NEW ISSUE – BOOK-ENTRY ONLY RATING: Moody’s: “Aa2” (See “RATING” herein.) In the opinion of Nixon Peabody LLP, Bond Counsel, under existing law and assuming compliance with the tax covenants described herein, and the accuracy of certain representations and certifications made by the District described herein, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Bond Counsel is also of the opinion that such interest is not treated as a preference item in calculating the alternative minimum tax imposed under the Code with respect to individuals and corporations. Bond Counsel is further of the opinion that interest on the Bonds is exempt from personal income taxes of the State of California (the “State”) under present State law. See “TAX MATTERS” herein regarding certain other tax considerations.

$9,381,072.90 NORRIS SCHOOL DISTRICT (Kern County, California) 2012 ELECTION GENERAL OBLIGATION BONDS 2014 SERIES B Consisting of $4,985,000.00 $4,396,072.90 Current Interest Bonds and Capital Appreciation Bonds

Dated: Date of Delivery Due: November 1, as shown on inside cover. The above-captioned Bonds (the “Bonds”) offered hereunder by Norris School District (the “District”) were authorized at a bond election conducted in the District on June 5, 2012 (the “Election”), at which more than 55% of the voters within the District voting on the measure voted to approve the issuance by the District of $149,000,000 aggregate principal amount of bonds, as more fully described herein under the caption “INTRODUCTION.” The proceeds of the Bonds are being used to finance the construction, acquisition, furnishing and equipping of District facilities and to pay certain costs of issuance associated therewith, as more fully described herein under the caption “THE PROJECTS.” The Bonds will be issued in denominations of $5,000 principal amount or maturity value, as applicable, or integral multiples thereof, and are payable as to principal amount, maturity value or redemption price at the office of Zions First National Bank, Paying Agent for the Bonds (the “Paying Agent”).

The Bonds are the second series of bonds issued pursuant to the authorization approved by the voters at the Election, and, following the issuance thereof, $123,111,018.70 of authorization under the Election will remain. The Bonds are issued on a parity with all other general obligation bonds of the District, including general obligation bonds issued pursuant to previous authorization.

The Bonds will be issued as current interest bonds (the “Current Interest Bonds”) and capital appreciation bonds (the “Capital Appreciation Bonds”). The Bonds will mature on the dates and in the amounts and bear or accrete interest at the rates shown on the inside cover hereof. Interest on the Bonds that are Current Interest Bonds is payable commencing November 1, 2014, and semiannually thereafter on May 1 and November 1 of each year. The Capital Appreciation Bonds accrete interest from their date of delivery, compounded semiannually on May 1 and November 1 of each year, commencing November 1, 2014, and will be payable solely at maturity. See “THE BONDS” herein.

The Bonds are issued in fully registered form and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Bonds as described herein under the caption “THE BONDS – Book-Entry Only System.” The Bonds are subject to redemption prior to maturity as described herein. See “THE BONDS – Optional Redemption” and “– Mandatory Sinking Fund Redemption” herein. The Bonds are general obligations of the District only and are not obligations of the County of Kern, the State of California or any of its other political subdivisions. The Board of Supervisors of the County of Kern has the power and is obligated to levy and collect ad valorem property taxes for each fiscal year upon the taxable property of the District in an amount at least sufficient, together with other moneys available for such purpose, to pay the principal or maturity value of, premium, if any, and interest on each Bond as the same becomes due and payable.

MATURITY SCHEDULE On Inside Cover

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval of legality by Nixon Peabody LLP, Bond Counsel, and certain other conditions. Nixon Peabody LLP is acting as Disclosure Counsel for the issue. Certain matters will be passed upon for the District by Schools Legal Service, Bakersfield, California and for the Underwriter by McFarlin & Anderson LLP, Laguna Hills, California. It is anticipated that the Bonds will be available for delivery in definitive form through the facilities of DTC on or about August 21, 2014.

Dated: August 5, 2014

15088028.3

MATURITY SCHEDULE

$1,875,000 Current Interest Serial Bonds Maturity Date CUSIP No. (November 1) Principal Amount Interest Rate Yield (656347)† 2041 $1,875,000.00 4.00% 4.12% EN7

$3,110,000.00 5.25% Current Interest Term Bonds Maturing November 1, 2040; Priced to Yield 3.76%c; CUSIP No. 656347 DQ1†

$4,396,072.90 Capital Appreciation Serial Bonds Maturity Date Denominational Accretion Reoffering Maturity CUSIP No. (November 1) Amount Rate Yield Amount (656347)† 2018 $23,247.50 1.740% 1.740% $25,000.00 DR9 2019 31,287.90 2.170 2.170 35,000.00 DS7 2020 59,904.60 2.530 2.530 70,000.00 DT5 2021 85,536.15 2.870 2.870 105,000.00 DU2 2022 108,105.20 3.180 3.180 140,000.00 DV0 2023 128,007.25 3.430 3.430 175,000.00 DW8 2024 146,111.70 3.590 3.590 210,000.00 DX6 2025 158,337.60 3.750 3.750 240,000.00 DY4 2026 170,678.75 3.950 3.950 275,000.00 DZ1 2027 186,592.00 4.130 4.130 320,000.00 EA5 2028 202,267.90 4.300 4.300 370,000.00 EB3 2029 226,102.80 4.430 4.430 440,000.00 EC1 2030 248,528.70 4.550 4.550 515,000.00 ED9 2031 271,296.20 4.620 4.620 595,000.00 EE7 2032 289,952.00 4.740 4.740 680,000.00 EF4 2033 304,332.95 4.790 4.790 755,000.00 EG2 2034 314,753.25 4.890 4.890 835,000.00 EH0 2035 330,596.40 4.940 4.940 930,000.00 EJ6 2036 349,970.50 4.990 4.990 1,045,000.00 EK3 2037 370,371.75 5.040 5.040 1,175,000.00 EL1 2038 390,091.80 5.070 5.070 1,310,000.00 EM9

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor’s Financial Services LLC on behalf of The American Bankers Association. This information is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the District or the Underwriter and are included solely for the convenience of the registered owners of the Bonds. Neither the District nor the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Bonds or as included herein. The CUSIP number for a specific maturity is subject to change after the issuance of the Bonds as a result of various subsequent actions. c Yield to par call on May 1, 2024.

15088028.3

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

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as a representation of facts.

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

The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. Although certain information set forth in this Official Statement has been provided by the County of Kern (the “County”), the County has not approved this Official Statement and is not responsible for the accuracy or completeness of the statements contained in this Official Statement except for the information set forth under the caption “THE KERN COUNTY TREASURY POOL.”

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS, BANKS OR OTHERS AT PRICES LOWER OR HIGHER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

15088028.3

NORRIS SCHOOL DISTRICT Kern County, State of California

Board of Trustees

John Genter, President Jeff Stone, Clerk Jim Bowles, Member Sue Dodgin, Member Cy Silver, Member

District Administrators

Steven Shelton, Superintendent Kelly Miller, Assistant Superintendent Kade Duey, Director of Business Services

SPECIAL SERVICES

Bond Counsel and Financial Advisor Disclosure Counsel Nixon Peabody LLP Dolinka Group, LLC Irvine, California

Paying Agent Zions First National Bank Los Angeles, California

15088028.3

TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 THE BONDS ...... 2 Authority for Issuance and Security for the Bonds ...... 2 Purpose of Issue ...... 2 Description of the Bonds ...... 2 Payment of the Bonds ...... 3 Estimated Sources and Uses of Funds ...... 4 Optional Redemption ...... 4 Mandatory Sinking Fund Redemption ...... 4 Selection of Bonds for Redemption ...... 5 Notice of Redemption ...... 5 Conditional Notice of Redemption ...... 6 Partial Redemption of Bonds ...... 6 Effect of Notice of Redemption ...... 6 Transfer and Exchange ...... 6 Defeasance ...... 7 Book-Entry-Only System ...... 7 Debt Service Schedule ...... 8 THE PROJECTS ...... 9 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ...... 11 General ...... 11 Assessed Valuations ...... 11 Ad Valorem Property Taxes, Tax Rates, Levies, Collections and Delinquencies ...... 15 Tax Charges and Delinquencies ...... 16 Teeter Plan ...... 17 Tax Rates ...... 17 Certain Existing Obligations ...... 18 Direct and Overlapping Debt ...... 18 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ...... 19 Article XIIIA of the California Constitution ...... 19 Legislation Implementing Article XIIIA ...... 20 Article XIIIB of the California Constitution ...... 20 Unitary Property ...... 20 California Lottery ...... 20 Proposition 46 ...... 21 Proposition 39 ...... 21 Article XIIIC and XIIID of the California Constitution ...... 21 Future Initiatives ...... 22

15088028.3 i TABLE OF CONTENTS (continued) Page

THE KERN COUNTY TREASURY POOL ...... 23 LEGAL OPINION ...... 26 TAX MATTERS ...... 26 Federal Income Taxes ...... 26 State Taxes ...... 27 Original Issue Discount ...... 27 Original Issue Premium ...... 27 Ancillary Tax Matters ...... 28 Changes in Law and Post Issuance Events ...... 28 LEGAL MATTERS ...... 29 Continuing Disclosure ...... 29 Limitation on Remedies; Amounts Held in the County Treasury Pool ...... 29 LEGALITY FOR INVESTMENT ...... 30 RATING ...... 30 UNDERWRITING ...... 30 NO LITIGATION ...... 30 OTHER INFORMATION ...... 31

APPENDIX A – THE DISTRICT ...... A-1 APPENDIX B – FORM OF BOND COUNSEL OPINION ...... B-1 APPENDIX C – NORRIS SCHOOL DISTRICT AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2013 ...... C-1 APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT ...... D-1 APPENDIX E – BOOK-ENTRY ONLY SYSTEM ...... E-1 APPENDIX F – ACCRETED VALUE TABLE ...... F-1

15088028.3 ii

$9,381,072.90 NORRIS SCHOOL DISTRICT (Kern County, California) 2012 ELECTION GENERAL OBLIGATION BONDS, 2014 SERIES B

Consisting of $4,985,000.00 $4,396,072.90 Current Interest Bonds and Capital Appreciation Bonds

INTRODUCTION

The Norris School District (the “District”) proposes to issue $9,381,072.90 aggregate principal and issue amount of its 2012 Election General Obligation Bonds, 2014 Series B (the “Bonds”), under and pursuant to a bond authorization for the issuance and sale of not more than $149,000,000 of general obligation bonds (the “Authorization”) approved by more than 55% of the voters of the District voting at an election held on June 5, 2012 (the “Election”). The Bonds are the second issue under the Authorization, after which $123,111,018.70 of the District’s Authorization will remain for issuance of subsequent series of the District’s general obligation bonds under the Election. All general obligation bonds issued by or on behalf of the District are or will be issued on a parity with the Bonds. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Proposition 39” herein.

THE BONDS ARE GENERAL OBLIGATION BONDS OF THE DISTRICT, SECURED BY AND PAYABLE FROM AD VALOREM PROPERTY TAXES ASSESSED ON TAXABLE PROPERTIES WITHIN THE DISTRICT, WITHOUT LIMITATION AS TO RATE OR AMOUNT. THE BONDS ARE NOT AN OBLIGATION OF THE GENERAL FUND OF THE DISTRICT OR OF THE COUNTY OF KERN (THE “COUNTY”). SEE “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” HEREIN.

Proceeds from the sale of the Bonds will be used for the acquisition, construction, furnishing and equipping of District facilities (collectively, the “Projects”), and the payment of costs of issuance, all as further described herein under “THE PROJECTS” and as provided in the bond proposition approved at the Election, in accordance with the Constitution and laws of the State of California.

Norris School District, a school district of the State of California (the “State”), was established in 1880. The District is located in the County, northwest of the City of Bakersfield, approximately 100 miles north of Los Angeles and encompasses approximately 15 square miles. The District operates four elementary schools (kindergarten through 6th grade) and one middle school (7th and 8th grade). See APPENDIX A – “THE DISTRICT.” Since June 2000, the number of single-family residences has increased in the Norris area and school enrollment in the District has grown from 1,400 to 3,915. During the same period, three new elementary campuses were built in the Norris area (Norris Elementary, William B. Bimat Elementary, and Veterans Elementary), Olive Drive Elementary added nine new classrooms, and Norris Middle School added eight permanent classrooms for science, math, and art, as well as a new gym. The District owns one undeveloped site that is planned for an elementary school, and is presently searching for additional school sites, in an effort to implement the District’s plan to grow its enrollment to 10,000 students to be served by 12 elementary schools and three middle schools at build- out. See APPENDIX A – “THE DISTRICT – District Growth.”

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The District has certain existing lease financing obligations as set forth in APPENDIX A and under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Certain Existing Obligations” and direct and overlapping bonded indebtedness as set forth under “– Direct and Overlapping Debt.” The District’s audited financial statements for fiscal year 2012-13 are attached hereto as APPENDIX C. For further information concerning the District, see APPENDIX A – “THE DISTRICT.”

THE BONDS

Authority for Issuance and Security for the Bonds

The Bonds are general obligations of the District. The Bonds are being issued by the District under the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State, as amended, and pursuant to a resolution of the Board of Trustees of the District adopted on July 9, 2014 (the “Resolution”).

Purpose of Issue

The District submitted a project list (the “Project List”) to the voters at the Election, specifying a number of capital improvements to District facilities, as well as equipment and furnishings to be used in such facilities, from which a number of components will be financed with the proceeds of the Bonds. Details regarding the Project List and the proposed components to be financed are set forth under the caption “THE PROJECTS” herein.

The net proceeds of sale of the Bonds shall be deposited into a debt service fund (the “Debt Service Fund”) and a project fund (the “Building Fund”) of the District and applied to pay the costs of certain of the Projects. Any excess proceeds of the Bonds not needed for the authorized purposes for which the Bonds are being issued shall be transferred to the Debt Service Fund and applied to the payment of the principal of and interest on the Bonds. Moneys in the Debt Service Fund are expected to be invested through the Kern County Treasury Pool. See “THE KERN COUNTY TREASURY POOL” herein.

Description of the Bonds

The Bonds will be issued in the form of current interest bonds (“Current Interest Bonds”) and capital appreciation bonds (“Capital Appreciation Bonds”).

The Current Interest Bonds will be issued in initial denominations of $5,000 or any integral multiple thereof, and the Capital Appreciation Bonds will be issued in initial amounts (“Denominational Amounts”) corresponding to $5,000 accreted value at maturity (“Maturity Amount”) or any integral multiple thereof. The Bonds will mature on the dates and in the amounts and bear or accrete interest at the rates per annum all as set forth on the inside cover page of this Official Statement.

The Bonds are not subject to acceleration.

The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Owners (as defined herein) or registered owners shall mean Cede & Co. as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds.

15088028.3 2

So long as Cede & Co. is the registered owner of the Bonds, principal of and interest or premium, if any, on the Bonds are payable by wire transfer of New York Clearing House or equivalent next-day funds or by wire transfer of same day funds by Zions First National Bank, as paying agent (the “Paying Agent”), to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the DTC Participants (“DTC Participants”) for subsequent disbursement to the Beneficial Owners. Payments of principal or Maturity Amount, and premium, if any, for any Bonds shall be made only upon the surrender of such Bonds to the Paying Agent. See APPENDIX E – “BOOK ENTRY ONLY SYSTEM” herein.

Payment of the Bonds

Current Interest Bonds

Interest on each Current Interest Bond shall accrue from its dated date. Interest on Current Interest Bonds shall be computed using a year of 360 days comprised of twelve 30-day months and shall be payable on each May 1 and November 1 of each year (each, an “Interest Payment Date”), commencing November 1, 2014, to the registered owner (each, an “Owner”) thereof as of the close of business on the fifteenth calendar day of the month preceding any Interest Payment Date (whether or not such day is a business day) (a “Record Date”). Interest on each Current Interest Bond will be payable from the Interest Payment Date next preceding the date of registration thereof, unless (i) it is registered after the close of business on any Record Date and before the close of business on the immediately following Interest Payment Date, in which event interest thereon shall be payable from such following Interest Payment Date; or (ii) it is registered prior to the close of business on the first Record Date, in which event interest shall be payable from its dated date; provided, however, that if at the time of registration of any Current Interest Bond interest thereon is in default, interest thereon shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment. Payments of interest on the Current Interest Bonds will be made on each Interest Payment Date by check or draft of the Paying Agent sent by first-class mail, postage prepaid, to the Owner thereof on the Record Date, or by wire transfer to any Owner of $1,000,000 or more of such Current Interest Bonds, to the account specified by such Owner in a written request delivered to the Paying Agent on or prior to the Record Date for such Interest Payment Date; provided, however, that payments of defaulted interest shall be payable to the person in whose name such Current Interest Bond is registered at the close of business on a special record date fixed therefor by the Paying Agent, which shall not be more than 15 days and not less than ten days prior to the date of the proposed payment of defaulted interest.

Principal on the Current Interest Bonds shall be due and payable on November 1 in each of the years as set forth on the inside cover of this Official Statement.

Capital Appreciation Bonds

The Capital Appreciation Bonds will not bear current interest, but will accrete in value from their Denominational Amounts to their respective Maturity Amounts on their respective maturity dates on the basis of a constant interest rate (with straight line interpolations between compounding interest dates) compounded commencing November 1, 2014, and semiannually thereafter on May 1 and November 1 in each year and shall be payable only upon maturity. The Bonds issued as Capital Appreciation Bonds shall be issued in fully registered form in their principal amounts but shall reflect denominations of $5,000 in Maturity Amount or any integral multiple thereof. The Capital Appreciation Bonds shall be dated the date of their issuance, shall be issued in the aggregate initial principal amounts, shall mature on the dates, in the years and in the Maturity Amounts, and shall accrete interest at the accretion rates, all as set forth on the inside cover of this Official Statement. See also APPENDIX F – “ACCRETED VALUE TABLE.”

15088028.3 3

Estimated Sources and Uses of Funds

The proceeds of the Bonds are expected to be applied as follows:

Sources of Funds

Principal and Issue Amount $9,381,072.90 Net Original Issue Premium 336,661.75 Total Sources $9,717,734.65

Uses of Funds

Deposit to Building Fund $9,000,000.00 Deposit to Debt Service Fund 445,316.64 Deposit to Costs of Issuance Account(1) 180,952.55 Underwriter’s Discount 91,465.46 Total Uses $9,717,734.65

(1) Includes payment of Bond and Disclosure Counsel fees, Financial Advisor fees, Paying Agent fees, rating agency fees, Preliminary Official Statement and Official Statement printing and other costs of issuance.

Optional Redemption

Current Interest Bonds. The Current Interest Bonds may be redeemed before maturity, at the option of the District, from any source of available funds, in whole or in part on any date on or after May 1, 2024, at par, together with interest accrued thereon to the date of redemption, without premium.

Capital Appreciation Bonds. The Capital Appreciation Bonds maturing on or prior to November 1, 2023 are not subject to optional redemption prior to their respective stated maturity dates. The Capital Appreciation Bonds maturing on or after November 1, 2024, may be redeemed prior to maturity, at the option of the District, from any source of available funds, in whole or in part on any date on or after May 1, 2024, at 100% of their Accreted Value to the date of redemption, without premium.

“Accreted Value” shall mean, with respect to any Capital Appreciation Bonds, as of any date of calculation, the sum of the Denominational Amount thereof and the interest accreted thereon to such date of calculation, compounded from the date of initial issuance at the stated accretion rate thereof on each May 1 and November 1, assuming in any such semiannual period that such Accreted Value increases in equal daily amounts on the basis of a 360-day year of twelve 30-day months.

Mandatory Sinking Fund Redemption

The Current Interest Bonds maturing on November 1, 2040, are subject to mandatory sinking fund redemption prior to their stated maturity in part (by lot) from mandatory sinking fund payments on any November 1 on or after November 1, 2039, at a redemption price equal to 100% of their principal amount, together with accrued interest thereon to the date fixed for redemption, without premium, on the dates and in the aggregate principal amounts listed below:

15088028.3 4

Mandatory Sinking Fund Payment Date Mandatory Sinking (November 1) Fund Payment 2039 $1,450,000 2040(1) 1,660,000

(1) Maturity.

Selection of Bonds for Redemption

Whenever provision is made for the redemption of Bonds and less than all outstanding Bonds are to be redeemed, the Paying Agent, upon written instruction from the District given at least 60 days prior to the date designated for such redemption, shall select Bonds for redemption in such order as the District may direct, or, in the absence of such direction, by lot. Within a maturity, the Paying Agent shall select Bonds for redemption by lot. Redemption by lot shall be in such manner as the Paying Agent shall determine; provided, however, that the portion of any Bond to be redeemed in part shall be in the principal amount of $5,000 or any integral multiple thereof.

Notice of Redemption

When redemption is authorized or required pursuant to the Resolution, the Paying Agent, upon written instruction from the District given at least 60 days prior to the date designated for such redemption, shall give notice (each, a “Redemption Notice”) of the redemption of the Bonds. Such Redemption Notice shall specify: (a) the Bonds or designated portions thereof (in the case of any Bond to be redeemed in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, (d) the redemption price, (e) the CUSIP numbers assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the principal amount of such Bond to be redeemed, and (g) the original issue date, interest rate and stated maturity date of each Bond to be redeemed in whole or in part. Such Redemption Notice shall further state that on the specified date there shall become due and payable upon each Bond or portion thereof being redeemed the redemption price thereof, and that from and after such date, interest on Bonds shall cease to accrue.

The Paying Agent shall take the following actions with respect to such Redemption Notice: (i) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice shall be given to the respective Owners of Bonds designated for redemption by first class mail, postage prepaid, at their addresses appearing on the Bond Register; (ii) in the event the Bonds are no longer held in book-entry- only form, at least two days before the date of the publication, such Redemption Notice shall be given by (1) first class mail, postage prepaid, (2) telephonically confirmed facsimile transmission, or (3) overnight delivery service, to each of the Securities Depositories; and (iii) in the event the Bonds are no longer held in book-entry-only form, at least two days before the date of the publication, such Redemption Notice shall be given by (1) first class mail, postage prepaid, or (2) overnight delivery service, to one of the Information Services.

“Securities Depositories” means DTC and, in accordance with then-current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the District may designate in a certificate delivered to the Paying Agent.

“Information Services” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system, and, in accordance with then-current guidelines of the Securities and

15088028.3 5

Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds as the District may designate in a certificate of the District delivered to the Paying Agent.

Neither failure to receive any Redemption Notice nor any defect in any such Redemption Notice so given shall affect the sufficiency of the proceedings for the redemption of the affected Bonds. Each check issued or other transfer of funds made by the Paying Agent for the purpose of redeeming Bonds shall bear the CUSIP number identifying, by series and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

Conditional Notice of Redemption

Any Redemption Notice given may be made conditional upon the satisfaction of certain conditions and may be rescinded by the District at any time prior to the scheduled date of redemption by so notifying the Owners of the affected Bonds and the Information Services.

Partial Redemption of Bonds

Upon the surrender of any Bond redeemed in part only, the Paying Agent shall execute and deliver to the Owner thereof a new Bond or Bonds of like series, tenor and maturity and of authorized denominations equal in transfer amounts to the unredeemed portion of the Bond surrendered. Such partial redemption shall be valid upon payment of the amount required to be paid to such Owner, and the County and the District shall be released and discharged thereupon from all liability to the extent of such payment.

Effect of Notice of Redemption

Notice having been given as required in the Resolution, and the moneys for redemption (including the interest to the applicable date of redemption) having been set aside in the District’s Debt Service Fund, the Bonds to be redeemed shall become due and payable on such date of redemption.

If on such redemption date, money for the redemption of all the Bonds to be redeemed, together with interest to such redemption date, shall be held by the Paying Agent so as to be available therefor on such redemption date, and if notice of redemption thereof shall have been given, then from and after such redemption date, interest on the Bonds to be redeemed shall cease to accrue and become payable.

Transfer and Exchange

Any Bond may be exchanged for Bonds of like tenor, series, maturity and principal amount upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed by the Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of such Bond at the principal office of the Paying Agent together with an assignment executed by the Owner or a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent shall complete, authenticate and deliver a new Bond or Bonds of like tenor and of any authorized denomination or denominations requested by the Owner equal to the principal amount of the Bond surrendered and bearing or accreting interest at the same rate and maturing on the same date.

15088028.3 6

Defeasance

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

(a) by paying or causing to be paid the principal or Maturity Amount, premium, if any, and interest on such Bonds, and when the same become due and payable;

(b) by depositing with the Paying Agent, in trust, cash which together with amounts then on deposit in the Debt Service Fund (and any accounts therein other than amounts that are not available to pay debt service) together with the interest to accrue thereon without the need for further investment, is fully sufficient to pay such Bonds at maturity thereof, including any premium and all interest thereon; or

(c) by depositing with an escrow agent selected by the District in accordance with the Resolution, in trust, lawful money or noncallable direct obligations issued by the United States Treasury (including State and Local Government Series) or obligations which are unconditionally guaranteed by the United States of America and permitted under Section 149(b) of the Code (defined below) and Regulations which, in the opinion of nationally recognized bond counsel, will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds, in such amount as will, together with the interest to accrue thereon without the need for further investment, be fully sufficient, in the opinion of a verification agent satisfactory to the District, to pay and discharge such Bonds at maturity or earlier redemption thereof, for which notice has been given or provided for, including any premium and all interest thereon.

Notwithstanding that any Bonds called for defeasance have not been surrendered for payment, all obligations of the District and the Paying Agent with respect to all such designated outstanding Bonds will cease and terminate. However, the obligation of the Paying Agent to pay or cause to be paid all sums thereon, and the obligation of the District to pay the Paying Agent certain amounts due under the Resolution shall not terminate.

Book-Entry-Only System

The Bonds will be issued under a book-entry system, evidencing ownership of the Bonds in principal amounts or Maturity Value, as applicable, of $5,000 or integral multiples thereof, with no physical distribution of Bonds made to the public. DTC will act as depository for the Bonds, which will be immobilized in their custody. The Bonds will be registered in the name of Cede & Co., as nominee for DTC. For further information regarding DTC and the book-entry system, see APPENDIX E hereto.

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Debt Service Schedule

The following table summarizes the debt service requirements for the Bonds assuming no optional redemption:

The Bonds Period Outstanding Ending Bonds Debt Principal or Total Debt November 1 Service Maturity Amount Interest Service 2014 $496,163.00 - $46,331.25 $542,494.25 2015 503,763.00 - 238,275.00 742,038.00 2016 526,063.00 - 238,275.00 764,338.00 2017 407,613.00 - 238,275.00 645,888.00 2018 417,613.00 23,247.50 240,027.50 680,888.00 2019 462,613.00 31,287.90 241,987.10 735,888.00 2020 512,613.00 59,904.60 248,370.40 820,888.00 2021 572,613.00 85,536.15 257,738.85 915,888.00 2022 627,613.00 108,105.20 270,169.80 1,005,888.00 2023 685,553.00 128,007.25 285,267.75 1,098,828.00 2024 740,553.00 146,111.70 302,163.30 1,188,828.00 2025 790,553.00 158,337.60 319,937.40 1,268,828.00 2026 852,403.00 170,678.75 342,596.25 1,365,678.00 2027 922,303.00 186,592.00 371,683.00 1,480,578.00 2028 1,009,340.00 202,267.90 406,007.10 1,617,615.00 2029 1,114,340.00 226,102.80 452,172.20 1,792,615.00 2030 1,254,340.00 248,528.70 504,746.30 2,007,615.00 2031 1,389,340.00 271,296.20 561,978.80 2,222,615.00 2032 1,524,140.00 289,952.00 628,323.00 2,442,415.00 2033 1,653,340.00 304,332.95 688,942.05 2,646,615.00 2034 1,783,340.00 314,753.25 758,521.75 2,856,615.00 2035 1,938,340.00 330,596.40 837,678.60 3,106,615.00 2036 2,123,340.00 349,970.50 933,304.50 3,406,615.00 2037 2,343,340.00 370,371.75 1,042,903.25 3,756,615.00 2038 2,574,680.00 390,091.80 1,158,183.20 4,122,955.00 2039 2,801,460.00 1,450,000.00 238,275.00 4,489,735.00 2040 3,026,080.00 1,660,000.00 162,150.00 4,848,230.00 2041 3,227,600.00 1,875,000.00 75,000.00 5,177,600.00 2042 3,473,600.00 - - 3,473,600.00 Total $39,754,652.00 $9,381,072.90 $12,089,283.35 $61,225,008.25

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THE PROJECTS

The District intends to apply proceeds of sale of the Bonds to certain of the capital improvements included on the Project List approved by the voters at the Election. The Project List includes the following components. The Board of Trustees retains the ability to set priorities among listed Projects in order to meet the needs of the District and its students.

Classroom Computer and Technology Improvements

 Acquire/update/upgrade campus, library, and classroom computers, instructional technology and school district technology systems  Update/upgrade servers, wiring and data systems to support 21st Century learning and information systems  Install/repair/replace/upgrade security and communication systems, including hardware and electronics, for student, teacher and staff safety

Operational Efficiency and Cost-Saving Improvements

 Add/repair/reconfigure/replace energy management and heating/cooling systems for improved functionality and efficiency, including renewable technology  Add/repair/reconfigure/replace utility infrastructure for improved functionality and efficiency, including renewable technology  Upgrade/replace/install plumbing, lighting, and electrical systems for improved functionality and efficiency  Make lease payments and refinance lease obligations to secure better terms for taxpayers and/or free up operational funding  Upgrade/replace/improve irrigation, water management and turf systems for improved resource efficiency and/or cost savings  Upgrade/replace/improve aging and inefficient windows, insulation, doors, roofs and other systems/structures for improved functionality and efficiency  Improve landscaping for safety, drainage, and resource efficiency

Classroom, Science Lab and Library Improvements to Support Instruction

 Modernize/reconfigure/expand/construct classroom buildings  Modernize/reconfigure/expand/construct science labs  Modernize/reconfigure/expand/construct computer labs  Modernize/reconfigure/expand/construct school libraries and media centers  Modernize/reconfigure/expand/construct art and music classrooms and other multi-use facilities  Modernize/reconfigure/expand existing buildings to improve functionality  Modernize/reconfigure/expand existing multipurpose rooms to improve functionality  Construct/purchase new classrooms, buildings, and structures to prevent school overcrowding

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 Construct joint-use facilities that are available for school and community use  Repair/replace building interior surfaces including walls, ceilings, floors and floor coverings  Repair/replace building exterior surfaces such as roofs, siding, painted surfaces and other fascia to protect building integrity and prevent dry rot/other infestations  Modernize/reconfigure/expand/construct support facilities including libraries, technology labs, fields/facilities for physical education and staff/administrative facilities that support teachers, students and instruction  Remove/repair/replace existing modular/portable classroom buildings  Upgrade/replace/install storage space for efficient and accurate record-keeping  Modernize/reconfigure/expand/construct facilities that support safe and reliable student transportation  Provide safe and modern furniture and equipment for all classrooms and related school facilities  Provide modern equipment and instructional technology to enable 21st Century instruction in science, engineering, technology and related subjects

Student and Teacher Safety and Accessibility Improvements

 Make school facilities accessible for students, parents, teachers and staff with disabilities by updating/reconfiguring/constructing schools and classrooms that are compliant with Americans with Disabilities Act  Ensure classrooms and schools meet current fire, earthquake and other safety codes  Remove any hazardous materials from District facilities/school sites, if necessary  Install/repair/replace shade structures for safety  Install/repair/replace sidewalks, walkways, asphalt pavement, parking lots, driveways, and/or playground surfaces/equipment for student safety  Improve/reconfigure/expand school parking and drop off/pick up zones to ensure student safety and alleviate traffic congestion

Deferred Maintenance and Upkeep

 Repair/maintain/upgrade classrooms/facilities/furnishings and equipment on an ongoing basis to protect school district assets and taxpayer investments  Update technology and related systems at regular intervals to remain up-to-date

Each Project is assumed to include its share of furniture, equipment, architectural, engineering, and similar planning costs, program/project management, staff training expenses and a customary contingency for unforeseen design and construction costs. In addition to the projects listed above, the Project List also includes the acquisition of needed land, prefabricated buildings and a variety of instructional, maintenance and operational equipment, including the reduction or retirement of outstanding lease obligations and interim funding incurred to advance fund projects from the Project List; installation of signage and fencing; payment of the costs of preparation of all facility planning, facility studies, assessment reviews, facility master plan preparation and updates, environmental studies (including environmental investigation, remediation and monitoring), design and construction

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documentation, and temporary housing of dislocated District activities caused by construction projects. In addition to the projects listed above, the repair and renovation of each of the existing school facilities may include, but not be limited to, some or all of the following: renovation of student and staff restrooms; repair and replacement of heating and ventilation systems; upgrade of facilities for energy efficiencies; repair and replacement of worn-out and leaky roofs, windows, walls, doors and drinking fountains; installation of wiring and electrical systems to safely accommodate computers, technology and other electrical devices and needs; upgrades or construction of support facilities, including administrative, physical education and performing arts buildings and maintenance yards; repair and replacement of fire alarms, emergency communications and security systems; resurfacing or replacing of hard courts, turf and irrigation systems and campus landscaping; expand parking; install interior and exterior painting and floor covering; demolition; and construction of various forms of storage and support spaces, upgrade classrooms, repair, upgrade and install interior and exterior lighting systems; replace outdated security fences and security systems. The upgrading of technology infrastructure includes, but is not limited to, computers, flat screen monitors, portable interface devices, servers, switches, routers, modules, sound projection systems, laser printers, digital white boards, document projectors, upgrade voice-over-IP, call manager and network security/firewall, wireless technology systems and other miscellaneous equipment and software.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

General

The Bonds are general obligations of the District, and the Board of Supervisors of the County has the power and is obligated to levy and collect ad valorem taxes upon all property within the District subject to taxation by the County, without limitation as to rate or amount (except certain personal property which is taxable at limited rates) for payment of both principal or Maturity Value of and interest on the Bonds. Subsequent to the issuance of the Bonds, $123,111,018.70 will remain for issuance of additional general obligation bonds under the Authorization. All general obligation bonds of the District are issued on a parity with one another.

Assessed Valuations

The assessed valuation of property in the District is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100% of the full value of the property, as defined in Article XIIIA of the California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” herein.

The State-reimbursed exemption currently provides a credit of $7,000 of the full value of an owner-occupied dwelling for which application has been made to the County Assessor. The revenue estimated to be lost to local taxing agencies due to the exemption is reimbursed from State sources. Reimbursement is based upon total taxes due upon such exempt value and is not reduced by any amount for estimated or actual delinquencies.

In addition, certain classes of property such as churches, colleges, not-for-profit hospitals and charitable institutions are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions.

Economic and other factors beyond the District’s control, such as a general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational,

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hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster such as earthquake, flood, toxic dumping, etc., could cause a reduction in the assessed value of taxable property within the District and necessitate a corresponding increase in the annual tax rate to be levied to pay the principal and accreted value of and interest on the District’s outstanding general obligation bonds, including the Bonds.

For fiscal year 2013-14, the total assessed valuation of property within the District’s boundaries was $2,305,106,741. Shown in the following tables are the assessed valuations of property in the District during the past five fiscal years and the twenty largest secured taxpayers in the District for fiscal year 2013-14.

NORRIS SCHOOL DISTRICT SUMMARY OF ASSESSED VALUATIONS FISCAL YEARS 2009-10 THROUGH 2013-14

Fiscal Year Local Secured Utility Unsecured Total 2009-10 $1,983,329,068 $ 54,718 $ 39,514,719 $2,022,898,505 2010-11 1,998,380,794 54,718 77,371,040 2,075,806,552 2011-12 1,952,300,591 844,360 103,146,330 2,056,291,281 2012-13 2,014,489,827 844,360 113,769,063 2,129,103,250 2013-14 2,176,036,261 841,260 128,229,220 2,305,106,741

Sources: California Municipal Statistics, Inc.

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NORRIS SCHOOL DISTRICT 2013-14 ASSESSED VALUATION OF SINGLE FAMILY HOMES(1)

No. of 2013-14 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 8,073 $1,873,819,756 $232,109 $218,484

2013-14 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels(1) Total % of Total Valuation Total % of Total $0 - $24,999 6 0.074% 0.074% $ 77,815 0.004% 0.004% $25,000 - $49,999 29 0.359 0.434 1,144,677 0.061 0.065 $50,000 - $74,999 75 0.929 1.363 4,607,475 0.246 0.311 $75,000 - $99,999 116 1.437 2.799 10,274,311 0.548 0.859 $100,000 - $124,999 170 2.106 4.905 19,167,488 1.023 1.882 $125,000 - $149,999 368 4.558 9.464 51,356,353 2.741 4.623 $150,000 - $174,999 966 11.966 21.429 158,123,480 8.439 13.062 $175,000 - $199,999 1,334 16.524 37.954 249,894,792 13.336 26.398 $200,000 - $224,999 1,305 16.165 54.119 277,290,426 14.798 41.196 $225,000 - $249,999 1,012 12.536 66.654 239,085,858 12.759 53.955 $250,000 - $274,999 822 10.182 76.836 214,646,800 11.455 65.410 $275,000 - $299,999 581 7.197 84.033 166,431,834 8.882 74.292 $300,000 - $324,999 460 5.698 89.731 143,134,229 7.639 81.931 $325,000 - $349,999 286 3.543 93.274 96,067,403 5.127 87.058 $350,000 - $374,999 178 2.205 95.479 64,220,726 3.427 90.485 $375,000 - $399,999 105 1.301 96.779 40,599,111 2.167 92.652 $400,000 - $424,999 54 0.669 97.448 22,231,721 1.186 93.838 $425,000 - $449,999 38 0.471 97.919 16,572,284 0.884 94.722 $450,000 - $474,999 23 0.285 98.204 10,644,651 0.568 95.290 $475,000 - $499,999 35 0.434 98.637 17,009,626 0.908 96.198 $500,000 and greater 110 1.363 100.000 71,238,696 3.802 100.000 Total 8,073 100.000% $1,873,819,756 100.000%

(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

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NORRIS SCHOOL DISTRICT 2013-14 ASSESSED VALUATION AND PARCELS BY LAND USE

2013-14 Assessed % of No. of % of Valuation(1) Total Parcels Total Non-Residential: Agricultural $ 23,201,525 1.07% 72 0.77% Commercial 97,478,439 4.48 49 0.52 Vacant Commercial 4,726,589 0.22 5 0.05 Industrial 75,178,203 3.45 60 0.64 Vacant Industrial 13,085,843 0.60 73 0.78 Oil & Gas/Mineral Rights 17,747,034 0.82 54 0.58 Recreational 5,127,752 0.24 4 0.04 Government/Social/Institutional 2,361,298 0.11 344 3.67 Subtotal Non-Residential $ 238,906,683 10.98% 661 7.05%

Residential: Single Family Residence $1,873,819,756 86.11% 8,073 86.06% Mobile Home 127,182 0.01 5 0.05 2-4 Residential Units 19,101,485 0.88 37 0.39 Vacant Residential 44,081,155 2.03 605 6.45 Subtotal Residential $1,937,129,578 89.02% 8,720 92.95%

Total $2,176,036,261 100.00% 9,381 100.00%

(1) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

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NORRIS SCHOOL DISTRICT 2013-14 LARGEST LOCAL SECURED TAXPAYERS

2013-14 % of Property Owner Primary Land Use Assessed Valuation Total(1) 1. Halliburton Energy Services Inc. Industrial $ 30,735,118 1.41% 2. Lennar Homes of California Inc. Residential Development 21,126,221 0.97 3. Crimson Resource Management Corp. Oil & Gas Production 17,679,503 0.81 4. Olive & Jewetta LP Shopping Center 15,448,333 0.71 5. Estancia Valley LLC Undeveloped 11,215,179 0.52 6. New Albertsons Inc. Supermarket 10,668,858 0.49 7. Downs Investments LLC Auto Sales 9,500,000 0.44 8. SB RBLI Land Co. No. Kern II LLC Undeveloped 9,416,827 0.43 9. Spectrum Hotel 1 LLC Hotel/Motel 7,871,300 0.36 10. MD Vac Investments LLC Industrial 7,177,944 0.33 11. Windy City Group Industrial 7,087,982 0.33 12. C&S Chong Investment Corp. Hotel/Motel 6,801,152 0.31 13. CQ Landlord Multi LLC Industrial 6,791,731 0.31 14. Franmar Co. Agricultural 6,763,064 0.31 15. California Water Service Co. Water Company 5,898,319 0.27 16. Bidart Bros. Agricultural 5,658,575 0.26 17. Gardiner Family LLC Agricultural 5,622,098 0.26 18. DCM Assets Management LLC Commercial Land 4,959,989 0.23 19. Bragg Investment Co. Inc. Industrial 4,799,624 0.22 20. Kern Schools Federal Credit Union Credit Union 4,659,217 0.21 $199,881,034 9.19%

(1) 2013-14 Local Secured Assessed Valuation: $2,176,036,261 Source: California Municipal Statistics, Inc.

Ad Valorem Property Taxes, Tax Rates, Levies, Collections and Delinquencies

Taxes are levied for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. However, upon a change in ownership of property or completion of new construction, State law permits an accelerated recognition and taxation of increases in real property assessed valuation (known as a “floating lien date”). For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed property secured by a lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”

The County levies a 1% property tax on behalf of all taxing agencies in the County. The taxes collected are allocated on the basis of a formula established by State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of “situs” growth in assessed value (new construction, change of ownership, inflation) prorated among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special and school districts. In addition, the County levies and collects additional approved property taxes and assessments on behalf of any taxing agency within the County.

Property taxes on the secured roll are due in two installments, on November 1 and February 1. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, then a ten percent penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to

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which taxes are delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale by the Treasurer and Tax Collector of the County (the “Treasurer”).

Property taxes on the unsecured roll are currently due as of the January 1 lien date prior to the commencement of a fiscal year and become delinquent, if unpaid, on August 31. A ten percent penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of one and one- half percent per month begins to accrue on November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements, bank accounts or possessory interests belonging or assessed to the taxpayer.

The County levies and collects all property taxes for property falling within its taxing boundaries.

Tax Charges and Delinquencies

The County secured roll tax charges and corresponding delinquencies with respect to property located in the District for the five-year period from fiscal years 2008-09 through 2012-13 are set forth in the following tables.

NORRIS SCHOOL DISTRICT SECURED TAX CHARGES AND DELINQUENCIES(1) FISCAL YEARS 2008-09 THROUGH 2012-13

Fiscal Secured Amt. Del. % Del. Year Tax Charge(2) June 30 June 30 2008-09 $3,039,767 $96,110 3.16% 2009-10 2,638,695 66,735 2.53 2010-11 2,728,190 57,822 2.12 2011-12 2,677,009 40,183 1.50 2012-13 2,736,841 36,648 1.34

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

Fiscal Secured Amt. Del. % Del. Year Tax Charge(1) June 30 June 30 2008-09 $ 551,235 $16,983 3.08% 2009-10 645,834 16,706 2.59 2010-11 585,003 7,746 1.32 2011-12 630,930 7,315 1.16 2012-13 1,148,527 13,498 1.18

(1) District’s general obligation bond debt service levy. Source: California Municipal Statistics, Inc.

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Teeter Plan

The County has adopted the alternative method of secured property tax apportionment available under Chapter 3, Part 8, Division 1 (commencing with Section 4701) of the Revenue and Taxation Code of the State (also known as the “Teeter Plan”). This alternative method provides for funding each taxing entity included in the Teeter Plan with its total secured property taxes during the year the taxes are levied, including any amount uncollected at fiscal year-end. Under the Teeter Plan, the County assumes an obligation under a debenture or similar demand obligation to advance funds to cover expected delinquencies, and, by such financing, its general fund receives the full amount of secured property taxes levied each year and, therefore, no longer experiences delinquent taxes. In addition, the County’s general fund benefits from future collections of penalties and interest on all delinquent taxes collected on behalf of participants in this alternative method of apportionment.

Upon adopting the Teeter Plan, the County was required to distribute to participating local agencies 95% of the then-accumulated, secured roll property tax delinquencies and to place the remain 5% in a tax losses reserve fund. Taxing entities that maintain funds in the County Treasury are all included in the Teeter Plan; other taxing entities may elect to be included in the Teeter Plan. Taxing entities that do not elect to participate in the Teeter Plan will be paid as taxes are collected. Since the District maintains funds in the County Treasury, the District is included in the Teeter Plan.

The Teeter Plan is to remain in effect unless the Board of Supervisors of the County orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the County Board of Supervisors shall receive a petition for its discontinuance joined in by resolutions adopted by two-thirds of the participating revenue districts in the County, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. In the event that the Teeter Plan was terminated, receipt of revenue of ad valorem taxes in the District would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the District. The District knows of no consideration by the County to discontinue the Teeter Plan.

Tax Rates

The following table sets forth typical tax rates levied in Tax Rate Area (1-295) for fiscal years 2009-10 through 2013-14.

NORRIS SCHOOL DISTRICT TYPICAL TOTAL TAX RATES (TRA 1-295) 2013-14 Assessed Valuation: $398,963,315(1)

2009-10 2010-11 2011-12 2012-13 2013-14 General 1.000000% 1.000000% 1.000000% 1.000000% 1.000000% Kern County Water Agency .026896 .023851 .038514 .026960 .027059 Norris School District .032974 .029766 .032646 .057992 .049959 Kern High School District .043114 .044697 .036276 .043663 .039160 Kern Community College District SRID .009401 .010117 .009057 .008502 .012644 Total All Property Tax Rate 1.112385% 1.108431% 1.116493% 1.137117% 1.128822%

(1) TRA 1-295 includes 17.31% of the total assessed valuation of the District. Source: California Municipal Statistics, Inc.

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Certain Existing Obligations

A schedule of the District’s changes in long-term debt for the year ended June 30, 2013, is shown below.

Balance Balance July 1, 2012 Additions Deductions June 30, 2013 General obligation bonds $1,971,813 $16,507,908 $194,823 $18,284,898 Accreted interest-general obligation bonds 4,001,806 629,543 520,177 4,111,172 Limited obligation (special tax bonds) 31,955,000 4,445,000 4,640,000 31,760,000 Compensated absences 81,052 10,812 - 91,864 Totals $38,009,671 $21,593,263 $5,355,000 $54,247,934

Source: The District.

Direct and Overlapping Debt

Numerous local agencies which provide public services overlap the District’s service area. These local agencies have outstanding debt in the form of general obligation, lease revenue and special assessment bonds. The following table shows the District’s estimated direct and overlapping bonded debt as of June 1, 2014. The statement excludes self-supporting revenue bonds, tax allocation bonds and non- bonded capital lease obligations. The District has not reviewed this table and there can be no assurance as to the accuracy of the information contained in the table; inquiries concerning the scope and methodology of procedures carried out to compile the information presented should be directed to California Municipal Statistics, Inc.

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NORRIS SCHOOL DISTRICT DIRECT AND OVERLAPPING BONDED INDEBTEDNESS

2013-14 Assessed Valuation: $2,305,106,741

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/14 Kern Community College District Safety, Repair and Improvement District 2.845% $ 4,320,453 Kern High School District 4.785 9,443,255 Norris School District 100. 18,094,031(1) Kern Delta Water District 0.158 1,706 RNR School Facilities Financing Authority Community Facilities District No. 92-1 40.554 29,922,769 City of Bakersfield 1915 Act Bonds 31.072-75.399 5,892,656 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $67,674,870

OVERLAPPING GENERAL FUND DEBT: Kern County Certificates of Participation 2.548% $ 2,967,783 Kern County Pension Obligations 2.548 8,524,984 Kern County Board of Education Certificates of Participation 2.548 1,045,954 Kern Community College District Certificates of Participation 2.573 1,540,455 Kern Community College District Benefit Obligations 2.573 2,116,164 Kern High School District Certificates of Participation 4.785 7,221,522 City of Bakersfield General Fund Obligations 6.035 1,245,624 TOTAL OVERLAPPING GENERAL FUND DEBT $24,662,486

COMBINED TOTAL DEBT $92,337,356(2)

Ratios to 2013-14 Assessed Valuation: Direct Debt ($18,094,031) ...... 0.78% Total Direct and Overlapping Tax and Assessment Debt ...... 2.94% Combined Total Debt ...... 4.01%

(1) Excludes general obligation bonds to be sold. (2) Excludes tax and revenue anticipation notes, revenue enterprise, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

Article XIIIA of the California Constitution

Article XIIIA of the California Constitution limits the amount of any ad valorem tax on real property to one percent (1%) of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978 and on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment.” The full cash value may be increased at a rate not to exceed two percent per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

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Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent (1%) property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

All taxable property is shown at full market value on the tax rolls, with tax rates expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Article XIIIB of the California Constitution

Under Article XIIIB of the California State Constitution, state and local government entities have an annual “appropriations limit” and are not permitted to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the “appropriations limit.” Article XIIIB does not affect the appropriations of moneys which are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the “appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

Unitary Property

Assembly Bill 454 (Chapter 921, Statutes of 1986) (“AB 454”) provides that revenues derived from most utility property assessed by the State Board of Equalization (“Unitary Property”) are allocated as follows: (1) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (2) if county-wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas.

The provisions of AB 454 do not constitute an elimination of the assessment of any State- assessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county.

California Lottery

In the August 1984 general election, the voters of the State approved a constitutional amendment establishing a California State Lottery (the “State Lottery”), the net revenues (revenues less expenses and prizes) of which shall be used to supplement other moneys allocated to public education. The legislation

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further requires that the funds shall be used for the education of pupils and students and cannot be used for the acquisition of real property, the construction of facilities or the financing of research.

Allocation of State Lottery net revenues is based upon the average daily attendance of each school and community college district; however, the exact allocation formula may vary from year to year. At this time, the amount of additional revenues that may be generated by the State Lottery in any given year cannot be predicted.

Proposition 46

On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the 1% tax limitation imposed by Article XIIIA. Under this amendment to Article XIIIA, local governments and school and community college districts may increase the property tax rate above 1% for the period necessary to retire new, general obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to purchase or improve real property.

Proposition 39

On November 7, 2000, California voters approved Proposition 39, called the “Smaller Classes, Safer Schools and Financial Accountability Act” (“Proposition 39”) which amends Section 1 of Article XIIIA, Section 18 of Article XVI of the California Constitution and Section 47614 of the California Education Code and allows an alternative means of seeking voter approval for bonded indebtedness by 55% of the vote, rather than the two-thirds majority required under Section 18 of Article XVI of the Constitution. The 55% voter requirement applies only if the bond measure submitted to the voters includes, among other items: (1) a restriction that the proceeds of the bonds may be used for “the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities,” (2) a list of projects to be funded and a certification that the school district board has evaluated “safety, class size reduction, and information technology needs in developing that list” and (3) that annual, independent performance and financial audits will be conducted regarding the expenditure and use of the bond proceeds.

Section 1(b)(3) of Article XIIIA has been added to exempt the one percent (1%) ad valorem tax limitation that Section 1(a) of Article XIIIA of the Constitution levies, to pay bonds approved by 55% of the voters, subject to the restrictions explained above.

The California Legislature enacted AB 1908, Chapter 44, which became effective upon passage of Proposition 39 and amends various sections of the Education Code. Under amendments to Section 15268 and 15270 of the Education Code, the following limits on ad valorem taxes apply in any single election: (1) for an elementary and high school district, indebtedness shall not exceed $30 per $100,000 of taxable property, (2) for a unified school district, indebtedness shall not exceed $60 per $100,000 of taxable property, and (3) for a community college district, indebtedness shall not exceed $25 per $100,000 of taxable property. Finally, AB 1908 requires that a citizens’ oversight committee must be appointed who will review the use of the bond funds and inform the public about their proper usage.

Article XIIIC and XIIID of the California Constitution

On November 5, 1996, an initiative to amend the California Constitution known as the “Right to Vote on Taxes Act” (“Proposition 218”) was approved by a majority of California voters. Proposition 218 added Articles XIIIC and XIIID to the State Constitution and requires majority voter

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approval for the imposition, extension or increase of general taxes and 2/3 voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include counties. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995, and prior to November 6, 1996 shall continue to be imposed only if approved by a majority vote in an election held within two years following November 6, 1996. All local taxes and benefit assessments which may be imposed by public agencies will be defined as “general taxes” (defined as those used for general governmental purposes) or “special taxes” (defined as taxes for a specific purpose even if the revenues flow through the local government’s general fund) both of which would require a popular vote. New general taxes require a majority vote and new special taxes require a two-thirds vote. Proposition 218 also extends the initiative power to reducing or repealing local taxes, assessments, fees and charges, regardless of the date such taxes, assessments or fees or charges were imposed, and lowers the number of signatures necessary for the process. In addition, Proposition 218 limits the application of assessments, fees and charges and requires them to be submitted to property owners for approval or rejection, after notice and public hearing.

The District has no power to impose taxes except property taxes associated with a general obligation bond election, following approval by 55% or 2/3 of the District’s voters, depending upon the Article of the Constitution under which it is passed. Proposition 218 significantly reduces the ability of the District to create such special assessment districts. Any assessments, fees or charges levied or imposed by any assessment district created by the District will become subject to the election requirements of Proposition 218 as described above, a more elaborate notice and balloting process and other requirements.

Proposition 218 also expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed, and reduces the number of signatures required for the initiative process. This extension of the initiative power to some extent constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v. Brown, which upheld an initiative that repealed a local tax and held that the State constitution does not preclude the repeal, including the prospective repeal, of a tax ordinance by an initiative, as contrasted with the State constitutional prohibition on referendum powers regarding statutes and. ordinances which impose a tax. Generally, the initiative process enables California voters to enact legislation upon obtaining requisite voter approval at a general election. Proposition 218 extends the authority stated in Rossi v. Brown by expanding the initiative power to include reducing or repealing assessments, fees and charges, which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6, 1996, and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges. Such legal authority could include the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution.

Proposition 218 has no effect upon the District’s ability to pursue approval of a general obligation bond issue or a Mello-Roos Community Facilities District bond issue in the future, both of which are already subject to a 2/3 vote, although certain procedures and burdens of proof may be altered slightly. The District is unable to predict the nature of any future challenges to Proposition 218 or the extent to which, if any, Proposition 218 may be held to be unconstitutional.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID and Propositions 98, 46 and 39 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time

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to time, other initiative measures could be adopted, further affecting the District’s revenues or their ability to expend revenues.

THE KERN COUNTY TREASURY POOL

The following information concerning the Kern County Treasury Pool (the “Investment Pool” or “Pool”) has been provided by the Treasurer and has not been confirmed or verified by the District or the Underwriter. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof or that the information contained or incorporated hereby by reference is correct as of any time subsequent to its date.

Under the California Education Code, the District is required to pay all moneys received from any source into the County of Kern Treasury to be held on behalf of the District. The Pool consists of monies deposited with the Treasurer by County departments and agencies, school districts, certain non-County governmental agencies and special assessment districts. Most of the Pool’s depositors are required by State law to invest their excess moneys in the Pool.

Each depositor is assigned a distinct fund number within the Investment Pool. Cash represented by the fund balances is commingled in a Pooled Cash Portfolio for investment purposes; no funds are segregated for separate investment. Investments are selected from those authorized by California Government Code Section 53635. Authorized investments include obligations of the United States Treasury, agencies of the United States government, federally sponsored enterprises, local and State bond issues, bankers acceptances, commercial paper of prime quality, collateralized and negotiable certificates of deposit, repurchase and reverse repurchase agreements, medium term corporate notes, shares of beneficial interest in diversified management companies (mutual funds), and asset backed (including mortgage related) and pass-through securities.

Each calendar year the Treasurer prepares an Annual Statement of Investment Policy (the “Investment Policy”) that sets the framework for the investment practices relating to the County treasury. Legislation enacted in 1996 and effective January 1, 1997, requires that the Investment Policy be filed and approved by the Board in open session. Additionally, the Board must determine whether to delegate investment authority to the Treasurer each year. Failure to so delegate transfers investment responsibility to the Board itself. The Board of Supervisors approved the current Investment Policy as presented by the Treasurer and delegated investment responsibility to the Treasurer on December 17, 2013. Having been so approved, the Investment Policy may not be changed without Board approval.

The approved Investment Policy provides that the County’s investment objectives are “safety and liquidity of all investments, while obtaining a reasonable return within established investment guidelines.” The Investment Policy provides that no more than 6% of the assets in the Pool can be invested in the securities of any single issuer other than the United States Treasury and agencies of the United States government. Investments in reverse repurchase agreements are limited to 10% of the total Pool and must always be matched in maturity to the reinvestment. Additionally, no investment will be made in any security whose coupon rate varies inversely with general credit market rates.

In accordance with California law, the Kern County Board of Supervisors created an eleven- member Treasury Oversight Committee (the “TOC”) on April 2, 1996. The statutory role of the TOC is to review the Investment Policy as prepared by the Treasurer and make recommendations to the Board, to monitor policy compliance as well as investment performance and to cause an annual independent audit to be performed. The TOC meets semi-annually to accomplish its tasks.

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The following tables present information with respect to the Pool as of June 30, 2014. As described above, a wide range of investments is authorized under State law and the Investment Policy. Therefore, there can be no assurance that the investments in the Pool will not vary significantly from the investments described below. In addition, the value of various investments in the Pool will fluctuate on a daily basis as a result of several factors, including generally prevailing interest rates and other economic conditions. For further information concerning County investments, access the County’s website: http://www.kcttc.co.kern.ca.us.

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The following table identifies the types of securities held by the Pool as of June 30, 2014.

KERN COUNTY TREASURER – TAX COLLECTOR Pooled Cash Portfolio Report (as of June 30, 2014 – amounts in 1,000’s)

Percent of Yield to Total Policy Average Effective Asset Par Market Cost Maturity Assets Limit Maturity Duration Pooled Funds $ 41,445 $ 41,445 $ 41,445 0.230% 1.89% $50,000 1 0 Negotiable CD's 495,000 495,075 495,000 0.578 22.60 30% 78 0.218 Commercial Paper - Discount 504,000 503,939 503,806 0.206 23.01 40% 26 0.070 Federal Agency Issues - Coupon 718,800 718,168 719,465 0.788 32.85 75% 1,089 0.456 Medium Term Notes 404,451 412,007 419,061 0.735 19.14 30% 769 1.872 Asset Backed Securities-Coupon 10,000 10,402 11,119 2.050 0.51 10% 1,085 0.574

Total Securities $2,173,696 $2,181,036 $2,189,896 0.572% -- -- 535 0.522

Cash in Banks $67,824 $67,824 $67,824 -- 3.12% ------

Total Assets $2,241,520 $2,248,860 $2,257,720 ------

Purchased Interest -- $45 $45 ------

Total Cash and Investments $2,241,520 $2,248,905 $2,257,765 ------

Source: Kern County Treasurer.

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The maturity distribution of the Pool’s portfolio as of June 30, 2014, is presented in the following table.

COUNTY OF KERN Treasury Pool Portfolio Liquidity (As of June 30, 2014)

Term to Maturity % of Total 0 – 366 days 52.94% 367 – 1,097 days 30.68 1,098 – 1,827 days 16.38

Source: Kern County Treasurer.

None of the District, the Financial Advisor or the Underwriter has made an independent investigation of the investments in the Pool nor have they made any assessment of the current County Investment Policy. The value of the various investments in the Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the Treasurer, with the consent of the Treasury Oversight Committee and the County Board of Supervisors, may change the County Investment Policy at any time. Therefore, there can be no assurance that the values of the various investments in the Pool will not vary significantly from the values described herein.

LEGAL OPINION

The legal opinion of Nixon Peabody LLP, Bond Counsel to the District (“Bond Counsel”), attesting to the validity of the Bonds, will be supplied to the original purchasers of the Bonds without charge. The form of legal opinion is attached hereto as APPENDIX B. Bond Counsel will receive compensation contingent upon the sale and delivery of the Bonds.

TAX MATTERS

Federal Income Taxes

The Internal Revenue Code of 1986, as amended (the “Code”), imposes certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issue of the Bonds. Pursuant to the Resolution and the tax and nonarbitrage certificate executed by the District in connection with the issuance of the Bonds (the “Tax Certificate”), the District has covenanted to comply with the applicable requirements of the Code in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes pursuant to Section 103 of the Code. In addition, the District has made certain representations and certifications in the Resolution and the Tax Certificate. Bond Counsel will not independently verify the accuracy of those representations and certifications.

In the opinion of Nixon Peabody LLP, Bond Counsel, under existing law and assuming compliance with the aforementioned covenant, and the accuracy of certain representations and certifications made by the District described above, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel is also of the opinion that such interest is not treated as a preference item in calculating the alternative minimum tax imposed under

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the Code with respect to individuals and corporations. Interest on the Bonds is, however, included in the adjusted current earnings of certain corporations for purposes of computing the alternative minimum tax imposed on such corporations.

In rendering these opinions, Bond Counsel has relied upon representations and covenants of the District in the Tax Certificate concerning the property financed with Bond proceeds, the investment and use of Bond proceeds and the rebate to the federal government of certain earnings thereon. In addition, Bond Counsel has assumed that all such representations are true and correct and that the District will comply with such covenants. Bond Counsel has expressed no opinion with respect to the exclusion of the interest on the Bonds from gross income under Section 103(a) of the Code in the event that any of such District representations are untrue or the District fails to comply with such covenants, unless such failure to comply is based on the advice or the opinion of Bond Counsel.

State Taxes

Bond Counsel is also of the opinion that interest on the Bonds is exempt from personal income taxes of the State of California under present State law. Bond Counsel expresses no opinion as to other state or local tax consequences arising with respect to the Bonds nor as to the taxability of the Bonds or the income therefrom under the laws of any state other than California.

Original Issue Discount

Bond Counsel is further of the opinion that the difference between the principal amount of the Current Interest Bonds maturing November 1, 2041 and the Capital Appreciation Bonds (collectively, the “Discount Bonds”) and the initial offering price to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount which is excluded from gross income for federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues actuarially on a constant interest rate basis over the term of each Discount Bond and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued original issue discount. The accrual of original issue discount may be taken into account as an increase in the amount of tax-exempt income for purposes of determining various other tax consequences of owning the Discount Bonds, even though there will not be a corresponding cash payment. Owners of the Discount Bonds are advised that they should consult with their own advisors with respect to the state and local tax consequences of owning such Discount Bonds.

Original Issue Premium

The Current Interest Bonds maturing on November 1, 2040 (collectively, the “Premium Bonds”), are being offered at prices in excess of their principal amounts. An initial purchaser with an initial adjusted basis in a Premium Bond in excess of its principal amount will have amortizable bond premium which is not deductible from gross income for federal income tax purposes. The amount of amortizable bond premium for a taxable year is determined actuarially on a constant interest rate basis over the term of each Premium Bond based on the purchaser’s yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, over the period to the call date, based on the purchaser’s yield to the call date and giving effect to any call premium). For purposes of determining gain or loss on the sale or other disposition of a Premium Bond, an initial purchaser who acquires such obligation with an amortizable bond premium is required to decrease such purchaser’s adjusted basis in such Premium Bond annually by the amount of amortizable bond premium for the taxable year. The amortization of bond premium may be taken into account as a reduction in the amount of tax-exempt income for purposes of determining

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various other tax consequences of owning such Bonds. Owners of the Premium Bonds are advised that they should consult with their own advisors with respect to the state and local tax consequences of owning such Premium Bonds.

Ancillary Tax Matters

Ownership of the Bonds may result in other federal tax consequences to certain taxpayers, including, without limitation, certain S corporations, foreign corporations with branches in the United States, property and casualty insurance companies, individuals receiving Social Security or Railroad Retirement benefits, and individuals seeking to claim the earned income credit. Ownership of the Bonds may also result in other federal tax consequences to taxpayers who may be deemed to have incurred or continued indebtedness to purchase or to carry the Bonds. Prospective investors are advised to consult their own tax advisors regarding these rules.

Interest paid on tax-exempt obligations such as the Bonds is subject to information reporting to the Internal Revenue Service (“IRS”) in a manner similar to interest paid on taxable obligations. In addition, interest on the Bonds may be subject to backup withholding if such interest is paid to a registered owner that (a) fails to provide certain identifying information (such as the registered owner’s taxpayer identification number) in the manner required by the IRS, or (b) has been identified by the IRS as being subject to backup withholding.

Bond Counsel is not rendering any opinion as to any federal tax matters other than those described in the opinion attached as APPENDIX A. Prospective investors, particularly those who may be subject to special rules described above, are advised to consult their own tax advisors regarding the federal tax consequences of owning and disposing of the Bonds, as well as any tax consequences arising under the laws of any state or other taxing jurisdiction.

Changes in Law and Post Issuance Events

Legislative or administrative actions and court decisions, at either the federal or state level, could have an adverse impact on the potential benefits of the exclusion from gross income of the interest on the Bonds for federal or state income tax purposes, and thus on the value or marketability of the Bonds. This could result from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), repeal of the exclusion of the interest on the Bonds from gross income for federal or state income tax purposes, or otherwise. We note that each year since 2011, President Obama released legislative proposals that would limit the extent of the exclusion from gross income of interest on obligations of states and political subdivisions under Section 103 of the Code (including the Bonds) for taxpayers whose income exceeds certain thresholds. It is not possible to predict whether any legislative or administrative actions or court decisions having an adverse impact on the federal or state income tax treatment of holders of the Bonds may occur. Prospective purchasers of the Bonds should consult their own tax advisors regarding the impact of any change in law on the Bonds. Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance and delivery of the Bonds may affect the tax status of interest on the Bonds. Bond Counsel expresses no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof upon the advice or approval of other counsel.

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LEGAL MATTERS

Continuing Disclosure

The District will covenant in its Continuing Disclosure Undertaking to be executed on the date of delivery of the Bonds (the “Continuing Disclosure Undertaking”), to file annual reports and notices of certain listed events (“Listed Events”) with the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The District’s obligations under the Continuing Disclosure Undertaking with respect to continuing disclosure shall terminate upon payment in full of the Bonds. If such termination occurs or is deemed to occur prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event. The District regularly prepares a variety of reports, including audits, budgets and related documents. Any Owner of a Bond may obtain a copy of any such report, as available, from the District. The specific nature of the annual reports and notices of Listed Events respecting the Bonds is contained in APPENDIX C – “FORM OF CONTINUING DISCLOSURE UNDERTAKING.”

In the last five years, with respect to its undertaking for its General Obligation Bonds, Election of 1987, Series D (the “2000 Bonds”), the District has filed each of its annual reports required by its undertaking after the required date. Certain information required by its undertaking for the 2000 Bonds was missing from the reports filed for fiscal years 2008-09 and 2009-10, but such information was included in a report filed in 2012. The District has not failed to include required information since the issue with the 2000 Bonds was corrected in 2012. The District has filed each of its reports for its 2012 Election General Obligation Bonds, 2012 Series A in a timely manner.

Limitation on Remedies; Amounts Held in the County Treasury Pool

The opinion of Bond Counsel, the proposed form of which is attached hereto as APPENDIX B, is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights. The rights of the Owners of the Bonds are subject to certain limitations. Enforceability of the rights and remedies of the Owners of the Bonds, and the obligations incurred by the District, are limited by applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect, equity principles that may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose, and the limitations on remedies against school and community college districts in the State. Bankruptcy proceedings, if initiated, could subject the beneficial owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or modification of their rights.

Under Chapter 9 of the Federal Bankruptcy Code (Title 11, United States Code) (the “Bankruptcy Code”), which governs the bankruptcy proceedings for public agencies, no involuntary petitions for bankruptcy relief are permitted. While current State law precludes school districts from voluntarily seeking bankruptcy relief under Chapter 9 of the Bankruptcy Code without the concurrence of the State, such concurrence could be granted or State law could be amended.

The Resolution and the State Government Code require the County to annually levy ad valorem property taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates), for the payment of the principal

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of, premium, if any, and interest on the Bonds. The County on behalf of the District is thus expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bonds and may invest these funds in the County’s Treasury Pool, as described above. In the event the District or the County were to go into bankruptcy, a federal bankruptcy court might hold that the owners of the Bonds are unsecured creditors with respect to any funds received by the District or the County prior to the bankruptcy, which may include taxes that have been collected and deposited into the Interest and Sinking Fund, where such amounts are deposited into the County Treasury Pool, and such amounts may not be available for payment of the principal and interest on the Bonds unless the owners of the Bonds can “trace” those funds. There can be no assurance that the Owners could successfully so “trace” such taxes on deposit in the Debt Service Fund where such amounts are invested in the County Treasury Pool. Under any such circumstances, there could be delays or reductions in payments on the Bonds.

LEGALITY FOR INVESTMENT

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

RATING

Moody’s Investors Service (“Moody’s”) has assigned its municipal bond rating of “Aa2” to the Bonds. Such rating reflects only the views of Moody’s and an explanation of the significance of such rating may be obtained as follows: Moody’s, 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, tel. (212) 553-0300. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.

UNDERWRITING

Stifel, Nicolaus & Company, Incorporated, as Underwriter, has agreed to purchase the Bonds at the purchase price of $9,626,269.19 (reflecting the aggregate initial principal and issue amount of $9,381,072.90, plus a net original issue premium of $336,661.75 and less an Underwriter’s discount of $91,465.46, at the rates and yields shown on the inside cover hereof.

The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page. The offering prices may be changed from time to time by the Underwriter.

NO LITIGATION

No litigation is pending concerning the validity of the Bonds, and District Counsel, Schools Legal Service, will deliver an opinion to that effect at the time of delivery of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District’s ability to receive ad valorem taxes or to collect other revenues or contesting the District’s ability to issue the Bonds.

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OTHER INFORMATION

References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made such documents and reports for full and complete statements of the contents thereof. Additional information concerning the District and copies of the most recent and subsequent audited financial statements of the District and the Resolution may be obtained by contacting: Norris School District, 6940 Calloway Drive, Bakersfield, California 93312, Attention: Superintendent. The District may impose a fee for copying, shipping and handling.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not be construed as a contract or agreement between the District and the purchasers or Owners of any of the Bonds.

The execution and delivery of this Official Statement has been duly authorized by the District.

NORRIS SCHOOL DISTRICT

By: ______/s/ Steven Shelton Superintendent

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APPENDIX A

THE DISTRICT

General

The Norris School District (the “District”), established on September 30, 1880, is located in the southern portion of the San Joaquin Valley of central California. The territory of the District, which includes unincorporated areas in Kern County (the “County”) northwest of Bakersfield, California (the “City”), encompasses approximately 15 square miles. The District has four elementary schools and one middle school. Fiscal year 2013-14 enrollment in the District was 3,917 students with an average daily attendance of 3,766 at P-2 in 2013-14. For fiscal year 2014-15, the District predicts enrollment of 3,943 students.

The District is governed by a Board of Trustees (the “Board”). The Board consists of 5 members who are elected at-large to overlapping four-year terms at elections held in staggered years. If a vacancy arises during any term, the vacancy is filled by either an appointment by the majority vote of the remaining Board members or by a special election. The years in which the current terms for each member of the Board expire are set forth below:

BOARD OF TRUSTEES

Term Expires Name Office (November) John Genter President 2016 Jeff Stone Clerk 2018 Jim Bowles Member 2016 Sue Dodgin Member 2018 Cy Silver Member 2018

Unless otherwise indicated, the following financial, statistical and demographic data has been provided by the District.

Key Personnel

The Superintendent of Schools of the District is appointed by the Board and reports to the Board. The Superintendent is responsible for management of the District’s day-to-day operations and supervises the work of other key District administrators.

Steven K. Shelton, Superintendent. Mr. Shelton received a B.A. degree at California State University, Bakersfield (“CSUB”) in June 1977, his California Life Teaching Credential from CSUB in 1978, his California Administrative Services Credential in 1983 from California Lutheran University (“Cal Lutheran”) and his Master’s Degree in Educational Administration in 1986 from Cal Lutheran.

Prior to taking over as Superintendent to the District in 2012, Mr. Shelton served as Assistant Superintendent to the District beginning in July 2004. Prior to becoming Assistant Superintendent, he served the Norris School District as a teacher, coach and principal. Mr. Shelton began teaching in the Norris School District in August 1979 after one year teaching in the Bakersfield City School District. His first administrative position was as Principal at Norris Elementary School beginning the 1983-84 school

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year. He then served as Principal at Norris Middle School from August 1987 until opening William B. Bimat Elementary School in August of 2001.

Mr. Shelton has served on the SISC Property and Liability Board as well as various committees related to elementary and middle schools. He has been very involved in county wide issues related to schools and was part of a team that wrote a drug abuse prevention curriculum for the Kern County Superintendent of Schools.

Kelly Miller, Assistant Superintendent. Kelly Miller earned her Bachelor of Arts degree from California State University Northridge in 1985. In 1998, she received her Multiple Subject Teaching Credential from University of La Verne and received her Master’s Degree in Administrative Services from Fresno Pacific University in 2005.

Mrs. Miller’s career began in marketing, working at KGET-TV and serving as the Western Region Coordinator of Public Affairs for Contel from 1986-1993. Her career in education began in the District in 1996. Utilizing her business and teaching background, Mrs. Miller has successfully served as an administrator for the past eight years: 2004-05, Norris Middle School Vice Principal; 2005-07, Olive Drive Elementary Principal; 2007-12, Veterans Elementary Principal. 2012-13 was Mrs. Miller’s first year as Assistant Superintendent of the District. In addition to her career in the District, Mrs. Miller is a Norris alumna class of 1976.

Kade M. Duey, Director of Business Services. Kade M. Duey has served as the District’s Director of Fiscal Services since 2006 and since fiscal year 2012-13 has been the Director of Business Services for the District. Prior to his position with the District, he spent ten years with the City of Bakersfield’s Economic and Community Development Department. Mr. Duey received a B.S. in Business/Economics from Willamette University in 1991 and a Master’s Degree in Business Administration from CSUB in 2000.

District Employees

The District employs approximately 195 full-time equivalent certificated academic professionals as well as 102 full-time equivalent classified employees.

The certificated employees of the District have assigned the California Teachers Association (“CTA”) as their exclusive bargaining agent. The certificated employees’ contract with CTA expired on June 30, 2014; the District is currently in negotiations with CTA regarding the new contract. Classified employees are represented by California School Employees Association (“CSEA”). The classified employees’ contract with CSEA expires on June 30, 2016.

Financial Statements

The District’s financial statements are prepared on a modified accrual basis of accounting in accordance with generally accepted accounting principles as set forth by the Governmental Accounting Standards Board.

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Funds used by the District are categorized as follows:

Governmental Funds Fiduciary Funds General Fund Trust and Agency Funds Special Revenue Funds Proprietary Funds Debt Service Funds Internal Service Funds Capital Project Funds

The General Fund of the District, as shown herein, is a combined fund comprised of moneys which are unrestricted and available to finance the legally authorized activities of the District not financed by restricted funds and moneys which are restricted to specific types of programs or purposes. General Fund revenues shown thereon are derived from such sources as taxes, aid from other government agencies, charges for current services and other revenue.

The financial statements included herein were prepared by the District using information from the Annual Financial Reports which are prepared by the Director of Fiscal Services for the District and audited by independent certified public accountants each year. The District’s audited financial statements for fiscal year 2012-13 are attached hereto as APPENDIX C.

Budgets of District

The fiscal year of the District begins on the first day of July of each year and ends on the 30th day of June of the following year. The District adopts on or before July 1 of each year a fiscal line-item budget setting forth expenditures in priority sequence so that appropriations during the fiscal year can be adjusted if revenues do not meet projections.

The District is required by provisions of the California Education Code to maintain a balanced budget each year, where the sum of expenditures plus the ending fund balance cannot exceed the revenues plus the carry-over fund balance from the previous year.

District Investments

The Kern County Treasurer and Tax Collector (the “Treasurer”) manages, in accordance with California Government Code Section 53600 et seq., funds deposited with the Treasurer by school and community college districts located in the County, various special districts, and some cities within the State of California. State law generally requires that all moneys of the County, school and community college districts and certain special districts located in the County be held in the County’s Treasury Pool.

The composition and value of investments under management in the Treasury Pool vary from time to time depending on cash flow needs of the County and public agencies invested in the pool, maturity or sale of investments, purchase of new securities, and due to fluctuations in interest rates generally.

For a further discussion of the County’s Treasury Pool, see the caption “THE KERN COUNTY TREASURY POOL” herein.

Financial Statements of the District

The following information, concerning the operations and finances of the District is not intended to and does not suggest that the Bonds are secured by the general revenues or General Fund of the

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District, nor is the County obligated in any way with respect to the Bonds. The Bonds are general obligation bonds of the District, secured and payable solely from ad valorem property taxes collected against taxable properties within the boundaries of the District. Prospective purchasers of the Bonds should be aware that the following discussion of the District’s financial condition, its fund balances, budgets and other obligations is intended as general information only, and no implication is made the payment of principal or Maturity Amount of or interest on the Bonds is dependent in any way upon the District’s financial condition. The District neither receives nor accounts for ad valorem property taxes collected by the County to pay debt service on the Bonds. Pursuant to Section 15241 of the California Education Code, all tax revenues collected for payment of debt service on general obligation bonds, including the Bonds, must be deposited into the debt service fund of the District maintained within the County Treasury Pool. See the body of this Official Statement under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.”

The District’s General Fund finances the legally authorized activities of the District for which restricted funds are not provided. General Fund revenues are derived from such sources as State of California (“State”) fund apportionments, taxes, use of money and property, and aid from other governmental agencies. The District has not requested its auditor to provide any review or update of such financial statements in connection with their inclusion in this Official Statement. Certain information from the District’s financial statements follows. The District’s audited financial statements for fiscal year 2012-13 are attached hereto as APPENDIX C.

[Remainder of Page Intentionally Left Blank.]

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General Fund

The following table describes the District’s audited financial results for the fiscal years 2010-11 through 2012-13.

Audited Audited Audited 2010-2011 2011-2012 2012-2013 Revenues Revenue Limit Sources(1) State Apportionments $14,796,703 $15,674,684 $16,256,026 Local Sources 2,817,652 2,481,080 2,600,770 Total Revenue Limit 17,614,355 18,155,764 18,856,796 Federal Revenue 1,451,997 758,615 707,194 Other State Revenue 4,272,332 4,800,104 2,837,829 State on-behalf payments 501,164 507,479 517,280 Other local revenue 1,203,145 384,752 2,673,491 Total Revenues $25,042,993 $24,606,714 $25,592,590

Expenditures Instruction $15,385,924 $14,879,947 $15,817,758 Supervision of instruction 207,069 223,994 167,201 Instructional library, media and technology 497,726 431,779 435,777 School site administration 1,243,218 1,275,935 1,255,325 Home-to-school transportation 981,195 505,643 673,381 Food services 210 – 6 All other pupil services 612,190 639,261 707,107 Data processing 110,300 59,799 195,512 All other general administration 1,751,709 1,756,951 1,693,597 Plant services 2,000,128 2,033,304 2,174,083 Facility acquisition and construction – 32,420 18,958 Community services –(2) –(2) 1,654,051 Other outgo 1,715,727 2,030,899 – Debt service Principal retirement 12,996 – – Interest on long-term debt – – – Total Expenditures $24,518,392 $23,869,932 $24,792,756

Excess of Revenues Over Expenditures 524,601 736,782 799,834

Other Financing Sources (Uses) Operating transfers in 49,116 –(2) – Operating transfers out – –(2) – Total Other Financing Sources (uses) 49,116 –(2) –

Excess of Revenues and Other Financing Services Over Expenditures and Other Financing Uses 573,717 736,782 799,834

Beginning Fund Balances, July 1 6,841,133 7,414,850 8,211,962 Adjustment for Restatement –(2) 60,330 –(2) Ending Fund Balances, June 30 $7,414,850 $8,211,962 $9,011,796

(1) The revenue limit system of funding was replaced with the LCCF (defined below) at the end of fiscal year 2012-13. (2) Not reported for fiscal year. Source: The District.

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The following table describes the District’s adopted budgets for fiscal years 2012-13 through 2014-15.

NORRIS SCHOOL DISTRICT ADOPTED BUDGETS FISCAL YEARS 2012-13, 2013-14 AND 2014-15 ADOPTED BUDGETS

Adopted Adopted Adopted 2012-13 Budget(1) 2013-14 Budget 2014-15 Budget Revenues Revenue Limit Sources(2) $16,670,419 $19,570,986 $24,022,447 Federal Revenue 670,732 672,333 671,13 Other State Revenue 4,184,865 2,762,830 836,579 Other Local Revenue 61,685 1,799,703 1,797,615 Total Revenues $21,587,701 $24,805,852 $27,327,772

Expenditures Certificated Salaries 11,349,132 11,918,305 $12,780,684 Classified Salaries 2,375,397 2,575,408 2,694,381 Employee Benefits 5,157,653 5,362,044 5,835,703 Books and Supplies 602,748 898,413 1,325,803 Services and Other Operating Expenditures 1,595,492 1,729,232 2,234,105 Capital Outlay 75,000 75,000 97,082 Other Outgo (excluding Transfers of Indirect Costs) 1,634,558 1,404,897 1,412,149 Other Outgo – Transfers of indirect costs – – – Total Expenditures $22,789,980 $23,963,299 26,379,907

Excess (Deficiency) of Revenues Over (Under) Expenditures Before Other Financing Sources and Uses (1,202,279) 842,553 947,865

Other Financing Sources (Uses): Operating Transfers In – – – Operating Transfers Out – – – Other Sources – – – Other Uses – – – Contributions – – – Total Other Financing Sources (Uses) – – –

Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Sources/Uses (1,202,279) 842,553 947,865

Beginning Fund Balance, July 1 8,211,961 9,199,645 9,598,938

Ending Fund Balances, June 30 $7,009,682 $10,042,198 $10,546,803

(1) The 2012-13 Budget assumed a $441 per ADA reduction based on the assumption that Proposition 30 (defined below) would not receive voter approval. (2) The revenue limit system of funding was replaced with the LCCF (defined below) at the end of fiscal year 2012-13. Source: The District.

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The following table compares the District’s Board final budgets to audited actuals for fiscal years 2011-12 and 2012-13. It also compares the final budget to fiscal year 2013-14 to the unaudited actuals for fiscal year 2013-14. See APPENDIX C for the District’s financial statements for fiscal year 2012-13. NORRIS SCHOOL DISTRICT COMPARISON OF FINAL BUDGETS AND ACTUALS(1) 2011-12 2011-12 2012-13 2012-13 2013-14 2013-14 Final Budget Audited Actuals Final Budget Audited Actuals Final Budget Unaudited Actuals Revenues Revenue Limit Sources(3) State apportionments $15,674,684 $15,674,684 $16,274,220 $16,256,026 $17,118,401 $19,270,821 Local sources 2,481,080 2,481,080 2,629,585 2,600,770 2,452,585 2,870,845 Total Revenue Limit 18,155,764 18,155,764 18,903,805 18,856,796 19,570,986 22,141,666

Federal revenue 758,615 758,615 707,194 707,194 672,333 671,131 Other state revenue 4,794,696 4,800,104 2,843,151 2,837,829 2,762,830 1,748,694 State on-behalf payments 507,479 507,479 517,280 517,280 517,280 517,280 Other local revenue 333,815 384,752 2,295,734 2,673,491 1,799,703 2,148,619 Total Revenues 24,550,369 24,606,714 25,267,164 25,592,590 25,323,132 27,227,390

Expenditures Certificated Salaries 11,370,156 11,367,186 11,543,000 11,541,073 11,918,305 12,361,941 Classified Salaries 2,375,266 2,371,803 2,463,729 2,461,816 2,575,408 2,584,078 Employee Benefits 4,902,138 4,901,849 5,110,455 5,077,705 5,362,044 5,358,015 State on-behalf payments 507,479 507,479 517,280 517,280 517,280 517,280 Books and Supplies 813,731 810,462 1,246,721 1,236,874 898,413 2,075,019 Services and Other Operating Expenditures 1,742,598 1,742,468 1,995,386 1,936,312 1,729,232 2,372,129 Capital Outlay 140,126 137,787 371,467 367,645 75,000 102,482 Payments to County Office 2,031,121 2,030,898 1,654,340 1,654,051 1,404,897 1,412,149 Debt service Principal retirement – – –(2) –(2) – – (2) (2) Interest and fiscal charges – – – – – – Total Expenditures 23,882,615 23,869,932 24,902,378 24,792,756 24,480,579 26,783,093

Excess (Deficiency) of Revenues Over Expenditures 667,754 736,782 364,786 799,834 842,553 444,297

Other Financing Sources (Uses) Operating transfers in 58,017 – 411,675 – – 203,931 (2) (2) Operating transfers out – – – – – – Total Other Financing Sources (Uses) 58,017 – 411,675 – – 203,931

Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 725,771 736,782 776,461 799,834 842,553 648,227

Fund Balances, July 1 7,414,850 7,414,850 8,211,961 8,211,962 8,964,341 8,964,341

Fund Balances, June 30 $ 8,200,951 $ 8,211,962 $ 8,988,422 $ 9,011,796 $ 9,806,894 $ 9,598,938

(1) Totals may not add due to rounding. (2) Not reported. (3) The revenue limit system of funding was replaced with the LCCF (defined below) at the end of fiscal year 2012-13. Source: The District. 15088028.3 A-7

Retirement System

The District participates in the State of California Teachers Retirement System (“STRS”) which provides retirement benefits to certificated personnel. The District contributed $933,588 in fiscal year 2011-12, $949,583 in fiscal year 2012-13 and estimates a contribution of $1,003,792 in fiscal year 2013- 14. The District estimates a contribution of $1,202,819 in fiscal year 2014-15. The District also participates in the State of California Public Employees’ Retirement System (“PERS”) which provides retirement benefits to classified personnel. The District contributed $279,118 to PERS in fiscal year 2011-12, $300,136 in fiscal year 2012-13 and estimates a contribution of $317,441 in fiscal year 2013-14. The District estimates a contribution of $368,435 in fiscal year 2014-15.

Both PERS and STRS are operated on a statewide basis and, based on available information, STRS and PERS both have unfunded liabilities. PERS may issue certain pension obligation bonds to reach funded status. (Additional funding of STRS by the State and the inclusion of adjustments to such State contributions based on consumer price changes were provided for in 1979 Statutes, Chapter 282.) The amounts of the pension/award benefit obligation (PERS) or actuarially accrued liability (STRS) will vary from time to time depending upon actuarial assumptions, rates of return on investments, salary scales, and levels of contribution. The District is unable to predict what the amount of unfunded liabilities will be in the future or the amount of the contributions which the District may be required to make.

In recent years, the combined employer, employee and State contributions to STRS have not been sufficient to pay actuarially required amounts. As a result, and due to significant investments losses, the unfunded actuarial liability of STRS has increased significantly. The District is unable to predict what the STRS program liabilities will be in the future. In order to address STRS funding inadequacies, the 2014- 15 State Budget (defined below) sets forth a plan of shared responsibility among the State, school districts and teachers to shore up STRS. The first year’s increased contributions from all three entities are approximately $275 million. The contributions would increase in subsequent years, reaching more than $5 billion annually. Total contributions from all three entities today equal 19.3 percent of teacher payroll at an average school district and would rise to 35.7 percent. Contributions from school districts and community colleges are presently at 8.88 percent, and would increase to 19.10 percent by July 1, 2020. Governor Brown expects that this will eliminate the unfunded liability in approximately 30 years.

The District also contributes to the Self-Insured Schools of California (“SISC”) Defined Benefit Plan, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan. The plan provides workers’ compensation, excess medical, property and liability benefits for its member districts. Benefit provisions are established by the SISC Board. Active plan members are not required to contribute. The District is required to contribute an actuarially determined rate. The District’s contributions to the SISC Defined Benefit Plan for fiscal years 2011-12, 2012-13 and 2013-14 were $11,331, $12,290, and $8,018 respectively, and equal 100% of the required District contributions. The District’s projected contribution for fiscal year 2014-15 is $8,792.

Post-Employment Benefits

The District does not offer any postemployment benefits to active employees that are paid by the District.

Funding Policy

The District has no invested plan assets accumulated for payment of future benefits. The District has established a Special Reserve Fund for Postemployment Benefits (the “Fund”) for retiree benefits.

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However, the assets in the Fund have not been contributed into an irrevocable trust, and are therefore not considered invested plan assets. The Fund has no current balance.

Annual OPEB Cost and Net OPEB Obligation

The District’s annual other postemployment benefits (“OPEB”) cost/(expense) is calculated based on an annual required contribution (“ARC”), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year, and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. A table showing the components of the District’s annual OPEB cost for the year, the amount actually paid from the plan, and changes in the District’s net OPEB obligation is not presented because the District has opted to record the total unfunded actuarial liability at June 30, 2013.

Capital Leases

The District leases buildings and equipment under agreements that provide for title to pass upon expiration of the lease period. Future minimum lease payments are as follows:

Year Ending June 30 Lease Payments 2014 $75,774 2015 49,678 2016 27,027 2017 27,027 2018 27,027 Total $206,533

Insurance

The District maintains insurance or self-insurance in such amounts and with such retentions and other terms providing coverage for property damage, fire and theft, general public liability and worker’s compensation as are adequate, customary and comparable with such insurance maintained by similarly situated elementary school districts. In addition, based upon prior claims experience, the District believes that the recorded liabilities for self-insured claims are adequate.

District Growth

The table below sets forth the enrollment for Average Daily Attendance (“ADA”) for the District for the Fiscal Years 2009-10 through 2012-13 and estimates for Fiscal Year 2013-14.

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NORRIS SCHOOL DISTRICT ENROLLMENT AND AVERAGE DAILY ATTENDANCE FISCAL YEARS 2009-10 THROUGH 2013-14(1) Base Revenue Fiscal Year Enrollment ADA Limit 2009-10 3,545 3,400.72 4,738.50 2010-11 3,647 3,503.02 5,028.33 2011-12 3,775 3,637.45 4,991.34 2012-13 3,884 3,742.46 5,042(2) 2013-14(2) 3,915 3,765.98 5,879

(1) Estimates based on the District’s 2013-14 Budget. (2) At the end of fiscal year 2012-13, the State replaced the revenue limit system with the LCCF. Source: The District.

Since June 2000, the number of single family residences has increased in the Norris area and school enrollment in the District has grown from 1,400 to 3,915. During the same period, three new elementary campuses were built in the Norris area (Norris Elementary, William B. Bimat Elementary, and Veterans Elementary), Olive Drive Elementary added nine new classrooms, and Norris Middle School added eight permanent classrooms for science, math, and art, as well as a new gym. The District owns one undeveloped site that is planned for an elementary school, and is presently searching for additional school sites, in an effort to implement the District’s plan to grow its enrollment to 10,000 students to be served by 12 elementary schools and three middle schools at build-out.

The projection of future student enrollment is based on 11,305 residential units that are currently planned within the District’s boundaries. Additionally, there is a substantial amount of (i) vacant land that is zoned for future residential use and (ii) land that could be re-zoned for residential use in the future, which has the potential for significant additional enrollment growth. Based on this potential for future residential development, student generation rates, and current enrollment trends, the District prepared long-term enrollment projections to identify future facilities needs.

Population

The population of the City, the County and the State is set forth in the following tables.

POPULATION OF THE CITY OF BAKERSFIELD, THE COUNTY AND STATE

Calendar Year(1) City of Bakersfield Kern County State 2009 340,997 825,503 36,966,713 2010 346,782 837,074 37,223,900 2011 350,020 844,480 37,427,946 2012 354,480 850,006 37,678,568 2013 360,633 861,164 37,984,138 2014 367,315 873,092 38,340,074

(1) Figures as of January of the year indicated. Source: California State Department of Finance.

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Developer Fees

The District collects developer fees to finance essential school facilities within the District. The following table of developer fee revenues reflects the collection of fees from Fiscal Year 2008-09 through Fiscal Year 2012-13.

NORRIS SCHOOL DISTRICT DEVELOPER FEES FISCAL YEARS 2008-09 TO 2012-13

Year Total Fees Received 2008-09 $364,687 2009-10 437,528 2010-11 367,752 2011-12 556,260 2012-13 750,828

Source: The District.

FUNDING OF SCHOOL DISTRICTS IN CALIFORNIA

General

Public school district revenues consist primarily of guaranteed State moneys, ad valorem property taxes and funds received from the State and federal government in the form of categorical aid, which are amounts restricted to specific categories of use, under various ongoing programs. All State apportionment (“State Aid”) is subject to the appropriation of funds in the State’s annual budget. Decreases in State revenues may affect appropriations made by the State Legislature to the District.

Historically, approximately 89% of the District’s annual General Fund revenues have consisted of payments from or under the control of the State. Payments made to K-12 public schools and public colleges and universities are priority payments for State funds and are expected to be made prior to other State payment obligations. Although the State Constitution protects the priority of payments to K-12 schools, college and universities, it does not protect the timing of such payments and other obligations may be scheduled and have been scheduled to be paid in advance of those dates on which payments to school districts are scheduled to be made.

On June 27, 2013, the State adopted a new method for funding school districts commonly referred to as the “Local Control Funding Formula” (the “LCFF”). The LCFF will be implemented in stages, beginning in fiscal year 2013-14 and will be fully implemented in fiscal year 2020-21. See “– Local Control Funding Formula” below for more information. Prior to adoption of the LCFF, the State used a revenue limit funding system, described below under “– Revenue Limit.”

Revenue Limit

School districts in the State have historically received most of their revenues under a formula known as the “revenue limit.” Generally, revenue limits were calculated for each school district by multiplying the ADA for such district by a base revenue limit per unit of ADA. Revenue limit calculations were subject to adjustment to provide cost of living adjustments (“COLAs”) and to equalize revenues among school districts of the same type. The revenue limit system of funding has been replaced

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by the LCFF. A description of the revenue limit system is included herein as the District has historically received financial assistance from the State pursuant to this method of appropriations.

Each school district’s revenue limit, which was funded by State moneys and local ad valorem property taxes from the general 1% ad valorem property tax levy, was allocated based on the ADA of each school district for either the current or preceding school year. Generally, State Aid to a school district amounted to the difference between the school district’s revenue limit and the school district’s local property tax allocation from the general 1% ad valorem property tax levy. See “CALIFORNIA CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” herein.

Local Control Funding Formula

Effective in Fiscal Year 2013-14, the State established the LCFF, a new system for funding school districts, charter schools and county offices of education. The LCCF replaces the revenue limit funding system, as well as many categorical programs. The LCCF distributes State resources to schools through a guaranteed base funding grant per unit of ADA (a “Base Grant”). The Base Grants per unit of ADA for each grade span are: (i) $6,845 for grades K-3; (ii) $6,947 for grades 4-6; (iii) $7,154 for grades 7-8; and (iv) $8,289 for grades 9-12. Implementation of the LCFF is expected to take several years, ending in Fiscal Year 2020-21. An annual transition adjustment is calculated for each school district, equal to such district’s proportionate share of appropriations included in the State budget to close the gap between the prior-year funding level and the target allocation following full implementation of the LCFF. Beginning in Fiscal Year 2014-15, the Base Grants are adjusted for COLAs by applying the implicit price deflator for government goods and services. Following full implementation of the LCFF, the provision of COLAs will be subject to appropriation for such adjustment in the annual State budget.

The Base Grants for grades K-3 are subject to adjustments of 10.4% to cover the costs of class size reduction. Following full implementation of the LCFF, and unless otherwise collectively bargained for, school districts serving students in grades K-3 must maintain an average class enrollment of 24 or fewer students in grades K-3 at each school site in order to continue receiving the adjustment to the K-3 Base Grant. The Base Grants for grades 9-12 are subject to adjustments of 2.6% for the provision of career technical education.

School districts that serve students of limited English proficiency (“EL” students), students from low income families that are eligible for free or reduced priced meals (“LI” students) and foster youth are eligible to receive additional funding grants. Enrollment counts are unduplicated; if the school district has students with both limited English proficiency and eligibility for reduced price meals, for instance, such students will not be duplicated for purposes of determining the additional funding grants. Foster students automatically qualify for free or reduced priced meals. A supplemental grant add-on (each, a “Supplemental Grant”) is authorized for school districts that serve EL/LI students, equal to 20% of the applicable Base Grant multiplied by such districts’ percentage of unduplicated EL/LI student enrollment. School districts whose EL/LI populations exceed 55% of their total enrollment are eligible for a concentration grant add-on (each, a “Concentration Grant”) equal to 50% of the applicable Base Grant multiplied the percentage of such district’s unduplicated EL/LI student enrollment in excess of the 55% threshold. The following table shows a breakdown of the District’s ADA by grade span, total enrollment, and the percentage of EL/LI student enrollment, for fiscal years 2012-13 and 2013-14.

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ADA, ENROLLMENT AND EL/LI ENROLLMENT PERCENTAGE Fiscal Years 2012-13 and 2013-14 Norris School District

(1) Average Daily Attendance Enrollment(2) % of Total Fiscal Total EL/LI Year K-3 4-6 7-8 9-12 ADA Enrollment Enrollment 2012-13 1,666 1,235 841 0.00 3,742 3,884 19.62% 2013-14 1,719 1,215 832 0.00 3,766 3,917 20.27

(1) Reflects P-2 ADA. (2) As of October report submitted to the California Basic Educational Data System. For purposes of calculating supplemental funding grants, a school district’s fiscal year 2013-14 percentage of unduplicated EL/LI students will be expressed solely as a percentage of its total fiscal year 2013-14 total enrollment. Source: The District.

The LCFF provides for a permanent economic recovery target (“ERT”) add-on for school districts that would have received greater funding levels under the revenue limit system. The ERT is equal to the difference between the revenue limit allocations such districts would have received under the prior system in fiscal year 2020-21, and the target LCFF allocations owed to such districts in the same year. The ERT add-on will be paid incrementally over the implementing period of the LCFF.

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

Beginning July 1, 2014, school districts are required to develop a three-year Local Control and Accountability Plan (each, a “LCAP”). County Superintendent of Schools and the State Superintendent of Public Instruction will review and provide support to the districts and county offices of education under their jurisdiction. In addition, the fiscal year 2013-14 State Budget created the California Collaborative for Education Excellence (the “Collaborative”) to advise and assist school districts, county offices of education, and charter schools in achieving the goals identified in their plans. The State Superintendent of Public Instruction may direct the Collaborative to provide additional assistance to any district, county office, or charter school. For those entities that continue to struggle in meeting their goals, and when the Collaborative indicates that additional intervention is needed, the State Superintendent of Public Instruction has authority to make changes to the district or county office’s local plan. For charter schools, the charter authorizer will be required to consider revocation of a charter if the Collaborative finds that the inadequate performance is so persistent and acute as to warrant revocation. The State will continue to measure student achievement through statewide assessments, produce an Academic Performance Index for schools and subgroups of students, determine the contents of the school accountability report card, and establish policies to implement the federal accountability system.

State Assistance

The District’s principal funding formulas and revenue sources are derived from the budget of the State of California. The following information concerning the State of California’s budgets has been obtained from publicly available information which the District believes to be reliable; however, the State has not entered into any contractual commitment with the District, the Underwriter, Bond

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and Disclosure Counsel or the owners of the Bonds to provide State budget information to the District or the owners of the Bonds. Although they believe the State sources of information listed above are reliable, none of the District, Bond and Disclosure Counsel or the Underwriter assumes any responsibility for the accuracy of the State budget information set forth or referred to herein or incorporated by reference herein. Additional information regarding State budgets is available at various State-maintained websites including www.dof.ca.gov, which website is not incorporated herein by reference.

Fiscal Year 2014-15 State Budget

On June 20, 2014, Governor Brown signed the fiscal year 2014-15 State Budget Act (the “2014- 15 State Budget”). The 2014-15 State Budget including approximately $109.3 billion in State General Fund resources (including revenues, transfers and prior year balance) and approximately $108.0 billion in planned State General Fund expenditures. $1.6 billion in State General Fund revenues will be transferred to a budget stabilization fund. The 2014-15 State Budget includes an approximately 7.2 percent State General Fund spending increase from the State’s fiscal year 2013-14 budget. The 2014-15 State Budget includes approximately $10 billion more in Proposition 98 funding than in fiscal year 2013-14.

The 2014-15 State Budget also assumes a proposed constitutional amendment to strengthen California’s reserve fund. The constitutional amendment would, among other things, create a Proposition 98 reserve, whereby spikes in funding would be saved for future years of decline, designed to minimize cuts during times of economic downturn. The establishment of such a reserve would not affect the guaranteed level of funding for school districts under Proposition 98. California voters will vote on the proposed constitutional amendment in November 2014.

The 2014-15 Proposed State Budget included the following significant adjustments affecting California K-12 school districts:

• K-12 Deferrals – The 2014-15 State Budget repays nearly $4.7 billion Proposition 98 General Fund for K-12 expenses that had been deferred from one year to the next during the recent economic downturn, leaving an outstanding balance of less than $900 million in K-12 deferrals. Further, the 2014-15 State Budget includes a trigger mechanism that will appropriate any additional funding resources attributable to fiscal years 2013-14 and 2014-15 subsequent to the enactment of the 2014-15 State Budget for the purpose of retiring the remaining deferral balance.

• Local Control Funding Formula – An increase of $4.75 billion Proposition 98 General Fund to continue the State’s transition to the LCFF. This increase will close the remaining funding implementation gap by more than 29 percent. Additionally, the 2014-15 State Budget addresses an administrative problem related to the collection of income eligibility forms that are used to determine student eligibility for free or reduced-price meals.

• K-12 Mandates – An increase of $400.5 million in one-time Proposition 98 General Fund to reimburse K-12 local educational agencies for the costs of state-mandated programs. These funds will make a significant down payment on outstanding mandate debt, while providing school districts, county offices of education, and charter schools with discretionary resources to support critical investments.

• Career Technical Education Pathways Program – An increase of $250 million in one-time Proposition 98 General Fund to support a second cohort of competitive grants for participating K- 12 local educational agencies. Established in the 2013-14 State Budget Act, the Career Pathways

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Trust Program provides grant awards to improve career technical programs and linkages between employers, schools, and community colleges.

Proposition 30

The passage of the Governor’s November Tax Initiative (“Proposition 30”) on November 6, 2012 resulted in an increase in the State sales tax by a quarter-cent for four years and, for seven years, and raises taxes on individuals after their first $250,000 in income and on couples after their first $500,000 in earnings. These increased tax rates affect approximately one percent of California personal income tax filers and will be in effect until the conclusion of the 2018 tax year. The State Office of Legislative Analyst (the “LAO”) estimates that, as a result of Proposition 30, additional state tax revenues of about $6 billion annually from fiscal years 2012-13 through 2016-17 will be received by the State with lesser amounts of additional revenue available in fiscal years 2017-18, and 2018-19. Proposition 30 also places into the State Constitution certain requirements related to the transfer of certain State program responsibilities to local governments, mostly counties, including incarcerating certain adult offenders, supervising parolees, and providing substance abuse treatment services.

Proposition 30 will also provide additional tax revenues aimed at balancing the State’s budget through fiscal year 2018-19, providing several billion dollars annually through fiscal year 2018-19 available for purposes including funding existing State programs, ending K-14 education payment delays, and paying other State debts. Future actions of the State Legislature and the Governor will determine the use of these funds. According to the LAO, revenues raised by Proposition 30 could be subject to multibillion-dollar swings, above or below the revenues projections, due to the majority of the additional revenue coming from the personal income tax rate increases on upper-income taxpayers. These fluctuations in incomes of upper-income taxpayers will impact potential State revenue and could complicate State budgeting in future years. After the tax increases expire, the loss of the associated tax revenues could create additional budget pressure in subsequent years.

Cash Management Legislation

Since 2003, the State has engaged in the practice of deferring certain apportionments to school districts in order to manage the State’s cash flow. This practice has included deferring certain apportionments within a fiscal year from one month to a subsequent month and deferring certain apportionments from one fiscal year to the next. These “cross-year” deferrals have been codified.

On May 23, 2012, the Governor signed into law Assembly Bill 103 (Chapter 13, Statutes of 2012) (“AB 103”) which extended certain provisions of SB 82 into Fiscal Year 2012-13. AB 103 addressed the State’s ongoing cash crisis by deferring a variety of K-12 payments within fiscal year 2012- 13 and required that fiscal year 2012-13 K-12 payments that would otherwise be made in four separate months be deferred and repaid later in fiscal year 2012-13. Specifically, Government Code Section 16326(a)(2) required that $1.2 billion in K-12 payments be deferred from July 2012, with $700 million paid in September 2012 and $500 million paid in January 2013; $600 million be deferred from August 2012 to January 2013; $800 million be deferred from October 2012 to January 2013; and $900 million be deferred from March 2013 to April 2013.

AB 103 permits schools to apply for an exemption from the July, August, and October 2012 and the March 2013 deferrals. Due to the late enactment of AB 103, the State Department of Finance agreed to accept applications as late as June 15, 2012. The District did not file an application for an exemption. The District cannot fully anticipate future cash management legislation from the State.

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Future State Budgets

Under State law, the State Legislature is required to adopt its budget by June 15 of each year for the upcoming fiscal year, with approval by the Governor to occur on or before June 30. Following the implementation of Proposition 25 (permitting State budget passage with a simple majority and mandating forfeiture of legislators’ daily salaries until the budget bill passes), the Governor signed the fiscal year 2014-15 State budget on June 20, 2014, the fiscal year 2013-14 State budget on June 27, 2013 and the fiscal year 2012-13 State budget on June 27, 2012. However, the Governor signed the fiscal year 2010-11 State budget on October 8, 2010, the latest budget in the State’s history. The District cannot fully anticipate future delays in State budget adoption or their impact. The events leading to the inability of the State Legislature to pass a budget in a timely fashion are not unique, and the District cannot predict what circumstances may cause a similar failure in future years. In each year where the State budget lags adoption of the District’s budget, it will be necessary for the District’s staff to review the consequences of the changes, if any, at the State level from the proposals in the Governor’s May Revision for that year, and determine whether the District’s budget will have to be revised.

The State has in past years experienced budgetary difficulties and has balanced its budget by requiring local political subdivisions to fund certain costs theretofore borne by the State. No prediction can be made as to whether the State will take further measures which would, in turn, adversely affect the District. Further State actions taken to address its budgetary difficulties could have the effect of reducing. District support indirectly, and the District is unable to predict the nature, extent or effect of such reductions.

The District cannot predict whether the State will continue to encounter budgetary difficulties in the current or future fiscal years. The District also cannot predict the impact future State budgets will have on District finances and operations or what actions the State Legislature and the Governor may take to respond to changing State revenues and expenditures. Current and future State Budgets will be affected by national and State economic conditions and other factors which the District cannot control.

In addition, the District cannot predict the effect that the general economic conditions within the State and the State’s budgetary problems may have in the future on the District budget or operations.

The District cannot predict how State income or State education funding will vary over the term of the Bonds, and the District takes no responsibility for informing owners of the Bonds as to actions the State Legislature or Governor may take affecting the current year’s budget after its adoption. Information about the State budget and State spending for education is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget” or www.ebudget.ca.gov. An impartial analysis of the budget is posted by the LAO at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on school districts in the State, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.

Jarvis v. Connell

On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court of Appeal held that a final budget bill, an emergency appropriation, a self-

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

Recent Litigation Regarding State Funding of Education

On May 20, 2010, more than 60 individual students and their respective families, nine California school districts, the California Congress of Parents Teachers & Students, the Association of California School Administrators, and the California School Boards Association filed a complaint for declaratory and injunctive relief, entitled Maya Robles-Wong, et al. v. State of California, et al. (the “Robles Complaint”) in the Alameda County Superior Court. The Robles Complaint alleges, among other things, that the State’s current system of funding public education is not designed to support core education programs and that the State has failed to meet its constitutional duties to maintain and support a system of common schools. The Robles Complaint further alleges that the State’s system for funding education is not rationally or demonstrably aligned with the goals and objectives of the State’s prescribed educational program, and the costs of ensuring that children of all needs have the opportunity to become proficient in accordance with State academic standards. The Robles Complaint requests that the court enter a permanent injunction to, among other things, require the State to align its school finance system with its prescribed educational program, as well as to direct the defendants to cease operating the existing public school finance system or any other system of public finance that does not meet the requirements of the State Constitution. On January 14, 2011, the Superior Court dismissed major portions of the case, allowing the plaintiffs to proceed only on the question of whether the State’s public education funding scheme provides equal opportunities to students throughout the State, but rejecting the claim that the State Constitution mandates an overall qualitative standard for public education. On July 26, 2011, the Superior Court issued a ruling sustaining demurrer to the complaint but granting leave to amend the complaint on or before August 25, 2011. On November 3, 2011, the court dismissed the case.

On July 18, 2011, the California Redevelopment Association, the League of California Cities, and the Cities of Union City and San Jose filed petition for a writ of mandate (the “CRA Petition”) with the Supreme Court of California (the “Court”) alleging that ABx1 26 and ABx1 27 violate the California Constitution, as amended by Proposition 22. See “Proposition 1A – Prohibitions on Diverting Local Revenues for State Purposes.” The petitioners alleged, among other things, that ABx1 26 and ABx1 27 seek to divert tax increment revenue illegally from redevelopment agencies by threatening such agencies with dissolution if payments are not made to support the State’s obligation to fund education. The CRA Petition was accompanied by an application for a stay, seeking to delay implementation of the provisions of ABx1 26 and ABx1 27 until the claims are adjudicated. On December 29, 2011, the California Supreme Court upheld the legality of ABx1 26, reasoning that the State Legislature has broad powers to establish or dissolve local agencies as it sees fit. The California Supreme Court, however, invalidated ABx1 27 on the grounds that the payments required of redevelopment agencies in order to remain in existence could not be characterized as voluntary, and thus violated Proposition 22.

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On September 28, 2011, the California School Boards Association, the Association of California School Administrators, the Los Angeles Unified School District, the San Francisco Unified School District and the Turlock Unified School District filed a petition for a writ of mandate in the Superior Court of the State in and for the County of San Francisco (the “CSBA Petition”). The petitioners alleged that the fiscal year 2011-12 State budget improperly diverted sales tax revenues away from the State General Fund, resulting in a reduction to the minimum funding guarantee of approximately $2.1 billion. See “Proposition 1A – Prohibitions on Diverting Local Revenues for State Purposes.” The CSBA Petition sought an order from the Court compelling the State Director of Finance, Superintendent of Public Instruction and the State Controller to recalculate the minimum funding guarantee in accordance with the provisions of the California Constitution. On March 28, 2012, the superior court issued a tentative ruling asserting that the State’s constitution and the language of the Proposition 98 ballot measure did not guarantee a certain level of base funding for schools under Proposition 98’s Test 1. On June 1, 2012, such court adopted the tentative ruling as an order, ruling against CSBA. On July 27, 2012, the petitioners filed a notice of appeal of the Court’s decision. On February 26, 2013, the Court of Appeal dismissed the appeal.

The District makes no representations as to how any final decision by the respective courts would affect the State’s ability to fund education in fiscal year 2014-15, or in future fiscal years.

Significant Accounting Policies and Audited Financial Statements

The California State Department of Education imposes by law uniform financial reporting and budgeting requirements for K-12 school districts. Financial transactions are accounted for in accordance with the California School Accounting Manual. Linger, Peterson, Shrum & Co., Fresno, California, serves as independent auditor to the District and excerpts of their report for the Fiscal Year Ended June 30, 2013, are attached hereto as APPENDIX C. The District’s auditor has not specifically approved the inclusion of such excerpts herewith.

California Assembly Bill 1200 (“A.B. 1200”), effective January 1, 1992, tightened the budget development process and interim financial reporting for school districts, enhancing the authority of the county schools superintendents’ offices and establishing guidelines for emergency State aid apportionments. Many provisions affect District operations directly, while others create a foundation from which outside authorities (primarily state and county school officials) may impose actions on the District. Under the provisions of A.B. 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or two subsequent fiscal years. Each certification is based on then-current projections. The District currently holds a positive certification from the County Office of Education for its budget submissions.

Independently audited financial reports are prepared annually in conformity with generally accepted accounting principles for educational institutions. The annual audit report is generally available about six months after the June 30 close of each fiscal year. For the District’s most recent available audited financial statements, see APPENDIX C.

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Proposition 98

General. In 1988, California voters approved Proposition 98, an initiative that amended Article XVI of the State Constitution and provided specific procedures to determine a minimum guarantee for annual grade kindergarten to 14 (“K-14”) funding. The constitutional provision links the K-14 funding formulas to growth factors that are also used to compute the State appropriations limit. Proposition 111 (Senate Constitutional Amendment 1), adopted in June 1990, among other things, revised certain funding provisions of Proposition 98 relating to the treatment of revenues in excess of the State spending limit and added a third funding “test” to calculate the annual funding guarantee. This third calculation is operative in years in which general fund tax revenue growth is weak. The amendment also specified that under Test 2 (see below), the COLA for the minimum guarantee would be the change in California’s per-capita personal income, which is the same COLA used to make annual adjustments to the State appropriations limit (Article XIII B).

Calculating Minimum Funding Guarantee. There are currently three tests which determine the minimum level of K-14 funding. Test 1 guarantees that K-14 education will receive at least the same funding share of the State general fund budget it received in 1986-87. Initially, that share was just over 40%. Because of the major shifts of property tax from local government to community colleges and K-12 which began in 1992-93 and increased in 1993-94, the percentage dropped to 33.0%.

Under implementing legislation (AB 198 and SB 98 of 1989), each segment of public education (K-12 districts, community college districts, and direct elementary and secondary level instructional services provided by the State of California) has separately calculated amounts under the Proposition 98 tests. The base year for the separate calculations is 1989-90. Each year, each segment is entitled to the greater of the amounts separately computed for each under Test 1 or 2. Should the calculated amount Proposition 98 guarantee (K-14 aggregated) be less than the sum of the separate calculations, then the Proposition 98 guarantee amount shall be prorated to the three segments in proportion to the amount calculated for each. This statutory split has been suspended in every year beginning with 1992-93. In those years, community colleges received less than was required from the statutory split.

Test 2 provides that K-14 education will receive as a minimum, its prior-year total funding (including State general fund and local revenues) adjusted for ADA and per-capita personal income COLA.

A third formula, established pursuant to Proposition 111 as “Test 3,” provides an alternative calculation of the funding base in years in which State per-capita General Fund revenues grow more slowly than per-capita personal income. When this condition exists, K-14 minimum funding is determined based on the prior-year funding level, adjusted for changes in enrollment and COLA where the COLA is measured by the annual increase in per-capita general fund revenues, instead of the higher per-capita personal income factor. The total allocation, however, is increased by an amount equal to one- half of one percent of the prior-year funding level as a funding supplement.

In order to make up for the lower funding level under Test 3, in subsequent years K-14 education receives a maintenance allowance equal to the difference between what should have been provided if the revenue conditions had not been weak and what was actually received under the Test 3 formula. This maintenance allowance is paid in subsequent years when the growth in per-capita State tax revenue outpaces the growth in per-capita personal income.

The enabling legislation to Proposition 111, Chapter 60, Statutes of 1990 (SB 88, Garamendi), further provides that K-14 education shall receive a supplemental appropriation in a Test 3 year if the

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annual growth rate in non-Proposition 98 per-capita appropriations exceeds the annual growth rate in per- pupil total spending.

Proposition 1A

Proposition 1A (SCA 4), proposed by the State Legislature in connection with the 2004-05 State budget and approved by the voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the State Legislature. Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses of the State Legislature and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Pursuant to Proposition 1A, if the State reduces the Vehicle License Fee rate below 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A required the State, beginning March 1, 2006, to suspend mandates affecting cities, counties and special districts, schools or community colleges, excepting mandates relating to employee rights, in any year that the State does not fully reimburse local governments for their costs of compliance with such mandates.

Prohibitions on Diverting Local Revenues for State Purposes. Beginning in fiscal year 1992- 93, the State satisfied a portion of its Proposition 98 obligations by shifting part of the property tax revenues otherwise belonging to cities, counties, special districts, and redevelopment agencies, to school and college districts through a local Educational Revenue Augmentation Fund (“ERAF”) in each county. Local agencies, objecting to invasions of their local revenues by the State, sponsored a statewide ballot initiative intended to eliminate the practice. In response, the State Legislature proposed an amendment to the State Constitution, which the State’s voters approved as Proposition 1A at the November 2004 election. That measure was generally superseded by the passage of a new initiative constitutional amendment at the November 2010 election, known as “Proposition 22.”

The effect of Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. It prevents the State from redirecting redevelopment agency property tax increment to any other local government, including school districts, or from temporarily shifting property taxes from cities, counties and special districts to schools, as in the ERAF program. This is intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes. One effect of this amendment will be to deprive the State of fuel tax revenues to pay debt service on most State bonds for transportation projects, reducing the amount of State general fund resources available for other purposes, including education.

Prior to the passage of Proposition 22, the State invoked Proposition 1A to divert $1.935 billion in local property tax revenues in fiscal year 2009-10 from cities, counties, and special districts to the State to offset State general fund spending for education and other programs, and included another diversion in the adopted fiscal year 2009-10 State budget of $1.7 billion in local property tax revenues from local redevelopment agencies. Because Proposition 22 reduces the State’s authority to use or reallocate certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to

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balance its budget, such as reducing State spending or increasing State taxes, and school and college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State’s General Fund.

On December 30, 2011, the California Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos, finding ABx1 26, a trailer bill to the 2011-12 State Budget, to be constitutional. As a result, all redevelopment agencies in California were dissolved as of February 1, 2012, and all net tax increment revenues, after payment of redevelopment bonds debt service and administrative costs, will be distributed to cities, counties, special districts and K-14 school districts. The Court also found that ABx1 27, a companion bill to ABx1 26, violated the California Constitution, as amended by Proposition 22. ABx1 27 would have permitted redevelopment agencies to continue operations provided their establishing cities or counties agreed to make specified payments to K-14 school districts and county offices of education, totaling $1.7 billion statewide. The District is unable to predict what affect the implementation of ABx1 26 will have on the District’s future receipt of tax increment revenues.

As a result of the dissolution of California redevelopment agencies and ABx1 26, the tax increment previously paid to redevelopment agencies shall first be used to pay pass-through payments to other taxing entities and second to pay the redevelopment agencies enforceable obligations; with the remaining revenue (if any) paid to the taxing entities by the County Auditor-Controller in the same proportion as other tax revenue. The District does not expect to have any of its property tax payments deferred as a result of the dissolution of area redevelopment agencies.

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APPENDIX B

FORM OF BOND COUNSEL OPINION

[Closing Date]

Board of Trustees Norris School District 6940 Calloway Drive Bakersfield, California 93312

Re: $9,381,072.90 Norris School District (Kern County, California) 2012 Election General Obligation Bonds, 2014 Series B

Ladies and Gentlemen:

We have acted as Bond Counsel to the Norris School District, County of Los Angeles, State of California (the “District”), in connection with the issuance by the District of $9,381,072.90 aggregate principal or issue amount of its 2012 Election General Obligation Bonds, 2014 Series B (the “Bonds”). The Bonds are issued pursuant to Section 53506 et seq. of the Government Code of the State of California, as amended, and the resolution adopted by the Board of Trustees of the District on July 9, 2014 (the “Resolution”). All terms used herein and not otherwise defined shall have the meanings given to them in the Resolution.

As Bond Counsel, we have examined copies, certified to us as being true and complete copies, of the proceedings of the District for the authorization and issuance of the Bonds. In connection thereto, we have also examined such certificates of public officials and officers of the District as we have considered necessary for the purposes of this opinion. We have, with your approval, assumed that all items submitted to us as originals are authentic and that all items submitted to us as copies conform to the originals.

On the basis of such examination, our reliance upon the assumptions contained herein and our consideration of those questions of law we considered relevant, and subject to the limitations and qualifications in this opinion, we are of the opinion that:

1. The Bonds have been duly authorized and issued and constitute legally valid and binding obligations of the District, enforceable in accordance with their terms and the terms of the Resolution.

2. The Bonds are payable solely from and are secured by a pledge of ad valorem taxes which may be levied without limitation as to rate or amount upon all taxable real property in the District, and which, under the laws now in force with respect to the Bonds, may be levied within the limit prescribed by law upon all taxable personal property in the District, and from other available funds as set forth in the Resolution.

3. The Resolution has been duly authorized by the District and constitutes the legally valid and binding obligation of the District, enforceable in accordance with its terms. The Bonds, assuming due authentication by the Paying Agent, are entitled to the benefits of the Resolution.

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4. The Internal Revenue Code of 1986, as amended (the “Code”) sets forth certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issue of the Bonds. Pursuant to the Resolution and the tax and nonarbitrage certificate executed by the District in connection with the issuance of the Bonds (the “Tax Certificate”), the District has covenanted to comply with the applicable requirements of the Code in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes pursuant to Section 103 of the Code. In addition, the District has made certain representations and certifications in the Resolution and the Tax Certificate. We have not independently verified the accuracy of those certifications and representations.

Under existing law, assuming compliance with the tax covenants described herein and the accuracy of the aforementioned representations and certifications, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Code. We are also of the opinion that such interest is not treated as a preference item in calculating the alternative minimum tax imposed under the Code with respect to individuals and corporations. Interest on the Bonds is, however, included in adjusted current earnings of certain corporations for purposes of computing the alternative minimum tax imposed on such corporations.

5. Interest on the Bonds is exempt from personal income taxes of the State of California under present state law.

6. Bond Counsel is further of the opinion that the difference between the principal amount of the Current Interest Bonds maturing on November 1, 2041 and the Capital Appreciation Bonds (collectively, the “Discount Bonds”) and the initial offering price to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount which is excluded from gross income for federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues actuarially on a constant interest rate basis over the term of each Discount Bond and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued original issue discount. The accrual of original issue discount may be taken into account as an increase in the amount of tax- exempt income for purposes of determining various other tax consequences of owning the Discount Bonds, even though there will not be a corresponding cash payment.

The opinions set forth in paragraphs 1, 2, and 3 above (i) assume that the Paying Agent has duly authenticated the Bonds and (ii) are subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally (including, without limitation, fraudulent conveyance laws), (b) the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and (c) the limitations on legal remedies against government entities in the State of California.

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In rendering the opinions set forth in paragraphs 4 and 6 above, we are relying upon representations and covenants of the District in the Resolution and in the Tax Certificate concerning the investment and use of Bond proceeds, the rebate to the federal government of certain earnings thereon, and the use of the property and facilities financed with the proceeds of the Bonds. In addition, we have assumed that all such representations are true and correct and that the District will comply with such covenants. We express no opinion with respect to the exclusion of the interest on the Bonds from gross income under Section 103(a) of the Code in the event that any of such representations are untrue or the District fails to comply with such covenants, unless such failure to comply is based on our advice or opinion.

Except as stated in paragraphs 4 through 6, we express no opinion as to any other federal, state or local tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof upon the advice or approval of other counsel.

No opinion is expressed herein on the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds. This opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters.

Our opinions are limited to matters of California law and applicable federal law, and we assume no responsibility as to the applicability of laws of other jurisdictions. We call attention to the fact that the opinions expressed herein and the exclusion of interest on the Bonds from gross income for federal income tax purposes may be affected by actions taken or omitted or events occurring or failing to occur after the date hereof. We have not undertaken to determine, or inform any person, whether any such actions are taken, omitted, occur or fail to occur.

Respectfully submitted,

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APPENDIX C

NORRIS SCHOOL DISTRICT AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2013

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NORRIS SCHOOL DISTRICT

KERN COUNTY

BAKERSFIELD, CALIFORNIA

JUNE 30, 2013

AUDIT REPORT

PREPARED BY

LINGER, PETERSON, SHRUM & CO. CERTIFIED PUBLIC ACCOUNT ANTS

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INTRODUCTORY SECTION NORRIS SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2013

FINANCIAL SECTION

Independent Auditors' Report 1-4

Management's Discussion and Analysis 5-21

Basic Financial Statements

Government-Wide Financial Statements

Statement of Net Position 22

Statement of Activities 23

Fund Financial Statements

Balance Sheet--Governmental Funds 24

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 25

Statement of Revenues, Expenditures, and Changes in Fund Balances--Governmental Funds 26

Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 27

Statement of Net Position--Nonmajor Proprietary Fund 28

Statement of Revenues, Expenditures, and Changes in Net Position--Nonmajor Proprietary Fund 29

Statement of Cash Flows--Nonmajor Proprietary Fund 30 NORRIS SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2013

Statement of Fiduciary Net Position--Fiduciary Fund 31

Statement of Changes in Assets and Liabilities-­ Agency Fund 32

Notes to the Basic Financial Statements 33-65

REQUIRED SUPPLEMENTARY INFORMATION SECTION

Schedule of Revenues, Expenditures, and Changes in Fund Balance--Budget and Actual (GAAP) (By Object)-­ General Fund 66

SUPPLEMENTARY INFORMATION SECTION

Schedule of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual (GAAP) (By Object)--Major Debt Service and Capital Projects Funds 67

Combining Statements

Combining Statements--General Fund

Combining Balance Sheet--General Fund 68

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances--General Fund (By Object) 69

Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual (GAAP)--General Fund (By Object) 70 NORRIS SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2013

Combining Statements--Nonmajor Funds

Combining Balance Sheet--Nonmajor Capital Projects Funds 71

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances--Nonmajor Capital Projects Funds (By Object) 72

Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual--Nonmajor Capital Projects Funds (By Object) 73

Individual Fund Statements

Individual Fund Statements--Nonmajor Funds

Balance Sheet--Nonmajor Special Revenue Fund 74

Statement of Revenues, Expenditures, and Changes in Fund Balance--Nonmajor Special Revenue Fund (By Object) 75

Schedule of Revenues, Expenditures, and Changes in Fund Balance--Budget and Actual--Nonmajor Special Revenue Fund (By Object) 76

Balance Sheet--Nonmajor Debt Service Fund 77

Statement of Revenues, Expenditures, and Changes in Fund Balance--Nonmajor Debt Service Fund (By Object) 78

Schedule of Revenues, Expenditures, and Changes in Fund Balance--Budget and Actual--Nonmajor Debt Service Fund (By Object) 79 NORRIS SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2013

Balance Sheet--Nonmajor Proprietary Fund 80

Statement of Revenues, Expenditures, and Changes in Fund Balance--Nonmajor Proprietary Fund (By Object) 81

Schedule of Revenues, Expenditures, and Changes in Fund Balance--Budget and Actual--Nonmajor Proprietary Fund (By Object) 82

Other Supplementary Information

Organization Structure 83

Schedule of Average Daily Attendance 84

Schedule of Instructional Time 85

Schedule of Financial Trends and Analysis 86

Schedule of Expenditures of Federal Awards 87

Notes to the Schedule of Expenditures of Federal Awards 88

Reconciliation of Annual Financial and Budget Report (SACS 2013) with Audited Financial Statements, All Governmental Funds 89

Reconciliation of Annual Financial and Budget Report (SACS 2013) Form DEBT with Audited Financial Statements 90

Schedule of Charter Schools 91

Excess Sick Leave 91 NORRIS SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2013

OTHER INDEPENDENT AUDITORS' REPORTS

Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 92-93

Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 94-95

Independent Auditors' Report on State Compliance 96-98

FINDINGS AND RECOMMENDATIONS SECTION

Schedule of Findings and Questioned Costs 99-100

Summary Schedule of Prior Findings 101 FINANCIAL SECTION I~ oflnaer, /l)elerjon, =====Ga=~=A=.S=hr=,m=,======~ ~/,';.~,n-'~ t:'o=.=.:;;======:=;; Kendra L. Keiscome Certified Public Accountants Mori/yn K. Adams Licensed by the California Board of Accountancy Robert L Linger (Retiretl} Jim L. Peterson (Retired)

INDEPENDENT AUDITORS' REPORT

Board of Trustees Norris School District Bakersfield, California:

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Norris School District as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

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

Auditors' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors

Santa Maria Building • 575 E. Locust Ave., • Suite 308 • Fresno, Ca 93720-2928 (559) 438-8740 • FAX 438-8746

-1- consider internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business­ type activities, each major fund, and the aggregate remaining fund information of the Norris School District, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and budgetary comparison information on Pages 5 - 21, and Page 66 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

-2- Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Norris School District's basic financial statements. The introductory section, Schedule of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual (GAAP) (By Object)--Major Debt Service and Capital Projects Funds, combining General Fund financial statements and the combining and individual nonmajor fund financial statements, and other supplementary information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining General Fund financial statements and the combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the Norris School District. The Schedule of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual (GAAP) (By Object)--Major Debt Service and Capital Projects Funds, combining General Fund financial statements and the combining and individual nonmajor fund financial statements, the schedule of average daily attendance, the schedule of instructional time, and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual (GAAP) (By Object)--Major Debt Service and Capital Projects Funds, combining General Fund financial statements and the combining and individual nonmajor fund financial statements, the schedule of average daily attendance, the schedule of instructional time, and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

-3- Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 17, 2013 on our consideration of the Norris School District's internal control over financial reporting and on our tests of compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Norris School District's internal control over financial reporting and compliance.

October 17, 2013

-4- Board of Trustees Bob Beechinor Steven K. Shelton Jim Bowles Superintendent Sue Dodgin NORRIS S DISTRICT John Genter Kelly Miller Jeff Stone Assistant Superintendent

6940 Calloway Drive • Bakersfield, CA 93312 • (661) 387-7000 • Fax: (661) 399-9750

NORRIS SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

The discussion and analysis of Norris School District's financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, 2013. The intent of this discussion and analysis is to look at the District's financial performance as a whole; readers should review the attached financial statements, charts, and spreadsheets to enhance their understanding of the District's financial performance.

The Non-is School District has seen a period of rapid growth followed by a period of declining revenues and moderate growth over the past five years. In the period up to the 2008-09 school year, the District was actively securing school sites, building schools and planning for future school facilities. Since that time the focus has shifted to providing the same level of service and education to our students, while seeing our revenues continue to decline as the State continues to be mired in an economic downturn. In 2012-13 the District's administration continued to walk the tightrope of balancing staffing against uncertain and chaotic State revenue with the Local Control Funding Formula (LCFF) promising to add stability to an unpredictable process.

The District was considered rural just 25 years ago. Over the past 20 years, farmland has been converted to single-family housing, and the District's property tax base has increased substantially. Even with the increase in base property taxes, the District's Revenue Limit remains among the lowest in the County and the State. The Revenue Limit and other State and Federal revenues are based on the District's Average Daily Attendance (ADA), which averages above 96% of enrollment

The District's goal of educating students remains of utmost importance and the primary focus. In 2012-13 the District continued to respond to the States economic uncertainty by staffing appropriately to enrollment. As a result, the District has avoided lay-offs, test scores continue to improve and the budget and services remain in balance. The District has achieved and maintained high test scores at all schools as a result of continuing efforts by staff, administrators, and the parents of the District to establish alignment of the curriculum with State standards. The District is proactive in its development of programs for students with special needs. Students with low test scores or students at risk of not passing grade-level competency requirements are quickly identified and offered assistance in after school programs. Also, an approach to Special Education called a "Learning Center" is also incorporated that allows children with the greatest need to receive serv1ces.

-5- FINANCIAL HIGHLIGHTS

• The District's financial status continues to remain solid. The District is able to meet all of the current needs and maintains a more than adequate reserve.

• Overall revenues in all governmental funds totaled $32,080,618, which was $3,250,973 less than expenses of $35,331,591.

• The General Fund's fund balance increased by $799,834.

• 2012-13 Student attendance increased to 3,742.45 at P-2 reporting, which is approximately 105 higher than 2011-12 student attendance of 3,637.45. (P-2 is a State attendance report submitted 1 at the end of the 8 h school calendar month.)

OVERVIEW OF THE FINANCIAL STATEMENTS

The full annual financial report is a product of three separate parts: The basic financial statements, supplementary information, and this section, Management's Discussion and Analysis. The three sections together provide a comprehensive overview of the District. The basic financials are comprised of two kinds of statements that present financial information from different perspectives, District-wide and funds. District-wide financial statements, which comprise the first two statements, provide both short-term and long-term information about the District's overall financial position. Individual parts of the District, which are reported as fund financial statements, focus on reporting the District's operations in more detail. These fund financial statements comprise the remaining statements.

Figure A-1. Organization of Norris School District's Annual Financial Report

i i Management's Basic Required Discussion and Financial Supplementary Analysis Statements Information

•.. ,./''"'''"'' " ...... ···" . ··•········••· ......

························ ~------,------2···..;-······················· District-wide Fund Notes Financial Financial to the Statements Statements Financial Statements

Summary Detail

-6- DISTRICT-WIDE FINANCIAL STATEMENTS

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

The two District-wide statements report the District's net position. Net position (the difference between the District's assets and liabilities) is one way to measure the District's financial health or position. Over time, increases or decreases in the District's net position are an indicator of whether its financial position is improving or deteriorating, respectively. In the District-wide financial statements, the District's activities are reported in two categories:

Governmental Activities -The District's basic services are included here, such as regular and special education, transportation, food services, and administration. Federal and State aid, operating grants and contributions, and property taxes finance most of these activities.

Business-Type Activities - The District charges fees to help cover the costs of certain services it provides. Childcare services that are beyond the scope of normal District operations are included in this type of activity.

FUND FINANCIAL STATEMENTS

The fund financial statements provide more detailed information about the District's various funds, not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required by State law and by bond covenants. The District has three kinds of funds:

Governmental Funds -Most of the District's basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash, flow in and out; and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs.

Proprietary Funds - The Proprietary Fund category includes Enterprise and Internal Service Funds. One type of Proprietary Fund, an Enterprise Fund, is the same as the business-type activities, but provides more detail and additional information, such as cash flows. Internal Service Funds (the other type of Proprietary Fund) report activities that provide supplies and services for the other programs and activities of the District. Proprietary Funds are reported in the same way as the District-wide statements.

• The District's Other Enterprise Fund currently consists of childcare services. The Other Enterprise Fund reports activities that provide childcare services outside of the normal operation of the District.

• Currently, the District has no Internal Service Funds.

-7- Fiduciary Funds - The District is the trustee, or fiduciary, for assets that belong to others, such as the student body funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. We exclude these activities from the District-wide financial statements because the District cannot use these assets to finance its operations.

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Net Position

The District's combined net position was $49,255,524 on June 30, 2013. (See Table A-1.) That figure represents a 3.49% increase from the prior year net position of $47,592,181.

TABLEA-1 Norris School District Net Position As of June 30, 2013 and 2012

Fiscal Year Ended June 30. 2013 Fiscal Year Ended June 30. 2012 Governmental Business-Type Governmental Business-Type Activities Activities Total Activities Activities Total

Assets Current and other assets $ 36,813,486 $ 1,416,649 $ 38,230,135 $ 17,797,894 $ 1,279, 114 $ 19,077,008 Capital assets 68.654.200 68.654.200 68.695.170 68.695.170

Total Assets $ I 05.467,686 $ 1.4)6.649 $ 106.884 335 $ 86.493.064 $ 1.279.114 $ 87.772,178

Liabilities Long-term debt outstanding $ 54,247,934 $ $ 54,247,934 $ 38,009,671 $ $ 38,009,671 Other liabilities 3.358.436 22.441 3.380.877 2,147,309 23.017 2.170.326

Total Liabilities $ 57 606 370 $ 22,44 I $ 57,628.8 IJ $ 40. J56 980 $ 23.017 $ 40.179.997

Net Position Invested in capital assets, net of related debt $ 15,255,131 $ $ 15,255,131 $ 31,462,498 $ $ 31,462,498 Restricted 32,606,185 32,606,185 6,799,390 6,799,390 Unrestricted 1.394,208 1,394.208 8,074,196 1.256.097 9.330,293

Total Net Position $ 47.86).3)6 $ ),394 208 $ 49 255.524 $ 46.336.084 $ ).256 097 $ 47.592. )8)

At the close of fiscal year 2012-13, the District had $106,884,335 in assets, including cash, investments, receivables, stores, prepaid expenses, and capital assets net of depreciation. Capital assets include land, site improvements, buildings, equipment, and work in progress. The District started the year with $87, 772, 178 in total assets and ended the year with $106,884,335 in total assets. The District had $57,628,811 in liabilities including current accounts payable, accrued compensated absences (earned vacation), and long-term bond debt. In regards to the District's long-term debt a

-8- General Obligation Bond, Measure B, was passed by the voters in June 2012. The District issued its first authorization in August of 2012 in the amount of $16,507,908 and is reflected in the Long Term Debt section of this report. Revenues from this authorization have been used for small projects throughout the District as well as providing the bulk of funding for Phase I of major construction projects at the Middle School and Olive Drive campuses.

Chart A-1 shows the annual ADA trend from the 1992-93 fiscal year. The District contracted with a consulting firm that specializes in projecting student population growth, based on housing development plans, to complete a master plan for the District. That firm's cohort calculations indicate the need for a total of ten elementary and three middle schools, once all land within the Norris School District's boundaries has been developed.

Chart A-1

NORRIS SCHOOL DISTRICT ANNUAL AVERAGE DAILY ATTENDANCE

3,950.00 .A 3,700.00 3,450.00 ~ ,-- . "' 3,200.00 2,950.00 JF ,/ 2,700.00 / 2.450.00 ,,,, 2,200.00 I 1,950.00 1,700.00 / .~ 1,450.00 ~ A A . • . T 1,200.00 . '""- ~ -~ ~ ~ ~ ~ ~ ~ ~ 4 ~ -~ ~ ~ ~ ~ ~ ~ ~ ~ ~ PJr,;-, C'i~· r.¥-, ~-, PJ<1:r PJ'\.'' fli' ,f]f\)- ~'V ~" s::,r,;" C'i\J ~<;;)~ r::,~'V s::,

The Board of Trustees and the Superintendent have actively encouraged developers to include their land in the Mello-Roos Community Facilities District (CFD). Fees assessed to new housing within the Mello-Roos CFD have been used to build classrooms necessary to meet the student population growth caused by the new housing. The revenue from the Mello-Roos fees and sale of Mello-Roos bonds has allowed the District to fund 'up front' the costs of school facility construction until State funding becomes available. That revenue also allows the District to meet the State SB-50 matching funds requirement.

The District continues to fund routine maintenance through the General Fund although not required by the State at this time. Typical routine maintenance projects completed over the past several years include roofing, electrical, plumbing, painting, network infrastructure wiring, and replacement of HV AC systems.

-9- Changes in Net Position

Table A-2 identifies the net position beginning balance, revenues, expenses, and the end of the year net position.

TABLEA-2 Norris School District Changes in Net Position For the Years Ending June 30, 2013 and 2012

Fiscal Year Ended June 30, 2013 Fiscal Year Ended June 30, 2012 Governmental Business-Type Governmental Business-Type Activities Activities Total Activities Activities Total

Revenues Program Revenues Charges for services $ 537,479 $ $ 537,479 $ 582,132 $ $ 582,132 Operating grants & contributions 4,177,268 4,177,268 4,342,805 4,342,805 General Revenues Property taxes 8,053,448 8,053,448 6,254,234 6,254,234 Federal and state aid not restricted to specific purposes 18,681,877 18,681,877 18,013,038 18,013,038 Other 218,871 996,507 1,215,378 166,059 824,144 990,203 Internal transfers 411 675 411,675) 57 876 57 876) Total Revenues 32,080,618 584,832 32,665,450 29,416,144 766,268 30,182,412

Expenses Program Expenses Instruction 17,494,703 17,494,703 16,454, 144 16,454, 144 Instruction- related services 1,934,102 1,934,102 2,009,098 2,009,098 Pupil services 2,229,719 2,229,719 2,232,717 2,232,717 General administration 1,979,493 1,979,493 2,049,715 2,049,715 Plant services 2,285,727 2,285,727 2,159,576 2, 159,576 Community services 21,265 21,265 21,150 21,150 Interest on long- term debt 2,591,082 2,591,082 2,079,770 2,079,770 Other outgo 2,019,298 2,019,298 2,089,676 2,089,676 Business-Type Activities Expenses 3) 446,721 446 718 174) 372,831 372,657 Total Expenses 30,555,386 446,721 31,002, 107 29,095,672 372,831 29,468,503 Changes in Net Position 1,525,232 138,I 11 1,663,343 320,472 393,437 713,909

Net Position, Beginning Balance 46,336,084 1,256,097 47,592,181 46,015,612 862,660 46,878,272 Net Position, Ending Balance $ 41861,316 $ 1,324 208 $ 42,255,524 $ 46,336,084 $ 1,256 021 $47,522,181

-10- Table A-3 presents the cost of the major District activities: Instruction, instruction-related services, pupil services, general administration, plant services, enterprise activities, community services, interest on long-term debt and other outgo. The table also shows each activity's net cost (total cost less fees generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden placed on the sources of funding.

TABLEA-3 Norris School District Net Cost of Governmental and Business-Type Activities For the Years Ending June 30, 2013 and 2012

2013 2012 Net Cost Net Cost (Profit) (Profit) of Services of Services Total Cost After Program Total Cost After Program of Services Revenues of Services Revenues

Instruction $ 17,494,703 $ 15,170,276 $16,454,144 $ 14,215,156 Instruction-related services 1,934,102 1,909,789 2,009,098 1,979,152 Pupil services 2,229,719 849,274 2,232,717 943,852 General administration 1,979,493 1,911,645 2,049,715 1,973,286 Plant services 2,285,727 2,285,629 2,159,576 2,159,359 Enterprise activities ( 3) ( 3) ( 174) ( 174) Community services 21,265 21,265 21,150 21,150 Interest on long-term debt 2,591,082 2,591,082 2,079,770 2,079,770 Other outgo 2,019,298 1,101,682 2,089,676 799 184

Totals--Governmental Activities 30,555,386 25,840,639 29,095,672 24,170,735

Business-type activities 446,721 446,721 372,831 372,831

Totals $ 31,QQ2,1Q1 $ 26,287,360 $ 29,468,503 $ 24,543,566

-11- Federal and State aid accounts for most of the District's revenue. The next largest revenue source is from property taxes. Chart A-2 presents the revenue by percent.

ChartA-2 Norris School District 2012-13 Revenue by Percent Based On Government-Wide Statement of Activities

D Clrnrgt-s fo1· st-rvict-s • Ot•t-rnting grants and contributions

• Ft-dt-rnl and stiltt" aid

• Other gen ernl 1·t-vt-nut-s a Bushtt-ss-tn•e activitit-s

-12- Based on the Government-Wide Statement of Activities, the District's expenses are predominantly related to instruction (56.43%). Chart A-3 presents the total Government-Wide Statement of Activities by percent.

Chart A-3 Norris School District 2012-13 Expenses by Percent Based On Governmental and Business-Type Activities

6.51%

56..43%

• 1n~1t11rtio11 • 111~1111 rlio11-1·d :,tt tl suvirts DPupil st1'\·irts • Gtunal :lllmi11h1t·,,nou •Plaut st1Yicts a Community stn ·irts Dluttrt~1 011 lou g-ttnn cltbt a Othtl' outgo DBn~iJ1tst-;.lypt arlivilits

A stable student population has resulted in school expenditures for the Non-is School District, i.e., teachers, administrators, counselors, nurse, psychological services, custodial, maintenance, office support, noon aides, utilities, insurance, supplies, and various other operating expenses, remaining relatively the same as compared to the prior year. Salary and benefit costs were 77% of the total General Fund expenses in 2012-13 and have averaged around 79% of the total General Fund expense budget over the past 10 years. The District is diligent in communicating with the community and bargaining units that the financial health of the District combined with a balanced budget and forward planning are in everyone's best interest.

Fund Analysis

The financial performance of the District as a whole is reflected in its governmental funds as well. As the District completed the 2012-13 fiscal year, its governmental funds reported a total fund balance of $32,698,049. This amount represents an increase of $17,743,411 over the previous year's ending balance, with most of it contributable to the Measure B Bond authorization. The District expects to maintain a sound financial picture.

-13- Revenue and expenditures related to the education of students and the routine operations of school business are tracked in the General Fund. The General Fund has always met the State requirement for reserves for economic uncertainty, and the District has never filed a qualified or negative budget report. The reserves for economic uncertainty at the close of fiscal year 2012-13 have once again met the State requirement of 3%.

NORRIS SCHOOL DISTRICT GENERAL FUND REVENUE BY SOURCE (from SACS Budget Report Form 01)

1/l 21.000 § 20.000 ~ 19.000 ~ - - c: 18.000 - .... - - 17.000 II II 16.000 - 1, 15.000 ' I 14.000 'I

13.000 - - 1, : 12.000 I II 1, I! 11.000 l l II - I! 11 II II 10.000 1, II Ii 9.000 ,1 II 1, 1, 8,000 1, Ii 7,000 I, Ii 1, 6.000 11 5.000 ------4.000 - I: - 3.000 - I, 2.000 11 1, 1.000 t-, ,-.__ II t-, II h ...... I 0 • I n I n I n... I h. 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

OREVENUE LIMIT • FEDERAL DOTHERSTATE COTHER LOCAL • TRANSFERS IN

The Revenue Limit, the single most important dollar amount that drives school district budgets, continues to be controlled by the State and is not affected by local decisions. In fiscal year 2012-13, approximately 75% of the Norris School District's revenue came from State Apportionment Revenue Limit that is apportioned to the District based on average daily attendance. This percentage is higher than the prior five-year average of 73% due to an increase in student enrollment for the 2012-13 year and a reduction in the State imposed deficit factor. Through 2012-13 the State continued to deficit the District's Revenue Limit at a factor of almost 23%. The Revenue Limit calculation continues to be very complicated and is influenced by many external factors out of the control of the District.

-14- The Norris School District continues to be the lowest funded school district in Kem County and among the lowest in the State. In addition to the State Apportionment Revenue Limit, the General Fund receives revenue from federally funded programs (approximately 3% of the total annual revenue), other State programs (11 % of the total annual revenue), and other local funds ( approximately 11 % of the total annual revenue). (See graph above.)

All expenditures are governed by the California Education Code and District policy. In addition to those guidelines, approximately 15% of the Federal, State, and local funds are further restricted in that they can only be spent in accordance with the grant, entitlement, or donor specifications. The District receives restricted categorical money from 21 different State and Federally funded program resources and locally funded restricted resources such as parent teacher clubs and associated student bodies.

NORRIS SCHOOL DISTRICT GENERAL FUND EXPENDITURES BY OBJECT CODES (from SACS Budget Report Form 01 )

C/) 11 .000 c 0 - 10.000 ~ c 9.000 II ~ IO 8.000 II

II 7,000 II Ii I• 6.000 Ii II 11 5,000 - - - - I 4,000 ,, I !, '1 3.000 ,, ' 2.000 - - ,, ,, ,, i 1,000 Ii II ,, II ' I II 0 .. ii 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

c TEACHERS' SALARIES • OTHER CERTIFICATED SALARI ES OCLASSIFIED SALARIES a EMPLOYEE BENEFITS • BOOKS & SUPPLI ES C OPERATING COSTS/SERVICES • CAPITAL OUTLAYS CINTERPROGRAM/OTHER • DIRECT SUPPORT/INDIRECT COSTS

-15- Norris School District 2012-13 General Fund Expenditures by Function

6.75%

• 111 ~1111ctio11 • 111~111utio11-1·datt

• Gtutrnl :uhniltiso:atiou •Phmt stl'victs a Otllt1· outgo

The above-mentioned revenues, salaries, benefits, supplies, services, utilities, and other operating costs are accounted for within the General Fund. Other funds are required by the California Education Code and are used to account for revenue and expenditures as follows:

Cafeteria Fund - Operation of the State and Federally required school lunch programs

Deferred Maintenance Fund - State and required District matching funds set aside for the maintenance of school buildings and facilities ( combined with the General Fund in this report for reporting purposes)

Building Fund - Used to account for the acquisition of major governmental capital facilities and buildings from the sale of bond proceeds

Capital Facilities Fund - Money collected from developer fees to be used exclusively for necessary school facilities construction for student population growth generated as a result of housing and commercial development

Special Reserve Fund for Capital Outlay Projects - Money set aside for capital purchases such as land for new school sites

-16- Capital Projects Fund for Blended Component Units - This money is generated from fees and taxes collected on housing and commercial developments within the RNR Mello-Roos Community Facilities District. This money is to be used exclusively for necessary school facilities as a result of housing and commercial developments and related student population growth.

Bond Interest and Redemption Fund - Used to track tax revenues and payments related to general obligation bonds

Debt Service Fund for Blended Component Units - Used to track Mello-Roos tax revenues and payments related to Mello-Roos bonds

Other Enterprise Fund - Used to account for the revenues and expenditures of the childcare program

The following is a summary of major activity for 2012-13 in various District Governmental Funds:

• Capital Facilities Fund (Fund 25)- This Fund's receipts include Developer Fees that occur outside of the District's Mello-Roos area but are inside the Community Facilities District boundaries. The net increase in the Fund 25 balance was $69,744.

• Special Reserve Fund for Capital Outlay Projects (Fund 40)- Funds from this Fund are invested in the Self-Insured Schools of Kem Investment Pool and are used for capital outlay projects. The fund balance increased by $905,624.

• Capital Projects Fund for Blended Component Units (Fund 49-the Mello-Roos Project Fund) - Mello-Roos Community Facility District (CFD) and Mello-Roos bond revenues are placed in this Fund for the purpose of funding major construction projects. Increased student population generated by housing developments within the Mello-Roos CFD makes school facility construction projects necessary. The net increase in this Capital Projects fund balance was $770,661.

General Fund Budgetary Highlights

The summary below shows the difference between the original adopted budget for 2012-13 and the year end unaudited actuals:

Norris School District 2012-13 Budget Summary

Adopted Unaudited Favorable Budget Actuals (Unfavorable)

Average Daily Attendance 3,637.45 3,742.45 105.00

Revenues $ 21,587,701 $ 24,676,957 $ 3,089,256 Expenditures 22,789,980 24,275,476 ( 1,485,496) Transfers In and Out 411,675 411,675

Increase (Decrease) in Fund Balance ($ 1,202,279) $ 813,156 $ 2,015,435

-17- Major increases in General Fund revenue include:

• Revenue Limit revenue increased approximately $2. l 5M from the adopted budget. The District included in the adopted budget a projected mid-year reduction due to the possibility of Proposition 30 not passing in November of 2012. The Proposition passed and, coupled with a 2.9% growth in ADA, the District realized a gain of $2.15M in Revenue Limit.

• The District received interfund transfers of over $400k from the Extended Day Care (EDC) Program, that also accounted for an increase in expenditures in the same amount. The District is not in the habit of budgeting interfund transfers, as there is no guarantee of these funds.

• Other local revenue, including fees charged for services, interest earned, and PTC contributions increased by almost $500k above the adopted budget. Note: There is a corresponding expenditure increase.

Major increases in General Fund expenditures include:

• PTC funding of school expenditures at school sites. Note: There is a corresponding increase in PTC revenues.

• Salary costs increased $191,941, mainly due to a one-time off salary payment to all District employees.

• Equipment, supplies and services increased substantially due to implementation of Common Core standards, as well as technology and supply purchases through funds received from the District's EDC program.

Over the course of a year, the District's General Fund budget is revised as required by the State. The 2012-13 budget was adopted in June 2012. The First Interim Reports are prepared as of October 31st and the Second Interim Reports are prepared as of January 31st. The State also requires a review of the budget upon completion of negotiations. Negotiation costs were disclosed to the Board of Trustees for the Certificated (CTA) and Classified (CSEA) bargaining units on July 11, 2012. Necessary budget revisions resulting from those negotiations were presented to the Board at that time. The projected year-end revenues and expenditures are prepared at the same time as the 2013- 14 adopted budget (June 2013). Finally, the 2012-13 Unaudited Actuals were presented to the Board on September 11, 2013.

Categorical Program Analysis

The District's home-to-school transportation program continues to encroach on the unrestricted General Fund. State funding has actually decreased over the past several years. The District anticipates that, with the construction of schools centrally located within housing communities, certain elementary bus routes will be eliminated. However, middle school busing will continue to increase as housing developments expand to our District boundaries. The home-to-school transportation program exceeded State revenue by $437,452 for daily operations in 2012-13. The Board does not charge for home-to-school transportation even though the State allows school districts to do so.

-18- The following table outlines the Federal categorical expenditures incurred by the District:

Federal 2012-13 2011-12 CFDA Resource Federal Federal Federal Programs Number Code Expenditures Expenditures

U.S. Department of Education: E.S.E.A.--Title II 84.367 4035 $ 42,289 $ 16,599 Education Jobs Fund 84.410 3205 9,634 85,303 Special Education--1.D.E.A. (Preschool) 84.173 3315 14,652 15,754 Special Education--1.D.E.A. Local (Preschool) 84.173 3320 31,490 Special Education--Basic Local Assistance 84.027 3310 640,619 609,469 State Fiscal Stabilization Fund (SFSF)-­ Education State Grants, Recovery Act 84.394 3200 151,249

Total U.S. Department of Education 707,194 909,864

U.S. Department of Agriculture: National School Lunch Program 10.555 5310 387,395 374,137

Total Expenditures of Federal Awards $ 1.094.589 $ 1.284.001

Capital Assets

The District established a $5,000 threshold for identifying capital assets. Capital assets are categorized by land, improvement of sites, buildings, equipment, and work in progress. Table A-4 presents these categories (at cost) and the amount associated with each one, less accumulated depreciation. The total of capital assets for governmental activities as of June 30, 2013 was $68,654,200, which shows a decrease of $40,970 over fiscal year 2011-2012. The following table outlines the capital asset activity for the year.

TABLEA-4 Norris School District Capital Assets--Governmental Activities

Increase 2013 2012 (Decrease)

Land $ 6,405,148 $ 6,405,148 $ Improvements of Sites 12,881,438 12,383,531 497,907 Buildings 63,584, 186 63,643,686 ( 59,500) Equipment 3,399,441 3,080,186 319,255 Work in Progress 1,670,950 490,385 1,180,565 Less Accumulated Depreciation ( 19,286,963) ( 17,307,766) ( 1,979,197)

Totals $ 68,654.2QQ $ 68,695,170 ($ 40.970)

-19- Long-Term Debt

At the end of fiscal year 2012-13, the District had $54,247,934 in long-term outstanding bond debt and compensated absences. That is $16,238,263 more than at the end of fiscal year 2011-2012, as shown in Table A-5.

TABLE A-5 Norris School District Outstanding Long-Term Debt

Increase 2013 2012 (Decrease)

General obligation bonds payable $ 18,284,898 $ 1,971,813 $ 16,313,085 Accreted interest on general obligation bonds 4,111,172 4,001,806 109,366

Sub-totals 22,396,070 5,973,619 16,422,451

Special tax bonds (Mello-Roos) 31,760,000 31,955,000 ( 195,000) Compensated absences payable 91 864 81,052 10,812

Totals $ 54,241,234 $ 38,002,611 $ 16,23 8,263

FACTORS BEARING ON THE DISTRICT'S FUTURE

At the time these financial statements were prepared and audited, the District was aware of the following existing circumstances that could significantly affect its financial health in the future:

• The single most important factor is the uncertainty of future State budgets and the impact of those State budgets on education. Future Revenue Limit funding will be based on the new Local Control Funding Formula (LCFF) which is being implemented starting in the 2013-14 school year. LCFF funding will be based on each year's State revenue so the District will have to take a wait and see approach as to the effect LCFF will have on future budgets.

• Although there was moderate ADA growth in the current year, the District will continue to budget for stagnant growth in the future as a result of current economic uncertainty. In anticipation of future growth there will still be a strong reliance on future State revenues to help the District fund school facility needs, and this reliance will play a major role in the District's finances.

• With Affordable Health Care Act requirements taking effect in the 2013-14 school year, the exact impact on the District and the rising health care costs are unknown, but will have a major impact on future budgets.

-20- CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions regarding this report or need additional financial information, contact:

Steven K. Shelton, Superintendent Norris School District 6940 Calloway Drive Bakersfield, California 93312

Phone:661-387-7000 Fax: 661-399-9750

-21- NORRIS SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2013

Governmental Business-Type Activities Activities Totals

Assets Cash in County Treasury $ 24,930,479 $ 1,346,736 $ 26,277,215 Cash on hand and in banks 8,047 68,547 76,594 Cash in revolving funds 10,650 10,650 Cash with Fiscal Agent 1,971,859 1,971,859 Investments with Fiscal Agent 2,312,590 2,312,590 Accounts receivable 6,209,976 1,366 6,211,342 Stores inventories Supplies 1,831 1,831 Food 4,499 4,499 Prepaid expenditures 1,363,555 1,363,555 Land 6,405,148 6,405,148 Work in progress 1,670,950 1,670,950 Buildings 63,584,186 63,584,186 Improvement of sites 12,881,438 12,881,438 Equipment 3,399,441 3,399,441 Less accumulated depreciation (19,286,963) ( 19 ,286,963)

Total Assets $ 105,467,686 $ 1,416,649 $ 106,884,335

Liabilities Accounts payable $ 2,784,468 $ 22,441 $ 2,806,909 Accrued interest payable 573,968 573,968 Long-tenn liabilities Due within one year General obligation bonds payable 190,867 190,867 Special tax bonds payable 325,000 325,000 Accreted interest 510,146 510,146 Due after one year General obligation bonds payable 18,094,031 18,094,031 Special tax bonds payable 31,435,000 31,435,000 Accreted interest 3,601,026 3,601,026 Compensated absences payable 91,864 91,864

Total Liabilities $ 57,606,370 $ 22,441 $ 57,628,811

Net Position Invested in capital assets, net of related debt $ 15,255,131 $ $ 15,255,131 Restricted for: Capital projects, net of related debt 21,097,003 21,097,003 Debt services 2,349,886 2,349,886 Educational programs 8,858,848 8,858,848 Other purposes (expendable) 294,118 294,118 Other purposes (nonexpendable) 6,330 6,330 Unrestricted 1,394,208 1,394,208

Total Net Position $ 47,861,316 $ 1,394,208 $ 49,255,524

See notes to the basic financial statements.

-22- NORRIS SCHOOL DISTRICT STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2013

Expenses

Governmental Activities Instruction $ 17,494,703 Instruction-related services Supervision of instruction 167,181 Instructional library, media and technology 481,916 School site administration 1,285,005 Pupil services Home-to-school transp01tation 598,082 Food services 862,132 All other pupil services 769,505 General administration Data processing 138,262 All other general administration 1,841,231 Plant services 2,285,727 Community services 21,265 Enterprise activities (3) Other outgo 2,019,298 Interest on long-term debt 2,591,082

Total Governmental Activities $ 30,555,386

Business-Type Activities $ 446,721

General Revenues Taxes and subventions Taxes levied for general purposes Taxes levied for debt service Taxes levied for other specific purposes Federal and state aid not restricted to specific purposes Interest and investment earnings Interagency revenues Miscellaneous Internal transfers

Total General Revenues

Changes in Net Position

Net Position, Beginning

Net Position, Ending

See notes to the basic financial statements. Program Revenues Net (Expenses) Revenues and Charges Operating Capital Changes in Net Position for Grants and Grants and Governmental Business-Type Services Contributions Contributions Activities Activities Totals

$ 21,804 $ 2,302,623 $ $ (15, 170,276) $ $ (15,170,276)

2,972 (164,209) (164,209) 21,341 (460,575) (460,575) (1,285,005) (1,285,005)

266,019 (332,063) (332,063) 501,189 409,953 49,010 49,010 2,428 200,856 (566,221) (566,221)

(138,262) (138,262) 12,058 55,790 (1,773,383) (1,773,383) 98 (2,285,629) (2,285,629) (21,265) (21,265) 3 3 917,616 (1,101,682) (1,101,682) (2,591,082) (2,591,082)

$ 537,479 $ 4,177,268 $ (25,840,639) (25,840,639)

$ $ $ (446,721) (446,721)

2,634,161 2,634,161 3,941,374 3,941,374 1,477,913 1,477,913 18,681,877 18,681,877 111,717 5,438 117,155 2,631 2,631 107,154 988,438 1,095,592 411,675 (411,675)

27,365,871 584,832 27,950,703

1,525,232 138,111 1,663,343

46,336,084 1,256,097 47,592,181

$ 47,861,316 $ 1,394,208 $ 49,255,524

-23- NORRIS SCHOOL DISTRICT BALANCE SHEET--GOVERNMENTAL FUNDS JUNE 30, 2013

General Fund

Assets Cash in County Treasury $ 5,262,109 Cash on hand and in banks 399 Cash in revolving funds 10,100 Cash with Fiscal Agent Investments with Fiscal Agent Accounts receivable 6,016,276 Stores inventories Supplies Food Prepaid expenditures

Total Assets $ 11,288,884

Liabilities and Fund Balances ·Liabilities Accounts payable $ 2,277,088

Fund Balances Nonspendable Revolving fund 10,100 Stores inventories Prepaid expenditures Restricted Debt services Legally restricted balances 448,542 Assigned Other assignments 3,695,666 Unassigned 4,857,488

Total Fund Balances 9,011,796

Total Liabilities and Fund Balances $ 11,288,884

See notes to the basic financial statements. Debt Service Capital Fund for Projects Fund Blended for Blended Other Total Component Building Component Governmental Governmental Units Fund Units Funds Funds

$ 13,382 $ 14,880, 181 $ 2,873,240 $ 1,901,567 $ 24,930,479 7,648 8,047 550 10,650 1,971,859 1,971,859 1,026,879 1,285,711 2,312,590 112 17, 177 133,409 43,002 6,209,976

1,831 1,831 4,499 4,499 32,586 32,586

$ 1,985,353 $ 14,897,358 $ 4,033,528 $ 3,277,394 $ 35,482,517

$ $ 156,638 $ 342,842 $ 7,900 $ 2,784,468

550 10,650 6,330 6,330 32,586 32,586

1,985,353 364,533 2,349,886

448,542

14,740,720 3,690,686 2,865,495 24,992,567 4,857,488

1,985,353 14,740,720 3,690,686 3,269,494 32,698,049

$ 1,985,353 $ 14,897,358 $ 4,033,528 $ 3,277,394 $ 35,482,517

-24- NORRIS SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2013

Total Fund Balances--Governmental Funds $ 32,698,049

Amounts reported for assets and liabilities for governmental activities in the statement of net position are different from amounts reported in governmental funds because:

Capital Assets: In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation.

Capital assets relating to governmental activities, at historical cost $ 87,941,163 Accumulated depreciation 19,286,963

Net 68,654,200

Unamortized Costs: In governmental funds, debt issue costs are recognized as expenditures in the period they are incurred. In the government-wide statements, debt issue costs are amortized over the life of the debt. Unamortized debt issue costs included in prepaid expense on the statement of net position were: 1,330,969

Unmatured Interest on Long-Term Debt: In governmental funds, interest on long-term debt is not recognized until the period in which it matures and is paid. In the government-wide statement of activities, it is recognized in the period that it is incurred. The additional liability for unmatured interest owing at the end of the period was: (573,968)

Long-Term Liabilities: In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including long-term liabilities, are rep01ted. Long-term liabilities relating to governmental activities consist of:

General obligation bonds payable 18,284,898 Accreted interest 4,111,172 Special tax bonds payable 31,760,000 Compensated absences payable 91,864

Total (54,247,934)

Total Net Position--Governmental Activities $ 47,861,316

See notes to the basic financial statements. -25-

[THIS PAGE INTENTIONALLY LEFT BLANK]

NORRIS SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES--GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2013

General Fund

Revenues Revenue limit sources State apportionments $ 16,256,026 Local sources 2,600,770

Total Revenue Limit 18,856,796

Federal revenue 707,194 Other state revenue 2,837,829 State on-behalf payments 517,280 Other local revenue 2,673,491

Total Revenues 25,592,590

Expenditures Instmction 15,817,758 Supervision of instruction 167,201 Instructional library, media and technology 435,777 School site administration 1,255,325 Home-to-school transpo11ation 673,381 Food services 6 All other pupil services 707,107 Data processing 195,512 All other general administration 1,693,597 Plant services 2,174,083 Facility acquisition and construction 18,958 Other outgo 1,654,051 Debt service Principal retirement Interest on long-term debt

Total Expenditures 24,792,756

Excess (Deficiency) of Revenues Over Expenditures 799,834

Other Financing Sources (Uses) Operating transfers in Operating transfers out All other financing sources Proceeds from sale of bonds Other

Total Other Financing Sources (Uses)

Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 799,834

Fund Balances, July 1, 2012 8,211,962

Fund Balances, June 30, 2013 $ 9,011,796

See notes to the basic financial statements. Debt Se,·vice Capital Fund for Projects Fund Blended for Blended Other Total Component Building Component Governmental Governmental Units Fund Units Funds Funds

$ $ $ $ $ 16,256,026 2,600,770

18,856,796

387,395 1,094,589 42,401 2,880,230 517,280 2,725,868 47,804 1,481,565 1,802,995 8,731,723

2,725,868 47,804 l,481,565 2,232,791 32,080,618

72,671 15,890,429 167,201 435,777 1,255,325 673,381 843,641 843,647 707,107 195,512 1,717 1,695,314 13,804 2,187,887 1,293,280 510,904 18,502 1,841,644 507,908 2,161,959

4,640,000 194,823 4,834,823 1,662,505 779,080 2,441,585

6,302,505 1,814,992 510,904 1,910,434 35,331,591

(3,576,637) (1,767, 188) 970,661 322,357 (3,250,973)

904,875 904,875 (704,875) (200,000) (904,875)

4,445,000 16,507,908 20,952,908 41,476 41,476

3,740,125 16,507,908 (200,000) 946,351 20,994,384

163,488 14,740,720 770,661 1,268,708 17,743,411

1,821,865 2,920,025 2,000,786 14,954,638

$ 1,985,353 $ 14,740,720 $ 3,690,686 $ 3,269,494 $ 32,698,049

-26- NORRIS SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENT AL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2013

Total Change in Fund Balances--Governmental Funds $ 17,743,411

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

Capital Outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are acquired. In the statement of activities, costs of capital assets are allocated over their estimated useful lives as depreciation expense. The difference between capital outlay expenditures and depreciation expense for the period was:

Expenditures for capital outlay $ 1,997,726 Depreciation expense 2,029,573

Net (31,847)

Debt Service: In governmental funds, repayments of long-term debt are reported as expenditures. In the government-wide statements, repayments of long-term debt are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long-term debt were: 4,834,823

Debt Proceeds: In governmental funds, proceeds from debt are recognized as other financing sources. In the government-wide statements, proceeds from debt are reported as increases to liabilities. Amounts recognized in governmental funds as proceeds from debt were: (20,952,908)

Debt Issue Costs: In governmental funds, debt issue costs are recognized as expenditures in the period they are incurred. In the government-wide statements, issue costs are amortized over the life of the debt. The difference between debt issue costs recognized in the current period and issue costs amortized for the period was:

Issue costs incurred during the period 335,675 Issue costs amortized for the period 234,490

Net 101,185

Gain or Loss from Disposal of Capital Assets: In governmental funds, the entire proceeds from disposal ofcapital assets are reported as revenue. In the statement of activities, only the resulting gain or loss is reported. The difference between the proceeds from disposal of capital assets and the resulting gain or loss was: (9,123)

Unmatured Interest on Long-Term Debt: In governmental funds, interest on long-term debt is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period that it is incurred. Unmatured interest owing at the end of the period, less matured interest paid during the period but owing from the prior period, was: (149,497)

Compensated Absences: In governmental funds, compensated absences are measured by the amounts paid during the period. In the statement of activities, compensated absences are measured by the amounts earned. The difference between compensated absences paid and compensated absences earned was: (10,812)

Changes in Net Position of Governmental Activities $ 1,525,232

See notes to the basic financial statements.

-27- NORRIS SCHOOL DISTRICT STATEMENT OF NET POSITION NONMAJOR PROPRIETARY FUND JUNE 30, 2013

Other Enterprise Fund

Assets

Cash in County Treasury $ 1,346,736

Cash on hand and in banks 68,547

Accounts receivable 1,366

Total Assets $ 1,416,649

Liabilities

Accounts payable $ 22,441

Net Position, Unrestricted $ 1,394,208

See notes to the basic financial statements. -28- NORRIS SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET POSITION--NONMAJOR PROPRIETARY FUND YEAR ENDED JUNE 30, 2013

Other Enterprise Fund

Operating Revenues

State on-behalf payments $ 2,631 Other sales 988,438 All other local revenue (411,675)

Total Operating Revenues 579,394

Operating Expenditures

Certificated salaries 58,246 Classified salaries 252,146 Employee benefits 55,890 CalSTRS 4,805 Cal PERS 15,258 State on-behalf payments 2,631 Books and supplies 52,544 Services and other operating expenditures 5,201

Total Operating Expenditures 446,721

Excess of Operating Revenues Over Expenditures 132,673

Non-Operating Revenues

Interest 5,438

Changes in Net Position 138,111

Net Position, July 1, 2012 1,256,097

Net Position, June 30, 2013 $ 1,394,208

See notes to the basic financial statements. -29- NORRIS SCHOOL DISTRICT STATEMENT OF CASH FLOWS NONMAJOR PROPRIETARY FUND YEAR ENDED JUNE 30, 2013

Other Enterprise Fund

Cash Flows from Operating Activities Cash received from other sales $ 988,973 Cash payments for payroll and other operating costs (444,666) Internal transfers (411,675)

Net cash provided by operating activities 132,632

Cash Flows from Investing Activities Interest 5,438

Net Increase in Cash 138,070

Cash, July 1, 2012 1,277,213

Cash, June 30, 2013 $ 1,415,283

* * *

Reconciliation of Excess of Operating Revenues Over Expenditures to Net Cash Provided by Operating Activities Excess of operating revenues over expenditures $ 132,673 Adjustments to reconcile excess of operating revenues over expenditures to net cash provided by operating activities Changes in assets and liabilities Decrease in accounts receivable 535 Decrease in accounts payable (576)

Net cash provided by operating activities $ 132,632

Non-Cash Transactions State on-behalf payments $ 2,631

See notes to the basic financial statements. -30- NORRIS SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION--FIDUCIARY FUND JUNE 30, 2013

Agency Fund Student Body Funds

Assets

Cash on hand and in banks $ 56,575

Li1tbilities

Due to student groups $ 56,575

Net Position

Unassigned $

See notes to the basic financial statements.

-31- NORRIS SCHOOL DISTRICT STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND YEAR ENDED JUNE 30, 2013

Balance Balance 7/1/12 Additions Deductions 6/30/13

Student Body Funds

Assets

Cash on hand and in banks $ 40,505 $ 68,558 $ 52,488 $ 56,575

Liabilities

Due to student groups $ 40,505 $ 68,558 $ 52,488 $ 56,575

See notes to the basic financial statements.

-32- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

1. SIGNIFICANT ACCOUNTING POLICIES

The NoITis School District (the "District") was established on September 30, 1880. The District is currently operating four elementary schools and one middle school. The District's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable), that do not conflict with or contradict GASB pronouncements. Although the District has the option to apply F ASB pronouncements issued after that date to its business-type activities and enterprise fund, the District has chosen not to do so. The more significant accounting policies established in GAAP and used by the District are discussed below.

A. Financial Reporting Entity

The NoITis School District (District), the RNR School Financing Authority (Authorlty), and the Community Facilities District No. 92-1 of the RNR School Financing Authority (CFD) have financial and operational relationships that meet the reporting entity definition criteria of GASB Statement No. 14, The Financial Reporting Entity, for inclusion of the Authority as a component unit of the District. The financial activities of the CFD are blended into the financial statements of the Authority. Funds are segregated by district and each district reports its funds as blended component units in their respective financial statements. Accordingly, the financial activities of the Authority pertaining to Norris School District have been included in these financial statements. The following are those aspects of the relationship between the District and the Authority which satisfy GASB Statement No. 14 criteria.

Accountability

1. The Authority's Board of Directors consists of two members from each of the school districts that are participating in the Authority. 2. The District is able to impose its will upon the Authority, based on the following: • All major financing arrangements, contracts, and other transactions of the Authority must have the consent of the District. • The District exercises significant influence over operations of the Authority.

-33- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

3. The Authority provides specific financial benefits or imposes specific financial burdens on the District based upon the following: • Debt service payments are made for each district's share of Authority debt are charged only to the Authority's Debt Service Fund for that district. • Although the revenues generated by the Authority do not legally belong to any of the individual districts, the funds are segregated by district and each district's share of Authority funds are used solely for the benefit of that district. • Any excess taxes of the Authority not needed for debt service are transferred annually to the District at the end of each fiscal year. • The District has assumed a "moral obligation", and potentially a legal obligation, for any debt incurred by the Authority.

Scope of Public Service

The Community Facilities District (CFD) was formed to issue bonds to be used for construction of school facilities within its boundaries which are entirely within the boundaries served by the RNR School Financing Authority. Title to the facilities is given to the school district in which the facilities are located. The debt service on the bonds issued by the CFD will be paid by the Authority.

Financial Presentation

For financial presentation purposes, the Authority's financial activity has been blended, or combined, with the financial data of the District. The financial statements present the Authority's financial activity within the Authority's Building Fund and the Authority's Debt Service Fund. Special tax bonds issued by the Authority are included in long-term debt. (Fixed assets acquired or constructed by the Authority for which title has been given to the District are included in fixed assets.)

B. Basis of Presentation

Government-Wide Financial Statements:

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the District and its component units. Governmental activities, which normally are financed through taxes, intergovernmental revenues, and other nonexchange

-34- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

transactions are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District.

Fund Financial Statements:

Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all nonmajor funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds presents increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary fund types are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the proprietary fund's Statement of Net Position. The Statement of Revenues, Expenditures, and

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Changes in Net Position for proprietary funds present increases (i.e., revenues) and decreases (i.e., expenses) in total net position. The Statement of Cash Flows provides information about how the District finances and meets the cash flow needs of its proprietary activities. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the proprietary fund were charges for daycare services. Operating expenses in the proprietary fund include the cost of services and administrative expenses. All revenues and expenses not meeting this definition are treated as non-operating revenues and expenses. Fiduciary funds are reported using the economic resources measurement focus.

C. Basis of Accounting

Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Proprietary funds use the accrual basis of accounting. Fiduciary funds use the accrual basis of accounting.

Revenues - Exchange and Non-Exchange Transactions:

Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. "Available" means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, "available" means collectible within the current period or within 60 days after year-end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in

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which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

Unearned Revenue:

Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. On governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have also been recorded as unearned revenue.

Expenses/Expenditures:

On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then umestricted resources as they are needed.

D. Fund Accounting

The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District's accounts are organized into major, nonmajor, proprietary, and fiduciary funds as follows:

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Major Governmental Funds:

General Fund is the general operating fund of the District. It is used to account for all financial resources not accounted for and reported in another fund. The General Fund, reported in these financial statements, includes two Funds maintained by the District: The General Fund (Fund O1 ), and the Deferred Maintenance Fund (Fund 14 ). Although Fund 14 is a separate fund authorized in the Education Code, it does not meet the definition of a Special Revenue Fund under accounting principles generally accepted in the United States of America, and has therefore been combined into the General Fund for financial reporting purposes.

Debt Service Fund for Blended Component Units is used to account for the District's interest in the Debt Service Fund of the RNR School Financing Authority, which is used to account for both the accumulation of resources from ad valorem tax levies and the interest and redemption of principal of the Special Tax Bonds issued by the Authority for projects at the District.

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

Capital Projects Fund for Blended Component Units is used to account for the District's interest in the Capital Projects Fund of the RNR School Financing Authority.

Nonmaior Governmental Funds:

Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service and capital projects. The District maintains the following Nonrnajor Special Revenue Fund:

Cafeteria Fund is used to account for revenues received and expenditures made to operate the District's cafeterias.

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Debt Service Funds are used to account for all financial resources that are restricted, committed or assigned to expenditure for principal and interest. The District maintains the following Nonmajor Debt Service Fund:

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

Capital Projects Funds are used to account for all financial resources that are restricted, committed or assigned to expenditure for capital outlays. The District maintains the following Nonmajor Capital Projects Funds:

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

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

Nonmajor Proprietary Funds:

Enterprise Funds are financed and operated in a manner similar to that employed by private business enterprises; that is, the governing board's intent is that the costs of providing continuous goods or services can be through charges to users. The District maintains the following Nonmajor Proprietary Fund:

Other Enterprise Fund is used to account for revenues received and expenditures made to operate the District's Enterprise Fund.

Fiduciary Funds:

Agency Funds are used to account for assets of others for which the District acts as an agent. The District maintains an Agency Fund for the student body accounts, which is used to account for the raising and expending of money to promote the general welfare, morale, and educational experience of the student body. The amounts reported for student body funds represent the combined totals of all schools within the District.

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E. Budgets and Budgetary Accounting

Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all government funds. By state law, the District's Governing Board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District's Governing Board satisfied these requirements. These budgets are revised by the District's Governing Board and District Superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for all major funds in the financial statements. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account.

F. Encumbrances

Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated on June 30.

G. Financial Statement Amounts

1. Deposits and Investments

Cash balances held in banks and in revolving funds are insured to $250,000 by the Federal Deposit Insurance Corporation. In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the County Treasury. The county pools these funds with those of other districts in the county and invests the cash. These pooled funds are carried at cost, which approximates market value. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool. The county is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et. seq. The funds maintained by the county are either secured by federal depository insurance or are collateralized.

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2. Stores Inventories and Prepaid Expenditures

Inventories are recorded using the consumption method, in that inventory acquisitions are initially recorded in inventory (asset) accounts, and are charged as expenditures when used. Reported inventories are equally offset by a fund balance reserve, which indicates that these amounts are not "available for appropriation and expenditure" even though they are a component of net current assets. The valuation of the cafeteria inventory is on a first-in, first-out (FIFO) basis. The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditure when incurred, except for costs associated for commodity and other food items purchased through a nutrition cooperative. On the government-wide statements, the District reports unamortized debt issuance cost as prepaid expenses.

3. Receivables

All receivables are reported net of estimated uncollectible amounts.

4. Capital Assets

Capital assets are those purchased or acquired with an original cost of $5,000 or more and are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the lives of the assets are not capitalized, but are expensed as incurred. Depreciation on all capital assets is computed using a straight­ line basis over the following estimated useful lives:

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Estimated Useful Life Asset Class Examples in Years

Land NIA Site improvements Paving, flagpoles, retaining walls, sidewalks, fencing, outdoor lighting 20 School buildings 50 Portable classrooms 25 HV AC systems Heating, ventilation, and air conditioning systems 20 Roofing 20 Interior construction 25 Carpet replacement 7 Electrical/plumbing 30 Sprinkler/fire system Fire suppression systems 25 Outdoor equipment Playground, radio towers, fuel tanks, pumps 20 Machinery and tools Shop and maintenance equipment, tools 15 Kitchen equipment Appliances 15 Custodial equipment Floor scrubbers, vacuums, other 15 Science and engineering Lab equipment, scientific apparatus 10 Furniture and accessories Classroom and other furniture 20 Business machines Fax, duplicating and printing equipment 10 Copiers 5 Communication equipment Mobile, portable radios, non-computerized 10 Computer hardware PC's, printers, network hardware 5 Computer software Instructional, other short-term 5 to 10 Computer software Administrative or long-term 10 to 20 Audio visual equipment Projectors, cameras (still and digital) 10 Athletic equipment Gymnastics, football, weight machines, wrestling mats 10 Musical instruments Pianos, strings, brass, percussion 10 Library books Collections 5 to 7 Licensed vehicles Buses, other on-road vehicles 8 Contractors equipment Major off-road vehicles, front-end loaders, large tractors, mobile air compressor 10 Grounds equipment Mowers, tractors, attachments 15

5. Unearned Revenue

Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Unearned revenue is recorded to the extent that cash received on specific projects and programs exceeds qualified expenditures.

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6. Compensated Absences

All vacation pay, plus related payroll taxes, is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken, since such benefits do not vest, nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires.

7. Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Position. Bond premiums and discounts as well as issuance costs are deferred and amortized over the life of the bonds using the effective-interest method. Bonds payable are reported net of applicable bond premium or discount. Bond issuance costs are reported as prepaid expenditures and amortized over the term of the related debt. In the fund financial statements, governmental funds recognize bond premiums and discounts as well as bond issuance costs, during the current period. The face amount of the debt issued, premiums, or discounts is reported as other financing sources/uses.

8. Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

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9. Governmental Activities Net Position and Proprietary Fund Net Position (Government-Wide)

Governmental activities net position and proprietary fund net position are divided into three components:

• Invested in capital assets, net of related debt - consist of the historical cost of capital assets less accumulated depreciation and less any debt that remains outstanding that was used to finance those assets.

• Restricted - consist of net position balances that are restricted by the District's creditors (for example, through debt covenants), by the state enabling legislation (through restrictions on shared revenues), by grantors (both federal and state), and by other contributors.

• Unrestricted - all other net position balances are reported in this category.

10. Governmental Fund Balances

In the governmental fund financial statements, fund balances are classified as follows:

• Nonspendable - Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

• Restricted - Amounts that can be spent only for specific purposes because of state or federal laws, or externally imposed conditions by grantors or creditors.

• Committed - Amounts that can be used only for specific purposes determined by a formal action by Board resolution. This includes the Budget Reserve Account.

• Assigned - Amounts that are designated by the Board for a particular purpose.

• Unassigned - All amounts not included in other spendable classifications.

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Restricted balances at June 30, 2013 are as follows:

BES Miscellaneous Donations--Tutoring $ 131 Economic Impact Aid (EIA/LEP) 100,629 English Language Acquisition Program, Teacher Training and Student Assistance 1,607 Library Benefactor 12,542 Lottery: Instructional Materials (Prop 20) 321,739 NE Library Miscellaneous Donations 510 NE Miscellaneous Donations 497 NMS Miscellaneous Donations 1,941 ODE Miscellaneous Donations 412 Special Education: Mental Health Services 676 VET Miscellaneous Donations 2,701 BimatPTC 5,087 NMSASB 70

Totals $ 448,542

11. Use of Restricted Resources

When an expense is incurred that can be paid using either restricted or unrestricted resources (net position), the District's policy is to first apply the expense toward restricted resources and then toward unrestricted resources. In governmental funds, the District's policy is to first apply the expenditure toward restricted fund balance and then to other, less-restrictive classifications - committed and then assigned fund balances before using unassigned fund balances.

12. Interfund Activity

Interfund activity is reported as either loans, services provided, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or between proprietary funds are netted as part of the reconciliation to the government-wide financial statements.

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13. Revenue Limit/Property Tax

The District's revenue limit is received from a combination of local property taxes, state apportionments, and other local sources. The county is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the county. The levy is based on the assessed values as of each January 1st, the lien date for both secured and unsecured property. Property taxes on the secured roll are due in two installments on November 1st and February 1st following the lien date, and become delinquent if not paid by December 10th and April 10th, respectively. Both installments of taxes due on the secured roll may be paid by December 1oth, at the option of each property owner. Property taxes on the unsecured roll are due on the lien date and become delinquent if not paid by August 31st following the lien date. Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The county apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll -­ approximately October 1st of each year. The County Auditor reports the amount of the District's allocated property tax revenue to the California Department of Education. Property taxes are recorded as local revenue limit sources by the District. The California Department of Education reduces the District's entitlement by the District's local property tax revenue. The balance is paid from the State General Fund, and is known as the State Apportionment. The District's Base Revenue Limit is the amount of general purpose tax revenue, per average daily attendance (ADA), that the District is entitled to by law. This amount is multiplied by the second period ADA to derive the District's total entitlement.

14. Impact of Recently Issued Accounting Principles

Recently Issued and Adopted Accounting Pronouncements

In June 2011, the Governmental Accounting Standards Board (GASB) issued Statement No. 63, Financial Reporting ofDeferred Outflows ofResources, Deferred Inflows ofResources, and Net Position. GASB 63 provides guidance for reporting deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position and related disclosures. The statement of net assets is renamed the statement of net position and includes four components: Assets, deferred outflows of assets, liabilities and deferred inflows of resources. The District adopted GASB 63 in the fiscal year ended June 30, 2013.

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Recently Issued Accounting Pronouncements (not yet adopted)

In April 2012, the Governmental Accounting Standards Board (GASB) issued Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB 65 provides guidance on which balances currently reported as assets and liabilities should be reported as deferred outflows of resources and deferred inflows of resources. It is effective for periods beginning after December 15, 2012. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In April 2012, the Governmental Accounting Standards Board (GASB) issued Statement No. 66, Technical Corrections-2012. GASB 66 amends specific provisions of GASB 10 and GASB 62. It is effective for periods beginning after December 15, 2012. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In June 2012, the Governmental Accounting Standards Board (GASB) issued Statement No. 67, Financial Reporting for Pension Plans -An Amendment ofGASB Statement No. 25. GASB 67 establishes financial reporting standards for pension plans of state and local governments and addresses the measurement of the net pension liability of the Defined Benefits Plan. It is effective for periods beginning after June 15, 2013. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements. In June 2012, the Governmental Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions. GASB 68 establishes standards of accounting and financial reporting for defined benefit pensions and defined contribution pensions provided to the employees of state and local government employers through pension plans. It is effective for periods beginning after June 15, 2014. Management is currently evaluating the impact of the adoption of this statement on the District's financial statements.

2. CASH AND INVESTMENTS

Cash and investments as of June 30, 2013 are classified in the accompanying financial statements as follows:

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Govermental Funds: Deposits Cash on hand and in banks $ 18,697 Pooled Funds Cash in county treasury 24,930,479 Held by Trustee (Self-Insured Schools of California) Corporate bonds 405,166 Federal Agency oblilgations 734,710 Mortgage passthrough 291,386 U.S. Treasury notes 718,984 Money Market Fund 162,344 Held by Bond Trustee Money Market Fund 1,971,859

Total Governmental Funds 29,233,625

Enterprise Funds: Cash on hand and in banks 68,547 Cash in county treasury 1,346,736

Total Enterprise Funds 1,415,283

Fiduciary Funds: Cash on hand and in banks 56,575

District Totals $ 30,705,483

A. Cash in County Treasury

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the County Treasury as part of a common investment pool ($26,277,215 as of June 30, 2013). The fair market value of this investment pool as of that date, as provided by the pool sponsor, was $26,277,215. The District is considered to be an involuntary participant in the external investment pool. Interest is deposited into participating funds. The county is restricted by Government Code Section 53635, pursuant to Section 53601, to invest in time deposits, U.S. government securities, state registered warrants, notes or bonds, State Treasurer's investment pool, bankers' acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements.

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B. Cash and Cash Equivalents The District has defined cash and cash equivalents to include cash on hand, demand deposits, and cash with fiscal agent. Additionally, cash in county treasury is treated as a cash equivalent because deposits or withdrawals can be made at any time without prior notice or penalty.

C. Investments

1. Investments Authorized by the California Government Code and the District's Investment Policy The table below identifies the investment types that are authorized for the District by the California Government Code (or the District's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the District's investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum Authorized Maximum Percentage Percentage Investment Type Maturity of Portfolio in One Issuer

Local Agency Bonds 5 years None None U.S. Treasury Obligations 5 years 2% 2% U.S. Agency Securities 5 years 3% 3% Banker's Acceptances 180 days None None Commercial Paper 270 days None None Negotiable Certificates of Deposit 5 years None None Repurchase Agreements I year None None Reverse Repurchase Agreements 92 days None None Medium-Term Notes 5 years 1% 1% Mutual Funds NIA None None Money Market Mutual Funds NIA 7% 7% Mortgage Pass-Through Securities 5 years 1% 1% County Pooled Investment Funds NIA 86% 86% Local Agency Investment Fund (LAIF) NIA None None

2. Investments Authorized by Debt Agreements Investment of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the District's investment policy. The schedule below identifies the investment types that are authorized for investments held by bond trustees. The schedule also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

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Maximum Maximum Authorized Maximum Percentage Percentage Investment Type Maturity of Portfolio in One Issuer

U.S. Treasury Obligations None None None U.S. Agency Securities None None None Banker's Acceptances 180 days None None Commercial Paper 270 days None None Money Market Mutual Funds NIA 100% 100% Investment Contracts 30 years None None

3. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the District's investments by maturity.

Remaining Maturity (in Months) 12 Months 13 to 24 25 to 60 More Than Investment Type Amount or Less Months Months 60 Months

County Investment Pool $ 26,277,215 $ 26,277,215 $ - $ - $ Held by Trustee (Self­ Insured Schools of California) Corporate bonds 405,166 107,127 190,931 107,108 Federal Agency oblilgations 734,710 32,798 321,044 199,350 181,518 Mortgage passthrough 291,386 6,122 83,143 202,121 U.S. Treasury notes 718,984 171,962 73,089 209,660 264,273 Money Market Fund 162,344 162,344 Held by Bond Trustee Money Market Fund 1,971,859 1,971,859

Totals $ 30,561,664 $ 26,757,568 $ 668,207 $ 718,239 $ 2,417,650

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4. Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the District's investment policy, and the actual rating as of year end for each investment type. The column marked "exempt from disclosure" identifies those investment types for which GASB No. 40 does not require disclosure as to credit risk:

Minimum Exempt Rating as of Year End Investment Legal From Not Type Amount Rating Disclosure AAA AA A Rated

County Investment Pool $ 26,277,215 NIA $ - $ - $ - $ - $ 26,277,215

Held by Trustee (Self-Insured Schools of California) Corporate bonds 405,166 NIA 136,770 268,396 Federal Agency oblilgations 734,710 NIA 734,710 Mortgage passthrough 291,386 NIA 291,386 U.S. Treasury notes 718,984 NIA 718,984 Money Market Fund 162,344 NIA 162,344

Held by Bond Trustee Money Market Fund 1,971,859 NIA 1,971,859

Totals $ 30,561,664 $ - $ 1,745,080 $ 136,770 $ 268,396 $ 28,411,418

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3. ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2013 consisted of the following:

Debt Service Capital Fund for Projects Fund All Other Blended for Blended Govern- Total Component Building Component mental Total Govern- Enterprise General Fund Units Fund Units Funds mental Funds Fund

Federal Government Federal Programs $ 361,275 $ - $ - $ - $ 38,867 $ 400,142 $

State Government Categorical Aid Programs 1,040,965 2,624 1,043,589 Lottery 295,520 295,520

Total State Government 1,336,485 2,624 1,339,109

Local Government Interest 4,874 112 17,177 3,469 1,511 27,143 1,366 Developer Fees 129,940 129,940

Total Local Government 4,874 112 17,177 133,409 1,511 157,083 1,366

Miscellaneous 4,313,642 4,313,642

Totals $ 6,016,276 $ 112 $ 17,177 $ 133,409 $ 43,002 $ 6,209,976 $ 1,366

4. INTERFUND TRANSACTIONS

Interfund Transfers

lnterfund transfers consist of operating transfers from funds receiving resources to funds through which the resources are to be expended.

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The interfund transfers for the 2012-2013 fiscal year are as follows:

Transfers In Transfers Out Amount

Special Reserve (Capital Projects) Fund Debt Service Fund for Blended $ 704,875 Component Units Special Reserve (Capital Projects) Fund Capital Projects Fund for Blended 200,000 Component Units

$ 904,875

The transfer of $704,875 from the Debt Service Fund for Blended Component Units to the Special Reserve (Capital Projects) Fund is for the transfer of excess taxes collected. The transfer of $200,000 from the Capital Projects Fund for Blended Component Units to the Special Reserve (Capital Projects) Fund is a transfer for investment purposes.

Internal Transfers (Government-Wide Statement)

Internal transfers consist of operating transfers from funds receiving resources to funds through which the resources are to be expended. The internal transfer for the 2012-2013 fiscal year is as follows:

Transfer In Transfer Out Amount

General Fund Other Enterprise Fund $411,675

The transfer of $411,675 from the Other Enterprise Fund to the General Fund was for technology and instructional materials.

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5. CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the year ended June 30, 2013 is shown below:

Balance Balance 7/1/12 Additions Deductions 6/30/13

Capital assets not being depreciated Land $ 6,405,148 $ - $ - $ 6,405,148 Work in progress 490,385 1,180,565 1,670,950

Total capital assets not being depreciated 6,895,533 1,180,565 8,076,098

Capital assets being depreciated Buildings 63,643,686 59,500 63,584,186 Improvements of sites 12,383,531 497,907 12,881,438 Equipment 3,080,187 319,254 3,399,441

Total capital assets being depreciated 79,107,404 817,161 59,500 79,865,065

Less: Accumulated depreciation Buildings 11,392,181 1,296,847 50,377 12,638,651 Improvements of sites 3,766,213 544,629 4,310,842 Equipment 2,149,373 188,097 2,337,470

Total accumulated depreciation 17,307,767 2,029,573 50,377 19,286,963

Total capital assets being depreciated, net 61,799,637 (1,212,412) 9,123 60,578,102

Governmental activities capital assets, net $ 68,695, 170 $ (31,847) $ 9,123 $ 68,654,200

Depreciation expense was charged to governmental activities as follows:

Governmental Activities: Instruction $ 1,660,250 Instructional library, media, and technology 29,469 School site administration 29,680 Home-to-school transportation 74,693 Food services 23,201 All other pupil services 62,401 Community services 21,265 All other general administration 21,130 Data processing 5,698 Plant services 101,786

Total Depreciation Expense $ 2,029,573

-54- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

6. ACCOUNTSPAYABLE

Accounts payable at June 30, 2013 consisted of the following:

Capital Projects Fund for All Other Blended Govern- Total Building Component mental Total Govern- Enterprise General Fund Fund Units Funds mental Funds Funds

Vendor payables $ 226,643 $ 156,638 $ 342,842 $ 7,900 $ 734,023 $ 640 Salaries and benefits 1,836,916 1,836,916 21,801 State apportionment 213,529 213,529

Totals $ 2,277,088 $ 156,638 $ 342,842 $ 7,900 $ 2,784,468 $ 22,441

7. GENERAL OBLIGATION BONDS

In 2012, the District received authorization through Measure A to issue $149,000,000 of bonds at an election held on June 5, 2012. The bonds are general obligations of the District, and the county is obligated to annually levy ad valorem taxes for the payment of the interest on, and the principal of the bonds. Bond proceeds will be used for the acquisition, construction, furnishing and equipping of District facilities, and the payment of costs of issuance. The interest rate ranges from 3.00% to 5.74%. The final maturity date is November 1, 2042.

-55- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

The outstanding general obligation bond debt of the District at June 30, 2013 is as follows:

Amount of Redeemed Interest Date of Maturity Original Outstanding During Outstanding Bond Rate Issue Date Issue 7/1/12 Issued Year 6/30/13

1987 C 6.79% to 4/1/94 5/1/19 $ 1,996,604 $ 1,162,012 $ - $ 194,823 $ 967,189 8.48%

1987 D 5.125% to 6/20/00 5/1/25 1, 749,801 809,801 809,801 6.25%

2012 A 3.00% to 9/19/12 11/1/42 16,507,908 16,507,908 16,507,908 5.74%

Totals $ 1,971,813 $ 16,507,908 $ 194,823 $ 18,284,898

The annual requirements to amortize general obligation bonds, payable and outstanding as of June 30, 2013, are as follows:

Year Ending June 30: Debt Interest Totals

2014 $ 190,867 $ 976,495 $ 1,167,362 2015 220,256 1,059,706 1,279,962 2016 237,403 1,090,009 1,327,412 2017 270,443 l,123,894 l,394,337 2018 162,590 l,155,022 1,317,612 2019-2023 928,504 4,818,526 5,747,030 2024-2028 798,911 4,284,343 5,083,254 2029-2033 2,161,351 4,102,149 6,263,500 2034-2038 l,749,779 7,625,091 9,374,870 2039-2043 l l,564,794 3,698,786 15,263,580

Totals $ 18,284,898 $ 29,934,021 $ 48,218,919

-56- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

8. SPECIAL TAX BONDS

Special tax bonds payable of the RNR School Financing Authority (a blended component unit) are neither general nor special obligations of Kern County, the Authority, or the RNR member school districts, nor are they general obligations of the Community Facilities District. These bonds are payable solely from special tax revenues and from amounts in certain of the funds created under the RNR Fiscal Agent Agreement and the earnings thereon. The District's utilized share in the outstanding limited obligation bonded debt of the RNR School Financing Authority at June 30, 2013 is as follows:

Amount of Redeemed Interest Date of Maturity Original Outstanding During Outstanding Bond Rate Issue Date Issue 7/1/12 Issued Year 6/30/13

2000 A 4.lo/oto 7/27/00 9/1/30 $ 4,850,000 $ 4,460,000 $ - $ 4,460,000 $ 5.625%

2004 A 3%to 5% 6/4/04 9/1/35 15,365,000 15,120,000 105,000 15,015,000

2006A 3.65% to 8/10/06 9/1/36 12,525,000 12,375,000 75,000 12,300,000 4.74% 2012 A 2.0o/oto 7/10/12 9/1/30 4,445,000 4,445,000 4,445,000 4.0%

Totals $ 31,955,000 $ 4,445,000 $ 4,640,000 $ 31, 760,000

The annual requirements to amortize the special tax bonds, payable and outstanding as of June 30, 2013, are as follows:

Year Ending June 30: Debt Interest Totals

2014 $ 325,000 $ 1,507,175 $ 1,832,175 2015 390,000 1,495,037 1,885,037 2016 445,000 1,479,131 1,924,131 2017 505,000 1,459,325 1,964,325 2018 565,000 1,436,642 2,001,642 2019-2023 3,890,000 6,726,630 10,616,630 2024-2028 5,495,000 5,580,798 11,075,798 2029-2033 9,810,000 3,790,225 13,600,225 2034-2037 10,335,000 1,078,875 11,413,875

Totals $ 31,760,000 $ 24,553,838 $ 56,313,838

-57- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

9. ACCRETEDINTEREST

The general obligation bonds issued by the District include capital appreciation bonds. Interest on the capital appreciation bonds is accreted each year, but is not paid until the bonds reach maturity. The accreted interest at June 30, 2013 was $4,111,172 and will mature as follows:

Year Ending June 30: 2014 $ 510,146 2015 527,331 2016 506,491 2017 491,345 2018 475,330 2019-2023 1,203,371 2024-2028 300,088 2029-2033 22,176 2034-2037 74,894

Total $ 4,111,172

10. POSTEMPLOYMENT HEALTH BENEFITS

The District does not offer any postemployment benefits.

11. COMPENSATED ABSENCES

Compensated absences at June 30, 2013 consisted of:

Compensated Absences Benefits Totals

Certificated $ 1,255 $ 145 $ 1,400 Classified 73,820 16,644 90,464

Totals (all due after one year) $ 75,075 $ 16,789 $ 91,864

-58- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

12. LEASES

Operating Leases The District has entered into various operating leases for buildings and equipment with lease terms in excess of one year. None of the agreements contain a termination clause providing for cancellation after a specified number of days written notice to lessors. The District will receive no sublease rental revenues nor pay any contingent rentals for these operating leases. Operating lease rental expense for the year ended June 30, 2013 under these operating leases was $70,709. Future minimum lease payments under these agreements are as follows:

Year Ending June 30: Amount

2014 $ 75,774 2015 49,678 2016 27,027 2017 27,027 2018 27,027

Total $ 206,533

13. GENERAL LONG-TERM DEBT--SCHEDULE OF CHANGES A schedule of changes in long-term debt for the year ended June 30, 2013 is shown below:

Balance Balance 7/1/12 Additions Deductions 6/30/13

General obligation bonds $ 1,971,813 $ 16,507,908 $ 194,823 $ 18,284,898 Accreted interest--general obligation bonds 4,001,806 629,543 520,177 4,111,172 Limited obligation (special tax) bonds 31,955,000 4,445,000 4,640,000 31,760,000 Compensated absences 81,052 10,812 91,864

Totals $ 38,009,671 $ 21,593,263 $ 5,355,000 $ 54,247,934

Payments on the general obligation bonds (including accreted interest) are made by the Bond Interest and Redemption Fund with local revenues. The compensated absences will be paid by the Fund for which the employee worked. Payments on the limited obligation (special tax) bonds are made by the Debt Service Fund for Blended Component Units with local revenue.

-59- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

14. JOINT VENTURES {JOINT POWERS AGREEMENTS)

The District participates in seven joint ventures under joint powers agreements (JPAs) as follows:

Partners in Nutrition Cooperative (PinCo) (commodities and other food items)

RNR School Financing Authority (financing)

Schools Legal Services (legal services)

Self-Insured Schools of California I (SISC I) (workers' compensation insurance)

Self-Insured Schools of California II (SISC II) (property and liability insurance)

Self-Insured Schools of California III (SISC III) (health insurance)

Special Education Consortium (special education)

The relationship between the District and RNR School Financing Authority is described in Footnote IA. RNR School Financing Authority is considered a component unit of Norris School District. The relationships between the District and the other JPAs are such that none of the other JP As are component units of the District for financial reporting purposes. The JPAs provide insurance and services as noted for member school districts. Each JPA is governed by a board consisting of a representative from each member district. Such governing board controls the operations of its JPA, including selection of management and approval of operating budgets, independent of any influence by the member districts beyond representation on the governing board. Each district pays premiums and fees commensurate with the level of coverage or services requested, and shares surpluses and deficits proportionate to its participation in each JP A. Each JP A is independently accountable for its fiscal matters, and maintains its own accounting records.

-60- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

The District's share of year-end assets, liabilities, or fund equity has not been calculated by the entities, except for the RNR School Financing Authority. Condensed financial information for the above JPAs for the year ended June 30, 2013 was not available as of the audit report date, except for the RNR School Financing Authority, where the Authority's financial information is included in the District's financial statements as blended component units. Complete financial statements for the JP As may be obtained from the JP As at the addresses indicated below:

PinCo C/0 Antelope Valley Union High School District 44811 Sierra Highway Lancaster, CA 93534-3226

RNR School Financing C/0 Rosedale Union School District Authority 2553 Old Farm Road Bakersfield, CA 93312

Schools Legal Services Kem County Superintendent of Schools P. 0. Box 2445 Bakersfield, CA 93303

SISC I, II, and III Self-Insured Schools of California Kern County Superintendent of Schools P.O. Box 1847 Bakersfield, CA 93303-184 7

Special Education Kern County Superintendent of Schools Consortium 1300 17th Street, City Centre Bakersfield, CA 93301-4533

15. COMMITMENTS AND CONTINGENCIES

A. Pending Assessment for Disputed Tax Revenues

The Kem County Auditor-Controller's Office has impounded disputed revenues of school district taxes on secured and unsecured property based on claims or actions filed for the return of such tax revenues. The claims and actions are regarding the valuation of mineral rights that could trigger repayment of property taxes. Revenues are impounded until the final disposition of the claim or action.

-61- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

The Kem County Auditor-Controller has estimated the contingent liability as follows:

Pending appeals for taxes $ 187,549 Pending appeals for interest 14,667

Total 202,216

Less amount held by Kem County Auditor-Controller 190,992)

Net Contingent Liability $ 11.224

B. General Obligation Bonds A general election was held on June 5, 2012, at which more than two-thirds of the persons voting on the proposition voted to authorize the issuance of $149 ,000,000 of general obligation bonds of the District to finance real property and improvements to be used in the public education operations of the District. Bonds in the amount of $16,507,908 had been issued at June 30, 2013 leaving a remaining commitment of $132,492,092. (See further, Note 7.)

C. State and Federal Allowances, Awards and Grants The District has received state and federal funds for specific purposes that are subject to review and audit by the grantor agencies. If the review or audit discloses exceptions, the District may incur a liability to grantor agencies.

16. CONSTRUCTION-IN-PROGRESS The District has construction contracts-in-progress as follows:

Project Expended to Authorization 6/30/13 Committed

District Office Modular $ 438,480 $ 352,506 $ 85,974

17. EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS), and classified employees are members of the California Public Employees' Retirement System (CalPERS). Part­ time, temporary and seasonal employees who work less than four hours per day are members of the Self-Insured Schools of California (SISC) Defined Benefit Plan.

-62- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

A. California State Teachers' Retirement System (CalSTRS)

Plan Description

The District contributes to the California State Teachers' Retirement System (CalSTRS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, with the State Teachers' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, Post Office Box 15275, Sacramento, California 95851-0275.

Funding Policy

Active plan members are required to contribute 8.0% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year 2012-2013 was 8.25% of annual payroll. The contribution requirements of the plan members are established by state statute. The District's contributions to CalSTRS for the fiscal years ended June 30, 2013, 2012, and 2011 were $949,583, $933,588, and $919,995, respectively, and equal 100% of the required contributions for each year.

B. California Public Employees' Retirement System (CalPERS)

Plan Description

The District contributes to the School Employer Pool under the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple­ employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from CalPERS Headquarters, Lincoln Plaza North, 400 Q Street, Sacramento, California 95811.

-63- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

Funding Policy

Active plan members are required to contribute 7.0% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2012-2013 was 11.417%. The contribution requirements of the plan members are established by state statute. The District's contributions to CalPERS for the fiscal years ended June 30, 2013, 2012, and 2011 were $300,136, $279,118, and $276,300, respectively, and equal 100% of the required contributions for each year.

C. Self-Insured Schools of California (SISC) Defined Benefit Plan

Plan Description

The District contributes to the Self-Insured Schools of California (SISC) Defined Benefit Plan, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by SISC. The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions are established by the SISC Board. The SISC Defined Benefit Plan issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the SISC Defined Benefit Plan annual financial report may be obtained from the SISC, Post Office Box 1847, Bakersfield, California 93303-1847.

Funding Policy

Active plan members are not required to contribute. The District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the SISC Board. The required employer contribution rate for fiscal year 2012-2013 was 3.9% of annual payroll. There are no contribution requirements of the plan members. The District's contributions to the SISC Defined Benefit Plan for the fiscal years ending June 30, 2013, 2012 and 2011 were $12,290, $11,331, and $10,517 respectively, and equal 100% of the required contributions.

-64- NORRIS SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

18. SECTION 457 DEFERRED COMPENSATION PLAN

Plan Description

The District's Board of Trustees previously authorized the establishment of a qualified Internal Revenue Code Section 457 deferred compensation plan for the exclusive benefit of all eligible employees of the District.

Funding Policy

The District contributes to an Employer Funded 457 Plan. The rate of contribution is as follows: 1% District match for employees who contribute 2%. Certificated employees are required to participate. Participation for classified employees is optional. The District's contributions to the Plan for the fiscal year ended June 30, 2013, 2012, and 2011 were $124,355, $121,889, and $121,099, respectively. The employee contributions for the fiscal year ended June 30, 2013 were $438,236.

19. SECTION 403{B) TAX-SHELTERED ANNUITY PLAN

Plan Description

The District's Board of Trustees authorized the establishment of a Section 403(b) Tax­ Sheltered Annuity Plan. This is a retirement plan funded by elective deferrals made under salary reduction agreements.

Funding Policy

All eligible employees electing to participate in this plan choose the amount of monthly compensation deferrals up to maximums allowed by the Internal Revenue Code and its regulations and rulings. The District does not contribute to the plan on behalf of participating employees. For the fiscal year ended June 30, 2013, there were 47 employees that had elected to participate, with total compensation deferrals of $188,453.

20. ON-BEHALF PAYMENTS MADE BY THE STATE OF CALIFORNIA

The District was the recipient of on-behalf payments made by the State of California to CalSTRS for K-12 education. These payments consist of State General Fund contributions of $519,911 to CalSTRS (5.175512% of salaries subject to CalSTRS).

-65- REQUIRED SUPPLEMENTARY INFORMATION SECTION NORRIS SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL (GAAP) (BY OBJECT)--GENERAL FUND YEAR ENDED JUNE 30, 2013

General Fund Variance with Actual Final Budget Budgeted Amounts (GAAP) Positive/ Original Final Basis (Negative)

Revenues Revenue limit sources State appottionments $ 14,216,755 $ 16,274,220 $ 16,256,026 $ (18,194) Local sources 2,453,664 2,629,585 2,600,770 (28,815)

Total Revenue Limit 16,670,419 18,903,805 18,856,796 (47,009)

Federal revenue 670,732 707,194 707, 194 Other state revenue 4,184,865 2,843,151 2,837,829 (5,322) State on-behalf payments 517,280 517,280 Other local revenue 61,685 2,295,734 2,673,491 377,757

Total Revenues 21,587,701 25,267,164 25,592,590 325,426

Expenditures Ce1tificated salaries 11,349,132 11,543,000 11,541,073 1,927 Classified salaries 2,375,397 2,463,729 2,461,816 1,913 Employee benefits 5,157,653 5,110,455 5,077,705 32,750 State on-behalf payments 517,280 517,280 Books and supplies 602,748 1,246,721 1,236,874 9,847 Services and other operating expenditures 1,595,492 1,995,386 1,936,312 59,074 Capital outlay 75,000 371,467 367,645 3,822 Payments to County Office 1,634,558 1,654,340 1,654,051 289

Total Expenditures 22,789,980 24,902,378 24,792,756 109,622

Excess (Deficiency) of Revenues Over Expenditures (1,202,279) 364,786 799,834 435,048

Other Financing Sources Operating transfers in 411,675 (411,675)

Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures (1,202,279) 776,461 799,834 23,373

Fund Balance, July 1, 2012 8,211,961 8,211,961 8,211,962

Fund Balance, June 30, 2013 $ 7,009,682 $ 8,988,422 $ 9,011,796 $ 23,374

See notes to the basic financial statements.

-66- SUPPLEMENTARY INFORMATION SECTION NORRIS SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES--BUDGET AND ACTUAL (GAAP) (BY OBJECT)--MAJOR DEBT SERVICE AND CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2013

Debt Service Fund for Blended Comeonent Units Variance with Actual Final Budget Budgeted Amounts (GAAP) Positive/ Original Final Basis (Negative)

Revenues

Other local revenue $ 2,631,500 $ 2,728,500 $ 2,725,868 $ (2,632)

Expenditures

Books and supplies

Services and other operating expenditures

Capital outlay

Debt service

Principal retirement 265,000 4,640,000 4,640,000

Interest and fiscal charges 1,595,806 1,665,806 1,662,505 3,301

Total Expenditures 1,860,806 6,305,806 6,302,505 3,301

Excess (Deficiency) of Revenues Over Expenditures 770,694 (3,577,306) (3,576,637) 669

Other Financing Sources (Uses)

Operating transfers out (704,875) (704,875)

All other financing sources

Proceeds from sale of bonds 4,445,000 4,445,000

Total Other Financing Sources (Uses) 3,740,125 3,740,125

Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 770,694 162,819 163,488 669

Fund Balances, July 1, 2012 1,821,864 1,821,864 1,821,865

Fund Balances, June 30, 2013 $ 2,592,558 $ 1,984,683 $ 1,985,353 $ 670

See notes to the basic financial statements. Building Fund Capital Projects Fund for Blended Component Units Variance with Variance with Actual Final Budget Actual Final Budget Budgeted Amounts (GAAP) Positive/ Budgeted Amounts (GAAP) Positive/ Original Final Basis (Negative) Original Final Basis (Negative)

$ $ 48,626 $ 47,804 _$ __~(8_22~) $ 385,000 $ 1,506,089 $ 1,481,565 $ (24,524)

14,169 14,169

522,512 521,712 800 75,000 59,541 45,314 14,227

1,293,385 1,293,280 105 20,000 464,390 451,421 12,969

1,815,897 1,814,992 905 95,000 538, 100 510,904 27,196

(l,767,271) (l, 767, 188) 83 290,000 967,989 970,661 2,672

(200,000) (200,000)

16,507,908 16,507,908

16,507,908 16,507,908 (200,000) (200,000)

14,740,637 14,740,720 83 290,000 767,989 770,661 2,672

2,920,024 2,920,024 2,920,025

$ $ 14,740,637 $ 14,740,720 $ 83 $ 3,210,024 $ 3,688,013 $ 3,690,686 $ 2,673 ======

-67- Combining Statements--General Fund NORRIS SCHOOL DISTRICT COMBINING BALANCE SHEET GENERAL FUND JUNE 30, 2013

Totals-- Combined Deferred General General Maintenance Fund ASSETS Fund Fund (GASB 54)

Cash in County Treasury $ 5,201,095 $ 61,014 $ 5,262,109

Cash on hand and in banks 399 399

Cash in revolving fund 10,100 10,100

Accounts receivable 6,016,206 70 6,016,276

Total Assets $ 11,227,800 $ 61,084 $ 11,288,884

LIABILITIES AND FUND BALANCES

Liabilities

Accounts payable $ 2,277,088 $ $ 2,277,088

Fund Balances

Nonspendable Revolving fund 10,100 10,100

Restricted Legally restricted balances 448,542 448,542

Assigned Other assignments 3,634,582 61,084 3,695,666

Unassigned 4,857,488 4,857,488

Total Fund Balances 8,950,712 61,084 9,011,796

Total Liabilities and Fund Balances $ 11,227,800 $ 61,084 $ I 1,288,884

See notes to the basic financial statements. -68- NORRIS SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Totals-- Combined Deferred General General Maintenance Fund Fund Fund (GASB 54)

Revenues Revenue limit sources State apportionments $ 16,256,026 $ $ 16,256,026 Local sources 2,600,770 2,600,770

Total Revenue Limit 18,856,796 18,856,796

Federal revenue 707,194 707,194 Other state revenue 2,837,829 2,837,829 State on-behalf payments 517,280 517,280 Other local revenue 2,673, 184 307 2,673,491

Total Revenues 25,592,283 307 25,592,590

Expenditures Certificated salaries 11,541,073 11,541,073 Classified salaries 2,461,816 2,461,816 Employee benefits 5,077,705 5,077,705 State on-behalf payments 517,280 517,280 Books and supplies 1,236,874 1,236,874 Services and other operating expenditures 1,936,312 1,936,312 Capital outlay 367,645 367,645 Payments to County Office 1,654,051 1,654,051

Total Expenditures 24,792,756 24,792,756

Excess of Revenues Over Expenditures 799,527 307 799,834

Fund Balances, July 1, 2012 8,151,185 60,777 8,211,962

Fund Balances, June 30, 2013 $ 8,950,712 $ 61,084 $ 9,011,796

See notes to the basic financial statements.

-69-

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NORRIS SCHOOL DISTRICT COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES--BUDGET AND ACTUAL (GAAP) GENERAL FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

General Fund (lnternaQ Variance with Actual Final Budget Budgeted Amounts (GAAP) Positive/ Original Final Basis (Negative)

Revenues

Revenue limit sources State apportionments $ 14,216,755 $ 16,274,220 $ 16,256,026 $ (18,194) Local sources 2,453,664 2,629,585 2,600,770 (28,815)

Total Revenue Limit 16,670,419 18,903,805 18,856,796 (47,009)

Federal revenue 670,732 707,194 707,194 Other state revenue 4,184,865 2,843, 151 2,837,829 (5,322) State on-behalf payments 517,280 517,280 Other local revenue 61,685 2,295,734 2,673,184 377,450

Total Revenues 21,587,701 25,267,164 25,592,283 325,119

Expenditures

Certificated salaries 11,349, 132 11,543,000 11,541,073 1,927 Classified salaries 2,375,397 2,463,729 2,461,816 1,913 Employee benefits 5, 157,653 5, 110,455 5,077,705 32,750 State on-behalf payments 517,280 517,280 Books and supplies 602,748 1,246,721 1,236,874 9,847 Services and other operating expenditures 1,595,492 1,995,386 1,936,312 59,074 Capital outlay 75,000 371,467 367,645 3,822 Payments to County Office 1,634,558 1,654,340 1,654,051 289

Total Expenditures 22,789,980 24,902,378 24,792,756 109,622

Excess (Deficiency) of Revenues Over Expenditures (1,202,279) 364,786 799,527 434,741

Other Financing Sources

Operating transfers in 411,675 (411,675)

Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures (1,202,279) 776,461 799,527 23,066

Fund Balances, July 1, 2012 8,151,185 8,151,185 8, 151, 185

Fund Balances, June 30, 2013 $ 6,948,906 $ 8,927,646 $ 8,950,712 $ 23,066

See notes to the basic financial statements. Deferred Maintenance Fund Totals--Combined General Fund (GASB 54) Variance with Variance with Actual Final Budget Actual Final Budget Budgeted Amounts (GAAP) Positive/ Budgeted Amounts (GAAP) Positive/ Original Final Basis (Negative) Original Final Basis (Negative)

$ $ $ $ $ 14,216, 755 $ 16,274,220 $ 16,256,026 $ (18, 194) 2,453,664 2,629,585 2,600,770 (28,815)

16,670,419 18,903,805 18,856,796 (47,009)

670,732 707,194 707,194 4,184,865 2,843, 151 2,837,829 (5,322) 517,280 517,280 307 307 61,685 2,295,734 2,673,491 377,757

307 307 21,587,701 25,267, 164 25,592,590 325,426

11,349, 132 11,543,000 11,541,073 1,927 2,375,397 2,463,729 2,461,816 1,913 5,157,653 5, 110,455 5,077,705 32,750 517,280 517,280 602,748 1,246,721 1,236,874 9,847 1,595,492 1,995,386 1,936,312 59,074 75,000 371,467 367,645 3,822 1,634,558 1,654,340 1,654,051 289

22,789,980 24,902,378 24,792,756 109,622

307 307 ( 1,202,279) 364,786 799,834 435,048

411,675 (411,675)

307 307 (1,202,279) 776,461 799,834 23,373

60,776 60,776 60,777 8,211,961 8,211,961 8,211,962

$ 60,776 $ 60,776 $ 61,084 $ 308 $ 7,009,682 $ 8,988,422 $ 9,011,796 $ 23,374 ======

-70- Combining Statements--Nonmajor Funds NORRIS SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2013

Capital Special Facilities Reserve ASSETS Fund Fund Totals

Cash in County Treasury $ 469,830 $ 908,693 $ 1,378,523

Investments with agent 1,285,711 1,285,711

Accounts receivable 531 832 1,363

Total Assets $ 470,361 $ 2,195,236 $ 2,665,597

LIABILITIES AND FUND BALANCES

Liabilities $ $ $

Fund Balances

Assigned

Other assignments 470,361 2,195,236 2,665,597

Total Liabilities and Fund Balances $ 470,361 $ 2,195,236 $ 2,665,597

See notes to the basic financial statements.

-71- NORRIS SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS (BY OBJECT) - YEARENDEDJUNE3~2ITT3

Capital Special Facilities Reserve Fund Fund Totals

Revenues

Other local revenue $ 71,461 $ 19,251 $ 90,712

Expenditures

Services and other operating expenditures 1,717 1,717

Capital outlay 18,502 18,502

Total Expenditures 1,717 18,502 20,219

Excess of Revenues Over Expenditures 69,744 749 70,493

Other Financing Sources

Operating transfers in 904,875 904,875

Excess of Revenues and Other Financing Sources Over Expenditures 69,744 905,624 975,368

Fund Balances, July 1, 2012 400,617 1,289,612 1,690,229

Fund Balances, June 30, 2013 $ 470,361 $ 2,195,236 $ 2,665,597

See notes to the basic financial statements.

-72-

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NORRIS SCHOOL DISTRICT COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES--BUDGET AND ACTUAL NONMAJOR CAPITAL PROJECTS FUNDS (BY OBJECT) YEAR ENDED JUNE 30, 2013

Capital Facilities Fund Variance Favorable Budget Actual (Unfavorable)

Revenues

Other local revenue $ 72,000 $ 71,461 $ (539)

Expenditures

Services and other operating expenditures 2,000 1,717 283

Capital outlay

Total Expenditures 2,000 1,717 283

Excess of Revenues Over Expenditures 70,000 69,744 (256)

Other Financing Sources

Operating transfers in

Excess of Revenues and Other Financing Sources Over Expenditures 70,000 69,744 (256)

Fund Balances, July 1, 2012 400,617 400,617

Fund Balances, June 30, 2013 $ 470,617 $ 470,361 $ (256)

See notes to the basic financial statements. Special Reserve Fund Totals Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable)

$ 20,000 $ 19,251 $ (749) $ 92,000 $ 90,712 $ (1,288) ----'----'- ----'-''---~

2,000 1,717 283

19,000 18,502 498 19,000 18,502 . 498

19,000 18,502 498 21,000 20,219 781

1,000 749 (251) 71,000 70,493 (507)

904,875 904,875 904,875 904,875

905,875 905,624 (251) 975,875 975,368 (507)

1,289,611 1,289,612 1,690,228 1,690,229

$ 2,195,486 $ 2,195,236 $ (250) $ 2,666, 103 $ 2,665,597 =$===(=50=6=) ======

-73- Individual Fund Statements--Nonmajor Funds NORRIS SCHOOL DISTRICT BALANCE SHEET NONMAJOR SPECIAL REVENUE FUND JUNE 30, 2013

Cafeteria ASSETS Fund

Cash in County Treasury $ 158,511 Cash on hand and in banks 7,648 Cash in revolving fund 550 Accounts receivable 41,639 Stores inventories Supplies 1,831 Food 4,499 Prepaid expenditures 32,586

Total Assets $ 247,264

LIABILITIES AND FUND BALANCE

Liabilities Accounts payable $ 7,900

Fund Balance Nonspendable Revolving fund 550 Stores inventories 6,330 Prepaid expenditures 32,586 Assigned Other assignments 199,898

Total Fund Balance 239,364

Total Liabilities and Fund Balance $ 247,264

See notes to the basic financial statements.

-74- NORRIS SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR SPECIAL REVENUE FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Cafeteria Fund

Revenues

Federal revenue $ 387,395

Other state revenue 21,692

Other local revenue 502,054

Total Revenues 911,141

Expenditures

Classified salaries 205,847

Employee benefits 57,025

Books and supplies 627,033

Services and other operating expenditures 21,691

Capital outlay 4,716

Total Expenditures 916,312

Deficiency of Revenues Over Expenditures (5,171)

Fund Balance, July 1, 2012 244,535

Fund Balance, June 30, 2013 $ 239,364

See notes to the basic financial statements. -75- NORRIS SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL NONMAJOR SPECIAL REVENUE FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Cafeteria Fund Variance Favorable Budget Actual (Unfavorable)

Revenues

Federal revenue $ 374,171 $ 387,395 $ 13,224

Other state revenue 20,000 21,692 1,692

Other local revenue 577,000 502,054 (74,946)

Total Revenues 971,171 911,141 (60,030)

Expenditures

Classified salaries 206,509 205,847 662

Employee benefits 57,196 57,025 171

Books and supplies 694,671 627,033 67,638

Services and other operating expenditures 26,565 21,691 4,874

Capital outlay 5,000 4,716 284

Total Expenditures 989,941 916,312 73,629

Deficiency of Revenues Over Expenditures (18,770) (5,171) 13,599

Fund Balance, July 1, 2012 244,534 244,535

Fund Balance, June 30, 2013 $ 225,764 $ 239,364 $ 13,600

See notes to the basic financial statements. -76- NORRIS SCHOOL DISTRICT BALANCE SHEET NONMAJOR DEBT SERVICE FUND JUNE 30, 2013

Bond Interest and Redemption ASSETS Fund

Cash in County Treasury $ 364,533

LIABILITIES AND FUND BALANCE

Liabilities $

Fund Balance

Restricted for debt services 364,533

Total Liabilities and Fund Balance $ 364,533

See notes to the basic financial statements.

-77- NORRIS SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR DEBT SERVICE FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Bond Interest and Redemption Fund

Revenues

Other state revenue $ 20,709 Other local revenue 1,210,229

Total Revenues 1,230,938

Expenditures

Debt service Principal retirement 194,823 Interest and fiscal charges 779,080

Total Expenditures 973,903

Excess of Revenues Over Expenditures 257,035

Other Financing Sources

All other financing sources Other 41,476

Excess of Revenues and Other Financing Sources Over Expenditures 298,511

Fund Balance, July 1, 2012 66,022

Fund Balance, June 30, 2013 $ 364,533

See notes to the basic financial statements. -78- NORRIS SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL NONMAJOR DEBT SERVICE FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Bond Interest and Redemption Fund Variance Favorable Budget Actual (Unfavorable)

Revenues

Other state revenue $ 21,000 $ 20,709 $ (291) Other local revenue 1,209,000 1,210,229 1,229

Total Revenues 1,230,000 1,230,938 938

Expenditures

Debt service Principal retirement 195,000 194,823 177 Interest and fiscal charges 780,000 779,080 920

Total Expenditures 975,000 973,903 1,097

Excess of Revenues Over Expenditures 255,000 257,035 2,035

Other Financing Sources

All other financing sources Other 41,476 41,476

Excess of Revenues and Other Financing Sources Over Expenditures 255,000 298,511 43,511

Fund Balance, July 1, 2012 66,022 66,022

Fund Balance, June 30, 2013 $ 321,022 $ 364,533 $ 43,511

See notes to the basic financial statements.

-79- NORRIS SCHOOL DISTRICT BALANCE SHEET NONMAJOR PROPRIETARY FUND JUNE 30, 2013

Other Enterprise ASSETS Fund

Cash in County Treasury $ 1,346,736

Cash on hand and in banks 68,547

Accounts receivable 1,366

Total Assets $ 1,416,649

LIABILITIES AND FUND BALANCE

Liabilities

Accounts payable $ 22,441

Fund Balance

Unassigned 1,394,208

Total Liabilities and Fund Balance $ 1,416,649

See notes to the basic financial statements. -80- NORRIS SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR PROPRIETARY FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Other Enterprise Fund

Revenues

State on-behalf payments $ 2,631 Other local revenue 582,201

Total Revenues 584,832

Expenditures

Ce1tificated salaries 58,246 Classified salaries 252,146 Employee benefits 75,953 State on-behalf payments 2,631 Books and supplies 52,544 Services and other operating expenditures 5,201

Total Expenditures 446,721

Excess of Revenues Over Expenditures 13 8, 111

Fund Balance, July 1, 2012 1,256,097

Fund Balance, June 30, 2013 $ 1,394,208

See notes to the basic financial statements.

-81- NORRIS SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL NONMAJOR PROPRIETARY FUND (BY OBJECT) YEAR ENDED JUNE 30, 2013

Other Enterprise Fund Variance Favorable Budget Actual (Unfavorable)

Revenues

State on-behalf payments $ 44,650 $ 2,631 $ (42,019) Other local revenue 998,000 582,201 {415,799)

Total Revenues 1,042,650 584,832 (457,818)

Expenditures

Ce1tificated salaries 59, 104 58,246 858 Classified salaries 254,895 252,146 2,749 Employee benefits 76,839 75,953 886 State on-behalf payments 2,631 2,631 Books and supplies 54,000 52,544 1,456 Services and other operating expenditures 7,900 5,201 2,699

Total Expenditures 455,369 446,721 8,648

Excess of Revenues Over Expenditures 587,281 138,111 (449,170)

Other Financing Uses

Operating transfers out (413,350) 413,350

Excess of Revenues Over Expenditures and Other Financing Uses 173,931 138,111 (35,820)

Fund Balance, July 1, 2012 1,256,096 1,256,097

Fund Balance, June 30, 2013 $ 1,430,027 $ 1,394,208 $ (35,819)

See notes to the basic financial statements. -82- Other Supplementary Information NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

ORGANIZATION STRUCTURE

The District was established on September 30, 1880, and is comprised of an area of approximately 15 square miles, located in Kern County, northwest of Bakersfield, California. There were no changes in the boundaries of the District during the year ended June 30, 2013. The District is currently operating four elementary schools and one middle school.

Board of Trustees

Name Office Term Ex~ires

Sue Dodgin President November, 2016

John Genter Clerk November, 2014

Bob Beechinor Member November, 2014

Jim Bowles Member November, 2016

Jeff Stone Member November, 2014

Administration

Steven K. Shelton District Superintendent

Kelly Miller Assistant Superintendent

Kade M. Duey Director of Fiscal Services

-83- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

SCHEDULE OF AVERAGE DAILY ATTENDANCE

District ADA Audited ADA Second Second Period Annual Period Annual

Elementary

Regular

Kindergarten 437.15 438.06 437.15 438.06

Grades 1 - 3 1,228.64 1,232.59 1,228.64 1,232.59

Grades 4 - 6 1,234.20 1,232.36 1,234.20 1,232.36

Grades 7 - 8 796.97 796.01 796.97 796.01

Opportunity schools 4.16 4.51 4.16 4.51

Home and hospital 1.20 1.31 1.20 1.31

Special education--special day class 27.88 27.77 27.88 27.77

Extended year special education--special day class 12.25 12.25 12.25 12.25

ADA Totals 3,742.45 3,744.86 3,742.45 3,744.86

Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs.

-84- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

SCHEDULE OF INSTRUCTIONAL TIME

1982-83 1982-83 1986-87 1986-87 2012-13 Offered Minutes Required Minutes Offered Days Grade Level Minutes as Reduced Minutes as Reduced Minutes Offered Status

Kindergarten 43,200* 42,000 36,000 35,000 55,702 180 In Compliance

Grade 1 49,875 48,490 50,400 49,000 52,518 180 In Compliance

Grade 2 49,875 48,490 50,400 49,000 52,518 180 In Compliance

Grade 3 49,875 48,490 50,400 49,000 57,753 180 In Compliance

Grade 4 56,350 54,785 54,000 52,500 59,302 180 In Compliance

Grade 5 56,350 54,785 54,000 52,500 59,302 180 In Compliance

Grade 6 56,350 54,785 54,000 52,500 60,431 180 In Compliance

Grade 7 61,600 59,889 54,000 52,500 65,614 180 In Compliance

Grade 8 61,600 59,889 54,000 52,500 65,614 180 In Compliance

* Because the 1982-83 offered minutes were above the legal maximum, that standard is reduced to the legal maximum of 43,200. Actual kindergarten minutes offered in 1982-83 was 43,750.

Districts must maintain their instructional minutes at either the 1982-83 actual minutes or the 1986-87 requirements, whichever is greater, as required by Education Code Section 46201.

The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections 46200 through 46206.

For fiscal year 2012-13, the minimum instructional time is reduced pursuant to the provisions of Education Code Section 46201.2, and the minimum number of days is reduced to 175 days for schools on a traditional calendar or to 158 days for multitrack year-round schools.

-85- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS

(Budget) General Fund 2014 2013 2012 2011 Revenues and Other Financing Sources $ 24,805,852 $ 25,592,590 $ 24,667,044 $ 25,092,109 Expenditures 23,963,299 24,792,756 23,869,932 24,518,392 Other Financing Uses and Transfers Out Total Outgo 23,963,299 24,792,756 23,869,932 24,518,392 Change in Fund Balance $ 842,553 $ 799,834 $ 797,112 $ 573,717 Ending Fund Balance $ 9,854,347 $ 9,011,796 $ 8,211,962 $ 7,414,850 Unassigned Fund Balance $ 6,290,697 $ 4,857,488 $ 7,839,836 $ 6,724,638 Reserve for Economic Uncertainties Available Reserves $ 6,290,697 $ 4,857,488 $ 7,839,836 $ 6,724,638 Available Reserves as a Percentage of Total Outgo 26.25% 19.59% 32.84% 27.43% Total Long-Term Debt $ 53,975,554 $ 54,247,934 $ 38,009,671 $ 38,462,301 Average Daily Attendance at P-2--Traditional 3,742 3,742 3,637 3,503

This schedule discloses the District's financial trends by displaying past years' data along with budget information for the fiscal year ending June 30, 2014. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time.

The General Fund balance has increased by $1,596,946 over the past two years. The fiscal year 2013-2014 budget projects a further increase of $842,553 (9.3%). For a District this size, the state recommends available reserves of at least 3% of total General Fund expenditures, transfers out, and other uses (total outgo), but not less than $60,000. The District's available reserves are in excess of this suggested balance.

The District has not incurred an operating deficit in any of the past three years, and does not anticipate an operating deficit during the 2013-2014 fiscal year.

Total long-term debt has increased by $15,785,633 over the past two years.

Average daily attendance has increased by 239 over the past two years. During fiscal year 2013-2014, no change in ADA is anticipated.

-86- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS

Pass-Through Federal Entity Grantor/Pass-Through CFDA Identifying Federal Grantor/Program or Cluster Title Number Number Expenditures

U.S. Department of Education

Passed through California Department of Education (CDE)

* Special Education--Grants to States 84.027 10115, 13379, 13682 $ 640,619 * Special Education--Preschool Grants 84.173 13430 14,652

Improving Teacher Quality State Grants 84.367 14341 42,289

Education Jobs Fund 84.410 25152 9,634

Total U.S. Department of Education 707,194

U.S. Department of Agriculture

Passed through CDE

National School Lunch Program 10.555 13523, 13524 387,395

Total Expenditures of Federal Awards $ 1,094,589

* = Major Federal Program

There were no expenditures of American Recovery and Reinvestment Act (ARRA) funds.

See notes to schedule of expenditures of federal awards.

-87- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

1. BASIS OF PRESENTATION

The accompanying schedule of expenditures of federal awards includes the federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements.

2. NON-CASH ASSISTANCE

Federal expenditures for the National School Lunch Program includes $72,671 of food commodities consumed. Food commodities are valued at the assessed value provided by the United States Department of Agriculture.

3. SUBRECIPIENTS

The District did not provide any awards to subrecipients.

* * *

-88- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT (SACS 2013) WITH AUDITED FINANCIAL STATEMENTS, ALL GOVERNMENTAL FUNDS

Deferred General Maintenance Fund Fund

Annual Financial and Budget Report (SACS 2013) Fund Balances $ 8,950,712 $ 61,084

Adjustments and Reclassifications Increasing (Decreasing) the Fund Balances

Reclassification of Funds per GASB 54 61,084 (61,084)

Audited Financial Statements Fund Balances $ 9,011,796 $

This schedule provides the information necessary to reconcile the fund balances of all Funds reported on SACS 2013 forms to the audited financial statements.

There were no audit adjustments for the remaining District Funds not listed above.

-89- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT {SACS 2013) FORM DEBT WITH AUDITED FINANCIAL STATEMENTS

Total Debt Reported on Form DEBT $ 54,450,394

Adjustments to Reported Amounts

General obligation bonds payable (202,460)

Total Debt Per Financial Statements $ 54,24 7 ,934

This schedule provides the information necessary to reconcile the long-term debt reported on SACS 2013 Form DEBT to the audited financial statements.

-90- NORRIS SCHOOL DISTRICT OTHER SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30,. 2013

SCHEDULE OF CHARTER SCHOOLS

No Charter Schools are chartered by the District.

* * *

EXCESS SICK LEAVE

The District did not authorize or accrue any excess sick leave as that term is defined in subdivision (c) of Education Code Section 22170.5 for the District's employees who are members of the California State Teachers' Retirement System (CalSTRS).

* * *

-91- OTHER INDEPENDENT AUDITORS' REPORTS ======I~ cfln

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Trustees Norris School District Bakersfield, California:

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Norris School District (the District), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated October 17, 2013.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District's internal control over financial repo1iing (internal control) to determine the audit procedures that are appropriate in the circumstances for the pmpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of District's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Santa Maria Building • 575 E. Locust Ave., • Suite 308 • Fresno, Ca 93720-2928 (559) 438-8740 • FAX 438·8746

-92- Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

October 17, 2013

-93- I~ cfin

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REOUffiED BY OMB CffiCULAR A-133

Board of Trustees Norris School District Bakersfield, California:

Report on Compliance for Each Major Federal Program We have audited Norris School District's (the District) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the District's major federal programs for the year ended June 30, 2013. The District's major federal programs are identified in the Summary of Auditors' Results section of the accompanying Schedule of Findings and Questioned Costs.

Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditors' R esponsibility Our responsibility is to express an opinion on compliance for each of the District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits ofStates , Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District's compliance.

Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2013.

Santa Maria Building • 575 E. Locust Aue., • Suite 308 • Fresno, Ca 93720-2928 (559) 438-8740 • FAX 438-8746

-94- Report on Internal Control Over Compliance

Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types ofrequirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Norris School District, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements. We issued our report thereon dated October 17, 2013, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

The purpose ofthis report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

October 17, 2013

-95- ciJnaer, /l)eferjon, ======(?Jr(/um_ _((-/~ V)o=.~======Gary A. Shrum ___)h C7 L( Kendre, L. Keiscome Certified Public Accountants Marilyn K. Ac/ams 6 Licensed by the California Board of Accountancy Robert L. linger (Retired) Jim L Peterson (Retired)

INDEPENDENT AUDITORS' REPORT ON STATE COMPLIANCE

Board of Trustees Nonis School District Bakersfield, California:

Report on State Compliance

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Norris School District, as of and for the year ended June 30, 2013, which collectively comprise the District's basic financial statements, and have issued our report thereon dated October 17, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards set forth in Government Auditing Standards, issued by the Comptroller General of the United States of America, and Standards and Procedures for Audits of California K-12 Local Educational Agencies, prescribed in the California Code ofRegulations (CCR) , Title 5, Education, Section 19810 and following. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In connection with the audit refened to above, we performed a compliance audit of the District's compliance with State laws and regulations for the year ended June 30, 2013. The specific compliance requirements tested can be found in the California Code ofRegulations (CCR), Title 5, Education, Division 1.5. Education Audit Appeals Panel, Chapter 3. Audits of California K-12 Local Educational Agencies.

Management's Responsibility

The District's management is responsible for the District's compliance with the applicable compliance requirements.

Auditors' Responsibility

Our responsibility is to express an opinion on the District's compliance with the applicable compliance requirements based on our compliance audit. Our compliance audit was made in accordance with auditing standards generally accepted in the United States of America, the

Santa Maria Building • 575 E. Locust Ave., • Suite 308 • Fresno, Ca 93720-2928 (559) 438-8740 • FAX 438-8746

-96- standards applicable to financial and compliance audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and Standards and Procedures for Audits of California K-12 Local Educational Agencies, prescribed in the California Code ofRegulations (CCR), Title 5, Education, Section 19810 and following. Our compliance audit included examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our compliance audit provides a reasonable basis for our opinion. Our compliance audit does not provide a legal determination on the District's compliance with these requirements. We selected and tested transactions and records to determine the District's compliance with the laws and regulations applicable to the items below. The reference following each item is the section of California Code of Regulations (CCR), Title 5, Education, Division 1.5. Education Audit Appeals Panel, Chapter 3. Audits of California K-12 Local Educational Agencies where a detailed description of the applicable compliance requirements can be found.

CCR Procedures in Procedures Description Section Audit Guide Performed

Attendance Accounting: Attendance reporting 19817.2 6 Yes Teacher Certification and Misassignments 19817.5 3 Yes Kindergarten continuance 19818 3 Yes Independent study 19819 23 No (see below) Continuation education 19820 10 Not Applicable Instructional Time: School districts 19824.1 6 Yes County Offices Of Education 19824.1 3 Not Applicable Instructional Materials General requirements 19828.4 8 Yes Ratios of Administrative Employees to Teachers 19829 1 Yes Classroom Teacher Salaries 19829.5 1 Yes Early Retirement Incentive 19830.1 4 Not Applicable GANN Limit Calculation 19831 1 Yes School Accountability Report Card 19837.3 3 Yes Juvenile Court Schools 19840 8 Not Applicable Class Size Reduction (including in charter schools) General requirements 19845.2 7 Yes Option one 19845.2 3 Yes Option two 19845.2 4 Not Applicable Districts or charter schools with only one school serving K-3 19845.2 4 Not Applicable

-97- CCR Procedures in Procedures Description Section Audit Guide Performed

After School Education and Safety Program General requirements 19846.1 4 Not Applicable After school 19846.1 5 Not Applicable Before school 19846.1 6 Not Applicable Contemporaneous Records of Attendance for Charter Schools 19850 1 Not Applicable Mode of Instruction for Charter Schools 19851 1 Not Applicable N onclassroom-Based Instruction/ Independent Study for Charter Schools 19852 15 Not Applicable Determination of Funding for Nonclassroom-Based Instruction for Charter Schools 19853 3 Not Applicable Annual Instructional Minutes-­ Classroom-Based for Charter Schools 19854.1 4 Not Applicable

We did not perform testing for independent study because the ADA for this program was under the level which requires testing.

Opinion on State Compliance

In our opinion, the Norris School District complied, in all material respects, with the state laws and regulations referred to above. Further, based on our examination, for items not tested, nothing came to our attention to indicate that the. Norris School District had not complied, in all material respects, with the state laws and regulations.

Purpose of this Report

This report is intended solely for the information and use of the District's management and Board, the Kern County Office of Education, the California State Department of Education, the State Controller's Office, and federal awarding agencies, and is not intended to be and should not be used by anyone other than these specified parties.

October 17, 2013

-98- FINDINGS AND RECOMMENDATIONS SECTION NORRIS SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

SECTION I - SUMMARY OF AUDITORS' RESULTS

Financial Statements

Type of Auditors' Report issued: Unmodified

Internal control over financial reporting: Material weakness identified? No Significant deficiency identified not considered to be a material weakness? No

Noncompliance material to financial statements noted? No

Federal Awards

Internal control over major programs: Material weakness identified? No Significant deficiency identified not considered to be a material weakness? No

Type of Auditors' Report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section .510(a)? No

Identification of major programs:

CFDA Numbers Name of Federal Program or Cluster

84.027, 84.173 Special Education Cluster

Dollar threshold used to distinguish between Type A and Type B programs: $300,000

Auditee qualified as low-risk auditee? No

-99- NORRIS SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

State Awards

Internal control over State programs: Material weakness identified? No Significant deficiency identified not considered to be a material weakness? No

Type of Auditors' Report issued on compliance for State programs: Unmodified

SECTION II-FINANCIAL STATEMENT FINDINGS

This section identifies the significant deficiencies, material weaknesses, and instances of noncompliance related to the financial statements that are required to be reported in accordance with paragraphs 5.18 through 5.20 of Government Auditing Standards.

There were no Financial Statement findings or questioned costs.

SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

This section identifies the audit findings required to be reported by Circular A-133, Section .510(a) (e.g., significant deficiencies, material weaknesses, and instances of noncompliance, including questioned costs).

There were no Federal award findings or questioned costs.

SECTION IV-STATE AWARD FINDINGS AND QUESTIONED COSTS

This section identifies the audit findings pertaining to noncompliance with State program rules and regulations.

There were no State award findings or questioned costs.

* * *

-100- NORRIS SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR FINDINGS YEAR ENDED JUNE 30, 2013

Finding District Explanation if Number Findings/Recommendations Status Not Fully Implemented

2012-1 There were insufficient numbers of Implemented employees to adequately separate duties in the Student Bodies at all school sites. We recommend that duties be segregated as much as possible in order to enhance internal control.

2012-2 For the Bimat Elementary School Implemented Student Body Fund, some randomly selected expenditures were not cancelled upon payment. All documentation from vendors should be clearly marked as "Paid" to avoid duplicate payments.

2012-3 For the Bimat Elementary School Implemented Student Body Fund, some randomly selected expenditures were not supported by appropriate documentation. Purchase orders should be used and approved prior to purchase, and invoices should document all expenditures.

* * *

-101-

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APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (this “Disclosure Agreement”) is executed and delivered by the Norris School District (the “District”) in connection with the execution and delivery of $9,381,072.90 aggregate principal or denominational amount of 2012 Election General Obligation Bonds, 2014 Series B (the “Bonds”). The Bonds are being issued pursuant to a Resolution adopted by the Board of Trustees of the District on July 9, 2014 (the “Resolution”). Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Resolution.

In consideration of the execution and delivery of the Bonds by the District and the purchase of such Bonds by the Underwriter described below, the District hereby covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District for the benefit of the Bondholders and in order to assist Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) in complying with Rule 15c2-12(b)(5) (the “Rule”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SECTION 2. Additional Definitions. In addition to the above definitions and the definitions set forth in the Resolution, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 4 and 5 of this Disclosure Agreement.

“Bondholder” or “Holder” means any holder of the Bonds or any beneficial owner of the Bonds so long as they are immobilized with DTC.

“Designated Material Event” means any of the events listed in Section 6(a) of this Disclosure Agreement.

“Dissemination Agent” shall mean the District, or any Dissemination Agent, or any alternate or successor Dissemination Agent, designated in writing by the Superintendent (or otherwise by the District), which Dissemination Agent has evidenced its acceptance in writing. Initially, the Dissemination Agent shall be Dolinka Group, LLC.

“EMMA System” shall mean the MSRB’s Electronic Municipal Market Access system, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future.

“Material Event” means any of the events listed in Section 6(b) of this Disclosure Agreement.

“Material Events Disclosure” means dissemination of a notice of a Designated Material Event or Material Event as set forth in Section 6.

“MSRB” shall mean the Municipal Securities Rulemaking Board.

“State” shall mean the State of California.

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SECTION 3. CUSIP® Numbers and Final Official Statement. The CUSIP Numbers for the Bonds have been assigned. The Final Official Statement relating to the Bonds is dated August 5, 2014 (“Final Official Statement”).

SECTION 4. Provision of Annual Reports.

(a) The District shall cause the Dissemination Agent, not later than 240 days after the end of the District’s fiscal year (currently ending June 30), commencing with the report for the Fiscal Year ending June 30, 2014, to provide to the MSRB through the EMMA System an Annual Report which is consistent with the requirements of Section 5 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross- reference other information as provided in Section 5 of this Disclosure Agreement; provided that the audited financial statements of the District may be submitted, when and if available, separately from the balance of the relevant Annual Report.

(b) If the District is unable to provide to the MSRB through the EMMA System an Annual Report by the date required in paragraph (a) above, the District shall send a notice to the MSRB through the EMMA System in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the electronic filing requirements of the MSRB for the Annual Reports; and

(ii) if the Dissemination Agent is other than the District or an official of the District, the Dissemination Agent shall file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System.

SECTION 5. Content of Annual Report. The District’s Annual Report shall contain or incorporate by reference the following:

(a) Financial information including the general purpose financial statements of the District for the preceding fiscal year, prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board and the American Institute of Certified Public Accountants. If audited financial information is not available by the time the Annual Report is required to be filed pursuant to Section 4(a) hereof, the financial information included in the Annual Report may be unaudited, and the District will provide audited financial information to the EMMA System as soon as practical after it has been made available to the District.

(b) Operating data, including the following information with respect to the District’s preceding fiscal year (to the extent not included in the audited financial statements described in paragraph (a) above):

(i) Outstanding indebtedness and lease obligations;

(ii) General fund budget and actual results;

(iii) Average daily attendance and State funding information, or equivalent information, as may be reasonably available;

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(iv) Assessed valuations; and

(v) Largest local secured taxpayers.

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

SECTION 6. Reporting of Designated Material Events and Material Events.

(a) The District agrees to provide or cause to be provided to the MSRB notice of the occurrence of any of the following Designated Material Events with respect to the Bonds not later than ten (10) Business Days after the occurrence of the event:

(i) Principal and interest payment delinquencies;

(ii) Unscheduled draws on any debt service reserves reflecting financial difficulties;

(iii) Unscheduled draws on any credit enhancements reflecting financial difficulties;

(iv) Substitution of or failure to perform by any credit provider;

(v) Issuance by the Internal Revenue Service of an adverse tax opinion, a proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

(vi) Tender offers;

(vii) Defeasances

(viii) Ratings; and

(ix) Bankruptcy, insolvency, receivership or similar event of the obligated person.

For purposes of item (ix) above, the described event shall be deemed to occur when any of the following shall occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or other governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority have supervision or jurisdiction over substantially all of the assets or business of the District.

(b) The District shall give, or cause to be given, notice of the occurrence of any of the following Material Events with respect to the Bonds, if material, not later than ten (10) Business Days after the occurrence of the event:

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(i) Unless described in paragraph 6(a)(v) hereof, other material events affecting the tax status of the Bonds;

(ii) Modifications of rights to Bondholders;

(iii) Optional, unscheduled or contingent Bond calls;

(iv) Release, substitution or sale of property securing repayment of the Bonds;

(v) Non-payment related defaults;

(vi) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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; or

(vii) Appointment of a successor or additional Paying Agent or the change of name of a Paying Agent.

(c) The District shall give, or cause to be given, in a timely manner, notice of a failure to provide the annual financial information on or before the date specified in Section 4 hereof, as provided in Section 4(b) hereof.

(d) Upon the occurrence of a Designated Material Event described in Section 6(a) hereof, or if the District determines that knowledge of a Material Event described in Section 6(b) hereof would be material under applicable federal securities laws, the District shall within ten (10) Business Days of occurrence of the Designated Material Event or Material Event file a notice of such occurrence with the MSRB in electronic format, accompanied by such identifying information as is prescribed by the MSRB. Notwithstanding the foregoing, notice of a Designated Material Event described in subsection (a)(vii) or a Material Event described in subsection (b)(iii) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution.

SECTION 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Agreement shall terminate when the District is no longer an obligated person with respect to the Bonds, as provided in the Rule, upon the defeasance, prior redemption or payment in full of all of the Bonds.

SECTION 8. Dissemination Agent. The District may, from time to time, appoint or engage an alternate or successor Dissemination Agent to assist in carrying out the District’s obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

The Dissemination Agent shall be entitled to the protections, limitations from liability, immunities and indemnities provided to the Paying Agent as set forth in the Resolution which are incorporated by reference herein. The Dissemination Agent agrees to perform only those duties of the Dissemination Agent specifically set forth in the Agreement, and no implied duties, covenants or obligations shall be read into this Agreement against the Dissemination Agent.

15088028.3 D-4

The Dissemination Agent shall have no duty or obligation to review the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the District in a timely manner in a form suitable for filing. In accepting the appointment under this Agreement, the Dissemination Agent is not acting in a fiduciary capacity to the registered holders or beneficial owners of the Bonds, the District, or any other party or person.

The Dissemination Agent may consult with counsel of its choice and shall be protected in any action taken or not taken by it in accordance with the advice or opinion of such counsel. No provision of this Agreement shall require the Dissemination Agent to risk or advance or expend its own funds or incur any financial liability. The Dissemination Agent shall have the right to resign from its duties as Dissemination Agent under this Agreement upon thirty days’ written notice to the District. The Dissemination Agent shall be entitled to compensation for its services as Dissemination Agent and reimbursement for its out-of-pocket expenses, attorney’s fees, costs and advances made or incurred in the performance of its duties under this Agreement in accordance with its written fee schedule provided to the District, as such fee schedule may be amended from time to time in writing. The District agrees to indemnify and hold the Dissemination Agent harmless from and against any cost, claim, expense, or liability related to or arising from the acceptance of and performance of the duties of the Dissemination Agent hereunder, provided the Dissemination Agent shall not be indemnified to the extent of its willful misconduct or negligence. The obligations of the District under this Section shall survive the termination or discharge of this Agreement and the Bonds.

SECTION 9. Amendment. Notwithstanding any other provision of this Disclosure Agreement, the District may amend this Disclosure Agreement under the following conditions, provided no amendment to this Agreement shall be made that affects the rights, duties or obligations of the Dissemination Agent without its written consent:

(a) The amendment may be made only in connection with a change in circumstances that arises from a change in legal requirements, change in law or change in the identity, nature or status of the obligated person, or type of business conducted;

(b) This Disclosure Agreement, as amended, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment does not materially impair the interests of Holders, as determined either by parties unaffiliated with the District or another obligated person (such as Bond Counsel) or by the written approval of the Bondholders; provided, that the Annual Report containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

SECTION 10. Additional Information. If the District chooses to include any information from any document or notice of occurrence of a Designated Material Event or a Material Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or to include it in any future disclosure or notice of occurrence of a Designated Material Event or Material Event.

Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of

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occurrence of a Designated Material Event or Material Event, in addition to that which is required by this Disclosure Agreement.

SECTION 11. Default. The District shall give notice to the MSRB through the EMMA System of any failure to provide the Annual Report when the same is due hereunder, which notice shall be given prior to July 1 of that year. In the event of a failure of the District to comply with any provision of this Disclosure Agreement, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an event of default under the Resolution, and the sole remedy under this Disclosure Agreement in the event of any failure of the District to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Underwriter and Holders from time to time of the Bonds, and shall create no rights in any other person or entity.

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SECTION 13. Governing Law. This Disclosure Agreement shall be governed by the laws of the State, applicable to contracts made and performed in such State.

Dated: August 21, 2014 NORRIS SCHOOL DISTRICT

By: Superintendent

ACCEPTED: DOLINKA GROUP, LLC, as Dissemination Agent

By: Authorized Representative

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EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Norris School District

Name of Issue: $9,381,072.90 2012 Election General Obligation Bonds, 2014 Series B

Date of Issuance: August 21, 2014

NOTICE IS HEREBY GIVEN that the above-named Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 4(a) of the Continuing Disclosure Agreement dated August 21, 2014. The Issuer anticipates that the Annual Report will be filed by ______.

Dated: ______

[ISSUER/DISSEMINATION AGENT]

By: cc: Norris School District Stifel, Nicolaus & Company, Incorporated

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APPENDIX E

BOOK-ENTRY-ONLY SYSTEM

The information in this Appendix concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Direct Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, as to the Bonds, (b) Bonds representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Direct Participants are on file with DTC.

General

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

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

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their

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

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

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.

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

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

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

A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Paying Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Paying Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase

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will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Paying Agent’s DTC account.

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

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

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

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APPENDIX F

ACCRETED VALUE TABLE

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BOND ACCRETED VALUE TABLE Norris School District Election of 2012, General Obligation Bonds, Series 2014B (Kern County, California) ______Final Pricing Numbers

CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond 11/01/2018 11/01/2019 11/01/2020 11/01/2021 11/01/2022 11/01/2023 11/01/2024 11/01/2025 11/01/2026 11/01/2027 11/01/2028 11/01/2029 11/01/2030 Date 1.74% 2.17% 2.53% 2.87% 3.18% 3.43% 3.59% 3.75% 3.95% 4.13% 4.3% 4.43% 4.55%

08/21/2014 4,649.50 4,469.70 4,278.90 4,073.15 3,860.90 3,657.35 3,478.85 3,298.70 3,103.25 2,915.50 2,733.35 2,569.35 2,412.90 11/01/2014 4,665.20 4,488.50 4,299.85 4,095.80 3,884.65 3,681.60 3,503.00 3,322.60 3,126.90 2,938.80 2,756.10 2,591.35 2,434.10 05/01/2015 4,705.80 4,537.20 4,354.25 4,154.55 3,946.40 3,744.75 3,565.85 3,384.90 3,188.70 2,999.50 2,815.35 2,648.75 2,489.50 11/01/2015 4,746.75 4,586.40 4,409.35 4,214.20 4,009.15 3,808.95 3,629.85 3,448.35 3,251.65 3,061.40 2,875.85 2,707.40 2,546.15 05/01/2016 4,788.05 4,636.20 4,465.10 4,274.65 4,072.90 3,874.30 3,695.05 3,513.05 3,315.90 3,124.65 2,937.70 2,767.40 2,604.05 11/01/2016 4,829.70 4,686.50 4,521.60 4,336.00 4,137.65 3,940.75 3,761.35 3,578.90 3,381.35 3,189.15 3,000.85 2,828.70 2,663.30 05/01/2017 4,871.70 4,737.35 4,578.80 4,398.20 4,203.45 4,008.30 3,828.85 3,646.00 3,448.15 3,255.00 3,065.40 2,891.35 2,723.90 11/01/2017 4,914.10 4,788.75 4,636.75 4,461.35 4,270.30 4,077.05 3,897.60 3,714.35 3,516.25 3,322.25 3,131.30 2,955.40 2,785.85 05/01/2018 4,956.85 4,840.70 4,695.40 4,525.35 4,338.20 4,147.00 3,967.55 3,784.00 3,585.70 3,390.85 3,198.60 3,020.85 2,849.25 11/01/2018 5,000.00 4,893.20 4,754.80 4,590.30 4,407.15 4,218.10 4,038.80 3,854.95 3,656.50 3,460.85 3,267.40 3,087.75 2,914.05 05/01/2019 4,946.30 4,814.95 4,656.15 4,477.25 4,290.45 4,111.25 3,927.25 3,728.75 3,532.30 3,337.65 3,156.15 2,980.35 11/01/2019 5,000.00 4,875.85 4,723.00 4,548.45 4,364.05 4,185.05 4,000.90 3,802.40 3,605.25 3,409.40 3,226.05 3,048.15 05/01/2020 4,937.50 4,790.75 4,620.75 4,438.85 4,260.20 4,075.90 3,877.45 3,679.70 3,482.70 3,297.55 3,117.50 11/01/2020 5,000.00 4,859.50 4,694.20 4,515.00 4,336.65 4,152.30 3,954.05 3,755.70 3,557.55 3,370.55 3,188.45 05/01/2021 4,929.25 4,768.85 4,592.45 4,414.50 4,230.20 4,032.15 3,833.25 3,634.05 3,445.25 3,260.95 11/01/2021 5,000.00 4,844.70 4,671.20 4,493.75 4,309.50 4,111.80 3,912.40 3,712.20 3,521.55 3,335.15 05/01/2022 4,921.70 4,751.30 4,574.40 4,390.30 4,193.00 3,993.20 3,792.00 3,599.55 3,411.05 11/01/2022 5,000.00 4,832.80 4,656.50 4,472.60 4,275.80 4,075.65 3,873.55 3,679.25 3,488.65 05/01/2023 4,915.65 4,740.10 4,556.50 4,360.25 4,159.85 3,956.80 3,760.75 3,568.00 11/01/2023 5,000.00 4,825.20 4,641.90 4,446.35 4,245.75 4,041.90 3,844.05 3,649.15 05/01/2024 4,911.80 4,728.95 4,534.20 4,333.40 4,128.80 3,929.20 3,732.20 11/01/2024 5,000.00 4,817.60 4,623.75 4,422.90 4,217.55 4,016.25 3,817.10 05/01/2025 4,907.95 4,715.05 4,514.25 4,308.25 4,105.20 3,903.95 11/01/2025 5,000.00 4,808.20 4,607.45 4,400.85 4,196.15 3,992.75 05/01/2026 4,903.15 4,702.60 4,495.50 4,289.10 4,083.60 11/01/2026 5,000.00 4,799.70 4,592.15 4,384.10 4,176.50 05/01/2027 4,898.80 4,690.85 4,481.20 4,271.50 11/01/2027 5,000.00 4,791.70 4,580.45 4,368.70 05/01/2028 4,894.75 4,681.90 4,468.05 11/01/2028 5,000.00 4,785.60 4,569.70 05/01/2029 4,891.60 4,673.70 11/01/2029 5,000.00 4,780.00 05/01/2030 4,888.75 11/01/2030 5,000.00 05/01/2031 11/01/2031 05/01/2032 11/01/2032 05/01/2033 11/01/2033 05/01/2034 11/01/2034 05/01/2035 11/01/2035 05/01/2036 11/01/2036 05/01/2037 11/01/2037 05/01/2038 11/01/2038

Aug 5, 2014 1:54 pm Prepared by Stifel, Nicolaus & Company, Inc. (RJR) Page 11 BOND ACCRETED VALUE TABLE Norris School District Election of 2012, General Obligation Bonds, Series 2014B (Kern County, California) ______Final Pricing Numbers

CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond 11/01/2031 11/01/2032 11/01/2033 11/01/2034 11/01/2035 11/01/2036 11/01/2037 11/01/2038 Date 4.62% 4.74% 4.79% 4.89% 4.94% 4.99% 5.04% 5.07%

08/21/2014 2,279.80 2,132.00 2,015.45 1,884.75 1,777.40 1,674.50 1,576.05 1,488.90 11/01/2014 2,300.10 2,151.55 2,034.10 1,902.55 1,794.30 1,690.60 1,591.35 1,503.50 05/01/2015 2,353.25 2,202.50 2,082.80 1,949.05 1,838.65 1,732.80 1,631.45 1,541.60 11/01/2015 2,407.60 2,254.70 2,132.70 1,996.70 1,884.05 1,776.05 1,672.55 1,580.70 05/01/2016 2,463.25 2,308.15 2,183.80 2,045.55 1,930.60 1,820.35 1,714.70 1,620.75 11/01/2016 2,520.15 2,362.85 2,236.10 2,095.55 1,978.30 1,865.75 1,757.95 1,661.85 05/01/2017 2,578.35 2,418.85 2,289.65 2,146.80 2,027.15 1,912.30 1,802.25 1,703.95 11/01/2017 2,637.90 2,476.20 2,344.45 2,199.25 2,077.20 1,960.05 1,847.65 1,747.15 05/01/2018 2,698.85 2,534.90 2,400.60 2,253.05 2,128.55 2,008.95 1,894.20 1,791.45 11/01/2018 2,761.20 2,594.95 2,458.10 2,308.15 2,181.10 2,059.05 1,941.95 1,836.85 05/01/2019 2,824.95 2,656.45 2,517.00 2,364.55 2,235.00 2,110.45 1,990.90 1,883.45 11/01/2019 2,890.25 2,719.40 2,577.30 2,422.40 2,290.20 2,163.10 2,041.05 1,931.20 05/01/2020 2,957.00 2,783.85 2,639.00 2,481.60 2,346.75 2,217.05 2,092.50 1,980.15 11/01/2020 3,025.30 2,849.85 2,702.20 2,542.30 2,404.70 2,272.35 2,145.20 2,030.35 05/01/2021 3,095.20 2,917.40 2,766.90 2,604.45 2,464.10 2,329.05 2,199.30 2,081.80 11/01/2021 3,166.70 2,986.55 2,833.20 2,668.10 2,525.00 2,387.20 2,254.70 2,134.60 05/01/2022 3,239.85 3,057.30 2,901.05 2,733.35 2,587.35 2,446.75 2,311.55 2,188.70 11/01/2022 3,314.70 3,129.75 2,970.55 2,800.20 2,651.25 2,507.80 2,369.80 2,244.20 05/01/2023 3,391.25 3,203.95 3,041.65 2,868.65 2,716.75 2,570.35 2,429.50 2,301.05 11/01/2023 3,469.60 3,279.90 3,114.50 2,938.80 2,783.85 2,634.50 2,490.70 2,359.40 05/01/2024 3,549.75 3,357.60 3,189.10 3,010.65 2,852.60 2,700.20 2,553.50 2,419.20 11/01/2024 3,631.75 3,437.20 3,265.50 3,084.25 2,923.05 2,767.60 2,617.85 2,480.55 05/01/2025 3,715.65 3,518.65 3,343.70 3,159.65 2,995.25 2,836.65 2,683.80 2,543.40 11/01/2025 3,801.45 3,602.05 3,423.80 3,236.95 3,069.25 2,907.40 2,751.45 2,607.90 05/01/2026 3,889.25 3,687.40 3,505.80 3,316.05 3,145.05 2,979.95 2,820.75 2,674.00 11/01/2026 3,979.10 3,774.80 3,589.75 3,397.15 3,222.75 3,054.30 2,891.85 2,741.80 05/01/2027 4,071.05 3,864.25 3,675.75 3,480.20 3,302.35 3,130.50 2,964.75 2,811.30 11/01/2027 4,165.05 3,955.85 3,763.75 3,565.30 3,383.90 3,208.60 3,039.45 2,882.55 05/01/2028 4,261.30 4,049.60 3,853.90 3,652.45 3,467.50 3,288.70 3,116.05 2,955.65 11/01/2028 4,359.70 4,145.60 3,946.20 3,741.80 3,553.15 3,370.75 3,194.55 3,030.55 05/01/2029 4,460.45 4,243.85 4,040.70 3,833.25 3,640.90 3,454.85 3,275.05 3,107.40 11/01/2029 4,563.45 4,344.40 4,137.50 3,927.00 3,730.85 3,541.05 3,357.60 3,186.15 05/01/2030 4,668.90 4,447.40 4,236.60 4,023.00 3,823.00 3,629.40 3,442.20 3,266.95 11/01/2030 4,776.75 4,552.80 4,338.05 4,121.35 3,917.40 3,719.95 3,528.95 3,349.75 05/01/2031 4,887.10 4,660.70 4,441.95 4,222.15 4,014.20 3,812.75 3,617.90 3,434.65 11/01/2031 5,000.00 4,771.15 4,548.35 4,325.35 4,113.35 3,907.85 3,709.05 3,521.75 05/01/2032 4,884.20 4,657.25 4,431.10 4,214.95 4,005.35 3,802.55 3,611.00 11/01/2032 5,000.00 4,768.80 4,539.45 4,319.05 4,105.30 3,898.35 3,702.55 05/01/2033 4,883.05 4,650.45 4,425.70 4,207.75 3,996.60 3,796.40 11/01/2033 5,000.00 4,764.15 4,535.05 4,312.70 4,097.30 3,892.65 05/01/2034 4,880.65 4,647.05 4,420.30 4,200.55 3,991.35 11/01/2034 5,000.00 4,761.85 4,530.60 4,306.40 4,092.50 05/01/2035 4,879.45 4,643.65 4,414.95 4,196.25 11/01/2035 5,000.00 4,759.50 4,526.20 4,302.65 05/01/2036 4,878.25 4,640.25 4,411.70 11/01/2036 5,000.00 4,757.20 4,523.55 05/01/2037 4,877.05 4,638.20 11/01/2037 5,000.00 4,755.80 05/01/2038 4,876.35 11/01/2038 5,000.00

Aug 5, 2014 1:54 pm Prepared by Stifel, Nicolaus & Company, Inc. (RJR) Page 12