,999 12.0% Between $12,000,000 and $12,999,999 11.5% Between $13,000,000 and $13,999,999 11.0% Between $14,000,000 and $14,999,999 10.5% Between $15,000,000 and $15,999,999 10.0% Between $16,000,000 and $16,999,999 9.5% Between $17,000,000 and $17,999,999 9.0% Between $18,000,000 and $18,999,999 8.5% Greater than or equal to $19,000,000 8.0%

“Estimated ending unreserved fund balance” is defined in Act 2003-48 as that portion of the fund balance which is appropriable for expenditure or not legally or otherwise segregated for a specific or tentative future use, projected for the close of the school year for which a school district’s budget was adopted and held in the general fund accounts of the school district.

SET FORTH ABOVE IS A SUMMARY OF PORTIONS OF ACT 48. THIS SUMMARY IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF THE PROVISIONS OF ACT 48 NOR A LEGAL INTERPRETATION OF ANY PROVISIONS OF ACT 48. A PROSPECTIVE PURCHASER OF THE BONDS SHOULD REVIEW THE FULL TEXT OF ACT 48 AS A PART OF ANY DECISION TO PURCHASE THE BONDS.

Tax Levy Trends

Table 6 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, Montgomery County and the municipalities within the School District.

TABLE 6 METHACTON SCHOOL DISTRICT TAX RATES

Real Estate Wage and Local Real Estate Transfer(1) Income(1) Services Amusement Per Capita(2) Fiscal Year (mills) (%) (%) ($) (%) (%) 2014-15 27.90 1.00 1.00 10.00 5.00 15.00 2015-16 27.90 1.00 1.00 10.00 5.00 15.00 2016-17 28.74 1.00 1.00 10.00 5.00 15.00 2017-18 29.46 1.00 1.00 10.00 5.00 15.00 2018-19 30.04 1.00 1.00 10.00 5.00 15.00 (1)Subject to sharing with the municipalities within the School District. (2)Includes School Code and Act 511 taxes. Source: School District Financial Reports.

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

2014-15 2015-16 2016-17 2017-18 2018-19 Methacton School District ...... 27.900 27.900 28.740 29.460 30.043

2015 2016 2017 2018 2019 Lower Providence Township ...... 1.592 1.592 1.767 1.767 2.087 Worcester Township ...... 0.050 0.050 0.050 0.050 0.050 Montgomery County ...... 3.152 3.152 3.459 3.459 3.459 Source: Local Government website.

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Real Property Tax

The real property tax (excluding delinquent collections) produced $71,389,125 in 2017-18, approximately 66.9% of overall revenue. The tax is levied on July 1 of each year. Taxpayers who remit within 60 days receive a 2% discount, and those who remit subsequent to 120 days after July 1 are assessed a 10% penalty.

The following table summarizes recent trends of assessed and market valuations of real property and real property tax collection data. The last County-wide reassessment became effective January 1, 1998.

TABLE 8 METHACTON SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA

Market Assessed Year Value Value Ratio 2013-14 ...... $3,821,188,589 $2,514,959,008 65.82% 2014-15 ...... 3,771,376,374 2,532,321,148 67.15% 2015-16 ...... 3,783,009,127 2,540,127,984 67.15% 2016-17 ...... 3,821,601,628 2,560,751,624 67.01% 2017-18 ...... 3,854,624,702 2,584,882,514 67.06% Average Annual % Change ...... 0.17% 0.55%

Source: PA State Tax Equalization Board (STEB)/Tax Equalization Division (TED)

TABLE 9 METHACTON SCHOOL DISTRICT REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY

2016 2016 2017 2017 Market Assessed Market Assessed Value Value Value Value Methacton School District ...... $3,821,601,628 $2,560,751,624 $3,854,624,702 $2,584,882,514 Lower Providence Township ...... 2,396,595,216 1,610,667,058 2,416,523,349 1,625,786,928 Worcester Township ...... 1,425,006,412 950,084,566 1,438,101,352 959,095,586 Montgomery County ...... 92,344,154,170 59,568,925,176 93,009,569,909 59,955,885,334

Source: PA State Tax Equalization Board (STEB)/Tax Equalization Division (TED)

TABLE 10 METHACTON SCHOOL DISTRICT ASSESSMENT BY LAND USE

2013 2014 2015 2016 2017 Residential $1,964,916,353 $1,977,419,503 $1,986,307,769 $2,000,765,139 $2,013,009,519 Trailers $6,480,124 $6,418,424 $6,439,389 $6,433,054 $6,388,124 Lots 13,623,995 14,730,005 15,153,945 14,333,395 13,480,315 Industrial 73,080,580 71,067,840 71,067,444 72,320,300 72,320,300 Commercial 420,132,856 427,102,336 425,029,582 429,041,586 441,646,896 Agriculture 34,128,240 32,771,660 33,744,880 35,972,950 36,311,060 Oil/ Gas/ Mineral 0 214,520 214,520 0 0 Land 2,596,860 2,596,860 2,170,460 1,885,200 1,726,300 Total $2,514,959,008 $2,532,321,148 $2,540,127,989 $2,560,751,624 $2,584,882,514

Source: PA State Tax Equalization Board (STEB) / Tax Equalization Division (TED)

TABLE 11 METHACTON SCHOOL DISTRICT REAL PROPERTY TAX COLLECTION DATA

Year Collections Total Collections Total Current as Percent Current as Percent Adjusted Year of Total Plus of Total Total Flat Flat Collections Adjusted Delinquent Adjusted Fiscal Year Billing Billing(1) (July-June) Flat Billing Collections(2) Flat Billing 2013-14 $66,211,970 $65,444,376 $64,023,533 97.83% $65,885,971 100.67% 2014-15 68,113,086 67,750,559 66,144,502 97.63% 67,783,152 100.05% 2015-16 70,869,571 68,922,687 66,097,506 95.90% 67,529,829 97.98% 2016-17 73,596,002 71,639,210 68,713,282 95.92% 70,284,282 98.11% 2017-18 76,146,762 74,138,272 71,389,125 96.29% 72,799,305 98.19%

(1)Flat billing plus penalties, less discounts, rebates and exonerations (2)Includes delinquent realty taxes collected only.

Source: School District officials.

The ten largest real property taxpayers, together with their assessed values, are shown in Table 12. The aggregate assessed value of these ten taxpayers totals approximately 9.8 percent of total assessed value.

TABLE 12 METHACTON SCHOOL DISTRICT TEN LARGEST REAL PROPERTY TAXPAYERS

2018-19 Owner Assessed Value SWD 89/101 LLC & WNR 38 LLC(1) $ 106,181,663 Meadowood Corp. 35,331,910 Monroe DelVal Association LP 24,800,600 MG Associates 19,908,200 DIV-AR Property LP 15,400,260 Eagleville Sanatorium 11,837,140 Audubon Square LP 10,745,970 Eagle Stream Trust 10,130,680 TPR33 LLC 9,871,600 Schracks LLC 9,580,770 Total $253,788,793

(1) The above taxpayer has appealed its tax assessment effective January 1, 2011. The years being appealed include 2011 through 2018. Appraisals have been completed and are currently under review. The School District filed a reverse appeal on August 1, 2012 and is currently pending in the Court of Common Pleas of Montgomery County. The School District has escrowed $4,946,668 to offset a potential loss, if any. Source: School District officials.

Other Taxes

Under Act 511, the School District collected $8,218,340 in other taxes in 2017-18. Among the taxes authorized by Act 511, the Real Estate Transfer Tax, Wage and Income Tax, Per Capita Tax, Amusement Tax, and Local Services Tax are levied by the School District. The Act 511 limit, equal to 12 mills on the market value of real property, was $46,255,496.

Real Estate Transfer. The School District levies a tax of 1.0% of the value of real estate transfers. In 2017-18, the School District collected $904,402 or less than one percent of total revenue.

Wage and Income Tax. A tax of .5% of the earned income of residents is levied by the School District. In 2017-18, the School District’s collected $7,064,441 or 6.6% of total revenue from this tax.

Per Capita Tax. A tax of $15.00 ($10.00 under Act 511 and $5.00 under the Public School Code) on each resident over 18 years old yielded $93,691 in 2017-18 or less than one percent of total revenue.

Amusement Tax. The School District levies a 10% Gross Receipts tax annually on all amusements. The 2017-18 levy yielded $46,538 or less than one half percent of total revenue. This tax is shared on a 50% basis with Lower Providence Township.

Local Services Tax. A tax of $10.00 is levied. In 2017-18, the collected portion of this tax yielded $109,268 or less than one percent of total revenue.

COMMONWEALTH AID TO SCHOOL DISTRICTS

Pennsylvania school districts receive financial assistance from the Commonwealth in a number of forms, all subject to statutory provisions and annual appropriation by the Pennsylvania General Assembly.

Basic education funding is allocated to all school districts in an amount equal to: (1) a fixed sum equal to the school district’s Fiscal Year 2014-15 basic educational funding; plus (2) an additional increment determined annually pursuant to statutory formula which adjusts a school district’s average daily membership by a number of factors specific to the composition of the student population as well as the school district’s median household income, local tax effort and capacity to generate local revenue. The additional increment as calculated above for any individual school district may be zero.

The School District’s Fiscal Year 2014-15 funding amount was $6,401,295.

Information concerning the calculation of the School District’s basic education funding can be found on the Pennsylvania Department of Education’s website at https://www.education.pa.gov.

School districts may also receive state aid for special education, pupil transportation, vocational education, and health services, among other things.

Current Lack of State Appropriations for Debt Service Subsidies

Commonwealth law presently provides that the School District will receive, subject to state legislative appropriation, reimbursement from the Commonwealth for a portion of debt service paid on the Bonds following final approval by PDE. Commonwealth reimbursement is calculated based on the “Reimbursable Percentage” assigned to the Bonds by the PDE and the School District's permanent Capital Account Reimbursement Fraction (“CARF”) (20.80%) or the wealth based Market Value Aid Ratio (“MVAR”) currently (20.26%), whichever is higher. The Reimbursable Percentage is determined through a process known as the “Planning and Construction Workbook” or “PlanCon”.

School District officials are currently undertaking the steps necessary to pursue PlanCon reimbursement for the project being financed by the Bonds, however the District has not based the affordability to pay for the debt service on the Bonds nor for the project on the receipt of any future PlanCon reimbursement.

In May of 2016, the Commonwealth enacted appropriation legislation known as Act 25 (“Act 25”), which contains authorization for the Commonwealth Finance Authority (“CFA”) to issue up to $2.5 billion of debt to fund PlanCon reimbursements to school districts. Act 25 also instituted a moratorium on new projects entering the PlanCon process while an advisory committee established under Act 25 considers amendments to the PlanCon reimbursement program. This moratorium went into effect on May 15, 2016 and expired on June 30, 2017. On November 6, 2017, House Bill 178 became law without the signature of the Governor and became known as Act 55 of 2017. Contained in Act 55 of 2017 was an extension of the PlanCon moratorium through the end of the 2017-18 fiscal year and a retroactive effective date of July 1, 2017. Subsequently, the Commonwealth enacted Act 42 of 2018, which permitted PlanCon applications submitted between July 1, 2017 and November 6, 2017, and whose school district votes to proceed with construction and award bids on their construction contracts no later than July 1, 2021, to receive PlanCon funding as permitted by law, if made available by the Commonwealth. On June 22, 2018, the Governor approved and signed House Bill 1448, known as Act 39 of 2018, extending the PlanCon moratorium through the end of the 2018-2019 fiscal year.

To date, the CFA has issued $1,170,705,000, to provide for PlanCon reimbursements owed to school districts, including the issuance of its Revenue Bonds, Series A of 2016 (Federally Taxable) in the principal amount of $758,185,000 issued on October 31, 2016, as well as its Revenue Bonds, Series A of 2018 (Federally Taxable) in the total amount of $412,520,000 issued on January 18, 2018. It is expected that proceeds of these issues have been and will continue to be used to provide PlanCon reimbursement that is owed to the School District for past and current fiscal years. However, the School District cannot be certain that any future PlanCon reimbursement will be received by PDE as the ability for CFA to issue additional bonds in the future to fund future PlanCon reimbursements owed to school districts may impact the availability of PlanCon reimbursements payable to the School District. Any failure by the Commonwealth to adopt a timely budget and enact necessary spending authorizations could have a material adverse effect upon the School District’s anticipated receipt of PlanCon reimbursements.

There can be no assurances that the School District will be able to successfully apply for, be awarded, and receive sufficient PlanCon reimbursement for the costs of any current or future projects of the School District. A failure by the School District to receive such reimbursement may have a material adverse effect on the financial resources of the School District to fund other obligations, including payment of debt service on the Bonds.

Legislation has been introduced from time to time in the Pennsylvania legislature containing language that would revise or even abolish the debt service reimbursement program for Pennsylvania school districts. As of the date hereof, and except as described above, none of these proposals have been signed into law. To the extent that any future legislation contains material changes to the PlanCon program as it is structured currently, the amount of PlanCon reimbursement to the School District may be positively or negatively affected, which could materially impact the amount of local funds needed to be raised by the School District to pay debt service on its debt obligations.

Debt Statement

Table 13 shows the debt of the Methacton School District as of May 31, 2019, including the issuance of the Bonds.

TABLE 13 METHACTON SCHOOL DISTRICT DEBT STATEMENT (As of May 31, 2019)*

Gross NONELECTORAL DEBT Outstanding General Obligation Bonds, Series of 2019 (last maturity 2033) $4,700,000 General Obligation Bonds, Series A of 2018 (last maturity 2025) 5,400,000 General Obligation Bonds, Series of 2018 (last maturity 2027) 5,910,000 General Obligation Bonds, Series B of 2017 (last maturity 2034) 8,460,000 General Obligation Bonds, Series A of 2017 (last maturity 2023) 5,220,000 General Obligation Bonds, Series of 2016 (last maturity 2025) 27,845,000 General Obligation Bonds, Series B of 2015 (last maturity 2021) 1,305,000 General Obligation Bonds, Series A of 2015 (last maturity 2020) 1,270,000 General Obligation Bonds, Series A of 2013 (last maturity 2025) 2,510,000 General Obligation Bonds, Series of 2013 (last maturity 2025) 4,200,000 General Obligation Bonds, Series A of 2012 (last maturity 2023) 3,940,000 TOTAL NONELECTORAL DEBT $70,760,000

LEASE RENTAL DEBT School Lease Revenue Bonds, Series of 2015(1) $1,117,913 TOTAL PRINCIPAL OF DIRECT DEBT $71,877,913

*Includes the estimated Bonds offered through this Preliminary Official Statement. (1)Pro rata 15.69% share of State Public School Building Authority’s (North Montco Technical Career Center Project), School Lease Revenue Bonds, Series of 2015, outstanding in the principal amount of $7,325,000.

Table 14 presents the overlapping indebtedness and debt ratios of the School District. After issuance of the Bonds, the principal of direct debt of the School District will total $71,877,913. After adjustment for available funds and estimated Commonwealth Aid, the local effort of direct debt will total $68,239,294.

TABLE 14 METHACTON SCHOOL DISTRICT BONDED INDEBTEDNESS AND DEBT RATIOS* (As of May 31, 2019)*

Local Effort or Net of Available Funds Gross and Estimated Outstanding Commonwealth Aid(1) DIRECT DEBT Nonelectoral Debt ...... $70,760,000 $67,298,310 Lease Rental Debt ...... 1,117,913 940,984 TOTAL DIRECT DEBT ...... $71,877,913 $68,239,294

OVERLAPPING DEBT Montgomery County, General Obligation(2) ...... $23,559,541 $23,559,541 Municipal general obligation debt ...... 10,994,576 10,994,576 TOTAL OVERLAPPING DEBT ...... $34,554,117 $34,554,117

TOTAL DIRECT AND OVERLAPPING DEBT ...... $106,432,030 $102,793,411

DEBT RATIOS Per Capita ...... $2,961.46 $2,860.22 Percent 2017-18 Assessed Value ...... 4.12% 3.98% Percent 2017-18 Market Value ...... 2.76% 2.67%

*Includes the estimated Bonds offered through this Preliminary Official Statement. (1)Gives effect to current appropriations for payment of debt service and expected future Commonwealth Reimbursement of School District sinking fund payments based on current Aid Ratio. See “Commonwealth Aid to School Districts.” (2)Pro rata 4.1 percent share of $568,476,304 outstanding.

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Debt Limit and Remaining Borrowing Capacity

Electoral debt, i.e., debt approved by the voters at a general or special election, may be incurred without limit. Non-electoral debt and lease rental debt are subject to a statutory borrowing limit.

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 Revenue for 2015-16...... $ 98,912,610 Total Revenue for 2016-17...... 103,909,870 Total Revenue for 2017-18...... 106,247,899

Total Revenues, Past Three Years...... $309,070,379

Annual Arithmetic Average (Borrowing Base) ...... $ 103,023,460

Under the Debt Act as presently in effect, no school district shall incur any nonelectoral debt or lease rental debt, if the aggregate net principal amount of such new debt together with any other net nonelectoral debt and lease rental debt then outstanding, would cause the net nonelectoral debt plus net lease rental debt to exceed 225% of the Borrowing Base. The application of the aforesaid percentage to the School District's Borrowing Base produces the following product:

Remaining Legal Net Debt Borrowing Limit Outstanding* Capacity Net Nonelectoral Debt and Lease Rental Debt Limit: 225% of Borrowing Base $231,802,784 $71,877,913 $159,924,871

*Includes the estimated Bonds offered through this Preliminary Official Statement. 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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Debt Service Requirements

Table 15 presents the debt service requirements on the School District’s outstanding general obligation and lease rental indebtedness, including debt service on the Bonds.

The School District has never defaulted on the payment of debt service.

TABLE 15 METHACTON SCHOOL DISTRICT DEBT SERVICE REQUIREMENTS

Total Other General Series of Obligation 2019 Bonds Total Year Debt Principal Interest Subtotal Obligations 2018-19 $9,631,363 2019-20 10,014,134 2020-21 10,021,937 2021-22 10,041,173 2022-23 10,000,423 2023-24 9,990,453 2024-25 9,863,153 2025-26 5,825,871 2026-27 2,831,840 2027-28 2,166,806 2028-29 1,259,079 2029-30 1,256,583 2030-31 1,262,917 2031-32 1,167,900 2032-33 1,179,825 2033-34 1,180,550 2034-35 106,575 Total $87,800,580

*Totals may not add due to rounding.

Table 16 presents data on the extent to which Commonwealth Aid provides coverage for debt service and lease rental requirements.

TABLE 16 METHACTON SCHOOL DISTRICT COVERAGE OF DEBT SERVICE AND LEASE RENTAL REQUIREMENTS BY COMMONWEALTH AID*

2017-18 Commonwealth Aid Received ...... $22,577,921 2017-18 Debt Service Requirements ...... $9,695,081 Maximum Future Debt Service Requirements after Issuance of Bonds ...... Coverage of 2017-18 Debt Service Requirements ...... 2.33 times Coverage of Maximum Future Debt Service Requirements after Issuance of Bonds ......

*Assumes current Commonwealth Aid Ratio. See “Commonwealth Aid to School Districts.”

Future Financing

The School District anticipates issuing additional long-term debt in the amount of approximately $8.5 million in each calendar year for the next 5 years.

LABOR RELATIONS

School District Employees

There are approximately 638 employees of the School District, including 439 teachers and administrators, and 199 support personnel including secretaries, custodian/maintenance staff, teacher’s assistants, and transportation aides.

The School District’s teachers are represented by the Methacton Education Association, an affiliate of the Pennsylvania State Education Association (PSEA), under a contract with the School District which expires on June 30, 2020. The custodial and maintenance personnel are represented by the Teamsters Local Union 384, under a contract with the School District which expires June 30, 2021. The secretarial and clerical support staff is represented by the Methacton Education Support Personnel Association, an affiliate of PSEA, under a contract with the School District which expires June 30, 2021.

Pension Program

Currently, all Pennsylvania school districts and intermediate units participate in a pension program administrated by the Commonwealth. The program is formally known as the Public School Employees’ Retirement System (“PSERS”), and a percentage of each eligible employee’s salary is contributed by the employee, the School District and the Commonwealth. All full-time employees, part- time employees salaried over eighty days per year and hourly employees with over five hundred hours per year participate in the program.

Contributions are required by active members, School Districts, and the Commonwealth of Pennsylvania as established by the Public School Employees’ Retirement Code. Members who enrolled prior to January 1, 2002 range from 5.28% to 7.5% of compensation, depending upon the date of commencement of employment and elections made by each employee member. Members who enrolled in the pension plan on or after January 1, 2002 and before July 1, 2011 is 7.5% of compensation. The contribution rate for PSERS members who enrolled on or after July 1, 2011 is 7.5% or 10.3%, depending upon elections made by each employee member. The PSERS Board of Trustees certified an annual employer contribution rate of 33.43% for the fiscal year 2018-19. Current financial projections indicate the possibility of increases in the contribution rate in the next five years.

The Commonwealth will reimburse the School District at the rate of 50% of its total contributions with respect to all employees who were hired prior to July 1, 1994. With respect to employees hired after July 1, 1994, and who were not previously employed by another public school system in the Commonwealth, the School District will be reimbursed by the Commonwealth at the rate of the higher of 50% of contributions made by the School District or the current Market Value/Personal Income Aid Ratio. The School District is reimbursed on a quarterly basis.

Under Act 5 of 2017 (“Act 5”) PSERS will transition from a traditional defined benefit system and begin to offer defined contribution plans as well. Beginning July 1, 2019, in addition to other transaction rules and options based on members’ classifications, certain classes of active members may choose to switch from the current defined benefit plan to one of three new retirement benefit plan options which will be available. Additionally, all active members newly hired on or after July 1, 2019 will be required to select one of those three new retirement benefit plan options and will not be eligible to participate in the current defined benefit plan. The three new plans consist of two hybrid plans, with defined benefit and defined contribution components, along with a stand-alone defined contribution plan.

In addition to its comprehensive change in available plans for active members, Act 5 also made certain changes to the PSERS Board of Trustees and administrative protocols and created the Public Pension Management and Asset Investment Review Commission to study and make recommendations to the General Assembly and the Governor regarding investment performance and strategies.

According to the Independent Fiscal Office, Act 5 is not expected to reduce school district and state contributions to PSERS over the first fifteen years. However, beginning in fiscal 2034-35 through fiscal 2049-50, employer contribution rates are expected to begin to decline due to the lower long-term employer costs of the new benefit plans and will be lower, in the aggregate, over the study period.

Annual School District contributions have been as follows:

2013-14 $7,515,779 2014-15 $9,109,386 2015-16 $10,962,919 2016-17 $12,739,602 2017-18 $13,771,644 2018-19 (Budgeted) $14,952,804

At June 30, 2018, the School District reported a liability of $159,327,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by rolling forward the PSERS total pension liability as of June 30, 2016 to June 30, 2017. The School District’s proportion of the net pension liability was calculated utilizing its one-year reported covered payroll as it relates to the total one-year reported covered payroll of all school districts. At June 30, 2018, the School District’s proportion as 0.3226% which was a decrease of 0.0083% from its proportion measured as of June 30, 2017.

As of June 30, 2017, the PSERS plan was 56.3% funded, with an unfunded actuarial accrued liability of approximately $44.5 billion. PSERS’ rate of return for fiscal year ended June 30, 2018 was 9.27%. The Fund had plan net assets of $56.7 billion at June 30, 2018. For more information, visit the PSERS website at www.psers.pa.gov, which is not incorporated by specific reference into this Official Statement.

Source: School District Administrative Officials and PSERS.

Other Post-Employment Benefits

The School District provides post-employment healthcare benefits as set forth in the collective bargaining agreement with the Methacton Education Association (MEA) and the Methacton Administrative Organization (MAO).

In the fiscal year ended June 30, 2009, the District implemented Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, for postemployment health care benefits provided by the District. The requirements of this Statement were implemented prospectively, with the actuarially accrued liability for benefits at June 30, 2009, date of transition amortized using a weighted average blended amortization period of 19 years. Accordingly, for financial reporting purposes, no liability is reported for the postemployment health care benefits liability at the date of transition.

For further details regarding “Plan Description, Funding Policy, Annual OPEB Cost and Net OPEB Obligation, Funded Status and Funding Progress, and Actuarial Methods and Assumptions” please refer to Appendix C, Annual Financial Statements, Notes to the Basic Financial Statements - No. I.

LITIGATION

As of the date of this Preliminary Official Statement, there is no litigation pending, nor to the best knowledge of the School District and its Solicitor is there any litigation threatened, that seeks to restrain or enjoin the sale, issuance, execution or delivery of the Bonds; questions or contests the power or authority of the School District to issue, sell and deliver the Bonds, the validity of the proceedings of the School District relating to the Bonds, the validity or enforceability of the Bonds, or the School District’s power or authority to perform its obligations related to the Bonds; questions or contests the valid existence of the School District or its official boundaries; questions or contests the right of any present member of the Board of School Directors or of any officer of the School District whose signature is to appear on the Bonds to hold office or exercise the powers of such office; or attempting to limit, enjoin or otherwise restrict or prevent the School District from functioning and collecting revenues and other income, or from levying and collecting taxes, for the payment of the principal of and interest on the Bonds, or from pledging its full faith, credit and taxing power for the payment of the principal of and interest on the Bonds.

At the time of settlement for the Bonds, the President or Vice President of the Board of School Directors of the School District and the Solicitor of the School District will deliver a written certification or certifications confirming that no litigation of the type described in the preceding paragraph is then pending or, to the best of their knowledge, is then threatened. If at the time of settlement for the Bonds any such litigation is then pending or threatened, however, in place of all or part of the aforementioned certifications as to the absence of litigation, the Underwriter may accept delivery of the Bonds and pay the purchase price for the Bonds upon receipt of an opinion of counsel satisfactory to the Underwriter to the effect that such pending or threatened litigation is without legal merit.

DEFAULTS AND REMEDIES

In the event of failure of the School District to pay or cause to be paid the interest on or principal of the Bonds, as the same becomes due and payable, the holders of the Bonds shall be entitled to certain remedies provided by the Act. Among the remedies, if the failure to pay shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing an action in assumpsit in the Court of Common Pleas of the county in which the School District is located. The Act provides any judgment shall have an appropriate priority upon the funds next coming into the treasury of the School District. The Act also provides that upon a default of at least 30 days, holders of at least 25 percent in aggregate principal amount of the Bonds may appoint a trustee to represent them. The Act provides certain other remedies in the event of default, and further qualifies the remedies hereinbefore described.

TAX MATTERS

Federal

Exclusion of Interest from Gross Income

In the opinion of Bond Counsel, under existing statutes, regulations, rulings and court decisions, interest on the Bonds will not be includible in gross income of the holders thereof for federal income tax purposes assuming continuing compliance by the School District with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds will not be a specific preference item for purposes of computing the federal alternative minimum tax on individuals.

In rendering its opinion, Bond Counsel has assumed compliance by the School District with its covenants contained in the Resolution and its representations in the Tax Compliance Certificate executed by the School District on the date of issuance of the Bonds (the “Tax Compliance Certificate”) relating to actions to be taken by the School District after issuance of the Bonds necessary to effect or maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes. These covenants and representations relate to, inter alia, the use and investment of proceeds of the Bonds, and the rebate to the United States Department of Treasury of specified arbitrage earnings, if any. Failure to comply with such covenants could result in interest on the Bonds becoming includible in gross income for federal income tax purposes from the date of issuance of the Bonds.

Qualified Tax-Exempt Obligations for Financial Institutions

Code Section 265 provides, in general, that interest expense to acquire or carry tax-exempt obligations is not deductible from the gross income of the owner of such obligations. In addition, Code Section 265 provides a complete (100%) disallowance of a deduction for interest expense incurred by “financial institutions” described in such section that is allocable, as computed under Code Section 265, to tax- exempt interest on obligations acquired after August 7, 1986. Code Section 265(b) provides an exception to this rule for interest allocable to tax-exempt obligations (other than private activity bonds) that are designated or deemed designated by an issuer, such as the School District, as “qualified tax-exempt obligations.” An issuer may make such designation only if the amount of the issue, when added to the amount of all other tax-exempt obligations other than private activity bonds) issued or reasonably anticipated to be issued by the issuer during the calendar year, does not exceed $10,000,000. The Bonds will be designated or deemed designated by the School District as “qualified tax exempt obligations”.

Other Federal Tax Matters

Ownership or disposition of the Bonds may result in other federal tax consequences to certain taxpayers, including, without limitation, certain S corporations, foreign corporations with branches in the United States, holders of an interest in a financial asset securitization investment trust property and casualty insurance companies, individuals who otherwise qualify for the earned income credit and taxpayers who have an initial basis in the Bonds greater or less than the principal amount thereof, individual recipients of Social Security or Railroad Retirement benefits and taxpayers, including banks, thrift institutions and other financial institutions, subject to Code Section 265, who may be deemed to have incurred or continued indebtedness to purchase or to carry the Bonds.

Bond Counsel is not rendering any opinion regarding any federal tax matters other than as described under the caption “Exclusion of Interest from Gross Income” above and expressly stated in the form of Bond Counsel opinion included as Appendix B. Purchasers of the Bonds should consult their independent tax advisors with regard to all federal tax matters.

Pennsylvania

In the opinion of Bond Counsel, under the laws of the Commonwealth as enacted and construed on the date hereof, interest on the Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax, and the Bonds are exempt from personal property taxes in Pennsylvania; however, under the laws of the Commonwealth, as enacted and construed on the date hereof, any profits, gains or income derived from the sale, exchange or other disposition of the Bonds will be subject to Pennsylvania taxes and local taxes within the Commonwealth.

Other

The Bonds and the interest thereon may be subject to state and local taxes in jurisdictions other than the Commonwealth under applicable state or local tax laws.

Purchasers of the Bonds should consult their independent tax advisors with regard to all state and local tax matters that may affect them.

CONTINUING DISCLOSURE UNDERTAKING

In accordance with the requirements of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission (the “SEC”), the School District (being an “obligated person” with respect to the Bonds, within the meaning of the Rule), will execute a Continuing Disclosure Certificate. See Appendix C for the proposed form of Continuing Disclosure Certificate (the “Continuing Disclosure Certificate”).

With respect to the filing of annual financial and operating information, the School District 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 a result of a change in legal requirements or a change in the nature of the School District or its operations or financial reporting, but the School District will agree that any such modification will be done in a manner consistent with the Rule.

The School District acknowledges that its undertaking pursuant to the Rule described herein is intended to be for the benefit of the holders and beneficial owners of the Bonds and shall be enforceable by the holders and beneficial owners of the Bonds, but the right of the holders and beneficial owners of the Bonds to enforce the provisions of the School District’s continuing disclosure undertaking shall be limited to a right to obtain specific enforcement, and any failure by the School District to comply with the provisions of the undertaking shall not be an event of default with respect to the Bonds.

The School District’s obligations with respect to continuing disclosure described herein and with regard to the Bonds shall terminate upon the prior redemption or payment in full of all of the Bonds or if and when the School District is no longer an “obligated person” with respect to the Bonds, within the meaning of the Rule.

The MSRB has been designated by the SEC to be the central and sole repository for continuing disclosure information filed by issuers of municipal securities since July 1, 2009. Information and notices filed by municipal issuers (and other “obligated persons” with respect to municipal securities issues) are made available through the MSRB’s Electronic Municipal Market Access (“EMMA”) System, which may be accessed on the internet at http://www.emma.msrb.org.

Some operating data of the School District may be inherently included in the annual filings of audited financial statements, the summary of the budget, contents of Preliminary Official Statements prepared by the School District for bond issues as well as other publically available information. In connection with the Continuing Disclosure Certificate associated with the Bonds, the School District may not be filing this information separately, but it may be available in the other annual filings of the School District or publically available elsewhere.

Continuing Disclosure Filing History

Under certain of the School District's existing annual disclosure requirements (“Prior Undertakings”) in connection with the outstanding bonds and other indebtedness of the School District, the School District has agreed to provide updates to certain audited financial statements and financial and operational information relating to the School District. The School District believes that it is in material compliance with its Prior Undertakings pursuant to the Rule within the last five years.

The School District has procedures in place to ensure that future filings of the required annual information and event notices will be accomplished within all required time periods.

RATING

Moody’s Investors Service, Inc. has assigned an underlying rating of “Aa2” to the Bonds. Such rating reflects only the view of such organization and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following address: Moody’s Investors Service, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own There is no assurance that the credit rating will be maintained for any given period of time, or that it may not be lowered or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of such credit rating may have an adverse effect on the market price of the Bonds.

The above ratings are not recommendations to buy, sell, or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds.

UNDERWRITING

RBC Capital Markets, LLC (the “Underwriter”) has agreed, subject to certain conditions, to purchase the Bonds from the School District, subject to certain conditions precedent, and will purchase all of the Bonds if any of such Bonds are purchased.

The Bonds will be purchased by the Underwriter for a purchase price of $ equal to the par value of the Bonds less an underwriters’ discount of $ plus an original issue premium of $ plus accrued interest from the dated date to the date of delivery of the Bonds.

The Underwriter has provided the following information for inclusion in this Official Statement: The Underwriter and their respective affiliates are full service financial institutions engaged in various activities, that may include securities trading, commercial and investment banking, municipal advisory, brokerage and asset management. In the ordinary course of business, the Underwriter and their respective affiliates may actively trade debt and if applicable equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriter and its affiliates may engage in transactions for its own accounts involving the securities and instruments made the subject of this securities offering or other offering of the Issuer. The Underwriter and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of this securities offering or other offerings of the Issuer. The Underwriter does not make a market in credit default swaps with respect to municipal securities at this time but may do so in the future.

LEGAL OPINION

The Bonds are offered subject to the receipt of the unqualified approving legal opinion of Eckert Seamans Cherin & Mellott, LLC, of Harrisburg, Pennsylvania, Bond Counsel to the School District. Certain legal matters will be passed upon for the School District by Sweet, Stevens, Katz & Williams, LLP, of New Britain, Pennsylvania, School District Solicitors.

FINANCIAL ADVISOR

The School District has retained PFM Financial Advisors LLC, Harrisburg, Pennsylvania, as financial advisor (the “Financial Advisor”) in connection with the preparation, authorization and issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Preliminary Official Statement. PFM Financial Advisors LLC is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

MISCELLANEOUS

This Preliminary Official Statement has been prepared under the direction of the School District by PFM Financial Advisors LLC, Harrisburg, Pennsylvania, in its capacity as Financial Advisor to the School District. The information set forth in this Preliminary Official Statement has been obtained from the School District and from other sources believed to be reliable. Insofar as any statement herein includes matters of opinion or estimates about future conditions, it is not intended as representation of fact, and there is no guarantee that it is, or will be, realized. Summaries or descriptions of provisions of the Bonds, the Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. Reference is hereby made to the complete documents, copies of which will be furnished by the School District or the Financial Advisor upon request. The information assembled in this Preliminary Official Statement is not to be construed as a contract with holders of the Bonds.

Use of the words “shall,” “will,” must,” or other words of similar import or meaning in summaries of documents or law in this Preliminary Official Statement to describe future events or continuing obligations is not intended as a representation that such event will occur or such obligations will be fulfilled, but only that the document or law requires or contemplates such event to occur or such obligation to be fulfilled.

The School District has authorized the distribution of this Preliminary Official Statement.

METHACTON SCHOOL DISTRICT Montgomery County, Pennsylvania

By: President, Board of School Directors

APPENDIX A Demographic and Economic Information Relating to the Methacton School District

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Population

Table A-1 shows recent population trends for the School District, Montgomery County and the Commonwealth. Table A-2 shows the age composition by household families for Montgomery County and the Commonwealth.

TABLE A-1 RECENT POPULATION TRENDS

American Community Census: April 2010 Survey (2011-2015) Change: 2010 to 2015 Geographic Area Number Number Number Percent Lower Providence Township ...... 25,436 25,765 329 0.26% Worcester Township ...... 9,750 10,174 424 0.85% School District ...... 35,186 35,939 753 0.42% Montgomery County ...... 799,874 812,970 13,096 0.33% Pennsylvania ...... 12,702,379 12,779,559 77,180 0.12% Source: U.S. Census Bureau, Census 2010.

TABLE A-2 AGE COMPOSITION BY HOUSEHOLD FAMILIES

Households Households with one or with one or Average Average more more Family Household Under 18 60 Years Size Size Years and Over Montgomery County...... 3.14 2.57 32.1% 38.8% Pennsylvania...... 3.10 2.49 28.8% 39.5% Source: U.S. Census Bureau, 2011-2015 American Community Survey 5-Year Estimates

A-1

Employment

Overall employment data are not compiled for the County, but such data are compiled for the Montgomery-Bucks-Chester, PA Metropolitan Division (an area which includes the County) as shown on Table A-3.

TABLE A-3 DISTRIBUTION OF EMPLOYMENT BY INDUSTRY MONTGOMERY-BUCKS-CHESTER, PA METROPOLITAN DIVISION

April 2019 NONFARM JOBS - NOT SEASONALLY ADJUSTED

Industry Employment Net Change From: Mar Apr Establishment Data Apr 2019 Mar 2019 Feb 2019 Apr 2018 2019 2018 TOTAL NONFARM 1,080,700 1,070,700 1,063,000 1,070,600 10,000 10,100 TOTAL PRIVATE 996,100 986,400 978,600 986,700 9,700 9,400 GOODS PRODUCING 144,700 142,100 142,300 142,600 2,600 2,100 Construction, Natural Resources, and Mining 55,000 52,600 52,500 53,200 2,400 1,800 Manufacturing 89,700 89,500 89,800 89,400 200 300 Durable Goods 46,200 46,000 46,300 46,100 200 100 Non-Durable Goods 43,500 43,500 43,500 43,300 0 200 Chemical Manufacturing 19,400 19,500 19,500 19,000 -100 400 SERVICE-PROVIDING 936,000 928,600 920,700 928,000 7,400 8,000 PRIVATE SERVICE-PROVIDING 851,400 844,300 836,300 844,100 7,100 7,300 Trade, Transportation, and Utilities 196,700 196,600 196,400 199,600 100 -2,900 Wholesale Trade 53,700 54,100 54,100 54,100 -400 -400 Retail Trade 113,600 113,100 112,700 116,300 500 -2,700 General merchandise stores 16,400 16,400 16,600 17,200 0 -800 Transportation, Warehousing, and Utilities 29,400 29,400 29,600 29,200 0 200 Information 23,500 23,300 23,300 23,300 200 200 Financial Activities 82,500 82,800 83,400 82,800 -300 -300 Finance and insurance 68,100 68,300 69,000 68,300 -200 -200 Credit Intermediation and Related Activities 15,600 15,700 15,800 16,400 -100 -800 Depository Credit Intermediation 8,900 9,000 9,100 9,300 -100 -400 Insurance carriers and related activities 28,700 28,800 28,800 28,200 -100 500 Real estate and rental and leasing 14,400 14,500 14,400 14,500 -100 -100 Professional and Business Services 209,100 203,600 201,600 204,500 5,500 4,600 Professional and technical services 113,300 111,700 111,800 108,300 1,600 5,000 Scientific research and development services 18,500 18,500 18,500 18,200 0 300 Management of companies and enterprises 26,800 27,100 27,100 27,700 -300 -900 Administrative and waste services 69,000 64,800 62,700 68,500 4,200 500 Education and Health Services 201,600 202,200 199,700 196,400 -600 5,200 Educational services 29,200 28,700 28,900 29,400 500 -200 Health care and social assistance 172,400 173,500 170,800 167,000 -1,100 5,400 Ambulatory health care services 65,800 66,100 65,200 63,300 -300 2,500 Hospitals 31,300 31,500 31,300 31,100 -200 200 Nursing and residential care facilities 38,300 38,800 37,900 37,500 -500 800 Social assistance 37,000 37,100 36,400 35,100 -100 1,900 Leisure and Hospitality 88,900 86,900 83,700 89,500 2,000 -600 Accommodation and food services 72,600 72,400 71,100 71,700 200 900 Other Services 49,100 48,900 48,200 48,000 200 1,100 Government 84,600 84,300 84,400 83,900 300 700 Federal Government 6,000 6,000 6,000 5,900 0 100 State Government 9,900 1,000 10,000 10,200 8,900 -300 Local Government 68,700 68,300 68,400 67,800 400 900 Local Government educational services 47,900 47,700 47,900 47,400 200 500 Local Government excluding educational services 20,800 20,600 20,500 20,400 200 400 ***Data changes of 100 may be due to Data benchmarked to March 2016 rounding***

Source: Center for Workforce Information & Analysis, Pennsylvania Department of Labor & Industry

A-2

Major Employers

Montgomery County 4th Quarter 2018

Merck Sharp & Dohme Corporation Abington Memorial Hospital State Government Main Line Hospitals Inc. Giant Food Stores LLC SEI Investments Company United Parcel Service Inc. Smithkline Beecham Corporation Montgomery County Federal Government

Source: Center for Workforce Information & Analysis

Table A-4 shows recent trends in labor force, employment, and unemployment for Montgomery County and the Commonwealth.

TABLE A-4 TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT NOT SEASONALLY ADJUSTED

2013 2014 2015 2016 2017 2018(1) Rate Montgomery County Civilian Labor Force (000) 435.6 434.4 441.3 447.7 448.7 452.8 0.78% Employment (000) 409.8 414.4 423.5 429 431.4 438.1 1.34% Unemployment (000) 25.7 20.1 17.8 18.7 17.3 14.8 -10.45% Unemployment Rate 5.90% 4.60% 4.00% 4.20% 3.90% 3.30%

Pennsylvania Civilian Labor Force (000) 6,460.0 6,378.0 6,424.0 6,472.0 6,427.0 6,455.0 -0.02% Employment (000) 5,982.0 6,009.0 6,094.0 6,120.0 6,112.0 6,201.0 0.72% Unemployment (000) 478.0 370.0 330.0 352.0 316.0 253.0 -11.95% Unemployment Rate 7.40% 5.80% 5.10% 5.40% 4.90% 3.90%

(1)As of October 2018. Source: Pennsylvania Department of Labor and Industry, Center for Workforce Information and Analysis website.

A-3

Income

Table A-5 shows recent trends in per capita income for the School District, Montgomery County, and the Commonwealth over the 2010-2015 period. Per capita income in the School District and in the County is higher than average per capita in the Commonwealth. Per capita income in the School District increased at a faster rate over this period than per capita income for the Commonwealth and the County.

TABLE A-5 RECENT TRENDS IN PER CAPITA INCOME*

Compound Average Annual Percentage Change 2010 2015(est.) 2010-2015(est.) School District ...... $41,855 $45,928 1.87% Montgomery County ...... 40,076 42,275 1.07% Pennsylvania ...... 27,049 29,291 1.61% *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. School District income is the population-weighted average for political subdivisions. Source: 2000: U.S. Census Bureau, 2015: U.S. Census Bureau, 2011-2015 American Community Survey.

Commercial Activity

TABLE A-6 TOTAL RETAIL SALES (000)

2013 2014 2015 2016 2017 Montgomery County 13,453,443 14,129,459 15,080,841 15,685,831 19,406,393 MSA 89,309,764 91,259,939 92,944,956 96,525,422 105,082,759 Pennsylvania 187,412,600 199,975,258 198,215,135 207,887,941 213,005,475

Source: The Nielson Company.

Educational Institutions

In the nearby Philadelphia area there are numerous institutions of higher education which are Temple University, The University of Pennsylvania and Drexel University, the following institutions of higher education are found in Montgomery County: Academy of New Church, Antonelli Institute of Art and Photography, Arcadia University, Biblical Theological Seminary, Bryn Mawr College, Calvary Baptist Theological Seminary, Combs College of Music, Dropsie College, Eastern Baptist Theological Seminary, Faith Theological Seminary, Gwynedd-Mercy College, Harcum Junior College, Haverford College, Lansdale School of Business (Lansdale and Pottstown), Manor Junior College, Montgomery County Community College, Northeastern Christian Junior College, The Pennsylvania State University (Malvern and Abington Campuses), Reconstructionist Rabbinical College, Rosemont College, St. Charles Borromeo Seminary, Temple University (Ambler Campus), Ursinus College, Welder Training and Testing Institute, and Westminster Theological Seminary.

Medical Facilities

Montgomery County contains 16 hospitals with approximately 4,550 beds and employing over 10,000 people.

The nearby City of Philadelphia is one of the largest health care centers in the world, with 53 hospitals employing over 37,000 people. There are 7 medical schools and 2 dental schools in Philadelphia.

Transportation Facilities

Montgomery County contains 32.7 miles of Pennsylvania Turnpike and other Interstate Highways and over 3,000 miles of Commonwealth, Federal, secondary and municipal roads. 7 commercial airports and 4 different railroads serve the County.

In nearby Philadelphia is the Philadelphia International Airport, along with all major rail, bus and trucking lines. The port located in Philadelphia is considered to be one of the largest fresh water ports in the world.

Utilities

Utility services for the area covered by the School District are provided by Verizon and PECO water and sewer service is provided by local authorities and on-site systems.

A-4

APPENDIX B Proposed Text of Bond Counsel Opinion

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[DATE OF CLOSING]

Re: $______aggregate principal amount Methacton School District, Montgomery County, Pennsylvania General Obligation Bonds, Series of 2019

To The Purchasers of the Within-Described Bonds:

We have served as bond counsel to the Methacton School District, Montgomery County, Pennsylvania (the “School District”), in connection with the issuance by the School District of its $______aggregate principal amount General Obligation Bonds, Series of 2019 (the “Bonds”), under the provisions of the Pennsylvania Local Government Unit Debt Act, 53 Pa. C.S. Chs. 80-82 (the “Act”), and a Resolution (the “Resolution”) adopted on ______, 2019, by the Board of School Directors of the School District (the “Board”). The Bonds are being issued for the purpose of providing funds which will be used for various capital projects of the School District as further described in the Resolution, and to pay the costs and expenses of issuing the Bonds.

As Bond Counsel for the School District, we have examined: (a) the relevant provisions of the Constitution of the Commonwealth of Pennsylvania (the “Commonwealth”); (b) the Act; (c) the relevant provisions of the Public School Code of 1949, as amended; (d) the Resolution and the Debt Statement of the School District filed with the Pennsylvania Department of Community and Economic Development (the “Department”); (e) the proceedings of the Board with respect to the authorization, issuance and sale of the Bonds; (f) a Certificate of Approval issued by the Department in respect of the proceedings authorizing the issuance of the Bonds; and (g) certain statements, certifications, affidavits and other documents and matters of law which we have considered relevant, including, without limitation, a certificate dated the date hereof (the “Tax Compliance Certificate”) of officials of the School District having responsibility for issuing the Bonds, given pursuant to the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the “Code”), an opinion of the Solicitor to the School District as to various matters, and the other documents, certifications and instruments listed in a closing index filed with the Paying Agent (hereinafter defined) on the date of original delivery of the Bonds. We also have examined a fully executed and authenticated Bond, or a true copy thereof, and assume all other Bonds are in such form and are similarly executed and authenticated.

The Bonds have been designated by the School District as Qualified Tax-Exempt Obligations within the meaning of Section 265(b)(3) of the Code.

In rendering the opinion set forth below, we have relied upon the genuineness, accuracy and completeness of all documents, records, certifications and other instruments we have examined, including, without limitation, the authenticity of all signatures appearing thereon. We also have relied, in the opinion set forth below, upon the opinion of the Solicitor of the School District as to all matters of fact and law set forth therein.

{L0807070.1}

To the Purchasers of the Within-Described Bonds [Date of Closing] Page 2

Except with respect to paragraph 6 below, our opinion is given only with respect to the internal laws of the Commonwealth as enacted and construed on the date hereof.

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

1. The School District is authorized under the provisions of the Constitution and the laws of the Commonwealth to issue the Bonds for the purposes therein set forth; the School District has properly authorized the issuance thereof; and the Department has duly approved such issuance.

2. The School District has established one or more sinking funds for the Bonds (collectively, the “Sinking Fund”) with Manufacturers and Traders Trust Company, as paying agent, registrar and sinking fund depository (the “Paying Agent”), and has covenanted in the Resolution to deposit in the Sinking Fund amounts sufficient to pay the principal of and interest on the Bonds as the same becomes due and payable and to apply the amounts so deposited to the payment of such principal and interest.

3. The School District has effectively covenanted: (i) to include the amount of debt service on the Bonds in each fiscal year of the School District in which such sums are due and payable in its budget for that fiscal year; (ii) to appropriate such amounts from its general revenues for the payment of such debt service; and (iii) to duly and punctually pay, or cause to be paid, from the Sinking Fund or any other of its general revenues or funds, the principal or redemption price of and interest on the Bonds on the dates and in the places and in the manner stated in the Bonds according to the true intent and meaning thereof. For such budgeting, appropriation and payment the School District has pledged, with respect to the Bonds, its full faith, credit and taxing power, within the limits established by law.

4. The Bonds have been duly authorized, executed, authenticated, issued and delivered, and are the legal, valid and binding general obligations of the School District, payable from the general revenues of the School District from whatever source derived, within the limits established by law, and are enforceable in accordance with the terms thereof, except to the extent that enforcement thereof may be affected by bankruptcy, insolvency, reorganization, moratorium or other similar laws or legal or equitable principles affecting the enforcement of creditors’ rights.

5. Under the laws of the Commonwealth as enacted and construed on the date hereof, interest on the Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax, and the Bonds are exempt from personal property taxes in the Commonwealth; however, under the laws of the Commonwealth as enacted and construed on the date hereof, any profits, gains or income derived from the sale, exchange or other disposition of the Bonds will be subject to Commonwealth taxes and local taxes within the Commonwealth.

6. Under existing statutes, regulations, rulings and court decisions, interest on the Bonds will not be includible in gross income of the holders thereof for federal income tax purposes, assuming continuing compliance by the School District with the requirements of the

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To the Purchasers of the Within-Described Bonds [Date of Closing] Page 3

Code. Interest on the Bonds will not be a specific preference item for purposes of computing the federal alternative minimum tax on individuals.

In rendering this opinion, we have assumed compliance by the School District with the covenants contained in the Resolution and the representations in the Tax Compliance Certificate relating to actions to be taken by the School District after the issuance of the Bonds necessary to effect or maintain the exclusion from gross income of the interest on the Bonds for federal income tax purposes. These covenants and representations relate to, among other things, the use and investment of proceeds of the Bonds, and the rebate to the United States Department of Treasury of specified arbitrage earnings, if any. Failure to comply with such covenants could result in the interest on the Bonds becoming includible in gross income for federal income tax purposes from the date of issuance of the Bonds.

We express no opinion as to any matter not set forth in the numbered paragraphs herein. This opinion is given as of the date hereof and we assume no obligation to supplement this opinion to reflect changes in law that may hereafter occur or changes in facts or circumstances that may hereafter come to our attention. Without limiting the generality of the foregoing, we express no opinion with respect to and assume no responsibility for, the accuracy, adequacy or completeness of the preliminary official statement or the official statement prepared in respect of the Bonds, and make no representation that we have independently verified the contents thereof.

Very truly yours,

ECKERT SEAMANS CHERIN & MELLOTT, LLC

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APPENDIX C Form of Continuing Disclosure Certificate

[ THIS PAGE INTENTIONALLY LEFT BLANK ] CONTINUING DISCLOSURE CERTIFICATE

Re: METHACTON SCHOOL DISTRICT, Montgomery County, Pennsylvania $______Aggregate Principal Amount General Obligation Bonds, Series of 2019 Dated [Date of Closing] [Date of Closing]

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by METHACTON SCHOOL DISTRICT, Montgomery County, Pennsylvania (the “School District”), in connection with the issuance of its General Obligation Bonds, Series of 2019, dated [Date of Closing] (the “Bonds”). The Bonds are being issued pursuant to a resolution duly adopted by the Board of School Directors of the School District (the “Resolution”). The School District makes the following certifications and representations as an inducement to the Participating Underwriters and others to purchase the Bonds:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the School District for the benefit of the holders of the Bonds and in order to assist the Participating Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined herein, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report filed by the School District pursuant to, and as described in, Section 3(a) of this Disclosure Certificate.

“Bondholder” shall mean any registered owner of the Bonds or any person who (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any of the Bonds (including persons holding through any nominee, securities depository or other intermediary) or (ii) is treated as the holder of any Bonds for federal income tax purposes.

“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 are authorized or required by law or executive order to close.

“Commonwealth” shall mean the Commonwealth of Pennsylvania.

“Financial Obligation” shall mean (i) a debt obligation; (ii) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) a guarantee of either (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.

{L0807072.1} “Listed Events” shall mean any of the events listed in Section 6 of this Disclosure Certificate.

“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 School District and distributed in connection with the offering and sale of the Bonds by the Participating Underwriters.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the primary offering of the Bonds.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“SEC” shall mean the United States Securities and Exchange Commission.

SECTION 3. Filing of Annual Reports. The School District shall file annually with the MSRB by April 1 of each year beginning on April 1, 2020 an Annual Report for the prior fiscal year ending June 30th 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, however, that if the audited financial statements of the School District for the most recent completed fiscal year are not available to be included in the Annual Report when filed, such audited financial statements may be filed separately from the balance of the Annual Report, as provided in the following paragraph.

If the audited financial statements of the School District for the most recent fiscal year are not available as of the date on which the Annual Report is to be filed, if available, its State Form PDE-2057 Annual Financial Report can be filed as an interim filing until such audited financial statements are available. The audited financial statements shall be filed with the MSRB as soon as they are available, and the Annual Report, when filed, shall contain a statement to that effect and a statement of the date by which the School District reasonably expects the audited financial statements to become available and to be filed with the MSRB.

SECTION 4. Content of Annual Reports. The School District’s Annual Report shall contain or incorporate by reference the following financial information and operating data with respect to the School District:

(1) financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for Pennsylvania school districts, and audited in accordance with generally accepted auditing standards;

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(2) a copy of (or a summary of) the budget for the current fiscal years; (3) the total assessed value of all taxable real estate for the then current fiscal year; (4) the taxes and millage rates imposed for the then current fiscal year; (5) the real property tax collection results for the most recent fiscal year, including (a) the real estate levy imposed (expressed both as a millage rate and an aggregate dollar amount), (b) the dollar amount of real estate taxes collected that represented current collections, (c) the dollar amount of delinquent real estate taxes collected that represent taxes levied in prior years, and (d) the total dollar amount of real estate taxes collected; and (6) owners of the top 10 parcels of real estate taxed by the School District and, for each, its total assessed value in 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 the School District or related public entities, which have been made available to the public on the MSRB’s internet website or filed with the SEC. The School District shall identify each other document so incorporated by reference.

The School District 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 a result of a change in legal requirements or a change in the nature of the School District or its operations or financial reporting, but the School District will agree that any such modification will be done in a manner consistent with the Rule.

SECTION 5. Notices of Late Filing of Annual Information. If the School District has failed to file, or is unable to file, an Annual Report with the MSRB within the time set forth in Section 3 above, the School District will file, in a timely manner, a notice with the MSRB stating such fact and, if appropriate, the date by which the School District expects to file the Annual Report.

SECTION 6. Reporting of Listed Events. In a timely manner not in excess of ten (10) Business Days after the occurrence of the event, the School District will file with the MSRB notice of the occurrence of any of the following events with respect to the Bonds:

(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the Bonds, or other material events affecting the tax- exempt status of the Bonds; (7) modifications to rights of holders of the Bonds, if material;

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(8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the School District; (13) the consummation of a merger, consolidation, or acquisition involving the School District or the sale of all or substantially all of the assets of the School District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee, or the change of name of a trustee, if material; (15) incurrence of a Financial Obligation of the School District, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the School District, any of which affect security holders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the School District, any of which reflect financial difficulties.

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

SECTION 7. Manner of Filing. All filings to be made with the MSRB in accordance with this Disclosure Certificate are to be filed in such electronic format as is prescribed by the MSRB and accompanied by such identifying information as is prescribed by the MSRB. As of the date of this Disclosure Certificate, the rules of the MSRB require all such filings to be made using the MSRB’s Electronic Municipal Market Access System (“EMMA”) at http://emma.msrb.org.

SECTION 8. Dissemination Agent. The School District 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 Bondholders.

SECTION 9. Termination of Disclosure Obligation. The School District’s obligations under this Disclosure Certificate shall terminate upon the prior redemption or payment in full of all of the Bonds or if and when the School District no longer remains an “obligated person” with respect to the Bonds, within the meaning of the Rule.

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SECTION 10. Default. In the event of a failure of the School District to comply with any provision of this Disclosure Certificate, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the School District to comply with its 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 School District to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the School District, the Participating Underwriters and Bondholders, and shall create no rights in any other person or entity.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the School District causes this Continuing Disclosure Certificate to be executed on its behalf by the President of the Board of School Directors all as of the date set forth above.

METHACTON SCHOOL DISTRICT, Montgomery County, Pennsylvania

By: ______(Vice) President of the Board of School Directors

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APPENDIX D Financial Statements and Single Audit for the Year Ending June 30, 2018

[ THIS PAGE INTENTIONALLY LEFT BLANK ] METHACTON SCHOOL DISTRICT

ANNUAL FINANCIAL REPORT

Year Ended June 30, 2018

Certified Public Accountants and Business Consultants

[ THIS PAGE INTENTIONALLY LEFT BLANK ] INTRODUCTORY SECTION

[ THIS PAGE INTENTIONALLY LEFT BLANK ] METHACTON SCHOOL DISTRICT TABLE OF CONTENTS YEAR ENDED JUNE 30, 2018

Page

Introductory Section

Table of Contents 1

Financial Section

Independent Auditors’ Report 3

Management’s Discussion and Analysis (Unaudited) 6

Basic Financial Statements

Government-Wide Financial Statements

Statement of Net Position 16

Statement of Activities 17

Fund Financial Statements

Governmental Funds

Balance Sheet 18

Reconciliation of Total Governmental Funds Balances to Net Position of Governmental Activities 19

Statement of Revenues, Expenditures and Changes in Fund Balances 20

Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 21

Proprietary Fund

Statement of Net Position 22

Statement of Revenues, Expenses and Changes in Net Position 23

Statement of Cash Flows 24

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Page

Fiduciary Funds

Statement of Fiduciary Net Position 25

Statement of Changes in Fiduciary Net Position 26

Notes to the Basic Financial Statements 27

Required Supplementary Information

Budgetary Comparison Schedule 64

Note to the Budgetary Comparison Schedule 65

Schedule of the School District’s Proportionate Share of the Net Pension Liability 66

Schedule of the School District’s Pension Contributions 67

Schedule of the School District’s Proportionate Share of the PSERS Net Other Postemployment Benefit Plan Liability 68

Schedule of the School District’s PSERS Other Postemployment Benefit Plan Contributions 69

Schedule of Changes in the Total Other Postemployment Benefit Plan Liability and Related Ratios 70

Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 71

Independent Auditors’ Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance in Accordance With the Uniform Guidance 73

Supplementary Information - Major Federal Award Programs Audit

Schedule of Expenditures of Federal Awards 76

Notes to the Schedule of Expenditures of Federal Awards 78

Schedule of Findings and Questioned Costs 79

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FINANCIAL SECTION

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Independent Auditors’ Report

To the Board of School Directors Methacton School District Eagleville, Pennsylvania

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund and the aggregate remaining fund information of the Methacton School District as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the Methacton School District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

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

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

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To the Board of School Directors Methacton School District Eagleville, Pennsylvania

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Methacton School District as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

For the year ended June 30, 2018, the Methacton School District adopted new accounting guidance, implementing Governmental Accounting Standards Board Statements No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pensions. Our opinion is not modified with respect to this matter.

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 6 through 15, budgetary comparison information on pages 64 and 65, schedule of the school district’s proportionate share of the net pension liability on page 66, schedule of the school district’s pension contributions on page 67, schedule of the school district’s proportionate share of the PSERS net other postemployment benefit plan liability on page 68, schedule of school district’s PSERS net other postemployment benefit contributions on page 69, and the schedule of changes in the total other postemployment benefit plan liability and related ratios on page 70 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

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

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To the Board of School Directors Methacton School District Eagleville, Pennsylvania

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

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 6, 2018, on our consideration of the Methacton School District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Methacton School District’s internal control over financial reporting and compliance.

Oaks, Pennsylvania November 6, 2018

- 5 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

This discussion and analysis of Methacton School District’s financial performance provides an overall review of the District’s financial activities for the fiscal year ended June 30, 2018. The intent of this discussion and analysis is to look at the District’s financial performance as a whole; readers should also review the audited financial statements and the related disclosures to enhance their understanding of the District’s financial performance.

Management’s 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 in June 1999. Certain comparative information between the current year and the prior year is required to be presented in the MD&A.

FINANCIAL HIGHLIGHTS

The Methacton School District (the “District”) experienced significant increases in the costs during the 2017/2018 fiscal year in special education instruction, and health related benefits for our employees. Further, increases in the mandated costs for the Public School Employees’ Retirement System (PSERS) employer contribution continue to cause additional stress on the financial resources of the District.

The District completed the fiscal year 2017/2018 with liabilities and deferred inflows of resources of $291,437,328 exceeding assets and deferred outflows of resources of $170,060,114 by $121,377,214. In comparison the total net position of the district increased $8,240,202 year-over-year.

• The governmental activities total assets increased by $9,378,072 over prior year.

• The District’s business-type activities, which are comprised of the Food Service Fund, showed a decrease of $64,009 in total assets from prior year.

• At the end of the current fiscal year, the unassigned, undesignated fund balance of the General Fund was $7,657,870 compared to the prior year of $7,318,083, an increase of $339,787.

• The Board continues to review the fund balance of the District and strives to maintain the fund balance to within 5-8% of the total budgeted expenditures, or in future years will budget to replenish the fund balance, should it be necessary.

USING THE BASIC FINANCIAL STATEMENTS

This annual report consists of two distinct series of financial statements: the District as a whole, and by fund.

The first two statements are government-wide financial statements (District as a whole). These are the Condensed Statement of Net Position, and the Statement of Activities. The statements provide both long-term and short-term information about the District’s overall financial status.

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The remaining statements (by fund) focus on individual parts of the District’s operations in more detail. The Governmental Funds statements focus on how general District services were financed in the short term, as well as what remains for future spending. The Proprietary Fund statements offer short and long term financial information about the activities the District operates as a business. For this District, this is the Food Service Fund. The Fiduciary Fund statements provide information about financial relationships where the District 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-1 shows how the required parts of the financial section are arranged and relate to one another.

Figure A-1 Organization of the Methacton School District Annual Financial Report

Management’s Basic Required Discussion Financial Supplementary and Analysis Statements Information

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

- 7 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

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

Figure A-2 Major Features of the Government-Wide and Fund Financial Statements

Government-Wide Fund Financial Statements Statements Governmental Funds Proprietary Fund Fiduciary Funds Scope Entire School District The activities of the Activities the School Instances in which the (except Fiduciary Funds) School District that are District operates similar School District not proprietary or to private businesses: administers resources fiduciary, such as food services and adult on behalf of someone special education and education else, such as building maintenance scholarship programs and student activities

Required financial • Statement of net position • Balance sheet • Statement of net • Statement of statements position fiduciary net • • Statement of activities Statement of position revenues, • Statement of expenditures revenues, • Statement of and changes in expenses and changes in fund balances changes in net fiduciary net position position • Statement of cash flows

Accounting basis Accrual accounting and Modified accrual Accrual accounting and Accrual accounting and and measurement economic resources focus accounting and current economic resources economic resources focus financial focus focus focus

Type of All assets and liabilities, Generally assets All assets and liabilities, All assets and liabilities, asset/liability both financial and capital, expected to be used up both financial and both short-term and information short-term and long-term and liabilities that come capital, and short-term long-term; capital due during the year or and long-term assets soon thereafter; no capital assets or long- term liabilities included

Type of inflow/ All revenues and expenses Revenues for which All revenues and All additions and outflow information during the year, regardless cash is received during expenses during the deductions during the of when cash is received or or soon after the end of year, regardless of year, regardless of paid the year; expenditures when cash is received when cash is received when goods or services or paid or paid have been received and the related liability is due and payable

- 8 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

OVERVIEW OF FINANCIAL STATEMENTS

Government-Wide Statements

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

The two government-wide statements report the District’s net position and how it has changed. Net position, the difference between the District’s assets, deferred outflows of resources, liabilities and deferred inflows of resources, is one way to measure the District’s financial health or current position.

The government-wide financial statements of the District are divided into two categories:

• Governmental Activities: All of the District’s basic services are included here, such as instruction, administration and community services. Revenues in the form of property taxes; state and federal subsidies; and state and federal grants finance most of these activities.

• Business-Type Activities: The District operates a food service operation and charges fees to staff, students and visitors to help it cover the costs of the food service operation. The food service operation is designed to be self-funding.

Fund Financial Statements

The District’s fund financial statements, which begin on page 18, provide detailed information about the most significant individual funds. Some funds are required by state law and by debt requirements.

• Governmental Funds: Most of the District’s activities are reported in Governmental Funds, which focus on the determination of financial position and change in financial position, not on income determination. Governmental Funds utilize the modified-accrual accounting method. This method of accounting measures cash and all other financial assets that can readily be converted to cash. The Governmental Funds statements provide a detailed short-term view of the District’s operations. Governmental Funds information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the District’s programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and Governmental Funds is reconciled in the financial statements.

• Proprietary Fund: The Proprietary Fund is used to account for District activities that are similar to private sector business operations. Fee for service charges by the District to customers (external and internal customers), are reported in the Proprietary Fund. Currently the Food Service Fund is the District’s sole Proprietary Fund.

• Fiduciary Funds: The District is the trustee for some Scholarship and Agency Funds. All of the District’s fiduciary activities are reported in a separate Statement of Fiduciary Net Position on page 25. These activities are excluded from the District’s other financial statements because the District cannot use these assets to finance its operations.

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FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE

The District’s total net position was $(121,377,214) as of June 30, 2018, as a result of the GASB 68 pension and GASB 75 OPEB reporting requirements.

Table A-1 Condensed Statements of Net Position June 30, 2018 and 2017

2018 2017

Governmental Business-Type Governmental Business-Type Activities Activities Totals Activities Activities Totals

ASSETS Current and other assets $ 35,738,128 $ 284,921 $ 36,023,049 $ 24,790,469 $ 346,448 $ 25,136,917 Capital assets 104,860,759 62,369 104,923,128 106,430,346 61,019 106,491,365 TOTAL ASSETS 140,598,887 347,290 140,946,177 131,220,815 407,467 131,628,282

DEFERRED OUTFLOWS OF RESOURCES 29,117,769 - - 28,946,929 - 28,946,929

LIABILITIES Current and other liabilities 15,779,677 139,344 15,919,021 21,104,053 249,719 21,353,772 Long-term liabilities 265,751,630 - 265,751,630 244,146,051 - 244,146,051 TOTAL LIABILITIES 281,531,307 139,344 281,670,651 265,250,104 249,719 265,499,823

DEFERRED INFLOWS OF RESOURCES 9,770,509 - 9,770,509 6,124,300 - 6,124,300

NET POSITION Net investment in capital assets 28,169,065 62,369 28,231,434 29,478,155 61,019 29,539,174 Restricted 7,227,280 - 7,227,280 1,248,529 - 1,248,529 Unrestricted (156,981,505) 145,577 (156,835,928) (141,933,344) 96,729 (141,836,615)

TOTAL NET POSITION $ (121,585,160) $ 207,946 $ (121,377,214) $ (111,206,660) $ 157,748 $ (111,048,912)

- 10 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

Table A-2 presents the Districts Statement of Changes in Net Position. This schedule uses the financial information from the Statement of Activities found on page 17. The presentation of Table A-2 is similar to an income statement of a private industry organization.

Total revenues from governmental and business-type activities were $108,642,888 for the fiscal year ended June 30, 2018, versus $106,134,103 for the prior fiscal year. The main contributors to the increase were local property taxes, earned income tax revenue and operating grants and contributions.

Total expenditures for the current fiscal year were $100,402,686 versus $108,364,443 for the prior fiscal year. The major contributors to the decrease in expenditures are related to decreased costs around instruction and instructional support services.

Overall the District’s net position increased $8.2 million during the current fiscal year.

Table A-2 Statements of Changes in Net Position Years Ended June 30, 2018 and 2017

2018 2017

Governmental Business-Type Governmental Business-Type Activities Activities Totals Activities Activities Totals

REVENUES Program revenues Charges for services $ 672,483 $ 990,954 $ 1,663,437 $ 507,175 $ 995,766 $ 1,502,941 Operating grants and contributions 14,877,237 489,473 15,366,710 14,974,040 469,091 15,443,131 Capital grants and contributions 485,382 - 485,382 - - - General revenues Taxes 81,574,263 - 81,574,263 79,189,269 - 79,189,269 Grants, subsidies and contributions, unrestricted 8,853,857 - 8,853,857 9,532,232 - 9,532,232 Investment earnings 485,598 4,061 489,659 151,657 1,612 153,269 Other 209,580 - 209,580 313,261 - 313,261 TOTAL REVENUES 107,158,400 1,484,488 108,642,888 104,667,634 1,466,469 106,134,103

EXPENSES Instruction 61,287,956 - 61,287,956 66,830,084 - 66,830,084 Support services 34,232,163 - 34,232,163 36,507,512 - 36,507,512 Operation of non-instructional services 1,528,327 - 1,528,327 1,553,380 - 1,553,380 Facilities acquisition, construction, and improvement services 184,525 - 184,525 - - - Interest on long-term debt 1,735,425 - 1,735,425 2,048,125 - 2,048,125 Food services - 1,434,290 1,434,290 - 1,425,342 1,425,342 TOTAL EXPENSES 98,968,396 1,434,290 100,402,686 106,939,101 1,425,342 108,364,443

CHANGE IN NET POSITION $ 8,190,004 $ 50,198 $ 8,240,202 $ (2,271,467) $ 41,127 $ (2,230,340)

- 11 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

Table A-3 compares the gross expenditures of the governmental activities of the District broken down by major category seven largest functions. The table further shows the net costs after applying each category’s direct revenue, grants and contributions. (total cost less revenues generated by the activities). Table A-3 Governmental Activities Years Ended June 30, 2018 and 2017

2018 2017 Total Cost Net Cos t Total Cost Net Cos t Functions/Programs of Services of Services of Services of Services

Instruction $ 61,287,956 $ 51,074,207 $ 66,830,084 $ 56,223,181 Support services 34,232,163 29,443,167 36,507,512 32, 140,385 Operation of non-instructional services 1,528,327 981,352 1,553,380 1,046, 195 Facilities acquisition, construction, and improvement services 184,525 184,525 - - Interest on long-term debt 1,735,425 1,250,043 2,048,125 2, 048,125

TOTA L GOV ERNMENTA L A CTIV ITIES $ 98,968,396 82,933,294 $ 106,939,101 91,457,886

Less unrestricted grants, subsidies (8,853,857) (9,532,232)

TOTA L NEEDS FROM LOCA L TA XES A ND OTHER REV ENUES $ 74,079,437 $ 81,925,654

Table A-4 reflects the activities of the Food Service program, the only business-type activity of the District. Table A-4 Business-Type Activities Years Ended June 30, 2018 and 2017

2018 2017 Total Cost Net Cos t Total Cost Net Cos t Functions/Programs of Services of Services of Services of Services

Food services $ 1,434,290 $ (46,137) $ 1,425,342 $ (39,515) Less investment earnings (4,061) (1,612)

TOTAL BUSINESS-TYPE A CTIV ITIES $ (50,198) $ (41,127)

The Statement of Revenues, Expenses and Changes in Net Position for this Proprietary Fund will further detail the actual results of operations.

- 12 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

THE DISTRICT FUNDS

At June 30, 2018, the District’s Governmental Funds reported a combined total fund balance of $18,770,646.

General Fund

The District budgeted for significant increases in health benefit costs, costs for anticipated needs of special education and future retirement and debt service cost. These areas are a challenge for the District in budgeting. The District is self-insured for health benefits for dental and prescription insurances. This category can fluctuate annually based upon the health of the individual employees within the District. Special education costs are dependent upon the type of student enrolled in the District each year. Enrollment and/or withdrawal of severely handicapped students can cause this expenditure to fluctuate. While the District does prepare a budget with a modest reserve each year for unexpected emergencies, this expenditure is dependent upon actual experience during the fiscal year.

Capital Projects Fund

The District established this fund in prior years for debt funded district-wide capital projects.

General Fund Budget

During the fiscal year, the Board of School Directors (the “Board”) authorizes revisions to the original budget to accommodate differences from the original budget to the actual expenditures of the District. All adjustments are again confirmed at the time the annual audit is accepted, which is after the end of the fiscal year. A statement showing the District’s original and final budget amounts compared with amounts actually paid and received is provided on page 64.

The District applies for federal, state and local grants, and these grants cannot always be anticipated in the budgetary process.

Budgeted expenditures and other financing uses also decreased during the fiscal year as more accurate data became available. Transfers between specific categories of expenditures/financing uses occur during the year. The most significant transfers occur from the budget reserve category to specific expenditure areas.

The Budgetary Reserve is an amount used for unexpected expenditures throughout the fiscal year.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2018, the District had $104,923,128 invested in a broad range of capital assets net of accumulated depreciation, including land, buildings, furniture and equipment. This amount represents a net decrease (including additions, deletions and depreciation) of $1,568,237 or 1.5% from last year.

Table A-5 reflects the capital assets of both the governmental activities and the business-type activities of the District.

- 13 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

Table A-5 Governmental and Business-Type Activities Capital Assets, Net of Depreciation Years Ended June 30, 2018 and 2017

2018 2017

Land $ 1,564,425 $ 1,564,425 Construction in progress 1,810,976 99,609 Site improvements, net of accumulated depreciation 6,698,934 7,133,252 Buildings and building improvements, net of accumulated depreciation 91,678,069 94,518,143 Machinery and equipment, net of accumulated depreciation 3,170,724 3,175,936

$ 104,923,128 $ 106,491,365

Debt Administration Table A-6 Outstanding Debt Years Ended June 30, 2018 and 2017

2018 2017

GENERAL OBLIGATION NOTES Series A of 2011 $ - $ 1,500,000 Series of 2013 - 5,465,000 Series A of 2013 2,515,000 2,520,000 Series of 2015 - 5,485,000 GENERAL OBLIGATION BONDS Series of 2011 - 7,235,000 Series of 2012 2,635,000 5,320,000 Series A of 2012 4,620,000 5,465,000 Series AA of 2012 2,015,000 3,930,000 Series of 2013 4,205,000 4,210,000 Series A of 2015 1,985,000 2,460,000 Series B of 2015 1,535,000 1,750,000 Series of 2016 27,895,000 27,945,000 Series A of 2017 6,075,000 - Series B of 2017 8,500,000 - Series of 2018 5,915,000 - Series A of 2018 5,400,000 -

$ 73,295,000 $ 73,285,000

The District maintains a rating of Aa2 from Moody’s for general obligation debt. Additional information on the District’s long-term debt can be found in Note F.

- 14 - METHACTON SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2018

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET 2018-2019 AND RATES

The District expects the tax base will continue to experience moderate growth. There are numerous housing units in construction or planned to be completed and in the near future, as well as anticipated commercial development. Assessments for the 2017-2018 Fiscal Year were roughly $20 million above the 2016-2017 Fiscal Year values based on the start of each Fiscal Year. By the end of the 2017-2018 Fiscal Year, the assessed values had increased by an additional $5+ million.

The District continues to develop strategic planning to meet future needs of the District. The Capital Projects Plan provides the District with the facility needs at each location as well as forecasting the financial needs of these efforts; Debt Management which included the elimination of the variable debt in the 2017-2018 Fiscal Year; and forecasting out the financial projections for the next 5 years to determine the future needs to of the District.

The Budget for the 2018-2019 Fiscal Year is $109,398,167. The Millage increased 1.99%, which was below the ACT 1 Index of 2.4%. This resulted in a millage rate of 30.0431 for the 2018-2019 Fiscal Year.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT

Our financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the District’s finances and to show the Board’s accountability for the money it receives. If you have questions about this report or wish to request additional financial information, please contact Timothy Bricker, Director of Business Services at Methacton School District, 1001 Kriebel Mill Road, Eagleville, PA 19403, or (610) 489-5000.

- 15 - METHACTON SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2018

Governmental Business-Type Activities Activities Totals

ASSETS Cash and investments $ 28,667,245 $ 190,374 $ 28,857,619 Taxes receivable, net 2,235,442 - 2,235,442 Intergovernmental receivables 3,212,115 68,195 3,280,310 Other receivables 126,971 722 127,693 Prepaid expenses 1,496,355 - 1,496,355 Inventories - 25,630 25,630 Capital assets not being depreciated Land 1,564,425 - 1,564,425 Construction in progress 1,810,976 - 1,810,976 Capital assets being depreciated Site improvements 9,025,165 - 9,025,165 Buildings and building improvements 145,543,508 - 145,543,508 Machinery and equipment 17,612,065 81,425 17,693,490 Accumulated depreciation (70,695,380) (19,056) (70,714,436) TOTAL ASSETS 140,598,887 347,290 140,946,177 DEFERRED OUTFLOW OF RESOURCES Deferred charge on refunding 2,775,256 - 2,775,256 Deferred outflows of resources - other postemployment benefits - PSERS 358,615 - 358,615 Deferred outflows of resources - other postemployment benefits - District Plan 307,893 - 307,893 Deferred outflows of resources, pension activity 25,676,005 - 25,676,005 TOTAL DEFERRED OUTFLOWS OF RESOURCES 29,117,769 - 29,117,769

LIABILITIES Accounts payable 2,704,099 90,640 2,794,739 Accrued salaries and benefits 3,600,394 - 3,600,394 Internal balances 3,792 (3,792) - Payroll deductions and withholdings 4,735,997 - 4,735,997 Accrued interest 545,750 - 545,750 Unearned revenue 80,783 12,483 93,266 Escrow for taxes 4,108,862 - 4,108,862 Other current liabilities - 40,013 40,013 Long-term liabilities Portion due or payable within one year Bonds payable 7,230,000 - 7,230,000 Notes payable 5,000 - 5,000 Capital lease obligation 154,503 - 154,503 Compensated absences 140,097 - 140,097 Portion due or payable after one year Bonds payable 63,550,000 - 63,550,000 Notes payable 2,510,000 - 2,510,000 Bond premiums and discounts, net 4,153,662 - 4,153,662 Capital lease obligation 1,863,785 - 1,863,785 Net other postemployment benefits liability - PSERS 6,574,000 - 6,574,000 Net other postemployment benefits liability - District Plan 17,581,739 - 17,581,739 Net pension liability 159,327,000 - 159,327,000 Compensated absences 2,661,844 - 2,661,844 TOTAL LIABILITIES 281,531,307 139,344 281,670,651

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - other postemployment benefits - PSERS 459,450 - 459,450 Deferred inflows of resources - other postemployment benefits - District Plan 192,059 - 192,059 Deferred inflows of resources, pension activity 9,119,000 - 9,119,000 TOTAL DEFERRED INFLOWS OF RESOURCES 9,770,509 - 9,770,509

NET POSITION Net investment in capital assets 28,169,065 62,369 28,231,434 Restricted for capital projects 7,227,280 - 7,227,280 Unrestricted (156,981,505) 145,577 (156,835,928)

TOTAL NET POSITION $ (121,585,160) $ 207,946 $ (121,377,214)

See accompanying notes to the basic financial statements.

- 16 - METHACTON SCHOOL DISTRICT STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2018

Program Operating Charges for Grants and Functions/Programs Expenses Services Contributions

GOVERNMENTAL ACTIVITIES Instruction Regular programs $ 42,137,511 $ - $ 4,711,196 Special programs 16,024,926 - 4,682,117 Vocational education 2,684,915 - 147,259 Other instructional programs 280,520 - 405,912 Nonpublic school programs 2,434 - - Adult education programs 157,650 264,035 3,230 Total instruction 61,287,956 264,035 9,949,714 - Support services Pupil personnel 4,720,696 - 492,323 Instructional staff 2,647,839 - 270,428 Administration services 6,455,802 87,764 660,972 Pupil health 1,717,931 - 387,757 Business services 1,052,524 - 88,698 Operation and maintenance of plant services 8,601,008 106,210 627,851 Student transportation 7,170,120 - 1,946,906 Central 1,788,901 - 119,641 Other support services 77,342 - 446 Total support services 34,232,163 193,974 4,595,022

Operation of noninstructional services Student activities 1,525,218 214,474 332,501 Community services 3,109 - - Facilities acquisition, construction and improvement services 184,525 - - Interest on long-term debt 1,735,425 - - Total operation of noninstructional services 3,448,277 214,474 332,501

TOTAL GOVERNMENTAL ACTIVITIES 98,968,396 672,483 14,877,237

BUSINESS-TYPE ACTIVITIES Food service 1,434,290 990,954 489,473

TOTAL SCHOOL DISTRICT ACTIVITIES $ 100,402,686 $ 1,663,437 $ 15,366,710 GENERAL REVENUES Taxes Property taxes, levied for general purposes Earned income, per capita, occupation and amusement taxes Transfer taxes Grants and entitlements not restricted to specific programs Investment earnings Miscellaneous TOTAL GENERAL REVENUES AND TRANSFERS CHANGE IN NET POSITION NET POSITION AT BEGINNING OF YEAR, restated

NET POSITION AT END OF YEAR See accompanying notes to the basic financial statements. Revenues Capital Net (Expense) Revenue and Changes in Net Position Grants and Governmental Business-Type Contributions Activities Activities Totals

$ - $ (37,426,315) $ - $ (37,426,315) - (11,342,809) - (11,342,809) - (2,537,656) - (2,537,656) - 125,392 - 125,392 - (2,434) - (2,434) - 109,615 - 109,615 - (51,074,207) - (51,074,207)

- (4,228,373) - (4,228,373) - (2,377,411) - (2,377,411) - (5,707,066) - (5,707,066) - (1,330,174) - (1,330,174) - (963,826) - (963,826)

- (7,866,947) - (7,866,947) - (5,223,214) - (5,223,214) - (1,669,260) - (1,669,260) - (76,896) - (76,896) - (29,443,167) - (29,443,167)

- (978,243) - (978,243) - (3,109) - (3,109)

- (184,525) - (184,525) 485,382 (1,250,043) - (1,250,043)

485,382 (2,415,920) - (2,415,920)

485,382 (82,933,294) - (82,933,294)

- - 46,137 46,137

$ 485,382 (82,933,294) 46,137 (82,887,157)

73,089,187 - 73,089,187

7,580,673 - 7,580,673 904,403 - 904,403

8,853,857 - 8,853,857 485,598 4,061 489,659 209,580 - 209,580

91,123,298 4,061 91,127,359 8,190,004 50,198 8,240,202 (129,775,164) 157,748 (129,617,416)

$ (121,585,160) $ 207,946 $ (121,377,214)

- 17 - METHACTON SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018

Capital Total General Projects Governmental Fund Fund Funds

ASSETS Cash and Investments $ 20,047,240 $ 8,620,005 $ 28,667,245 Taxes receivable, net of allowance of $149,969 2,235,442 - 2,235,442 Intergovernmental receivables 3,212,115 - 3,212,115 Interfund receivables 375,087 - 375,087 Prepaid expenditures 1,496,355 - 1,496,355 Other receivables 126,971 - 126,971

TOTAL ASSETS $ 27,493,210 $ 8,620,005 $ 36,113,215

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

LIABILITIES Accounts payable $ 1,686,461 $ 1,017,638 $ 2,704,099 Interfunds payables 3,792 375,087 378,879 Payroll deductions and withholdings 4,735,997 - 4,735,997 Accrued salaries and benefits 3,600,394 - 3,600,394 Current portion of compensated absences 140,097 - 140,097 Unearned revenue 80,783 - 80,783 Escrow for taxes 4,108,862 - 4,108,862 TOTAL LIABILITIES 14,356,386 1,392,725 15,749,111

DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes 1,593,458 - 1,593,458

FUND BALANCES Nonspendable for prepaid expenditures 1,496,355 - 1,496,355 Restricted for capital projects - 7,227,280 7,227,280 Committed for facilities master plan 2,389,141 - 2,389,141 Unassigned fund balance 7,657,870 - 7,657,870 TOTAL FUND BALANCES 11,543,366 7,227,280 18,770,646

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 27,493,210 $ 8,620,005 $ 36,113,215

See accompanying notes to the basic financial statements.

- 18 - METHACTON SCHOOL DISTRICT RECONCILIATION OF TOTAL GOVERNMENTAL FUNDS BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2018

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

TOTAL GOVERNMENTAL FUNDS BALANCES $ 18,770,646

Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. 104,860,759

enough to pay for the current period's expenditures and therefore are reported as unavailable revenue in the funds adjusted for allowance for doubtful accounts. 1,593,458

Deferred charges on refunding are recorded as other financing uses in the Governmental funds, the statement of net position includes these amounts as deferred outflows of resources. 2,775,256

Deferred outflows and inflows of resources related to pensions and OPEB are applicable to future periods and, therefore, are not reported in the funds: Deferred outflows of resources related to pensions and OPEB 26,342,513 Deferred inflows of resources related to pensions and OPEB (9,770,509)

Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: Accrued interest (545,750) Bonds and notes payable (73,295,000) Bond premiums and discounts (4,153,662) Capital lease obligations (2,018,288) Other post-employment benefits (24,155,739) Net pension liability (159,327,000) Accumulated compensated absences (2,661,844)

NET POSITION OF GOVERNMENTAL ACTIVITIES $ (121,585,160)

See accompanying notes to the basic financial statements.

- 19 - METHACTON SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2018

Total Capital Governmental General Fund Projects Funds

REVENUES Local sources $ 83,483,440 $ 254,582 $ 83,738,022 State sources 22,577,920 - 22,577,920 Federal sources 690,370 - 690,370 TOTAL REVENUES 106,751,730 254,582 107,006,312

EXPENDITURES Instruction services 59,456,141 - 59,456,141 Support services 33,411,582 35 33,411,617 Operation of noninstructional services 1,461,124 - 1,461,124 Capital outlays - 2,018,045 2,018,045 Debt service Principal 7,316,388 - 7,316,388 Interest 2,321,591 4,283 2,325,874 Debt issuance cost - 455,998 455,998 TOTAL EXPENDITURES 103,966,826 2,478,361 106,445,187

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 2,784,904 (2,223,779) 561,125

OTHER FINANCING SOURCES (USES) Premiums and discounts on bond issuances - 901,540 901,540 Proceeds from bonds issued - 8,500,000 8,500,000 Issuance of refunding bonds - 17,390,000 17,390,000 Payment to refunded bond escrow agent - (18,789,010) (18,789,010) Transfers in - 200,000 200,000 Transfers out (200,000) - (200,000) TOTAL OTHER FINANCING SOURCES (USES) (200,000) 8,202,530 8,002,530

NET CHANGE IN FUND BALANCES 2,584,904 5,978,751 8,563,655

FUND BALANCES AT BEGINNING OF YEAR 8,958,462 1,248,529 10,206,991

FUND BALANCES AT END OF YEAR $ 11,543,366 $ 7,227,280 $ 18,770,646

See accompanying notes to the basic financial statements.

- 20 - METHACTON SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2018

NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS $ 8,563,655

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital outlays 2,245,367 Depreciation expense (3,814,954) Revenues on the statement of activities that do not provide current financial resources are not reported as revenues in Governmental Funds. 152,088

Repayment of capital lease obligations is an expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the statement of net position. 146,387

Compensated absences do not require the use of current financial resources, and therefore, are not reported as expenditures in Governmental Funds. (340,218)

Other post-employment benefits do not require the use of current financial resources, and therefore, are not reported as expenditures in Governmental Funds. (142,871)

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the Governmental Funds. Pension expense 1,166,632

The issuance of long-term debt provides current financial resources to Governmental Funds, while the repayment of the principal of long-term debt consumes the current financial resources of Governmental Funds. Neither transaction, however, has any affect on net position. Also, Governmental Funds report the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. 114,110 Interest is reported as an expenditure when due in the Governmental Funds, but is accrued on outstanding debt on the statement of activities. 99,808

CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 8,190,004

See accompanying notes to the basic financial statements.

- 21 - METHACTON SCHOOL DISTRICT STATEMENT OF NET POSITION PROPRIETARY FUND JUNE 30, 2018

Enterprise Fund Food Service Fund

ASSETS

CURRENT ASSETS Cash and cash equivalents $ 190,374 Intergovernmental receivables 68,195 Due from other funds 3,792 Other receivables 722 Inventories 25,630 TOTAL CURRENT ASSETS 288,713

NONCURRENT ASSETS Machinery and equipment, net 62,369

TOTAL ASSETS 351,082

LIABILITIES

CURRENT LIABILITIES Accounts payable 90,640 Unearned revenue 12,483 Deposits 40,013 TOTAL CURRENT LIABILITIES 143,136

NET POSITION Net invested in capital assets 62,369 Unrestricted 145,577

TOTAL NET POSITION $ 207,946

See accompanying notes to the basic financial statements.

- 22 - METHACTON SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUND YEAR ENDED JUNE 30, 2018

Enterprise Fund Food Service Fund

OPERATING REVENUES $ 990,954

OPERATING EXPENSES Purchased professional and technical services 1,349,820 Supplies 76,780 Depreciation 7,690 TOTAL OPERATING EXPENSES 1,434,290

OPERATING LOSS (443,336)

NONOPERATING REVENUES Earnings on investments 4,061 State sources 32,656 Federal sources 456,817 TOTAL NONOPERATING REVENUES 493,534

CHANGE IN NET POSITION 50,198

NET POSITION AT BEGINNING OF YEAR 157,748

NET POSITION AT END OF YEAR $ 207,946

See accompanying notes to the basic financial statements.

- 23 - METHACTON SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDED JUNE 30, 2018

Enterprise Fund Food Service Fund

CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 990,766 Cash payments to suppliers for goods and services (1,542,456) NET CASH USED BY OPERATING ACTIVITIES (551,690)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State sources 32,300 Federal sources 451,510 NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 483,810

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of equipment (9,040)

CASH FLOWS FROM INVESTING ACTIVITIES Earnings on investments 4,061

NET DECREASE IN CASH AND CASH EQUIVALENTS (72,859)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 259,401

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 186,542

RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES Operating loss $ (443,336) Adjustments to reconcile operating loss to net cash used by operating activities Depreciation 7,690 (Increase) decrease in assets Accounts receivable (188) Due from other funds (1,179) Inventory (1,649) Increase (decrease) in liabilities Accounts payable 9,451 Due to other funds (120,398) Deposit (2,081)

NET CASH USED BY OPERATING ACTIVITIES $ (551,690)

NONCASH NONCAPITAL FINANCING ACTIVITIES Donated commodities $ 76,143

See accompanying notes to the basic financial statements.

- 24 - METHACTON SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2018

Scholarship Agency Funds Funds

ASSETS Cash and cash equivalents $ 96,857 $ 426,901 Other receivables - 60 Prepaid items - 7,527

TOTAL ASSETS $ 96,857 $ 434,488

LIABILITIES AND NET POSITION

LIABILITIES Accounts payable $ - $ 70,947 Due to student organizations - 363,541 TOTAL LIABILITIES - 434,488

NET POSITION Reserved for scholarships 96,857 -

TOTAL LIABILITIES AND NET ASSETS $ 96,857 $ 434,488

See accompanying notes to the basic financial statements.

- 25 - METHACTON SCHOOL DISTRICT STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2018

Scholarship Funds

ADDITIONS Contributions $ 9,390 Investment income 586 TOTAL ADDITIONS 9,976

DEDUCTIONS Fees paid and scholarships awarded 7,900

CHANGE IN NET POSITION 2,076

NET POSITION AT BEGINNING OF YEAR 94,781

NET POSITION AT END OF YEAR $ 96,857

See accompanying notes to the basic financial statements.

- 26 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The basic financial statements of the Methacton School District (the “District”) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the District’s accounting policies are described below.

School District

The Methacton School District is located in Fairview Village, Pennsylvania. This District’s tax base consists of the Townships of Lower Providence and Worcester.

The District is a unit established, organized and empowered by the Commonwealth of Pennsylvania for the express purpose of carrying out, on the local level, the Commonwealth’s obligation to public education, as established by the constitution of the Commonwealth and by the School Law Code of the same (Article II; Act 150, July 8, 1968).

Board of School Directors

The District is governed by a board of nine School Directors who are residents of the District and who are elected every two years, on a staggered basis, for a four-year term. The Board of School Directors has the power and duty to establish, equip, furnish and maintain a sufficient number of elementary, secondary and other schools necessary to educate every person residing in such district between the ages of 6 and 21 years who may attend.

In order to establish, enlarge, equip, furnish, operate and maintain any schools herein provided, or pay any school indebtedness which the District is required to pay, or pay any indebtedness that may at any time hereafter be created by the District, the Board of School Directors is vested with all the necessary authority and power annually to levy and collect the necessary taxes required and granted by the legislature, in addition to the annual state appropriation, and is vested with all necessary power and authority to comply with and carry out any or all of the provisions of the Public School Code of 1949.

Reporting Entity

The accompanying basic financial statements comply with the provisions of GASB Statement No. 61, The Financial Reporting Entity: Omnibus, in that the financial statements include all organizations, activities and functions for which the District is financially accountable. Financial accountability is defined as the appointment of a voting majority of a component unit’s board and either (1) the District’s ability to impose its will over a component unit or (2) the possibility that the component unit will provide a financial benefit or impose a financial burden on the District. In addition, component units can be organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the District’s financial statements to be misleading. This report presents the activities of the Methacton School District. The District is not a component unit of another reporting entity nor does it have any component units.

- 27 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The tax collectors are elected officers who collect taxes on behalf of the county, townships, boroughs and the District. The District regards the tax collectors’ offices as separate entities and, therefore, does not account for their activity in the financial statements.

Joint Ventures

The District is a participating member of the North Montco Area Vocational-Technical School (NMAVTS). The NMAVTS is run by a joint committee consisting of members from each participating district. No participating district appoints a majority of the joint committee. The board of directors of each participating district must approve the NMAVTS’s annual operating budget. Each participating district pays a pro-rata share of the NMAVTS’s operating costs based on the number of students attending the NMAVTS for each District. The District’s share of the NMAVTS’s operating costs for 2017-2018 was $1,322,588.

On dissolution of the North Montco Area Vocational Technical School, the net position of NMAVTS will be shared on a pro-rata basis of each participating district’s current market value of taxable real property as certified by the Pennsylvania State Tax Equalization Board. However, the district does not have an equity interest in NMAVTS as defined by GASB Statement No. 14, as amended by GASB No. 61, except a residual interest in net position upon dissolution that should not be reflected in the financial statements. Complete financial statements for the NMAVTS can be obtained from the NMAVTS’s administrative office.

Jointly Governed Organizations

The District is a participating member of the Montgomery County Intermediate Unit (MCIU). The MCIU is run by a joint committee consisting of members from each participating district. No participating district appoints a majority of the joint committee.

The board of directors of each participating district must approve MCIU’s annual operating budget. The MCIU is a self-sustaining organization that provides services from fees to participating districts. As such, the District has no on-going financial interest or responsibility in the MCIU. The MCIU contracts with participating districts to supply special education services, computer services, and as a conduit for certain federal programs.

Basis of Presentation and Accounting

Government-Wide Financial Statements - The statement of net position and the statement of activities display information about the District 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 District that are governmental and those that are considered business-type activities.

- 28 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the Proprietary Fund financial statements but differs from the manner in which Governmental Funds financial statements are prepared. Governmental Funds financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for Governmental Funds. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

The government-wide statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the District and for each function or program of the District’s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and 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 and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues, which are not classified as program revenues, are presented as general revenues of the District, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each business segment or governmental function is self-financing or draws from the general revenues of the District.

As a general rule, the effect of interfund activity has been eliminated from the government- wide financial statements.

Fund Financial Statements - Fund financial statements report detailed information about the District. The focus of Governmental and Proprietary Funds financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column (Other Govern- mental Funds). Fiduciary Funds are reported by fund type.

- 29 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All Governmental Funds are accounted for using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, and claims and judgments are recorded only when payment is due. 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 (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources.

The Proprietary Funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of the funds are included on the statement of net position. The statement of revenues, expenses and changes in net position presents increases (i.e., revenues) and decreases (i.e., expenses) in net position. The statement of cash flows provides information about how the District finances and meets the cash flow needs of its proprietary activities.

The Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the Proprietary Funds’ principal ongoing operations. The principal operating revenues of the District’s Enterprise Fund are food service charges. Operating expenses of the Enterprise Fund include cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

Fiduciary Funds are reported using the economic resources measurement focus.

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed.

Fund Accounting

The District uses funds to maintain its financial records during the fiscal year. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain District functions or activities. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. The various funds of the District are grouped into the categories governmental, proprietary and fiduciary.

- 30 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Governmental Funds

General Fund - The General Fund is used to account for all financial resources except those required to be accounted for in another fund. The General Fund balance is available for any purpose provided it is expended or transferred according to the general laws of Pennsylvania.

Capital Project Funds - These funds are used to account for the proceeds of specific revenue sources that are legally or administratively restricted to expenditures for specified purposes.

Proprietary Funds

Enterprise Fund - The Enterprise Fund (Food Service Fund) is used to account for operations (1) that are financed and operated in a manner similar to private business enterprises--where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or (2) where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.

Fiduciary Funds

Trust and Agency Funds - Trust and Agency Funds are used to account for assets held by the District in a trustee capacity or as an agent for individuals. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.

Trust Funds are used to account for the resources of the various scholarships whose sole purpose is to provide annual scholarships to particular students as prescribed by donor stipulations.

Agency Funds account for the assets held as an agent for the various student activities and retirees escrow.

Cash and Cash Equivalents

The District’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition and no restrictions on withdrawal.

- 31 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investments

Statutes authorize the School District to invest in: 1) obligations, participations and other instruments of any Federal agency, 2) repurchase agreements with respect to U.S. Treasury bills or obligations, 3) negotiable certificates of deposit, 4) bankers’ acceptances, 5) commercial paper, 6) shares of an investment company registered under the Investment Company Act of 1940 whose shares are registered under the Securities Act of 1933, and 7) savings or demand deposits. The specific conditions under which the District may invest in these categories are detailed in Pennsylvania Act No. 53 of 1973, as amended by Pennsylvania Act No. 10 of 2016. Investments are stated at fair value.

Pennsylvania Local Government Investment Trust (“PLGIT”) Funds are invested in accordance with Section 440.1 of the School Code. Each school district owns a pro rata share of each investment or deposit which is held in the name of the fund.

The School District has adopted GASB Statements No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, No. 72, Fair Value Measurement and Application and No. 79 Certain External Investment Pools and Pool Participants. In accordance with these Statements, investments in marketable securities with readily determinable fair value and all investments in debt securities are reported at their fair values. Investments in qualifying external investment pools are reported at amortized cost basis.

Fair Value Measurement

The School District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are those that lack significant observable inputs.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 2 inputs. If a price for an identical asset or liability is not observable, a government should measure fair value using another valuation techniques that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset or a liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.

Short-Term Interfund Receivables/Payables

During the course of operations, transactions may occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due from other funds” or “due to other funds” on the Governmental Funds balance sheet. Short-term interfund loans are classified as “interfund receivables/payables.” These amounts are eliminated in the statement of net position, except for amounts due between governmental and business-type activities, which, when present, are shown as internal balances.

- 32 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventories and Prepaid Items

Inventory of food and milk in the Food Service Fund consists of supplies purchased and donated foods received from the federal government. Donated foods are valued at their fair market value in accordance with the Manual of Accounting for Pennsylvania School Systems - Food Service Fund. Food and supplies are carried at cost using the first-in, first- out method. Inventories of Governmental Funds are recorded as expenditures when consumed rather than when purchased. Inventories on government-wide financial statements are presented at the lower of cost or market on a first-in, first-out method and are expensed when used.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements.

Capital Assets

Capital assets, which include land, site improvements, buildings, building improvements, machinery and equipment, and vehicles are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The District defines capital assets as assets with an estimated useful life in excess of one year and an initial, individual cost equal to or greater than $5,000. Management has elected to include certain homogeneous asset categories with individual assets that cost more than $2,500, $10,000 in the aggregate, as composite groups for financial reporting purposes. Depreciation has been calculated on each class of depreciable property using the straight- line method.

Estimated useful lives are as followings: Years

Site improvements 5-45 Buildings and building improvements 10-45 Machinery and equipment 5-45 Vehicles 6-10

Compensated Absences

Sick Leave Under the District’s various bargaining agreements and plans, professional and eligible support personnel accumulate unused sick days from year to year based on their classification. These accumulated sick days are non-vesting during the employee’s tenure. Upon retirement, these employees are eligible for remuneration of unused sick days for the following bargaining units:

 Methacton Education Association - $75 per day up to a maximum 160 days.  Methacton Educational Support Personnel Association - $50 per day up to a maximum 115 days.  Teamsters Local 384 - $45 per day up to a maximum of 120 days.  Methacton Administrators agreement $95 per day up to a maximum of 185 days.

- 33 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

To be eligible for this benefit, the employee must be eligible to receive superannuation, early retirement or disability pension from the Public School Employees Retirement System (PSERS), and the employee must have at least ten (10) years of service in the Methacton School District, including previous subdivisions. The employee must be retiring from a full- time position and complete full-time service.

The District maintains records of each employee’s accumulated sick days that are vested with employees who are eligible to retire and those under the administrators plan.

Vacation Leave The District maintains records of each employee’s accumulated vacation days, and has valued the accumulated vacation days earned at June 30, 2018.

Unavailable and unearned Revenues

General Fund unavailable revenues represent primarily delinquent taxes not collected within 30 days subsequent to the District’s year end and grants received but not expended by year end. It is expected that these receivables will be collected and included in revenues of future fiscal years.

Food Service Fund unearned revenues represent food received in its food service operation that is on hand at June 30, 2018. Such revenues will be recognized when the food commodities are used.

Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities or business-type activities columns of the statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount.

In the fund financial statements, Governmental Funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources and payment of principal and interest reported as expenditures. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures.

Interfund Assets/Liabilities

On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as “interfund receivables/payables”. Interfund balances within governmental activities and within business-type activities are eliminated on the government-wide statement of net position.

- 34 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Net Position

Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources. The net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any borrowing used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments.

Deferred Outflows/Inflows of Resources

The District previously implemented GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities.

In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District’s deferred outflows on the statement on net position consist of deferred charges on debt refundings, net of accumulated amortization and the deferred outflows related to pension and OPEB activity. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition prices. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The deferred outflows related to pension and OPEB activity are reported in the statement of net position and are deferred and recognized as an outflow of resources in the period to which the expense applies.

In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has two items, which arise only under a modified accrual basis of accounting that qualify for reporting in this category. The first item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes. The second item, deferred inflows related to pension and OPEB activity, are reported in the government-wide statement of net position. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.

- 35 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Net Position Flow Assumption

Sometimes the District will fund outlays for a particular purpose for both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and Proprietary Fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the District’s policy to consider restricted net position to have been depleted before unrestricted net position is applied.

Fund Balance and GASB Statement No. 54

The District previously implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on the District’s fund balances more transparent.

The following classifications describe the relative strength of the spending constraints:

• Nonspendable - Amounts that cannot be spent either because they are not in spendable form or because of legal or contractual constraints. Fund balance types of this category are prepaid expenses.

• Restricted – This classification reflects the constraints imposed on resources either (a) externally by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation.

• Committed - Amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision-making authority and do not lapse at year-end. Those committed amounts cannot be used for any other purpose unless the school board removes the specified use by taking the same type of action imposing the commitment.

• Assigned - Amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balance may be assigned by the Business Manager. Fund balance of this type includes all remaining amounts (except negative balances) that are reported in governmental funds, other than the General Fund, that are not classified as nonspendable and are neither restricted nor committed.

• Unassigned – This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds.

The restricted fund balance shall be reduced to the extent that the underlying reason for the restriction has been eliminated. Then committed, assigned and unassigned in that order as needed. - 36 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

NOTE B - CASH AND INVESTMENTS

Cash

Custodial Credit Risk - Custodial credit risk is the risk that, in the event of a bank failure, the School District’s deposits may not be returned to it. Deposits are insured under Act 72 of the 1971 Session of the Pennsylvania General Assembly whereby financial institutions were granted the authority to secure deposits of public bodies by pledging a pool of assets, as defined in the Act, to cover all public funds deposited in excess of FDIC limits. The School District does not have a deposit policy for custodial credit risk. The carrying value of the District’s cash accounts at June 30, 2018, was $22,620,422.

As of June 30, 2018, $23,122,535 of the School District’s bank balance of $23,636,423 was exposed to custodial credit risk as follows:

Uninsured and collateralized with securities held by pledging bank's trust department not in the School District's name $ 21,503,786 Uninsured and uncollateralized with State investment 1,618,749

$ 23,122,535

Interest Rate Risk - The District’s investment policy limits investment maturities in accordance with the Commonwealth of Pennsylvania School Code as a means of managing its exposure to fair value losses arising from increasing interest rates.

Investments

As of June 30, 2018, the School District had the following investments and maturities:

Investment Maturities Amortized Less than One to Five Investment Type Cost Fair Value One Year Years

State investment pools $ 5,556,576 $ - $ 5,556,576 $ - Certificates of deposit 1,204,379 - 1,204,379 -

$ 6,760,955 $ - $ 6,760,955 $ -

- 37 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE B - CASH AND INVESTMENTS (Continued)

A portion of the School District’s investments is in the PSDLAF and PLGIT programs, of which are funds similar to mutual funds. GASB Statement No. 3, Paragraph 69, provides that certain types of cash and investments, such as cash investments in a State Treasurer’s investment pool or mutual fund, cannot be assigned a credit risk category because the government does not own specific securities. Therefore, the PSDLAF and PLGIT investments included in these statements will not be assigned a credit risk category. The carrying amount of these investments at June 30, 2018, is $6,760,955. These assets maintain a stable net asset value of $1 per share. PSDLAF is not SEC-registered. All investments are monitored weekly by Standard & Poor’s and are subject to an independent audit on an annual basis.

Investments held with qualifying external state investment pools are valued at amortized cost in accordance with GASB Statement No. 79.

Certificates of deposit held by banks of $1,204,379 are stated at cost plus interest earned.

Credit Risk - State law permits the School District to invest funds in the following types of investments:

Obligations of (1) the United States of America or any of its agencies or instrumentalities backed by the full faith and credit of the United States of America, (2) the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the Commonwealth, or (3) any political subdivision of the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the political subdivision.

The School District’s investment policy does not further limit its investment choices. As of June 30, 2018, the School District’s investment in the state investment pools was rated AAAm by Standard & Poor’s.

Concentration of Credit Risk - The following investments represent greater than 5% of the School District’s total investments:

Full Flex Pool (PSDLAF) $ 5,200,000

NOTE C - TAXES - REAL ESTATE AND OTHER

The School Board is authorized by state law to levy property taxes for District operations, capital improvements and debt service. Property taxes are based on assessed valuations of all taxable real property within the District. Taxable real property was assessed at $2,590,988,554. The tax rate for the year was $29.4585 mills ($ .0294585 per $1 of assessed valuation). Assessed valuation of property is established by the Board of Assessments, and the elected or appointed tax collectors are responsible for collection.

- 38 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE C - TAXES - REAL ESTATE AND OTHER (Continued)

Taxes are levied on July 1 and payable in the following periods:

Discount period ...... July 1 to August 31 - 2% of gross levy Face period ...... September 1 to October 31 Penalty period ...... November 1 to collection - 10% of gross levy Lien date ...... January 1

For government-wide financial statements, the school district, in accordance with GAAP, recognized the delinquent and unpaid taxes receivable reduced by an allowance for uncollectible taxes in the amount of $149,969 as determined by the administration. A portion of the amount estimated to be collectible, which was measurable and available within 30 days, was recognized as revenue and the balance deferred in the fund financial statements.

NOTE D - INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS

The composition of interfund balances as of June 30, 2018, is as follows:

Due to/from Other Funds

Interfund Interfund Receivables Payables

General Fund $ 375,087 $ 3,792 Capital Project Fund - 375,087 Proprietary, Food Service 3,792 -

$ 378,879 $ 378,879

These balances resulted from the time lag between the dates that 1) interfund goods and services were provided or reimbursable expenditures occur, 2) transactions are recorded in the accounting system, and 3) payments between funds are made. All amounts are expected to be repaid within one year.

Interfund Transfers

Transfer to Transfer from Other Funds Other Funds

General Fund $ 200,000 $ - Capital Project Funds - 200,000

$ 200,000 $ 200,000

Transfers are used to 1) move revenues from the fund that statute or budget requires to collect them to the fund that statue or budget requires to expend them, 2) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

- 39 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE E - CAPITAL ASSETS

A summary of changes in capital assets is as follows:

Balance Balance July 1, 2017 Additions Deletions June 30, 2018 GOV ERNMENTA L A CTIV ITIES Capital assets not being depreciated Land $ 1,564,425 $ - $ - $ 1,564, 425 Construction in progress 99,609 1,711,367 - 1,810,976 TOTAL CAPITAL ASSETS NOT BEING DEPRECIA TED 1,664,034 1,711,367 - 3,375,401 Capital assets being depreciated Site improvements 9,025,165 - - 9,025,165 Buildings and building improvements 145,460,202 83,306 - 145,543,508 Machinery and equipment 17,195,671 450,694 (34,300) 17,612, 065 TOTAL CAPITAL ASSETS BEING DEPRECIA TED 171,681,038 534,000 (34,300) 172,180,738 Accumulated depreciation Site improvements (1,891,913) (434,318) - (2,326, 231) Buildings and building improvements (50,942,059) (2,923,380) - (53,865,439) Machinery and equipment (14,080,754) (457,256) 34,300 (14,503,710) TOTA L A CCUMULA TED DEPRECIA TION (66,914,726) (3,814,954) 34,300 (70,695,380) TOTAL CAPITAL ASSETS BEING DEPRECIA TED, net 104,766,312 (3,280,954) - 101,485,358 GOV ERNMENTA L A CTIV ITIES CAPITAL ASSETS, net 106,430,346 (1,569,587) - 104,860,759

BUSINESS-TYPE ACTIVITIES Capital assets being depreciated Machinery and equipment 72,385 9,040 - 81,425 Accumulated depreciation (11,366) (7,690) - (19,056) BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS, net 61,019 1,350 - 62,369

CAPITAL ASSETS, net $ 106,491,365 $ (1,568,237) $ - $ 104,923,128

- 40 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE E - CAPITAL ASSETS (Continued)

Depreciation expense was charged to governmental functions as follows:

INSTRUCTION Regular programs $ 1,774,868 Special programs 661,187 Vocational programs 110,337 Other programs 12,265 Adult education programs 6,527

SUPPORT SERVICES Pupil personnel services 186,764 Instructional staff services 105,357 Pupil health services 67,861 Administrative services 274,851 Business services 44,297 Central services 72,364 Operation and maintenance of plant services 419,001 Pupil transportation 2,621 Other support services 3,072

OPERATION OF NON-INSTRUCTIONAL SERVICES Student activities 73,582

TOTAL GOVERNMENTAL ACTIVITIES DEPRECIATION EXPENSE $ 3,814,954

- 41 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE F - LONG-TERM LIABILITIES

The following is a summary of governmental long-term liabilities activity of the District for the year ending June 30, 2018:

Beginning Ending Due Within Balance Additions Reductions Balance One Year

GOVERNMENTAL ACTIVITIES General obligation notes Series A of 2011 $ 1,500,000 $ - $ (1,500,000) $ - $ - Series of 2013 5,465,000 - (5,465,000) - - Series A of 2013 2,520,000 - (5,000) 2,515,000 5,000 Series of 2015 5,485,000 - (5,485,000) - - General obligation bonds Series of 2011 7,235,000 - (7,235,000) - - Series of 2012 5,320,000 - (2,685,000) 2,635,000 2,635,000 Series A of 2012 5,465,000 - (845,000) 4,620,000 680,000 Series AA of 2012 3,930,000 - (1,915,000) 2,015,000 2,015,000 Series of 2013 4,210,000 - (5,000) 4,205,000 5,000 Series A of 2015 2,460,000 - (475,000) 1,985,000 715,000 Series B of 2015 1,750,000 - (215,000) 1,535,000 230,000 Series of 2016 27,945,000 - (50,000) 27,895,000 50,000 Series A of 2017 - 6,075,000 - 6,075,000 855,000 Series B of 2017 - 8,500,000 - 8,500,000 40,000 Series of 2018 - 5,915,000 - 5,915,000 5,000 Series A of 2018 - 5,400,000 - 5,400,000 - 73,285,000 25,890,000 (25,880,000) 73,295,000 7,235,000

Capital lease obligations 2,164,675 - (146,387) 2,018,288 154,503 Net pension liability 163,984,000 - (4,657,000) 159,327,000 Net PSERS OPEB liability 7,128,000 - (555,000) 6,573,000 Net other OPEB liability 5,429,365 17,581,739 (5,429,365) 17,581,739 Compensated absences 2,443,817 358,124 - 2,801,941 140,097

TOTAL LONG-TERM LIABILITIES $ 254,434,857 $ 43,829,863 $ (36,667,752) $ 261,596,968 $ 7,529,600

Interest expense for Bonds and Notes for the year ended June 30, 2018 was $2,272,025.

- 42 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE F - LONG-TERM LIABILITIES (Continued)

Bonds and Notes payable at June 30, 2018 consisted of:

On June 4, 2012 the District issued General Obligation Bond Series of 2012. The purpose of this issues is to currently refund the part of the outstanding principal of the General Obligation Bonds Series 2007 A and 2008AA. The Bond has an original principal amount of $9,995,000, matures on September 15, 2018, and bears interest from .5% to 4%. Interest is paid semi-annually on March 15 and September 15. $ 2,635,000

On December 3, 2012, the District issued General Obligation Bond Series of 2012A. The purpose of this issue is to currently refund the remaining outstanding principal of the General Obligation Bonds Series 2007A and 2008A and part of the General Obligation Bonds Series 2008AA. The Bond has an original principal amount of $8,770,000, matures on September 15, 2023, and bears interest from .35% to 2.06%. Interest is paid semi-annually on March 15 and September 15. 4,620,000

On December 19, 2012, the District issued General Obligation Bond Series of 2012AA. The purpose of this issue is to currently refund the remaining outstanding principal of the General Obligation bonds Series 2008AA and part of the General Obligation Bonds Series 2008. The Bond has an original principal amount of $7,245,000, matures on December 15, 2018, and bear interest from .5% to 2.0%. Interest is paid semi-annually on June 15 and December 15. 2,015,000

On June 27, 2013, The District issued General Obligation Bond Series of 2013. The purpose of this issue is to advance currently refund part of the outstanding principal of the General Obligation Notes Series 1997, 1997C and 2003. The Bond has an original principal amount of $4,225,000, matures on September 15, 2025, and bears interest from .45% to 2.45%. Interest is paid semi-annually on March 15 and September 15. 4,205,000

On June 27, 2013, The District issued General Obligation Note Series of 2013A. The purpose of this issue is to advance refund part of the outstanding principal of the General Obligation Bonds Series 2010. The Note has an original principal amount of $2,535,000, matures on September 15, 2025, and bears interest from .45% to 3.125%. Interest is paid semi-annually on March 15 and September 15. 2,515,000

SUBTOTAL FORWARD $ 15,990,000

- 43 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE F - LONG-TERM LIABILITIES (Continued)

SUBTOTAL FORWARDED $ 15,990,000

On May 1, 2015, The District issued General Obligation Bond Series of 2015A. The purpose of this issue is to currently refund the outstanding principal of the General Obligation Bonds Series 2009A. The Bond has an original principal amount of $3,285,000, matures on September 1, 2020, and bears interest from .35% to 4.00%. Interest is paid semi-annually on March 1 and September 1. 1,985,000

On May 1, 2015, The District issued General Obligation Bond Series of 2015B. The purpose of this issue is to currently refund the outstanding principal of the General Obligation Bonds Series 2010. The Bond has an original principal amount of $2,245,000, matures on September 1, 2021, and bears interest from .35% to 4.00%. Interest is paid semi-annually on March 1 and September 1. 1,535,000

On March 30, 2016, The District issued General Obligation Bond Series of 2016. The purpose of this issue is to advance refund the outstanding principal of the General Obligation Bonds Series 2009. The Bond has an original principal amount of $28,080,000, matures on March 1, 2025, and bears interest from .70% to 5.00%. Interest is paid semi-annually on March 1 and September 1. 27,895,000

On October 31, 2017, The District issued General Obligation Bond Series of 2017A. The purpose of this issue is to currently refund the outstanding principal of the General Obligation Bonds Series 2011. The Bond has an original principal amount of $6,075,000, matures on September 15, 2023, and bears interest from 1.0% to 4.00%. Interest is paid semi-annually on March 15 and September 15. 6,075,000

On December 5, 2017, The District issued General Obligation Bond Series of 2017B. The purpose of this issue is to provide funds for the acquisition, construction and improvement of facilities. The Bond has an original principal amount of $8,500,000, matures on September 15, 2034, and bears interest from 1.35% to 3.00%. Interest is paid semi-annually on March 15 and September 15. 8,500,000

SUBTOTAL FORWARD $ 61,980,000

TE H - CHANGES IN LONG-TERM LI

- 44 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE F - LONG-TERM LIABILITIES (Continued)

SUBTOTAL FORWARDED $ 61,980,000

On May 10, 2018, The District issued General Obligation Bond Series of 2018. The purpose of this issue is to currently refund the outstanding principal of the General Obligation Bonds Series 2011A and General Obligation Notes Series 2015. The Bond has an original principal amount of $5,915,000, matures on September 15, 2027, and bears interest from 1.850% to 4.00%. Interest is paid semi-annually on March 15 and September 15. 5,915,000

On May 10, 2018, The District issued General Obligation Bond Series of 2018A. The purpose of this issue is to currently refund the outstanding principal of the General Obligation Notes Series 2013. The Bond has an original principal amount of $5,400,000, matures on September 15, 2025, and bears interest from 2.20% to 4.00%. Interest is paid semi-annually on March 15 and September 15. 5,400,000

$ 73,295,000

Principal and interest payments for Bonds and Notes for the succeeding fiscal years are as follows:

Year Ending June 30, Principal Interest Total

2019 $ 7,235,000 $ 2,287,557 $ 9,522,557 2020 7,630,000 2,167,058 9,797,058 2021 7,925,000 1,915,746 9,840,746 2022 8,170,000 1,656,433 9,826,433 2023 8,425,000 1,230,338 9,655,338 2024-2028 27,430,000 2,556,263 29,986,263 2029-2033 5,215,000 586,650 5,801,650 2034-2035 1,265,000 22,125 1,287,125

$ 73,295,000 $ 12,422,170 $ 85,717,170

- 45 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE G - CAPITAL LEASES

Methacton School District has the following capital lease obligations.

On July 2, 2013, the District entered into a lease-purchase agreement with TD Equipment Finance for the purchase of transportation and other equipment. The present value of the lease payments was originally $723,555. The lease provides for seven annual payments of $107,991. The implicit interest rate is 1.46%. The District sold the transportation equipment and paid the transportation portion of the lease during the year ending June 30, 2015. The revised payments are $37,321 per year.

On January 5, 2016 the District entered into a lease-purchase agreement with TD Equipment Finance for the purchase of a vehicle. The present value of the lease payments is $33,442. The lease provides for forty eight monthly payments of $738. The implicit interest rate is 3.00%.

On August 12, 2015 The District entered into a lease-purchase agreement with Bank of America for the energy performance contract. The present value of the lease payments is $2,428,935. The lease provides for seventeen annual payments ranging from $136,026 to $341,446. The implicit interest rate is 2.49%.

On August 2, 2016 the District entered into a lease-purchase agreement with Conn & Selmar for the music equipment. The present value of the lease payments is $16,712. The lease provides for four annual payments of $4,883. The implicit interest rate is 11.50%.

The assets acquired through capital lease are as follows:

Machinery and equipment $ 2,729,139 Accumulated depreciation (464,363)

$ 2,264,776

The equipment acquired under capital leases is included in machinery and equipment in Note E.

Principal and interest payments for the succeeding fiscal years are as follows:

Year Ending June 30, Principal Interest Total

2019 $ 154,503 $ 50,209 $ 204,712 2020 160,024 46,345 206,369 2021 120,582 42,424 163,006 2022 124,158 39,421 163,579 2023 127,947 36,330 164,277 2024-2028 703,899 131,790 835,689 2029-2032 627,175 37,951 665,126

$ 2,018,288 $ 384,470 $ 2,402,758

Interest expense for the capital leases for the year ended June 30, 2018, was $53,849.

- 46 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE H - PENSION PLAN

Summary of Significant Accounting Policies

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

General Information About the Pension Plan

Plan Description - PSERS is a governmental cost-sharing multi-employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in the System include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtained at www.psers.state.pa.us.

Benefits Provided - PSERS provides retirement, disability and death benefits. Members are eligible for monthly retirement benefits upon reaching (a) age 62 with at least one year of credited service; (b) age 60 with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of 2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions for individuals who become new members on or after July 1, 2011. Act 120 created two membership classes, Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum three years of service or attain a total combination of age and service that is equal to or greater than 92 with a minimum of 35 years of service. Benefits are generally equal to 2% or 2.5%, depending on membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service. For members whose membership started prior to July 1, 2011, after completion of five years of service, a member’s right to the defined benefits is vested and early retirement benefits may be elected. For Class T-E and Class T-F members, the right to benefits is vested after ten years of service.

Participants are eligible for disability retirement benefits after completion of five years of credited service. Such benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits.

Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T-E and Class T-F members) or who has at least five years of credited service (ten years for Class T-E and Class T-F members). Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death.

- 47 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE H - PENSION PLAN (Continued)

Contributions

Members Contributions

• Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.50% (Membership Class T-D) 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 T-C) or at 7.50% (Membership Class T-D) 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 T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with services 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 7.5% (base rate) of the member’s qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.3% (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 7.5% and 9.5% and the Membership Class T-F contribution rate to fluctuate between 10.3% and 12.3%.

Employer Contributions

The School District’s contractually required contribution rate for the fiscal year ended June 30, 2017, was 29.20% of covered payroll, actuarially determined as an amount that, when combined with employee contributions is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the plan from the School District were $13,539,000 for the year ended June 30, 2017.

Pension Liabilities, Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2018, the School District reported a liability of $159,327,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by rolling forward the System’s total pension liability as of June 30, 2016 to June 30, 2017. The School District’s proportion of the net pension liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2018, the School District’s proportion was 0.3226%, which was a decrease of 0.0083% from its proportion measured as of June 30, 2017.

- 48 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE H - PENSION PLAN (Continued)

For the year ended June 30, 2018, the School District recognized pension expense of $12,214,410. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

GOVERNMENTAL ACTIVITIES Difference between expected and actual experience $ 1,662,000 $ 963,000 Changes in assumptions 4,328,000 - Net difference between projected and actual investment earnings 3,692,000 - Changes in proportions 1,509,000 8,156,000 Difference between employer contributions and proportionate share of total contributions 1,104,005 - Contributions subsequent to the measurement date 13,381,000 -

$ 25,676,005 $ 9,119,000

$13,381,000 reported as deferred outflows of resources related to pensions resulting from School District contributions subsequent to the measurement date will be recognized as a reduction of the new pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending Governmental June 30, Activities

2019 $ 1,778,937 2020 1,778,937 2021 1,778,937 2022 (2,160,805)

$ 3,176,005

- 49 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE H - PENSION PLAN (Continued)

Actuarial Assumptions - The total pension liability as of June 30, 2017, was determined by rolling forward the System’s total pension liability as of the June 30, 2016 actuarial valuation to June 30, 2017, using the following actuarial assumptions, applied to all periods included in the measurement:

• Actuarial cost method – Entry Age Normal – Level % of pay.

• Investment return – 7.25%, includes inflation at 2.75%

• Salary growth – Effective average of 5.00%, comprised of inflation of 2.75% and 2.25% for real wage growth and for merit or seniority increases.

• Mortality rates were based on the RP-2014 Mortality Tables for Males and Females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale.

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

The plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension.

- 50 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE H - PENSION PLAN (Continued)

Long-Term Expected Target Real Rate Asset Class Allocation of Return

Global public equity 20.00% 5.10% Fixed income 36.00% 2.60% Commodities 8.00% 3.00% Absolute return 10.00% 3.40% Risk parity 10.00% 3.80% Infrastructure/MLPs 8.00% 4.80% Real estate 10.00% 3.60% Alternative investments 15.00% 6.20% Cash 3.00% 0.60% Financing (LIBOR) -20.00% 1.10%

100.00%

The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2017.

Discount Rate - The discount rate used to measure the total pension liability was 7.25%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the School District’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the net pension liability, calculated using the discount rate of 7.25%, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.25%) or one percentage point higher (8.25%) than the current rate: Current 1% Discount 1% Decrease Rate Increase 6.25% 7.25% 8.25%

School District's proportionate share of the net pension liability $ 196,118,000 $ 159,327,000 $ 128,265,000

Pension Plan Fiduciary Net Position - Detailed information about PSERS’s fiduciary net position is available in the PSERS Comprehensive Annual Financial Report which can be found on the System’s website at www.psers.state.pa.us.

- 51 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE I - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)-PSERS

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Public School Employees’ Retirement System (PSERS) and additions to/deductions from PSERS’s fiduciary net position have been determined on the same basis as they are reported by PSERS. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

General Information about the Health Insurance Premium Assistance Program

Health Insurance Premium Assistance Program

The System provides Premium Assistance which, is a governmental cost sharing, multiple- employer other postemployment benefit plan (OPEB) for all eligible retirees who qualify and elect to participate. Employer contribution rates for Premium Assistance are established to provide reserves in the Health Insurance Account that are sufficient for the payment of Premium Assistance benefits for each succeeding year. Effective January 1, 2002 under the provisions of Act 9 of 2001, participating eligible retirees are entitled to receive premium assistance payments equal to the lesser of $100 per month or their out-of-pocket monthly health insurance premium. To receive premium assistance, eligible retirees must obtain their health insurance through either their school employer or the PSERS’ Health Options Program. As of June 30, 2017 there were no assumed future benefit increases to participating eligible retirees.

Premium Assistance Eligibility Criteria

Retirees of the System can participate in the Premium Assistance program if they satisfy the following criteria:

• Have 24 ½ or more years of service, or • Are a disability retiree, or • Have 15 or more years of service and retired after reaching superannuation age, and • Participate in the HOP or employer-sponsored health insurance program.

Pension Plan Description

PSERS is a governmental cost-sharing multiple-employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in the System include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year, and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtained at www.psers.pa.gov.

- 52 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE I - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)-PSERS (Continued)

Benefits Provided

Participating eligible retirees are entitled to receive premium assistance payments equal to the lesser of $100 per month or their out-of-pocket monthly health insurance premium. To receive premium assistance, eligible retirees must obtain their health insurance through either their school employer or the PSERS’ Health Options Program. As of June 30, 2017 there were no assumed future benefit increases to participating eligible retirees.

Contributions

The Districts’ contractually required contribution rate for the fiscal year ended June 30, 2017 was 0.83% of covered payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the OPEB plan from the District were $356,460 for the year ended June 30, 2017.

OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

At June 30, 2018, the District reported a liability of $6,573,000 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017, and the total OPEB liability used to calculate the net OPEB liability was determined by rolling forward the System’s total OPEB liability as of June 30, 2016 to June 30, 2017. The District’s proportion of the net OPEB liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2018, the District’s proportion was 0.2263% percent, which was a decrease of 0.0060% from its proportion measured as of June 30, 2017.

For the year ended June 30, 2018, the District recognized OPEB expense of (69,000). At June 30, 2018, the District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources

GOVERNMENTAL ACTIVITIES Changes in assumptions $ - $ 306,000 Net difference between projected and actual investment earnings 7,000 - Changes in proportions - 153,000 Difference between employer contributions and proportionate share of total contributions - 450 Contributions subsequent to the measurement date 351,615 -

$ 358,615 $ 459,450

- 53 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE I - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)-PSERS (Continued)

$351,615 reported as deferred outflows of resources related to OPEB resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ending Governmental June 30, Activities

2019 $ (74,840) 2020 (74,840) 2021 (74,840) 2022 (74,840) 2023 (76,590) Thereafter (76,500)

$ (452,450)

Actuarial Assumptions

The Total OPEB Liability as of June 30, 2017, was determined by rolling forward the System’s Total OPEB Liability as of June 30, 2016 to June 30, 2017 using the following actuarial assumptions, applied to all periods included in the measurement:

• Actuarial cost method - Entry Age Normal - level % of pay. • Investment return - 3.13% - S&P 20 Year Municipal Bond Rate. • Salary growth - Effective average of 5.00%, comprised of inflation of 2.75% and 2.25% for real wage growth and for merit or seniority increases. • Premium Assistance reimbursement is capped at $1,200 per year. • Assumed Healthcare cost trends were applied to retirees with less than $1,200 in premium assistance per year. • Mortality rates were based on the RP-2014 Mortality Tables for Males and Females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale. • Participation rate. • Eligible retirees will elect to participate Pre age 65 at 50%. • Eligible retirees will elect to participate Post age 65 at 70%.

- 54 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE I - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)-PSERS (Continued)

The following assumptions were used to determine the contribution rate:

• The results of the actuarial valuation as of June 30, 2015 determined the employer contribution rate for fiscal year 2017. • Cost Method: Amount necessary to assure solvency of Premium Assistance through the third fiscal year after the valuation date. • Asset valuation method: Market Value. • Participation rate: 63% of eligible retirees are assumed to elect premium assistance. • Mortality rates and retirement ages were based on the RP-2000 Combined Healthy Annuitant Tables with age set back 3 for both males and females for healthy annuitants and for dependent beneficiaries. For disabled annuitants, the RP-2000 Combined Disabled Tables with age set back 7 years for males and 3 years for females for disabled annuitants. (A unisex table based on the RP-2000 Combined Healthy Annuitant Tables with age set back 3 years for both genders assuming the population consists of 25% males and 75% females is used to determine actuarial equivalent benefits.)

Investments consist primarily of short term assets designed to protect the principal of the plan assets. The expected rate of return on OPEB plan investments was determined using the OPEB asset allocation policy and best estimates of geometric real rates of return for each asset class.

The OPEB plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Under the program, as defined in the retirement code employer contribution rates for Premium Assistance are established to provide reserves in the Health Insurance Account that are sufficient for the payment of Premium Assistance benefits for each succeeding year.

Long-Term Expected Target Real Rate Asset Class Allocation of Return

Cash 76.4% 0.6% Fixed income 23.6% 1.5%

100.0%

The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2017.

- 55 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE I - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)-PSERS (Continued)

Discount Rate

The discount rate used to measure the Total OPEB Liability was 3.13%. Under the plan’s funding policy, contributions are structured for short term funding of Premium Assistance. The funding policy sets contribution rates necessary to assure solvency of Premium Assistance through the third fiscal year after the actuarial valuation date. The Premium Assistance account is funded to establish reserves that are sufficient for the payment of Premium Assistance benefits for each succeeding year. Due to the short term funding policy, the OPEB plan’s fiduciary net position was not projected to be sufficient to meet projected future benefit payments, therefore the plan is considered a “pay-as-you-go” plan. A discount rate of 3.13% which represents the S&P 20 year Municipal Bond Rate at June 30, 2017, was applied to all projected benefit payments to measure the total OPEB liability.

Sensitivity of the System Net OPEB Liability to Change in Healthcare Cost Trend Rates

Healthcare cost trends were applied to retirees receiving less than $1,200 in annual Premium Assistance. As of June 30, 2017, retirees Premium Assistance benefits are not subject to future healthcare cost increases. The annual Premium Assistance reimbursement for qualifying retirees is capped at a maximum of $1,200. As of June 30, 2016, 91,797 retirees were receiving the maximum amount allowed of $1,200 per year. As of June 30, 2016, 1,354 members were receiving less than the maximum amount allowed of $1,200 per year. The actual number of retirees receiving less than the $1,200 per year cap is a small percentage of the total population and has a minimal impact on Healthcare Cost Trends as depicted below.

The following presents the System net OPEB liability for June 30,2017, calculated using current Healthcare cost trends as well as what the System net OPEB liability would be if it health cost trends were 1-percentage point lower or 1-percentage point higher than the current rate: 1% Current 1% Decrease Rate Increase

System net OPEB liability $ 6,571,000 $ 6,573,000 $ 6,574,000

Sensitivity of the Net OPEB Liability to Change in the Discount Rate

The following presents the net OPEB liability, calculated using the discount rate of 3.13%, as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage point lower (2.13%) or 1-percentage-point higher (4.13%) than the current rate: Current 1% Discount 1% Decrease Rate Increase 2.13% 3.13% 4.13%

District's proportionate share of the net OPEB liability $ 7,471,000 $ 6,573,000 $ 5,826,000

- 56 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE J - POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS–SINGLE EMPLOYER PLAN

Plan Description

The School administers a single-employer defined benefit healthcare plan. The plan provides medical insurance benefits to eligible retirees and their spouses. The Board of School Directors has the authority to establish and amend benefit provisions through the collective bargaining process with members of the professional and support staff, an agreement with administrative employees and individual employment contracts with certain employees. The plan does not issue any financial report and is not included in the report of any public employee retirement system or any other entity.

Plan Membership

At June 30, 2018, plan membership consisted of the following:

Inactive plan members or beneficiaries currently receiving benefits 191 Inactive plan members entitled to but not yet receiving benefits - Active plan members 630

821

Funding Policy and Funding Status

The plan is an unfunded plan with no assets accumulated in a trust. Contributions to the plan are equal to benefit payments. For the year ending June 30, 2018 benefit payments paid as they came due were $822,690.

Benefits Provided

The plan provides the following benefits:

Administrators

For administrators who retired before July 1, 2005 with at least 10 years of service, shall be eligible for up to 87% reimbursement of premiums for medical, prescription drug, dental, and vision insurance for up to 12 years. For administrators who retire after July 1, 2005 who are eligible for PSERS retirement with at least 10 years of service with the School District shall be eligible for premium sharing payments for medical, prescription drug, dental, and vision insurance. Payments are made into a health premiums account and vary from $10,000 to $20,000 per year, depending on year of retirement and the member is responsible for payment of the full premium. Payments are made for two to five years.

After the District ceases payments as noted above, members are responsible for the full premium and are eligible to retain the coverage for the life of the member and spouse.

- 57 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE J - POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS–SINGLE EMPLOYER PLAN (Continued)

Teachers

For teachers who retired before July 1, 2005 with at least 10 years of service, shall be eligible for up to 87% reimbursement of premiums for medical, prescription drug, dental, and vision insurance for up to 12 years. For teachers who retire after July 1, 2005 who are eligible for PSERS retirement with at least 10 years of service with the School District shall be eligible for premium sharing payments for medical, prescription drug, dental, and vision insurance. Payments are made into a health premiums account and vary from $10,000 to $20,000 per year, depending on year of retirement and the member is responsible for payment of the full premium. Payments are made for two to five years.

After the District ceases payments as noted above, members are responsible for the full premium and are eligible to retain the coverage for the life of the member and spouse.

Support Staff

For support staff who retire and are eligible for PSERS retirement with at least 10 years of service with the School District shall be eligible for medical, prescription drug, dental, and vision insurance. Members are responsible for the full premium and are eligible to retain the coverage for the life of the member and spouse.

Assumptions

The following assumptions and actuarial methods and calculation were used:

Interest Rate – 3.13%, based on S&P Municipal Bond 20 Year High grade Rate Index at July 1, 2017.

Salary - An assumption for salary increases is used only for spreading contributions over future pay under the entry age normal cost method. For this purpose, salary increases are composed of a 2.5% cost of living adjustment, 1% real wage growth, and for teachers and administrators a merit increase which varies from 2.75% to 0%.

Health Care Cost Trend Rate - 6.0% in 2017, and 5.5% in 2018 through 2023. Rates gradually decrease from 5.4% in 2024 to 3.9% in 2075 and later based on the Society of Actuaries Long-Run Medical Cost Trend Model.

- 58 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE J - POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS–SINGLE EMPLOYER PLAN (Continued)

Withdrawal - Rates of withdrawal vary by age, gender and years of service. Sample rates for employees with more than 10 years of service are shown below. Rates for new employees start at 22.9% for both men and women and decrease with age and service.

Male Female Male Female Age Rate Rate Age Rate Rate

25 2.57% 5.02% 45 1.37% 1.65% 30 2.57% 4.02% 50 1.92% 2.06% 35 1.50% 2.85% 55 3.38% 3.11% 40 1.34% 1.60% 60 5.57% 6.40%

Mortality - Separate rates are assumed preretirement and postretirement using the rates assumed in the PSERS defined benefit pension plan actuarial valuation.

Disability - No disability was assumed.

Retirement - Assumed retirement rates are based on PSERS plan experience and vary by age, service and gender.

Percent of Eligible Retirees Electing Coverage in Plan – 70% of teachers and administrators and 40% of the support staff are assumed to elect coverage. Upon Medicare eligibility, spouses are not assumed to continue coverage.

Percent Married at Retirement - 55% of employees are assumed to be married and have a spouse covered by the plan at retirement.

Spouse Age - Wives are assumed to be two years younger than their husbands.

Retiree Contributions - Retiree Contributions are assumed to increase at the same rate as the Health Care Cost Trend Rate.

Actuarial Value of Assets - Equal to the Market Value of Assets.

Actuarial Cost Method - Entry Age Normal - Under the Entry Age Normal Cost Method, the Normal Cost is the present value of benefits allocated to the year following the valuation date. Benefits are allocated on a level basis over the earnings of an individual between the date of hire and the assumed retirement age. The Accrued Liability as of the valuation date is the excess of the present value of future benefits over the present value of future Normal Cost. The Unfunded Accrued Liability is the excess of the Accrued Liability over the Actuarial Value of Assets. Actuarial gains and losses serve to reduce or increase the Unfunded Accrued Liability.

Changes in Assumptions - In the 2017 actuarial valuation, the discount rate changed from 2.49% to 3.13%. The trend assumption was updated. Assumptions for salary, mortality, withdrawal and retirement were updated based on new PSERS assumptions.

- 59 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE J - POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS–SINGLE EMPLOYER PLAN (Continued)

Changes in the Total OPEB Liability Total OPEB Liability

Balance at June 30, 2017 $ 17,226,329 Changes for the year Service cost 952,607 Interest cost 441,559 Changes for experience - Changes in assumptions (216,066) Benefit payments (822,690) Net changes 355,410

Balance at June 30, 2018 $ 17,581,739

Sensitivity of the Total OPEB Liability to Changes in the Discount Rate

The following presents the total OPEB liability of the School, as well as what the School’s net OPEB liability would be if it were calculated using a discount rate that is 1-percentage- point lower (2.13 percent) or 1-percentage-point higher (4.13 percent) than the current discount rate: Current Discount 1% Decrease Rate 1% Increase 2.13% 3.13% 4.13%

Total OPEB liability $ 21,120,579 $ 17,581,739 $ 14,818,498

Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates

The following presents the total OPEB liability of the School, as well as what the School’s net OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1- percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rate: 1% Current 1% Decrease Rates Increase

Total OPEB liability $ 14,175,184 $ 17,581,739 $ 22,163,107

- 60 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE J - POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS–SINGLE EMPLOYER PLAN (Continued)

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB - For the year ended June 30, 2018, the School recognized OPEB expense of $10,910. At June 30, 2018, the School reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Changes in assumptions $ - $ 192,059 Contributions subsequent to the measurement date 307,893 -

$ 307,893 $ 192,059

$307,893 reported as deferred outflows of resources related to OPEB resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ending June 30,

2019 $ (24,007) 2020 (24,007) 2021 (24, 007) 2022 (24,007) 2023 (24,007) Thereafter (72,024)

$ (192,059)

- 61 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE K - OPERATING LEASES

There District entered into operating leases for computer equipment and vehicles. The total expense under these operating leases for the June 30, 2018 year is $688,030. The lease payments for future years are as follows:

Year Ending Lease June 30, Payment

2019 $ 689,944 2020 513,563 2021 357,227 2022 156,222

$ 1,716,956

NOTE L - COMMITMENTS AND CONTINGENCIES

Claims or Litigation

The District is currently a party, as both plaintiff and defendant, to various claims and litigation arising in the normal course of operations. Certain tax assessment appeals are ongoing. The amount of loss contingency, due to the nature of tax assessment appeals, is not determinable.

The District has various commitments under long-term construction contracts totaling approximately $2,285,305 as of June 30, 2018.

NOTE M - RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Significant losses are covered by commercial insurance. There were no significant reduction in insurance coverages for the fiscal year June 30, 2018.

The District is a participant in the Bucks and Montgomery County Schools Healthcare Consortium, which is a pooled trust fund for the purpose of providing health and related benefits up to $200,000 per participant. The school pays the Consortium a monthly contribution as determined by the trustees. The pool is self-sustaining through member premiums. The District reinsured through a commercial company for claims in excess of the amount covered by the pool.

- 62 - METHACTON SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

NOTE N - PRIOR PERIOD ADJUSTMENT

The School District implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The objective of GASB Statement No. 75 is to improve accounting and financial reporting by state and local governments for other postemployment benefit (OPEB) plans. GASB Statement No. 75 states that the School Districts must record their share of the Public School Employees’ Retirement System (PSERS) unfunded liability. In addition, the School also must record the total liability of their single employer other postemployment benefit plan.

For the government-wide governmental activities, the School District has treated their proportionate share of the beginning of year PSERS net OPEB liability of $7,128,000 and deferred outflows of resources of $356,460 and the beginning of year single employer OPEB plan liability of $17,226,329 as having been recognized in the period incurred. As part of the implementation, the previously recognized obligation for other postemployment benefits under GASB 45 in the amount of $5,429,365 will be reversed. The School District has adjusted beginning net position for the governmental activities from ($111,206,660) to ($129,775,164).

- 63 - REQUIRED SUPPLEMENTARY INFORMATION METHACTON SCHOOL DISTRICT BUDGETARY COMPARISON SCHEDULE GENERAL FUND YEAR ENDED JUNE 30, 2018

Budgeted Amounts Amounts Positive Original Final GAAP Basis (Negative)

REVENUES Local sources $ 82,882,139 $ 82,882,139 $ 83,483,440 $ 601,301 State sources 22,448,472 22,448,472 22,577,920 129,448 Federal sources 563,447 563,447 690,370 126,923 TOTAL REVENUES 105,894,058 105,894,058 106,751,730 857,672

EXPENDITURES Instruction Regular programs 42,090,294 43,007,983 41,154,005 1,853,978 Special programs 14,864,892 15,090,149 15,309,739 (219,590) Vocational education programs 2,341,124 2,518,926 2,554,842 (35,916) Other instructional programs 327,746 337,323 283,998 53,325 Nonpublic school programs 6,410 6,410 2,434 3,976 Adult education programs 202,300 202,300 151,123 51,177 Support services Pupil personnel services 4,300,318 4,374,004 4,514,624 (140,620) Instructional staff services 2,619,621 2,650,569 2,546,788 103,781 Administration services 6,214,010 6,271,985 6,230,604 41,381 Pupil health services 1,261,080 1,312,974 1,640,392 (327,418) Business services 1,095,703 1,115,130 1,004,178 110,952 Operation and maintenance of plant services 8,719,057 8,892,461 8,450,325 442,136 Student transportation services 6,830,933 6,830,933 7,201,160 (370,227) Central and other services 2,129,088 2,129,088 1,749,241 379,847 Other support services 72,922 72,922 74,270 (1,348) Operation of non-instructional services Student activities 1,475,745 1,475,745 1,458,015 17,730 Community services 500 500 3,109 (2,609) Debt service 10,026,411 9,968,781 9,637,979 330,802 TOTAL EXPENDITURES 104,578,154 106,258,183 103,966,826 2,291,357

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 1,315,904 (364,125) 2,784,904 3,149,029

OTHER FINANCING SOURCES (USES) Proceeds from extended term financing 1,000,000 1,000,000 - 1,000,000 Budget reserve (2,115,904) (435,875) - (435,875) Transfers out (200,000) (200,000) (200,000) - TOTAL OTHER FINANCING SOURCES (USES) (1,315,904) 364,125 (200,000) 564,125

NET CHANGE IN FUND BALANCE - - 2,584,904 2,584,904

FUND BALANCE AT BEGINNING OF YEAR 8,958,462 8,958,462 8,958,462 -

FUND BALANCE AT END OF YEAR $ 8,958,462 $ 8,958,462 $ 11,543,366 $ 2,584, 904

See accompanying note to the budgetary comparison schedule.

- 64 - METHACTON SCHOOL DISTRICT NOTE TO THE BUDGETARY COMPARISON SCHEDULE JUNE 30, 2018

NOTE A - BUDGETARY INFORMATION

The District follows the following procedures in establishing the budgetary data reflected in the financial statements:

 Prior to May 31, the School Board submits a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them for the General Fund.

 The budget is presented at the Methacton School District public board meeting to obtain taxpayer comments.

 Prior to June 30, the budget is legally enacted through passage of an ordinance.

 Legal budgetary control is maintained by the School Board at the departmental level. Transfers between departments, whether between funds or within a fund, or revisions that alter the total revenues and expenditures of any fund must be approved by the School Board.

 Budgetary data are included in the District’s management information system and are employed as a management control device during the year.

 Budgets for the General Fund are adopted substantially on the modified accrual basis of accounting, which is consistent with generally accepted accounting principles.

For the year ended June 30, 2018, the District overspent from budgeted amounts in the general fund for the following line items:

 Special programs ...... $219,590

 Vocational education programs ...... $35,916

 Pupil personnel services ...... $140,620

 Pupil health services ...... $327,418

 Student transportation services ...... $370,227

 Other support services ...... $1,348

 Community services ...... $2,609

These overages were made up with funds from other line items that were underspent during the year.

- 65 - METHACTON SCHOOL DISTRICT SCHEDULE OF THE SCHOOL DISTRICTʼS PROPORTIONATE SHARE OF THE NET PENSION LIABILITY LAST FIVE FISCAL YEARS

2018 2017 2016 2015 2014

SCHOOL DISTRICT'S PROPORTION OF THE NET PENSION LIABILITY (ASSET) 0.3226% 0.3309% 0.3274% 0.3577% 0.3512%

SCHOOL DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (ASSET) $ 159,327,000 $ 163,984,000 $ 141,814,000 $ 14,158,000 $ 143,768,000

SCHOOL DISTRICT'S COVERED-EMPLOYEE PAYROLL $ 42,946,943 $ 42,860,302 $ 41,299,971 $ 45, 644,540 $ 45,071,142

SCHOOL DISTRICT'S PROPORTIONATE SHARE

- 66 - - OF THE NET PENSION LIABILITY (ASSET) AS A PERCENTAGE OF ITS COVERED-EMPLOYEE PAYROLL 370.99% 382.60% 343.38% 310.81% 318.98%

THE PLAN'S FIDUCIARY NET POSITION AS A PERCENTAGE OF THE TOTAL PENSION LIABILITY 51.84% 50.14% 54.36% 57.24% 54.49% METHACTON SCHOOL DISTRICT SCHEDULE OF THE SCHOOL DISTRICT'S PENSION CONTRIBUTIONS LAST FIVE FISCAL YEARS

2018 2017 2016 2015 2014

CONTRACTUALLY REQUIRED CONTRIBUTION $ 13,381,000 $ 12,431,368 $ 10,567,279 $ 8,466,494 $ 7,084,130

CONTRIBUTIONS IN RELATION TO THE CONTRACTUALLY REQUIRED CONTRIBUTION 13,381,000 12,431,368 10,567,279 8,466,494 7,084,130

CONTRIBUTION (EXCESS) DEFICIENCY $ - $ - $ - $ - $ -

SCHOOL DISTRICT'S COVERED-EMPLOYEE PAYROLL $ 42,158,160 $ 42,946,943 $ 42,860,302 $ 41, 299,971 $ 45,644,540

CONTRIBUTIONS AS A PERCENTAGE OF COVERED-EMPLOYEE PAYROLL 31.74% 28.95% 24.66% 20.50% 15.52% - 67 - -

METHACTON SCHOOL DISTRICT SCHEDULE OF THE SCHOOL DISTRICTʼS PROPORTIONATE SHARE OF THE PSERS NET OTHER POSTEMPLOYMENT BENEFIT PLAN LIABILITY LAST FISCAL YEAR

SCHOOL DISTRICT'S PROPORTION OF THE NET OPEB LIABILITY (ASSET) 0.3226%

SCHOOL DISTRICT'S PROPORTIONATE SHARE OF THE NET OPEB LIABILITY (ASSET) $ 6,573,000

SCHOOL DISTRICT'S COVERED-EMPLOYEE PAYROLL $ 42,946,943

SCHOOL DISTRICT'S PROPORTIONATE SHARE OF THE NET OPEB LIABILITY (ASSET) AS A PERCENTAGE OF ITS COVERED-EMPLOYEE PAYROLL 15.30%

THE PLAN'S FIDUCIARY NET POSITION AS A PERCENTAGE OF THE TOTAL OPEB LIABILITY 5.73%

NOTES TO SCHEDULE

The District's covered employee payroll noted above is as of the measurement date of the net pension liability (June 30, 2017).

This schedule is to present the requirement to show information for ten (10) years. However, until a full ten-year trend is compiled, information for only those years for which information is available is shown.

- 68 - METHACTON SCHOOL DISTRICT SCHEDULE OF THE SCHOOL DISTRICT'S PSERS OTHER POSTEMPLOYMENT BENEFIT PLAN CONTRIBUTIONS LAST FISCAL YEAR

CONTRACTUALLY REQUIRED CONTRIBUTION $ 351,615

CONTRIBUTIONS IN RELATION TO THE CONTRACTUALLY REQUIRED CONTRIBUTION 351,615

CONTRIBUTION (EXCESS) DEFICIENCY $ -

SCHOOL DISTRICT'S COVERED-EMPLOYEE PAYROLL $ 42,158,160

CONTRIBUTIONS AS A PERCENTAGE OF COVERED-EMPLOYEE PAYROLL 0.83%

NOTE TO SCHEDULE

- 69 - METHACTON SCHOOL DISTRICT SCHEDULE OF CHANGES IN THE TOTAL OTHER POSTEMPLOYMENT BENEFIT PLAN LIABILITY AND RELATED RATIOS LAST FISCAL YEAR

TOTAL OPEB LIABILITY Service cost $ 952,607 Interest 441,559 Changes of assumptions (216,066) Benefit payments (822,690) NET CHANGE IN TOTAL OPEB LIABILITY 355,410

TOTAL OPEB LIABILITY, BEGINNING 17,226,329

TOTAL OPEB LIABILITY, ENDING $ 17,581,739

COVERED-EMPLOYEE PAYROLL $ 39,529,955

TOTAL OPEB LIABILITY AS A PERCENTAGE OF COVERED-EMPLOYEE PAYROLL 44.48%

NOTES TO SCHEDULE

No assets are accumulated in a trust to pay benefits related to this plan

Changes in assumptions: In the 2017 actuarial valuation, the discount rate changed from 2.49% to 3.13%. The trend assumption was updated. Assumptions for salary, mortality, withdrawal and retirement were updated based on new PSERS assumptions.

- 70 -

To the Board of School Directors Methacton School District Eagleville, Pennsylvania

We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Methacton School District as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the Methacton School District’s basic financial statements, and have issued our report thereon dated November 6, 2018.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Methacton School District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Methacton School District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Methacton School District’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

- 71 - Certified Pu b lic Acc oun ta n ts and Bu s iness Co n s ultant s

To the Board of School Directors Methacton School District Eagleville, Pennsylvania

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Methacton School District’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Oaks, Pennsylvania November 6, 2018

- 72 -

Independent Auditors’ Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance in Accordance With the Uniform Guidance

To the Board of School Directors Methacton School District Eagleville, Pennsylvania

Report on Compliance for Each Major Federal Program

We have audited the Methacton School District’s compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the Methacton School District’s major federal programs for the year ended June 30, 2018. Methacton School District’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of the Methacton School District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Methacton School District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Methacton School District’s compliance.

- 73 - Certified Pu b lic Acc oun ta n ts and Bu s iness Co n s ultant s

To the Board of School Directors Methacton School District Eagleville, Pennsylvania

Opinion on Each Major Federal Program

In our opinion, the Methacton School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018.

Report on Internal Control Over Compliance

Management of the Methacton School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Methacton School District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Methacton School District’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

- 74 -

To the Board of School Directors Methacton School District Eagleville, Pennsylvania

Purpose of this Report

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Oaks, Pennsylvania November 6, 2018

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SUPPLEMENTARY INFORMATION - MAJOR FEDERAL AWARD PROGRAMS AUDIT

METHACTON SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2018

Federal Pass-Through Grant Period Source CFDA Grantor’s Beginning/ Federal Grantor/Pass-Through Grantor/Program Title Code Number Number Ending Dates U.S. DEPARTMENT OF EDUCATION Passed through the Pennsylvania Department of Education Title I Improving Basic Programs I 84.010 013-170245 August 2, 2016 to September 30, 2017 Title I Improving Basic Programs I 84.010 013-180245 August 15, 2017 to September 30, 2018 TOTAL TITLE I Title II Improving Teacher Quality I 84.367 020-170245 August 2, 2016 to September 30, 2017 Title II Improving Teacher Quality I 84.367 020-180245 August 15, 2017 to September 30, 2018 TOTAL TITLE II Title IV Student Support and Academic Enrichment I 84.424 144-180245 August 15, 2017 to September 30, 2018 TOTAL TITLE IV Medical Assistance Access Admin I 93.778 N/A July 1, 2016 to June 30, 2017 Medical Assistance Access Admin I 93.778 N/A July 1, 2017 to June 30, 2018 TOTAL MEDICAID CLUSTER

Passed through the Montgomery County Intermediate Unit Title III Language Instruction I 84.365 N/A July 17, 2016 to September 30, 2017 Title III Language Instruction I 84.365 N/A July 17, 2017 to September 30, 2018 TOTAL TITLE III

Individual Disability Education Act ("IDEA") Part B I 84.027 N/A July 1, 2015 to June 30, 2016 Individual Disability Education Act ("IDEA") Part B I 84.027 N/A July 1, 2016 to June 30, 2017 Individual Disability Education Act ("IDEA") - Preschool I 84.173 N/A July 2016 to June 30, 2017 TOTAL SPECIAL EDUCATION CLUSTER

TOTAL U.S. DEPARTMENT OF EDUCATION

U.S. DEPARTMENT OF AGRICULTURE Passed through the Pennsylvania Department of Education National School Lunch Program, Federal I 10.555 N/A July 1, 2016 to June 30, 2017 National School Lunch Program, Federal I 10.555 N/A July 1, 2017 to June 30, 2018 Regular/ Needy Breakfast Program I 10.553 N/A July 1, 2016 to June 30, 2017 Regular/ Needy Breakfast Program I 10.553 N/A July 1, 2017 to June 30, 2018

Passed through the Pennsylvania Department of Agriculture National School Lunch Program - Donated foods I 10.555 N/A July 1, 2017 to June 30, 2018 TOTAL CHILD NUTRITION CLUSTER TOTAL U.S. DEPARTMENT OF AGRICULTURE TOTAL FEDERAL AWARDS FORWARD Accrued or Accrued or Program Total (Deferred) (Deferred) Passed or Award Received Revenue at Revenue Revenue at Through to Amount for the Year July 1, 2017 Recognized Expenditures June 30, 2018 Sub-Recipients

$ 380,687 $ 122,529 $ 88,912 $ 33,617 $ 33,617 $ - $ -

328,536 234,669 - 300,946 300,946 66,277 -

357,198 88,912 334,563 334,563 66,277 - 105,414 37,254 27,138 10,116 10,116 - -

96,447 96,447 - 96,447 96,447 - -

133,701 27,138 106,563 106,563 - - 10,000 5,000 - 10,000 10,000 5,000

5,000 - 10,000 10,000 5,000 13,129 5,908 5,908 - - -

4,244 4,244 - 4,244 4,244 -

10,152 5,908 4,244 4,244 -

15,314 15,314 15,314 - - - -

11,188 6,295 - 9,162 9,162 2,867 -

21,609 15,314 9,162 9,162 2,867 -

8 82,887 71,079 71,079 - - - -

853,512 853,512 - 853,512 853,512 - -

1,910 1,910 - 1,910 1,910 - -

926,501 71,079 855,422 855,422 - -

1,454,161 208,351 1,319,954 1,319,954 74,144 -

N/A 50,059 50,059 - - - -

N/A 283,267 - 337,428 337,428 54,161 -

N/A 7,433 7,433 - - - -

N/A 38,441 - 47,078 47,078 8,637 -

N/A 76,143 (8,650) 72,311 72,311 (12,482) -

455,343 48,842 456,817 456,817 50,316 - 455,343 48,842 456,817 456,817 50,316 -

$ 1,909,504 $ 257,193 $ 1,776,771 $ 1,776,771 $ 124,460 $ -

- 76 - METHACTON SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2018

Federal Pass-Through Grant Period Source CFDA Grantor’s Beginning/ Federal Grantor/Pass-Through Grantor/Program Title Code Number Number Ending Dates

TOTAL FEDERAL AWARDS FORWARDED

Current State Grants Passed through the PA Dept. of Agriculture National School Lunch Program S N/A N/A July 1, 2016 to June 30, 2017

National School Lunch Program S N/A N/A July 1, 2017 to June 30, 2018

Regular/ Needy Breakfast Program S N/A N/A July 1, 2016 to June 30, 2017

Regular/ Needy Breakfast Program S N/A N/A July 1, 2017 to June 30, 2018 TOTAL CURRENT STATE GRANTS

GRAND TOTAL FEDERAL AWARDS AND CURRENT STATE GRANTS

I - Indirect Funding S - State Funding

See accompanying notes to the schedule of expenditures of federal awards. Accrued or Accrued or Program Total (Deferred) (Deferred) Passed or Award Received Revenue at Revenue Revenue at Through to Amount for the Year July 1, 2017 Recognized Expenditures June 30, 2018 Sub-Recipients

$ 1,909,504 $ 257,193 $ 1,776,771 $ 1,776,771 $ 124,460 $ -

N/A 4,485 4,485 - - - -

N/A 24,585 - 29,346 29,346 4,761 -

N/A 556 556 - - - -

N/A 2,674 - 3,310 3,310 636 -

32,300 5,041 32,656 32,656 5,397 -

$ 1,941,804 $ 262,234 $ 1,809,427 $ 1,809,427 $ 129,857 $ -

- 77 - METHACTON SCHOOL DISTRICT NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2018

NOTE A - BASIS OF ACCOUNTING

The accompanying schedule of expenditures of federal awards is presented using the modified accrual basis of accounting, which is described in Note A to the School District’s basic financial statements.

NOTE B - FEDERAL EXPENDITURES

The schedule of expenditures of federal awards reflects federal expenditures for all individual grants, which were active during the fiscal year.

NOTE C - DONATED FOODS

Donated foods were valued according to cost estimates provided by the U.S.D.A.

NOTE D - INDIRECT COST RATES

The School District has not elected to use the 10% de minimis indirect cost rate as allowed in the Uniform Guidance, Section 414.

- 78 - METHACTON SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

A. SUMMARY OF AUDITORS’ RESULTS

Financial Statements

Type of auditors’ report issued: Unmodified

Internal control over financial reporting:

Significant deficiencies identified: No

Significant deficiencies identified that are considered to be material weaknesses: No

Noncompliance material to financial statements noted: No

Federal Awards

Internal control over major programs:

Significant deficiencies identified: No

Significant deficiencies identified that are considered to be material weaknesses: No

Type of auditors’ report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with the Uniform Grant Guidance: No

Identification of major programs:

Program CFDA

Special Education Cluster (IDEA) Special Education Grants to States (IDEA, Part B) 84.027 Preschool Grants (IDEA, Section 619) 84.173

The threshold used for distinguishing Types A and B programs was $750,000.

Auditee qualified as a low-risk auditee: Yes

B. FINDINGS - FINANCIAL STATEMENTS AUDIT

None.

C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS AUDIT

None.

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