SUPPLEMENT DATED OCTOBER 4, 2016 TO PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 29, 2016

$52,185,000* No. 6 Snohomish County, Unlimited Tax General Obligation Bonds, 2016

This supplement is made a part of the Preliminary Official Statement dated September 29, 2016.

The following paragraph is added as a new section under the heading “THE DISTRICT.”

Capital Facilities Information

The District staff provided the Board with the annual Building Condition Assessment Scores (“BCA Scores”) as and in the form required by the Office of the Superintendent of Public Instruction at its Board meeting on March 14, 2016. The BCA Scores report is available on EMMA.

The District approved a six-year Capital Facilities Plan, 2016-2021 (the “Plan”) at its Board meeting on August 22, 2016 in accordance with District policies. The Plan is available on EMMA.

The BCA Scores and Plan are available for convenience of investors and potential investors but is not incorporated by reference or otherwise made a part of this Official Statement. The District disclaims any obligation to update the BCA Scores and Plan other than as required by District policies.

* Preliminary; subject to change. This Preliminary Official Statement and the information contained herein are subject to completion, revision and amendment without notice. 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 these Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. disbursement totheBeneficialOwnersofBonds.See “ will makesuchpaymentsonly to DTC,which in turnwillremitsuchprincipal and interestto its participantsforsubsequent Association (the“BondRegistrar”).ForsolongastheBondsremainina“book-entryonly”transfersystem,Bond Registrar interest ontheBondswillbepayablebyfiscalagentofStateWashington(the“State”),currentlyU.S.Bank National the Bondsispayableupontheirstatedmaturitydatesassetforthinscheduleoninsidecover.Principal ofand maturity orpriorredemptionoftheBonds,atinterestratesinschedulesetforthoninsidecover.Principal of C, “BOOK-ENTRYSYSTEM”herein. * Preliminary; subjecttochange. DATED: DateofDelivery(EstimatedtobeOctober18,2016) See “ beneficial interestintheBonds(the“BeneficialOwners”)willnotreceivecertificatesrepresentingtheirinterests theBonds. Depository TrustCompany,NewYork,York(“DTC”),whichwillactassecuritiesdepositoryfortheBonds.Owners ofany thereof withinamaturity.TheBondswillberegisteredinthenameofCede&Co.(the“RegisteredOwner”),asnominee forThe Bonds, 2016(the“Bonds”)infullyregisteredformunderabook-entrysystemdenominationsof$5,000,orintegral multiples District. See“SECURITYFORTHEBONDS”herein. of SnohomishCounty,Washington(the“County”),the State,oranypoliticalsubdivisionthereofotherthanthe of thosetaxesandthepromptpaymentthatprincipal interest.TheBondsdonotconstituteadebtorindebtedness the Bonds, and the full faith, credit and resources of the District have been pledged irrevocably for the annual levy and collection sufficient, togetherwithothermoneylegallyavailableand tobeusedtherefor,paywhenduetheprincipalofandintereston pledged tolevytaxesannuallywithoutlimitationasrateor amountuponallofthetaxablepropertyinDistrictan Redemption Provisions.” BOND PROCEEDS”herein. educational facilities,and(ii)paythecostsofissuing,sellingdeliveringBonds.See“PURPOSEANDAPPLICATION OF corporations. See“TAXMATTERS”hereinforadiscussionoftheopinionBondCounsel. on theBonds may beindirectly subject to corporate alternative minimum tax and certain other taxes imposed oncertain Bonds isnotanitemoftaxpreferenceforpurposeseitherindividualorcorporatealternativeminimumtax.Interest interest ontheBondsisexcludablefromgrossincomeforfederaltaxpurposesunderexistinglaw.Interest NOT BANKQUALIFIED BOOK-ENTRY of theInternalRevenueCode of 1986,asamended.See“ Bond Registrar onbehalfofDTCbyFastAutomated SecuritiesTransferon oraboutOctober18,2016(the “DateofDelivery”). of BondCounsel’s opinionisattachedhereto asAppendixA.Itisexpected thattheBondswillbeavailable fordeliverytothe read theentireofficialstatement toobtaininformationessentialthemakingofaninformed investmentdecision. under theprovisionsofWashingtonStateSchoolDistrict CreditEnhancementProgram.SeeAppendixDattachedhereto Payment ofprincipalandinterestontheBondswhendue isguaranteedbythefullfaith,credit,andtaxingpowerof Interest ontheBondswillbepayablesemiannuallyJune1andDecemberofeachyear,commencing1,2017, to Mukilteo SchoolDistrictNo.6,SnohomishCounty,Washington(the“District”)willissueitsUnlimitedTaxGeneralObligation The BondsaregeneralobligationsoftheDistrict.Forsolongasoutstanding,Districthasirrevocably The Bondsaresubjecttoredemptionpriortheirstatedmaturitydatesasfurtherdescribedherein.See“THEBONDS – Proceeds oftheBondswillbeusedto:(i)financecostscapitalconstructionandimprovementstoDistrict’s In the opinion of Pacifica LawGroup LLP,Bond Counsel, assuming compliance withcertaincovenantsoftheDistrict, designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) The DistricthasnotdesignatedtheBondsas“qualified tax-exemptobligations”withinthemeaningofSection 265(b)(3)(B) The Bondsareofferedfordelivery when,asandifissued,subjectintheapprovinglegalopinion ofBondCounsel.Theform This coverpagecontainscertain informationforquickreferenceonly.Itisnotasummary ofthisissue.Investorsmust T he B onds C ompetitive

–BondRegistrarandRegistrationFeatures”AppendixC,“BOOK-ENTRYSYSTEM”herein. PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 29, 2016 S October 6,2016*asfurtherdescribedintheOfficialNoticeofSaleattachedhereto. and titled“

ale —The Bondswillbesoldpursuanttoacompetitivesaleheldat8:30a.m.*PacificTimeon Unlimited TaxGeneralObligationBonds,2016 M W ashington ukilteo MATURITY SCHEDULE–SeeInsideCover Snohomish County,Washington S tate S S tate S $52,185,000* chool T chool T a he

x M of

B W D atters onds istrict ashington D SCHOOL DISTRICTCREDITENHANCEMENTPROGRAM” See “Ratings”andAppendixD,“WASHINGTONSTATE istrict –BondRegistrarandRegistrationFeatures”Appendix C ” herein. redit E nhancement RATING WITHSTATEGUARANTEE:Aa1 N DUE: December1,asshownoninsidecover o . 6 NEW ISSUEMOODY’SRATING:Aa2 P rogram .”

MUKILTEO SCHOOL DISTRICT NO. 6 SNOHOMISH COUNTY, WASHINGTON $52,185,000* UNLIMITED TAX GENERAL OBLIGATION BONDS, 2016

MATURITY SCHEDULE, INTEREST RATES, YIELDS, PRICES AND CUSIP NUMBERS

Due Dec. 1* Amount* Interest Rate Yield Price CUSIP No.(1) 2017 $3,395,000 % % % 833136___ 2018 5,325,000 833136___ 2019 2,235,000 833136___ 2020 8,920,000 833136___ 2021 4,000,000 833136___ 2022 4,700,000 833136___ 2023 5,000,000 833136___ 2024 3,480,000 833136___ 2025 4,670,000 833136___ 2026 1,490,000 833136___ 2027 1,615,000 833136___ 2028 1,750,000 833136___ 2029 1,705,000 833136___ 2030 1,700,000 833136___ 2031 2,200,000 833136___

* Preliminary; subject to change. (1) The CUSIP numbers are provided by Standard and Poor’s, CUSIP Service Bureau, a division of The McGraw- Hill Companies, Inc. These numbers are not intended to create a database and do not service in any way as a substitute for the CUSIP Service. CUSIP numbers are provided for the convenience of reference only. CUSIP numbers are subject to change. The District takes no responsibility for the accuracy of such CUSIP numbers.

MUKILTEO SCHOOL DISTRICT NO. 6 9401 Sharon Drive Everett, Washington 98204 (425) 356-1274 www.mukilteo.wednet.edu*

Board of Directors

Judy Schwab President John Gahagan Vice President Kyle Kennedy Member Michael L. Simmons Member Geoff Thorp Member

Administration

Dr. Marci L. Larsen Superintendent Alison Brynelson Deputy Superintendent Patty Dowd Executive Director of Business Services

Snohomish County Officials

Linda Hjelle Assessor Kirke Sievers Treasurer and ex officio Treasurer of the District

Bond Counsel

Pacifica Law Group LLP , Washington

Financial Advisor

Northwest Municipal Advisors Bellevue, Washington

Bond Registrar

U.S. Bank National Association (current State fiscal agent) Seattle, Washington

______* The District’s website is not part of this official statement and investors should not rely on information that is presented in the District’s website in determining whether to purchase the Bonds. This inactive textual reference to the District’s website is not a hyperlink and does not incorporate the District’s website by reference.

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No quotations from or summaries or explanations of the provisions of laws or documents herein purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or owners of any of the Bonds. The cover page and inside cover page hereof and appendices attached hereto are part of this Official Statement. No dealer, broker, sales representative, or other person has been authorized by the District or its financial advisor, Northwest Municipal Advisors (the “Financial Advisor”), to give any information or to make any representations other than as contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon. The District makes no representation regarding the accuracy or completeness of Bond Counsel’s form of opinion or information provided by the purchaser of the Bonds regarding reoffering prices, Appendix C “BOOK-ENTRY SYSTEM,” which has been furnished by DTC, or in Appendix D “WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM,” which has been provided by the State. The information and expressions of opinions herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the information set forth herein since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such persons to make such offer, solicitation or sale. Certain statements contained in this Official Statement reflect not historical facts but forecasts and “forward-looking statements.” The words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements. The achievement of certain results or other expectations contained in forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE BOND RESOLUTION HAS NOT 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 IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

This Preliminary Official Statement has been “deemed final” by the District, pursuant to Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, except for information which is permitted to be excluded from this Preliminary Official Statement under said Rule 15c2-12.

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TABLE OF CONTENTS OFFICIAL NOTICE OF SALE ...... NOS-i Budgetary Process ...... 22 INTRODUCTION ...... 1 Pension Plans ...... 22 AUTHORIZATION ...... 1 Other Post-Employment Benefits ...... 25 THE BONDS ...... 1 GENERAL AND ECONOMIC INFORMATION .. 26 Principal Amount, Date, Interest Rates and Snohomish County ...... 2 6 Maturities ...... 1 Economic Indicators ...... 27 Bond Registrar and Registration Features ...... 2 LITIGATION ...... 28 Redemption Provisions ...... 2 INITIATIVE AND REFERENDUM ...... 28 Open Market Purchase ...... 3 LIMITATIONS ON REMEDIES; Failure to Redeem Bonds ...... 3 BANKRUPTCY ...... 28 Defeasance ...... 3 APPROVAL OF COUNSEL ...... 28 PURPOSE AND APPLICATION OF BOND TAX MATTERS ...... 30 PROCEEDS ...... 3 INITIATIVE AND REFERENDUM ...... 30 Purpose ...... 3 CONTINUING DISCLOSURE ...... 31 Sources and Uses of Funds ...... 4 RATINGS ...... 33 SECURITY FOR THE BONDS ...... 4 CONFLICTS OF INTEREST ...... 33 General ...... 4 FINANCIAL ADVISOR ...... 33 Washington State School District Credit UNDERWRITING ...... 3 3 Enhancement Program ...... 4 CONCLUDING STATEMENT ...... 33 BOND INDEBTEDNESS ...... 4 Authorization of Total Debt ...... 4 APPENDICES: Authorization of Voted Debt ...... 5 Authorization of Non-Voted Debt ...... 5 FORM OF LEGAL OPINION ...... Appendix A 2014 - 2015 AUDITED FINANCIAL Outstanding Long Term Debt ...... 6 STATEMENTS ...... Appendix B Short Term Borrowing ...... 6 BOOK-ENTRY SYSTEM ...... Appendix C Unlimited Tax General Obligation Debt Service WASHINGTON STATE SCHOOL DISTRICT CREDIT Requirements ...... 6 ENHANCEMENT PROGRAM ...... Appendix D Debt Payment Record ...... 6 Future Financings ...... 7 Net Direct and Estimated Overlapping Debt ...... 7 DISTRICT FUNDING SOURCES ...... 8 Federal Funding ...... 8 State Funding ...... 8 Local Funding ...... 11 Valuations and Assessments for Property Tax Purposes ...... 12 Property Tax Collection Procedures ...... 13 Tax Liens and Foreclosure ...... 13 Tax Collections ...... 13 Overlapping Taxing Districts – Taxing Authority ...... 14 Major Taxpayers ...... 15 Limitations on Regular Property Tax Levies of Overlapping Taxing Districts ...... 15 THE DISTRICT ...... 16 Government Organization ...... 16 The Board of Directors ...... 1 6 Key Administrative Officials ...... 16 Staff and Labor Relations ...... 16 Enrollment ...... 17 DISTRICT FINANCIAL AND BUDGETARY INFORMATION ...... 17 Accounting Practices ...... 17 Financial Reporting ...... 18 Auditing of District Finances ...... 19 Authorized Investments ...... 19 Local Government Investment Pool ...... 19 Comparative Statement of General Fund and Debt Service Fund Revenues and Expenditures ...... 20 iii

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OFFICIAL NOTICE OF SALE

$52,185,000∗ Mukilteo School District No. 6 Snohomish County, Washington Unlimited Tax General Obligation Bonds, 2016

NOTICE IS HEREBY GIVEN THAT electronic bids will be received on behalf of Mukilteo School District No. 6, Snohomish County, Washington (the “District”) by the District’s Executive Director of Finance (the “Executive Director”) via the electronic bidding service BiDCOMP®/PARITY® (“PARITY”), which has been selected by the District as a qualified electronic bid provider for the purchase of the above-described bonds (the “Bonds”), at 8:30 a.m., Pacific Time, on Thursday October 6, 2016, or such other day or time and under such other terms and conditions as may be established by the Executive Director and communicated by News Services as defined and described under “Modification, Cancellation or Postponement” below. Bids may only be submitted electronically through PARITY, as described in this Official Notice of Sale.

Each bidder (and not the District) is responsible for the timely delivery of its bid. The official time will be determined by the District and not by any bidder or PARITY. No bid will be received after the time for receiving bids specified above. The District reserves the right to reject any and all bids and to waive any irregularity in a bid. No bid may be withdrawn after submission without permission of the District. The Executive Director, acting on behalf of the District pursuant to Resolution No. 15/2015-16, adopted by the Board of Directors of the District on August 22, 2016, intends to award the sale of the Bonds at approximately 11:00 a.m. Pacific Time (or as soon thereafter as possible) on October 6, 2016 (the “Bid Date”). Modification, Cancellation or Postponement

Bidders are advised that the District may modify the terms of this Official Notice of Sale prior to the time for receipt of bids. Any such modifications will be provided to The Bond Buyer Wire (available on TM3, the Thomson Municipal Market Monitor, at http://www.tm3.com) and Bloomberg Business News (collectively, the “News Services”) prior to the Bid Date. In addition, the District may cancel or postpone the Bid Date at any time prior to the opening of the bids. Notice of such modification, cancellation or postponement will be communicated by the District through the News Services as soon as practicable following such cancellation or postponement. Notices of the new bid date, if any, will be given through the News Services not less than 24 hours prior to the time bids are to be received. As an accommodation to bidders, telephonic or facsimile notice of the postponement of the Bid Date and of the new bid date will be given to any bidder requesting such notice from the District’s financial advisor, Northwest Municipal Advisors (“Financial Advisor”), telephone: (425) 452-9550 or e-mail: [email protected] or [email protected]. Failure of any bidder to receive such telephonic, facsimile or News Services’ notice will not affect the legality of the sale. Bond Details The Bonds will be dated the date of their initial delivery, estimated to be October 18, 2016 (the “Date of Delivery”). Interest on the Bonds will be paid semiannually on each June 1 and December 1, beginning June 1, 2017. Registration and Book-Entry System The Bonds will be issued only as fully registered bonds and when issued will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as initial securities depository for the Bonds. Purchases of the Bonds will be made in book-entry only form, in the denominations of $5,000 or any integral multiple thereof. Owners of any beneficial interest in the Bonds (“Beneficial Owners”) will not receive certificates representing their interest in the Bonds purchased. The principal of and interest on the Bonds are payable by the fiscal agent of the State of Washington (the “State”) (currently, U.S. Bank National Association) as registrar, authenticating agent and paying agent (the “Bond Registrar”) to DTC, which is obligated in turn to remit such payments to its participants for subsequent disbursement to the Beneficial Owners.

∗ Preliminary; subject to change.

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Election of Maturities The Successful Bidder (as hereinafter defined) for the Bonds shall designate whether some or all of the following principal amounts of the Bonds shall be retired on December 1 of each respective year as serial bonds maturing in such year, or as mandatory redemption amounts of Term Bonds maturing on those respective dates in the years specified by the bidder. Term Bonds, if any, must consist of the total principal payments of two or more consecutive years and mature in the latest of those years.

Years Serial Maturities or (December 1) Mandatory Redemption Amounts(1) 2017 $3,395,000 2018 5,325,000 2019 2,235,000 2020 8,920,000 2021 4,000,000 2022 4,700,000 2023 5,000,000 2024 3,480,000 2025 4,670,000 2026 1,490,000 2027 1,615,000 2028 1,750,000 2029 1,705,000 2030 1,700,000 2031 2,200,000 (1) Preliminary, subject to change. These amounts will constitute principal maturities of the Bonds unless Term Bonds are specified by the Successful Bidder for the Bonds, in which case these amounts may constitute mandatory redemption amounts of Term Bonds. Redemption Provisions The Bonds maturing on or before December 1, 2025 are not subject to optional redemption prior to maturity. The Bonds maturing on or after December 1, 2026 are subject to redemption at the option of the District, prior to their stated maturity date at any time on or after June 1, 2026, as a whole or in part (within one or more maturities selected by the District and randomly within a maturity in such manner as the Bond Registrar shall determine), at the price of par, plus accrued interest, if any, to the date of redemption. Purpose Proceeds of the Bonds will be used to: (i) finance the costs of capital construction and capital improvements to the District’s educational facilities; and (ii) pay the costs of issuing, selling and delivering the Bonds. See “PURPOSE AND APPLICATION OF BOND PROCEEDS” herein. Security Pledge of Unlimited Taxes and Full Faith, Credit and Resources. The Bonds are general obligations of the District. For as long as the Bonds are outstanding, the District has irrevocably pledged to levy taxes annually without limitation as to rate or amount on all of the taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds, and the full faith, credit and resources of the District have been pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal and interest. The Bonds do not constitute a debt or indebtedness of Snohomish County (the “County”), the State, or any political subdivision thereof other than the District.

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Washington State School District Credit Enhancement Program. Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the State under the provisions of the Washington State School District Credit Enhancement Program. Bidding Process Bids must be submitted electronically via PARITY in accordance with its Rules of Participation and this Official Notice of Sale. For further information about PARITY, potential bidders may contact PARITY via phone at (212) 849-5021 or via email at [email protected]. Hard copy bids will not be accepted. If a bidder submits an electronic bid for the Bonds, such bidder thereby agrees to the following terms and conditions: (i) If any provision in this Official Notice of Sale with respect to the Bonds conflicts with information or terms provided or required by PARITY, this Official Notice of Sale, including any amendments issued through the News Services, shall control. Information provided by PARITY to bidders shall form no part of any bid or of any contract between the Successful Bidder and the District unless that information is included in this Official Notice of Sale (including any modifications issued by the District through the News Services). (ii) Each bidder shall be solely responsible for making necessary arrangements to access PARITY for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Official Notice of Sale (including any modifications issued by the District through the News Services). (iii) The District shall not have any duty or obligation to provide or assure access to PARITY to any bidder, and the District shall not be responsible for proper operation of, or have any liability for, any delays, interruptions or damages caused by use or attempted use of PARITY or any incomplete, inaccurate or untimely bid submitted by any bidder through PARITY. (iv) The District is using PARITY as a communication mechanism, and not as the District’s agent, to conduct the electronic bidding for the Bonds. PARITY is acting as an independent contractor, and is not acting for or on behalf of the District. (v) The District is not responsible for ensuring or verifying bidder compliance with any PARITY procedures. (vi) Each electronic transmission of a bid through PARITY (including information regarding the purchase price for the Bonds and interest rates for any maturity of the Bonds) shall be deemed an offer to purchase the Bonds in response to this Official Notice of Sale, and shall be binding upon the bidder as if made by a signed, sealed bid delivered to the District. (vii) If the bidder’s electronic bid is accepted by the District, this Official Notice of Sale (including any modifications issued by the District through the News Services) and the information regarding the purchase price of the Bonds and the interest rates for each maturity of the Bonds that is transmitted electronically to the District through PARITY shall form a contract between the bidder and the District, and the bidder shall be bound by the terms of such contract whether or not such bidder in fact attempted or intended to submit a bid on those terms. (viii) Information provided by PARITY to bidders shall form no part of any bid or of any contract between the Successful Bidder and the District unless that information is included in this Official Notice of Sale (including any modifications issued by the District through the News Services) provided by the District. Bid Constraints

All bids are subject to the following constraints: (i) Interest rates bid shall be in multiples of 1/8 or 1/20 of 1%, or both, computed on the basis of a 360-day year of twelve 30-day months. (ii) No rate of interest for any maturity may exceed 5.25% and no more than one rate of interest may be fixed for any one maturity. (iii) All bids shall be without condition. (iv) Each bid shall state the true interest cost of the bid as such term is defined in this Official Notice of Sale. (v) No bid will be considered for the Bonds with an aggregate purchase price of less than 100.5% or more than 130% of the aggregate stated principal amount of the Bonds or for less than the entire offering of the Bonds.

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(vi) Each individual maturity must be reoffered at a yield that will produce a price of not less than 97% nor more than 130% of the principal amount for that maturity. For the purpose of the preceding sentence, “price” shall be defined as the lesser of the price at the redemption date or the price at the maturity date. Adjustment of Principal Amount of Bonds and Bid Price The District reserves the right to increase or decrease the aggregate principal amount of the Bonds and the principal amount within each maturity by an amount not to exceed 15 percent following the opening of the bids. Adjustments in any principal amount in excess of 15 percent of the principal amount of such maturity may be made with approval of the Successful Bidder. The principal amount of any maturity of the Bonds shall only be adjusted in increments of $5,000. The price bid by the Successful Bidder will be adjusted by the District to reflect an increase or decrease in the principal amount and maturity schedule for the Bonds, taking into account the interest rates, reoffering yields and underwriting spread contained in the initial bid. The Successful Bidder will be provided with any adjustments, in writing, by 12:00 noon, Pacific Time, on the Bid Date. The District will not be responsible in the event and to the extent that any adjustment affects (1) the net compensation to be realized by the Successful Bidder for the Bonds or (2) the true interest cost of the winning bid or its ranking relative to other bids. Good Faith Deposit To be considered, the successful bid must be backed by a good faith deposit in the amount of $800,000 (the “Good Faith Deposit”). The Good Faith Deposit shall be paid by federal funds wire transfer not later than 11:00 AM Pacific Time on the Bid Date. Wire transfer instructions will be provided to the Successful Bidder at the time of the verbal award. The Good Faith Deposit of the Successful Bidder for the Bonds shall be retained by the District as security for the performance of the successful bid and shall be applied to the purchase price of the Bonds upon the delivery of the Bonds to the Successful Bidder. Pending delivery of the Bonds, the Good Faith Deposit may be invested for the sole benefit of the District and such Successful Bidder will not receive credit for any earnings on such investment. In the event the apparent Successful Bidder fails to honor its accepted bid, the Good Faith Deposit shall be retained by the District as reasonable liquidated damages and not as a penalty. Each bidder waives the right to claim that actual damages arising from such default are less than such amount. Selection of the Winning Bid The Bonds will be sold to the bidder making a bid conforming to the terms of this Official Notice of Sale (including any modifications issued by the District through the News Services) that produces the lowest true interest cost to the District, a/k/a the best bid for the Bonds (the “Successful Bidder”). The true interest cost to the District will be the rate that, when used to discount to the date of the Bonds, all future payments of principal and interest (using semiannual compounding and a 30/360 day basis), produces an amount equal to the bid amount, without regard to the interest accrued to the Date of Delivery. The true interest cost calculations will be confirmed by the Financial Advisor, and the District will base its determination of the best bid for the Bonds solely on the results of the Financial Advisor’s confirmation of such calculations. If there are two or more equal bids for the Bonds and those bids are the best bids received, the Superintendent of the District or the Executive Director, Business Services will determine which bid will be accepted as the winning bid. The District reserves the right to reject any or all bids submitted and to waive any formality or irregularity in any bid or the bidding process. If all bids for the Bonds are rejected, then the Bonds may be sold in the manner provided by law. Any bid presented after the time specified for the receipt of bids will not be accepted, and any bid not backed by the required Good Faith Deposit will not be considered. The winning bid for the Bonds shall remain in effect until 11:59 p.m., Pacific Time, on the Bid Date. Bond Insurance The Successful Bidder may purchase municipal bond insurance, if available, for some or all of the Bonds. However, the delivery of the Bonds shall not be conditioned upon the issuance of any such insurance. Payment of any insurance premium and satisfaction of any conditions to the issuance of a municipal bond insurance policy, including payment for any legal opinions to be delivered to any insurer (“Bond Insurer”), shall be the sole responsibility of the Successful Bidder. In particular, the District will not pay any costs associated with supplementing the Official Statement, nor will the District enter into any additional agreements with respect to the provision of any such insurance. The Official Statement will not include disclosure of any insurance purchased by the Successful Bidder, although the District and

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the Financial Advisor will cooperate with the Successful Bidder to provide an addendum relating to insurance upon successful delivery of the Bonds. Failure of the Bond Insurer to issue its policy shall not justify failure or refusal by the Successful Bidder to accept delivery of or pay for the Bonds. If the Successful Bidder for the Bonds purchases insurance for any of the Bonds, the District may require such Successful Bidder to furnish to the District and Bond Counsel a certificate in form and substance acceptable to Bond Counsel confirming that (1) the present value (calculated using the same yield as the yield on the insured Bonds) of the insurance premium is less than the present value (calculated using the same yield as the yield on the insured Bonds) of the interest cost savings represented by the comparative differences between interest amounts that would have been payable on the various maturities of the insured Bonds at interest rates on the insured Bonds issued with and without the insurance on the insured Bonds, and (2) in the process of requesting competitive proposals to provide such insurance, such insurance provided the lowest cost. Delivery of Bonds The Bonds will be delivered to DTC, or to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer, prior to the Date of Delivery against payment of the purchase price to the District in immediately available federal funds, plus accrued interest to the Date of Delivery (if any), less the amount of the Good Faith Deposit. The Date of Delivery shall occur within 30 days after the Bid Date. Payment of the purchase price for the Bonds shall be made to the District by wire transfer on the Date of Delivery in immediately available federal funds in the Office of the Treasurer of Snohomish County, as ex officio treasurer of the District, in Everett, Washington. The District will furnish to the Successful Bidder one transcript of proceedings in CD form; additional transcripts will be furnished at the Successful Bidder’s cost. CUSIP Numbers It is anticipated that CUSIP identification numbers will be printed on the Bonds; however, neither the failure to print CUSIP numbers on any Bond nor any error with respect thereto will constitute cause for failure or refusal by the Successful Bidder thereof to accept delivery of and pay for the Bonds. The Successful Bidder is responsible for obtaining CUSIP numbers for the Bonds, and the CUSIP Service Bureau charge for assignment of those numbers shall be the responsibility of and shall be paid for by the Successful Bidder. Costs The District will pay the costs of printing the Bonds, if any, the fees and charges of the Financial Advisor, Bond Counsel, the costs of obtaining ratings on the Bonds from Moody’s Investors Service (“Moody’s”), the costs of electronically posting and printing the Official Statement, and other costs related to the issuance, sale and delivery of the Bonds. The Successful Bidder shall pay the costs of qualifying the Bonds for sale in the various states chosen by the Successful Bidder, all advertising expenses in connection with the public offering of the Bonds, the fees and disbursements of underwriter's counsel, if any, and all other expenses incurred by the Successful Bidder in connection with the public offering and distribution of the Bonds. Bond Counsel Opinion The approving legal opinion of Bond Counsel will be provided to the Successful Bidder for the Bonds on the Date of Delivery in substantially the form attached to the Preliminary Official Statement in Appendix A. Bond Counsel’s opinion will express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used in connection with the Bonds. Bond Counsel’s opinion will not be addressed to any Bond Insurer (a reliance letter may be delivered upon request), and will express no opinion considering the accuracy, completeness of sufficiency of the Preliminary Official Statement, final Official Statement, or other offering material relating to the Bonds, nor will there be an opinion of Bond Counsel relating to the undertaking of the District to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. Reoffering Price Certificate Upon award of the Bonds, the Successful Bidder for the Bonds must provide the District and Bond Counsel the initial reoffering prices at which each maturity of the Bonds is reasonably expected on the Bid Date to be sold to the public (the “Initial Reoffering Prices”), for the District’s inclusion in the final Official Statement for the Bonds. Before the

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Date of Delivery, the Successful Bidder for the Bonds shall furnish to the District and Bond Counsel a certificate in form and substance acceptable to Bond Counsel: (i) confirming the Initial Reoffering Prices for the Bonds, (ii) certifying that a bona fide offering of the Bonds has been made to the public (excluding bond houses, brokers and similar persons acting in the capacity of underwriters or wholesalers), (iii) stating the first price at which a substantial amount (at least 10%) of each maturity of the Bonds was sold to the public (excluding bond houses, brokers and other intermediaries), and (iv) if the first price at which a substantial amount of any maturity of the Bonds does not conform to the Initial Reoffering Price of that maturity, providing an explanation of the facts and circumstances that resulted in that nonconformity. Ratings Moody’s has assigned an underlying municipal bond rating of “Aa2” to the Bonds. Moody’s has also assigned its credit enhanced rating of “Aa1” to the Bonds, based upon the District’s participation in the Washington State School District Credit Enhancement Program. Continuing Disclosure In order to assist bidders in complying with paragraph (b)(5) of the Securities and Exchange Commission (“SEC”) Rule 15c2-12 (“Rule 15c2-12”), the District has entered into an undertaking to provide certain annual financial information and notices of the occurrences of certain events to the Municipal Securities Rulemaking Board (the “MSRB”). A description of this undertaking is set forth in the Preliminary Official Statement and will be set forth in the final Official Statement. See “CONTINUING DISCLOSURE” in the Preliminary Official Statement. See Appendix D in the Preliminary Official Statement attached hereto for a description of the State’s compliance with the State’s prior written undertakings under SEC Rule 15c2-12. Not Bank Qualified The District has not designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Internal Revenue Code of 1986, as amended. Official Statement The Preliminary Official Statement has been “deemed final” by the District for the purpose of the Rule 15c2-12, but is subject to revision, amendment and completion in a final Official Statement which the District will deliver at its own expense, to the Successful Bidder not later than seven business days after the District’s acceptance of the Successful Bidder’s bid. It is the District’s preference to use electronic distribution of the final Official Statement, but the District will provide without charge no more than 30 copies in printed form of the final Official Statement to the Successful Bidder for the Bonds. Additional copies will be provided at the Successful Bidder’s expense. The Successful Bidder for the Bonds also agrees: (i) to provide to the District, the Financial Advisor and Bond Counsel, in writing, within 24 hours of acceptance and award of bid, pricing and other related information, including the Initial Reoffering Prices of the Bonds, necessary for completion of the final Official Statement and the final tax certification, (ii) to disseminate to all members of the underwriting syndicate, if any, copies of the final Official Statement, including any amendments or supplements prepared by the District, (iii) to take any and all actions necessary to comply with applicable SEC and MSRB rules governing the offering, sale and delivery of the Bonds to ultimate purchasers, including without limitation, the delivery of a final Official Statement to each investor who purchases Bonds, and (iv) to file, or cause to be filed, within one business day following the receipt from the District, the final Official Statement with the MSRB. At the time of delivery of the Bonds, one or more officials of the District will furnish a certificate stating that to the best of his or her knowledge, this Official Statement (other than the information regarding DTC or the Washington State School District Credit Enhancement Program), as of its date and as of the date of delivery of the Bonds does not

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contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances in which they were made, not misleading. Additional Information Additional information regarding the details of the Bonds may be obtained from the Financial Advisor, Northwest Municipal Advisors, 11900 NE 1st Street, Suite 300, Bellevue, Washington 98005, telephone (425) 452-9550; e-mail: [email protected] or [email protected]). The Preliminary Official Statement, including this Official Notice of Sale, may be obtained from MuniOS, a product of ImageMaster, at www.munios.com ((800) 452-5152).

Dated: September 29, 2016.

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OFFICIAL STATEMENT

$52,185,000* Mukilteo School District No. 6 Snohomish County, Washington Unlimited Tax General Obligation Bonds, 2016

INTRODUCTION Mukilteo School District No. 6, Snohomish County, Washington (the “District”), a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the “State”), furnishes this Official Statement in connection with the offering of $52,185,000* aggregate principal amount of its Unlimited Tax General Obligation Bonds, 2016 (the “Bonds”). This Official Statement, which includes the cover page, the inside cover page and appendices, provides information concerning the District and the Bonds.

AUTHORIZATION The Bonds are issued pursuant to Resolution No. 15/2015-16 (the “Bond Resolution”), adopted by the District’s Board of Directors (the “Board”) on August 22, 2016, and the authority of the Washington Constitution and chapters 28A.530, 39.36, and 39.46 of the Revised Code of Washington (“RCW”).

The Bonds are also authorized pursuant to a favorable vote at an election held in the District on February 11, 2014, which authorized the District to issue $119,150,000 of unlimited tax general obligation bonds (the “Bond Authorization”). Final election results were as follows:

Number of Votes Percentage Yes 8,039 63.88% No 4,545 36.12 Total 12,584 100.00%

Unlimited tax general obligation bonds, such as the Bonds, require an approving vote, and any election to validate unlimited tax general obligation bonds must have a voter turnout of at least 40% of those who voted in the last State general election. Of those voting, at least 60% must vote in the affirmative.

The Bonds represent the second and final series of bonds issued under the Bond Authorization. The Unlimited Tax General Obligation Bonds, 2014 (the “2014 Bonds”), in the principal amount of $58,825,000 plus $1,175,000 of original issue premium generated by the sale of the 2014 Bonds and deposited into the District’s Construction Fund, counted toward the Bond Authorization. The Bonds, in the principal amount of $52,185,000* plus $6,965,000* of original issue premium generated by the sale of the Bonds and deposited into the District’s Construction Fund, will count towards the remaining Bond Authorization. Following the issuance of the Bonds, the District will have no remaining Bond Authorization (see “BOND INDEBTEDNESS – Future Financings” herein).

THE BONDS Principal Amount, Date, Interest Rates and Maturities The Bonds will be issued in the aggregate principal amount of $52,185,000*. The Bonds will be dated and bear interest from the Date of Delivery. The Bonds will mature on the dates and in the principal amounts and will bear interest (payable semiannually on June 1 and December 1, commencing June 1, 2017) until maturity or earlier redemption of the Bonds at the respective rates as set forth on the inside cover page of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. Principal of and interest on the Bonds will be payable by the Bond Registrar (defined below).

* Preliminary; subject to change.

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Bond Registrar and Registration Features Book-Entry System. The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co. as nominee for The Depository Trust Company (“DTC”). DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in denominations of $5,000 or integral multiples thereof within a single maturity (“Authorized Denominations”). The owners of any beneficial interest in the Bonds (“Beneficial Owners”) will not receive certificates representing their interest in the Bonds. See Appendix C, “BOOK-ENTRY SYSTEM” attached hereto. Bond Registrar. Principal of and interest on the Bonds will be payable by the fiscal agent of the State, currently U.S. Bank National Association (the “Bond Registrar”) (or such other fiscal agency or agencies as the Snohomish County Treasurer, as ex officio treasurer of the District (the “Treasurer”), may from time to time designate). So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer by the Bond Registrar to DTC, which, in turn, is obligated to remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners of the Bonds, as further described herein in Appendix C. Procedure in the Event of Revisions of Book-Entry Transfer System. If DTC resigns as the securities depository and the District is unable to retain a qualified successor to DTC, or the District has determined that the Bonds are to be in certificated form, the District will execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees, certificated Bonds in fully registered form, in Authorized Denominations. In the event the Bonds are transferred by the District in fully registered form, the Bonds may be paid by the Bond Registrar. Thereafter, the principal of the Bonds will be payable upon due presentment and surrender thereof to the Bond Registrar; interest on the Bonds will be payable by check or draft mailed to the persons in whose names such Bonds are registered (“Registered Owner”), at the address appearing upon the registration books (“Bond Register”) on the 15th day of the month preceding an interest payment date (a “record date”). The Bond Registrar shall not be obligated to register the transfer of or to exchange any Bond during the 15 days preceding any interest payment or principal payment date. The Bonds will be transferable as provided in the Bond Resolution. Redemption Provisions Optional Redemption. The Bonds maturing on or before December 1, 2025 are not subject to optional redemption prior to maturity. The Bonds maturing on or after December 1, 2026 are subject to redemption at the option of the District, prior to their stated maturity date at any time on or after June 1, 2026, as a whole or in part (within one or more maturities selected by the District and randomly within a maturity in such manner as the Bond Registrar shall determine), at the price of par, plus accrued interest, if any, to the date of redemption. Notice of Redemption (Book-Entry). So long as the Bonds are in book-entry only form, the Bond Registrar will notify DTC of an early redemption not less than 20 days and not more than 60 days prior to the date fixed for redemption, and will provide such information as required by a Blanket Issuer Letter of Representations from the District to DTC (“Letter of Representations”). Any notice of redemption may set forth the conditions that must be met prior to redemption and the District reserves the right to rescind any redemption notice as provided in the Bond Resolution. Notice of Redemption (Non Book-Entry). During any period in which the Bonds are not in book-entry only form, unless waived by any Registered Owner of the Bonds to be redeemed, official notice of any redemption of Bonds will be given by the Bond Registrar on behalf of the District by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 20 days and not more than 60 days prior to the date fixed for redemption, to the Registered Owners of the Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Registered Owners to the Bond Registrar. Partial Redemption of Bonds. Portions of the principal amount of any Bond, in Authorized Denominations, may be redeemed (but only to the extent those Bonds are otherwise subject to redemption). If less than all of the principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar, there will be issued to the Registered Owner, without charge therefor, a new Bond (or Bonds, at the option of the Registered Owner) of the same maturity and interest rate in any Authorized Denominations in the aggregate principal amount remaining unredeemed. Selection of Bonds for Redemption. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, selection of Bonds for redemption will be made in accordance with the Letter of Representations.

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Effect of Notice. On or prior to any redemption date, the District shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. The District retains the right to rescind any redemption notice and the related optional redemption of Bonds by giving notice of rescission to the affected registered owners at any time on or prior to the scheduled redemption date. Any notice of optional redemption that is so rescinded shall be of no effect, and the Bonds for which the notice of optional redemption has been rescinded shall remain outstanding. Unless the District has revoked a notice of redemption (or unless the District provided a conditional notice and the conditions for redemption set forth therein are not satisfied), official notice of redemption having been given as provided in the Bond Resolution, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the District shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Open Market Purchase The District reserves the right and option to purchase any or all of the Bonds in the open market at any time at any price acceptable to the District. Failure to Redeem Bonds If any Bond is not redeemed when properly presented at its maturity or date set for redemption, as applicable, the District will be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or date set for redemption until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the District’s Debt Service Fund and the Bond has been called for payment by giving notice of that call to the Registered Owner of each of those unpaid Bonds. Defeasance In the event that money and/or “Government Obligations” (as defined below) maturing at such time or times and bearing interest to be earned thereon in amounts (together with such money, if necessary) sufficient to redeem and retire part or all of the Bonds in accordance with their terms, are set aside in a special account of the District to effect such redemption and retirement, and such moneys and the principal of and interest on such Government Obligations are irrevocably set aside and pledged for such purpose, then no further payments need be made into the Debt Service Fund for the payment of the principal of and interest on the Bonds so provided for, and such Bonds shall cease to be entitled to any lien, benefit or security of the Bond Resolution except the right to receive the moneys so set aside and pledged, and such Bonds shall be deemed not to be outstanding. “Government Obligations” is defined in the Bond Resolution to have the meaning specified in RCW 39.53.010, as it may be amended from time to time, which currently means any of the following: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank system, the Export-Import Bank of the United States, Federal Land Banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or to the extent guaranteed as permitted under any other provision of State law.

PURPOSE AND APPLICATION OF BOND PROCEEDS Purpose The proceeds from the sale of the Bonds will be used to: (i) finance the costs of capital construction and capital improvements to the District’s educational facilities, including (a) construction of a new Kindergarten/Early Learning Center at Fairmont Elementary School; (b) replacing and expanding music facilities and modernizing gym and pool buildings at Olympic View Middle School; and (c) technology upgrades; and (ii) pay the costs of issuing, selling and delivering the Bonds.

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Sources and Uses of Funds The proceeds from the Bonds are estimated to be applied as follows: Sources of Funds Par Amount of Bonds $ Original Issue Premium Total Sources of Funds $

Uses of Funds Deposit to the Construction Fund $ Issuance Costs (1) Deposit to Debt Service Fund Total Uses of Funds $ ______(1) Includes bond rating fee, underwriter’s discount, Financial Advisor’s fees, Bond Counsel’s fees, costs of distributing the Preliminary and Final Official Statements, contingency and other costs incurred in connection with the issuance of the Bonds.

SECURITY FOR THE BONDS General The Bonds are general obligations of the District. For as long as the Bonds are outstanding, the District has irrevocably pledged to levy property taxes annually without limitation as to rate or amount on all of the taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds, and the full faith, credit and resources of the District have been pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal and interest. The foregoing excess property taxes, when collected, are required to be applied solely for the purpose of payment of principal of and interest on the Bonds and for no other purpose until the Bonds have been fully paid, satisfied and discharged. The District may, subject to applicable laws, but is not obligated to, apply other money available to make payments with respect to the Bonds and thereby reduce the amount of future tax levies for such purpose. Bond owners do not have a perfected security interest in particular revenues or assets of the District. The Bonds do not constitute a debt or indebtedness of Snohomish County (the “County”), the State or any political subdivision thereof, other than the District. Washington State School District Credit Enhancement Program Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the State under the provisions of the Washington State School District Credit Enhancement Program, as described in Appendix D attached hereto.

BOND INDEBTEDNESS The power of the District to contract debt of any kind is controlled and limited by State law. All debt must be set forth in accordance with detailed budget procedures and paid for out of identifiable receipts and revenues. The budget must be balanced for each fiscal year. It is unlawful for an officer or employee of the District to incur liabilities in excess of budgetary appropriations. Authorization of Total Debt A school district may incur total indebtedness, including voter-approved debt, not to exceed 5% of the assessed value of taxable property (the “Bond Assessed Value), which includes all real and personal property (as described within “DISTRICT FUNDING SOURCES – Valuation and Assessments for Property Tax Purposes”) within the school district. Following issuance of the Bonds, the District will have $127,455,000* of voter approved debt representing

* Preliminary; subject to change.

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0.85%* of the District’s 2016 collection year Bond Assessed Value of $15,078,554,946. The District has no non-voter approved debt outstanding. Authorization of Voted Debt Any election to authorize such debt must have a voter turnout of at least 40% of those who voted in the last State general election and, of those voting, 60% must vote in the affirmative. The District’s bonds met all voter approval criteria (see “AUTHORIZATION” herein). Authorization of Non-Voted Debt Washington municipal corporations, including the District, are authorized under State law to borrow money and issue short-term obligations, the proceeds of which may be used for any lawful purpose. Short-term obligations may be issued in anticipation of the receipt of revenues, taxes, or grants or the sale of the bonds. These short-term obligations shall be repaid out of money derived from the source or sources in anticipation of which they were issued or from any money legally available for this purpose. RCW 28A.530.080 authorizes school districts, to incur long-term indebtedness without a vote of the people through the issuance of bonds payable out of the district's ordinary revenues. Such bonds may be issued to acquire real or personal property or make structural changes and additions to school facilities, including energy conservation improvements. School districts also are authorized to incur debt by purchasing real or personal property pursuant to a conditional sale (installment purchase) contract. In an emergency, school districts may, by action of the board of directors, authorize indebtedness outside the current budget. All expenditures for emergency purposes shall be paid by warrants from any available money in the fund properly chargeable with such expenditures. If there is insufficient money on hand in the fund, the warrants become registered interest-bearing warrants. In adopting the budget for any fiscal year, the school district’s board will appropriate funds to retire any outstanding registered warrants issued since the adoption of the last preceding budget. The amount of all non-voted debt (including short-term obligations, conditional sale contracts, warrants and bonds) may not exceed 3/8ths of 1 percent (0.375%) of the value of Bond Assessed Value. The District currently has no non- voted debt outstanding. General Obligation Debt Capacity Bond Assessed Value (2016 Collection Year) (1) $ 15,078,554,946

Total General Obligation Debt Capacity (5% of Assessed Valuation) $ 753,927,747 Less: Outstanding Unlimited Tax General Obligation Bonds (75,270,000) Less: The Bonds* (52,185,000) Less: Outstanding Non-voter Approved Debt (0) Plus: Cash and Investments in Debt Service Fund (2) 7,048,724 Remaining Total Debt Capacity $ 633,521,471 Non-voted General Obligation Debt Capacity (0.375% of Assessed Valuation) $ 56,544,581 Less: Outstanding Non-voter Approved Debt (0) Remaining Non-voted Debt Capacity $ 56,544,581 ______* Preliminary; subject to change. (1) Bond Assessed Value within the District is based on 100% of estimated value, plus Timber Assessed Value, less senior citizen exemptions. (2) As of August 19, 2016.

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Outstanding Long Term Debt The District has the following outstanding long term debt (including the Bonds). Outstanding Long Term Debt Date of Amount Amount Unlimited Tax General Obligation Bonds Dated Date Maturity Issued Outstanding UTGO Bonds, 2014 5/7/2014 12/1/2033 $ 58,825,000 $ 52,500,000 UTGO Ref. Bonds, 2015 4/29/2015 12/1/2019 28,910,000 22,770,000 The Bonds* 10/18/2016 12/1/2033 52,185,000 52,185,000 Total Voted Debt Outstanding $141,195,000 $127,455,000 ______* Preliminary; subject to change.

Source: The District The District does not have any limited general obligation bonds or financing contracts outstanding. Short Term Borrowing The District does not currently have any outstanding short term borrowing commitments. Unlimited Tax General Obligation Debt Service Requirements The following table shows debt service on the District’s unlimited tax general obligation bonds, including the Bonds. Summary of Unlimited Tax General Obligation Debt Service Requirements

Calendar Outstanding The Bonds Total Year Debt Service (1) Principal Interest Debt Service 2016 $ 9,133,500 2017 8,614,900 2018 8,098,500 2019 7,688,500 2020 2,055,250 2021 2,055,250 2022 2,055,250 2023 2,055,250 2024 2,055,250 2025 2,055,250 2026 6,530,250 2027 7,636,000 2028 8,802,400 2029 5,793,000 2030 6,967,600 2031 8,203,200 2032 9,510,200 2033 9,448,400 Total $ 108,757,950 ______(1) Includes debt service paid year to date. Note: Numbers may not add due to rounding. Source: The District Debt Payment Record The District has always promptly met principal and interest payments of its outstanding obligations when due. Additionally, no refunding bonds have been issued for the purpose of avoiding an impending default.

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Future Financings Upon the issuance of the Bonds, the District will have no more remaining Bond Authorization. Therefore, the District does not anticipate issuing debt within the next 24 months. Net Direct and Estimated Overlapping Debt A number of other taxing districts are located within all or a portion of the District, including cities and towns, ports and other special purpose districts. Taxable property located within the District is subject to property taxes imposed by these overlapping taxing districts including the District. The following tables set forth the outstanding principal amount of general obligation debt of the District, adjusted to reflect the issuance of the Bonds (the “Direct Debt”), and the outstanding principal amount of general obligation debt incurred by other governmental entities whose taxing jurisdiction includes a part or all of the District and the estimated portion of that debt which is applicable to the property within the District (the “Overlapping Debt”). The District has obtained the information regarding the Overlapping Debt from the overlapping taxing districts, the County and other sources believed to be reliable, but has not independently verified the accuracy or completeness of such information. No person should rely upon such information as being accurate or complete. Furthermore, the amounts described below relate only to general obligation bonds issued by the various taxing districts and may not reflect certain leases or other contracts that may constitute indebtedness under State law. The table below does not reflect any special revenue obligations (e.g., utility revenue bonds) issued by any taxing district. The taxing districts listed below may have issued additional general obligation debt since the dates indicated and may have plans for future general obligation debt issuances. See “DISTRICT FUNDING SOURCES – Overlapping Taxing Districts – Taxing Authority” herein. Overlapping Debt Calculation (August 19, 2016)

2016 Collection Year Percent Outstanding General Estimated Assessed Value Overlapping Obligation Debt Overlapping Debt Snohomish County (1) $96,080,092,915 15.74% $410,279,775 $ 64,596,718 City of Everett 13,726,861,571 44.51 46,650,000 20,764,406 14,850,899,018 50.85 18,220,000 9,264,818 City of Mukilteo 4,043,482,123 100.00 9,650,000 9,650,000 City of Mill Creek 3,056,655,758 1.07 117,575 1,256 Total: $484,917,350 $104,277,199 ______(1) Snohomish County’s debt excludes proprietary-type debt, debt financed from component units, public facilities district debt financed from special taxes and hotel/motel tax-financed debt.

Source: Snohomish County Assessor, Snohomish County Treasurer, and individual entities

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Debt Ratio Calculation

Bond Assessed Value (2016 Collection Year) $15,078,554,946 District Population (1) 98,345 Debt Information Direct Debt (2) $ 127,455,000 Less: Cash and Investments ( 7,048,724) Net Direct Debt (2) 120,406,276 Estimated Overlapping Debt 104,277,199 Total Direct and Overlapping Debt $ 224,683,476 Ratios Net Direct Debt to 2016 Bond Assessed Value 0.80% Net Direct & Overlapping Debt to 2016 Bond Assessed Value 1.49% Per Capita 2016 Bond Assessed Value $ 153,323 Per Capita Net Direct Debt $ 1,224 Per Capita Net Direct and Overlapping Debt $ 2,285 ______(1) Washington State Office of Financial Management 2015 estimate. (2) Includes the Bonds and the District’s outstanding unlimited tax general obligation bonds. See “BOND INDEBTEDNESS– Outstanding Long Term Debt” herein.

DISTRICT FUNDING SOURCES The District’s primary sources of revenue for the General Fund are state funds, local funds and federal funds. State funding represents 68% of the District’s operating revenues for the General Fund, local tax receipts represent 23% and federal funding represents 7% in the fiscal year ending August 31, 2015. In addition, the District receives income from local non-tax sources, including tuition, sales of goods and supplies, food service, investment earnings, fines and damages, rentals and other miscellaneous sources. These additional revenues comprised 2% of total funding. Federal Funding The District receives federal money for a variety of programs. Principal of and interest on the Bonds are payable from excess property tax levies unlimited as to rate or amount. Consequently, changes in federal funding due to programmatic alterations, loss of funding due to federal sequestration, or any other reason, is not expected to impair the security for the Bonds. State Funding The Washington Basic Education Act of 1977 (the “Act”) provides for the full funding of what the Act refers to as “basic education,” or the regular program, and of vocational education, according to statutory formulas, and for operational costs for transportation, the purchase of transportation equipment, and programs for the handicapped by the State. Legislation passed in 1979 recognized the State’s responsibility to fund bilingual and remediation programs. The Washington State Legislature (the “Legislature”), at its discretion, may provide funds for other special programs, including, but not limited to, vocational technical institutes, gifted education and others. State funding for school districts is provided through the general apportionment formula (a/k/a the Basic Education Allocation) and funds basic education as well as a number of non-basic education adjustments. The amount received by each school district varies based on certain characteristics. At each regular session in an odd-numbered year, the Legislature is required to appropriate money to the Office of the Superintendent of Public Instruction (“OSPI”) (i) from the State General Fund for the current use of the common schools during the ensuing biennium, and (ii) from the Education Construction Fund for the support of capital improvements. Basic Education Allocation. The Basic Education Allocation is reviewed biennially by OSPI and the governor of the State (the “Governor”). Pursuant to RCW 28A.150.260, the Governor shall, and OSPI may, recommend to the Legislature a formula based on a ratio of students to staff. Once the Legislature adopts a formula it is used for the distribution of a basic education allocation for each annual average full time equivalent student enrolled in a common school. In the event the Legislature rejects the distribution formula recommended by the Governor, without adopting a new distribution formula, the distribution formula for the previous school year will remain in effect. In the event of

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an unforeseen emergency, in the nature of either an unavoidable cost to a district or unexpected variation in anticipated revenues to a district, OSPI is authorized, for a period of time not to exceed two years, to make such an adjustment in the allocation of funds. An objective of the Basic Education Allocation is to equalize educational opportunities among the State’s public school districts. In the 2009-11 biennium, the Legislature enacted two significant bills to redefine basic education and restructure K- 12 funding formulas. The first was ESHB 2261 (Chapter 548, Laws of 2009) which added programs to the definition of basic education — including the program for highly capable students and phasing in all-day kindergarten. ESHB 2261 increased the number of instructional hours, increased the minimum number of credits for high school graduation, and changed the system for funding student transportation. ESHB 2261 also created the framework for a new K-12 funding allocation formula based on prototypical schools. Changes took effect September 1, 2011 and most enhancements are to be phased in by 2018 on a schedule set by the Legislature. The second bill, SHB 2776 (Chapter 236, Laws of 2010), enacted the funding formulas for the new prototypical schools format at levels that represented what the State was spending on basic education at the time. SHB 2776 set targets for class-size reduction in the lower grades and established a timeline for phasing in certain enhancements to basic education and the new funding levels. Under this new funding structure, effective September 1, 2011, the general apportionment formula follows the prototypical school model. Prototypes illustrate a level of resources to operate a school of a particular size with particular types and grade levels of students. Allocations to school districts are based on actual full-time equivalent (“FTE”) student enrollment in each grade in a district, adjusted for small schools and reflecting other factors in the State's biennial budget. Under SHB 2776, the Legislature designed a funding formula that allocates funding in three primary groups: schools, district-wide support, and central administration. In addition to the Basic Education Allocation, eligible school districts have received local assistance funds from the State under the Local Effort Assistance Program (“LEA”). The LEA was originally implemented in 1989 and seeks to equalize the tax burden by providing matching state funds to districts with low property values and high levy rates. Eligible school districts are those school districts with an assessed value (for excess levy purposes) per pupil lower than the State average. For calendar year 2016, the District is not eligible for LEA funds. Beginning in 2001 portions of the state property tax and state lottery revenues were dedicated to the Student Achievement Fund (“SAF”), per Initiative 728 (“I-728”). I-728 directed that, beginning in 2004, school districts receive SAF allocations in the amount of $450 per FTE student, with the amount to increase by designated amounts in proceeding years. The 2003 Legislature revised the per-pupil payments to a lower amount, to increase in subsequent years. In 2009-11 payments were again reduced – from planned per-pupil allocations of $458.10 and $463.58 in school years 2009-10 and 2010-11, respectively, to $131.20 and $99.32. The I-728 payments were eliminated for the 2010-11 school year. I-728 (including SAF) was repealed by the Legislature in 2012 because supplementary I-728 funding would be unnecessary as the Legislature began to redefine and enhance basic education and phase in new funding formulas with the enactment of ESHB 2261 and SHB 2776. Passed by voters in November 2000, Initiative 732 (“I-732”) required the State to provide annual cost-of-living increases for Washington’s public school employees. In 2003 and again in 2009 through 2015, the Legislature suspended the inflation increases in I-732. For the 2015-2017 biennium, the Legislature did not suspend inflation increases in I-732 going forward. In addition, the Legislature also approved a temporary K-12 public schools salary increase. The Legislature also provides some funding for staffing in K-4 classrooms beyond basic education. All districts receive this enhanced allocation, except in the 2009-13 biennia. Constitutional Challenge to State Funding of K-12 Education. In 2007, a coalition of parents, students, school districts, teachers’ unions and other nonprofit organizations, filed a lawsuit alleging that the State’s approach to funding local school districts does not satisfy the State’s obligation under Article IX of the Washington State Constitution, which provides that it is the “paramount duty” of the State to make “ample provision” for education. On February 24, 2010, the King County Superior Court entered its Final Judgment in McCleary et al. v. State (Cause No. 07-2-02323-2 SEA) (“McCleary”), ruling that the State is currently failing to fulfill this constitutional duty and ordering the Legislature to address the issue. The State appealed to the Washington State Supreme Court, and on January 5, 2012, the Court agreed with the decision of the King County Superior Court and ruled that the State is currently failing to fulfill this constitutional duty to amply fund education. The Supreme Court stated that if the Legislature followed through on its prior legislative commitments to enact and fund certain education initiatives by

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2018, it will have discharged its constitutional duties. The Court reserved jurisdiction to enforce its ruling and required the State to provide an annual report summarizing actions taken to achieve compliance with the Constitution within 60 days following the adoption of the state budget through 2018. The 2013 Legislature provided a down payment in an effort to comply with McCleary. Funding was provided to restore previously reduced State salary allocations for K-12 employees (1.9 percent for classified and certificated instructional staff and 3.0 percent for certificated administrative staff for 2011-12 and 2012-13 school years). However, I-732 (annual cost of living adjustments) remains suspended. The 2013 State operating budget increased allocations to districts for Maintenance, Supplies and Operating Costs and provided targeted funding enhancements for high poverty schools to reduce class sizes in kindergarten and first grade. In January 2014, the Court ordered the Legislature to present a complete plan for funding McCleary. After the 2014 legislative session, the Legislature provided a report to the Court, but it did not include a complete funding plan. Plaintiffs asked the Court to impose sanctions on the Legislature, including ordering the Legislature to pass certain education bills, invalidating education spending cuts, and holding the Legislature in contempt of court. In June 2014, the Court ordered the State to appear before it and explain why sanctions should not be imposed. In September 2014, the Court held the Legislature in contempt for its failure to put forth a complete funding plan. The Court gave the Legislature through the 2015 legislative session to layout its plan to fully fund basic education by the 2017-18 school year. The Legislature increased funding for K-12 education in the 2015 legislative session. On August 13, 2015, the Court found that the Legislature had not achieved full constitutional compliance and imposed sanctions in the form of a $100,000 per day fine. The Legislature did not call a special session in response and the sanctions continue to accrue. In May 2016, the Legislature filed a post-2016 legislative session progress report with the Court. The Legislature claimed that it had complied with the Court’s order to produce a plan for full funding of basic education by 2018 and, therefore, the sanctions and contempt order should be lifted. The Legislature also noted that while it had not achieved full constitutional compliance, it had made significant progress and was poised to achieve compliance by 2018. In response, Plaintiffs claimed that the Legislature did not produce a cognizable plan and that the additional funding the Legislature has provided for education is a fraction of what is needed. Plaintiffs argue for continued and increased sanctions. In July 2016, the Court ordered the parties to appear in Court on September 7, 2016, to answer specific questions on the Legislature’s progress toward fully funding basic education and sanctions. The Court noted that the 2017 legislative session is the last opportunity prior to the Court’s deadline for the Legislature to enact laws to comply with its constitutional duties. Superintendent of Public Instruction v. State and Everett, Seattle, Bellevue, Spokane, Tacoma, Puyallup and Evergreen School Districts. In July 2016, the State Superintendent of Public Instruction filed a lawsuit (Cause No. 16- 2-17134-6 SEA) alleging that Everett, Seattle, Bellevue, Spokane, Tacoma, Puyallup and Evergreen school districts unlawfully used local property tax levies to fund supplemental salaries for employees. The lawsuit also lists the State as a defendant. The lawsuit alleges that the “action of local districts in raising levies to fund these supplemental contracts enables the Legislature to evade its duty to amply fund education” as required by the McCleary decision. The complaint seeks relief including a declaration by the court that the use of local levies to pay for supplemental salaries is impermissible under State law, and an injunction prohibiting school districts from using local levies for such purpose. The District is not a named defendant in the lawsuit. The District cannot predict what the outcome of the lawsuit will be, or what effect (if any) the any decision or subsequent events may have on the District’s finances. The State’s largest General Fund expenditures are for education, social and health services and corrections. Approximately 47 percent of the State’s General Fund budget for 2015-2017 is for supporting public schools. The State’s General Fund has experienced revenue shortfalls, resulting in reduced funding for public schools during the 2009-2011 and 2011-2013 bienniums. The State’s 2011-2013 biennial budget for public schools was reduced by approximately 11.6 percent from the maintenance level budget (estimated cost of providing currently authorized services). In response to the Supreme Court’s McCleary decision, the Legislature increased funding in the 2013-2015 State operating budget, adopted on June 28, 2013, for K-12 public schools by $1.6 billion as compared to the 2011- 2013 biennium funding. This represented an increase of approximately 11.4 percent. The Legislature increased funding in the 2015-2017 State operating budget, adopted on June 29, 2015, for K-12 public schools by $2.8 billion as compared to the 2013-2015 biennium funding. This represents an increase of approximately 19.0 percent as compared to the 2013-2015 biennium. For the 2015-2017 biennium, the Legislature focused enhancements concerning: (i) smaller early elementary class size; (ii) expanding full-day kindergarten; (iii) a temporary K-12 public schools salary increase in addition to the I-732 cost-of-living adjustment; (iv) materials, supplies and operating costs

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(MSOC) as required by HB 2776; and (v) increasing allocations for Early Childhood Education and Assistance and Early Start/Achievers programs. On March 29, 2016 the Washington Legislature adopted a supplemental budget (the “Supplemental Budget”). The Supplemental Budget adds approximately $191 million of new appropriations to the current 2015-2017 State operating budget. The Supplemental Budget provided approximately $15 million in K-12 education enhancements, which include, among others: (i) recruiting and retaining teachers; (ii) supporting charter schools; (iii) implementing a state- wide initiative to increase the number of qualified individuals for teachers; and (iv) supporting foster youth educational outcomes. Local Funding Local property taxes, the most significant local revenue source, provide money that enhances the State-funded Basic Education Allocation. Pursuant to Article VII, Section 2(a) of the State Constitution and RCW 84.52.053, school districts may, upon voter approval, impose excess property tax levies for various purposes, including maintenance and operation (“M&O Levies”), capital projects (“Capital Project Levies”), repayment of bonds issued to finance capital projects (“Bond Levies”) and acquisition of student transportation vehicles (“Transportation Vehicle Levies”). Historically, each of these excess property tax levies were required to be approved by 60% of those voting and the number of yes votes must equal or exceed 40% of those voting in the last State general election. Commencing in 2008, the voter approval requirement for M&O, Capital Projects and Transportation Vehicle Levies became a simple majority. For Bond Levies, the voter approval requirement did not change. Bond Levies are dedicated exclusively to the repayment of the bonds for which the taxes were approved and those tax proceeds cannot be diverted to other purposes. Therefore, a change in M&O, Capital Projects and Transportation Vehicle Levies will not affect the District’s levy of excess property taxes for the repayment of the Bonds. M&O Levies. The State Constitution allows school districts to submit to voters M&O Levies for up to four years. In 1977, when the State assumed additional responsibility for funding schools, the Legislature limited school district M&O Levy authority by passing the levy lid law. This law establishes the maximum amount of a school district’s M&O Levy for a calendar year. In 1979, the levy lid law took effect, limiting excess General Fund revenue to 10 percent of the school district’s basic education allocation for the school year. The law allowed districts that historically relied on M&O Levies to be grandfathered in and exceed the 10 percent limit. In 1987, the levy lid limit was increased to 20 percent. In 1994, the levy base increased to 24 percent. RCW 84.52.0531 outlines the process for deriving a district’s levy limit. The Legislature provided funding for additional staffing in K-4 classrooms beyond basic education through 2008. This funding was eliminated for both the 2009-2011 biennium and the 2011-2013 biennium. The Legislature, in 2010, approved Laws of 2010, Chapter 237 (“2010 Supplemental Levy Act”), enhancing the levy authority of school districts. For levy collections through calendar year 2017 a district’s levy base will include the amounts the district would have received from State funding for I-728 and I-732. Districts are allowed to include in their levy bases any cuts to the K-4 class-size funding. The 2010 Supplemental Levy Act also amended RCW 84.52.053 to permit additional levies to be authorized by voters during the term of the levy collection period to provide for subsequently- enacted increases affecting a school district’s levy base or maximum levy percentages. The requirement that OSPI must offset the amount added to a district’s levy base is removed. The levy lid is increased by four percent, including districts, which are currently grandfathered above 24 percent, such as the District which has a levy limit of 28.97 percent. For non-grandfathered districts a district’s maximum levy percentage is increased from 24 percent to 28 percent in 2011 through 2017 and returns to 24 percent every year thereafter. The LEA percentage is increased to 14 percent for calendar years 2011 through 2017 and returns to 12 percent in calendar year 2018. The District cannot predict what actions the Legislature might take, if any, regarding the expiration of the maximum levy lid on LEA percentages. On February 11, 2014, the voters of the District approved a four-year M&O levy in the amount of $40,200,000 for collection in 2015, $42,200,000 for collection in 2016, $43,200,000 for collection in 2017 and $44,200,000 for collection in 2018. The District collects the lesser of the OSPI calculated maximum and the voter-approved M&O levy amount. For collection in the 2016 tax year, the OSPI maximum is $42,808,298, therefore the District will collect the voter- approved maximum of $42,200,000.

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By law, taxes levied to pay principal of and interest on unlimited tax general obligation bonds, such as the Bonds, are not available for any other use. Thus, any possible decline in the District’s M&O Levy would not impair the security of the Bonds. Transportation and Capital Project Levies. One- and two-year Transportation Vehicle Levies and one- to six-year Capital Projects Levies may also be authorized by a school district’s voters (RCW 84.52.053 and the State Constitution). These types of levies require a simple majority approval by the District voters. The levy lid lift described previously does not apply to Capital Projects or Transportation Vehicle Levies. In February 2010, the voters of the District approved a six-year Capital Projects levy in the amount of $2,000,000 each year for collection in 2011 and 2012, and $4,000,000 each year for collection in 2013 - 2016. In February 2016, the voters of the District approved a six-year Capital Projects levy in the amount of $4,000,000 each year for collection in 2017 and 2018, and $3,000,000 each year for collection in 2019 - 2022. The following table shows the District’s excess property tax levy rates and dollar amounts levied for the last five years. Ad Valorem Levy Amounts and Rates of the District Levy Amount Collection Capital Year M&O Projects Transportation Bond Total 2016 $42,276,638 $4,012,920 -- $9,200,000 $55,489,559 2015 40,215,655 4,002,217 -- 15,808,000 60,025,871 2014 36,592,658 7,210,700 -- 4,986,000 48,789,359 2013 35,721,534 7,209,022 $3,000,000 (1) 5,552,000 51,482,556 2012 34,420,766 5,209,671 -- 15,321,000 54,951,437

Levy Rate (per $1,000 of assessed value) Collection Capital Year M&O Projects Transportation Bond Total 2016 $2.8038 $0.2661 -- $0.6101 $3.6800 2015 2.8989 0.2885 -- 1.1395 4.3269 2014 2.9103 0.5735 -- 0.3965 3.8804 2013 3.1291 0.6315 $0.2628 (1) 0.4863 4.5097 2012 2.9326 0.4439 -- 1.3053 4.6817 ______(1) Transportation levy for funding new school buses approved at the November 2012 election. Source: Snohomish County Assessor and Treasurer Valuations and Assessments for Property Tax Purposes The Snohomish County Assessor, or equivalent thereof (the “Assessor”), determines the value of all real property (including all land, buildings, structures and improvements to land) and personal property (including machinery and equipment, fixtures, furniture and other items that are movable in nature) throughout the County that is subject to ad valorem taxation, except certain utility properties which are valued by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the State Department of Revenue. For tax purposes, the assessed value of property is set at 100% of its actual value. Three approaches may be used to determine real property value: market data, replacement cost and income generating capacity. All property in the County is subject to annual property valuation and an on-site revaluation every six years. The property is listed by the Assessor on a tax roll at its current assessed value and the tax roll is filed in the Assessor’s office. The Assessor’s determinations are subject to revision by the County Board of Equalization and, for certain property, subject to further revision by the State Board of Equalization. After all administrative procedures are completed, the County receives the Assessor’s final certificate of assessed value of property within the County.

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Property Tax Collection Procedures Property taxes are levied in specific amounts and the rates for all taxes levied for all taxing districts in the County are determined, calculated and fixed by the Assessor based upon the assessed valuation of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district upon a tax roll which contains the total amount of taxes to be so levied and collected. The tax roll is delivered to the Treasurer by January 15 of each year, who creates a tax account for each taxpayer and is responsible for the collection of taxes due to each account. All such taxes are due and payable on the 30th of April of each year, but if the amount due from a taxpayer exceeds $50, one-half may be paid then and the balance no later than October 31 of that year. Delinquent taxes are subject to interest at the rate of 12% per year computed on a monthly basis from the date of delinquency until paid. In addition, a penalty of 3% will be assessed on June 1st of the year in which the tax was due and 8% on December 1st of the year due. All collections of interest on delinquent taxes will be credited to the County’s current expense fund. The method of giving notice of payment of taxes due, the Treasurer’s accounting for the money collected, the division of the taxes among the various taxing districts, notices of delinquency, and collection procedures are all covered by detailed statutes. Tax Liens and Foreclosure Property taxes and all charges and expenses relating to the taxes constitute a statutory lien on the property taxed. The lien attaches to the property from and including January 1 in the year in which the tax is levied, and is discharged only when the taxes are paid. The lien for ad valorem property taxes on personal property, which have been levied prior to the filing of federal tax liens, is prior to such federal tax liens. In addition, a federal civil judgment lien (but not a federal tax lien) is senior to real property taxes that are incurred after the judgment lien has been recorded. In other respects, and subject to the “Homestead Exemption,” the lien for delinquent property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law the Treasurer may not commence foreclosure of a tax lien on real property until three years have passed since the first delinquency. The State’s courts have not decided whether the Homestead Law (chapter 6.13 Revised Code of Washington (“RCW”)) may give the occupying homeowner a right in the forced sale of the family residence for delinquent general property taxes to retain the first $125,000 of proceeds of the sale (see Algona v. Sharp, 30 Wn. App. 837, 638 P.2d 627 (1982), holding the homestead right superior to liens for local improvement district assessments). The United States Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the State Attorney General has taken the position that it does not. Tax Collections The following table shows the tax collection record of the District for the last five full years and the year in progress. Tax Collection Record Bond Collected as of Collection Assessed Tax Collected Year of Levy July 31, 2016 Year Valuation Levy Amount Percent Amount Percent 2016 (1) $15,078,554,946 $55,489,519 $29,065,286 52.38% $29,065,286 52.38% 2015 13,872,516,158 60,025,866 59,280,004 98.76 59,795,835 99.62 2014 12,573,391,213 48,789,358 48,705,931 99.83 48,705,931 99.83 2013 11,415,917,653 51,521,460 50,954,786 98.90 51,496,572 99.95 2012 11,737,418,307 54,995,315 53,968,979 98.13 54,972,295 99.96 2011 12,779,055,519 55,067,980 53,954,991 97.98 55,050,267 99.97 ______(1) In process of collection. Source: Snohomish County Assessor and Treasurer

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Overlapping Taxing Districts – Taxing Authority Generally, most Washington municipalities (or “taxing districts”) have the authority to impose two types of property tax levies: regular levies and excess levies. Regular property tax levies are imposed without a vote of the people and may be used to pay principal of and interest on non-voted general obligations, for costs of maintenance and operation, or for any other lawful purpose. Washington school districts, however, do not have authority to impose regular property tax levies. All school district levies are special excess property tax levies, which may be imposed only with voter approval.

The 2016 combined representative regular and excess property levy rates for levy code 00025 of Snohomish County for the District and the various taxing districts that overlap the District, as well as the statutory levy authority of each type of potential overlapping taxing district are listed below. Levy code 00025 does not include all of the property within the District; as a result, additional taxing districts in the County, not listed below, levy taxes within the District.

Representative Levy Rates Statutory Levy Authority Per $1,000 Per $1,000 of Assessed Value of Assessed Value Snohomish County $0.895 $1.800(2) Snohomish County (Conservation Futures) 0.038 0.0625 County (Road Levy) n/a (1) 2.25 Fire Protection District n/a (1) 1.50 City of Everett 2.596 3.375 City of Everett (EMS) 0.472 n/a(3) Cities and Towns n/a 0.225(4) Port of Everett 0.316 0.450(5) State Schools 2.124 3.600(6) The District 3.680 n/a Total for Snohomish County $10.120 Levy code 00025: (7) (1) Snohomish County levy code 00025 is included within the incorporated portion of the County and therefore does not have a county road levy. Additionally, it does not contain a fire district. (2) Pursuant to RCW 84.52.043(1), a county may increase its levy from $1.80 per $1,000 to a rate not to exceed $2.475 per $1,000 for general county purposes if (i) the total levies for both the county and any road district within the county do not exceed $4.05 per $1,000 and (ii) no other taxing district has its levy reduced as a result of the increased county levy. (3) Emergency Medical Services (“EMS”) levies must be approved by a supermajority of the voters every six or ten years or, if permanent, must be subject to referendum. (4) RCW 41.16.060. To be used for pension funding purposes, if required, otherwise this tax may be levied and used for any other municipal purpose. (5) Port districts are authorized to impose independent $0.45/$1,000 levies under RCW 53.36.020, 53.36.070, 53.36.100, and 53.47.040, after complying with various voter approval, notice, public hearing, or other requirements that differ depending on the statute. Port district levies are outside of the aggregate rate limitations. (6) RCW 84.52.043(1). The levy by the State shall not exceed $3.60 per $1,000 assessed value adjusted to the State equalized value in accordance with the indicated ratio fixed by the State Department of Revenue to be used exclusively for the support of the common schools. (7) Numbers might not add due to rounding. Source: Snohomish County Assessor’s Office

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Major Taxpayers The following table lists the largest taxpayers within the District, based on their 2016 Bond Assessed Value. Percent of 2016 Collection District Year Assessed Assessed Taxpayer Business Valuation Valuation The Boeing Company Aerospace $ 2,544,551,631 16.88% Fluke Electronics Corp. Electronics 90,378,950 0.60 RREEF Management Co. Real Estate 65,752,000 0.44 Travis Business Park LLC Business Park 59,698,600 0.40 Grove Plaza LLC Apartments 55,130,700 0.37 Stockpot Inc. Food Services 52,296,868 0.35 Prime Catalina Merrill Creek LLC Apartments 49,484,892 0.33 Strata Fulton LLC Apartments 48,218,500 0.32 Harbour Pointe Apartments WA LLC Apartments 48,139,582 0.32 SCG Atlas Bella Terra LLC Apartments 43,343,288 0.29 Subtotal – District’s Ten Largest Taxpayers $ 3,056,995,011 20.27%

All Other District Taxpayers $12,021,559,935 79.73%

Total District Taxpayers $15,078,554,946 100.00% ______Source: Snohomish County Assessor Limitations on Regular Property Tax Levies of Overlapping Taxing Districts General. Regular property tax levies are subject to statutory and constitutional limitations as to rate and amount. The information in this section is provided for informational purposes only with reference to the tax burden imposed on District taxpayers by overlapping taxing districts, and is not intended to be a comprehensive list of all possible overlapping levies or limitations. Other factors may affect aggregate property tax rates imposed upon District taxpayers, including maximum rates that vary by individual taxing district and the ability of those taxing districts to impose additional regular and excess property taxes pursuant to voter approval. Aggregate Levy Rate Limitations. The State Constitution limits the aggregate regular property tax levy by the State and all overlapping taxing authorities (other than ports and public utility districts) to $10 per $1,000 of assessed value, or 1%. Within that limitation, aggregate regular property taxes levied by entities other than the State may not exceed $5.90 per $1,000. If aggregate regular property tax levies exceed either limitation, junior taxing district levies within the area affected are reduced or eliminated according to priority established by statute. Constitutional Uniformity. Property taxes generally are subject to a “uniformity” requirement under the State Constitution, which specifies that similarly classified property throughout a taxing district must be taxed at a uniform rate. Aggregate property tax rates may vary within a taxing district because of the different overlapping districts. Under the uniformity requirement, if the maximum permissible levy rate varies within a district, then the rate for the entire district will be uniformly lowered to the lowest of the permissible rates under the aggregate rate limitations, in accordance with the priority described in RCW 84.52.010. Regular Levy Amount Increase Limitation. State law also limits regular property tax levies to 100% of the highest property tax levy of the three most recent years multiplied by a “limit factor” plus a full value adjustment for new construction. Substantively, this means that the regular property tax levy must be set so that the property taxes payable in a given year (excluding new construction, improvements and State-assessed property) will not exceed the amount levied in the highest of the three most recent years multiplied by the limit factor. The limit factor is defined as (i) the lesser of 101% or 100% plus inflation (measured by the implicit price deflator), or (ii) a factor not to exceed 101% as approved by the legislative authority of the taxing district upon a finding of substantial need and by the voters at an election (regardless of inflation). A taxing district may exceed the amount limitations upon a simple majority voter approval of a ballot proposition describing the proposed increase. Such voter approval does not permit the taxing district to exceed the rate limitations described above.

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THE DISTRICT Government Organization Washington school districts are municipal corporations empowered to provide elementary and secondary educational services. Their operations are supported primarily by State funds, excess property taxes (the most significant local revenue source) and federal grants. The District is governed by a five-member board of directors (the “Board”) and operates under the Constitution and laws of the State. Each director resides in one of five director districts within the District but is elected at large. Members of the Board are elected for four-year terms. The Board holds regular meetings twice a month and special meetings as needed. All meetings are open to the public as provided by law and agenda items are prepared in advance. The Board appoints a chief executive officer of the District, designated as the Superintendent, who serves at the discretion of the Board. The Superintendent is responsible to the Board for the administration of all schools and departments of the District and serves as the secretary to the Board. The Superintendent recommends District department heads, managers and legal and bond counsel; she maintains a permanent journal of Board proceedings, records and certifies appropriate policies and resolutions and serves as custodian of official District records. The Board of Directors The policies of the District are established by the Board. The District’s current members are listed below. Member Position Term Expires Judy Schwab President 2017 John Gahagan Vice President 2019 Kyle Kennedy Member 2019 Michael L. Simmons Member 2019 Geoff Thorp Member 2017

Key Administrative Officials Dr. Marci Larsen, Superintendent. Dr. Larsen has been the superintendent of the District since 2003. Her career in education spans 36 years, starting as a special education teacher in the Edmonds School District, an elementary school principal in the Snoqualmie Valley School District, a central office administrator in the South Kitsap School District, and as the executive director of teaching and learning at the District before becoming superintendent. She holds a master’s degree from Western Washington University and a doctorate degree in education, leadership and policy studies from the University of Washington. Currently, Dr. Larsen serves on the Executive Committee and Board of Trustees for the Economic Alliance of Snohomish County, the Board for the Center of Excellence for Aerospace and Advanced Manufacturing, the Board for the Mukilteo Young Men’s Christian Association, and the Board for the Washington Alliance for Better Schools.

Dr. Alison Brynelson, Deputy Superintendent. Dr. Brynelson joined the District in 1998 and has held six different leadership positions during this time including principal, executive director of secondary education, and assistant superintendent. She began her career in education 23 years ago as a middle school social studies and English teacher in the Bethel School District. Her other professional experience includes dean of students, assistant principal, and director of student services. Dr. Brynelson has a bachelor’s degree from Western Washington University, a master’s degree from University of , and a doctorate degree from Seattle Pacific University. She also holds an Administrative Certificate and a Superintendent Certificate.

Patty Dowd, Executive Director of Business Services. Ms. Dowd has worked in school district business and finance since 1999. She has served as Executive Director of Business Services for the District since 2015. She has served the previous three years as Director of Finance for the District. Prior to joining the District, Ms. Dowd was the Director of Finance for the Lakewood School District for 13 years. She has a bachelor’s degree from Columbia College. Staff and Labor Relations The District employs 1,731 employees, which includes 1,023 certificated and 708 classified employees. The majority of employees, who are eligible under State law to be represented by a labor organization, are employed under provisions of negotiated contracts with four labor organizations.

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The District enters into written bargaining agreements with each of the bargaining organizations. Agreements contain provisions on such matters as salaries, vacation, sick leave, medical and dental insurance, working conditions and grievance procedures. Following are the bargaining groups which represent District employees: Bargaining Group Number of Employees Contract Expires Mukilteo Education Association (1) 951 August 31, 2019 Mukilteo Association of Classified Employees 369 August 31, 2017 Mukilteo Educational Support Personnel 272 August 31, 2017 American Federation of Teachers 21 August 31, 2019 ______(1) Last contract expired August 31, 2016. New contract approved by union. Approval by the Board is expected on September 12. Source: The District Enrollment Historical and projected full-time equivalent (“FTE”) October enrollments for the District are shown in the following table: FTE Enrollment Historical Projected Oct. 1 Enrollment Oct. 1 Enrollment 2011 13,917 2016 14,569 2012 13,923 2017 14,719 2013 14,143 2018 14,927 2014 14,208 2019 15,162 2015 14,413 2020 15,364 ______Source: The District

Lead Testing In 2005, the District tested water in all of its buildings for the presence of lead using testing protocol developed by the Washington State Department of Health. Testing outcomes indicated that none of the water supply to District buildings contained unacceptable levels of lead. In several cases, fixtures in certain buildings were found to have lead issues and the District posted signage that the water was not to be used for consumption and in most cases the fixtures were subsequently removed.

DISTRICT FINANCIAL AND BUDGETARY INFORMATION Accounting Practices General. Washington school districts prepare their financial statements on the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington, issued jointly by the State Auditor and OSPI, by the authority of RCW 43.09.200, RCW 28A.505.140, RCW 28A.505.010(1) and RCW 28A.505.020 which is an Other Comprehensive Basis Of Accounting (“OCBOA”) that differs from Generally Accepted Accounting Principles (“GAAP”). Financial statements for school districts in the State fall into one of three categories: (i) GAAP Districts that issue GAAP financial statements; (ii) OCBOA Districts that issue GAAP financial statements except that the General Fixed Asset Group, district-wide financial statements and management’s discussion and analysis are not presented and (iii) Districts with less than 1,000 Full Time Equivalent students for the preceding fiscal year may issue cash basis financial statements. The District prepares its financial reports utilizing OCBOA. All governmental and expendable trust funds are accounted for on a spending or “financial flow” measurement focus. This focus means that only current assets and current liabilities are included on their balance sheets.

The modified accrual basis of accounting is used for all governmental and expendable trust funds. Revenues are recognized when they become measurable and available. Property taxes receivable are measurable but not available

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and are, therefore, not accrued. However, categorical program claims and interdistrict billings are measurable and available and are, therefore, accrued. Expenditures are recognized under the modified accrual basis of accounting when the related fund liability is incurred. The fund liability is incurred when the goods or services have been received. The one exception is the recognition of principal of and interest on long-term debt which is recognized when due. Fund Accounting. The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenue, and expenditures or expenses, as appropriate. The various funds are grouped into governmental funds as follows:

General Fund. This fund is used to account for all expendable financial resources, except those required to be accounted for in another fund.

Debt Service Fund. This fund is used to account for revenue sources that are legally restricted for the payment of general long-term debt principal, interest and related expenditures.

Capital Projects Fund. This fund is used to account for resources set aside for the acquisition and construction of fixed assets. Deposits to the fund are made from net rental income and net proceeds from the sale of real property and State grants for construction of school facilities. Voter approved bond proceeds are deposited into this fund and disbursed to pay for capital expenditures.

Transportation Vehicle Fund. This fund is used to account for expenditures related to the acquisition of student transportation vehicles. Special Revenue Funds. These funds account for the proceeds of specific revenue sources that are legally restricted for specific purposes. The Associated Student Body Program Fund (ASB Fund) is the only fund of this type. This fund is accounted for as a special revenue fund since the financial resources legally belong to the District. For additional information on accounting practices of the District, see Appendix B, “2014 - 2015 AUDITED FINANCIAL STATEMENTS.” Financial Reporting The District presents governmental fund financial statements and related notes in accordance with OCBOA (see “Accounting Practices” above). The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The regulatory agencies require all funds be presented as major funds. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures (or expenses), as appropriate. GASB 45. The Government Accounting Standards Board (“GASB”) issued a standard concerning Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions (“GASB 45”). In addition to pensions, many state and local governmental employers provide other post employment benefits (“OPEB”) as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits when provided separately from a pension plan. The standard provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. The District does not offer any OPEB to current or past employees and does not plan to offer any such benefits in the future. The District currently prepares its financial reports utilizing OCBOA (see “Accounting Practices” above) and therefore does not anticipate it will incorporate this reporting standard into its basis of accounting. GASB 67/68. In August 2012, GASB approved Statements No. 67 and 68 that modify the accounting and financial reporting of pensions by state and local governments and pension plans. Statement No. 67 (“GASB 67”), Financial Reporting for Pension Plans, replaces the requirements of GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and GASB Statement 50 as they relate to pension plans that are administered through trusts or similar arrangements meeting certain criteria. Statement No. 68 (“GASB 68”), Accounting and Financial Reporting for Pensions, revises and establishes new financial reporting requirements for most state and local governments that provide their employees with pension benefits. The State Department of Retirement Systems (“DRS”) is subject to GASB 67, and each participating employer, including the District, is also subject to GASB 68. GASB 67 became effective for the State’s fiscal year ended June 30, 2014 and GASB 68 became effective for the State’s fiscal year ending June 30, 2015 (fiscal years ending August 31, 2015 for

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school districts). In November 2015, DRS compiled the required information which was subsequently disseminated to school districts via a web-based tool developed by OSPI and the State Auditor’s Office (see also “Pension Plans” below). In addition, OSPI and the State Auditor’s Office are creating guidance for inclusion of this information within school district audited financials and the related notes. Auditing of District Finances The State Auditor is required to examine the affairs of school districts. School districts are audited annually, biennially or triennially depending on their size and whether or not they receive certain federal funding. Additionally, annual audits may be conducted at the request of a school district or the State. The District is audited annually. The examination must include, among other things, the financial conditions and resources of the District, compliance with the State constitution and laws, and the methods and accuracy of the accounts and reports of the District. Reports of the State Auditor’s examinations are required to be filed in the office of the State Auditor and in the Business Office of the District. The most recent audit by the State Auditor of the District’s financial position covered the operating year September 1, 2014 through August 31, 2015 and is included as Appendix B and is incorporated by reference to this Official Statement. Authorized Investments As the ex officio treasurer for the District, the Treasurer receives deposits and makes investments on the District’s behalf. All temporary investments are stated at cost plus accrued interest, which approximates market. Investments are shown on the combined balance sheet at cost, net of amortized premium or discount. Reductions in market value are not reflected on the financial statements. Gains or losses on investments sold or exchanged are recognized at the time of sale or exchange. Effective in June 2016, chapter 39.59 RCW limits the investment of public funds by local governments, including the District, to the following authorized instruments: (i) bonds of the State or any local government in the State, (ii) general obligation bonds of any other state or local government thereof which have at the time of investment one of the three highest credit ratings of a nationally recognized rating agency, (iii) registered warrants of a local government in the same county as the local government making the investment, (iv) obligations of the U.S. government, its agencies and wholly owned corporations, or obligations issued or guaranteed by supranational institutions, provided, that at the time of investment, the United States government must be the largest shareholder of such institution, (v) obligations of the Federal Home Loan Bank, Fannie Mae and other government-sponsored enterprises, (vi) bankers’ acceptances, (vii) commercial paper, subject to state investment board policies, and (viii) corporate notes, subject to state investment board policies. Any municipal corporation including the District may authorize the investment by the Treasurer of funds not required for immediate expenditure. Such funds of the District, including debt service funds, have been invested by the Treasurer. In consultation with the District, the Treasurer may, upon the request of one or more units of local government that invest their money with the County, combine that money for the purposes of investment (RCW 36.29.022). The Treasurer has its own investment pool; the “Snohomish County Investment Pool”. However, the District does not currently participate. The Treasurer may reimburse its office for any expenses incurred in the establishment and maintenance of such a County investment pool (RCW 36.29.024). The Treasurer charges a variable fee to participate in the pool, currently at 3.7 basis points. The Treasurer currently invests the District’s funds in the State’s Local Government Investment Pool (the “LGIP”) described below.

As of August 19, 2016, the District’s investments held by the Treasurer had a total market value of $63,523,081. Local Government Investment Pool The LGIP was created by the Legislature in 1986 to provide a mechanism for political subdivisions to invest available funds and take advantage of the economies of scale and expertise of the LGIP to earn a competitive rate of return, security and liquidity of funds. The LGIP is a conservatively managed, highly liquid money market fund that is considered low-risk. The LGIP is restricted to investments with maturities of one year or less, and the average life typically is less than 90 days. Permissible investments include U.S. government and agency securities, bankers’ acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, and certificates of deposit issued by qualified Washington State depositories.

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The State Treasurer’s Office administers the LGIP, which has more than 540 local government participants. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (1) the safety of principal; (2) the assurance of sufficient liquidity to meet cash flow demands; and (3) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. Comparative Statement of General Fund and Debt Service Fund Revenues and Expenditures Summaries of the Statement of Revenues, Expenditures and Changes in the General Fund Balance and the Debt Service Fund Income Statement follow. The District’s fiscal year ends August 31.

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Statement of Revenues, Expenditures, and Changes in General Fund Balance (Fiscal Year Ended August 31)

Budget Audited 2016-17 2014-15 2013-14 2012-13 2011-12 2010-11 Revenues Local $ 45,171,415 $ 41,314,959 $ 38,924,809 $ 38,213,111 $ 36,153,317 $ 32,911,186 State Funds 128,489,224 111,753,276 104,938,529 94,444,903 92,954,452 88,631,840 Federal Funds 16,223,902 11,146,631 11,086,963 10,497,790 11,341,986 9,721,989 Federal Stimulus - - - - 48,450 5,383,965 Other 425,243 4,994 - - - - $ 190,309,784 $164,219,860 $ 154,950,300 $ 143,155,805 $ 140,498,206 $136,648,982 Subtotal Revenues Expenditures Regular Instruction $ 105,211,461 $ 87,785,478 $ 85,124,383 $ 81,506,182 $ 78,904,438 $ 71,534,130 ARRA Fed. Stimulus Stabilization - - - - 48,452 5,286,817 Special Education 27,603,489 21,907,975 20,928,524 19,258,192 18,653,738 16,685,674 Vocational Instruction 4,128,115 3,462,091 3,447,024 3,370,981 2,881,180 2,730,097 Skills Center 3,807,571 3,651,181 3,637,622 3,377,368 3,205,881 3,490,733 Compensatory Education 11,320,927 10,597,539 10,132,905 8,061,343 8,284,549 8,937,646 Other Instructional 5,341,220 1,490,236 1,459,883 1,401,069 1,641,120 1,350,707 Community Services 83,328 36,500 35,467 33,932 28,183 30,820 Support Services 36,083,914 29,518,238 28,939,058 27,860,138 26,940,252 28,025,689 Capital Outlay - 197,991 393,443 341,778 248,800 167,398 Subtotal Expenditures $ 193,580,025 $158,647,229 $ 154,098,309 $ 145,210,983 $ 140,836,593 $138,239,712

Revenue over/(under) Expenditures $ (3,270,241) $ 5,572,631 $ 851,991 $ (2,055,178) $ (338,387) $ (1,590,731) Other Financing Sources (Uses) - 11,419 7,563 4,554 8,948 (722,825) Net Adjustments/Transfers (1) - - - 312,000 (136,848) 1,140 BEGINNING FUND BALANCE (2) $ 20,630,619 $ 11,869,149 $ 11,009,594 $ 12,748,218 $ 13,214,505 $ 15,526,922 ENDING FUND BALANCE (2) $ 17,360,378 $ 17,453,199 $ 11,869,148 $ 11,009,594 $ 12,748,218 $ 13,214,506

Reserved/Nonspendable (3) $ 94,729 $ 94,729 $ 79,898 $ 143,323 $ 93,756 $ 108,602 Restricted 214,140 198,140 317,356 207,674 195,224 772,893 Committed - 4,648,736 4,304,172 4,224,485 4,113,244 Assigned 6,756,201 9,863,219 5,317,756 5,246,748 5,698,222 5,284,158 Unreserved/Unassigned Fund Balance 10,295,308 7,297,112 1,505,403 1,107,677 2,536,531 2,935,609 Ending Fund Balance $ 17,360,378 $ 17,453,200 $ 11,869,149 $ 11,009,594 $ 12,748,218 $ 13,214,506 ______(1) Payment of Limited General Obligations Bonds and State LOCAL financing contracts occur by operating transfers from the General Fund to the Debt Service Fund. (2) The 2016 - 2017 Budget beginning and ending fund balances were estimated before the prior year end. (3) Beginning budget year 2010-2011, the following changes have been made to certain General Fund balance categories: “Reserved” is now known as “Nonspendable” and “Restricted”; and “Unreserved” has been divided into three categories known as “Committed,” “Assigned” and “Unassigned Fund Balance.” Nonspendable amounts cannot be spent either because they are not in a spendable form or are legally required to be maintained intact, such as inventory. Committed amounts can only be used for specific purposes pursuant to constraints imposed by resolution or adopted policy of the Board. Assigned amounts are constrained by the District’s intent to use such amounts for specific purposes, but are neither restricted nor committed. Source: The District’s Audited Financial Statements for years 2010/11 through 2014/15 and State Form F-195 for the 2016/17 budget 21

Statement of Revenues, Expenditures and Changes in Debt Service Fund Balance (Fiscal Years Ended August 31)

Budget Audited Revenues 2016-17 2014-15 2013-14 2012-13 2011-12 2010-11 Local Funds $ 11,308,947 $ 10,671,337 $ 5,318,697 $10,395,863 $16,629,900 $18,265,102 State Funds ------Federal ------Total Revenues $ 11,308,947 $ 10,671,337 $ 5,318,697 $10,395,863 $16,629,900 $18,265,102

Expenditures Principal $ 6,120,000 $ 3,265,000 $ 3,655,000 $12,790,693 $14,387,299 $14,714,032 Interest and Other 4,936,000 3,334,784 1,808,729 2,261,200 3,059,894 3,939,386 Total Expenditures $ 11,056,000 $ 6,599,784 $ 5,463,729 $15,051,893 $17,447,192 $18,653,417

Revenues Over/(Under) $ 252,947 $ 4,071,553 $ (145,032) $ (4,656,030) $ (817,293) $ (388,316) Expenditures

Other Financing Sources (Uses) - (630,216) 1,238,429 - - 279,959

Beginning Fund Balance $ 7,143,896 $ 7,011,390 $ 5,917,994 $10,574,024 $11,391,316 $11,499,673 Ending Fund Balance $ 7,396,843 $ 10,452,727 $ 7,011,390 $ 5,917,994 $10,574,024 $11,391,316

______(1) The 2016 - 2017 Budgets beginning and ending fund balances were estimated before the prior year end. Source: The District’s Audited Financial Statements for years 2010/11 through 2014/15 and State form F-195 for the 2016/17 budget Budgetary Process General Budgetary Policies. Chapter 28A.505 RCW and Chapter 392-123 Washington Administrative Code mandate school district budget policies and procedures. The budget is adopted by the board after a public hearing. An appropriation is a prerequisite to expenditure. Appropriations lapse at the end of the fiscal period.

Budgetary Basis of Accounting. For budget and accounting purposes, revenues and expenditures are accounted for on the modified accrual basis as prescribed by law for all governmental funds. Fund balance is budgeted as available resources and, pursuant to law, the budgeted ending fund balance cannot be negative.

Encumbrances. Encumbrance accounting is employed in governmental funds. Purchase orders, contracts and other commitments for the expenditure of moneys are recorded in order to reserve a portion of the applicable appropriation. Encumbrances are closed at the end of the fiscal year and reopened the following year. Pension Plans Pensions for District employees are provided through the State Department of Retirement Systems (the “DRS”). Substantially all District full-time and qualifying part-time employees participate in one of the following three state-wide retirement systems: (i) the State Teachers’ Retirement System (“TRS”) for certificated employees, (ii) the Public Employees’ Retirement System (“PERS”) and (iii) the School Employees’ Retirement System (“SERS”) for classified employees. TRS includes three plans (Plans 1, 2 and 3), PERS includes three plans (Plans 1, 2 and 3), and SERS includes two plans (Plans 2 and 3). Participants who joined the retirement system by September 30, 1977 are eligible to be either TRS or PERS Plan 1 members. Those who joined thereafter are enrolled in TRS Plans 2 or 3, PERS Plans 2 or 3 or SERS Plans 2 or 3. All Plans 1 and 2 are defined benefit plans. New PERS and SERS participants have the irrevocable option of choosing membership in either of their respective Plan 2 or Plan 3. This option must be exercised within 90 days, and if not exercised the participant will be placed in their respective Plan 3. New TRS participants must join TRS Plan 3. Each of the PERS Plan 3, the SERS Plan 3 and the TRS Plan 3 consists of a defined benefit and a defined contribution portion. Retirement benefits under all Plans 1 and 2 are vested after completion of five years of eligible service. PERS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. TRS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five

22 service credit years earned in TRS Plan 2 by July 1, 1996. Plan 3 members are immediately vested in the defined contribution portion of their plan. SERS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in PERS Plan 2 by September 1, 2000. The District contributed $9,822,029 in fiscal year August 31, 2014 and $9,992,283 in fiscal year August 31, 2015 to these pension plans. District employees also are covered by the federal social security program. The Legislature establishes all employer and employee contribution rates for all plans during even numbered years according to a statutory rate-setting process. The following table lists current contribution rates for employers and employees: Contribution Rates For 2015-2017 Biennium Current Rates Employer Employee Rate(1) Rate PERS Plan 1 11.18% 6.00% PERS Plan 2/3(2) 11.18 6.12 TRS Plan 1 13.13 6.00 TRS Plan 2/3(2) 13.13 5.95 SERS Plan 2/3(2) 11.58 5.63 ______(1) Includes a 0.18 percent Department of Retirement Systems administrative expense rate. (2) Plan 3 members do not contribute to the defined benefit plan. Source: Department of Retirement Systems While the District’s prior contributions represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the TRS Plans 2 and 3 and PERS Plans 2 and 3 will increase in the coming years. The State Actuary’s website (which is not incorporated into this Official Statement by reference) includes information regarding the values, funding levels and investments of these retirement plans. For additional information, see Note 5 to the Audited Financial Statements for the Year Ended August 31, 2015, attached hereto as Appendix B. The Actuarial Valuation Report – Washington 2014, produced by the Office of the State Actuary (“OSA”), states that as of June 30, 2014, PERS Plans 2 and 3 and TRS Plans 2 and 3 had no unfunded actuarial accrued liability. However, during the years 2001 through 2010 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1 and TRS Plan 1, closed plans with a large proportion of the retirees. The following table shows the funded status of the PERS, TRS and SERS for 2005-2014. The assumptions used by the State Actuary in calculating the unfunded liability are a 7.8 percent annual rate of investment return, 3.75 percent general salary increases, 3.0 percent consumer price index increase and 0.95 percent growth in membership (0.80 percent for TRS). The long-term investment return assumption is used as the discount rate for determining the liabilities for a plan. The OSA uses two funded status measures. The first funded status measure compares the Actuarial Value of Assets (“AVA”) to the “Projected Unit Credit (“PUC”) liabilities. The PUC cost method projects future benefits using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The asset valuation method smoothes the inherent volatility in the Market Value of Assets (“MVA”) by deferring a portion of the annual investment gains or losses over a period of up to eight years. This method is consistent with governmental accounting standards. In 2011, the Legislature ended the future automatic annual increase, which is a fixed dollar amount multiplied by the member’s total years of service, for most retirees in the PERS Plan 1 and TRS Plan 1 plans, which is forecast to reduce the unfunded accrued actuarial liability in PERS Plan 1 and TRS Plan 1. A lawsuit was filed challenging this legislation. In August, 2014 the State Supreme Court upheld the constitutionality of this legislation.

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Funded Status On An Actuarial Value Basis(1) PERS TRS SERS Plan 1 Plan 2/3 Plan 1 Plan 2/3 Plan 2/3 PUC Liability(2) $12,727 $26,172 $9,266 $8,843 $3,598 Valuation Assets(2) 7,761 26,386 6,353 9,193 3,624 Unfunded Liability(2) $ 4,965 ($214) $2,913 ($ 350) ($ 26) Funded Ratio (%) 2005(3) 74% 127% 80% 134% 122% 2006(3) 74 121 80 133 125 2007(3) 71 120 76 130 126 2008(3) 71 119 77 125 121 2009(3) 70 116 75 118 116 2010 74 113 84 116 113 2011(3) 71 112 81 113 110 2012 69 111 79 114 110 2013(3) 63 102 71 105 102 2014 61 101 69 104 101 ______(1) Liabilities valued using the Projected Unit Credit (“PUC”) cost method at an interest rate of 7.8 percent while assets have been valued under the actuarial value of assets. (2) Dollars in millions. Based on actuarial valuation as of June 30, 2014. (3) Actuarial assumptions changed. Source: Office of the State Actuary, 2013 Actuarial Valuation Report, September 2014

In September 2015, OSA revised the methodology used to estimate pension liabilities for the purposes of reporting funded status and released figures as of June 30 2014 using this methodology. The revised methodology reports the funded status of the pension plans by comparing liabilities estimated using the Entry Age Normal (“EAN”) cost method to assets valued according to the Actuarial Value of Assets (“AVA”). The EAN method represents each plan member’s benefits as a constant share of payroll throughout the member’s career. The liability estimate also incorporates the statutorily set discount rate, currently at 7.8 percent. Using the revised methodology, the funded status of all of the State-administered plans combined is 87 percent, with PERS Plan 1 at 61 percent, PERS Plans 2 and 3 at 90 percent, TRS Plan 1 at 69 percent, TRS Plans 2 and 3 at 94 percent, and SERS Plans 2 and 3 at 91 percent. Beginning in July 2016, OSA will discontinue funded status reports based on liabilities estimated using the PUC method and instead estimate pension liabilities using the EAN method. The information in this section has been obtained from the District’s financial statements and information on OSA and DRS’s websites (which are not incorporated into this Official Statement by reference). New GASB Reporting Rules. GASB has implemented new pension standards that require employers, including the District, to report their pension liabilities on generally accepted accounting principles (“GAAP”) basis rather than a funding basis. Commencing with its 2015 financial statements, the District reported its proportionate share of the net plan asset or liability for each pension plan in which District employees participate. The liability will be based on the actuarial present value of projected benefit payments to periods of employee service, a discount rate that considers the availability of plan assets and recognition of projected investment earnings. The DRS will determine each participating employers’ proportionate share of the plan liability and OSA will determine each plan’s accounting valuation. The GASB rules impact accounting for pensions and not the funding status of the plans calculated by OSA or pension contribution rates that are set based on statutory assumptions. DRS has calculated the collective net pension liability for the various retirement plans based on the new GASB reporting requirements as well as the District’s share of such liability for fiscal year ended June 30, 2014. Net pension liability equals the total pension liability (a measure of the total cost of future pension benefit payments already earned, stated in current dollars) minus the value of the assets in the pension trust that can be used to make benefit payments. Contributions from plan members and employers are assumed to continue to be made at contractually required rates, the assumed long-term rate of investment return is 7.50%, the assumed economic inflation is 3.0%, and the assumed salary inflation is 3.75%.

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The following table shows the District’s share of the net pension liability, determined by actuarial valuations as the State fiscal year ended June 30, 2015, for the plans it participates in.

District’s Share of Pension Liabilities District’s Share of Net Net Liability District’s Percent Liability PERS Plan 1 $5,230,930,000 0.189681% $ 9,922,059 TRS Plan 1 3,168,142,000 1.628569 51,595,377 TRS Plan 2/3 843,802,000 1.620997 13,678,007 SERS Plan 2/3 406,151,000 1.201786 4,881,066 ______

Source: OSPI Pension Reporting Tool and DRS Participating Employer Financial Information for Fiscal Year Ended June 30, 2015

Other Post-Employment Benefits PEBB Overview. The Public Employee Benefits Board (“PEBB”), created within the State Health Care Authority (“HCA”), administers medical, dental and life insurance plans for State public employees and retirees. Employers who participate in the PEBB plan include the State, K-12 school districts, numerous political subdivisions of the State and tribal governments. The relationship between the PEBB Other Post-Employment Benefits (“OPEB”) plan and its member employers and their employees and retirees is not formalized in a contract or plan document; rather, the benefits are provided in accordance with a substantive plan in which the plan terms are understood by the employers and plan members. The District does not offer any OPEB to current or past employees and does not plan to offer any such benefits in the future. PEBB Membership. PEBB members are covered in the PERS, TRS and SERS retirement systems. Retirees’ access to PEBB depends on the retirement eligibility of their respective retirement system. The following table shows PEBB plan membership. Membership in PEBB Plan (As of June 30, 2015) Active Employees Retirees(1) Total State 108,899 30,640 139,539 K-12 Schools and ESDs(2) 2,561 32,993 35,554 Political Subdivision 12,571 1,687 14,258 Total 124,031 65,320 189,351 ______(1) Retirees include retired employees, surviving spouses, and terminated members entitled to a benefit. (2) In Fiscal Year 2015, there were 106,879 full-time equivalent active employees in the 245 K-12 schools and Education Service Districts which elected to limit participation in PEBB only to their retirees. Source: Washington State Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2015

Funding of PEBB Plan. In the State, retiree benefits and contributions are set each biennium as part of the budget process. These benefits are funded on a pay-as-you-go basis. According to State law, the State Treasurer collects a fee from all school district entities which have employees who are not current active members of the HCA but participate in the State retirement system. The purpose of this fee is to cover the impact of the subsidized rate of health care benefits for school retirees that elect to purchase their health care benefits through the HCA. For the fiscal year 2014-2015, the District was required to pay the HCA $66.64 per month per full-time equivalent employee to support the program, for a total payment of $1,170,931. This assessment to the District is set forth in the State’s operating budget and is subject to change on an annual basis. This amount is not actuarially determined and is not placed in a trust to pay the obligations for post-employment health care benefits. The District has no control over the benefits offered to retirees, the rates charged to retirees, nor the fee paid to the HCA. The District does not determine its annual required contribution nor the net OPEB obligation associated with this plan. Accordingly, these amounts are not shown on the District’s financial statements. This is a departure from GAAP. GASB 45. The GASB standard concerning Accounting and Financial Reporting by Employers for OPEB is known as “GASB 45.” OPEB includes post-employment healthcare, as well as other forms of post-employment benefits when provided separately from a pension plan. GASB 45 provides for the measurement, recognition and display of OPEB

25 expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. District OPEB Reporting. The District does not provide other post-employment benefits to any current or retired employees OPEB that are required to be disclosed under GASB’s standard concerning Accounting and Financial Reporting by Employers for OPEB. The District prepares its financial reports on a cash basis (See “DISTRICT FINANCIAL AND BUDGETARY INFORMATION - Accounting Policies” above) and therefore does not anticipate it will incorporate the reporting standards into its basis of accounting.

GENERAL AND ECONOMIC INFORMATION The District is located within Snohomish County approximately fifteen miles north of the City of Seattle. It encompasses the City of Mukilteo as well as portions of the cities of Everett and Mill Creek and unincorporated portions of Snohomish County. The wide-body airplane assembly plant for the Boeing Company is located in the District, where the 747, 767, 777, and 787 airplanes are assembled and delivered to customers. Boeing’s next generation 777, the 777X, will be assembled at this assembly plan along with the airplane’s composite wing. Other major employers in the area include Microsoft, , BF Goodrich Aerospace, and Corporation. North of the District is the Everett Naval Base, the U.S. Navy’s home for aircraft carrier USS Nimitz and several support ships. Snohomish County The County encompasses a land area of approximately 2,100 square miles in northwestern Washington. The County extends from Puget Sound to the crest of the Cascade Mountain range 70 miles to the east. The County includes a significant portion of the Puget Sound metropolitan area and is the third most populated county in the State, after King and Pierce Counties. Population statistics for the County and the Cities of Mukilteo, Everett, and Mill Creek are as follows: Population Snohomish City of City of City of Year County Mukilteo Everett Mill Creek 2016 772,860 21,070 108,300 19,900 2015 757,600 20,900 105,800 19,760 2014 741,000 20,540 104,900 18,780 2013 730,500 20,440 104,200 18,600 2012 722,900 20,360 103,300 18,450 2011 717,000 20,310 103,100 18,370 ______Source: Washington State Office of Financial Management

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Economic Indicators The following tables are economic indicators for the District, the Cities of Mukilteo, Everett and Mill Creek, the County and the State. Snohomish County and Washington State Labor Force and Employment Data

August Annual Average Snohomish County 2016 2015 2014 2013 2012 2011 Civilian Labor Force 415,334 401,742 395,317 388,771 386,290 385,890 Employment 397,125 382,341 374,985 366,711 356,250 349,670 Unemployment 18,209 19,401 20,332 22,060 30,040 36,220 Unemployment Rate 4.4% 4.8% 5.1% 5.7% 7.8% 9.4%

Washington State Civilian Labor Force 3,645,713 3,544,242 3,488,183 3,460,038 3,481,460 3,482,240 Employment 3,448,590 3,343,992 3,270,362 3,216,966 3,197,290 3,161,820 Unemployment 197,123 200,250 217,821 243,072 284,170 320,420 Unemployment Rate 5.4% 5.7% 6.2% 7.0% 8.2% 9.2% ______Source: Washington State Employment Security Department

The major private and public employers in the County are shown on the following table:

Major Employers (2015) No. of Employer Product/Business Employees The Boeing Company Aircraft Manufacturing 38,000 U.S. Navy Base 6,500 State of Washington (1) State Government 4,600 Providence Regional Medical Center Medical Services 3,500 Tribes Enterprises Gaming, real estate, gov’t services 3,200 Snohomish County County Government 2,700 Edmonds School District Education 2,558 Premera Blue Cross Health Insurer 2,400 Northshore School District Education 2,341 Everett School District Education 2,025 ______(1) Includes colleges. Source: Economic Alliance Snohomish County

Snohomish County and State of Washington Median Household Income Snohomish Washington Year County State 2015 (1) $71,092 $62,108 2014 (2) 68,637 60,153 2013 64,391 57,284 2012 64,033 56,444 2011 62,687 55,500 ______(1) Projection. Most recent data available. (2) Preliminary. Source: Washington State Office of Financial Management

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Taxable Retail Sales City of City of City of Mill Year Everett Mukilteo Creek Snohomish County (1) 2016 Q1 (2) $ 656,168,711 $ 57,464,958 $ 60,543,243 $3,025,826,472 2015 Q1 (2) 609,358,299 60,594,584 62,307,541 2,766,933,041

2015 2,704,459,177 270,276,953 271,537,581 12,641,937,565 2014 2,441,363,133 251,914,950 266,906,877 11,699,234,128 2013 2,453,078,134 231,314,021 247,636,082 11,172,617,894 2012 2,402,359,443 215,296,280 223,319,807 10,341,318,734 2011 2,301,803,155 209,477,152 213,441,112 9,742,666,146 ______(1) Includes incorporated and unincorporated Snohomish County. (2) First quarter of respective years. Source: Washington State Department of Revenue Building Permit Statistics – Snohomish County Number of Year Permits Value of Permits 2015 2,449 $847,766,606 2014 2,194 761,945,957 2013 2,116 834,807,102 2012 2,266 717,318,655 2011 1,871 514,747,872 ______Source: U.S. Census Bureau

LITIGATION

There is no litigation pending or threatened questioning the validity of the Bonds or the power and authority of the District to issue the Bonds. There is no litigation pending or threatened which would materially affect the finances of the District or affect the District’s ability to meet debt service requirements on the Bonds.

INITIATIVE AND REFERENDUM Under the State Constitution, the voters of the State have the ability to initiate legislation and to modify existing statutes through the power of initiative and referendum, respectively. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of petitions signed by at least 8% (initiatives) and 4% (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws. Initiative petitions affecting tax collections and levy rates for State and local governments (not including the excess property taxes pledged to the repayment of the Bonds) and other matters may be filed in the future. The District cannot predict whether any such initiatives will qualify to be submitted to the voters or, if submitted, will be approved. Likewise, the District cannot predict what actions the Legislature might take, if any, regarding future initiatives approved by voters.

LIMITATIONS ON REMEDIES; BANKRUPTCY Limitations on Remedies. Any remedies available to the owners of the Bonds are in many respects dependent upon judicial actions, which are in turn often subject to discretion and delay and could be both expensive and time consuming to obtain. If the District fails to comply with its covenants under the Bond Resolution or to pay principal of or interest on the Bonds, there can be no assurance that available remedies will be adequate to fully protect the interests of the owners of the Bonds. In addition to the limitations on remedies contained in State law, the rights and obligations under the Bonds and the Bond Resolution may be limited by and are subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, and other laws relating to or affecting creditors’ rights, to the application of equitable principles, and to the exercise of judicial discretion in appropriate cases. The legal opinion of Bond Counsel regarding the validity of the Bonds, attached hereto as Appendix A, will be qualified by reference to bankruptcy, reorganization, insolvency, fraudulent

28 conveyance, moratorium and other similar laws affecting the rights of creditors generally, and by general principles of equity.

No Acceleration Upon Default. Upon the occurrence and continuance of an event of default under the Bond Resolution, payment of the principal amount of the Bonds is not subject to acceleration. The District would be liable only for principal and interest payments as they became due, and the bond owners would be required to seek a separate judgment for each payment, if any, not made. Any such action for money damages would be subject to any limitations on legal claims and remedies against public bodies under Washington law. Amounts recovered would be applied to unpaid installments of interest prior to being applied to unpaid principal and premium, if any, which had become due.

Financial Insolvency. A school district may be dissolved due to financial insolvency. State law (chapter 28A.315 RCW) outlines the process for dissolution. A financially insolvent school district is defined as a district that has been on binding conditions pursuant to RCW 28A.505.110 for two consecutive years and is unable to prepare a satisfactory financial plan, or is reasonably foreseeable and likely to have a deficit general fund balance within three years and is unable to prepare a satisfactory financial plan. A satisfactory financial plan is a plan approved by OSPI and the Educational Service District (“ESD”) where the school district is located demonstrating that the district will have an adequate fund balance by the end of the plan period relying on currently available revenue streams provided by federal, state, or local resources, or other revenue streams determined reasonably reliable by the ESD where the school district is located.

OSPI is directed to convene a financial oversight committee (“Oversight Committee”) if a district is found to be financially insolvent or at the request of a financially insolvent district. The Oversight Committee is responsible for reviewing the financial condition of a financially insolvent school district, holding a public hearing, and making a recommendation to OSPI as to whether the district should be dissolved or placed under enhanced financial monitoring. OSPI may file a petition with the appropriate regional committee to dissolve a financially insolvent school district if recommended by the Oversight Committee. The petition must specify the proposed annexation of the financially insolvent school district by one or more contiguous school districts and the disposition of assets and liabilities of the financially insolvent school district.

The order filed by the OSPI that implements the agreement must also specify that any excess tax levy approved by an annexing school district is imposed on the newly annexed territory. Before the effective date of dissolution, a school district that annexes part or all of a financially insolvent school district may submit to the voters either a levy to replace existing levies and provide for an increase due to the dissolution, or an additional levy to provide for an increase due to the dissolution. If these elections do not occur or fail, the transferred territory is relieved of any previous levy associated with the dissolved district, but subject to any previous levy associated with the annexing district. In the case of voted bonded indebtedness by a dissolved school district, the dissolved district will retain its corporate existence until the debt is repaid in full and the receiving or annexing school district must collect a tax levy sufficient to pay the principal of and interest on such outstanding voted bonded indebtedness. The receiving or annexing school may also determine to refund all or a part of the outstanding voted bonded indebtedness. A financially insolvent school district may file for bankruptcy only if recommended by the Oversight Committee. Bankruptcy. Under current Washington law, local governments, such as the District, may be able to file for bankruptcy under Chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”). A creditor, however, cannot bring an involuntary bankruptcy proceeding against a municipality, including the District. The federal bankruptcy courts have broad discretionary powers under the Bankruptcy Code. Taxing districts in the State are expressly authorized to carry out a plan of readjustment if approved by the appropriate court. If the District were to become a debtor in a federal bankruptcy case, owners of the Bonds may not be able to exercise any of their remedies under the Bond Resolution during the course of a proceeding. Legal proceedings to resolve issues could be time-consuming and expensive, and substantial delays and/or reductions in payments could result.

APPROVAL OF COUNSEL

Legal matters incident to the authorization, issuance and sale of the Bonds by the District are subject to the approving legal opinion of Bond Counsel, a form of which is attached hereto in Appendix A. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Bond Counsel has not been retained to review and has not reviewed this Official Statement for completeness or accuracy and will not offer an opinion concerning this Official Statement. The enforceability of the Bond Resolution is subject to applicable bankruptcy laws, equitable principles affecting the enforcement of creditors’ rights generally, the police powers of the State and the District, the exercise of judicial authority by state or federal courts and the exercise by the United States of the powers delegated to it by the federal constitution. All legal opinions with respect to the enforceability of the Bond Resolution and the Bonds will be expressly subject to a qualification that enforceability thereof may be limited by bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws affecting the rights of creditors generally, and by general principles of equity. Prospective

29 investors concerned with the impact of any bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws should consult with their own independent counsel before purchasing any Bonds.

TAX MATTERS General. In the opinion of Bond Counsel, under existing law and subject to certain qualifications described below, interest on the Bonds is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The proposed form of opinion of Bond Counsel with respect to the Bonds to be delivered on the date of issuance of the Bonds is set forth in Appendix A.

The Code contains a number of requirements that apply to the Bonds, and the District has made certain representations and has covenanted to comply with each such requirement. Bond Counsel’s opinion assumes the accuracy of the representations made by the District and is subject to the condition that the District comply with the above-referenced covenants. If the District fails to comply with such covenants or if the District’s representations are inaccurate or incomplete, interest on the Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

Except as expressly stated herein, Bond Counsel expresses no opinion regarding any tax consequences related to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on, the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds.

Original Issue Premium and Discount. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes. De minimis original issue discount and original issue premium is disregarded.

Under the Code, original issue discount is treated as interest excluded from federal gross income to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes.

Under the Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to federal income tax consequences of owning such Bonds.

Post Issuance Matters. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the District and its appointed counsel,

30 including the Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the District or the Owners to incur significant expense.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Not Bank Qualified. The District has not designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Code.

CONTINUING DISCLOSURE In accordance with Section (b)(5) of Securities and Exchange Commission (the “Commission”) Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (“Rule 15c2-12”), the District has agreed for the benefit of the Bond owners or beneficial owners of the Bonds to provide or cause to be provided to the Municipal Securities Rulemaking Board (the “MSRB”) in accordance with Rule 15c2-12, the following annual financial information for the prior fiscal year (commencing in 2017 for the fiscal year ended August 31, 2016) and operating data for the prior calendar year (commencing in 2017 for the calendar year ending December 31, 2016): (i) annual financial statements, which statements may or may not be audited showing ending fund balances, prepared in accordance with regulations prescribed by the Superintendent of Public Instruction and the State Auditor pursuant to RCW 43.09.200, 28A.505.020, 28A.505.090, and 28A.505.140 (or any successor statute) and generally of the type included in this Official Statement; (ii) the assessed valuation of taxable property in the District; (iii) ad valorem taxes due and percentage of taxes collected; (iv) property tax levy rate per $1,000 of assessed valuation; and (v) outstanding general obligation debt of the District.

Items (ii)-(v) shall be required only to the extent that such information is not included in the annual financial statements.

The information and data described above will be provided on or before nine months after the end of the District’s fiscal year. The District's current fiscal year ends August 31. The District may adjust such fiscal year by providing written notice of the change of fiscal year to the MSRB. In lieu of providing such annual financial information and operating data, the District may cross-reference to other documents available to the public on the MSRB’s internet website or filed with the Commission and, if such document is a final official statement within the meaning of Rule 15c2-12, available from the MSRB.

If not provided as part of the annual financial information discussed above, the District will provide the District's audited annual financial statement prepared in accordance with the Budget Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200, 28A.505.140, 28A.505.010, and 28A.505.020 (or any successor statute) when and if available to the MSRB.

Listed Events. The District further agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: • Principal and interest payment delinquencies; • Non-payment related defaults, if material; • Unscheduled draws on debt service reserves reflecting financial difficulties; • Unscheduled draws on credit enhancements reflecting financial difficulties; • Substitution of credit or liquidity providers, or their failure to perform; • Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; • Modifications to the rights of Bondholders, if material;

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• Optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856, if material, and tender offers; • Defeasances; • Release, substitution, or sale of property securing repayment of the Bonds, if material; • Rating changes; • Bankruptcy, insolvency, receivership or similar event of the District; • The consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and • Appointment of a successor or additional trustee or the change of name of a trustee, if material.

Solely for purposes of disclosure, and not intending to modify this undertaking, the District advises that there is no property securing repayment of the Bonds and there is no debt service reserve for the Bonds.

The District agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described above on or prior to the date set forth above.

Until otherwise designated by the MSRB or the Commission, any information or notices submitted to the MSRB in compliance with Rule 15c2-12 are to be submitted through the MSRB's Electronic Municipal Market Access system (“EMMA”), currently located at www.emma.msrb.org (which is not incorporated into this Official Statement by this reference). All notices, financial information and operating data required by the District’s undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to the District’s undertaking must be accompanied by identifying information as prescribed by the MSRB.

The District’s obligations to provide annual financial information and notices of listed events will terminate upon the legal defeasance or payment in full of all of the Bonds. Any provision of the District’s undertaking will be null and void if the District (1) obtains an opinion of nationally recognized bond counsel to the effect that the portion of Rule 15c2-12 that requires that provision is invalid, has been repealed retroactively or otherwise does not apply to the Bonds and (2) notifies the MSRB of such opinion and the cancellation of the District’s undertaking.

Notwithstanding any other provision of the District’s undertaking, the District may amend its undertaking with an opinion of nationally recognized bond counsel in accordance with Rule 15c2-12. In the event of any amendment, the District will describe such amendment in the next annual report, and shall include a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a listed event described above, and (ii) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

The right of any bondowner or beneficial owner of Bonds to enforce the provisions of the District’s undertaking described in the Bond Resolution will be limited to a right to obtain specific enforcement of the District's obligations, and any failure by the District to comply with the provisions of the undertaking will not be an event of default with respect to the Bonds. For purposes of this section, “beneficial owner” means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories. Continuing Disclosure Obligation of the State of Washington. The following sentence was furnished by the State for use in this Official Statement. In accordance with Rule 15c2-12, the State is also an obligated party with respect to the Bonds and will provide the information described in Appendix D under the heading “WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM.” Prior Compliance with Continuing Disclosure Undertakings. The District entered into undertakings under Rule 15c2-12 with respect to its obligations issued after July 3, 1995 and has complied with its prior undertakings for the previous five years in all material respects. See Appendix D attached hereto for a description of the State of Washington’s compliance with the State’s prior written undertakings under Rule 15c2-12.

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RATINGS As noted on the cover page of this Official Statement, Moody’s Investors Service Inc., New York, New York (“Moody’s”) has assigned its municipal bond ratings of “Aa2” to the Bonds. The Bonds are guaranteed under the provisions of the Washington State School District Credit Enhancement Program, which is rated “Aa1” by Moody’s (See Appendix D). No application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. Each rating reflects only the view of Moody’s and an interpretation of such rating may be obtained only from Moody’s. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agency, if, in the judgment of such agency, circumstances so warrant. Any such revision or withdrawal of either such rating may have an adverse effect on the market price of the Bonds. The District does not have any obligation to take any action, other than file a listed event notification, if the ratings on the Bonds are changed, suspended or withdrawn.

CONFLICTS OF INTEREST All or a portion of the fees of the Purchaser, the Financial Advisor and Bond Counsel are contingent upon the issuance and sale of the Bonds. None of the members of the Board or other officers of the District have any conflict of interest in the issuance of the Bonds that is prohibited by applicable law.

FINANCIAL ADVISOR Northwest Municipal Advisors has served as financial advisor to the District (“Financial Advisor”) relative to the preparation of the Bonds for sale, timing of the sale and other factors relating to the Bonds. The Financial Advisor has not audited, authenticated or otherwise verified the information set forth in this Official Statement or other information provided relative to the Bonds. The Financial Advisor makes no guaranty, warranty or other representation on any matter related to the information contained in the Official Statement. The Financial Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, marketing, trading or distributing municipal securities.

UNDERWRITING The Bonds are being purchased by ______(the “Purchaser”) at the aggregate purchase price of $______. The Bonds will be re-offered at the aggregate price of $______. The Purchaser may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the initial offering prices set forth on the inside cover page of this Official Statement, and such initial offering prices may be changed from time to time, by the Purchaser. After the initial public offering, the public offering prices may be varied from time to time.

CONCLUDING STATEMENT At the time of delivery of the Bonds, one or more officials of the District will furnish a certificate stating that to the best of his or her knowledge, this Official Statement (other than the information regarding DTC or the Washington State School District Credit Enhancement Program), as of its date and as of the date of delivery of the Bonds does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances in which they were made, not misleading. Statements in this Official Statement including matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the Owners of the Bonds. The execution and distribution of this Official Statement has been authorized by the District. Additional information may be obtained from the District. The statements relating to the Bond Resolution are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the provisions of the Bond Resolution in its complete form.

MUKILTEO SCHOOL DISTRICT NO. 6 SNOHOMISH COUNTY, WASHINGTON

By: Secretary to the Board of Directors

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APPENDIX A

FORM OF LEGAL OPINION

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______, 2016

Mukilteo School District No. 6 Snohomish County, Washington

[Purchaser] [City, State]

Re: Mukilteo School District No. 6, Snohomish County, Washington Unlimited Tax General Obligation Bonds, 2016- $______

Ladies and Gentlemen:

We have acted as bond counsel to Mukilteo School District No. 6, Snohomish County, Washington (the “District”), and have examined a certified transcript of the proceedings taken in the matter of the issuance by the District of its Unlimited Tax General Obligation Bonds, 2016 (the “Bonds”), dated as of the date hereof, in the aggregate principal amount of $______, issued pursuant to approving votes of the District’s voters and Resolution No. 15/2015-16 of the District (the “Bond Resolution”) for the purpose of providing funds to construct, equip, renovate and make certain capital improvements to the facilities of the District and to pay costs of issuance for the Bonds. Capitalized terms used in this opinion and not otherwise defined herein shall have the meanings given such terms in the Bond Resolution.

The Bonds are subject to redemption prior to their stated maturities as provided in the Official Statement and Certificate of Award. The District has not designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the “Code”).

Regarding questions of fact material to our opinion, we have relied on representations of the District in the Bond Resolution and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.

Based on the foregoing, we are of the opinion that, under existing law:

1. The Bonds have been legally issued and constitute valid and binding general obligations of the District, except to the extent that the enforcement of the rights and remedies of the holders and owners of the Bonds may be limited by laws relating to bankruptcy, insolvency,

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Mukilteo School District No. 6 [Purchaser] ______, 2016 Page 2

moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion;

2. Both principal of and interest on the Bonds are payable out of annual levies of ad valorem taxes to be made upon all of the taxable property within the District without limitation as to rate or amount and in amounts that, together with other available funds, will be sufficient to pay such principal and interest as the same shall become due; and

3. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the District comply with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with all applicable requirements. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

Except as expressly stated above, we express no opinion regarding any tax consequences related to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on, the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds.

We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the Official Statement or other offering material related to the Bonds (except to the extent, if any, stated in the Official Statement), and we express no opinion relating thereto, or relating to the undertaking by the District to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12.

This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Very truly yours,

PACIFICA LAW GROUP LLP

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APPENDIX B

2014-2015 AUDITED FINANCIAL STATEMENTS

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Washington State Auditor's Office Page 12  

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Washington State Auditor's Office Page 13  

2WKHU0DWWHUV SupplementaryandOtherInformation

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27+(5 5(3257,1* 5(48,5(' %< *29(510(17 $8',7,1* 67$1'$5'6 ,QDFFRUGDQFHZLWKGovernmentAuditingStandardsZHKDYHDOVRLVVXHGRXUUHSRUWGDWHG0DUFK on our consideration of the District’s internal control over financial reporting and on our tests RILWVFRPSOLDQFHZLWKFHUWDLQSURYLVLRQVRIODZVUHJXODWLRQVFRQWUDFWVDQGJUDQWDJUHHPHQWVDQG RWKHUPDWWHUV7KHSXUSRVHRIWKDWUHSRUWLVWRGHVFULEHWKHVFRSHRIRXUWHVWLQJRILQWHUQDOFRQWURO RYHU ILQDQFLDO UHSRUWLQJ DQG FRPSOLDQFH DQG WKH UHVXOWV RI WKDW WHVWLQJ DQG QRW WR SURYLGH DQ RSLQLRQRQWKHLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJRURQFRPSOLDQFH7KDWUHSRUWLVDQLQWHJUDO SDUWRIDQDXGLWSHUIRUPHGLQDFFRUGDQFHZLWKGovernmentAuditingStandardsLQFRQVLGHULQJWKH District’s internal controlRYHUILQDQFLDOUHSRUWLQJDQGFRPSOLDQFH

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Washington State Auditor's Office Page 14  

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Washington State Auditor's Office Page 15  Mukilteo School District No. 006

Balance Sheet

Governmental Funds Washin

______August 31, 2015

g Debt Capital Transportation ton StateAuditor'sO General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total ASSETS: Cash and Cash Equivalents 4,487,401.01 31,824.12 413,301.20 1,214,277.41 512.03 0.00 6,147,315.77 Minus Warrants Outstanding -3,541,211.02 -25,042.95 0.00 -234,131.09 0.00 0.00 -3,800,385.06 ff ice Taxes Receivable 19,523,698.78 7,660,772.19 1,968,910.40 5,697.89 29,159,079.26 Due From Other Funds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Due From Other Governmental 11,097.96 0.00 0.00 0.00 0.00 0.00 11,097.96 Units Accounts Receivable 1,513,360.07 0.00 0.00 0.00 0.00 0.00 1,513,360.07 Interfund Loans Receivable 0.00 0.00 0.00 Accrued Interest Receivable 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Inventory 94,728.78 0.00 0.00 94,728.78 Prepaid Items 0.00 0.00 0.00 0.00 0.00 Investments 17,359,327.92 1,126,310.17 10,039,425.47 62,833,418.79 642,631.49 0.00 92,001,113.84 Investments/Cash With Trustee 0.00 0.00 0.00 0.00 0.00 0.00 Investments-Deferred 0.00 0.00 0.00 Compensation Self-Insurance Security 0.00 0.00 Deposit TOTAL ASSETS 39,448,403.50 1,133,091.34 18,113,498.86 65,782,475.51 648,841.41 0.00 125,126,310.62 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflows of 0.00 0.00 0.00 0.00 0.00 Resources - Other TOTAL DEFERRED OUTFLOWS OF 0.00 0.00 0.00 0.00 0.00 0.00 0.00 RESOURCES

TOTAL ASSETS AND DEFERRED 39,448,403.50 1,133,091.34 18,113,498.86 65,782,475.51 648,841.41 0.00 125,126,310.62 OUTFLOW OF RESOURCES

LIABILITIES: Accounts Payable 2,132,515.42 22,558.50 0.00 4,836,888.52 0.00 0.00 6,991,962.44 P a g Contracts Payable Current 0.00 0.00 0.00 0.00 0.00 0.00 e 16 Accrued Interest Payable 0.00 0.00

Accrued Salaries 277,308.36 0.00 0.00 277,308.36 Anticipation Notes Payable 0.00 0.00 0.00 0.00 0.00 The accompanying notes are an integral part of this financial statement. Mukilteo School District No. 006

Balance Sheet

Governmental Funds Washin

______August 31, 2015 g

ton StateAuditor'sO Debt Capital Transportation General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total LIABILITIES: Payroll Deductions and Taxes 47,153.35 0.00 0.00 47,153.35 Payable ff ice Due To Other Governmental 6,724.56 685.00 0.00 0.00 0.00 7,409.56 Units Deferred Compensation Payable 0.00 0.00 0.00 Estimated Employee Benefits 0.00 0.00 Payable Due To Other Funds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interfund Loans Payable 0.00 0.00 0.00 0.00 0.00 Deposits 0.00 0.00 0.00 0.00 Unearned Revenue 0.00 0.00 0.00 0.00 0.00 0.00 Matured Bonds Payable 0.00 0.00 Matured Bond Interest Payable 0.00 0.00 Arbitrage Rebate Payable 0.00 0.00 0.00 0.00 0.00 TOTAL LIABILITIES 2,463,701.69 23,243.50 0.00 4,836,888.52 0.00 0.00 7,323,833.71 DEFERRED INFLOWS OF RESOURCES: Unavailable Revenue 7,802.83 6,930.00 0.00 0.00 0.00 0.00 14,732.83 Unavailable Revenue - Taxes 19,523,698.78 7,660,772.19 1,968,910.40 5,697.89 29,159,079.26 Receivable TOTAL DEFERRED INFLOWS OF 19,531,501.61 6,930.00 7,660,772.19 1,968,910.40 5,697.89 0.00 29,173,812.09 RESOURCES FUND BALANCE: Nonspendable Fund Balance 94,729.00 0.00 0.00 0.00 0.00 0.00 94,729.00 Restricted Fund Balance 198,140.27 1,102,917.84 10,452,726.67 46,181,557.64 643,143.52 0.00 58,578,485.94 Committed Fund Balance 0.00 0.00 0.00 12,795,118.95 0.00 0.00 12,795,118.95 Assigned Fund Balance 9,863,219.00 0.00 0.00 0.00 0.00 0.00 9,863,219.00 Unassigned Fund Balance 7,297,111.93 0.00 0.00 0.00 0.00 0.00 7,297,111.93

P TOTAL FUND BALANCE 17,453,200.20 1,102,917.84 10,452,726.67 58,976,676.59 643,143.52 0.00 88,628,664.82 a g e 17

TOTAL LIABILITIES, DEFERRED 39,448,403.50 1,133,091.34 18,113,498.86 65,782,475.51 648,841.41 0.00 125,126,310.62 INFLOW OF RESOURCES, AND FUND BALANCE

The accompanying notes are an integral part of this financial statement. Mukilteo School District No. 006

Statement of Revenues, Expenditures, and Changes in Fund Balance

Governmental Funds

Washin For the Year Ended August 31, 2015 ______Debt Capital Transportation g ton StateAuditor'sO General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total REVENUES: Local 41,314,958.98 1,642,694.79 10,671,336.95 6,505,749.01 6,006.39 60,140,746.12 State 111,753,276.05 0.00 508,000.00 596,168.98 112,857,445.03 Federal 11,146,630.69 0.00 0.00 0.00 11,146,630.69 ff ice Federal Stimulus 0.00 0.00 Other 4,993.70 0.00 0.00 0.00 4,993.70 TOTAL REVENUES 164,219,859.42 1,642,694.79 10,671,336.95 7,013,749.01 602,175.37 0.00 184,149,815.54 EXPENDITURES: CURRENT: Regular Instruction 87,785,477.61 87,785,477.61 Federal Stimulus 0.00 0.00 Special Education 21,907,975.03 21,907,975.03 Vocational Education 3,462,090.69 3,462,090.69 Skill Center 3,651,181.31 3,651,181.31 Compensatory Programs 10,597,538.96 10,597,538.96 Other Instructional Programs 1,490,235.51 1,490,235.51 Community Services 36,499.57 36,499.57 Support Services 29,518,237.51 29,518,237.51 Student Activities/Other 1,696,139.59 0.00 1,696,139.59 CAPITAL OUTLAY: Sites 17,948,680.40 17,948,680.40 Building 1,787,618.92 1,787,618.92 Equipment 1,153,889.44 1,153,889.44 Instructional Technology 2,639,069.51 2,639,069.51 Energy 0.00 0.00 Transportation Equipment 1,504,958.57 1,504,958.57 Sales and Lease 0.00 0.00 Other 197,990.60 197,990.60 DEBT SERVICE:

P Principal 0.00 3,265,000.00 0.00 0.00 3,265,000.00 a g e 18 Interest and Other Charges 0.00 3,334,784.14 0.00 0.00 3,334,784.14

Bond/Levy Issuance 57,700.00 0.00 57,700.00 TOTAL EXPENDITURES 158,647,226.79 1,696,139.59 6,599,784.14 23,586,958.27 1,504,958.57 0.00 192,035,067.36

The accompanying notes are an integral part of this financial statement. Mukilteo School District No. 006

Statement of Revenues, Expenditures, and Changes in Fund Balance

Governmental Funds Washin ______For the Year Ended August 31, 2015

g Debt Capital Transportation ton StateAuditor'sO General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total DEBT SERVICE: REVENUES OVER (UNDER) EXPENDITURES 5,572,632.63 -53,444.80 4,071,552.81 -16,573,209.26 -902,783.20 0.00 -7,885,251.82 OTHER FINANCING SOURCES (USES): ff ice Bond Sales & Refunding Bond Sales 0.00 31,318,576.15 0.00 0.00 31,318,576.15 Long-Term Financing 0.00 0.00 0.00 0.00 Transfers In 0.00 0.00 0.00 0.00 0.00 Transfers Out (GL 536) 0.00 0.00 0.00 0.00 0.00 0.00 Other Financing Uses (GL 535) 0.00 -31,948,792.50 0.00 0.00 -31,948,792.50 Other 11,418.73 0.00 0.00 7,573.11 18,991.84 TOTAL OTHER FINANCING SOURCES (USES) 11,418.73 -630,216.35 0.00 7,573.11 0.00 -611,224.51

EXCESS OF REVENUES/OTHER FINANCING SOURCES 5,584,051.36 -53,444.80 3,441,336.46 -16,573,209.26 -895,210.09 0.00 -8,496,476.33 OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES

BEGINNING TOTAL FUND BALANCE 11,869,148.84 1,156,362.64 7,011,390.21 75,549,885.85 1,538,353.61 0.00 97,125,141.15 Prior Year(s) Corrections or 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Restatements ENDING TOTAL FUND BALANCE 17,453,200.20 1,102,917.84 10,452,726.67 58,976,676.59 643,143.52 0.00 88,628,664.82

The accompanying notes are an integral part of this financial statement.

P a g e 19

Mukilteo School District No. 006

Statement Of Fiduciary Net Position

Fiduciary Funds

Washin

______August 31, 2015

g ton StateAuditor'sO Private Purpose Other ASSETS: Trust Trust Imprest Cash 0.00 0.00 Cash On Hand 0.00 0.00 ff Cash On Deposit with Cty Treas 4,740.90 0.00 ice Minus Warrants Outstanding 0.00 0.00 Due From Other Funds 0.00 0.00 Accounts Receivable 0.00 0.00 Accrued Interest Receivable 0.00 0.00 Investments 0.00 0.00 Investments/Cash With Trustee 0.00 0.00 Other Assets 0.00

Capital Assets, Land 0.00 Capital Assets, Buildings 0.00 Capital Assets, Equipment 0.00 0.00 Accum Depreciation, Buildings 0.00 Accum Depreciation, Equipment 0.00 0.00 TOTAL ASSETS 4,740.90 0.00

LIABILITIES: Accounts Payable 0.00 0.00 Due To Other Funds 0.00 0.00 TOTAL LIABILITIES 0.00 0.00

NET POSITION: Held in trust for: Held In Trust For Intact Trust Principal 0.00 0.00 Held In Trust For Private Purposes 4,740.90 Held In Trust For Pension Or Other Post-Employment Benefits 0.00 Held In Trust For Other Purposes 0.00 0.00 TOTAL NET POSITION 4,740.90 0.00

P a g e 20

The accompanying notes are an integral part of this financial statement. Mukilteo School District No. 006

Statement of Changes in Fiduciary Net Position

Fiduciary Funds Washin ______For the Year Ended August 31, 2015 g ton StateAuditor'sO Private ADDITIONS: Purpose Other Contributions: Trust Trust Private Donations 6,677.00 0.00 Employer 0.00 Members 0.00 ff ice Other 0.00 0.00 TOTAL CONTRIBUTIONS 6,677.00 0.00 Investment Income: Net Appreciation (Depreciation) in Fair Value 0.00 0.00 Interest and Dividends 0.00 0.00 Less Investment Expenses 0.00 0.00 Net Investment Income 0.00 0.00 Other Additions: Rent or Lease Revenue 0.00 0.00 Total Other Additions 0.00 0.00 TOTAL ADDITIONS 6,677.00 0.00 DEDUCTIONS: Benefits 0.00 Refund of Contributions 0.00 0.00 Administrative Expenses 0.00 0.00 Scholarships 0.00 Other 5,754.56 0.00 TOTAL DEDUCTIONS 5,754.56 0.00

Net Increase (Decrease) 922.44 0.00 Net Position--Beginning 3,818.46 0.00 Prior Year(s) Corrections or Restatements 0.00 0.00 NET POSITION--ENDING 4,740.90 0.00

P

a g e 21

The accompanying notes are an integral part of this financial statement. MUKILTEO SCHOOL DISTRICT Notes to the Financial Statements September 1, 2014 through August 31, 2015

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  7KH0XNLOWHR6FKRRO'LVWULFW 'LVWULFW LVDPXQLFLSDOFRUSRUDWLRQRUJDQL]HGSXUVXDQWWR7LWOH$RIWKH 5HYLVHG&RGHRI:DVKLQJWRQ 5&: IRUWKHSXUSRVHVRISURYLGLQJSXEOLFVFKRROVHUYLFHVWRVWXGHQWVLQ JUDGHV.–2YHUVLJKWUHVSRQVLELOLW\IRUWKH'LVWULFW’s operations is vested with the independently HOHFWHGERDUGRIGLUHFWRUV0DQDJHPHQWRIWKH'LVWULFWLVDSSRLQWHGE\DQGLVDFFRXQWDEOHWRWKHERDUGRI GLUHFWRUV)LVFDOUHVSRQVLELOLW\LQFOXGLQJEXGJHWDXWKRULW\DQGWKHSRZHUWRVHWIHHVOHY\SURSHUW\WD[HV DQGLVVXHGHEWFRQVLVWHQWZLWKSURYLVLRQVRIVWDWHVWDWXWHVDOVRUHVWVZLWKWKHERDUGRIGLUHFWRUV  7KH'LVWULFWSUHVHQWVJRYHUQPHQWDOIXQGILQDQFLDOVWDWHPHQWVDQGUHODWHGQRWHVRQWKHPRGLILHGDFFUXDO EDVLVRIDFFRXQWLQJLQDFFRUGDQFHZLWKWKHAccounting Manual for Public School Districts in the State of WashingtonLVVXHGMRLQWO\E\WKHState Auditor’s Office and the Superintendent of Public Instruction by WKHDXWKRULW\RI5&:5&:$5&:$  DQG5&:$7KLV PDQXDOSUHVFULEHVDILQDQFLDOUHSRUWLQJIUDPHZRUNWKDWGLIIHUVIURPJHQHUDOO\DFFHSWHGDFFRXQWLQJ SULQFLSOHV *$$3 LQWKHIROORZLQJPDQQHU    'LVWULFWZLGHVWDWHPHQWVDVGHILQHGLQ*$$3DUHQRWSUHVHQWHG   $6FKHGXOHRI/RQJ7HUP/LDELOLWLHVLVSUHVHQWHGDVVXSSOHPHQWDU\LQIRUPDWLRQ   6XSSOHPHQWDU\LQIRUPDWLRQUHTXLUHGE\*$$3LVQRWSUHVHQWHG  Fund Accounting  )LQDQFLDOWUDQVDFWLRQVRIWKH'LVWULFWDUHUHSRUWHGLQLQGLYLGXDOIXQGVHDFKIXQGXVHVDVHSDUDWHVHWRI VHOIEDODQFLQJDFFRXQWVWKDWFRPSULVHLWVDVVHWVOLDELOLWLHVIXQGHTXLW\UHYHQXHVDQGH[SHQGLWXUHV RU H[SHQVHV DVDSSURSULDWH$OOIXQGVDUHFRQVLGHUHGPDMRUIXQGV7KHYDULRXVIXQGVLQWKHUHSRUWDUH JURXSHGLQWRJRYHUQPHQWDO DQGILGXFLDU\ IXQGVDVIROORZV  Governmental Funds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Washington State Auditor's Office Page 22

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Measurement focus, basis of accounting, and fund financial statement presentation  *RYHUQPHQWDOIXQGILQDQFLDOVWDWHPHQWVDUHUHSRUWHGXVLQJWKHFXUUHQWILQDQFLDOUHVRXUFHV PHDVXUHPHQWIRFXVDQGWKHPRGLILHGDFFUXDOEDVLVRIDFFRXQWLQJ5HYHQXHVDUHUHFRJQL]HGDVVRRQDV WKH\DUHPHDVXUDEOHDQGDYDLODEOH5HYHQXHVDUHFRQVLGHUHG“Peasurable” LIWKHDPRXQWRIWKH transaction can be readily determined. Revenues are considered “available”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Washington State Auditor's Office Page 23

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The government’s policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available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

The government’s fund balance classifications policies and procedures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istrict’s board of directors. &RPPLWPHQWVDUHPDGHHLWKHUWKURXJKDIRUPDODGRSWHGERDUGUHVROXWLRQRUDUHUHODWHGWRDVFKRRO ERDUGSROLF\&RPPLWPHQWVPD\RQO\EHFKDQJHGZKHQWKHUHVRXUFHVDUHXVHGIRUWKHLQWHQGHGSXUSRVH RUWKHOLPLWDWLRQLVUHPRYHGE\DVXEVHTXHQWIRUPDODFWLRQRIWKHERDUGRIGLUHFWRUV  $VVLJQHG)XQG%DODQFH,QWKH*HQHUDO)XQGDPRXQWVWKDWDUHUHSRUWHGDV$VVLJQHGDUHWKRVH UHVRXUFHVWKDWWKH'LVWULFWKDVVHWDVLGHIRUVSHFLILFSXUSRVHV7KHVHDFFRXQWVUHIOHFWWHQWDWLYH PDQDJHPHQWSODQVIRUIXWXUHILQDQFLDOUHVRXUFHXVHVXFKDVWKHUHSODFHPHQWRIHTXLSPHQWRUWKH

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Washington State Auditor's Office Page 24

DVVLJQPHQWRIUHVRXUFHVIRUFRQWLQJHQFLHV$VVLJQPHQWVUHGXFHWKHDPRXQWUHSRUWHGDV8QDVVLJQHG )XQG%DODQFHEXWPD\QRWUHGXFHWKDWEDODQFHEHORZ]HUR  ,QRWKHUJRYHUQPHQWDOIXQGV$VVLJQHGIXQGEDODQFHUHSUHVHQWVDSRVLWLYHHQGLQJVSHQGDEOHIXQG EDODQFHRQFHDOOUHVWULFWLRQVDQGFRPPLWPHQWVDUHFRQVLGHUHG7KHVHUHVRXUFHVDUHRQO\DYDLODEOHIRU H[SHQGLWXUHLQWKDWIXQGDQGPD\QRWEHXVHGLQDQ\RWKHUIXQGZLWKRXWIRUPDODFWLRQE\WKH'istrict’s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ash and Cash Equivalents  $OORIWKH'istrict’s cash and cash equivalents are considered to be cash on KDQGGHPDQGGHSRVLWVDQG VKRUWWHUPLQYHVWPHQWVZLWKRULJLQDOPDWXULWLHVRIWKUHHPRQWKVRUOHVVIURPWKHGDWHRIDFTXLVLWLRQ

Inventory  ,QYHQWRU\LVYDOXHGDWFRVWXVLQJWKHILUVWLQILUVWRXW ),)2 PHWKRG7KHFRQVXPSWLRQPHWKRGRI LQYHQWRU\LVXVHGZKLFKFKDUJHVLQYHQWRU\DVDQH[SHQGLWXUHZKHQLWLVFRQVXPHG$SRUWLRQRIIXQG EDODQFHUHSUHVHQWLQJLQYHQWRU\LVFRQVLGHUHG1RQVSHQGDEOH86'$FRPPRGLW\LQYHQWRU\FRQVLVWVRI IRRGGRQDWHGE\WKH8QLWHG6WDWHV'HSDUWPHQWRI$JULFXOWXUH,WLVYDOXHGDWWKHSULFHVSDLGE\WKH86'$ IRUWKHFRPPRGLWLHV  Accounting and Reporting Changes for 2014–2015  (IIHFWLYHIRUWKH–VFKRRO\HDUWKHGLVWULFWLPSOHPHQWHGSURYLVLRQVRI*$6%6WDWHPHQW1R $FFRXQWLQJDQG)LQDQFLDO5HSRUWLQJIRU3HQVLRQV$VDUHVXOWWKH6FKHGXOHRI/RQJ7HUP/LDELOLWLHVQRZ includes the district’s proportionate share of the net pension liability for the costVKDULQJPXOWLSOH HPSOR\HUSODQVLQZKLFKWKHGLVWULFWSDUWLFLSDWHV  NOTE 2: DEPOSITS AND INVESTMENTS  7KH6QRKRPLVK&RXQW\7UHDVXUHULVWKH ex officioWUHDVXUHUIRUWKH'LVWULFWDQGKROGVDOODFFRXQWVRIWKH 'LVWULFW7KH'LVWULFWGLUHFWVWKH&RXQW\7UHDVXUHUWRLQYHVWWKRVHILQDQFLDOUHVRXUFHVRIWKH'LVWULFWWKDW WKH'LVWULFWKDVGHWHUPLQHGDUHQRWQHHGHGWRPHHWWKHFXUUHQWILQDQFLDOREOLJDWLRQVRIWKH'LVWULFW  $OORIWKH'LVWULFW’s investments (except for investments of deferred compensation plans) during the year DQGDW\HDUHQGZHUHLQVXUHGRUUHJLVWHUHGDQGKHOGE\WKH'LVWULFWRULWVDJHQWLQWKH'LVWULFW’s QDPH 

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Washington State Auditor's Office Page 25

The District’s investments as of August 31, 20DUHDVIROORZV  0XNLOWHR6FKRRO 7\SHRI,QYHVWPHQW 'LVWULFWVLQYHVWPHQWV 7RWDO County Treasurer’s Investment Pool   7RWDO    NOTE 3: SIGNIFICANT CONTINGENT LIABILITIES  Litigation  7KH'LVWULFWKDVQRNQRZQOHJDOREOLJDWLRQVWKDWZRXOGPDWHULDOO\LPSDFWWKHILQDQFLDOSRVLWLRQRIWKH 'LVWULFW  NOTE 4: SIGNIFICANT EFFECTS OF SUBSEQUENT EVENTS  7KHUHZHUHQRHYHQWVDIWHUWKHEDODQFHVKHHWGDWHWKDWZRXOGKDYHDPDWHULDOLPSDFWRQWKHQH[WRU IXWXUHILVFDO\HDUV  NOTE 5: PENSION PLANS  General Information  7KH:DVKLQJWRQ6WDWH'HSDUWPHQWRI5HWLUHPHQW6\VWHPV '56 DGHSDUWPHQWZLWKLQWKHSULPDU\ JRYHUQPHQWRIWKHVWDWHRI:DVKLQJWRQSUHSDUHVDVWDQGDORQHFRPSUHKHQVLYHDQQXDOILQDQFLDOUHSRUW &$)5 WKDWLQFOXGHVILQDQFLDOVWDWHPHQWVDQGUHTXLUHGVXSSOHPHQWDU\LQIRUPDWLRQIRUHDFKSHQVLRQSODQ The pension plan’s basic financial statement is accounted for using theDFFUXDOEDVLVRIDFFRXQWLQJ7KH PHDVXUHPHQWGDWHRIWKHSHQVLRQSODQVLV-XQH%HQHILWSD\PHQWV LQFOXGLQJUHIXQGVRIHPSOR\HH FRQWULEXWLRQV DUHUHFRJQL]HGZKHQGXHDQGSD\DEOHLQDFFRUGDQFHZLWKWKHEHQHILWWHUPV,QYHVWPHQWV DUHUHSRUWHGDWIDLUYDOXH  7KHVFKRROGLVWULFWLVUHSRUWLQJWKHQHWSHQVLRQOLDELOLW\LQWKHQRWHVDQGRQWKH6FKHGXOHRI/RQJWHUP Liabilities calculated as the district’s proportionate allocation percentage multiplied by the total plan FROOHFWLYHQHWSHQVLRQOLDELOLW\ 'HWailed information about the pension plans’ fiduciary net position is available in the separately issued '56&$)5&RSLHVRIWKHUHSRUWPD\EHREWDLQHGE\FRQWDFWLQJWKH:DVKLQJWRQ6WDWH'HSDUWPHQWRI 5HWLUHPHQW6\VWHPV32%R[2O\PSLD:$RURQOLQHDW KWWSZZZGUVZDJRYDGPLQLVWUDWLRQVDQQXDOUHSRUW  Membership Participation  6XEVWDQWLDOO\DOOVFKRROGLVWULFWIXOOWLPHDQGTXDOLI\LQJSDUWWLPHHPSOR\HHVSDUWLFLSDWHLQRQHRIWKH IROORZLQJWKUHHFRQWULEXWRU\PXOWLHPSOR\HUFRVWVKDULQJVWDWHZLGHUHWLUHPHQWV\VWHPVPDQDJHGE\ DRS: Teachers’ Retirement System (TRS), Public Employees’ Retirement System (PERS) and School Employees’ Retirement System (SERS).  

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Washington State Auditor's Office Page 26

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Washington State Auditor's Office Page 27

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Washington State Auditor's Office Page 28

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Plan Contributions

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Pension Rates 5DWH 5DWH PERS 1 0HPEHU&RQWULEXWLRQ5DWH   (PSOR\HU&RQWULEXWLRQ5DWH   Pension Rates 5DWH 5DWH TRS 1 0HPEHU&RQWULEXWLRQ5DWH   (PSOR\HU&RQWULEXWLRQ5DWH   TRS 2 0HPEHU&RQWULEXWLRQ5DWH   (PSOR\HU&RQWULEXWLRQ5DWH   TRS 3 0HPEHU&RQWULEXWLRQ5DWH YDULHV  YDULHV  (PSOR\HU&RQWULEXWLRQ5DWH    SERS 2 0HPEHU&RQWULEXWLRQ5DWH   (PSOR\HU&RQWULEXWLRQ5DWH   SERS 3 0HPEHU&RQWULEXWLRQ5DWH YDULHV  YDULHV  (PSOR\HU&RQWULEXWLRQ5DWH    Note: The DRS administrative rate of .0018 is included in the employer rate.  9DULDEOHIURPWREDVHGRQUDWHVHOHFWHGE\WKHPHPEHU  'HILQHGEHQHILWSRUWLRQRQO\

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Washington State Auditor's Office Page 29

The Collective Net Pension Liability

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The School District’s Proportionate Share of the Net Pension Liability (NPL)

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-XQH 3(56 6(56 756 756 District’s Annual Contributions     3URSRUWLRQDWH6KDUHRIWKH1HW 3HQVLRQ/LDELOLW\    

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Actuarial Assumptions

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Washington State Auditor's Office Page 30

Mortality Rates  0RUWDOLW\UDWHVXVHGLQWKHSODQVZHUHEDVHGRQWKH53&RPELQHG+HDOWK\7DEOHDQG&RPELQHG 'LVDEOHG7DEOHSXEOLVKHGE\WKH6RFLHW\RI$FWXDULHV7KH2IILFHRIWKH6WDWH$FWXDU\DSSOLHGRIIVHWVWR WKHEDVHWDEOHDQGUHFRJQL]HGIXWXUHLPSURYHPHQWVLQPRUWDOLW\E\SURMHFWLQJWKHPRUWDOLW\UDWHVXVLQJ SHUFHQW6FDOH%%0RUWDOLW\UDWHVDUHDSSOLHGRQDJHQHUDWLRQDOEDVLVPHDQLQJPHPEHUVDUH DVVXPHGWRUHFHLYHDGGLWLRQDOPRUWDOLW\LPSURYHPHQWVLQHDFKIXWXUH\HDUWKURXJKRXWWKHLUOLIHWLPH7KH DFWXDULDODVVXPSWLRQVXVHGLQWKH-XQHYDOXDWLRQZHUHEDVHGRQWKHUHVXOWVRIWKH– ([SHULHQFH6WXG\$GGLWLRQDODVVXPSWLRQVIRUVXEVHTXHQWHYHQWVDQGODZFKDQJHVDUHFXUUHQWDVRIWKH DFWXDULDOYDOXDWLRQUHSRUW

Long-term Expected Rate of Return  7KHORQJWHUPH[SHFWHGUDWHRIUHWXUQRQSHQVLRQSODQLQYHVWPHQWVZDVGHWHUPLQHGXVLQJDEXLOGLQJ EORFNPHWKRGLQZKLFKDEHVWHVWLPDWHRIH[SHFWHGIXWXUHUDWHVRIUHWXUQ H[SHFWHGUHWXUQVQHWRI SHQVLRQSODQLQYHVWPHQWH[SHQVHEXWLQFOXGLQJLQIODWLRQ DUHGHYHORSHGIRUHDFKPDMRUDVVHWFODVVE\ WKH:DVKLQJWRQ6WDWH,QYHVWPHQW%RDUG :6,% 7KRVHH[SHFWHGUHWXUQVPDNHXSRQHFRPSRQHQWRI WSIB’s &0$V7KH&0$VFRQWDLQWKUHHSLHFHVRILQIRUPDWLRQIRUHDFKFODVVRIDVVHWVWKH:6,%FXUUHQWO\ LQYHVWLQ   ([SHFWHGDQQXDOUHWXUQ  6WDQGDUGGHYLDWLRQRIWKHDQQXDOUHWXUQ  &RUUHODWLRQVEHWZHHQWKHDQQXDOUHWXUQVRIHDFKDVVHWFODVVZLWKHYHU\RWKHUDVVHWFODVV  :6,%XVHVWKH&0$VDQGWKHLUWDUJHWDVVHWDOORFDWLRQWRVLPXODWHIXWXUHLQYHVWPHQWUHWXUQVRYHUYDULRXV WLPHKRUL]RQV  7KHORQJWHUPH[SHFWHGUDWHRIUHWXUQRISHUFHQWDSSUR[LPDWHO\HTXDOVWKHPHGLDQRIWKH VLPXODWHGLQYHVWPHQWUHWXUQVRYHUDILIW\year time horizon, increased slightly to remove WSIB’s implicit DQGVPDOOVKRUWWHUPdownward adjustment due to assumed mean reversion. WSIB’s implicit shortWHUP DGMXVWPHQWZKLOHVPDOODQGDSSURSULDWHRYHUDWHQWRILIWHHQ\HDUSHULRGEHFRPHVDPSOLILHGRYHUDILIW\ \HDUPHDVXUHPHQWSHULRG  %HVWHVWLPDWHVRIDULWKPHWLFUHDOUDWHVRIUHturn for each major asset class included in the pension plans’ WDUJHWDVVHWDOORFDWLRQDVRI-XQHDUHVXPPDUL]HGLQWKHIROORZLQJWDEOH  7567563(56DQG6(56 $VVHW&ODVV 7DUJHW /RQJWHUP([SHFWHG $OORFDWLRQ 5HDO5DWHRI5HWXUQ )L[HG,QFRPH   7DQJLEOH$VVHWV   5HDO(VWDWH   *OREDO(TXLW\   3ULYDWH(TXLW\    7KHLQIODWLRQFRPSRQHQWXVHGWRFUHDWHWKHDERYHWDEOHLVpercent, and represents WSIB’s most UHFHQWORQJWHUPHVWLPDWHRIEURDGHFRQRPLFLQIODWLRQ 

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Washington State Auditor's Office Page 31

Discount Rate  7KHGLVFRXQWUDWHXVHGWRPHDVXUHWKHWRWDOSHQVLRQOLDELOLW\ZDVSHUFHQW7RGHWHUPLQHWKHGLVFRXQW UDWHan asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was VXIILFLHQWWRPDNHDOOSURMHFWHGIXWXUHEHQHILWSD\PHQWVRIFXUUHQWSODQPHPEHUV&RQVLVWHQWZLWKFXUUHQW ODZWKHFRPSOHWHGDVVHWVXIILFLHQF\WHVWLQFOXGHGDQDVVXPHGSHUFHQWORQJWHUPGLVFRXQWUDWHWR GHWHUPLQHIXQGLQJOLDELOLWLHVIRUFDOFXODWLQJIXWXUHFRQWULEXWLRQVUDWHUHTXLUHPHQWV&RQVLVWHQWZLWKWKH ORQJWHUPH[SHFWHGUDWHRIUHWXUQDSHUFHQWIXWXUHLQYHVWPHQWUDWHRIUHWXUQRQLQYHVWHGDVVHWVZDV DVVXPHGIRUWKHWHVW&RQWULEXWLRQVIURPSODQPHPEHUVDQGHPSOR\HUVDUHDVVXPHGWRFRQWLQXHWREH PDGHDWFRQWUDFWXDOO\UHTXLUHGUDWHV%DVHGRQWKRVHDVVXPSWLRQVthe pension plan’s fiduciary net SRVLWLRQZDVSURMHFWHGWREHDYDLODEOHWRPDNHDOOSURMHFWHGIXWXUHEHQHILWSD\PHQWVRIFXUUHQWSODQ PHPEHUV7KHUHIRUHWKHORQJWHUPH[SHFWHGUDWHRIUHWXUQRISHUFHQWRQSHQVLRQSODQLQYHVWPHQWV ZDVDSSOLHGWRGHWHUPLQHWKHWRWDOSHQVLRQOLDELOLW\  Sensitivity of the Net Pension Liability to Changes in the Discount Rate  7KHIROORZLQJWDEOHSUHVHQWVWKHMukilteo School District’sSURSRUWLRQDWHVKDUHRIWKHFROOHFWLYHQHW SHQVLRQOLDELOLW\ 13/ FDOFXODWHGXVLQJWKHGLVFRXQWUDWHRISHUFHQWDVZHOODVZKDWWKHQHWSHQVLRQ OLDELOLW\ZRXOGEHLILWZHUHFDOFXODWHGXVLQJDGLVFRXQWUDWHWKDWLVRQHSHUFHQWDJHSRLQWORZHU  SHUFHQW RURQHSHUFHQWDJHSRLQWKLJKHU SHUFHQW WKDQWKHFXUUHQWUDWH$PRXQWVDUHFDOFXODWHG XVLQJWKHVFKRROGLVWULFW’VVSHFLILFDOORFDWLRQSHUFHQWDJHE\SODQWRGHWHUPLQHWKHSURSRUWLRQDWHVKDUHRI WKHFROOHFWLYHQHWSHQVLRQOLDELOLW\  'HFUHDVH &XUUHQW'LVFRXQW5DWH ,QFUHDVH        PERS1 NPL    $OORFDWLRQ3HUFHQWDJH    3URSRUWLRQDWH6KDUHRI    &ROOHFWLYH13/   SERS2/3 NPL     $OORFDWLRQ3HUFHQWDJH    3URSRUWLRQDWH6KDUHRI     &ROOHFWLYH13/

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NOTE 6: ANNUAL OTHER POST-EMPLOYMENT BENEFIT COST AND NET OPEB OBLIGATIONS  7KHVWDWHWKURXJKWKH+HDOWK&DUH$XWKRULW\ +&$ DGPLQLVWHUVDQDJHQWPXOWLHPSOR\HURWKHUSRVW HPSOR\PHQWEHQHILWSODQ7KH3XEOLF(PSOR\HHV%HQHILWV%RDUG 3(%% FUHDWHGZLWKLQWKH+&$LV DXWKRUL]HGWRGHVLJQEHQHILWVDQGGHWHUPLQHWKHWHUPVDQGFRQGLWLRQVRIHPSOR\HHDQGUHWLUHGHPSOR\HH

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Washington State Auditor's Office Page 32

SDUWLFLSDWLRQDQGFRYHUDJHLQFOXGLQJHVWDEOLVKPHQWRIHOLJLELOLW\FULWHULDIRUERWKDFWLYHDQGUHWLUHG HPSOR\HHV3URJUDPVLQFOXGH PHGLFDOGHQWDOOLIHLQVXUDQFHDQGORQJWHUPGLVDELOLW\LQVXUDQFH   (PSOR\HUVSDUWLFLSDWLQJLQWKHSODQLQFOXGHWKHVWDWHRI:DVKLQJWRQ ZKLFKLQFOXGHVJHQHUDOJRYHUQPHQW DJHQFLHVDQGKLJKHUHGXFDWLRQLQVWLWXWLRQV of the state’s K–VFKRROGLVWULFWVDQGHGXFDWLRQDO VHUYLFHGLVWULFWV (6'V DQGSROLWLFDOVXEGLYLVLRQVDQGWULEDOJRYHUQPHQWV$GGLWLRQDOO\WKH3(%% SODQLVDYDLODEOHWRWKHUHWLUHHVRIWKHUHPDLQLQJ.–VFKRROGLVWULFWVDQG(6'V7KH'LVWULFW’s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tate’s operating budget and is subject WRFKDQJHRQDQDQQXDOEDVLV7KLVDPRXQWLVQRWDFWXDULDOO\GHWHUPLQHGDQGLVQRWSODFHGLQDWUXVWWR SD\WKHREOLJDWLRQVIRUSRVWHPSOR\PHQWKHDOWKFDUHEHQHILWV  7KH'LVWULFWKDVQRFRQWURORYHUWKHEHQHILWVRIIHUHGWRUHWLUHHVWKHUDWHVFKDUJHGWRUHWLUHHVQRUWKHIHH SDLGWRWKH+HDOWK&DUH$XWKRULW\7KH'LVWULFWGRHVQRWGHWHUPLQHLWVDQQXDOUHTXLUHGFRQWULEXWLRQQRUWKH QHWRWKHUSRVWHPSOR\PHQWEHQHILWREOLJDWLRQDVVRFLDWHGZLWKWKLVSODQ$FFRUGLQJO\WKHVHDPRXQWVDUH QRWVKRZQRQWKHILQDQFLDOVWDWHPHQWV

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NOTE 7: OTHER SIGNIFICANT COMMITMENTS  &RQVWUXFWLRQLQSURJUHVVLVFRPSRVHGRI  3URMHFW $GGLWLRQDO/RFDO $GGLWLRQDO6WDWH ([SHQGHGDV 3URMHFW $XWKRUL]DWLRQ )XQGV )XQGV RI $PRXQW &RPPLWWHG &RPPLWWHG 3KDVH:LUHOHVV     3KDVH:LUHOHVV     7HOHSKRQH6\VWHP     (OHP'HYLFHVZ&DUWV     06'HYLFHVZ&DUWV     +6'HYLFHVZ&DUWV     3UH%RQG$UFKLWHFW     3DYHPHQW5HKDELOLWDWLRQ     5RRI'LVWULFW2IILFH     (OHYDWLRQ6HDO     3DYHPHQW5HKDELOLWDWLRQ     1HZ(OHP/DNH6WLFNQH\     .LQGHUJDUWHQ&HQWHU     +RXVH5HPRGHO     &DUSHW9DULRXV     0XOWLSXUSRVH     29*\P0XVLF     6HFXULW\     )LHOGV92 +3     +9$&0$     %RLOHUV''&     9DULRXV'LVWULFW     3DYHPHQW5HIXUELVK     3OD\JURXQG     )LHOGV.$ 0$     5RRILQJ6XPPHU     5HFRQGLWLRQ3DUN%XV=RQH     7KHDWUH,PSURYHPHQW0$     6SHFLDO(GXFDWLRQ+HDOWK      6DIHW\ )LUH$ODUP5HSODFHPHQW     $OW&DPSXV3DYHPHQW          7RWDO      Encumbrances  (QFXPEUDQFHDFFRXQWLQJLVHPSOR\HGLQJRYHUQPHQWDOIXQGV3XUFKDVHRUGHUVFRQWUDFWVDQGRWKHU FRPPLWPHQWVIRUWKHH[SHQGLWXUHRIPRQH\VDUHUHFRUGHGLQRUGHUWRUHVHUYHDSRUWLRQRIWKHDSSOLFDEOH DSSURSULDWLRQ(QFXPEUDQFHVODSVHDWWKHHQGRIWKHILVFDO\HDUDQGPD\EHUHHQFXPEHUHGWKHIROORZLQJ \HDU7KHIROORZLQJHQFXPEUDQFHDPRXQWVZHUHUHHQFXPEHUHGE\IXQGRQ6HSWHPEHU  )XQG $PRXQW *HQHUDO  &DSLWDO3URMHFWV)XQG 

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NOTE 8: REQUIRED DISCLOSURES ABOUT CAPITAL ASSETS  7KH'istrict’s capital assets are insured in the amount of IRUILVFDO\HDU,QWKH RSLQLRQRIWKH'LVWULFW’s insurance consultant, the amount is sufficient to adequately fund replacement of WKH'LVWULFW’s assets.  NOTE 9: REQUIRED DISCLOSURES ABOUT LONG-TERM LIABILITIES  Long-Term Debt  %RQGVSD\DEOHDW$XJXVWDUHFRPSULVHGRIWKHIROORZLQJLQGLYLGXDOLVVXHV  $PRXQW )LQDO ,QWHUHVW $PRXQW ,VVXH1DPH $XWKRUL]HG $QQXDO,QVWDOOPHQWV 0DWXULW\ 5DWH V  2XWVWDQGLQJ 5*)    9DULRXV  *2%    9DULRXV        7RWDO*HQHUDO      2EOLJDWLRQ%RQGV  7KHIROORZLQJLVDVXPPDU\RIJHQHUDOREOLJDWLRQORQJWHUPGHEWWUDQVDFWLRQVRIWKH'LVWULFWIRUWKHILVFDO \HDU V HQGHG$XJXVW  /RQJ7HUP'HEW3D\DEOHDW  1HZ,VVXHV  'HEW5HWLUHG  /RQJ7HUP'HEW3D\DEOHDW   7KHIROORZLQJLVDVFKHGXOHRIDQQXDOUHTXLUHPHQWVWRDPRUWL]HGHEWDW$XJXVW 

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strict is a member of the King County Director’s Association (KCDA). KCDA is a purchasing FRRSHUDWLYHGHVLJQHGWRSRROWKHPHPEHUGLVWULFWs’ purchasing power. 7KHERDUGDXWKRUL]HGMRLQLQJWKH DVVRFLDWLRQE\SDVVLQJ5HVROXWLRQGDWHG2FWREHUDQGKDVUHPDLQHGLQWKHMRLQW YHQWXUHHYHUVLQFH7KH'LVWULFW’sFXUUHQWHTXLW\RILVWKHDFFXPXODWLRQRIWKHDQQXDO assignment of KCDA’s operating surplus based upon the percentage derived from KCDA’s total sales to

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Washington State Auditor's Office Page 36

WKH'LVWULFWFRPSDUHGWRDOORWKHUGLVWULFWVDSSOLHGDJDLQVWSDLGDGPLQLVWUDWLYHIHHV7KH'LVWULFWPD\ ZLWKGUDZIURPWKHMRLQWYHQWXUHDQGZLOOUHFHLYHLWVHTXLW\LQWHQDQQXDODOORFDWLRQVRIPHUFKDQGLVHRU DQQXDOSD\PHQWV   NOTE 13: FUND BALANCE CLASSIFICATION DETAILS  7KH'istrict’s financial statements include the following amounts presented in the aggregate.   &DSLWDO3URMHFWV 'HEW6HUYLFH 7UDQVSRUWDWLRQ *HQHUDO)XQG $6%)XQG )XQG )XQG 9HKLFOH)XQG 1RQVSHQGDEOH      )XQG%DODQFH ,QYHQWRU\DQG      3UHSDLG,WHPV 5HVWULFWHG)XQG      %DODQFH )RU2WKHU      ,WHPV )RU)XQG      3XUSRVH )RU&DUU\RYHU RI5HVWULFWHG      5HYHQXHV )RU6NLOO      &HQWHUV )RU&DUU\RYHU RI)RRG      6HUYLFH 5HYHQXH )RU'HEW      6HUYLFH &RPPLWWHG      )XQG%DODQFH )RU(FRQRPLF      6WDELOL]DWLRQ 2WKHU      &RPPLWPHQWV $VVLJQHG)XQG      %DODQFH &RQWLQJHQFLHV      2WKHU&DSLWDO      3URMHFWV 2WKHU      3XUSRVHV )XQG      3XUSRVHV 8QDVVLJQHG      )XQG%DODQFH  ,QDGGLWLRQWKH&DSLWDO3URMHFWV)XQGKDVWKHIROORZLQJDPRXQWVLQ5HVWULFWHGDQG&RPPLWWHG)XQG %DODQFHEDVHGRQWKHVRXUFHRIWKHUHYHQXHV  5HVWULFWHGIURP%RQG3URFHHGV  &RPPLWWHGIURP/HY\3URFHHGV  5HVWULFWHGIURP6WDWH3URFHHGV  5HVWULFWHGIURP2WKHU3URFHHGV 

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Washington State Auditor's Office Page 37

 7KHERDUGRIGLUHFWRUVKDVHVWDEOLVKHGDPLQLPXPIXQGEDODQFHSROLF\IRUWKHJHQHUDOIXQGWRSURYLGHIRU ILQDQFLDOVWDELOLW\DQGFRQWLQJHQFLHVZLWKLQWKH'LVWULFW7KHSROLF\LVWKDWWKH'LVWULFWVKDOOPDLQWDLQRI UHYHQXH3RUWLRQVRIIXQGEDODQFHWKDWDUHVHWDVLGHIRUWKHSXUSRVHRIPHHWLQJWKLVSROLF\DUHUHFRUGHG RQWKHILQDQFLDOVWDWHPHQWVDVDSDUWRI8QDVVLJQHGIXQGEDODQFH  NOTE 14: POST-EMPLOYMENT BENEFIT PLANS OTHER THAN PENSION PLANS  457 Plan – Deferred Compensation Plan  'LVWULFWHPSOR\HHVKDYHWKHRSWLRQRISDUWLFLSDWLQJLQDGHIHUUHGFRPSHQVDWLRQSODQDVGHILQHGLQ†RI WKH,QWHUQDO5HYHQXH&RGHWKDWLVDGPLQLVWHUHGE\WKHVWDWHGHIHUUHGFRPSHQVDWLRQSODQRUWKH'LVWULFW  403(b) Plan – Tax Sheltered Annuity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ompensated Absences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kill Center Core Campus Note  7KH'LVWULFWLVWKHKRVWGLVWULFWIRUWKH6QR,VOH6NLOO&HQWHUDUHJLRQDOSURJUDPGHVLJQHGWRSURYLGH FDUHHUDQGWHFKQLFDOHGXFDWLRQRSSRUWXQLWLHVWRVWXGHQWVLQSDUWLFLSDWLQJGLVWULFWV7KHSXUSRVHRID6NLOO &HQWHULVWRHQKDQFHWKHFDUHHUDQGWHFKQLFDOHGXFDWLRQFRXUVHRIIHULQJVDPRQJGLVWULFWVE\DYRLGLQJ XQQHFHVVDU\GXSOLFDWLRQRIFRXUVHV

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Washington State Auditor's Office Page 38

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ources of Funding  7KH6NLOO&HQWHULVSULPDULO\IXQGHGE\VWDWHDSSRUWLRQPHQWEDVHGRQWKHQXPEHURIVWXGHQWVZKR DWWHQGWKH6NLOO&HQWHU2WKHUVRXUFHVRILQFRPHLQFOXGHIHGHUDOJUDQWVIURPWKH&DUO'3HUNLQV SURJUDPWXLWLRQDQGIHHVDQGSD\PHQWVIURPPHPEHUGLVWULFWV  Unspent Funds  $Q\IXQGVUHPDLQLQJDWWKHHQGRIWKH\HDUIURP6NLOO&HQWHURSHUDWLRQVDUHUHFRUGHGDVDUHVWULFWLRQ RIWKH'LVWULFW V*HQHUDO)XQGEDODQFHDQGDUHWREHXVHGIRUILQDQFLQJIXWXUHRSHUDWLRQVRIWKH6NLOOV &HQWHU0HPEHUGLVWULFWVGRQRWKDYHFODLPWRDQ\XQVSHQWIXQGVRIWKH6NLOO&HQWHU  7KHIROORZLQJGLVWULFWVDUHPHPEHUGLVWULFWVRIWKH6NLOO&HQWHU$UOLQJWRQ'DUULQJWRQ(GPRQGV(YHUHWW *UDQLWH)DOOV/DNH6WHYHQV/DNHZRRG0DU\VYLOOH0RQURH0XNLOWHR6N\NRPLVK6QRKRPLVK6RXWK :KLGEH\DQG6XOWDQ

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Washington State Auditor's Office Page 39

Mukilteo School District No. 006

Schedule of Long-Term Liabilities: GENERAL FUND

For the Year Ended August 31, 2015 Washin

______

Beginning g ton StateAuditor'sO Outstanding Debt Amount Ending September 1, Amount Issued / Redeemed / Outstanding Debt Amount Due Description 2014 Increased Decreased August 31, 2015 Within One Year

Non-Voted Debt and Liabilities Capital Leases 0.00 0.00 0.00 0.00 0.00 ff

ice Contracts Payable 0.00 0.00 0.00 0.00 0.00 Non-Cancellable Operating Leases 0.00 0.00 0.00 0.00 0.00 Claims & Judgements 0.00 0.00 0.00 0.00 0.00 Compensated Absences 2,672,027.78 85,530.52 0.00 2,757,558.30 392,563.95 Long-Term Notes 0.00 0.00 0.00 0.00 0.00 Anticipation Notes Payable 0.00 0.00 0.00 0.00 0.00 Lines of Credit 0.00 0.00 0.00 0.00 0.00 Other Non-Voted Debt 0.00 0.00 0.00 0.00 0.00

Other Liabilities Non-Voted Notes Not Recorded as Debt 0.00 0.00 0.00 0.00 0.00 Net Pension Liabilities: Net Pension Liabilities TRS 1 0.00 51,595,377.00 0.00 51,595,377.00 Net Pension Liabilities TRS 2/3 0.00 13,678,007.00 0.00 13,678,007.00 Net Pension Liabilities SERS 2/3 0.00 4,881,066.00 0.00 4,881,066.00 Net Pension Liabilities PERS 1 0.00 9,922,059.00 0.00 9,922,059.00

Total Long-Term Liabilities 2,672,027.78 80,162,039.52 0.00 82,834,067.30 392,563.95

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Mukilteo School District No. 006

Schedule of Long-Term Liabilities: DEBT SERVICE FUND

For the Year Ended August 31, 2015

Washin ______Beginning g Outstanding Debt Amount Ending ton StateAuditor'sO September 1, Amount Issued / Redeemed / Outstanding Debt Amount Due Description 2014 Increased Decreased August 31, 2015 Within One Year

Voted Debt Voted Bonds 93,260,000.00 0.00 5,525,000.00 87,735,000.00 12,465,000.00

ff LOCAL Program Proceeds Issued in Lieu of Bonds 0.00 0.00 0.00 0.00 0.00 ice Non-Voted Debt Non-Voted Bonds 0.00 0.00 0.00 0.00 0.00 LOCAL Program Proceeds 0.00 0.00 0.00 0.00 0.00

Total Long-Term Liabilities 93,260,000.00 0.00 5,525,000.00 87,735,000.00 12,465,000.00

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MUKILTEO SCHOOL DISTRICT NO. 6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS )RUWKH\HDUHQGLQJ$XJXVW

        ([SHQGLWXUHV )HGHUDO 3DVV 2WKHU,GHQWLILFDWLRQ )URP &)'$ )URP3DVV7KURXJK $JHQF\ 7KURXJK )HGHUDO3URJUDP7LWOH 1XPEHU 'LUHFW 7RWDO 1RWH 1XPEHU $ZDUGV 1DPH $JHQF\ $ZDUGV

86'$ :$263, 6FKRRO%UHDNIDVW3URJUDP  1$    :$263, 1DWLRQDO6FKRRO/XQFK&DVK$VVLVWDQFH 1$   :$263, 1DWLRQDO6FKRRO/XQFK1RQ&DVK$VVLVWDQFH 1$   :$263, 1DWLRQDO6FKRRO/XQFK3URJUDP  1$  :$263, 6XPPHU)RRG6HUYLFH3URJUDPIRU&KLOGUHQ  1$    6XEWRWDO&KLOG1XWULWLRQ&OXVWHU 

:$263, &KLOGDQG$GXOW&DUH)RRG3URJUDP  1$    :$263, 6FKRROVDQG5RDGV*UDQWVWR6WDWH  1$    Subtotal US Department of Agriculture -$ $ 4,184,579.86 $ 4,184,579.86

'2( :$263, 7LWOH*UDQWVWR/RFDO(GXFDWLRQDO$JHQFLHV      :$263, 6SHFLDO(G*UDQWVWR6WDWHV     :$263, 6SHFLDO(G*UDQWVWR6WDWHV6DIHW\1HW $    :$263, 6SHFLDO(G3UHVFKRRO*UDQWV     6XEWRWDO6SHFLDO(G&OXVWHU 

:$263, &DUHHUDQG7HFKQLFDO(GXFDWLRQ%DVLF*UDQWVWR6WDWHV      :$263, (QJOLVK/DQJXDJH$FTXLVLWLRQ6WDWH*UDQWV $     :$263, ,PSURYLQJ7HDFKHU4XDOLW\6WDWH*UDQWV      Subtotal US Department of Education -$ $ 6,962,050.83 $ 6,962,050.83

TOTAL FEDERAL AWARDS EXPENDED -$ $ 11,146,630.69 $ 11,146,630.69

NOTE 1—BASIS OF ACCOUNTING 7KH6FKHGXOHRI([SHQGLWXUHVRI)HGHUDO$ZDUGVLVSUHSDUHGRQWKHVDPHEDVLVRIDFFRXQWLQJDVWKH0XNLOWHR6FKRRO'LVWULFW VILQDQFLDOVWDWHPHQWV7KH'LVWULFW XVHVWKHPRGLILHGDFFXUDOEDVLVRIDFFRXQWLQJ([SHQGLWXUHVUHSUHVHQWRQO\WKHIHGHUDOO\IXQGHGSRUWLRQVRIWKHSURJUDP'LVWULFWUHFRUGVVKRXOGEHFRQVXOWHG

NOTE 2—NONCASH AWARDS 7KHDPRXQWRIFRPPRGLWLHV UHSRUWHGRQWKHVFKHGXOHLVWKHYDOXHRIFRPPRGLWLHVGLVWULEXWHGE\WKH'LVWULFWGXULQJWKHFXUUHQW\HDUDQGSULFHVDVSUHVFULEHGE\86'$

NOTE 3—SCHOOLWIDE PROGRAMS 7KH0XNLOWHR6FKRRO'LVWULFW operates a “schoolwide program” in six elementary buildings. Using federal funding, schoolwide programs are designed to upgrade DQHQWLUHHGXFDWLRQDOSURJUDPZLWKLQDVFKRROIRUDOOVWXGHQWVUDWKHUWKDQOLPLWVHUYLFHVWRFHUWDLQWDUJHWHGVWXGHQWV7KHIROORZLQJIHGHUDOSURJUDPDPRXQWZDV H[SHQGHGE\WKH'LVWULFWLQLWVVFKRROZLGHSURJUDP7LWOH  

NOTE 4—NOT AVAILABLE (N/A) 7KH0XNLOWHR6FKRRO'LVWULFWZDVXQDEOHWRREWDLQRWKHULGHQWLILFDWLRQQXPEHU

NOTE 5—FEDERAL INDIRECT RATE 7KH0XNLOWHR6FKRRO'LVWULFW XVHGWKHIHGHUDOUHVWULFWHGUDWHRISHUFHQWIRUWKLVSURJUDP

The Accompanying Notes to the Schedule of Expenditures of Federal Awards are an Integral Part of this Schedule.

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Washington State Auditor's Office Page 42 

ABOUT THE STATE A UDITOR’S OFFICE UurT‡h‡r6ˆqv‡‚ †Pssvprv†r†‡hiyv†urqv‡ur†‡h‡r†8‚†‡v‡ˆ‡v‚hqv†ƒh ‡‚s‡urr‘rpˆ‡v‰r i hpu‚s†‡h‡rt‚‰r €r‡UurT‡h‡r6ˆqv‡‚ v†ryrp‡rqi’‡urpv‡v“r†‚sXh†uvt‡‚hq†r ‰r† s‚ˆ ’rh ‡r €†

Xr‚ xv‡u‚ˆ hˆqv‡pyvr‡†hqpv‡v“r†‡‚hpuvr‰r‚ˆ ‰v†v‚‚st‚‰r €r‡‡uh‡‚ x†s‚  pv‡v“r† i’uryƒvt t‚‰r €r‡† ‚ xir‡‡r p‚†‡ yr††qryv‰r uvtur  ‰hyˆrhq rh  t rh‡r  ƒˆiyvp‡ ˆ†‡

Dsˆysvyyvt‚ˆ €v††v‚‡‚u‚yq†‡h‡rhqy‚phyt‚‰r €r‡†hpp‚ˆ‡hiyrs‚ ‡urˆ†r‚sƒˆiyvp r†‚ˆ pr† r hy†‚ u‚yq ‚ˆ †ry‰r† hpp‚ˆ‡hiyr i’ p‚‡vˆhyy’ v€ƒ ‚‰vt ‚ˆ  hˆqv‡ „ˆhyv‡’ hq ‚ƒr h‡v‚hyrssvpvrp’hqqr‰ry‚ƒvtuvtuy’rthtrqhqp‚€€v‡‡rqr€ƒy‚’rr†

6†hryrp‡rqhtrp’‡urT‡h‡r6ˆqv‡‚ †Pssvpruh†‡urvqrƒrqrprrpr††h ’‡‚‚iwrp‡v‰ry’ ƒr s‚ €hˆqv‡†hqv‰r†‡vth‡v‚†Pˆ hˆqv‡†h rqr†vtrq‡‚p‚€ƒy’v‡uƒ ‚sr††v‚hy†‡hqh q† h†ryyh†‡‚†h‡v†s’‡ur r„ˆv r€r‡†‚ssrqr hy†‡h‡rhqy‚phyyh†

Pˆ hˆqv‡†y‚‚xh‡svhpvhyvs‚ €h‡v‚hqp‚€ƒyvhprv‡u†‡h‡rsrqr hyhqy‚phyyh†‚‡ur ƒh ‡‚shyyy‚phyt‚‰r €r‡†vpyˆqvt†pu‚‚y†hqhyy†‡h‡rhtrpvr†vpyˆqvtv†‡v‡ˆ‡v‚†‚s uvtur  rqˆph‡v‚ D hqqv‡v‚ r p‚qˆp‡ ƒr s‚ €hpr hˆqv‡† ‚s †‡h‡r htrpvr† hq y‚phy t‚‰r €r‡†h†ryyh†s hˆq†‡h‡ruv†‡yriy‚r hqpv‡v“ru‚‡yvrv‰r†‡vth‡v‚†

Uur r†ˆy‡†‚s‚ˆ ‚ xh rvqry’qv†‡ viˆ‡rq‡u ‚ˆtuh‰h vr‡’‚s rƒ‚ ‡†uvpuh rh‰hvyhiyr‚ ‚ˆ ri†v‡rhq‡u ‚ˆtu‚ˆ s rrryrp‡ ‚vp†ˆi†p vƒ‡v‚†r ‰vpr

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Contact information for the State Auditor’s Office

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Washington State Auditor's Office Page 43 

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APPENDIX C

BOOK-ENTRY SYSTEM

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BOOK-ENTRY SYSTEM The information in this section concerning the Depository Trust Company, New York, New York (“DTC”) and DTC’s book- entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. Beneficial Owners (as hereinafter defined) should therefore confirm the following with DTC or the Participants (as hereinafter defined). For purposes of this section, references to the Issuer mean the District, and references to Agent mean the Registrar. For the purposes of this Official Statement, the term “Beneficial Owner” includes the person for whom the Participant acquires an interest in the Bonds.

The Depository Trust Company A subsidiary of The Depository Trust & Clearing Corporation

Sample Offering Document Language Describing DTC and Book-Entry-Only Issuance

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and 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. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

SOL 06-2013 C-1

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.] 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transf erred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

SOL 06-2013 C-2

APPENDIX D

WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM

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WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM The following information has been furnished by the State of Washington for use in this Official Statement. The issuer of the bonds offered pursuant to this Official Statement (the “Offered Bonds”) makes no representation as to the accuracy or the completeness of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. Definitions “Act” means the Washington State School District Credit Enhancement Program Act, chapter 39.98 Revised Code of Washington. “Program” means the Washington State School District Credit Enhancement Program established by the Act. “Program Bond” means any validly issued voted general obligation bond issued by a school district, holding a certificate issued pursuant to the Act for such a bond. “State” means the State of Washington. Program Provisions Article VIII, section 1(e) of the Constitution of the State and the Act allow the State to guarantee any voted general obligation bonds issued by a school district. Payment of the principal of and interest on Program Bonds when due is guaranteed by the full faith, credit and taxing power of the State under the provisions of the Act. The Act provides as follows: The full faith, credit, and taxing power of the State is pledged to guarantee full and timely payment of the principal of and interest on Program Bonds as such payments become due. However, in the event of any acceleration of the due date of the principal by reason of mandatory redemption or acceleration resulting from default, the payments guaranteed shall be made in the amounts and at the times as payments of principal would have been due had there not been any acceleration. The State guarantee does not extend to the payment of any redemption premium. The Act further provides that the State pledges to and agrees with the owners of any Program Bonds that the State will not alter, impair, or limit the rights vested by the Program with respect to the Program Bonds until the Program Bonds, together with applicable interest, are fully paid and discharged. However, an alteration, impairment, or limitation of such rights is not precluded if full provision is made by law for the payment of the Program Bonds. Program Procedures In accordance with applicable law, each school district with outstanding, unpaid Program Bonds is required to levy property taxes approved by the voters for repayment of the Program Bonds and certify the taxes to the County Assessor. In accordance with applicable law, the County Treasurer for each school district with outstanding, unpaid Program Bonds is required to collect property taxes approved by the voters for repayment of the Program Bonds. Under the Act, the County Treasurer is required to transfer money sufficient for each scheduled debt service payment to the paying agent on or before any principal or interest payment date for the Program Bonds. A County Treasurer who is unable to transfer to the paying agent funds required to make any scheduled debt service payments on the Program Bonds on or prior to the payment date is required to immediately provide notice to the State Treasurer and to the paying agent. If sufficient funds are not transferred to the paying agent at the time required to make a scheduled debt service payment on the Program Bonds, the paying agent is required to immediately notify the State Treasurer. Pursuant to the Act, the State legislature is required to appropriate, in each and every biennial appropriations act, such amount as may be required to make timely payment on the Program Bonds. If sufficient money to make any scheduled debt service payment on the Program Bonds has not been transferred to the paying agent in a timely manner, the State Treasurer is required to transfer sufficient money to the paying agent for such payment and the paying agent is required to make such scheduled debt service payment.

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Each school district is responsible for paying in full the principal of and interest on its Program Bonds. The State Treasurer is required to recover from the school district any funds paid by the State on behalf of that school district under the Program. A payment by the State Treasurer discharges the obligation of the school district to its Program Bond owners for the payment, but does not retire any Program Bond that has matured. The terms of that Program Bond remain in effect until the State is repaid. Any such payment by the State transfers the rights represented by the general obligation of the school district from the Program Bond owners to the State. If the State has made all or part of a debt service payment on behalf of a school district that has issued Program Bonds, the State Treasurer may (a) direct the school district and the County Treasurer to restructure and revise, to the extent permitted by law, the collection of excess levy taxes for the payment of Program Bonds on which the State Treasurer has made payments under the Act to the extent necessary to obtain repayment to the State Treasurer; and (b) require, to the extent permitted by law, that the proceeds of such taxes be applied to the school district’s obligations to the State if all outstanding obligations of the school district payable from such taxes are fully paid or their payment is fully provided for. Outstanding Certificates of Eligibility and Outstanding Program Bonds As of September 1, 2016, the State has guaranteed and there are currently outstanding the following under the Act (not including the Offered Bonds): Number of school districts with Certificates of Eligibility 181 Number of Program Bond issues guaranteed 506 Aggregate total principal amount of Program Bonds guaranteed $10,367,565,121.34

Program Contact Person Requests for information regarding the Program may be directed to: School Bond Guarantee Program Office of the State Treasurer Legislative Office Building 2nd Floor P.O. Box 40200 Olympia, WA 98504 0200 Phone: (360) 902-9000 Fax: (360) 902-9045 State of Washington - Financial and Operating Information The State’s most recent audited financial statements and the financial and operating information relating to the State included in the most recent official statement for the State’s general obligation debt are on file with the Municipal Securities Rulemaking Board (the “MSRB”), in an electronic format as prescribed by the MSRB, and are incorporated by this reference in this official statement. The State’s financial statements and official statement are dated and speak only as of their dates. Except as provided below under “STATE OF WASHINGTON – Continuing Disclosure,” the State does not undertake to update this information. State of Washington - Continuing Disclosure The State has undertaken (the “Undertaking”) to provide (1) not later than seven months after the end of each fiscal year in each fiscal year that the Offered Bonds are outstanding, either directly or through a designated agent, to the MSRB, in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB, (a) audited financial statements of the State for such fiscal year prepared ((except as noted therein) in accordance with generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board, as such principles may be changed from time to time, except that if the audited financial statements are not available by such date, unaudited financial statements in a format similar to the audited financial statements most recently prepared for the State shall be provided, and the State’s audited financial statements shall be provided when and if they become available; and (b) the historical financial and operating information relating to the State included in the most recent official statement for the State’s general obligation debt; and (2) to the MSRB, in a timely manner, notice of its failure to provide the foregoing information on or prior to the date set forth in (1). The State regularly

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updates the information described in (1)(b) in the prior sentence, which may involve adding additional financial and operation data, displaying data in a different format, or eliminating data that are no longer material.

The MSRB has indicated that it intends to make the continuing disclosure information submitted to it publicly available on the internet on its Electronic Municipal Market Access System (“EMMA”) website. Currently, the State’s latest audited financials and historical financial and operating information may be found on the EMMA website under base CUSIP number 93974D.

The Undertaking is subject to amendment or termination under the circumstances and in the manner permitted by SEC Rule 15c2-12.

The right to enforce the provisions of the Undertaking shall be limited to a right to obtain specific performance of the State’s obligations thereunder, and any failure by the State to comply with the provisions of the Undertaking shall not be a default with respect to the Offered Bonds. The Undertaking inures to the benefit of the State and the issuer, any underwriter and any holder of the Offered Bonds, and does not inure to the benefit of or create any rights in any other person.

Within the past five years, the State has complied in all material respects with all prior written undertakings under SEC Rule 15c2-12.

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