GARVEY SCHOOL DISTRICT (Los Angeles County, California) Election of 2016 General Obligation Bonds, Series A

NEW ISSUE-FULL BOOK-£NTRY INSURED RATING: "AA" UNDERLYING RATING: S&P"A+" See "MISCELLANEOUS - Ratings" herein

In the opinion of Stradling Ycx:ca Carlson & Rauth, a Professional Corporation, San Francisco, California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative rrinimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See "TAX lvfATTERS" herein with respect to tax consequences relating to the Bonds.

$10,(XX),(XX) GARVEY SCHOOL DISTRICT (Los Angeles County, California) Election of 2016 General Obligation Bonds, Series A

Dated: Date of Delivery Due: August l, as shown on the inside cover This cover page contains certain inforrmtion for general reference only. It is not a sumrmry of this issue. Investors must read the entire Official Statement to obtain inforrmtion essential to the rmking of an informed investment decision. Capitali,ied terms used but not otherwise defined on this cover page shall have the meanings assigned to such terms herein. The Garvey School District (Los Angeles County, California) Election of 2016 General Obligation Bonds, Series A (the "Bonds"), were authorized at an election of the registered voters of the GaIVey School District (the "District") held on November 8, 2016, at which the requisite 55% of the persons voting on the proposition voted to authori:,e the issuance and sale of $40,000,000 aggregate principal amount of general obligation bonds of the District. The Bonds are being issued to (i) finance the acquisition, construction, modernization and equipping of District sites and facilities, and (ii) pay the costs of issuance of the Bands. The Bands are general obligations of the District payable solely from the proceeds of ad valorem property taxes. The Board of Supervisors of Los Angeles County is empowered and obligated to annually levy such ad valoremtaxes, without limitation as to rate or amount (except certain personal property which is taxable at limited rates), upon all property within the District subject to taxation thereby, forthe payment of the principal of and interest on the Bands when due. The Bonds will be issued in book-

The Bands are subject to optional and mandatory sinking fund redemption prior to maturity as further described herein.

Maturity Schedule (see inside cover page)

The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel. Certain rmtters will be passed on for the Underwriter by Norton Rose Fulbright US LLP, Los Angeles, California. It is anticipated that the Bonds, in book-

Dated: A pri I 20, 201 7 MATURITY SCHEDULE

$10,000,000 GARVEY SCHOOL DISTRICT (Los Angeles County, California) Election of 2016General Obligation Bonds, Series A

BaseCUSI PI1I : 366658

$2,395,000Serial Bonds Maturity Principal Interest cusIPI1I (August 1) Amount Rate Yield Suffix 2018 $500,000 5.000!6 0.970!6 RTl 2019 800,000 5.000 1.120 RU8 2031 100,000 3.000 3.200 RV6 2032 100,000 3.125 3.300 RW4 2033 120,000 3.125 3.370 RX2 2034 150,000 4.000 3.350121 RY0 2035 175,000 3.250 3.500 RZ7 2036 200,000 4.000 3.49d2) SAl 2037 250,000 4.000 3.52d2I SB9

$2,265,000- 3.625% Term Bonds due August 1, 2041 - Yield 3.767% ; CUSI P Suffixl1I : SC7 $5,340,000- 4.000!6 Term Bonds due August 1, 2046- Yield 3.750!6 121 ; CUSI P Suffixl1I : SD5

7 ( J CUSI Pis a registered tra:lemark oft~ Arrerican Bankers Association. CUSIP data herein is provided by CUSIP Global Services ("CGS"), managed by S&P Capital IQ on ~half of T~ Arrerican Bankers Association. This data is mt inten:led to create a database an::l dC€s mt serve in any way as a substitute fort~ CGS database. No~ oft~ U n:lerwriter, t~ Finan:::ial Advisor or t~ District is resrxmsible fort~ selection, uses or correct~ss oft~ CUSIP num~rs set fotth ~rein. CUSIP num~rs have ~n assigrl=d by an in::le~n::lent company mt affiliated with t~ District, t~ Finan:::ial Advisor or t~ U n:lerwriter an::l are irr::lu::led solely for t~ convenierr::e oft~ registered ONn:fi oft~ applicable Bon:ls. T~ CUSIP num~r for a sr:e::ific maturity is subject to ~itl'J chanJed after t~ execution and delivery oft~ Bon:ls as a result of various subseq~nt actions irr::lu::litl'J, but mt limited to, a refun:litl'J in wh:Jle or in part or as a result oft~ procurerrent of secon:laiy market rx,ttfolio insuran::::e or ot~r similar enhan:::errent IJ,,I itlv'estors that is applicable to all or a rx,rtion of certain maturities oft~ Bon:ls.

2 ( JYieldtocall atparonAUJust l, 2!J27. GARVEY SCHOOL DISTRICT

BOARD OF EDUCATION

Ronald Tramnino, President Bob B ruesch, Vice President Keilley Meng, Clerk Maureen Chin, Menner Henry Lo, Menner

DISTRICT ADMINISTRATION

Anita Chu, Superintendent Grace Garner, Chief Business Officer

PROFESSIONAL SERVICES

BOND COUNSEL AND DISCLOSURE COUNSEL

StradlingY occaCarlson & Rauth, a Prd'essional Corporation San Francisco, California

Fl NANCI AL ADVISOR

lsornAdvisors, a Division of U rmn Futures, Inc. Wal nut Creek, California

PAYING AGENT

U.S. Bank National Association, as agent cf Treasurer and Tax Collector of Los Angeles County Los Angeles, California This Official Statement does not constitute an offering of any security other than the original offering of the Bonds of the District No dealer, broker, salesperson or other person has been authorized o, the District to give any inform1tion or to m1ke any representations other than as contained in this Official Statement, and if given or m1de, such other inform1tion or representation not so authorized should not be relied upon as having been given or authorized o, the District.

The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exerrptions prCNided thereunder 0y Sections 3(a)2 and 3(a) 12, respectively, for the issuance and sale of municipal securities. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person m1king such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to m1ke such offer or solicitation.

Certain inform1tion set forth herein has been obtained from sources outside of the District which are believed to be reliable, but such inform1tion is not guaranteed as to accuracy or completeness, and is not to be construed as a representation 0y the District. The inform1tion and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale m1de hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and m1y not be reproduced or used, in whole or in part, for any other purpose.

When used in this Official Statement and in any continuing disclosure 0y the District in any press release and in any oral statement m1de with the apprCNal of an authorized officer of the District or any other entity described or referenced in this Official Statement, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estirrate," "project," "forecast," "expect," "intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ m1terially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to da,elop the forecasts will not be realized and unanticipated events and circumstances m1y occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences m1y be m1terial.

The Underwriter has pr01ided the follo.ving sentence for inclusion in this Official Statement: "The Underwriter has ra,iewed the inform1tion 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 inform1tion."

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

The District m1intains a website. Ho.va,er, the inform1tion presented on the District's website is not incorporated into this Official Statement 0y any reference, and should not be relied upon in m1king investment decisions with respect to the Bonds.

Build America Mutual Assurance Company ("BAM") m1kes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, m1kes no representation regarding, and does not accept any responsibility forthe accuracy or completeness of this Official Statement or any inform1tion or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the inform1tion regarding BAM, supplied o, BAM and presented under the heading "THE BONDS - Bond Insurance'' and "APPENDIX F - SPECIMEN MUNICIPAL BOND INSURANCE POLICY." TABLE OF CONTENTS

INTRODUCTION ...... 1

CHANGES SINCE THE PRELIMINARY OFFICIAL STATEMENT ...... 1 GENERAL ...... ] PURPOSE OF THE BONDS ...... 1 AUTHORITY FOR ISSUANCE OF THE BONDS ...... 2 SOURCES OF PAYMENT FOR THE BONDS ...... 2 DESCRIPTION OF THE BONDS ...... 2 TAX MATTERS ...... 3 OFFERING AND DELIVERY OF THE BONDS ...... 3 BOND OWNER'S RISKS ...... 3 CONTINUING DISCLOSURE ...... 3 PROFESSIONALS INVOLVED IN THE OFFERING ...... 3 FORWARD-LOOKING STATEMENTS ...... 4 OTHER INFORMATION ...... 4

THE BONDS ...... 5

AUTHORITY FOR ISSUANCE ...... 5 SECURITY AND SOURCES OF PAYMENT ...... 5 GENERAL PROVISIONS ...... 6 BOND INSURANCE ...... 7 ANNUAL DEBTSERVICE ...... 9 APPLICATION AND INVESTMENT OF BOND PROCEEDS ...... 9 REDEMPTION ...... 10 BOOK-ENTRY ONLY SYSTEM ...... 13 DISCONTINUATION OF BOOK-ENTRY ONLY SYSTEM; PAYMENT TO BENEFICIAL OWNERS ...... 15 DEFEASANCE ...... 16 ESTIMATED SOURCES AND USES OF FUNDS ...... 17 TAX BASE FOR PAYMENT OF BONDS ...... 17

AD VALOREM PROPERTY TAXATION ...... 17 ASSESSED VALUATIONS ...... 18 SECURED TAX CHARGES AND DELINQUENCIES ...... 23 ALTERNATIVE METHOD OF TAX APPORTIONMENT-"TEETER PLAN" ...... 23 TAX RATES ...... 24 PRINCIPAL TAXPAYERS ...... 25 STATEMENT OF DIRECT AND OVERLAPPING DEBT ...... 26 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ...... 28

ARTICLE XIIIA OF THE CALIFORNIA CONSTITUTION ...... 28 LEGISLATION IMPLEMENTING ARTICLE XII IA ...... 29 STATE-ASSESSED UTILITY PROPERTY ...... 29 ARTICLE XIII B OF THE CALIFORNIA CONSTITUTION ...... 29 ARTICLE XIIIC AND ARTICLE XIII DOF THE CALIFORNIA CONSTITUTION ...... 30 PROPOSITION 26 ...... 31 PROPOSITIONS 98AND 111 ...... 31 PROPOSITION 39 ...... 33 J MVIS VS. CONNELL ...... 33 PROPOSITION lAAND PROPOSITION 22 ...... 34 PROPOSITIONS 30AND 55 ...... 34 PROPOSITION 2 ...... 35 PROPOSITION 51 ...... 36 FUTURE INITIATIVES ...... 37 TABLE OF CONTENTS (cont'd)

DISTRICT Fl NANCI AL I NFORMATION ...... 37

STATE FUNDING OF EDUCATION ...... 37 OTHER REVENUE SOURCES ...... 41 BUDGET PROCESS ...... 43 COMPARATIVE FINANCIAL STATEMENTS ...... 47 ACCOUNTING PRACTICES ...... 48 STATE BUDGET MEASURES ...... 48 GARVEY SCHOOL DISTRICT ...... 52

INTRODUCTION ...... 52 ADMINISTRATION ...... 53 DISTRICT ENROLLMENT ...... 54 LABOR RELATIONS ...... 54 STATE RETIREMENT PROGRAMS ...... 55 OTHER POST-EMPLOYMENT B ENEFITS ...... 61 RISK MANAGEMENT ...... 62 DISTRICT DEBT STRUCTURE ...... 62 TAX MATTERS ...... 65 LIMITATION ON REMEDIES; BANKRUPTCY ...... 66 LEGAL MATTERS ...... 68

LEGALITY FOR INVESTMENT IN CALIFORNIA ...... 68 INFORMATION REPORTING REQUIREMENTS ...... 68 CONTINUING DISCLOSURE ...... 68 ABSENCE OF MATERIAL LITIGATION ...... 69 FINANCIAL STATEMENTS ...... 69 LEGAL OPINION ...... 69 MISCELLANEOUS ...... 69

RATINGS ...... 69 UNDERWRITING ...... 70 ADDITIONAL INFORMATION ...... 70

APPENDIX A: FORM OF OPINION OF BOND COUNSEL FOR THE BONDS ...... A-1 APPENDIX B: 2015-16AUDITED FINANCIAL STATEMENTS OF THE DISTRICT ...... B-1 APPENDIX C: FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE BONDS ...... C-1 APPENDIX D: GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF MONTEREY PARK, THE CITY OF ROSEMEAD AND Los ANGELES COUNTY ...... D-1 APPENDIX E: Los ANGELES COUNTY TREASURY POOL ...... E-1 APPENDIX F: SPECIMEN MUNICIPAL BOND INSURANCE POLICY ...... F-1

ii $10,000,000 GARVEY SCHOOL DISTRICT (Los Angeles County, California) Election of 2016General Obligation Bonds, Series A INTRODUCTION

This Official Statement, which includes the ccwer page, inside ccwer page and appendices hereto, pro.tides information in connection with the sale of the Garvey School District (Los Angeles County, California) Election of 2016 General Obligation Bonds, Series A (the "Bonds").

This Introduction is not a sumrary of this Official Statement. It is only a brief description of and guide to, and is qualified by, rrore corl1)iete and detailed information contained in the entire Official Statement, including the ccwer page, inside c0.ter page and appendices hereto, and the documents sumrari:zed or described herein. A full revie.v should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.

Changes Si nee the Preli mi nary Official Statement

Information in this Official Statement under "TAX BASE FOR PAYMENT OF BONDS - Assessed Valuations - Drought" has been revised to reflect a recent executive order from the Gcwernor terni nati ng the state-wide Drought State of Emergency with respect to certain counties in California

General

The Garvey School District (the "District") is an elementary school district formed in 1892 and is the second oldest elementary school in Los Angeles County (the "County"). The District is situated at the western end of the San Gabriel Valley, about 10 miles from the City of Los Angeles. The District pro.tides elementary education services in a four square-mile territory that includes portions of the Cities of Monterey Park, San Gabriel and Rosemead as well as unincorporated portions of the County. The District currently operates eight elementary schools for grades K--6 and two intermediate schools for grades 7--8. For fiscal year 2016-17, taxable property within the District has an assessed valuation of $3,922,802,551 and the District's average daily attendance ("ADA") is budgeted to be 4,683 students.

The District is g0.terned by a five-member Board of Education (the "Board'), each member of which is elected to a four-year term. Elections for positions to the Board are held every two years, alternating between two and three available positions. The management and policies of the District are adninistered by a Superintendent appointed by the Board who is responsible for day-to-clay District operations as well as the supervision of the District's other key personnel. Ms. Anita Chu is the District's current Superi ntendent.

For more information regarding the District generally, see "DISTRICT FINANCIAL INFORMATION" and "GARVEY SCHOOL DISTRICT," and for more information regarding the District's assessed valuation, see "TAX BASE FOR PAYMENT OF BONDS" herein. The District's audited financial statements for fiscal year endedJ une 30, 2016 are attached hereto as APPENDIX B and should be read i n thei r entirety.

Purpose of the Bonds

The Bonds are being issued to (i) finance the acquisition, construction, modernization and equipping of District sites and facilities, and (ii) pay the costs of issuing the Bonds. See 'THE BONDS - Application and Investment of Bond Proceeds" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. Authority for Issuance of the Bonds

The Bonds are issued pursuant to certain pr0.tisions of the State of California G0.temment Code and pursuant to a resolution adopted b,I the Board on March 9, 2017 (the "Resolution"). See 'THE B ON DS - Authority for I ssuance'' herei n.

Sources of Payment for the Bonds

The Bands are general obi i gati ons of the District payable solely from the proceeds of ad val orem property taxes. The Board of Supervisors of Los Angeles County is emp:wered and obligated to annually levy such ad valorem taxes, without limitation as to rate or amount (except certain personal property which is taxable at limited rates), upon all property within the District suqject to taxation thereb,I, for the payment of the principal of and interest on the Bonds when due. See "THE BONDS - Security and Sources of Payment" and'TAX BASE FOR PAYMENT OF BONDS" herein.

Description of the Bonds

Form and Registration. The Bonds will be issued in fully registered oook--entry form only, without coupons. The Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New Yark(" DTC"). DTC will act as securities depository for the Bonds. See 'THE BONDS - General Prcwisions" and 'THE BONDS - Book-Entry Only System'' herein. Purchasers of the Bonds (the "Beneficial owners") will not receive physical certificates representing their interests in the Bonds purchased, but will instead receive credit balances on the oooks of their respective noninees. In the event that the oook--entry only system described herein is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the Resolution. See 'THE BONDS - Discontinuation of Boak-£ ntry Only System; Paymentto Beneficial owners" herein.

So long as Cede & Co. is the registered o.vner of the Bonds, as nominee of DTC, references herein to the" Owners," "Bondo.vners" or "Holders" of the Bonds (other than under the caption "TAX MATTERS" and in APPENDIX A) will mean Cede& Co. and will not mean the Beneficial Owners of the Bands.

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

Redemption. The Bonds are suqject to optional and mandatory sinking fund redemption prior to maturity as further described herein. See 'THE BONDS - Redemption."

Payments. The Bonds will be dated as of the date of their initial delivery (the "Date of Delivery"). Interest on the Bonds accrues from the Date of Delivery, and is payable semiannually on each February 1 and August 1 (each a "Bond Payment Date''), commencing August 1, 2017. Principal of the Bonds is payable on August 1 in the amounts and years as set forth on the inside c0.ter page hereof. Payments of the principal of and interest on the Bands wi 11 be rnade b,I the designated paying agent, registrar and transfer agent (the "Paying Agent'') to DTC for subsequent disbursement through DTC Participants (defined herein) to the Beneficial owners of the Bonds. U.S. Bank National Association, Los Angeles, California, has been appointed as agent of the Treasurer and Tax Collector of the County (the 'Treasurer") to act as Paying Agent forthe Bands.

Bond Insurance. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the

2 Bonds b,I BUILD AMERICA MUTUAL ASSURANCE COMPANY. See 'THE BONDS - Bond I nsurance'' herei n.

Tax Matters

In the opinion of Stradling Y occa Carlson & Rauth, a Professional Corporation, San Francisco, California ("Bond Counsel"), based on existing statutes, regulations, rulings and judicial decisions and assuming the accuracy of certain opinions and representati ans and compi iance with certain co.tenants and requirements described herein, interest on the Bands is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative ninirnum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exerrpt from State of California (the "State") personal income tax. In addition, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Bond constitutes original issue discount, and the amount of original issue discount that accrues to the o.vner of the Bond is excluded from gross income of such o.vner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State personal income tax. See "TAX MATIERS" herein.

Offering and Delivery of the Bands

The B ands are offered when, as and if issued, suqj ect to apprcwal as to their Iegal i ty b,I B and Counsel. It is anticipated that the Bonds in oook--entry form will be available for delivery through the facilities of DTC in Ne.vY ork, Ne.vY ork, on or about May 4, 2017.

Bond Owner's Risks

The Bands are general obi i gati ans of the District payable solely from the proceeds of ad val orem taxes which may be levied on all taxable property in the District, without linitation as to rate or amount (except with respect to certain personal property which is taxable at limited rates). For more complete information regarding the District's financial condition and taxation of property within the District, see 'TAX BASE FOR PAYMENT OF BONDS," "DISTRICT FINANCIAL INFORMATION" and "GARVEY SCHOOL DISTRICT" herein.

Continuing Disclosure

Pursuant to that certain Continuing Disclosure Certificate relating to the Bonds, the District will co.tenant for the benefit of the owners and Beneficial owners of the Bonds to make available certain financial information and operating data relating to the District and to pro.tide notices of the occurrence of certain listed events, in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the "Rule"). See "LEGAL MATTERS - Continuing Disclosure" herein. The specific nature of the information to be made available and the notices of listed events required to be pro.tided are described in "APPENDIX C - FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE BONDS" attached hereto.

Professionals Involved in the Offering

StradlingY occa Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Bond Counsel and Disclosure Counsel to the District with respect to the Bonds. Isom Advisors, a Division of Urban Futures, Walnut Creek, California is acting as Financial Advisor to the District with respect to the Bonds. Bond Counsel, Disclosure Counsel and the Financial Advisor will each receive

3 corrpensation from the District contingent upon the sale and delivery of the Bonds. Certain matters will be passed on for the Underwriter (defined belo.v) b,I Norton Rose Fulbright US LLP, Los Angeles, California From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds.

F orward-l ooki ng Statements

Certain statements included or incorporated b,I reference in this Official Statement constitute "forward-looking statements'' within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable b,I the terminology used such as "plan," "expect," "estimate," "prqject," "intend," "budget" or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information regarding the District herein.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is suqject to change. Copies of documents referred to herein and information concerning the Bonds are available from the Garvey School District, 2730 North Del Mar Avenue, Rosemead, California 91770. The District may impose a charge for cop,1i ng, mai Ii ng and handling.

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

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representati ans of fact. The summaries and references to documents, statutes and constituti anal prcwisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties b,I reference to each such documents, statutes and constitutional prcwisions.

Certain of the information set forth herein, other than that pro.tided b,I the District, has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or corrpleteness, and is not to be construed as a representation b,I the District. The information and expressions of opinions herein are suqject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shal I, under any circumstances, create any i mpl i cation that there has been no change in the affairs of the District since the date hereof. This Official Statement is

4 subnitted 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 purp:ise.

Capitalized term, used but not otherwise defined herein shall have the rreanings assigned to such term, in the Resolution.

THE BONDS

Authority for Issuance

The Bonds are issued pursuant to the prcwisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Gcwemrrent Code of the State of California (the "Act''), comnencing with Section 535CXi et seq., as arrended, Article XI I IA of the California Constitution and the Resolution. The District received authorization at an election held on Ncwember 8, 2016 b,I the requisite 55% of the votes cast b,I eligible voters within the District to issue $40,000,000 aggregate principal amount of general obligation bonds (the "2016 Authorization"). The Bonds are the first series of bonds issued under the 2016 Authorization, and follo.ving the issuance thereof, $30,000,000 of the Authorization will remain unissued.

Security and Sources of Payment

The Bands are general obi i gati ons of the District payable solely frorn the proceeds of ad val orem property taxes. The Board of Supervisors of the County is empo.vered and obligated to annually levy such ad valoremtaxes, without limitation as to rate or amount (except certain personal property which is taxable at limited rates), upon all property within the District suqject to taxation thereb,I, forthe payrrent of the pri nci pal of and interest on the Bands when due.

Such ad valorem property taxes will be levied annually in addition to all other taxes during the period that the Bonds are outstanding in an amount sufficient to pay the principal of and interest thereon when due. The levy may include an allo.vance for an annual reserve, established for the purp:ise of avoiding fluctuating tax levies. While the County has historically levied ad valorem property taxes to establish such a reserve for other bonds of the District, the County is not obligated to establish or maintain such a reserve, and the District can make no representations that the County wi 11 do so in future years. Such taxes, when collected, will be placed b,I the County in the Debt Service Fund (defined herein) established b,I the Resolution, which is required to be segregated and maintained b,I the County and which is designated for the payrrent of the Bonds and interest thereon when due, and for no other purp:ise. Pursuant to the Resolution, the District has pledged funds on dep:isit in the Debt Service Fund to the payrrent of the Bonds. Although the County is obligated to levy ad valorem property taxes for the payrrent of the Bonds as described abcwe, and will maintain the Debt Service Fund, the Bonds are not a debt of the County.

Pursuant to California Gcwemrrent Code Section 53515, the Bonds will be secured b,I a statutory lien on all revenues received pursuant to the levy and collection of ad valorem property taxes for the payrrent thereof. The lien automatically attaches, without further action or authorization b,I the District Board, and is valid and binding frorn the tirre the Bonds are executed and delivered. The revenues received pursuant to the levy and collection of the ad valorem property tax wil I be i mnediately suqject to the lien, and such lien will be enforceable againstthe District, its successor, transferees and creditors, and all other parties asserting rights therein, irrespective of whether such parties have notice of the lien and without the need for physical delivery, recordation, filing or further act.

5 The rmneys in the Debt Service Fund, to the extent necessary to pay the principal of and interest on the Bonds, as the sarre becorres due and payable, will be transferred b,I the County to the Paying Agent. The Paying Agent will in turn rernitthe funds to DTC for renittance of such principal and interest to its Participants (as defined herein) for subsequent disburserrent to the respective Beneficial owners of such Bonds.

The armunt of the annual ad valorern property taxes levied b,I the County to repay the Bonds as described aro..rewill be deternined b,I the relationship between the assessed valuation of taxable property in the District and the armunt of debt service due on the Bonds in any year. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the District may cause the annual tax rates to fluctuate. Economic and other factors beyond the District's control, such as general market decline in land values, reclassification of property to a class exempt frorn taxation, whether b,I o.vnership or use (such as exemptions for property o.vned b,I the State of California (the "State") and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused b,I a natural or manrnade disaster, such as earthquake, flood, drought or taxi c contani nation, could cause a reduction i n the assessed value of taxable property within the District and necessitate a corresponding increase in the respective annual tax rates. For further information regarding the District's assessed valuation, tax rates, 0.terlapping debt, and other matters concerning taxation, see "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS - Article XIIIA of the California Constitution" and "TAX BASE FOR REPAYMENT OF BONDS" herein.

General Pr0.tisions

The Bonds will be issued in book-entry forrn only, and will be initially issued and registered in the name of Cede& Co., as noninee for DTC. Purchasers will not receive physical certificates representing their interests in the Bonds, but will instead receive credit balances on the books of their respective noninees. The Bonds will be dated as of the Date of Delivery.

Interest on the Bonds accrues from the Date of Delivery, and is payable semiannually on each Bond Payrrent Date, comrrenci ng August 1, 2017. Interest on the Bands wi 11 be computed on the basis of a 360-clay year of 12, 30-day months. Each Bond wi 11 bear interest frorn the Bond Payrrent Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 16th day of the rnonth next preceding any Bond Payrrent Date to that Bond Payrrent Date, inclusive, in which event it will bear interest frorn such Bond Payrrent Date, or unless it is authenticated on or before J uly 15, 2017, in which event it wi 11 bear interest frorn the Date of Delivery. The Bands are issuable in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds mature on August 1, in the years and amounts set forth on the c0.ter page hereof.

The principal of the Bonds will be payable in liMiful rmney of the United States of Arrerica to the registered OWnerthereof, upon the surrender thereof at the principal office of the Paying Agent. The interest on the Bonds will be payable in lawful rnoney to the person whose narre appears on the bond registration books of the Paying Agent as the registered owner thereof as of the close of business on the 15th day of the rnonth preceding any Bond Payrrent Date (a" Record Date"), whether or not such day is a business day. Such interest is to be paid b,I wire transfer on such Bond Payrrent Date to such registered owner to the bank and account number on file with the Paying Agent as of the Record Date. The Paying Agent is authorized to pay the Bonds when duly presented for payrrent at maturity, and to cancel all Bands upon payrrent thereof.

6 Bond Insurance

Bond Insurance Policy. Concurrently with the issuance of the Bonds, Build Arrerica Mutual Assurance Corrpany ("BAM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payrrent of principal of and interest on the Bonds when due as set forth in the form of the Policy included as APPENDIX F to this Official Staterrent.

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

BuildArrerica Mutual Assurance Company. BAM is a New York domiciled mutual insurance corporation. BAM pro.tides credit enhancerrent products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of incorre under section 115 of the U.S. Internal Revenue Code of 1986, as arrended. No rrember of BAM is liable for the obligations of BAM.

The address of the principal executive offices of BAM is: 200 Liberty Street, 27'h Floor, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildarrerica.com.

BAM is licensed and suqject to regulation as a financial guaranty insurance corporation underthe laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law.BAM's financial strength is rated "AA;Stable" b,I S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"). An explanation of the significance of the rating and current reports may be obtained from S&P at 1Nww.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflects the S&P's current assessrrent of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The alx:we rating is not a recomrrendation to buy, sell or hold the Bonds, and such rating is suqject to revision or withdrawal at any tirre b,I S& P, including withdrawal initiated at the request of BAM in its sole discretion. Any dcwnward revision or withdrawal of the alx:we rating may have an adJerse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payrrents payable b,I the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (suqject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn.

Capitalization of BAM.

BAM's total adnitted assets, total liabilities, and total capital and surplus, as of December 31, 2016 and as prepared i n accordance with statutory accounting practices prescribed or permitted b,I the NewY ork State Departrrent of Financial Services were $496.7 million, $65.2 nil lion and $431.5 nillion, respectively.

BAM is party to a first loss reinsurance treaty that pro.tides first loss protection upto a maximum of 15% of the par amount outstanding for each policy issued b,I BAM, suqject to certain limitations and restri cti ans.

BAM's most recent Statutory Annual Staterrent, which has been filed with the New York State Insurance Departrrent and posted on BAM's website atwww.buildarnericacom, is incorporated herein b,I reference and may be obtained, without charge, upon request to BAM at its address pro.tided abcwe

7 (Attention: Finance Departrrent). Future financial staterrents will similarly be made available when published.

BAM makes no representation regarding the Bonds or the ad.tisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Staterrent or any information or disclosure contained herein, or onitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied b,I BAM and presented under the heading 'THE BONDS - Bond I nsurance."

Additional Information Available from BAM.

Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that pro.tides a discussion of the obligor and some of the key factors BAM's analysts and credit comnittee considered when apprcwing the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildarrerica.com/creditinsights/. (The preceding website address is pro.tided for convenience of reference only. Information available at such address is not incorporated herein b,I reference.)

Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Credit Profile for those bonds. These pre-sale Credit Profiles pro.tide information about the sector designation (e.g. general obligation, sales tax); a prelininary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured b,I BAM, any pre-sale Credit Profile will be updated and superseded b,I a final Credit Profile to include information about the gross par insured b,I CUSIP, maturity and coupon. BAM pre-sale and final Credit Profiles are easily accessible on BAM's website at buildarrerica.com/obligor/. BAM will produce a Credit Profile for all bonds insured b,I BAM, whether or not a pre-sale Credit Profile has been prepared for such bonds. (The preceding website address is pro.tided for convenience of reference only. Information available at such address is not incorporated herein b,I reference.)

Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recomrrendations to purchase, hold or sell securities or to make any investrrent decisions. CrediHelated and other analyses and staterrents in the Credit Profiles and the Credit Insights videos are staterrents of opinion as of the date expressed, and BAM assurres no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared b,I BAM; they have not been revie.ved or apprcwed b,I the issuer of or the underwriter for the Bonds, and the issuer and underwriter assurre no responsi bi I ity for their content.

BAM receives compensation (an insurance prenium) for the insurance that it is pro.tiding with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the B ands, whether at the i ni ti al offering or otherwise.

8 Annual Debt Service

The fol Io.vi ng table sho.vs the annual debt service requirements of the District for the Bands (assuning no optional redemptions):

Year Ending Annual Principal Annual Interest Total Annual August 1 Payment Payment111 Debt Service 2017 $96,731.61 $96,731.61 2018 $500,000.00 400,268.76 900,26876 2019 800,000.00 375,268.76 1,175,268.76 2020 335,268.76 335,268.76 2021 335,268.76 335,268.76 2022 335,268.76 335,268.76 2023 335,268.76 335,268.76 2024 335,268.76 335,268.76 2025 335,268.76 335,268.76 2026 335,268.76 335,268.76 2027 335,268.76 335,268.76 2028 335,268.76 335,268.76 2029 335,268.76 335,268.76 2030 335,268.76 335,268.76 2031 100,000.00 335,268.76 435,268.76 2032 100,000.00 332,268.76 432,268.76 2033 120,000.00 329,143.76 449,143.76 2034 150,000.00 325,393.76 475,393.76 2035 175,000.00 319,393.76 494,393.76 2036 200,000.00 313,706.26 513,706.26 2037 250,000.00 305,706.26 555,706.26 2038 310,000.00 295,706.26 605,706.26 2039 345,000.00 284,468.76 629,468.76 2040 770,000.00 271,962.50 1,041,962.50 2041 840,000.00 244,050.00 1,084,050.00 2042 910,000.00 213,600.00 1,123,600.00 2043 990,000.00 177,200.00 1,167,200.00 2044 1,075,000.00 137,600.00 1,212,600.00 2045 1,160,000.00 94,600.00 1,254,600.00 2046 1,205,000.00 48,200.00 1,253,200.00 Total $10,000,000.00 $8,588,494.33 $18,588,494.33

'" I merest payrrents on the Bonds will be rmde serriannually on February l and August l of each year, comrrencing August l, 2017.

See "GARVEY SCHOOL DISTRICT - District Debt Structure - General Obligation Bonds" herein for a corrplete debt service schedule of all of the District's general obligation bonded debt.

Application and Investment of Bond Proceeds

The proceeds of the sale from the Bands, net of costs of issuance and any preni um received upon the sale thereof, will be deposited b,I the County to the credit of the fund created b,I the Resolution and kno.vn as the "Garvey School District, Election of 2016 General Obligation Bonds, Series A Building Fund' (the "Building Fund'), and will be applied solely for the purposes for which the Bonds are being issued. Interest earnings in the Building Fund will be retained therein. Any excess proceeds of the Bonds not needed for the authorized purposes for which the Bonds are being issued, upon written notice from the

9 District, will be transferred to the Debt Service Fund and applied to the payrrent of the principal of and interest on the B ands.

The ad valorem property taxes levied b,I the County for the payrrent of the Bonds, when col Iected, are required to be held separate and apart b,I the County in a fund created b,I the Resol uti on and kno.vn as the "Garvey School District, Election of 2016 General Obligation Bonds, Series A Debt Service Fund' (the "Debt Service Fund"), and used only for payrrent of principal of and interest on Bonds. Any accrued interest and net prenium received upon the sale of the Bonds will be deposited in the Debt Service Fund. Any interest earnings on moneys held in the Debt Service Fund will be retained therein. If, after all of the Bonds have been redeemed or paid and otherwise cancelled, there are moneys remaining in the Debt Service Fund, said moneys will be transferred to the general fund of the District as pro.rided and pernitted b,l law.

Moneys in the Debt Service Fund and the Building Fund are expected to be invested through the County's p:xlled investrrent fund. See "APPENDIX E - LOS ANGELES COUNTY TREASURY POOL" herein.

Redemption

Optional Redemption. The Bonds maturing on or before August 1, 2027 are not suqject to redemption prior to their stated maturity dates. The Bonds maturing on and after August 1, 2028 may be redeerred prior to their respective stated maturity dates at the option of the District, from any source of funds, in whole or in part, on August 1, 2027 or on any date thereafter, at a redemption price equal to the principal amount of such Bonds called for redemption, together with interest accrued thereon to the date fixed for redemption, without preni um.

Mandatory Sinking Fund Redemption. The Bonds maturing on August 1, 2041 (the "2041 Term Bonds") are suqject to redemption prior to maturity from mandatory sinking fund payrrents on August 1 of each year, on and after August 1, 2038, at a redemption price equal to the principal amount thereof as of the date fixed for redemption, together with interest accrued to the date set for such redemption, without prenium. The principal amount of the 2041 Term Bonds to be so redeerred and the redemption dates therefor, and the final payrrent date is as indicated in the follo.ving table: Redemption Date (August 1) Principal Amount 2038 $310,000 2039 345,000 2040 770,000 2041 Ill 840,000

en Maturity.

The Bonds maturing on August 1, 2046 (the" 2046 Term Bonds," and together with the 2041 Term Bonds, the 'Term Bonds") are suqject to redemption prior to maturity from mandatory sinking fund payrrents on August 1 of each year, on and after August 1, 2042, at a redemption price equal to the principal amount thereof as of the date fixed for redemption, together with interest accrued to the date set for such redemption, without premium The principal amount of the 2046 Term Bands to be so redeemed and the redemption dates therefor, and the final payrrent date is as indicated in the follo.ving table:

10 Redemption Date (August 1) Principal Amount 2042 $910,CXX) 2043 990,CXX) 2044 1,075,CXX) 2045 1, 160,CXX) 2045111 1,205,CXX)

en Maturity.

In the event that a Term Bond is opti anal redeemed in part, the remaining mandatory sinking fund payments with respect to such Term Bond shall be reduced proportionately, or as otherwise directed b,I the District, in integral multiples of $5,CXXl principal amount, in respect to the portion of such Term Bond optional ly redeemed.

Selection of Bonds for Redemption. Whenever prcwision is made for the redemption of Bonds and less than all Bonds are to be redeemed, the Paying Agent, upon written instruction from the District, shall select Bonds for redemption as so directed and if not directed, in inverse order of maturity. Within a maturity, the Paying Agent, shall select Bonds for redemption b,l lot. Redemption b,l lot shall be in such manner as the Paying Agent shall deternine; pro.tided, ho.vever, that the portion of any Bond to be redeemed in part shall be in a principal amount of $5,CXXl, or any integral multiple thereof.

Redemption Notice. W hen redemption is authorized or requi red pursuant to the Resol uti on, the Paying Agent, upon written instruction from the District, will give notice (a" Redemption Notice") of the redemption of the B ands. Each Redemption Notice wi 11 specify ( a) the B ands or designated portions thereof (in the case ofredemption of the Bonds in part but not in whole) which are to be redeemed, (b) the date of redemption, ( c) the pl ace or pl aces where the redemption wi 11 be made, i ncl udi ng the name and address of the Paying Agent, (cl) the redemption price, (e) the CUSI P numbers (if any) assigned to the Bands to be redeemed, ( f) the Bond numbers of the Bands to be redeemed i n whole or i n part and, i n 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.

The Paying Agent will take the follo.ving actions with respect to each such Redemption Notice: ( a) at I east 20 but not more than 4 5 days prior to the redemption date, such Redemption Notice wi 11 be given to the respective owners of Bonds designated for redemption b,I registered or certified mail, postage prepaid, at thei r addresses appeari ng on the bond register; ( b) at I east 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given b,I registered or certified mail, postage prepaid, telephonically confirmed facsimile transmission, or cwernight delivery service, to the Securities Depository; (c) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given b,I registered or certified mail, postage prepaid, or 0.ternight delivery service, to one of the Information Services; and (cl) such Redemption Notice will be given to such other persons as may be required pursuanttothe Continuing Disclosure Certificate.

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

"Securities Depository" shal I mean The Depository Trust Company, 55 Water Street, New York, NewYork 10041. 11 A certificate of the Paying Agent or the District that a Redemption Notice has been given as pr0.tided in the Resolution will be conclusive as against all parties. Neither failure to receive any Redemption Notice nor any defect in any such Redemption Notice so given will affect the sufficiency of the proceedings for the redemption of the affected Bands. Each check issued or other transfer of funds made b,I the Paying Agent for the purpose of redeeming Bonds will bear or include the CUSI P number identifying, b,I issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

Payment of Redeemed Bonds. When a Redemption Notice has been given substantially as described alx:we, and, when the amount necessary for the redemption of the Bands cal I ed for redemption (principal, interest, and premium, if any) is irre..rocably set aside in trust for that purpose, as described in "-Defeasance," the Bands designated for redemption in such notice wi 11 become due and payable on the date fixed for redemption thereof and upon presentation and surrender of said Bands at the pl ace specified in the Redemption Notice, said B ands wi 11 be redeemed and paid at the redemption price out of such funds. All unpaid interest payable at or prior to the redemption date will continue to be payable to the respective owners, but without interest thereon.

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

Effect of Redemption Notice. I f on the applicable designated redemption date, money for the redemption of the B ands to be redeemed, together with interest to such redemption date, is held b,I an independent escro.v agent selected b,I the District so as to be available therefor on such redemption date as described in" -Defeasance," and if a Redemption Notice thereof will have been given substantially as described abOJe, then from and after such redemption date, interest on the Bonds to be redeemed shall cease to accrue and become payable.

Rescission of Redemption Notice. With respect to any Redemption Notice in connection with the opti anal redemption of Bands ( or portions thereof) as described abOJe, uni ess upon the giving of such notice such Bonds or portions thereof shall be deemed to have been defeased as described in " Defeasance," such Redemption Notice will state that such redemption will be conditional upon the receipt b,I an independent escro.v agent selected b,I the District, on or prior to the date fixed for such redemption, of the moneys necessary and sufficient to pay the principal, and preni um, if any, and interest on, such Bonds (or portions thereof) to be redeemed, and that if such moneys shall not have been so received said Redemption Notice will be of no force and effect, no portion of the Bonds will be suqject to redemption on such date and such Bands wi 11 not be required to be redeemed on such date. In the e..rent that such Redemption Notice contains such a condition and such moneys are not so received, the redemption will not be made and the Paying Agent wi II within a reasonable ti me thereafter (but in no event later than the date originally set for redemption) give notice to the persons to whom and in the manner in which the Redemption Notice was given that such moneys were not so received. In addition, the District wi II have the right to rescind any Redemption Notice, b,I written notice to the Paying Agent, on or priortothe date fixed for such redemption. The Paying Agent will distribute a notice of the rescission of such Redemption Notice i n the same manner as such notice was ori gi nal ly pr0.ti ded.

Bonds No Longer Outstanding. When any Bonds (or portions thereof), which have been duly called for redemption prior to maturity, or with respect to which irrevocable instructions to call for redemption prior to maturity at the earliest redemption date have been given to the Paying Agent, in form

12 satisfactory to it, and sufficient moneys shal I be held irrevocably in trust for the payment of the redemption price of such Bands or portions thereof, and, accrued interest thereon to the date fixed for redemption, then such Bonds will no longer be deemed outstanding and shall be surrendered to the Paying Agent for cancellation.

Book--E ntry Only System

The informttion in this section concerning DTC and DTC's oook--entry system has been obtained from sources that the District belie..res to be reliable, but the District takes no responsibility for the accuracy or conl)leteness thereof. The District cannot and does not give any assurances that DTC or the Direct Participants or Indirect Participants will distribute to the Beneficial Owners (a) payrrents of interest, principal or prenium if any, with respect to the Bonds, (b) certificates representing OM1ership interest in or other confirmttion or OM1ership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its noninee, as the registered OM1er of the Bonds, or that they will so do on a timely basis or that DTC or the Direct Participants or Indirect Participants will act in the mtnner described in this Official Statement. The current "Rules" applicable to DTC are on file with the Securities and Exchange Cornnission and the current" Procedures" of DTC to be follo.ved in dealing with the Direct Participants or Indirect Participants are on file with DTC.

The DTC, New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as ful ly,egi stered securities registered in the name of Cede & Co. (DTC' s partnership nominee) or such other name as may be requested b,I an authorized representative of DTC. One fully,egistered Bond certificate wi 11 be issued for each maturity of the B ands, each i n the aggregate pri nci pal amount of such mtturity, 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 NewY ork Banking Law, a member of the Federal Reserve System a "clearing corporation" within the meaning of the New York Uniform Comnercial Code, and a "clearing agency" registered pursuant to the prcwisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and pro.tides asset servicing fcr ewer 3.6 nil lion issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and rroney market instruments (from ewer 100 countries) that DTC's participants ("Direct Participants'') deposit with DTC. DTC also facilitates the post-trade settlement anmg Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized oook--entry transfers and pledges between Direct Participants' accounts. This elininates the need for physical mcwement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, l::anks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-o,vned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed I ncorne Clearing Ccrporation, all of which are regstered clearing agencies. DTCC is o.vned b,I the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and noo-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 drectly or indirectly ("Indirect Participants"). DTC is rated "AA-+'' b,I Standard & Poor's. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Comnission. More i nforrrati on about DTC can be found at www.dtcc.com

Purchases of Bonds under the DTC system must be made b,I or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The o.vnership interest of each Beneficial owner is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial owners are, ho.vever, expected to receive written confi rmati ons prcwi di ng detai Is of the transaction, as wel I as periodic statements of their

13 holdings, from the Direct or Indirect Participant through which the Beneficial owner entered into the transaction. Transfers of cwnership interests in the Bonds are to be accomplished b,I entries made on the oooks of Direct and Indirect Participants acting on behalf of Beneficial owners. Beneficial owners will not receive certificates representing their cwnership interests in the Bonds, except in the event that use of the oook--entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited b,I Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested b,I an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC noninee do not effect any change in beneficial cwnership. DTC has no kncwledge 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 thei r holdings on behalf of their customers.

Conveyance of notices and other communications b,I DTC to Direct Participants, b,I Direct Participants to Indirect Participants, and b,I Direct Participants and Indirect Participants to Beneficial owners wi 11 be gcwerned b,I arrangements among them, suqj ect to any statutory or regulatory requirements as may be in effect from ti me to ti me. B enefi ci al owners of B ands may wish to take certai n steps to augment the transnission to them of notices of significant events with respect to the Bonds, such as redemptions, defaults, and proposed amendments to the Resolutions. For example, Beneficial owners of Bands may wish to ascertai n that the noni nee holding the B ands for thei r benefit has agreed to obtain and transmit notices to Beneficial owners. In the alternative, Beneficial owners may wish to pr0.tide their names and addresses to the registrar and request that copies of notices be pr0.ti ded directly to them

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to deternine b,l 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 noni nee) wil I consent or vote with respect to Bonds unless authorized b,I a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds and distributions on the Bonds will be made to Cede & Co., or such other nominee as may be requested b,I 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 the Paying Agent, on payable date in accordance with their respective holdings shewn on DTC's records. Payments b,I Participants to Beneficial owners will be gcwerned b,I 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, suqject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds or distributions to Cede & Co. (or such other noninee as may be requested b,I 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.

14 DTC may discontinue pro.tiding its services as dep:isitory with respect to the Bonds at any time b,I giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor dep:isitory is not obtained, Bond certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of oook--entry--only transfers through DTC (or a successor securities dep:isitory). In that event, Bond certificates will be printed and delivered toDTC.

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

Discontinuation of Book-£ ntry Only System; Payment to Beneficial Owners

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

In the event that the oook--entry system described abcwe is no I anger used with respect to the Bonds, the follONing prcwisions will gcwern the payment, registration, transfer, exchange and replacement of the Bonds.

The principal of the Bands and any premium and interest upon the redemption thereof prior to the maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Bonds at the designated office of the Paying Agent, initially located in Los Angeles, California Interest on the Bonds will be paid b,I the Paying Agent b,I wire transfer to the bank and account number on file with the Paying Agent as of the Record Date.

Any Bond may be exchanged for Bonds of like tenor, maturity and Transfer Amount (which with respect to any outstanding Bonds means the principal amount thereof) upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed b,I the registered owner or b,I a person legally emp:wered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred only on the Bond Register b,I the person in whose name it is registered, in person or b,I his duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Paying Agent, accompanied b,I delivery of a written instrument of transfer in a form apprcwed b,I the Paying Agent, duly executed. Upon exchange or transfer, the Paying Agent shal I register, authenticate and deliver a new Bond or Bonds of like tenor and of any authorized denomination or denominations requested b,I the owner equal to the Transfer Amount of the Bond surrendered and bearing interest at the same rate and maturing on the same date.

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

15 Defeasance

A 11 or any portion of the outstanding maturities of the Bands may be defeased at any ti rre prior to maturity in the fol Io.vi ng ways:

(a) Cash: by irrevocably depositing with an independent escro.v agent selected by the District an am:iunt of cash which, together with am:iunts transferred from the Debt Service Fund, if any, is sufficient to pay and discharge all Bonds outstanding and designated for defeasance ( i ncl udi ng al I pri nci pal thereof, accrued interest thereon and redemption premiums, if any) at or before their maturity date; or

(b) Gcwernrrent Obligations: by irrevocably depositing with an independent escro.v agent selected by the District noncallable Gcwernrrent Obligations together with cash and am:iunts transferred from the Debt Service Fund, if any, in such am:iunt as will, in the opinion of an independent certified public accountant, be fully sufficient to pay and discharge al I Bands outstandi ng and designated for defeasance (including al I pri nci pal thereof, accrued interest thereon and redemption premiums, if any) at or before their maturity date; then, notwithstanding that any of such Bonds shall not have been surrendered for payrrent, all obligations of the District with respect to al I such designated outstanding Bands shal I cease and terminate, except only the obligation of the Paying Agent or an independent escro.v agent selected by the District to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) abcwe, to the o.vners of such designated Bands not so surrendered and paid al I sums due with respect thereto.

"Gcwernrrent Obligations" means direct and general obligations of the United States of Arrerica, obligations that are unconditionally guaranteed as to principal and interest by the United States of Arrerica (which may consist of obligations of the Resolution Funding Corporation that constitute interest strips), or obligations the payrrent of the principal of and interest on which is secured, guaranteed or otherwise backed by, directly or indirectly, a pledge of the full faith and credit of the United States of Arrerica. In the case of direct and general obligations of the United States of Arrerica, Gcwernrrent Obi i gati ans shal I include evidences of direct o.vnershi p of proportionate interests in future interest or principal payrrents of such obligations. lnvestrrents in such proportionate interests must be limited to circumstances where (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the o.vner of the investrrent is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations are held in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; pro.tided that such obligations are rated or assessed at least as high as direct and general obligations of the United States of Arrerica by Moody's Investors Service or S& P Global Ratings ("S& P").

16 ESTIMATED SOURCES AND USES OF FUNDS

The proceeds of the Bonds are expected to be applied as folio.vs:

Sources of Funds Pri nci pal A nnunt of the Bonds $10,000,000.00 Net Original Issue Prenium 168,185.20 Total Sources $10,168,185.20

Uses of Funds Deposit to Building Fund $9,845,000.00 Deposit to Debt Service Fund 99,071.84 Costs of I ssuance111 224,113.36 Total Uses $10,168. 185.20

'" Reflects all costs of issuance, including the underwriting discount, legal and financial advisory fees, printing costs, bond insurance prerrium, rating agency fee, and the costs and fees of the Paying Agent.

TAX BASE FOR PAYMENT OF BONDS

The inforrration in this section describes ad valorem property taxation, assessed valuation, and other rreasures of the tax base of the District. The principal of and interest on the Bonds are payable solely from the proceeds of advaloremtaxes levied and collected b,lthe County on taxable property in the District. The District's general fund is not a source for the repayment of the Bonds. Ad Valorem Property Taxation

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

Taxes are levied for each fiscal year on taxable real and personal property which is located in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as "secured' or "unsecured' and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll." A supplemental roll is developed when property changes hands or new construction is completed. The County levies and collects all property taxes for property fallingwithin the County's taxing boundaries.

The valuation of secured property is established as of J anuary 1 and is subsequently enrol I ed in August. Property taxes on the secured roll are payable in two installments, due Ncwember 1 and February 1 of the calendar year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 1036 penalty attaches to any delinquent installment plus any additional amount deternined b,I the Treasurer. After the second installment of taxes on the secured roll is delinquent, the tax collector shall collect a cost of $10 for preparing the delinquent tax records and giving notice of delinquency. Property on the secured roll with delinquent taxes is declared tax-defaulted onJ uly 1 of the calendar year. Such property may thereafter be redeemed, until the right of redemption is terminated, b,I payment of the delinquent taxes and the delinquency penalty, plus a $15 redemption fee and a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is suqject to sale b,I the Treasurer.

17 Property taxes on the unsecured roll as of July 31 becorre delinquent if they are not paid b,I August 31 and are thereafter suqject to a delinquent penalty of 1036. Taxes added to the unsecure tax roll after July 31, if unpaid are delinquent and suqject to a penalty of 1036 on the last day of the month succeeding the month of enrollrrent. In the case of unsecured property taxes, an additional penalty of 1. 5% per month begins to accrue when such taxes remai n unpaid on the Iast day of the second month after the 1036 penalty attaches. The taxing authority has four ways of collecting unsecured personal property taxes: ( 1) a civi I action against the assessee; ( 2) fi I i ng a certificate i n the office of the county cl erk speci fyi ng certain facts i n order to obtain a j udgrrent Ii en on specific property of the assessee; ( 3) fi I i ng a certificate of delinquency for record in the county recorder's office in order to obtain a lien on specified property of the assessee; and (4) seizure and sale of personal property, imprcwerrents or possessory interests belonging or assessed to the assessee. See also"- Secured Tax Charges and Delinquencies" herein.

State law exempts from taxation $7,CXXl of the full cash value of an o.vner--occupied d.velling, but this exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the val ue of the exemptions.

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

Assessed valuation grONth allo.ved under Article XIIIA (new construction, certain changes of o.vnership, 2% inflation) is allocated on the basis of "situs" among the jurisdictions that serve the tax rate area within which the grONth occurs. Local agencies and school districts share the grONth of" base" revenues from the tax rate area. Each year's grONth allocation becorres part of each agency's allocation in the follo.vingyear. Assessed Valuations

The follo.ving table represents a lG-year history of assessed valuations in the District.

ASSESSED VALUATIONS Fiscal Years 2007-08 through 2016-17 Garvey School District

Local Secured Utility Unsecured Total % Change 2007-08 $2,887,792,858 $18,978,415 $37,654, 134 $2,944,425,407 2008-09 3,061,350,264 18,978,415 42,214,380 3,122,543,059 6.05% 2009-10 3,081,484,727 3,402,181 40,339,076 3,125,225,984 0.09 2010-11 3,128,572,713 3,396,181 42,066,256 3,174,035,150 1.56 2011-12 3,215,653,936 3,396,181 41,826,794 3,260,876,911 2.74 2012-13 3,288,746,062 3,396,181 41,886,587 3,334,028,830 2.24 2013-14 3,408,294,010 1,973,111 42,047,744 3,452,314,865 3.55 2014-15 3,551,978,603 1,973,111 41,926,365 3,595,878,079 4.16 2015-16 3,736,554,560 1,973,111 39,314,250 3,777,841,921 5.06 2016-17 3,880,712, 187 2,123,111 39,967,253 3,922,802,551 3.84

Source: California Municipal Statistics, Inc.

18 Econonic and other factors beyond the District's control, such as general market decline in property values, disruption in financial markets that may reduce avai I abi I ity of financing for purchasers of property, reclassification of property to a class exempt from taxation, whether b,I o.vnership or use (such as exemptions for property o.vned b,I the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the compiete or partial destruction of the taxable property caused b,I a natural or manmade disaster, such as earthquake, flood, fire or toxic contamination, could cause a reduction in the assessed value of taxable property within the District. Any such reduction would result in a corresponding increase in the annual tax rate levied b,I the County to pay the debt service with respect to the Bonds. See "THE BONDS - Security and Sources of Payment'' herein.

Drought. On January 17, 2014, the State Gcwernor (the "Gcwernor") declared a state-wide Drought State of Emergency. As of such date, the State faced water shortfalls due to the driest year in recorded State history; the State's rivers and reservoirs were belo.v their record lo.v levels, and manual and electronic readings recorded the water content of sno.vpack at the highest elevations in the State (chiefly in the Sierra Nevada mountain range) at about 2036 of normal average for the winter season. As part of his State of Emergency declaration, the Gcwernor directed State officials to assist agricultural producers and communities that may be economically impacted b,I dry conditions. Follo.ving the Gcwernor's declaration, the California State Water Resources Control Board (the "Water Board') issued a statewide notice of water shortages and poten ti al future curtai I ment of water right diversi ans. On A pri I 1, 2015, the Gcwernor issued an executive order mandating certain temporary conservation measures, which were i mpl emented b,I means of an emergency regulation adopted b,I the Water Board on May 5, 201 5.

The temporary conservation measures have been extended and amended b,I subsequent executive orders of the Gcwernor and Water Board regulations. Most recently, on May 9, 2016, the Gcwernor issued an executive order ordering the Department of Water Resources, the Water Board and the California Public Utilities Comnission to update and extend temporary water restrictions through the end of January 2017, and to take actions to transition to permanent, long-term imprcwements in water use. Follo.ving the Gcwernor's executive order, on May 18, 2016, the Water Board adopted a localized "stress test" approach of water conservation, under which local urban water agencies are required to ensure a three-year supply of water assuning three years of drought conditions. Agencies that prqject a water shortage at the end of the three-year period under the stress test are required to impiement conservation measures through January 2017 equal to the percentage of water shortage prqjected. On February 8, 2017, the Water Board extended the existing restrictions for an additional 270 days.

The Gcwernor has issued an executive order terminating the state-wide Drought State of Emergency in light of successful conservation efforts and plentiful rain and sno.v during the 2016-17 winter season. The executive order rescinds and modifies prior executive orders, ending the emergency regulations that require stress tests and mandatory conservation standards for urban water agencies, maintaining the emergency regulations that pro.tide for development of permanent prohibitions on wasteful water use, and di recti ng the Water B oard to take acti ans to promote efficiency and conservation. The Drought State of Emergency is continued in Fresno, Kings, Tulare and Tuolumne Counties, where emergency drinking water prqj ects con ti nue.

The District cannot make any representation regarding the effects that the current drought has had or, if it should continue, may have on the value of taxable property within the District, or to what extent the drought could cause disruptions to econoni c activity within the boundaries of the District.

19 Appeals and Acjjustments of Assessed Valuations. Under California law, property o.vners may apply for a reduction of thei r property tax assessment b,I fi I i ng a written application, i n form prescri bed b,I the State Board of Equalization ("SBE"), with the appropriate county ooard of equalization or assessment appeals ooard. In most cases, the appeal is filed because the applicant belie.es that present market conditions ( such as residential home prices) cause the property to be worth Iess than its current assessed value. Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. Such reductions are suqject to yearly reappraisals and may be adjusted back to their original values when market conditions irnprcwe. Once the property has regained its prior value, adjusted for inflation, it once again is suqject to the annual inflationary factor grONth rate allo.ved under Article XIIIA. See "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS - Article XI I IA of the California Constitution" herein.

A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is deternined b,I the completion date of new construction or the date of change of o.vnership. Any base year appeal must be made within four years of the change of o.vnership or new construction date.

In addition to the alx:we--described taxpayer appeals, county assessors may independently reduce assessed valuations based on changes in the market value of property, or for other factors such as the complete or partial destruction of taxable property caused b,I natural or man-made disasters such as earthquakes, floods, fire, drought or toxic contamination pursuant to relevant prcwisions of the State Constitution. See also "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS - Article XIIIA of the California Constitution" herein. Such reductions are suqject to yearly reappraisals b,I the county assessor and may be adjusted back to their original values when real estate market conditions imprcwe. Once property has regained its prior assessed value, acjj usted for inflation, it once again is suqject to the annual inflationary grONth rate factor al lo.ved under Article XI I IA.

No assurance can be given that property tax appeals or actions b,I the County Assessor in the future will not significantly reduce the assessed valuation of property within the District.

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20 Assessed Valuation of Single Fanily Homes. The follcwing table shews the distribution of single family homes within the District among various fiscal year 2016-17 assessed valuation ranges, as well as the average and median assessed valuation of single fanily homes within the District.

ASSESSED VALUATION OF SING LE FAMILY HOMES Fiscal Year 2016-17 Garvey School District

No. of 2016-17 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Farrily Residential 5,525 $1,707,966,044 $309,134 $284,788

2016-17 No.of % of Cumulative Total % of Cumulative 0 Assessed Valuation Parce1s .1. Total % ofTotal Valuation Total % ofTotal $0-$24,999 9 0.163% 0.163% $178,809 Q0l(JJ6 0.010% 25,000-49,999 289 5.231 5.394 11,810,983 0.692 0.7<12. 50,000-74,999 315 5.701 l l.095 19,613,541 l.148 l.850 75,000 -99, 999 361 6.534 17.629 30,789,591 l.803 3.653 100,000-124,999 210 3.801 21.430 23,575,900 l.380 5.033 125,000-149,999 222 4.018 25.448 30,590,710 l.791 6.824 150,000-174,999 191 3.457 28.905 31,099,762 l.821 8.645 175,000-199,999 241 4.362 33.267 45,136,971 2.643 l l.288 200,000-224,999 241 4.362 37.629 51,335,380 3.006 14.294 225,000-249,999 309 5.593 43.222 73,259,737 4.289 18.583 250,000-274,999 294 5.321 48.543 77,091,350 4.514 23.097 275,000 - 299,999 215 3.891 52.434 61,870,801 3.6.22 26.719 300,000-324,999 242 4.380 56.814 75,884,363 4.443 31.16.2 325,000-349,999 217 3.928 60.742 72,970,448 4.272 35.434 350,000-374,999 237 4.290 65.032 85,477,204 5.005 40.439 375,000 - 399,999 239 4.326 69.357 92,776,592 5.432 45.871 400,000-424,999 244 4.416 73.774 100,535,127 5.886 51.757 425,000-449,999 169 3.059 76.833 73,826,033 4.322 56.080 450,000-474,999 202 3.656 80.489 93,338,779 5.465 61.545 475,000-499,999 174 3.149 83.638 84,754,721 4.962 66.507 500,000 and greater 904 16.362 100000 572,049,242 33.493 100000 Total 5,525 100000% $1,707,966,044 100000% ------'" I rrproved single family residential parcels. Excludes condominiums and parcels with rrultiple family units. Source: California Municipal Statistics, Inc.

21 Assessed Valuation and Parcels b,I Land Use. The follo.ving table sho.vs the distribution of taxable property within the District b,I principal use, as rreasured b,I assessed valuation and parcels in fiscal year 2016-17.

ASSESSED VALUATION AND PARCELS BY LAND USE Fiscal Year 2016-17 Garvey School District

2016-17 % of No. of % of No. of Taxable % Assessed Valuation(]) Total Parcels Total Parcels Total Non-Re~dential: Comrrercial $512,996,075 13.22% 455 4.34% 448 4.39% Vacant Comrrercial 16,734,506 Q43 50 0.48 49 0.48 Industrial 91,005,299 2.35 80 0.76 80 Q78 Vacant Industrial 5,857,762 Ql5 20 0.19 20 Q20 Recreational 2,556,899 Q07 l3 0.12 12 Ql2 Governmentpocial ~ nstitutional 31,249,862 Q8l 169 l.61 78 Q76 Miscellaneous 5,621,673 Ql4 144 LlZ --2 Q09 Subtotal Non-Re~dential $666,022,076 17.18% 931 &89% 696 6.82%

Residential: Single Family Residence $1,707,966,044 44.01% 5,544 52.93% 5,525 54.11% Condorrinium/fo.-vnhouse 449,354,161 l l.58 1,414 13.50 1,413 13.85 Mobile Home Park 11,524,765 Q30 ll 0. ll ll 0. ll 2-4 Residential Units &27,596,214 21.33 2,140 20.43 2,140 20.98 5+ Residential Units/Apartments 188,035,672 4.85 258 2.46 257 2.52 Vacant Residential 3Q,2l :l,255 Q78 --1ZZ l.69 _ill l.54 S ubtotal Resi denti al $3,214,690, l l l &2.84% 9,544 91.11% 9,503 93.18%

Total $3,880,712,187 100.006 10,475 100.006 10,199 100.006 ------'" Local secured assessed valuation; excluding tax-exerrpt property. Source: California Municipal Statistics, Inc.

Assessed Valuation b,I Jurisdiction. The follo.ving table sho.vs the District's assessed valuation b,I jurisdiction for fiscal year 2016-17.

ASSESSED VALUATION AND PARCELS BY J URISDICTION111 Fiscal Year 2016-17 Garvey School District

Assessed Valuation % of Assessed Valuation % of Jurisdiction I urisdiction: in District District of I urisdiction in District City of Monterey Park $1,143,114,080 29.14% $6,934,068,876 16.49% City ofRosemead 1,992,662,267 50.80 4,267,980,901 46.69 City of San Gabriel 490,142,349 12.49 4,727,434, 173 lQ37 Unincorporated Los Angeles County 29(;,88:l,855 7.57 98,268,176,262 Q30 Total Di strict $3,922,802,551 100.006

Los Angeles County $3,922,802,551 100.006 $1,344,647,265,846 Q29%

Ol Before deduction of redevelopment i nc::rerrental valuation. Source: California Municipal Statistics, Inc.

22 Secured Tax Charges and Delinquencies

The follo.ving tables sho.v secured tax charges and delinquency information for the District for fiscal years 2cn;-07 through 2015-16.

SECURED TAX CHARGES AND DELINQUENCIES Fiscal Years 2006--07 through 2015-16 Garvey School District

Amount % Secured Delinquent Delinquent Tax C harge111 I une 30 I une 30 2006--07 $1.552.478.31 $57,895.56 3.7"¼, 2007--00 1,726,505.24 85,336.73 4.94 2000-ffi 1,823,923.22 84,538.37 4.63 2oce-10 1,819,006.28 61,804.52 3.40 2010-11 1,854,894.16 44,106.68 2.38 2011-12 1,913,969.67 39,570.75 2.07 2012-13 1,916,874.63 35,056.31 1.83 2013-14 2,042,648.23 29,868.42 1.46 2014-15 2,134,003.04 30,532.70 1.43 2015-16 2,249,446.39 31,682.45 1.41

Amount % Secured Delinquent Delinquent Tax C harge121 I une 30 I une 30 2006--07 $1,325,182.74 $23,929.54 1.81% 2007--00 1,464,061.16 37,499.66 2.56 2000-ffi 2,063,280.72 47,414.81 2.30 2oce-10 2,380,526.88 53,031.05 2.23 2010-11 2,628,476.75 44,863.49 1.71 2011-12 2,669,672.82 37,551.35 1.41 2012-13 2,881,502.97 38,148.27 1.32 2013-14 3,099,801.10 32,092.94 1.04 2014-15 3,122,878.93 26,560.19 0.85 2015-16 3,257,816.47 30,254.42 0.93

'" 1% General Fund apportionrrent Excludes redeveloprrent agency impounds. Reflects countywide delinquency rate. w General obligation bond debt service levy. Source: California Municipal Statistics, Inc.

Alternative Method of Tax Apportionment -"Teeter Plan"

Certain counties in the State operate under a statutory program entitled Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the 'Teeter Plan"). Under the Teeter Plan local taxing entities receive 10036 of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected b,I the county. The County has not adopted the Teeter Plan, and consequently the Teeter Plan is not available to local taxing entities within the County, such as the District. The District's receipt of property taxes is therefore subject to delinquencies.

The District participates in the California Statewide Delinquent Tax Finance Authority ("CSDTFA"). CSDTFA is a joint exercise of po.vers agency formed for the purpose of purchasing delinquent ad valorem property taxes of its members in accordance with Section 6516.6 of the

23 Gcwernment Code of the State of California. The District anticipates that CSDTFA will frorn time to ti me purchase delinquent ad valorern property tax receivables frorn the District. For the rnost recent fi seal year for which CSDTFA purchased delinquencies (the 2015-16 fiscal year), such delinquencies were purchased frorn the District at a purchase price equal to 11036 thereof. Any penalty charges collected with respect to such delinquencies will be retained b,I CSDTFA. CSDTFA does not currently purchase ad valorerntax receivables related to the payment of general obligation bonds of the District. Thus, the District's participation in CSDTFA's program does not ensure that the District will receive the timely payment of ad valorern property taxes levied to secure the Bonds. See also "-Ad Valorern Property Taxation" herein.

Tax Rates

Representative tax rate areas ("TRAs") located within the District are TRAs 3917, 3925, and 3932. The table belo.v sho.vs the total ad valorern property tax rates, as a percentage of assessed valuation, levied b,I all taxing entities in these TRAs during the five-year period frorn fiscal years 2012-13 through 2016-17.

TYPICAL TAX RATES 111 Fiscal Years 2012-13 through 2016-17 Garvey School District

Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2012-13 2013-14 2014-15 2015-16 2016-17 City ofRosemead - Tax Rate Area 3917'" General Countywide l . 000000% l.000000% l.000000% l.000000% l.000000% Garvey School District .088318 .091314 .088596 .087798 .088735 Los Angeles Community College District .048750 .04454 l .040174 .035755 .035956 Metropolitan Water Di strict .003500 .003500 .003500 .003500 .003500 Total l.140568% l. l 39355% l. 132270% l.127053% l.128191%

City of Monterey Park- Tax Rate Area 3925'" General Countywide l.000000% l.000000% l.000000% l.000000% l.000000% City of Monterey Park .091175 .091175 .091175 .091175 .091175 Garvey School District .088318 .09l3l4 .088596 .087798 .088735 Los Angeles Community College District .048750 .044541 .040174 .035755 .035956 San Gabriel Valley Municipal Water District .018000 .018000 .018000 .018000 .023000 Total l.246243% l.245030% l.237945% l.232728% l.238866%

City of San Gabriel - Tax Rate Area 3932'3> General Countywide l.000000% l.000000% l.000000% l.000000% l.000000% City of San Gabriel .140000 .140000 .140000 .140000 .140000 Garvey School District .088318 .09l3l4 .088596 .087798 .088735 Los Angeles Community College District .048750 .044541 .040174 .035755 .035956 Metropolitan Water Di strict .003500 .003500 .003500 .003500 .003500 Total l.280568% l.279355% l.272270% l.267053% l.268191%

'" Fiscal year 2016-17 assessed valuation of TRA 3917 is $1,389,485,211, representing approximately 35.4% of the District's total assessed val uati on. w Fiscal year 2016-l 7 assessed valuation of TRA 3925 is $1,041,576,710, representing approximately 26.8% of the District's total assessed val uati on. 3 < > Fiscal year 2016-17 assessed valuation of TRA 3932 is $240,265,157, representing approximately 6.1% of the District's total assessed val uati on. Source: California Municipal Statistics, Inc.

24 Principal Taxpayers

The more property (b,I assessed value) which is CM/lled b,I a single taxpayer within the District, the greater amount of tax collections that are exposed to weaknesses in such a taxpayer's financial situation and ability or willingness to pay property taxes. The follcwing table lists the 20 largest local secured taxpayers in the District in term, of their fiscal year 2016-17 secured assessed valuations. Each taxpayer listed belcw is a narre listed on the tax rolls. The District cannot make any representation as to whether individual persons, corporations or other organizations are I i able for tax payrrents with respect to multi pl e properties held i n various narres that in aggregate may be Iarger than is suggested b,I the table belcw. LARGEST LOCAL SECURED TAXPAYERS Fiscal Year 2016-17 Garvey School District

2016-17 % of Property Owner Primary Land Use Assessed Valuation Total 111 1. Wal Mart Real Estate B usi ness Trust Commercial $35,607,894 0.92% 2. Rosemead Hwang LL C S hopping Center 35,030,575 0.90 3. TonyC.Chu Commercial 29,931,374 0.77 4. AFG Investment Fund 5 LLC Hospital 26,030,793 0.67 5. Metodo Investments LLC Industrial 19,627,334 0.51 6. Big Island Property LLC Mobile Home Park 10,451,686 0.27 7. Tai king LLC Commercial 10,433,554 0.27 8. Citadel Panda Express Inc. Office Building 9,862,505 0.25 9. Sun 6th LLC Apartments 8,956,650 0.23 10. Hawaii Property Inc. Commercial 7,990,314 0.21 11. BMC Rosemead LLC Industrial 7,200,000 0.19 12. Garvey Commercial Center LLC Commercial 7,066,647 0.18 13. CFT Da

'" The fiscal year 2016-17 loc:al secured assessed valuation of the District is $3,880,712, 187. Source: California Municipal Statistics, Inc.

25 Statement of Direct and Overlapping Debt

Set forth on the follewing page is a direct and 0.terlapping debt report (the "Debt Report") prepared b,I California Municipal Statistics, Inc. effective as of February 14, 2017. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for corrpleteness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets b,I public agencies whose boundaries 0.terlap the boundaries of the District in whole or in part. Such long term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured b,l landwithin the District. In many cases long-term obligations issued b,I a public agency are payable only from the general fund or other revenues of such public agency.

The table shews the percentage of each 0.terlapping entity's assessed value located within the boundaries of the District. The table also shews the corresponding portion of the cwerlapping entity's existing debt payable from property taxes levied within the District. The total amount of debt for each 0.terlappingentity is not given in the table.

The first col umn i n the table names each publ i c agency which has outstandi ng debt as of the date of the report and whose territory 0.terlaps the District in whole or in part. The second column shews the percentage of each 0.terlapping agency's assessed value located within the boundaries of the District. This percentage, multiplied b,I the total outstanding debt of each cwerlapping agency (which is not shewn in the table) produces the amount shewn in the third column, which is the apportionment of each 0.terl appi ng agency's outstanding debt to taxable property i n the District.

[REMAINDER OF PAGE LEFT BLANK]

26 STATEMENT OF DIRECT AND OVERLAPPING DEBT Garvey School District

2016-17 Assessed Valuation: $3,922,802,551

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DE BT: % Applicable Debt 2/14/17 Los Angeles County Flood Control District 0.298)6 $29,979 Metropolitan Water District 0.109 81,713 Los Angeles Comm.rnity College Di strict 0.525 20,201,370 Alhambra Unified School District 23.396 16,580,674 Garvey School District 100.000 32,715,386"' Los Angeles County Regional Park and Open Space Assessrrent District 0.292 113 573 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $69,722,695

OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 0.292"/o $5,733,482 Los Angeles County Superintendent of Schools Certificates of Participation 0.292 21,039 City of Monterey Park Pension Obligation Bands 16.485 2,302,955 Los Angeles County Sanitation District No. 2 Authority 2.309 328,913 Los Angeles County Sanitation District No. 15 Authority 4.228 616,498 TOTAL OVERLAPPING GENERAL FUND DEBT $9,002,887

OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): $18,951,472

GROSS COMBINED TOTAL DEBT $97,677,054'0

Ratios to 2016-17 Assessed Valuation: Direct Debt ($32,715,386) ...... 0.83% Total Direct and Overlapping Tax and Assessrrent Debt ...... 1.73//o Combined Total Debt ...... 2.4g'/o

Ratios to Redevelopment Incremental Valuation ($538,231,575): Total Overlapping Tax I ncrerrent Debt...... 3.52%

'" Excludes the Bonds described herein. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

27 CONSTITUTIONAL AND STATUTORY PROVISIONSAFFECTI NG DISTRICT REVENUES AND APPROPRIATIONS

The principal of and interest on the Bonds are payable solely from the proceeds of an advalorem property tax levied b,I the County for the payrrent thereof. See" THE BONDS - Security and Sources of Payment'' herein. Articles XI I IA, XI 11 B, XI I IC and XI 11 D of the State Constitution, Prop:isitions 98 and 111, and certain other prcwisions of law discussed belcw, are included in this section to describe the potential effect of these Constituti anal and statutory measures on the abi I ity of the County to I evy taxes on behalf of the District and of the District to spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws irnp:ise any linitation on the ability of the County to levy taxes for payment of the principal of and interest on the Bonds.

ArticleX I I IA of the California Constitution

ArticleXIIIA ("ArticleXIIIA") of the State Constitution Ii nits the amount of advaloremtaxes on real property to 1% of "full cash value" as determined b,I the county assessor. ArticleX I I IA defines "full cash value" to mean "the county assessor's valuation of real property as shewn on the 1975-76 bill under "ful I cash value," or thereafter, the appraised value of real property when purchased, newly constructed or a change in cwnership has occurred after the 1975 assessment," suqject to exemptions in certain circumstances of property transfer or reconstruction. Deternined in this manner, the full cash value is also referred to as the "base year value." The "full cash value'' is suqject to annual aqjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable Iocal data, or to reflect reductions i n property val ue caused b,I damage, destruction or other factors.

Article XI I IA has been amended to all cw for temporary reductions of assessed value in instances where the fair market value of real property falls belcw the adjusted base year value described abcwe. Prop:isition 8-apprcwed b,I the voters in Ncwember of 1978-prcwides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, remcwal of property, or other factors causing a sinilar decline. In these instances, the market value is required to be reviewed annually unti I the market value exceeds the base year value, acjjusted for inflation. Reductions in assessed value could result in a corresponding increase in the annual tax rate levied b,I the County to pay debt service on the Bonds. See 'THE BONDS - Security and Sources of Payment'' and "TAX BASE FOR PAYMENT OF BONDS - AssessedValuations" herein.

ArticleX I I IA requires a vote of two-thirds or more of the qualified electorate of a city, county, special district or other public agency to irnp:ise special taxes, while totally precluding the irnp:isition of any additional ad valorern sales or transaction tax on real property. ArticleX I I IA exempts from the 1% tax limitation any taxes alx:we that level required to pay debt service (a) on any indebtedness apprcwed b,I the voters prior to July 1, 1978, or (b) as the result of an amendment apprcwed b,I State voters onJ une 3, 1986, on any bonded indebtedness apprcwed b,I two-thirds or more of the votes cast b,I the voters for the acquisition or imprcwement of real property on or after July 1, 1978, or (c) bonded indebtedness incurred b,I a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, apprcwed b,I 55% or more of the votes cast on the prop:isition, but only if certain accountability measures are included in the prop:isition. The tax for payment of the Bonds falls within the exception described in (c) of the immediately preceding sentence. In addition, ArticleXIIIA requires the apprcwal of two-thirds or more of all members of the State legislature to change any State taxes for the purp:ise of increasing tax revenues.

28 Legislation I mplementingArticleXI I IA

Legislation has been enacted and amended a number of times since 1978 to implement ArticleX I I IA. Under current liM', local agencies are no longer permitted to levy directly any property tax (except to pay voter--apprcwed indebtedness). The 1% property tax is automatically levied b,I the relevant county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to ne.v construction, change i n cwnershi p or from the annual adjustment not to exceed ZYo are al Iocated among the various jurisdictions in the "taxing area'' based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years.

All taxable property value included in this Official Statement is shewn at 10036 of taxable value (unless noted differently) and al I tax rates reflect the $1 per $100 of taxable value.

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

State-Assessed Utility Property

Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxingjurisdictions. Underthe State Constitution, such property is assessed b,I the SBE as part of a "going concern" rather than as individual pieces of real or personal property. Such State-assessed property is allocated to the counties b,I the SBE, taxed at special county-wide rates, and the tax revenues distributed to taxingjurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. So long as the District is not a basic aid district, taxes lost through any reduction in assessed valuation will be compensated b,I the State as equalization aid underthe State's school financing formula See "DI STRICT Fl NANCIAL INFORMATION - State Funding of Education" herein.

ArticleX 111 B of the California Constitution

ArticleXIIIB ("Article XIIIB") of the State Constitution, as subsequently amended b,I Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular g0.ternmental entity for the prior fiscal year, as acjjusted for changes in the cost of living and in population and for transfers in the financial responsibility for pro.tiding services and for certain declared emergencies. As amended, ArticleX 111 B defines

( a) "change in the cost of I ivi ng'' with respect to school districts to mean the percentage change in State per capita income from the preceding year, and

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

For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of g0.ternment shall be the appropriations limit for the 1986--87 fiscal year acjjusted for the changes made from that fiscal year pursuant to the pr0.tisions of ArticleX 111 B, as amended.

29 The appropriations of an entity of local gcwernrrent suqject to Article X 111 B Iirritations include the proceeds of taxes I evi ed b,I or for that entity and the proceeds of certain state sulNenti ans to that entity. "Proceeds of taxes" include, but are not lirrited to, all tax revenues and the proceeds to the entity frorn (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in pro.tiding the regulation, product or service), and (b) the investrrent of tax revenues.

Appropriations suqject to !irritation do not include (a) refunds of taxes, (b) appropriations for debt service such as the Bonds, (c) appropriations required to comply with certain mandates of the courts or the federal gcwernrrent, (cl) appropriations of certain special districts, (e) appropriations for all qualified capital outlay prqjects as defined b,I the State legislature, (f) appropriations derived frorn certain fuel and vehicle taxes and (g) appropriations derived frorn certain taxes on tobacco products.

ArticleX 111 B includes a requirerrent that all revenues received b,I an entity of gcwernrrent other than the State in a fiscal year and in the fiscal year imnediately follo.ving it in excess of the amount perrritted to be appropriated during that fiscal year and the fiscal year irnrnediately follo.ving it shall be returned b,I a revision of tax rates or fee schedules within the next two subsequent fiscal years.

Article X 111 B al so includes a requi rerrent that 5036 of al I revenues received b,I the State in a fiscal year and in the fiscal year irnrnediately follo.ving it in excess of the amount perrritted to be appropriated during that fiscal year and the fiscal year imnediately follo.ving it shall be transferred and allocated to the State School Fund pursuant to Section 8.5 of Article XVI of the State Constitution. See "-Propositions 98 and 111" herein.

ArticleX 111 C and ArticleX 111 D of the California Constitution

On Ncwernber 5, 1996, the voters of the State apprcwed Proposition 218, popularly kno.vn as the "Right to Vote on Taxes Act." Proposition 218 added to the State Constitution Articles XI I IC and X 111 D (respectively, "Article XIIIC" and "Article XIIID"), which contain a number of prcwisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessrrents, fees and charges.

According to the "Title and Surnrnary" of Proposition 218 prepared b,I the State Attorney General, Proposition 218 lirnits "the authority of local gcwernrrents to impose taxes and property,elated assessrrents, fees and charges." Arnong other things, Article XI I IC establishes that every tax is either a "general tax" (imposed for general gcwernrrental purposes) or a "special tax" (imposed for specific purposes), prohibits special purpose gcwernrrent agencies such as school districts frorn levying general taxes, and prohibits any local agency frorn imposing, extending or increasing any special tax beyond its rnaxirnurn authorized rate without a two-thirds vote; and also pro.tides that the initiative po.ver will not be limited in matters of reducing or repealing local taxes, assessrrents, fees and charges. ArticleXIIIC further pro.tides that no tax rnay be assessed on property other than ad valorern property taxes imposed in accordance with Articles X 111 and XI I IA of the State Constitution and special taxes apprcwed b,I a two- thirds vote under Article XI I IA, Section 4. Article X 111 D deals with assessrrents and property,elated fees and charges, and explicitly pro.tides that nothing in Article XI I IC orX 111 D will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property developrrent.

The District does not impose any taxes, assessrrents, or property,elated fees or charges which are suqject to the prcwisions of Proposition 218. It does, ho.vever, receive a portion of the basic 1% ad valorern property tax levied and collected b,I the County pursuant to Article XI I IA of the State Constitution. The prcwisions of Proposition 218 rnay have an indirect effect on the District, such as b,I limiting or reducing the revenues otherwise available to other local gcwernrrents whose boundaries

30 encompass property located within the District thereby causing such local gcwernments to reduce service levels and possibly adversely affecting the value of property within the District.

Proposition 26

On Ncwernber 2, 2010, voters in the State apprcwed Proposition 26. Proposition 26 amends Article XI I IC of the State Constitution to expand the definition of "tax'' to include "any levy, charge, or exaction of any kind imposed by a local gcwernment'' except the follo.ving: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not pro.tided to those not charged, and which does not exceed the reasonable costs to the local gcwernment of conferring the benefit or granting the privilege; (2) a charge imposed for a specific gcwernment service or product pro.tided directly to the payor that is not pro.tided to those not charged, and which does not exceed the reasonable costs to the local gcwernment of pro.tiding the service or product; (3) a charge imposed for the reasonable regulatory costs to a local gcwernment for issuing licenses and permits, perforning investigations, inspections, and audits, enforcing agricultural marketing orders, and the adninistrative enforcement and aqjudication thereof; (4) a charge imposed for entrance to or use of local gcwernment property, or the purchase, rental, or lease of local gcwernment property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of gcwernment or a local gcwernment, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property,elated fees imposed in accordance with the prcwisions of Article X 111 D. Proposition 26 pro.tides that the local gcwernment bears the burden of pro.ting by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no rnore than necessary to ccwer the reasonable costs of the gcwernmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationshiptothe payor's burdens on, or benefits received from, the gcwernmental activity.

Propositions 98 and 111

On Ncwernber 8, 1988, voters of the State apprcwed Proposition 98, a combined initiative constitutional amendment and statute called the "Classroom Instructional lrnprcwement and Accountability Act'' (the "Accountability Act"). Certain prcwisions of the Accountability Act have, ho.vever, been modified by Proposition 111, discussed belo.v, the prcwisions of which became effective onJ uly 1, 1990. The Accountability Act changed State funding of public education belo.v the university level and the operation of the State's appropriations Ii nit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as "K-14 school districts") at a level equal to the greater of (a) the same percentage of the State general fund revenues as the percentage appropriated to such districts in the 1986-S7 fiscal year, and (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, acjjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the State legislature to suspend this formula for a one-year period.

The Accountability Act also changed ho.vtax revenues in excess of the State appropriations Ii nit are distributed. Any excess State tax revenues up to a specified amount are, instead of being returned to taxpayers, to be transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded frorn the appropriations lirnit for K-14 school districts and the K-14 school district appropriations Ii nit for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year follo.ving an ArticleX 111 B surplus. The rnaxirnurn amount of excess tax revenues which can be transferred to K-14 school districts is 4% of the ninirnurn State spending for education mandated by the Accountability Act.

31 Since the Accountability Act is unclear in some details, there can be no assurances that the State legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State's budgets in a different way than is prop:ised in the Gcwernor's Budget.

On June 5, 1990, the voters of the State appr0.ted Prop:isition 111 (Senate Constitutional Amendment No. 1) called the 'Traffic Congestion Relief and Spending Linitation Act of 1990'' ("Prop:isition 111") which further rnodified ArticleXIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations linitations and school funding priority and allocation.

The most significant pr0.tisions of Prop:isition 111 are summarized as folio.vs:

a. Annual Adjustments to Spending Linit. The annual aqjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic grONth. Instead of being tied to the Consumer Price Index, the "change in the cost of Iivi ng'' is no.v measured b,I the change in State per capita personal income. The definition of "change in population" specifies that a portion of the State's spending limit is to be aqj usted to reflect changes i n school attendance.

b. Treatment of Excess Tax Revenues. "Excess" tax revenues with respect toArticleX 111 B are no.v deternined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Prop:isition 98 prcwision regarding excess tax revenues was rnodified. After any two-year period, if there are excess State tax revenues, 5036 of the excess are to be transferred to K -14 school districts with the balance returned to taxpayers; under prior law, 10036 of excess State tax revenues went to K-14 school districts, but only upto a maximum of 4% of the schools' minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts' base expenditures for calculating their entitlement for State aid in the next year, and the State's appropriations Ii nit is not to be increased b,I this amount.

c. Exclusions from Spending Linit. Two exceptions were added to the calculation of appropriations which are suqject to the Article XIIIB spending limit. First, there are excluded all appropriations for "qualified capital outlay prqjects" as defined b,I the State legislature. Second, there are excluded any increases in gasoline taxes abOJe the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts fromvehicleweight fees abOJethe levels in effect onJanuary 1, 1990. These latter pr0.tisions were necessary to make effective the transportation funding package appr0.ted b,I the State I egi slature and the Gcwernor, which was expected to raise 0.ter $15 billion in additional taxes from 1990 through 2CXXl to fund transportation programs.

d. Recalculation of Appropriations Limit. TheArticleXIIIB appropriations linit for each unit of gcwernment, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual Ii mit for fiscal year 1986-S7, aqj usted forward to 1990- 91 as if Prop:isition 111 had been in effect.

e. School Funding Guarantee. There is a complex adjustment in the formula enacted in Prop:isition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1)

32 40.9% of State general fund revenues ('Test 1") or (2) the amount appropriated in the prior year aqjusted for changes in the cost of living (rreasured as in Article XIIIB b,I reference to per capita personal income) and enrollrrent ('Test 2"). Under Proposition 111, K -14 school districts wi 11 receive the greater of ( 1) Test 1, ( 2) Test 2, or ( 3) a thi rd test ('Test 3"), which will replace Test 2 in any year when grcwth in per capita State general fund revenues from the prior year is less than the annual grcwth in the State per capital personal income. Under Test 3, K-14 school districts will receive the amount appropriated in the prior year acjjusted for change in enrollrrent and per capita State general fund revenues, plus an additional small acjjustrrent factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 will become a "credit'' to schools which wi 11 be paid in future years when State general fund revenue grcwth exceeds personal income grcwth.

Proposition 39

On Ncwerrber 7, 2000, State voters apprcwed an arnendrrent (commonly kno.vn as Proposition 39) to the State Constitution. This arrendrrent (1) al lo.vs school facilities bond rreasures to be apprcwed b,I 55% (rather than two-thirds) of the voters in local elections and pernits property taxes to exceed the current 1% I i mi t in order to repay the bonds and ( 2) changes exi sti ng statutory Iaw regardi ng charter school faci Iiti es. As adopted, the constitutional arnendrrents may be changed only with another State.vi de vote of the people. The statutory prcwisions could be changed b,I a majority vote of both houses of the State legislature and apprcwal b,I the Gcwernor, but only to further the purposes of the proposition. The local school jurisdictions affected b,I this proposition are K-12 school districts, including the District, community college districts, and county offices of education. As noted abcwe, the State Constitution previously I imited property taxes to 1% of the value of property. Prior to the apprcwal of Proposition 30, property taxes could only exceed this limit to pay for (1) any local gcwernrrent debts apprcwed b,I the voters prior toJ uly 1, 1978 or (2) bonds to acquire or imprcwe real property that receive two-thirds voter apprcwal after J uly 1, 1978.

The 55% vote requirerrent authorized b,I Proposition 39 applies only if the local bond measure presented to the voters includes: (1) a requirerrent that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school prqjects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirerrent that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the prqjects I isted in the rreasure. Legislation apprcwed in June 2000 placed certain linitations on local school bonds to be apprcwed b,I 55% of the voters. These prcwisions require that the tax rate per $100,000 of taxable property value prqjected to be levied as the result of any single election be no more than $60 (for a unified school district), $30 (for a high school or elerrentary school district, such as the District), or $25 (for a community college district) when assessed valuation is prqjected to increase in accordance with Article XI I IA of the State Constitution. These requi rerrents are not part of Proposition 39 and can be changed with a majority vote of both houses of the State legislature and apprcwal b,I the Gcwernor. See" -Article XI I IA of the California Constitution" herein.

J arvisvs. Connell

On May 29, 2002, the State Court of Appeal for the Second District decided the case of Ho.vard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State). The Court of Appeal held that either a final budget bill, an errergency appropriation, a self-executing authorization pursuant to state statutes (such as continuing appropriations) or the State Constitution or a federal mandate is

33 necessary for the State Controller to disburse funds. The foregoing requirerrent could apply to amounts budgeted b,I the District as being received from the State. To the extent the holding in such case would apply to State payrrents reflected in the District's budget, the requirerrent that there be either a final budget bill or an errergency appropriation may result in the delay of such payrrents to the District if such required legislative action is delayed, unless the payrrents are self-executing authorizations or are suqject to a federal mandate. On May 1, 2003, the State Suprerre 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 enactrrent of a budget or other proper appropriation, but under federal law, the Controller is required, notwithstanding a budget impasse and the limitations imposed b,I State law, to tirrely pay those State employees who are suqject to the ninimum wage and cwertirre compensation prcwisions of the federal Fair Labor Standards Act.

Proposition lA and Proposition 22

On Ncwember 2, 2004, State voters apprcwed Proposition lA, which arrends the State Constitution to significantly reduce the State's authority ewer major local gcwernrrent revenue sources. Under Proposition lA, the State cannot (i) reduce local sales tax rates or alterthe rrethod of allocating the revenue generated b,I such taxes, (ii) shift property taxes from local gcwernrrents to schools or community colleges, (iii) change ho.v property tax revenues are shared among local gcwernrrents without two-third apprcwal of borh houses of the State legislature or (iv) decrease Vehicle License Fee revenues without pro.tiding local gcwernrrents with equal replacerrent funding. Proposition lA does allo.v the State to apprcwe voluntary exchanges of local sales tax and property tax revenues among local gcwernrrents within a county. Proposition lA also amends the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local gcwernrrents for their costs to comply with the mandates. This prcwision does not apply to mandates relating to schools or community col I eges or to those mandates relating to employee rights.

Proposition 22, The Local Taxpayer, Public Safety, and Transportation Protection Act, apprcwed b,I the voters of the State on Ncwember 2, 2010, prohibits the State from enacting ne.v laws that require redevelopment agencies to shift funds to schools or other agencies and eliminates the State's authority to shift property taxes temporarily during a severe financial hardship of the State. In addition, Proposition 22 restricts the State's authority to use State fuel tax revenues to pay debt service on state transportation bonds, to borro.v or change the distribution of state fuel tax revenues, and to use vehicle license fee revenues to reimburse local gcwernrrents for state mandated costs. Proposition 22 impacts resources in the State's general fund and transportation funds, the State's main funding source for schools and community colleges, as well as universities, prisons and health and social services programs. According to an analysis of Proposition 22 submitted b,I the Legislative Analyst's Office (the "LAO") on July 15, 2010, the expected reduction in resources available for the State to spend on these other programs as a consequence of the passage of Proposition 22 was expected to be approximately $1 billion in fiscal year 2010-11, with an estimated i mrrediate fiscal effect equal to approximately 1% of the State's total general fund spending. The longer-term effect of Proposition 22, according to the LAO analysis, will be an increase in the State's general fund costs b,I approximately $1 bi 11 ion annually for several decades. See also "DISTRICT FINANCIAL INFORMATION - Other Revenue Sources - Redeveloprrent Revenue" herein.

Propositions 30 and 55

On Ncweniber 6, 2012, voters of the State apprcwed the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Arrendrrent (also kno.vn as "Proposition 30''), which temporarily increased the State Sales and Use Tax and personal incorre tax rates on higher i ncornes. For personal i ncorre taxes imposed beginning in the taxable year comrrenci ng

34 January 1, 2012 and ending December 31, 2018, Prop:isition 30 increases the marginal personal income tax rate b,I: (i) 1% for taxable income ewer $250,000 but less than $300,001 for single filers (ewer $500,000 but less than $600,001 for joint filers and ewer $340,000 but less than $408,001 for head--of household filers), (ii) 2% for taxable incorre ewer $300,000 but less than $500,001 for single filers (ewer $600,000 but less than $1,000,001 for joint filers and ewer $408,000 but less than $680,001 for head--of household filers), and (iii) 3% for taxable income ewer $500,000 for single filers (ewer $1,000,000 for joint filers and ewer $680,000 for head-of-household filers).

The California Children's Education and Health Care Protection Act of 2016 (also kno.vn as "Prop:isition 55") is a constitutional arnendrrent apprcwed b,I the voters of the State on Ncwember 8, 2016. Prop:isition 55 extends the increases to personal incorre tax rates for high-income taxpayers that were apprcwed as part of Prop:isition 30 through 2030. Prop:isition 55 did not extend the terrporary State Sales and Use Tax rate increase enacted under Prop:isition 30, which expired as ofJanuary 1, 2017.

The revenues generated from the personal income tax increases will be included in the calculation of the Prop:isition 98 Minimum Funding Guarantee (defined herein) for school districts and community college districts. See "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS - Prop:isitions 98 and 111" herein. From an accounting perspective, the revenues generated from the personal income tax increases are being dep:isited into the State account created pursuant to Prop:isition 30 called the Education Protection Account (the" EPA"). Pursuantto Prop:isition 30, funds in the EPA will be allocated quarterly, with 8936 of such funds pro.tided to schools districts and 11 % pro.tided to community col I ege districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full tirre equivalent student. The gcwerning ooard of each school district and community college district is granted sole authority to deternine ho.v the moneys received from the EPA are spent, pro.tided that the appropriate gcwerning ooard is required to make these spending determinations in open session at a public rreeting and such local gcwerning ooard is prohibited from using any funds from the EPA for salaries or benefits of adninistrators or any other administrative costs.

Proposition 2

On Ncwember 4, 2014, voters apprcwed the Rainy Day Budget Stabilization Fund Act (also kno.vn as "Prop:isition 2"). Prop:isition 2 is a legislatively,eferred constitutional arrendrrent which makes certain changes to State budgeting practices, including substantially revising the conditions under which transfers are made to and from the State's Budget Stabilization Account (the" BSA") established b,I the California Balanced B udgetAct of 2004 (also kno.vn as Prop:isition 58).

Under Prop:isition 2, and beginning in fiscal year 2015-16 and each fiscal year thereafter, the State wi 11 generally be required to annually transfer to the BSA an amount equal to 1. 5% of estimated State general fund revenues (the "Annual BSA Transfer"). Supplerrental transfers to the BSA (a "Supplerrental BSA Transfer") are also required in any fiscal year in which the estimated State general fund revenues that are allocable to capital gains taxes exceed 836 of the total estimated general fund tax revenues. Such excess capital gains taxes-net of any portion thereof o.ved to K-14 school districts pursuant to Prop:isition 98-will be transferred to the BSA. Prop:isition 2 also increases the maximum size of the BSA to an amount equal to 1036 of estimated State general fund revenues for any given fiscal year. In any fiscal year in which a required transfertothe BSA would result in an amount in excess of the 1036 threshold, Prop:isition 2 requires such excess to be expended on State infrastructure, including deferred maintenance.

35 Forthe first 15-year period ending with the 2029-30 fiscal year, Proposition 2 pr0.tides that half of any required transfer to the BSA, either annual or supplerrental, must be appropriated to reduce certain State liabilities, including making certain payrrents o.ved to K-14 school districts, repaying State interfund borro.ving, reimbursing local g0.ternrrents for State mandated services, and reducing or prefunding accrued liabilities associated with State-level pension and retirerrent benefits. Follo.ving the initial 15-year period, the G0.ternor and the Legislature are given discretion to apply up to half of any required transfer to the BSA to the reduction of such State liabilities. Any amount not applied to.vards such reduction must be transferred to the BSA or applied to infrastructure, as described alx:we.

Proposition 2 changes the conditions under which the G0.ternor and the Legislature may draw upon or reduce transfers to the BSA. The G0.ternor does not retain unilateral discretion to suspend transfers to the B SA, nor does the L egi sl ature retain discretion to transfer funds from the BSA for any reason, as previously pr0.ti ded b,I I aw. Rather, the G0.ternor must declare a "budget errergency ," defined as an errergency wi thi n the rreani ng of Article X 111 B of the Constitution or a deterni nation that esti mated resources are inadequate to fund State general fund expenditures, for the current or ensuing fiscal year, at a level equal to the highest level of State spending within the three imrrediately preceding fiscal years. Any such declaration must be follo.ved b,I a legislative bill pr0.tiding for a reduction or transfer. Draws on the BSA are limited to the amount necessary to address the budget errergency, and no draw in any fi seal year may exceed 5036 of the funds on deposit in the BSA uni ess a budget errergency was declared in the preceding fiscal year.

Proposition 2 also requires the creation of the Public School System Stabilization Account (the "PSSSA") into which transfers will be made in any fiscal year in which a Supplerrental BSA Transfer is required (as described abOJe). Such transfer will be equal to the portion of capital gains taxes alx:we the 836 threshold that would otherwise be paid to K -14 school districts as part of the mini mum funding guarantee. A transferto the PSSSA will only be made if certain additional conditions are rret, as folio.vs: (i) the minimum funding guarantee was not suspended in the immediately preceding fiscal year, (ii) the operative Proposition 98 formula for the fiscal year in which a PSS SA transfer might be made is "Test 1," (iii) no maintenance factor obligation is being created in the budgetary legislation for the fiscal year in which a PSSSA transfer night be made, (iv) all prior maintenance factor obligations have been fully repaid, and (v) the ninimum funding guarantee for the fiscal year in which a PSSSA transfer might be made is higher than the imrrediately preceding fiscal year, as acjjusted for ADA grONth and cost of living. Proposition 2 caps the size of the PSSSA at 1036 of the estimated minimum guarantee in any fiscal year, and any excess funds must be paid to K-14 school districts. Reductions to any required transfer to the PSSSA, or draws on the PSSSA, are suqject to the sarre budget errergency requirerrents described alx:we. Ho.vever, Proposition 2 also mandates draws on the PSSSA in any fiscal year in which the estimated ninimum funding guarantee is less than the prior year's funding level, as acjjusted for ADA grONth and cost of Iivi ng.

Proposition 51

The Kindergarten Through Community College Public Education Facilities Bond Act of 2016 (also kno.vn as Proposition 51) is a voter initiative that was appr0.ted b,I voters on N0.tember 8, 2016. Proposition 51 authorizes the sale and issuance of $9 billion in general obligation bonds for the mw construction and modernization of K-14 facilities.

K-12 School Facilities. Proposition 51 includes $3 billion for the new construction of K-12 facilities and an additional $3 billion for the modernization of existing K-12 facilities. K-12 school districts will be required to pay for 5036 of the new construction costs and 4036 of the modernization costs with local revenues. If a school districts lack sufficient local funding, it may apply for additional state grant funding, up to 10036 of the prqj ect costs. I n addition, a total of $1 bi 11 ion wi 11 be avai I able for the 36 mxlernization and mw construction of charter school ($500 million) and technical education ($500 million) facilities. Generally, 5036 of modernization and new construction prqject costs for charter school and technical education facilities rnust corre frorn local revenues. Ho.vever, schools that cannot ccwer their local share for these two types of prqjects may apply for state loans. State loans rnust be repaid ewer a rnaxirnurn of 30years for charter school facilities and 15 years for career technical education facilities. For career technical education facilities, state grants are capped at $3 million for a new facility and $1.5 for a modernized facility. Charter schools rnust be deerred financially sound before prqject apprcwal.

Cornrnunity College Facilities. Prop:isition 51 includes $2 billion for cornrnunity college district facility prqjects, including buying land, constructing new buildings, modernizing existing buildings, and purchasing equipment. In order to receive funding, cornrnunity college districts rnust subnit prqject prop:isals to the Chancellor of the cornrnunity college system, who then decides which prqjects to subnit to the Legislature and Gcwernor based on a scoring system that factors in the amount of local funds contributed to the prqject. The Gcwernor and Legislature will select arnong eligible prqjects as part of the annual state budget process.

The District makes no guarantees that it will either pursue or qualify for Prop:isition 51 state facilities funding.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the State Constitution and Prop:isitions 22, 26, 30, 39, 98, 55 and 51 were each adopted as rreasures that qualified for the ballot pursuant to the State's initiative process. Frorn tirre to tirre other initiative rreasures could be adopted further affecting District revenues or the District's abi I ity to expend revenues. The nature and i rnpact of these rreasures cannot be anticipated b,I the District.

DISTRICT FINANCIAL INFORMATION

The information in this section concerning the State funding of public education is pro.tided as supplerrentary information only, and it should not be inferred frornthe inclusion of this information in this Official Staterrent that the principal of or interest on the Bonds are payable frornthe general fund of the District. The principal of and interest on the Bonds are payable solely frornthe proceeds of an ad valorern property tax which is required to be levied b,I the County in the District in an amount sufficient for the payrrentthereof. See" THE BONDS - Security and Sources of Payrrent" herein. State Funding of Education

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

Revenue Li nit Funding. Previously, school districts operated under general purpose revenue limits established b,I the State Departrrent of Education. In general, revenue Ii nits were calculated for each school district b,I multiplying the ADA for such district b,I a base revenue lirnit per unit of ADA. Revenue Ii nit calculations were suqject to adjustrrent in accordance with a number of factors designed to pro.tide cost of living adjustrrents ("COLAs") and to equalize revenues arnong school districts of the sarre type. Funding of a school district's revenue Ii nit was pro.tided b,I a nix of local property taxes and State apportionrrents of basic and equalization aid. Since fiscal year 2013-14, school districts have been funded based on uniform system of funding grants assigned to certain grade spans. See" -Local Control Funding Formula'' herein.

37 The follo.ving table reflects the District's historical ADA and the revenue Ii nit rates per unit of ADA for fiscal years 2008--09 through 2012-13.

AVERAGE DAILY ATTENDANCE AND REVENUE LI MIT Fiscal Years 2008-09 through 2012-13 Garvey School District

Average Daily ADA Base Deficit Ra,enue Fiscal Year A ttendance111 Change Revenue L imit121 Limit Per ADA 121 2008-09 5,656 $5,846 $5,387 2009-10 5,549 ( 107) 6,096 4,724 2010-11 5,487 (62) 6,072 4,981 2011-12 5,233 (254) 6,209 4,930 2012-13 5,123 ( 110) 6,419 5,243

'" Reflects ADA as of the second principal reporting period ("P-2 ADA""), which ends on or before the last attendance rronth prior to April 15 of each school year. An attendance rronth is each four week period of instruction beginning with the first day of school for any school district '" Deficit revenue limit funding, when prNing the implementation of the LCFF (as defined herein). Source: GarveySchool District

Local Control Funding Formula. State Assembly Bill 97 (Stats. 2013, Chapter 47) ("AB 97'), enacted as part of the fiscal year 2013-14 State budget, established the current system for funding school districts, charter schools and county offices of education. Certain prcwisions of AB 97were amended and clarified b,I Senate B ii I 91 (Stats. 2013, Chapter 49) (" SB 91 ").

The primary component of AB 97, as amended b,I SB 91, is the implementation of the Local Control Funding Formula ("LCFF"), which replaced the revenue Ii nit funding system for deternining State apportionments, as well as the majority of categorical program funding. State allocations are pro.tided on the basis of target base funding grants per unit of ADA (a" Base Grant") assigned to each of four grade spans. Each Base Grant is suqject to certain acjjustments and add-ons, as discussed belo.v. Full implementation of the LCFF is expected to occur ewer a period of several fiscal years. Beginning in fiscal year 2013-14, an annual transition acjjustment has been 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 follo.ving full implementation of the LCFF. In each year, school districts will have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district' s funding gap.

The Base Grants per unit of ADA for each grade span are as folio.vs: (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. Beginning in fiscal year 2013-14, the Base Grants are to be acjjusted for COLAs b,I applying the implicit price deflator for gcwernment goods and services. Follo.ving full implementation of the LCFF, the prcwision of COLAs will be suqject to appropriation for such acjjustment in the annual State budget. The differences among Base Grants are linked to differentials in statewide average revenue limit rates b,I district type, and are intended to recognize the generally higher costs of education at higher grade levels. See" - State Budget Measures" herein for information on the acjj usted Base Grants pro.tided for b,I current State budgetary legislation.

38 The Base Grants for grades K-3 and 9-12 are suqject to acjjustments of 10.4% and 2.6%, respectively, to ccwer the costs of class size reduction in early grades and the prcwision of career technical education in high schools. Follcwing full irrplementation 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 acjjustment to the K-3 Base Grant. Such school districts must also make progress tcwards this class size reduction goal in proportion to the grcwth in their funding ewer the implementation period. Additional add-ons are also pro.tided to school districts that received categorical block grant funding pursuant to the Targeted Instructional I rrprcwement and Home-to-School Transportation programs during fiscal year 2012-13.

School districts that serve students of linited English proficiency ("EL" students), students from lcw income families that are eligible for free or reduced priced meals(" LI" students) and foster youth are eligible to receive additional funding grants. Enrollment counts are unduplicated, such that students may not be counted as both EL and LI (foster youth automatically meet the eligibility requirements for free or reduced priced meals, and are therefore not discussed separately herein). A supplemental grant add-on (each, a "Supplemental Grant") is authorized for school districts that serve EL;ll students, equal to 2036 of the applicable Base Grant multiplied b,I such districts' percentage of unduplicated EL;LI student enrollment. School districts whose EL;ll populations exceed 55% of their total enrollment are eligible for a concentration grant add-on (each, a "Concentration Grant") equal to 5036 of the applicable Base Grant multiplied the percentage of such district's unduplicated EL;LI student enrollment in excess of the 55% threshold.

The follcwing table shews a breakdcwn of the District's ADA b,I grade span, total enrollment, and the percentage of EL ;LI student enrol I ment, for fi seal years 2012-13 through 2016-17.

ADA, ENROLLMENT AND EL/ll ENROLLMENT PERCENTAGE Fiscal Years 2012-13 through 2016-17 Garvey School District Average Daily Attendance111 Enrollment % of Fiscal Total Total EL/ll Year K--3 4-6 7-S ADA E nrollment121 En roll ment131 2012-13 2,165 1,7f0 1,198 5,123 5,230 88.00!6 2013-14 2,156 1,739 1,217 5,112 5,215 88.79 2014-15 2,096 1,642 1,146 4,933 5,051 88.73 2015-16 2,027 1,593 1,140 4,759 4,897 88.55 2016-1741 2,029 1,496 1,159 4,683 4,805 85.99

Ncte: ADA nurrbers rourded to the nearest whole numl::er. 111 Except for fi seal year 2016-17. refiects P-2 ADA. '" Fiscal year 2012-13 enrdlment as of October repot submtted to the California Base Educational DataSystem("CBEDS""). Fiscal years 2013-14 and onward refiect certified enrollment as of the fal I census di"ty (the first Wednesdi"fy in October). which is reported to the California Longitudinal Pupil Achievement Data System ("CALPADS"") in each school year and used to calculate each school district's unduplicated EL ;LI student enrollment Adjustments rmy be mace to the certified EL ;LI counts by the California Department of Education. CAL PADS figures generally exclude preschool and adult transtional student~ " For purposes of calculating SuprJemental and Concentration Grant~ a school district's fiscal year 2013-14 percentage of unduplicated EL ;LI students was expressed solely as a percentage of its tctal fi seal year 2013-14 total enrollment. For fi seal year 2014-15. the percentage of undurJ icated EL ;LI enrollment was based on the two-year <"Werage of EL ;LI enrd I ment in fi seal years 2013-14 and 2014-15. Beginning in fi seal year 2015-16. a school di strict' s percentage ofundupl icated EL ;LI students is based on a rol Ii ng average of such di stnct' s EL ;LI enrollment for the then-current fi seal year and the two immediately preceding fiscal year~ 141 Refiects projected ADA. Source: Garvey School District

39 For certain school districts that would have received greater funding levels under the prior revenue limit system, the LCFF pro.tides for a permanent economic reccwery target ("ERT") add-on, equal to the difference between the revenue limit allocations such districts would have received underthe prior system in fiscal year 2020-21, and the target LCFF allocations o.ved to such districts in the same year. To derive the prqjected funding levels, the LCFF assumes the discontinuance of deficit revenue linit funding, implementation of COLAs in fiscal years 2014-15 through 2020-21, and restoration of categorical funding to pre-recession levels. The ERT add-on will be paid incrementally ewer the LCFF implementation period. The District does not qualify forthe ERT add-on.

The sum of a school district's acjjusted Base, Supplemental and Concentration Grants will be multiplied b,I such district's P-2 ADA for the current or prior year, whichever is greater (with certain acjjustments 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 b,I a school district wi 11 amount to the difference between such total LCFF allocation and such district's share of applicable local property taxes. Most school districts receive a significant portion of their funding from such State apportionments. As a result, decreases in State revenues may significantly affect appropriations made b,I the State legislature to school districts.

Certain schools districts, kno.vn as "basic aid' districts, have allocable local property tax collections that equal or exceed such districts' total LCFF allocation, and result in the receipt of no State apportionment aid. Basic aid school districts receive only special categorical funding, which is deemed to satisfy the "basic aid' requirement of $120 per student per year guaranteed b,I Article IX, Section 6 of the State Constitution. The implication for basic aid districts is that the legislatively determined allocations to school districts, and other politically deternined factors, are less significant in determining their primary funding sources. Rather, property tax grONth and the local econoITTy' are the primary deterninants. The District does not currently qualify as a basic aid district.

Accou ntabi Ii ty. Regul ati ons adopted b,I the State Board of Education require that school districts increase or imprcwe services for EL;LI students in proportion to the increase in funds apportioned to such districts on the basis of the number and concentration of such EL;LI students, and detail the conditions under which school districts can use supplemental or concentration funding on a school-wide or district wide basis.

School districts are also required to adopt local control and accountability plans ("LCAPs") disclosing annual goals for all students, as well as certain numerically significant student subgroups, to be achieved in eight areas of State priority identified b,I the L CFF. L CAPs may also specify additional local priorities. LCAPs must specify the actions to be taken to achieve each goal, including actions to correct identified deficiencies with regard to areas of State priority. Beginning in fiscal year 2014-15, LCAPs have been required to be adopted ccwering a period of three fiscal years, and updated annually. The State Board of Education has adopted a tempi ate L CAP for use b,I school districts.

Support and Intervention. AB 97, as amended b,I SB 91, establishes a ne.v system of support and intervention to assist school districts in meeting the performance expectations outlined in their respective LCAPs. School districts must adopt their LCAPs (or annual updates thereto) in tandem with their annual operating budgets, and not later than five days thereafter subnit such LCAPs or updates to their respective county superintendents of schools. On or before August 15 of each year, a county superintendent may seek clarification regarding the contents of a district's LCAP (or annual update thereto), and the district is required to respond to such a request within 15 clays. Within 15 days of receiving such a response, the county superintendent can submit non-binding recommenclati ons for amending the LCAP or annual update, and such recommendations must be considered b,I the respective school district at a public hearing within 15 clays. A district's LCAP or annual update must be apprcwed

40 b,I the county superintendent b,I October 8of each year if the superintendent deternines that (i) the LCAP or annual update adheres to the State template, and (ii) the district's budgeted expenditures are sufficient to implement the actions and strategies outl i ned i n the L CAP.

A school district is required to receive additional support if its respective LCAP or annual update thereto is not apprcwed, if the district requests technical assistance from its respective county superintendent, or if the district does not i mprcwe student achievement across more than one State priority for one or more student subgroups. Such support can include a review of a district's strengths and weaknesses in the eight State priority areas, or the assignment of an academe expert to assist the district in identifying and implementing programs designed to imprcwe outcomes. Assistance may be pro.tided b,I the California Collaborative for Educational Excellence, a state agency created b,I the LCFF and charged with assisting school districts with achieving the goals set forth in their LCAPs. On or before October 1, 2015, the State Board of Education is required to develop rubrics to assess school district performance and the need for support and intervention.

The State Superintendent of Public Instruction (the "State Superintendent") is further authorized, with the apprcwal of the State Board of Education, to intervene in the management of persistently underperforning school districts. The State Superintendent may intervene directly or assign an academic trustee to act on his or her behalf. In so ck:ling, the State Superintendent is authorized to (i) modify a district's LCAP, (ii) impose budget revisions designed to imprcwe student outcomes, and (iii) stay or rescind actions of the local gcwerning board that would prevent such district from imprcwing student outcomes; pro.tided, hew ever, that the State Superi ntendent is not authorized to rescind an action requi red b,I a I ocal col I ective bargaining agreement.

Other State Sources. In addition to State allocations deternined pursuant to the LCFF, the District receives other State revenues consisting primarily of restricted revenues designed to implement State mandated programs. Beginning in fiscal year 2013-14, categorical spending restrictions associated with a majority of State mandated programs were eliminated, and funding for these programs was folded into the LCFF. Categorical funding for certain programs was excluded from the LCFF, and school districts wi 11 continue to receive restricted State revenues to fund these programs.

Other Revenue Sources

Federal and Local Sources. The federal gcwernment pro.tides funding for several of the District's programs, including special education programs, programs underthe No Child Left Behind Act, and specialized programs such as Drug Free Schools, I nncwative Strategies, and Vocational & Applied Technology. In addition, the District may receive additional local revenues beyond local property tax collections, such as leases and rentals, interest earnings, interagency services, foundation contributions, developer fees (as discussed belcw), redevelopment revenues (as discussed belcw).

41 De..reloper Fees. The District receives de.teloper fees of $3.20 per square foot for residential de..relopment, $0.51 per square foot for commercial de.telopment, and $0.42 per square foot for hotel;tnotel de.teloprrent pursuant to Gcwernment Code Section 65995 (the "Developer Fees"). De..reloper Fees received b,I the District are deposited into the District's Capital Facilities Fund and, pursuant to State liM', rnay only be used to construct or reconstruct certain school facilities in order accommodate grcwths in student enrollment. The follo.ving table lists the De..reloper Fees collected for fiscal years 2012-13 through 2016-17.

DEVELOPER FEES COLLECTIONS Fiscal Years 2012-13 through 2016-17 Garvey School District

Da,eloper Fees Fiscal Year Collected 2012-13 $63,598 2013-14 153,590 2014-15 125,281 2015-16 181,128 2016-1711 175,840

'" Budgeted. Source: GarveySchool District

Rede..relopment Revenue. The District receives pass-through tax increment re..renue ("Redeveloprrent Re..renue'') from several former rede.telopment agencies within the boundaries of the District. The Rede..reloprrent Revenue received b,I the District is deposited directly into the general fund of the District and is offset against the L CFF apportionments from the State.

On December 30, 2011, the State Supreme Court issued its decision in the case of California Rede.telopment Association v. Matosantos (" Matosantos''), finding ABX 1 26, a trailer bill to the 2011-12 State budget, to be constitutional. As a result, all redeveloprrent agencies in the State ceased to exist as a matter of IiM' on February 1, 2012.

ABXl 26 was modified b,I Asserrbly Bill No. 1484 (Chapter 26, Statutes of 2011-12) ("AB 1484"), which, together with ABxl 26, is referred to herein as the "Dissolution Act." The Dissolution Act pro.tides that all rights, po.vers, duties and obligations of a rede.telopment agency under the California Community Rede..reloprrent LiM' that have not been repealed, restricted or re..rised pursuant to ABxl 26 will be vested in a successor agency, generally the county or city that authorized the creation of the rede..relopment agency (each, a "Successor Agency"). All property tax re..renues that would have been al Iocated to a rede.tel opment agency, Iess the corresponding county auditor-control Ier' s cost to adrni ni ster the allocation of property tax re..renues, are no.v allocated to a corresponding Redeveloprrent Property Tax Trust Fund ('Trust Fund"), to be used for the payment of pass-through payments to local taxing entities, and thereafterto bonds of the former rede..relopment agency and any "enforceable obligations'' of the Successor Agency, as well as to pay certain administrative costs. The Dissolution Act defines "enforceable obligations" to include bonds, loans, legally required payments, judgments or settlements, Iegai binding and enforceable obi i gati ons, and certain other obi i gati ons.

Arnong the various types of enforceable obligations, the first priority for payment is tax allocation bonds issued b,I the former rede.teloprrent agency; second is re..renue bonds, which rnay have been issued b,I the host city, but only where the tax increment revenues were pledged for repayment and only where other pledged revenues are insufficient to rnake scheduled debt service payments; third is adninistrative costs of the Successor Agency, not to exceed $250,000 in any year, to the extent such costs have been

42 appr0.ted in an adrrinistrative budget; then, fourth tax revenues in the Trust Fund in excess of such amounts, if any, will be allocated as residual distributions to local taxing entities in the sarre proportions as other tax revenues. More0.ter, all unencumbered cash and other assets of forrrer redeveloprrent agencies will also be allocated to local taxing entities in the sarre proportions as tax revenues. Notwithstanding the foregoing portion of this paragraph, the order of payrrent is suqject to mxlification in the event a Successor Agency tirrely reports to the State Controller and the Departrrent of Finance that application of the foregoing will leave the Successor Agency with amounts insufficient to make scheduled payrrents on enforceable obligations. If the county auditor-controller verifies that the Successor Agency will have insufficient amounts to make scheduled payrrents on enforceable obligations, it shall report its findings to the State Controller. If the State Controller agrees there are insufficient funds to pay scheduled payrrents on enforceable obligations, the amount of such deficiency shall be deducted from the amount remaining to be distributed to taxing agencies, as described as the fourth distribution alx:we, then from amounts available to the Successor Agency to defray administrative costs. In addition, if a taxing agency entered into an agreerrent pursuant to Health and Safety Code Section 33401 for payrrents from a redevel oprrent agency under which the payrrents were to be subordinated to certain obligations of the redeveloprrent agency, such subordination prcwisions shall continue to be given effect.

As noted alx:we, the Dissolution Act expressly pr0.tides for continuation of pass-through payrrents to local taxing entities, including the District. Per statute, 10036 of contractual and statutory two percent pass-throughs, and 56. 7% of statutory pass-th roughs authorized under the Community Redeveloprrent Law Reform Act of 1993 (AB 1290, Chapter 942, Statutes of 1993) ("AB 1290''), are restricted to educational facilities without offset against LCFF apportionrrents by the State. Only 43.3% of AB 1290 pass-throughs to the District are offset against State aid so long as the District uses the moneys received for land acquisition, facility construction, reconstruction, or remodeling, or deferred maintenance as pro.tided under Education Code Section 42238(h).

ABX 1 26 states that in the future, pass-throughs shall be made in the amount "which would have been received ... had the redeveloprrent agency existed at that tirre," and that the County Auditor Controller shall "determine the amount of property taxes that would have been allocated to each redevelopment agency had the redeveloprrent agency not been dissolved pursuant to the operation of ABX 1 26 using current assessed values ... and pursuant to statutory [pass-through] formulas and contractual agreerrents with other taxing agencies."

Successor Agencies continue to operate until all enforceable obligations have been satisfied and all remaining assets of the Successor Agency have been disposed of. AB 1484 pr0.tides that once the debt of the Successor Agency is paid off and remaining assets have been disposed of, the Successor Agency shal I term nate its existence and al I pass-through payrrent obi i gati ons shal I cease.

The District can make no representations as to the extent to which apporti onrrents from the State may be offset by the future receipt of residual di stri buti ons or from unencumbered cash and assets of forrrer redevelopment agencies or any other surplus property tax revenues pursuant to the Dissolution Act.

Budget Process

State Budgeting Requirerrents. The District is required by prcwisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-ewer fund balance from the previous year. The State Departrrent of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially arrended by Assembly Bill 1200 ("AB 1200''),

43 which becarre State liM' on October 14, 1991. Portions of AB 1200 are sumnarized belo.v. Additional arrendrrents to the budget process were made b,I Asserrbly Bi 11 2585, effective as of September 9, 2014, including the elinination of the dual budget cycle option for school districts. All school districts must no.v be on a single budget cycle.

School districts must adopt a budget on or before July 1 of each year. The budget must be subnitted to the county superintendent within five days of adoption or b,I July 1, whichever occurs first. The county superintendent will exanine the adopted budget for compliance with the standards and criteria adopted b,I the State Board of Education and identify technical corrections necessary to bring the budget into corrpl i ance, and wi 11 determine if the budget al Io.vs the district to meet its current obi i gati ans, if the budget is consistent with a financial plan that will enable the district to rreet its multi-year financial commitrrents, whether the budget includes the expenditures necessary to implerrent a local control and accountability plan, and whether the budget's ending fund balance exceeds the minimum recomrrended reserve for econoni c uncertainties.

On or before August 15, the county superintendent will apprcwe, conditionally appr0.te or disapprcwe the adopted budget for each school district. Budgets wi II be disappr0.ted if they fai I the abOJe standards. The district board must be notified b,I August 15 of the county superintendent's recomrrendati ans for revision and reasons for the recomrrendati ans. The county superintendent may assign a fiscal acwisor or appoint a comnittee to exani ne and comrrent on the superintendent's recomrrendati ons. The comni ttee must report its fi ndi ngs no I ater than August 20. Any recomrrendati ons made b,I the county superintendent must be made available b,I the district for public inspection. No later than September 22, the county superintendent must notify the State Superintendent of Public Instruction of al I school districts whose budget may be di sappr0.ted.

Current Budget. The District Board adopted its budget for Fiscal Year 2016-17 onJune 8, 2016 (the "2016-17 District Budget"), and subnitted it to the Los Angeles County Office of Education ("LACOE") in a tirrely manner for revie.v. In addition, the District Board apprcwed and submitted the District's LCAP concurrently with the 2016-17 District Budget. See "-State Funding of Education - Accountability" herein.

The 2016-17 District Budget prqjected a general fund beginning balance of $10 nil lion, revenues of $56.6 nil lion, total estimated expenditures of $58.7 nil lion, and an ending balance of $7 million. This ending balance was to consist of approximately $1.8 mi 11 ion for the State-mandated reserve for economic uncertainties, $30,000 of non-spendable funds, $1.7 million of restricted ending balances, $1.1 million of assigned ending balances and $2.4 mi 11 ion of undesi gnated and unassigned endi ng balances.

The 2016-17 District Budget incorporated funding levels included in the G0.ternor's May revision to the proposed State budget for fiscal year 2016-17, as well as guidance from the Los Angeles County Office of Education ("LACOE"). Other significant revenue assumptions made b,I the 2016-17 District Budget included the follo.ving: (i) a decline in enrollrrent of 87 students, resulting in funded ADA being based on the prior year's figure (4,759 students), (ii) total base LCFF funding of $34.7 nillion, and (iii) supplerrental and concentration grant funding of $10.5 million.

Significant expenditure assumptions made b,I the 2016-17 District Budget included (i) step;t:olurnn salary increases of 1.4%, (ii) increases to STRS and PERS pension costs of 12.5836 and 13.8836, respectively, (iii) an increase of 7% in health and welfare benefit costs, and (iv) an increase in general fund contributions for special education costs.

44 Interim Financial Reports. Under the prcwisions of AB 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent two fiscal years. The county office of education revie.vs the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the current fiscal year or the subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or the two subsequent fiscal years.

The District has never had an adopted budget disapprcwed by the County Superintendent of Schools, pursuant to AB 1200. The District submitted its second interim reports in fiscal years 2009-10 and 2011-12, as well as the first interim report in 2012-13, with "qualified" designations. The District has subnitted, and the county office of education has accepted, "positive'' certifications for all other interim reporting periods.

The District Board adopted its most recent interim financial report on March 9, 2017 (the "2016- 17 Second Interim Financial Report'') and submitted it to LACOE in a timely manner. The 2016-17 Second Interim Financial Report prqjects general fund revenues of $58.4 million, total estimated expenditures of $61.9 million, and an ending balance of $11.5 million. This ending balance consists of approximately $1.9 million for the State-mandated reserve for economic uncertainties, $52,000 of non spendable funds, $2 million of restricted ending balances, and $4.5 million of undesignated and unassigned ending balances. The 2016-17 Second Interim Financial Report was self-certified by the District as positive, a designation that was accepted by LA COE. The 2016-17 Second Interim Financial Report prqjects that the District will be able to meet its financial obligations in fiscal years 2015-16 through 2017-18 and satisfy the State-mandated minimum reserve requirement, equal to 3% of general fund expenditures, in each of those years.

Fiscal Stabilization Plan. In its comment lettertothe District regarding its first interim financial report for fiscal year 2016-17, LACOE expressed concern regarding ongoing deficit spending reflected in the District's multi-year prqjections brought about by prqjected declines in enrollment and the use of one ti me monies to support ongoing expenditures. Accardi ng to LA COE, this deficit spending could severely impact the District's fiscal solvency in future years. LACOE requested that the District adopt a fiscal stabilization plan in orderto make necessary expenditure adjustments and maintain reserves.

The fiscal stabilization plan (the "Stabilization Plan") was apprcwed by the Board on March 9, 2017, and was subnitted to LA COE concurrently with the 2016-17 Second Interim Financial Repot. The Stabilization Plan identifies approximately $2 million of potential cost savings that the District expects to incorporate into its budget for fiscal year 2017-18. These cost savings include (i) discontinuance of two certificated teacher positions in grades 4-6 and mai ntenance of the current 30-to--1 student-to-teacher ratio in those grades, (ii) reductions in expenditures for supplies and materials and for services and certain other operating expenses in fiscal years 2017-18 and 2018-19, and (iii) assignment of a portion of the ending fund balance currently classified as committed funds to.vards stabilization purposes, such that those funds may not be used for other purposes.

Budgeting Trends. The follo.ving table summarizes the District's adopted general fund budgets for fiscal years 2013-14 through 2016-17, ending results for fiscal years 2013-14 through 2015-16, and prqjected actual ending results for fiscal year 2016-17.

45 GENERAL FUND BUDGETING Fiscal Years2013-14through 2016-17 Garvey School District

Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2013-14"' 2014-15"' 2015-16'" 2016-17 Revenues Bud~ted Ending Budgeted Ending Budqeted Ending Budgeted'" Proj ectedC 3l LCFF Sources $25,962,603 $34,265,523 $38,559,482 $38, 999, 798 $44,364,656 $44,207,287 $45,589,919 $45,562,638 Federal 4,357,831 4,273,644 4,449,440 3,906,216 4,556,027 3,917,093 3,806,879 5,456,480 Other state 8,978,349 3,629,305 2,620,549 3,995,313 5,468,544 7,712,286 3,847,392 3,883,379 Other local :l,540,128 4,230,224 2,871,076 4,588,814 3,598,611 4,93:l, 122 :l,317,701 3,545,995 Total revenues 42,838,911 46,398,696 48,500,547 51,490,141 57,987,838 60,767,788 56,561,891 58,448,492 Expenditures: Certificated salaries 21,671,464 22,124,737 23,182,282 22,842,427 27,374,217 24,250,790 25,818,798 25,708,390 Classified salaries 6,140,450 6,234,240 7,086,096 6,704,654 7,801,297 7,059,240 8,524,497 8,230,603 Emplc,yee benefits 9,042,154 7,979,520 8,832,614 9,668,564 9,572,956 11,263,672 11,385,479 11,395,735 Books and supplies 2,565,389 1,965,733 2,681,418 2,875,266 4,559,725 2,656, 189 4,045,483 5,178,862 Contracted services and other operating 6,466,989 7,084,194 6,755,036 7,806,075 7,586,548 7,428,802 9,074,207 10,918,414 expenditures Capital outlay 61,591 43,913 100,000 7,396 214,584 377,335 Other outgo 176,816 1,450,223 (206,572) (214,777) 43,428 1,035,487 (165,221) 139,377 Total expenditures 46,124,853 46,882,560 48,430,874 49,689,605 56,938,171 53,908,764 58,683,243 61,948,716 Excess (Deficiency) of revenues over (under) Expenditures (3,285,942) (483,864) 69,673 l,S00,536 1,049,667 6,861,024 (2,121,352) (3,500,224) Other Financing Sources (Uses): I nterfund transfers in I nterfund transfers out (224,06~ (224,06~ (5,544) (19,579) Total other financing sources (uses) (224,065) (224,065) (5,544) (19,579) Net change in fund balance (3,510,007) (483,864) (154,392) 1,794,992 1,049,667 6,841,445 (2,121,352) (3,500,224)

Fund balance, J uly l 6,710,518 6,710,518 6,226,654 6,226,654 8,052,928 8,052,928 9,151,639 14,953,733 4 Audit Restatements 31,282' ' Fund balance, J une 30 $1200 511 $6,226 654 $6,072 262 $8,052 928 $9 102 595 $14 894 373 $703Q287 $11453 510

Note: Num~rs roun:led to rm.rest wh:Jle dollar. In From t~ District's au::lited finan:::ial staterrents for fiscal years i n::licated. "' Reflects t~ District's original adopted budget, approved onJ u~ 8, 2016, prior tot~ close oft~ books for fiscal year 2015-16. (,) From t~ District's secon:l interim finan:::ial rerx,tt for fiscal year 2016-17, approved IJ,,I t~ Board on March 9, 2017. ('I Reflects an au::lit restaterrent to correct an un::lerstaterrent oft~ balan::::e int~ District's accounts receivable. Source: GarveySch::xJI District.

46 Comparative Financial Statements

The District's audited financial statements for fiscal year 2015-16 are attached hereto as APPENDIX B. Audited financial statements forthe District for the fiscal year endedJ une 30, 2016 and prior fiscal years are on file with the District and available for public inspection at the Garvey School District, 2730 North Del Mar Avenue, Rosemead, California 91770, telephone (626) 307-3400.

The follo.ving table reflects the District's audited general fund revenues, expenditures and fund balances for fiscal years 2011-12 through 2015-16.

AUDITED GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCES Fiscal Years 2011-12 through 2015-16 Garvey School District

Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 20ll-l2 2012-13 2013-14 2014-15 2015-16 Revenues: Revenue Limitft_CFF Sources: State apportionments $24,913, 113 $22,361,800 $25,930,823 $28,873,410 $33, 375, 127 Education Protection Account Funds 5,468,431 6,892, lll 6,384,472 Local sources 2,583,809 3,916,671 2,866,269 3,234,277 4,447,688 Federal 5,124,652 4,298,464 4,273,644 3,906,216 3,917,093 Other state 8,579,845 8,210,646 3,629,305 3,995,313 7,712,286 Other local 3,645,519 :!, 183,544 4,23Q,224 4,588,814 4,93:l, 122 Total revenues 44,846,938 41,971,133 46,398,696 51,490,141 60,769,788

Expenditures: Certificated salaries 22,216,040 21,153,311 22,124,737 22,842,427 24,250,790 Classified salaries 6,491,731 6,281,639 6,234,240 6,704,654 7,059,240 Emplc,yee benefits 8,586,174 8,296,449 7,979,520 9,668,564 11,263,672 Books and supplies l, 149,842 1,425,674 1,965,733 2,875,266 2,656,189 Contracted services and other operating 5,910,577 6,068,368 7,084,194 7,806,075 7,428,802 expenditures Capital outlay 299,403 77,139 43,913 7,396 214,584 Otheroutgo 39:l, 737 193,861 l,45Q,223 (214,777) 1,035,487 Total expenditures 45,047,504 43,496,441 46,882,560 49,689,605 53,908,764

Excessofrevenuesover (under) (200,566) (1,525,308) (483,864) l,S00,536 6,861,024 expenditures

Other financing sources (uses): Transfers in Transfers out (46,258) (5,544) (19,759) Total other financing sources (uses) (46,258) (5,544) (19,759)

Net change in fund balance (246,824) (1,525,308) (483,864) 1,794,992 6,841,445

Fund balance, J uly l 8,482,650 8,235,826 6,710,518 6,226,654 8,052,928 Audit Restatement 31,282'" Fund balance, J une 30 $8,235,826 $6,710,518 $6,226,654 $8,052,928 $14,894,373

In Reflects an au::lit restaterrent to correct an un::lerstaterrent oft~ balan::::e int~ District's accounts receivable. Source: GarveySch::xJI District.

47 Accounting Practices

The accounting practices of the District conform to general ly accepted accounti ng pri nci pl es i n accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section 41010 of the State Education Code, is to be follo.ved b,I all State school districts. Revenues are recognized in the period in which they become l:x:Jth measurable and available to finance expenditures of the current fiscal period. Expenditures are recognized in the period in which the liability is incurred.

State Budget Measures

The follCMing information concerning the State's budgets has been obtained from publicly available information which the District believes to be reliable; ho.vever, the District does not guarantee the accuracy or cCJ111)1eteness of this information and has not independently verified such information. Furthermore, it should not be inferred from the inclusion of this information herein that the principal of or interest on the Bonds is payable from the general fund of the District. The principal of and interest on the Bonds are payable solely from the proceeds of an advalorem property tax required to be levied b,lthe County in an amount sufficient for the payment thereof.

2016-17 Budget. OnJ une 27, 2016, the Gewernor signed into the law the State budget for fiscal year 2016-17 (the "2016-17 Budget''). The follo.ving information is drawn from the Department of Finance's summary of the 2016-17 Budget and the LA O's revie.v of the 2016-17 Budget.

The 2016-17 Budget prqjects, for fiscal year 2015-16, total general fund revenues and transfers of $117 billion and total expenditures of $115.6 billion. The State is prqjected to end the 2015-16 fiscal year with total available reserves of $7.3 billion, including $3.9 billion in the traditional general fund reserve and $3.4 billion in the BSA. For fiscal year 2016-17, the 2016-17 Budget prqjects a grONth in State general fund revenues driven primarily b,I total general fund revenues of $120.3 bi 11 ion and authorizes expenditures of $122.5 billion. The State is prqjected to end the 2016-17 fiscal year with total availabie reserves of $8.5 billion, including $1.8 billion in the traditional general fund reserve and $6.7 billion in the BSA.

As a result of higher general fund revenue estimates for fiscal years 2015-16 and 2016-17, and after accounting for expenditures controlled b,I constitutional funding requirements such as Proposition 2 and Proposition 98, the 2016-17 Budget allocates ewer $6 billion in discretionary funding for various purposes. These include (i) additional deposits of $2 billion to the BSA (reflected in the discussion abcwe) and $600 million to the State's discretionary budget reserve fund, (ii) approximately $2.9 billion in one-time funding for various purposes including infrastructure, affordabie housing and public safety programs, and (iii) $700 million in on-going funding commitments for higher education (California State University and the University of California systems), corrections and rehabi I itation and State courts.

As required b,I Proposition 2, the 2016-17 Budget applies $1.3 billion to.vards the repayment of existing State liabilities, including loans from special funds, State and University of California pension and retiree health benefits and senl e-up payments to K-14 school districts resulting from an underfunding of the Proposition 98 minimum funding guarantee in a prior fiscal year.

With respect to education funding, the 2016-17 Budget revises the Proposition 98 minimum funding guarantees for both fi seal years 2014-15 and 2015-16, as a result of increased revenue estimates. The 2016-17 Budget sets the Proposition 98 minimum funding guarantee for fiscal year 2016-17 at $71.9 billion, an increase of $2.8 billion ewer the revised level from the prior fiscal year. With respect to K-12 education, the share of the minimum funding guarantee is $62.5 billion, including $44.5 billion from the

48 State general fund and $18.1 billion from local property tax collections. Significant features with respect to K -1 2 education funding include the fol Io.vi ng:

• Local Control Funding Formula - $2.9 billion of Prop:isition 98 funding to continue the implementation of the LCFF. This reflects a 5.7% increase from the prior year, and is estimated to close the remaining funding implementation gap between the prior year and the LCFF target levels by approximately 54%. The 2016-17 Budget prqjects total LCFF implementation to be at 96% during fiscal year 2016-17. As a result, the aqjusted 2016-17 Base Grants are as folio.vs: (i) $7,820 for grades K-3, (ii) $7,189 for grades 4-6, (iii) $7,403 for grades 7--8, and (iv) $8,801 for grades 9-12. See also "DISTRICT FINANCIAL INFORMATION - State Funding of Education - Local Control Funding Formula'' herein. • Discretionary Funding - $1.3 billion in additional one-time funding that local educational agencies may use for any purp:ise. Funding will be distributed based on ADA. While funding is intended to reduce the backlog of unpaid reimbursement claims for State-mandated activities, the 2016-17 Budget estimates that most local educational agencies do not have such unpaid claims, and that only $617 nillion of the total funding will be used for this purp:ise. • Maintenance Factor - The 2016-17 Budget assumes the creation of a ne.v maintenance factor of $746 million in fiscal year 2016-17, created by the difference in grONth in per capita State general fund revenues and grONth in State per capita personal income. • College Readiness - $200 nillion in one-time Prop:isition 98 funding to fund a block grant for school districts and charter schools serving high school students. Funds are intended to pr0.tide additional services that support access and successful transition to higher education. Allocation of the funding will be based on the number of students in grades 9 through 12 that are English-learners, lo.v--income or foster youth, with no district or charter school receiving less than $75,000. The 2016-17 Budget also pr0.tides $15 nil lion in one-time Prop:isition 98 grant funding to support coordi nated student outreach by Iocal educati anal agencies and community college districts aimed at increasing college preparation, access, and success. • Career Technical Education (CTE) - The State Budget for fiscal year 2015-16 established the Career Technical Education Incentive Grant Program for I ocal education agencies to establish ne.v or expand high-quality CTE programs, and pr0.tided $400 million in fiscal year 2015-16 to fund the program The 2016-17 Budget pr0.ti des $300 ni 11 ion in second-year funding for this program. • Charter Schools - An increase of $20 million in one-time Prop:isition 98 funding to support startup costs for ne.v charter schools in 2016 and 2017. The funds are intended to offset the loss of previously available federal funding. • Support System; - $20 million in one-time Prop:isition 98 funding to assist local educational agencies pr0.ti de academic, behavioral, social and emoti anal student support services. • Truancy and Dropout Prevention - Prop:isition 47, apprcwed by voters in N0.tember 2014, reduces penalties for certain non-serious and non-violent property and drug offenses, and requires that a portion of State expenditure savings resulting from these reduced penalties by invested into K-12 truancy and dropout prevention. The 2016-17 Budget estimates approximately $9.9 million in state savings that will be available for this program. The 2016- 17 Budget also includes an additional $18 million in one-time funding for the program, resulting in total funding of $27.9 nil lion.

49 • Teacher Workforce Initiatives - The 2016-17 Budget funds several initiatives designed to i ncrease the supply of K-12 teachers, incl udi ng ( i) $20 ni 11 ion to encourage classified employees to complete their education and pursue teaching credentials, (ii) $10 nil lion in non-Proposition 98 funding to expand the number of integrated programs that allcw a participant to concurrently earn a bachelor's degree and a teaching credential, and (iii) $5 mi 11 ion to fund teacher recruitment activities. • Drinking Water - $9.5 million in one-time Proposition 98 funding to assist school districts that serve isolated or econonically disadvantaged areas imprcwe access to safe drinking water. For additional information regarding the 2016-17 Budget, see the State Department of Finance website at 1Nww.dof.cagov and the LAO's website at 1Nww.lao.cagov. Hcwe..rer, the information presented on such websites is not incorporated herei n by reference.

Gcwernor's Proposed 2017-18 Budget. OnJ anuary 10, 2017, the Gcwernor released his proposed State budget for fiscal year 2017-18 (the" Proposed Budget''). The follcwing information is drawn from the Department of Finance's summary of the Proposed Budget and the LAO's cwervie.v of the Proposed Budget.

Follcwing several years of increases, the Gcwernor reports that the three main sources of State re..renues-incorne, sales and corporation taxes-are shewing weakness. Consequently, the Proposed Budget includes a re..rised revenue forecast for fiscal years 2015-16 and 2016-17 that is $3.2 billion I ewer for than what was included in the current State budget. The Gcwernor attributes the change in expectations to a pattern of shortfalls in monthly revenue collections and a grcwth in lcwer--income workers, which results in decreased revenues due to the State's progressive tax structure. The Gcwernor also identifies some increases in State general fund spending relative to the 2016-17 Budget, most significant among those being an increase in Medi-Cal costs of approximately $1.8 billion. As a result, albsent corrective action, the Gcwernor prqjects that the State would face a general fund deficit of approximately $1.6 billion in fiscal year 2017-18, as well as comparable deficits in future years.

To close the prqjected deficit, the Proposed Budget includes $3.2 billion in remedial budgetary measures designed to reduce State general fund spending in a variety of areas. Significantly, the Proposed Budget would lcwer, by $1.7 billion, the existing Proposition 98 funding appropriations for fiscal years 2015-16 and 2016-17 which, as a result of the drop in State re..renues, are prqjected to cwerappropriate the minimum funding guarantee. As a result, the Proposed Budget also shifts, on a one time basis (i) $31 0 million of previously appropriated discretionary K-12 funding from the 2015-16 fiscal year to the 2016-17 fiscal year, and (ii) $859.1 million in LCFF payments fromJ une 2017 toJ uly 2017. These shifts would bring Proposition 98 spending in line with the revised funding guarantees described belcw. Other significant remedial measures include elininating a $400 nillion set aside for affordable housing and $300 nillion in pre..riously apprcwed funding for the replacement and rencwation of State office bui I di ngs.

Assuning the implementation of these measures, the Proposed Budget prqjects, for fiscal year 2016-17, total general fund re..renues and transfers of $118.8 billion and total expenditures of $122.8 billion. The State is prqjected to end the 2016-17 fiscal year with total available reserves of $7.7 billion, including $980 nil lion in the traditional general fund reserve and $6.7 billion in the BSA. For fiscal year 2017-18, the Proposed Budget prqjects total general fund re..renues of $124 billion and authorizes expenditures of $122.5 billion. The State is prqjected to end the 2017-18 fiscal year with total available reserves of $8.8 billion, including $980 nil lion in the traditional general fund reserve and $7.9 billion in the BSA.

50 As a result of the revised State revenue estimates discussed alx:we, the Proposed Budget aqjusts the ninimum funding guarantee for fiscal year 2015-16 to $68.7 billion, a decrease of $379 million from the level set b,I the 2016-17 Budget. Sinilarly, for fiscal year 2016-17, the ninimum funding guarantee is revised at $71.4 billion, reflecting a decrease of $5CXi million from the level set b,I the 2016-17 Budget. For fiscal year 2017-18, the Proposed Budget sets the ninimum funding guarantee at $73.5 billion, including $51.4 billion from the State general fund, reflecting a year-to-year increase of $2.1 billion (or 3%). Fiscal year 2017-18 is prqjected to be "Test 3" year, with the increase in the ninimum guarantee driven primarily b,I an increase in per capital State general fund revenues. Significant proposals with respect to K-12 education funding include the follo.ving:

• Local Control Funding Formula - $744 million in Proposition 98 funding to continue the implerrentation of the LCFF. This level of funding would support a 1.4836 COLA for acjjusted Base Grants in fiscal year 2017-18. The Proposed Budget prqjects to maintain total LCFF irnplerrentation at 96%. The Proposed Budget would also pr0.tide $2.4 nillion in Proposition 98 funding to support a COLA for LCFF funding levels for county offices of education. • Maintenance Factor - As a result of the acjjustrrents to the Proposition 98 ninimum funding guarantee for fiscal years 2015-16 and 2016-17, as described abOJe, the State is no longer required to make a $379 million maintenance factor payrrent for fiscal year 2015-16 that was appr0.ted b,I the 2016-17 Budget, and the maintenance factor created for fiscal year 2016-17 gro.vs from $746 nil lion to $838 million. In addition, the funding levels set b,I the Proposed Budget would create a new maintenance factor in fiscal year 2017-18 equal to $219 nil lion, bringing the total outstanding State obiigation to $1.6 billion. • Discretionary Funding - An increase of $287 million in one-tirre funding that local educational agencies may use for any purpose. Sinilar to features included in prior State budgets, these funds would offset any applicable unpaid reimburserrent claims for State- mandated activities. • Settle Up Payrrent - $601 nillion in one-tirre funding to support a "settle up'' payrrent related to an obi i gation created in fi seal year 2009-10 when revenue estimates understated the ni ni mum funding guarantee. • Career Technical Education (CTE) - The State Budget for fiscal year 2015-16 established the Career Technical Education Incentive Grant Program for I ocal education agencies to establish new or expand high-quality CTE programs. The Proposed Budget would pr0.tide $200 nil lion as the final installrrent of funding for this program. • ADA Adjustrrents - The Proposed Budget's funding levels reflect the follo.ving adjustrrents (i) an increase of $93 million in Proposition 98 funding to support a prqjected grONth in charter school ADA, (ii) a decrease of $4.9 nillion in Proposition 98 funding as a result of a prqjected decrease in special education ADA, and (iii) a total decrease of $232 nillion for fiscal years 2016-17 and 2017-18 as a result of continuing prqjected declines in ADA for school districts. • Local PropertyTaxAcjjustrrents - A decrease of $149.2 nillion in Proposition 98 funding in fiscal year 2016-17 for school districts and county office of education as a result of higher offsetting property tax revenues. The Proposed Budget would make a sinilar decrease of $922.7 million in fiscal year 2017-18. • Categorical Program; - An increase of $58.1 nil lion in Proposition 98 funding to support a 1.4836 COLA for categorical programs that remain outside of the LCFF.

51 • Proposition 39 - Passed by voters in Ncwerrber 2012, Proposition 39 increases State corporate tax revenues and requires that, for a five-year period starting in fiscal year 2013-14, a portion of these additional revenues be allocated to local education agencies to irrprcwe energy efficiency and expand the use of alternative energy in public buildings. The Proposed Budget allocates $422.9 million of such funds to support school district and charter school energy efficiency prqjects in fiscal year 2017-18. • Proposition 56 - Passed by voters in Ncwerrber 2016, Proposition 56 increases the per-pack State sales tax on cigarettes by $2, and requires that a portion of the revenue generated be used for school program, designed to prevent and reduce the use of tobacco and nicotine products. The Proposed Budget would allocate $29.9 million of Proposition 56 revenues to support these program,.

For additional information regarding the Proposed Budget, see the State Department of Finance website at www.dof.cagov and the LAO's website at www.lao.cagov. Hcwever, the information presented on such websites is not incorporated herei n by reference.

Future Budgets and Actions. The District cannot predict what actions will be taken in the future by the State legislature and the Gcwernor to address the changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State econonic conditions and other factors ewer which the District will have no control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State's ability to fund education. State budget shortfalls in future fiscal years could have an ad.terse financial impact on the State general fund budget.

GARVEY SCHOOL DISTRICT

The information in this section concerning the operations of the District and the District's finances is pro.tided as supplernentary information only, and it should not be inferred from the inclusion of this information in this Official Staternent that the principal of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied by the County in an amount sufficient for the payrnent thereof. See "THE BONDS- Security and Sources of Payment" herein.

Introduction

The District is an elernentary school district formed in 1892 and is the second oldest elementary school in the County. The District is situated atthewestern end of the San Gabriel Valley, about 10 miles from the City of Los Angeles. The District pro.tides elernentary education services in a four square-mile territory that includes portions of the Cities of Monterey Park, San Gabriel and Rosernead as well as unincorporated portions of the County. The District currently operates eight elernentary schools for grades K--6 and two intermediate schools for grades 7--8. For fiscal year 2016-17, taxable property within the District has an assessed valuation of $3,922,802,554 and the District's ADA is budgeted to be 4,683 students.

52 Administration

The District is gcwerned b,I a five---rrember Board, each member of which is elected to a four-year term Elections for positions to the Board are held every two years, alternating between two and three available positions. Current members of the Board, together with their offices and the dates their terms expire, are I i sted bel cw:

BOARD OF EDUCATION Garvey School District

Brard Member Office Term Expires Ronald Trabanino President No;ember 2017 Bob Bruesch Vice President No;ember 2017 Keilley Meng Clerk No;ember 2019 Maureen Chin Member No;ember 2017 Henry Lo Member No;ember 2019

The management and policies of the District are adninistered b,I a Superintendent appointed b,I the Board who is responsible for day-to-day District operations as well as the supervision of the District's other key personnel. Anita Chu is the District's current Superintendent. Brief Biographies of the Superintendent and Chief Business Officer follo.v.

Anita Chu, Superintendent. Anita Chu has served the District for ewer 20 years and began her tenure as the District's Superintendent on Ncwember 1, 2014. Previously, Ms. Chu held district and county positions that included teacher, program director, consultant and assistant superintendent. Ms. Chu received her Bachelor of Education from the University of Manitoba, Canada and a Master of Education Administration from California State University, Los Angeles. She is currently a doctoral candidate at Azusa Pacific University.

Grace Garner, Chief Business Officer. Ms. Garner has served the District as Chief Business Officer since 2015. Ms. Garner has ewer 20years of experience in school business and management. She received her Bachelor of Science degree in business and management from the University of the Redlands, and a Master of Arts degree in organizational management from Azusa Pacific University. Ms. Garner has al so successful ly cornpl eted certificate programs i n school busi ness and management offered b,I the CaliforniaAssociation of School Business Officials and at California State University, Fullerton.

53 District Enrollment

The follcwing table shews enrollment figures for the District for fiscal years 2008-09 through 2016-17.

HISTORICAL ENROLLMENT Fiscal Years 2008-09 through 2016-17 Garvey School District

Fiscal Year Enroll ment111 % Change 2008-09 5.790 2009-10 5.696 (1.62)% 2010-11 5.596 (1.76) 2011-12 5.321 (4.91) 2012-13 5,230 (1.71) 2013-14 5,215 (0.29) 2014-15 5,051 (3.14) 2015-16 4,897 (3.05) 2016-17 4,805 (1.88)

'" Enrollment for years prior to fiscal 2013-14 is as of October CB EDS report For fiscal years 2013-14 and onward, certified enrollrrentas of the fall census day (the first Wednesday in October) reported to CAL PADS. See also "DISTRICT Fl NANCIAL INFORMATION - State Funding of Education - Local Control Funding Forrrula' herein. Source: GarveySchool District

Labor Relations

The District currently emplO{s 305 full-time equivalent certificated errplO(ees and 128 full-time equivalent classified emplO{ees. In addition, the District emplO{s 198 part-time faculty and staff. District emplO{ees, except management and some part-time emplO{ees, are represented b,I the two bargai ni ng uni ts as noted bel cw:

DISTRICT EMPLOYEES Garvey School District

Contract Labor Organization Expiration Date Garvey Education Association J une 30, 201 7 California School E rnpl0yees Association J une 30, 201 7

Source: GarveySchool District

54 State Retirement Programs

The informttion set forth belo.v regarding STRS (as defined herein) and PERS (as defined herein), other than the informttion pr0.tided by the District regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation by either the District or the Underwriter.

STRS. All full-time certificated employees, as well as certain classified employees, are members of the State Teachers' Retirement System ("STRS"). STRS pro.tides retirement, disability and survivor benefits to plan members and beneficiaries under a defined benefit program (the "STRS Defined Benefit Program''). The STRS Defined Benefit Program is funded through a corrbination of investment earnings and statutorily set contributions from three sources: employees, employers, and the State. Benefit pr0.tisions and contribution amounts are established by State statutes, as legislatively amended from time to time.

Prior to fiscal year 2014-15, and unlike typical defined benefit programs, none of the employee, employer nor State contribution rates to the STRS Defined Benefit Program varied annually to mtke up funding shortfalls or assess credits for actuarial surpluses. In recent years, the combined employer, employee and State contributions to the STRS Defined Benefit Program have not been sufficient to pay actuarially required amounts. As a result, and due to significant investment losses, the unfunded actuarial liability of the STRS Defined Benefit Program has increased significantly in recent fiscal years. In September 2013, STRS prqjected that the STRS Defined Benefit Program would be depleted in 31 years assuming exi sti ng contri buti on rates continued, and other significant actuarial assumpti ans were real i zed. In an effort to reduce the unfunded actuarial liability of the STRS Defined Benefit Program, the State recently passed the Iegi sl ati on descri bed bel ON to i ncrease contribution rates.

Prior toJ uly 1, 2014, K-14 school districts were required by such statutes to contribute 8.25% of eligible salary expenditures, while participants contributed 836 of their respective salaries. On June 24, 2014, the G0.ternor signed AB 1469 ("AB 1469'') into law as a part of the State's fiscal year 2014-15 budget. AB 1469 seeks to fully fund the unfunded actuarial obi igation with respect to service credited to members of the STRS Defined Benefit Program before July 1, 2014 (the" 2014 Liability"), within 32 years, by increasing member, K-14 school district and State contributions to STRS. CommencingJ uly 1, 2014, the employee contribution rate increased ewer a three-year phase-in period in accordance with the fol Io.vi ng schedule:

MEMBER CONT RI BUT ION RATES STRS (Defined Benefit Program)

ST RS Members Hi red Prior to STRS Members Hired Effective Date I anuary 1, 2013 After I anuary 1, 2013 July 1,2014 8.150% 8.150% July 1,2015 9.200 8.560 July 1,2016 10.250 9.205

Source: AB 1469.

55 Pursuant to the Reform Act (defined belcw), the contribution rates for members hired after the I rrplementation Date (defined belcw) will be adjusted if the normal cost increases b,I more than 1% since the last time the member contribution was set. While the contribution rate for errplO(ees hired after the I rrplementation Date will remain unchanged at 9.205% of creditable corrpensation for fiscal year commencing J uly 1, 2017, the STRS actuary currently estimates that member contribution rates for such members will have to increase to 10.205% of creditable corrpensation effectiveJ uly 1, 2018, based on the ne.v actuarial assurrptions discussed belcw.

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

K-14SCHOOL DISTRICT CONT RI BUT ION RATES STRS (Defined Benefit Program)

Effective Date K-14school districts July 1, 2014 8.8836 July 1, 2015 10.73 July 1, 2016 12.58 July 1, 2017 14.43 July 1, 2018 16.28 July 1, 2019 18.13 July 1, 2020 19.10

Source: AB 1469.

Based upon the recommendation from its actuary, for fiscal year 2021-22 and each fiscal year thereafter the STRS Teachers' Retirement Board (the "STRS Board'), is required to increase or decrease the K-14 school districts' contribution rate to reflect the contribution required to elininate the remaining 2014 Liability b,I June 30, 2046; pro.tided that the rate cannot change in any fiscal year b,I more than 1% of creditable compensation upon which members' contributions to the STR S Defi ned B enefi t Program are based; and pro.tided further that such contribution rate cannot exceed a maximum of 20.25%. In addition to the increased contribution rates discussed abcwe, AB 1469 also requires the STRS Board to report to the State Legislature every five years (commencing with a report due on or before J uly 1, 2019) on the fiscal health of the STRS Defined Benefit Program and the unfunded actuarial obligation with respect to service credited to members of that program beforeJ uly 1, 2014. The reports are also required to identify acjjustments required in contribution rates for K-14 school districts and the State in order to eliminate the 2014 Liability.

The District's contributions to STRS were $1,820,004 for fiscal year 2012-13, $1,888,860 for fiscal year 2013-14, $2,102,846 for fiscal year 2014-15 and $2,697,965 for fiscal year 2015-16. The District has budgeted a contribution of $3,377,635 toSTRS for fiscal year 2016-17.

The State also contributes to STRS, currently in an amount equal to 6.32836 of teacher payroll for fiscal year 2016-17. The State's contribution reflects a base contribution rate of 2.017%, and a supplemental contribution rate that will vary from year to year based on statutory criteria Based upon the recommendation from its actuary, for fiscal year 2017-18 and each fiscal year thereafter, the STRS Board is required, with certain limitations, to increase or decrease the State's contribution rates to reflect the contribution required to eliminate the unfunded actuarial accrued liability attributed to benefits in effect beforeJ uly 1, 1990. For the firsttime, in fiscal year 2017-18, the State contribution will increase 0.5% of ccwered payroll (the maximum rate increase allcwed per year under current law) to 6.82836.

56 In addition, the State is currently required to make an annual general fund contribution upto 2.5% of the fiscal year ccwered STRS member payroll to the Supplemental Benefit Protection Account (the "SBPA"), which was established b,I statute to pro.tide supplemental payments to beneficiaries whose purchasing p::wer has fallen belo.v 85% of the purchasing p::wer of their initial allo.vance.

PE RS. Classified employees working four or more hours per day are members of the Public Employees' Retirement System ("PERS"). PERS pro.tides retirement and disability benefits, annual cost of--1 ivi ng acjj ustments, and death benefits to pl an members and benefi ci ari es. B enefi t pro.ti si ans are established b,I the State statutes, as legislatively amended from time to time. PERS operates a number of retirement plans including the Public Employees Retirement Fund ("PERF"). PERF is a multiple- employer defined benefit retirement plan. In addition to the State, employer participants atJ une 30, 2014 included 1,580 public agencies and 1,513 K-14 school districts. PERS acts as the common investment and administrative agent for the member agencies. The State and K-14 school districts (for "classified employees," which generally consist of school employees other than teachers) are required b,i liM' to participate in PERF. Employees participating in PERF generally become fully vested in their retirement benefits earned to date after five years of credited service. One of the plans operated b,I PERS is for K-14 school districts throughout the State (the "Schools Pool").

Contributions b,I employers to the Schools Pool are based upon an actuarial rate determined annually and contributions b,I plan members vary based upon their date of hire. The District is currently required to contribute to PERS at an actuarially determined rate, which is 13.88836 of eligible salary expenditures for fiscal year 2016-17. Participants enrolled in PERS prior toJ anuary 1, 2013 contribute 7% of their respective salaries, while participants enrolled after January 1, 2013 contribute at an actuarially determined rate, which is 6% of their respective salaries for fiscal year 2016-17. See" California Public Employees' Pension Reform Act of 2013" herein.

The District's contributions to PERS were $807,508 for fiscal year 2012-13, $815,958 for fiscal year 2013-14, $896,220 for fiscal year 2014-15 and $941,766 for fiscal year 2015-16. The District has budgeted a contribution of $1,441,985 to PERS for fiscal year 2016-17.

State Pension Trusts. Each of STRS and PE RS issues a separate comprehensive financial report that includes financial statements and required supplemental information. Copies of such financial reports may be obtained from each of STRS and PERS as folio.vs: (i) STRS, P.O. Box 15275, Sacramento, California 95851-0275; (ii) PERS, P.O. Box 942703, Sacramento, California 94229-2703. More0.ter, each of STRS and PERS maintains a website, as folio.vs: (i) STRS: 1Nww.calstrs.com (ii) PERS: www.calpers.ca.gov. Ho.vever, the information presented in such financial reports or on such websites is not incorporated into this Official Statement b,I any reference.

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

57 FUNDED STATUS STRS (Defined Benefit Program) and PERS (Dollar Amounts in M ii lions) 111 Fiscal Years 2010-11 through 2015-16 STRS Value of Value of Trust Unfunded Trust Unfunded Fiscal Accrued Assets Liability Assets Liability 3 Year L iabili!Y (MV A)"' (MV A)"" ' (AVA)(4' (AVA)(4' 2010-ll $208,405 $147,140 $68,365 $143,930 $64,475 201l-l2 215,189 143,118 80,354 144,232 70,957 2012-13 222,281 157,176 74,374 148,614 73,667 2013-14 231,213 179,749 61,807 158,495 72,718 2014-15 241,753 180,633 72,626 165,553 76,200 2015-16 266,704 177,914 101,586 169,976 96,728

PERS Value of Value of Trust Unfunded Trust Unfunded Fiscal Accrued Assets Liability Assets Liability Year L iabili!Y (MVA)'a (MVA)'a (AVA)(4' (AVA)(4' 2010-ll $58,358 $45,901 $12,457 $51,547 $6,811 201l-l2 59,439 44,854 14,585 53,791 5,648 2012-13 61,487 49,482 12,005 56,250 5,237 2013-14 65,600 56,838 8,761 _JS _JS) 2014-15 73,325 56,814 16,511 _JS _JS)

'" Arr<>unts rmy not add due to rounding. w Reflects rrarketvalue of assets. 3 < > Excludes assets allocated to the SB PA reserve. 4 < > Reflects actuarial value of assets.

The STRS Board has sole authority to deternine the actuarial assurrptions and methods used for the valuation of the STRS Defined Benefit Program Based on the multi-year CalSTRS Experience Analysis (spanning fromJuly 1, 2010, through June 30, 2015), on February 1, 2017, the STRS Board adopted a ne.v set of actuarial assumptions that reflect member's i ncreasi ng Ii fe expectancies and current economic trends. These ne.v assurrptions were first reflected in the STRS Defined Benefit Program Actuarial Valuation, as of June 30, 2016 (the "2016 Actuarial Valuation"). The ne.v actuarial assumptions include, but are not limited to: (i) adopting a generational mortality methodology to reflect past imprcwements in life expectancies and pro.tide a more dynamic assessment of future life spans, (ii) decreasing the investment rate of return (net of investment and adninistrative expenses) to 7.25% for the 2016 Actuarial Valuation and 7.00% for theJ une 30, 2017 actuarial evaluation, and (iii) decreasing the prqjected wage grcwth to 3.50% and the prqjected inflation rate to 2.75%. The 2016 Actuarial Valuation con ti nues using the Entry Age Normal Actuarial Cost Met hod.

Based on the change in actuarial assumptions adopted b,I the STRS Board, recent investment experience and the insufficiency of the contributions received in fiscal year 2015-16 to ccwer interest on the unfunded actuarial obligation, the 2016 Actuarial Valuation reports that the unfunded actuarial obligation increased b,I $20.5 billion since the June 30, 2015 actuarial valuation and the funded ratio decreased b,14.836 to 63.7% ewer such time period. Had the investment rate of return been lcwered to 7.00% for the 2016 Actuarial Valuation, the unfunded actuarial obligation and the funded ratio would have been $105.1 billion and 61.8%, respectively. As a result, it is currently prqjected that there will be a

~~58 need for higher contributions from the State, employers and merrbers in the future to reach full funding by 2046.~~

According to the 2016 Actuarial Valuation, the future revenues from contributions and appropriations for the STRS Defined Benefit Program are prqjected to be sufficient to finance its obligations, except for a small portion of the unfunded actuarial obligation related to service accrued on or after July 1, 2014 for merrber benefits ack:Jpted after 1990, for which AB 1469 pr0.tides no authority to the STRS Board to acjjust rates to pay dcwn that portion of the unfunded actuarial obligation. This finding reflects the scheduled contribution rate increases directed by statute, assumes additional increases in the scheduled contri buti on rates al Icwed under the current I iM' wi 11 be made, and is based on the valuation assumptions and valuation policy adopted by the STRS Board, including a 7.00% investment rate of return assumption.

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

On March 14, 2012, the PERS Board voted to lcwer the PERS' rate of expected price inflation and its investment rate of return (net of adninistrative expenses) (the" PERS Discount Rate") from 7.7'JYo to 7.5%. On February 18, 2014, the PE RS Board voted to keep the PERS Discount Rate unchanged at 7.5%. On Ncwerrber 17, 2015, the PERS Board appr0.ted a mw funding risk mitigation policy to incrementally lcwer the PERS Discount Rate by establishing a mechanism whereby such rate is reduced by a minimum of 0.0'JYo to a maximum of 0.2'JYo in years when investment returns outperform the existing PERS Discount Rate by at least four percentage points. On December 21, 2016, the PERS Board voted to lcwer the PERS Discount Rate to 7.0% ewer the next three years in accordance with the follcwing schedule: 7.375% in fiscal year 2017-18, 7.25% in fiscal year 2018-19 and 7.00% in fiscal year 2019-20. The new discount rate wi 11 go into effect July 1, 2017 for the State and J uly 1, 2018 for K-14 school districts and other public agencies. Lcwering the PERS Discount Rate means employers that contract with PE RS to administer their pension pl ans wi 11 see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Reform Act (defined belcw) will also see their contribution rates rise. The three-year reduction of the discount rate to 7.0% is expected to result in average employer rate increases of approximately 1-3% of normal cost as a percent of payroll for rmst niscellaneous retirement plans and a 2-'JYo increase for most safety plans.

On April 17, 2013, the PERS Board appr0.ted new actuarial policies aimed at returning PERS to fully-funded status within 30 years. The policies include a rate smoothing method with a 30-year fixed amortization period for gains and losses, a five-year increase of public agency contribution rates, including the contribution rate at the onset of such amortization period, and a five year reduction of public agency contribution rates at the end of such arnorti zati on period. The new actuarial policies were fi rst included in the J une 30, 2014 actuarial valuation and were implemented with respect the State, K-14 school districts and all other public agencies in fiscal year 2015-16.

Also, on February 20, 2014, the PERS Board appr0.ted new demographic assumptions reflecting (i) expected longer life spans of public agency employees and related increases in costs for the PERS system and (ii) trends of higher rates of retirement for certain public agency employee classes, including police officers and firefighters. The new actuarial assumptions will first be reflected in the Schools Pool in the June 30, 2015 actuarial valuation. The increase in liability due to the new assumptions will be amortized 0.ter 20 years with increases phased in 0.ter five years, beginning with the contribution requirement for fiscal year 2016-17. The new demographic assumptions affect the State, K-14 school districts and all other public agencies.

59 The District can make no representations regarding the future program liabilities of STRS, or whether the District will be required to make additional contributions to STRS in the future alx:we those amounts required under AB 1469. The District can also pro.tide no assurances thatthe District's required contributions to PERS will not increase in the future.

California Public Employees' Pension Reform Act of 2013. On September 12, 2012, the Gcwernor signed into law the California Public Employees' Pension Reform Act of 2013 (the "Reform Act"), which makes changes to both STRS and PERS, most substantially affecting ne.v employees hired after January 1, 2013 (the "Implementation Date"). For STRS participants hired after the Implementation Date, the Reform Act changes the normal retirement age b,I increasing the eligibility for the 2% age factor (the age factor is the percent of final compensation to which an employee is entitled for each year of service) from age 60 to 62 and increasing the eligibility of the maximum age factor of 2.4% from age 63 to 65. Similarly, for non-safety PERS participants hired after the Implementation Date, the Reform Act changes the normal reti rement age b,I i ncreasi ng the el i gi bi Ii ty for the 2% age factor from age 55 to 62 and increases the eligibility requirement for the maximum age factor of 2.5% to age 67. Among the other changes to PERS and STRS, the Reform Act also: (i) requires all ne.v participants enrolled in PERS and STRS after the Implementation Date to contribute at least 5036 of the total annual normal cost of their pension benefit each year as deterrrined b,I an actuary, (ii) requires STRS and PERS to deterrrine the final compensation amount for employees based upon the highest annual compensation earnable averaged ewer a consecutive 36-m:Jnth period as the basis for calculating retirement benefits for ne.v participants enrolled after the Implementation Date (previously 12 months for STRS members who retire with 25 years of service), and (iii) caps "pensionable compensation" for ne.v participants enrolled after the Implementation Date at 10036 of the federal Social Security contribution (to be adjusted annually based on changes to the Consumer Price Index for all Urban Consumers) and benefit base for members participating in Social Security or 12036 for members not participating in social security (to be acjjusted annually based on changes to the Consumer Price Index for all Urban Consumers), while excluding previously al lcwed forms of compensation under the formula such as payments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off.

GASB Statement Nos. 67 and 68. OnJ une 25, 2012, GASB apprcwed Statements Nos. 67 and 68 ("Statements") with respect to pension accounting and financial reporting standards for state and local gcwernments and pension plans. The ne.v Statements, No. 67 and No. 68, replace GASB Statement No. 27 and most of Statements No. 25 and No. 50. The changes impact the accounting treatment of pension plans in which state and local gcwernments participate. Major changes include: (1) the inclusion of unfunded pension liabilities on the gcwernment's balance sheet (currently, such unfunded liabilities are typically included as notes to the gcwernment's financial statements); (2) more components of full pension costs being sho.vn as expenses regardless of actual contribution levels; (3) lcwer actuarial discount rates being required to be used for underfunded plans in certain cases for purposes of the financial statements; (4) closed amortization periods for unfunded liabilities being required to be used for certain purposes of the fi nanci al statements; and ( 5) the difference between expected and actual investment returns being recognized ewer a closed five-year smoothing period. In addition, according to GASB, Statement No. 68 means that, for pensions within the scope of the Statement, a cost-sharing employer that does not have a special funding situation is required to recognize a net pension liability, deferred outfl o.vs of resources, deferred i nfl cws of resources related to pensions and pension expense based on its proportionate share of the net pension liability for benefits pro.tided through the pension plan. Because the accounting standards do not require changes in funding policies, the ful I extent of the effect of the ne.v standards on the District is not kno.vn at this time. The reporting requirements for pension plans took effect for the fiscal year beginningJ uly 1, 2013 and the reporting requirements for gcwernment employers, including the District, took effect for the fiscal year beginningJ uly 1, 2014.

60 As of June 30, 2016, the District reported its share of the net pension liabilities for the STRS and PERS systems to be $33,803,380 and $10,018,845, respectively. See also "APPENDIX B - 2015-16 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT- Note 11" attached hereto

~~Other Post-£ mployment Benefits~~

Plan Description. The District administers a single-employer defined benefit healthcare plan (the "Plan"). The Plan pr0.tides health benefits (the "Benefits") to eligible retirees and their dependents, as detailed belo.v. As of June 30, 2016, there were 142 retirees and beneficiaries currently receiving the Benefits, and 101 active Plan members who are eligible for, but not yet receiving, the Benefits.

Certificated EOJ)icyees: Retirees age 55 to 65, with at least 15 years of service, may choose among health plans offered b,I the District, but will pay the difference between the least expensive plan and the plan selected. Retirees have the option for dependent c0.terage solely at the retiree's expense. Such retirees receive dental, vision and life insurance at no cost to the retiree. Retirees have the option for dental and vision c0.terage for dependents solely at the retirees' expense.

Classified Employees: Retirees age 55 to 65 with at least 20years of service may choose among health plans offered b,I the District but will pay the difference between the least expensive plan and the plan selected. Retirees have the option for dependent c0.terage solely at the retiree's expense. Such retirees receive dental, vision and life insurance at no costtothe retiree. (This benefit is currently limited to 18 retirees at a time; if more than 18 retirees seek this benefit, they may be purchased solely at the retiree's expense.) Retirees have the option for dental and vision ccwerage for dependents solely at the retirees' expense. Retirees age 55 to 65 with at least lOyears of service receive dental, vision and vision c0.terage for the retiree and their dependents solely at the retiree's expense.

Management: Retirees age 55 to 65 with at least six years of service may choose among health plans offered b,I the District but will pay the difference between the least expensive plan and the plan selected. Retirees have the option for dependent c0.terage solely at the retiree's expense. Such retirees receive dental, vision and life insurance at no cost to the retiree. Retirees have the option for dental and vision ccwerage for dependents solely at the retirees' expense. After age 65, retiree's may purchase dental and vision insurance forthemselves and their dependents solely atthe retiree's expense.

All Employees: Afterthe age of 65, the District will pay an amountto.vard the cost of a Medicare supplement plan offered b,I the District's pr0.tider for the retiree only. Retirees may purchase c0.terage for their dependents solely at the retiree's expense. The Benefits are pro-rated based on a percentage of ful I-ti me equival ency.

Funding Policy. The District's funding policy for the Benefits is based on the prqjected pay--as you-go fi nanci ng requirements. The District's contributions to.vards the B enefi ts for fi seal years 2012-13 through 2015-16, all of which were used for current premiums, were $745,708, $795,028, $1,064,845 and $1,132,700, respectively. The District has budgeted a contribution of $1,152,364 to the Plan in fiscal year 2016-17, all of which is expected to be used for current preniums.

Actuarial Report. The District has implemented G0.ternmental Accounting Standards Board Statement #45, Accounting and Financial Reporting b,I Employers for Postemployment Benefit Plans Other Than Pension Plans ("GASB 45"), pursuant to which the District has commissioned and received several actuarial studies of its outstanding liabilities with respect to the Benefits. The most recent of these studies (the "Actuarial Report''), dated October 6, 2015, with a valuation date ofJuly 1, 2014, determined that the unfunded actuarial accrued liability ("AAL") with respect to the Benefits was approximately $15,629,414. In calculating the AAL, the District is required to recognize an implicit insurance premium

61 rate subsidy because retirees and current employees in the District's plan are insured together as a group, since it is assumed that the preniums paid for retiree insurance ccwerage are lcwer than they would have been if the current retirees were insured separately. The Actuarial Report also concluded that the annual required contribution (the "ARC") for fiscal year 2014-15 was $1,595,777. The ARC is the amount that would be necessary to fund the value of future Benefits earned by current employees during each fiscal year (the "Normal Cost'') and the amount necessary to amortize the UAAL, in accordance with GASB Statements Numbers 43 and 45. The ARC is expected to grew with ccwered payroll.

Net OPE B Obligation. As of June 30, 2016, the District recognized a long-term obligation (the "Net OPEB Obligation") of $6,558,347 with respect to its accrued liability for the Benefits. The Net OPEB Obligation is based on the District's contributions tcwards the ARC during fiscal year 2015-16, plus interest on the prior year's Net OPEB Obligation and minus any acjjustments to reflect the amortization thereof. See "APPENDIX B - 2015-16AUDITED FINANCIAL STATEMENTS OF THE DI STR I CT - Nate 7' attached hereto.

~~Risk Management~~

The District is exposed to various risks of loss related to property, general liability, workers' compensation and employee benefits. These risks are addressed through a combination of commercial insurance and participation in the public entity risk pool described belcw. While there are no currently pending claims against the District, settled claims have not exceeded the commercial ccwerage in any of the past three fi seal years.

The District also participates in the Mountain View, El Monte City, Rosemead, Garvey, and El Monte Union High School Districts (MERGE) public entity risk pool. MERGE pro.tides worker's compensation, property, and liability insurance for its member districts. MERGE is gcwerned by a board consisting of one representative from each member district. The gcwerning board controls the pool's operations, independent of any influence by the member districts. Each member district pays a premium commensurate with the level of ccwerage requested and shares surpluses and deficits proportionally to its participation in MERGE. The relationship between the District and MERGE is such that the latter is not component unit of the District for financial reporting purposes.

~~District Debt Structure~~

Short-Term Obi i gati ans. The District has no outstandi ng short-term obi i gati ans. Long-Term Obligations. A schedule of changes in long-term debt for the fiscal year ended June 30, 2016, is shewn belcw:

Balance Balance Julyl,2015 Additions Deductions I une 30, 2016 General obi i gati on bonds $36, 180,386 $1,690,000 $34,490,386 Original issue premium 1,358,799 106,155 1,252,644 Accreted interest payable 11,034,931 $1,420,727 8,834 12,446,824 Compensated absences 912,704 123,056 136,905 898,855 Net pension liability 36,586,230 10,251,043 3,015,048 43,822,225 OPEB 6,169,013 1,522,034 1,132,700 6,558,347 Totals $92,242,063 $13,316,860 $6,089,642 $99,469,281

~~Source: GarveySchool District~~

62 General Obligation Bonds. The District has pre..riously issued general obligation bonds pursuant to three voter--apprcwed authorizations, as well as three series of general obligation refunding bonds to refinance portions thereof. Other than the 2016 Authorization, substantially all of the bonds appr0.ted as part of the District's prior voter--apprcwed authorizations have been issued. The follo.ving table summarizes the outstanding general obligation bond issuances b,I the District, not including the Bonds.

~~OUTSTANDING GENERAL OBLIGATION BONDS Garvey School District~~

Principal Initial Currently Band Issuance Principal Amount Outstanding"' Date of Delivery Election of 2000General Obligation Bonds, Series B $6,999,519.25 $4,344,519.25 4/1/2004 General Obligation Bonds, Election of 2004, Series 2005 g_ggs,735_70 548,735.76 6/23/2005 General Obligation Bonds, Election of 2004, Series 2006 10,999,898.35 8,674, 168.50 12/21/2006 General Obligation Bonds, Election of 2004, Series 2008 8,997,864.05 8,612,964.05 6,"1/2008 2011 General Obligation Refunding Bonds 5,200,000.00 3,960,000.00 7/27/2011 2013 General Obligation Refunding Bonds 1,995,000.00 1,725,000.00 12/17/2013 2014General Obligation Refunding Bonds 5,500,000.00 4,850,000.00 12/.)/2014

~~'" As of February l, 2017.~~

The table on the fol Io.vi ng page summarizes the total annual debt service requirements of the District for al I general obi i gati on bonded debt, incl udi ng the Bands (assuming no opti anal redempti ans are made).

~~[REMAINDER OF PAGE LEFT BLANK]~~

63 ANNUAL OUTSTANDING BONDED DEBT SERVICE Garvey School District 2000 200! 2016 Authorization Authorization Authorization Period Election of 2000 2011 2013 Election of 200! Election of 200! Election of 200! 2014 Total Ending Series B Refunding Refunding Series 2005 Series 2006 Series 2008 Refunding Annual (August l) Bonds Bonds Bonds Bonds Bonds Bonds Bonds The Bonds Debt Service 2017 $563,400.00 $377,087.50 $531,60000 $146,800.00 $807,575.00 $96,731.61 $2,523, 194. ll 2018 522,200.00 464,777.50 560,225.00 166,400.00 844,275.00 900,268.76 3,458,146.26 2019 547,000.00 475,425.00 594,200.00 155,000.00 882,675.00 l, 175,26&76 3,829,56& 76 2020 540,200.00 505,642.50 6.29,200.00 160,000.00 921,475.00 335,268.76 3,091,786.26 2021 $500,000.00 578,000.00 865,000.00 170,000.00 766,725.00 335,268.76 3,214,99176 2022 500,000.00 6.23,60000 1,265,000.00 175,000.00 441,375.00 335,268.76 3,340,243.76 2023 525,000.00 666,60000 1,330,000.00 185,000.00 46.2,625.00 335,268.76 3,504,49176 2024 550,000.00 702,000.00 1,400,000.00 195,000.00 486,875.00 335,268.76 3,669, 14176 2025 575,000.00 1,475,000.00 205,000.00 126,000.00 335,268.76 2,716,26&76 2026 1,400,000.00 $540,000.00 1,545,000.00 215,000.00 335,268.76 4,035,26& 76 2027 1,450,000.00 565,000.00 1,620,000.00 225,000.00 335,268.76 4, 195,26& 76 2028 1,500,000.00 585,000.00 l, 710,000.00 235,000.00 335,268.76 4,365,26& 76 2029 1,600,000.00 610,000.00 1,800,000.00 245,000.00 335,268.76 4,590,26& 76 2030 1,625,000.00 635,ooo.od" 1,895,000.00 260,000.00 335,268.76 4, 750,26& 76 2031 l, 700,000.00 2,320,000.00 530,000.00 435,268.76 4,985,26& 76 2012 1,800,000.00 2,9l3,67Q80 432,268.76 5,145,939.56 2033 1,825,000.00 2,915,000.00 449,143.76 5,189, 14176 2034 2,916,163.60 475,393.76 3,391,557.36 2035 2,915,000.00 494,393.76 3,409,39176 2036 2,914,851.75 513,706.26 3,428,55&01 2037 2,913,895.50 555,706.26 3,469,601.76 2038 2,915,000.00 605,706.26 3,520,706.26 2039 2,916,0l l.50 6.29,468. 76 3,545,480.26 2040 2,913,636.50 l,041,96.2.50 3,955,599.00 2041 2,914,518.90 1,084,050.00 3,998, 56& 90 2042 2,915,000.00 l, 123,600.00 4,038,600.00 2043 l, 167,200.00 l, 167,200.00 2044 l,212,60000 1,212,600.00 2045 l,254,60000 1,254,600.00 2046 l,25:l,200.00 1,253,200.00 Total $15,550,000.00 $4,743,000.00 $1,822,912.50 $2,935,000.00 $19,540,225.00 $35,330,948.55 $5,739,600.00 $18,588,494.33 $104,250,200.38

~~In Matures J u~ l, 2030. Source: GarveySch::xJI District.~~

~~64 TAX MATTERS~~

In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain co.tenants and requirements described herein, interest on the Bands is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an acjjustment in the calculation of alternative minimum taxable income, which may affect the alternative ninirnum tax liability of corporations.

The difference between the issue price of a Bond (the first price at which a substantial amount of the Bands of the same series and maturity is to be sold to the publ i c) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received b,I the Bond OWnerwill increase the Bond owner's basis in the Bond. In the opinion of Bond Counsel, the amount of original issue di scountthat accrues to the o.vner of the Band is excluded from the gross income of such o.vner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State personal i ncome tax.

Bond Counsel's opinion as to the exclusion from gross income of interest (and original issue discount) on the Bands is based upon certain representati ans of fact and certi fi cati ans made b,I the District and others and is suqject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code''), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code night cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has co.tenanted to comply with al I such requirements.

The amount b,I which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond prenium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Band preni um may result in a Band owner realizing a taxable gain when a Bond is sold b,I the owner for an amount equal to or I ess ( under certain circumstances) than the original cost of the Band to the owner. Purchasers of the Bands should consult their o.vn tax advisors as to the treatment, computation and col Iateral consequences of amorti zabl e Band prenium.

The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit b,I the I RS. It is also possible thatthe market value of the Bonds night be affected as a result of such an audit of the Bonds (or b,I an audit of sinilar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the I RS night not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it ad.tersely affects the exclusion from gross income of interest on the Bonds or their market value.

65 SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE INTEREST ON THE BONDS OR THE MARKET VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS.

Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Resolutions and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is pr0.tided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of i nterest ( and original issue discount) on the Bands for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the ad.tice of counsel otherthan StradlingY occa Carlson & Rauth.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes pr0.tided thatthe District continues to comply with certain requirements of the Code, the o.vnershi p of the Bands and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Band Counsel expresses no opinion regardi ng any such tax consequences. Accordingly, before purchasing any of the Bonds, al I potential purchasers should consult thei rtax ad.tisors with respect to col I ateral tax consequences rel ati ng to the Bands.

~~A cop,1 of the proposed form of opinion of Bond Counsel for the Bonds is attached hereto as APPENDIX A.~~

~~LIMITATION ON REMEDIES; BANKRUPTCY~~

General. State law contains certain safeguards to protect the financial solvency of school districts. See "DISTRICT FINANCIAL INFORMATION - Budget Process" herein. If the safeguards are not successful in preventing a school district from becoming insolvent, the State Superintendent, operating through an administrator appointed thereby, may be authorized under State law to file a petition under Chapter 9 of the United States Bankruptcy Code (the" Bankruptcy Code'') on behalf of the school district for the adjustment of its debts, assuning that the school district meets certain other requirements contained in the Bankruptcy Code necessary for filing such a petition. School districts are not themselves authorized to fi I e a bankruptcy proceeding, and they are not suqj ect to involuntary bankruptcy.

Bankruptcy courts are courts of equity and as such have broad discretionary po.vers. If the District were to become the debtor in a proceeding under Chapter 9 of the Bankruptcy Code, the automatic stay pr0.tisions of Bankruptcy Code Sections 362 and 922 generally would prohibit creditors

66 from taking any action to collect amounts due from the District orto enforce any obligation of the District related to such amounts due, without consent of the District or authorization of the bankruptcy court (although such stays would not operate to block creditor application of pledged special revenues to payrrent of indebtedness secured by such revenues). In addition, as part of its plan of acjjustrrent in a chapter 9 bankruptcy case, the District may be able to alter the priority, interest rate, principal amount, payrrent terms, collateral, maturity dates, payrrent sources, co.tenants (including tax,elated co.tenants), and other terms or prcwisions of the Bonds and other transaction docurrents related to the Bonds, as long as the bankruptcy court deterni nes that the alterations are fair and equitable. There also may be other possible effects of a bankruptcy of the District that could result in delays or reductions in payrrents on the Bonds. Morecwer, regardless of any specific ad.terse determinations in any District bankruptcy proceeding, the fact of a District bankruptcy proceeding could have an ad.terse effect on the liquidity and market price of the Bands.

Statutory Lien. Pursuant to Section 53515 of the Gcwernrrent Code, the Bonds are secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax, and such lien automatically arises, without the need for any action or authorization by the local agency or its gcwerning board, and is valid and binding from the tirre the Bonds are executed and delivered. See "THE BONDS - Security and Sources of Payrrent" herein. Although a statutory lien would not be automatically terninated by the filing of a Chapter 9 bankruptcy petition by the District, the automatic stay prcwisions of the Bankruptcy Code would apply and payrrents that become due and o.vi ng on the Bands duri ng the pendency of the Chapter 9 proceeding could be delayed, unless the Bonds are determined to be secured by a pledge of "special revenues" within the rreaning of the Bankruptcy Code and the pledged ad valorem taxes are appl i ed to pay the Bands i n a manner consistent with the Bankruptcy Code.

Special Revenues. If the ad valoremtax revenues that are pledged to the payrrent of the Bonds are determined to be "special revenues'' within the rreaning of the Bankruptcy Code, then the application in a manner consistent with the Bankruptcy Code of the pledged ad valorem revenues should not be suqject to the automatic stay. "Special revenues" are defined to include, among others, taxes specifically levied to finance one or more prqjects or systems of the debtor, but excluding receipts from general property, sales, or incorre taxes levied to finance the general purposes of the debtor. State law prohibits the use of the tax proceeds for any purpose other than payrrent of the Bands and the Band proceeds can only be used to finance or refinance the acquisition or imprcwerrent of real property and other capital expenditures included in the proposition, so such tax revenues appear to fit the definition of special revenues. Ho.vever, there is no binding judicial precedent dealing with the treatrrent in bankruptcy proceedings of ad valorem tax revenues collected for the payrrents of bonds in California, so no assurance can be given that a bankruptcy court would not hold otherwise.

Possession of Tax Revenues; Remedies. The County on behalf of the District is expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bands and may invest these funds in the County's pooled investrrent fund, as described in "THE BONDS - Application and I nvestrrent of Bond Proceeds" herein and"APPENDIX E - LOS ANGELES COUNTY TREASURY POOL" attached hereto. If the County goes into bankruptcy and has possession of tax revenues (whether collected before or after comrrencerrent of the bankruptcy), and if the County does not voluntarily pay such tax revenues to the o.vners of the Bonds, it is not entirely clear what procedures the o.vners of the Bonds would have to follo.v to attempt to obtain possession of such tax revenues, ho.v much tirre it would take for such procedures to be completed, or whether such procedures would ultimately be successful. Further, should those investrrents suffer any losses, there may be delays or reductions in payrrents on the Bands.

67 Opinion of Bond Counsel Qualified b,I Reference to Bankruptcy, Insolvency and Other Law; Relating to or Affecting Creditor's Rights. The proposed form of the apprcwing opinion of Bond Counsel attached hereto as APPENDIX A is qualified b,I reference to bankruptcy, insolvency and other laws relating to or affecting creditor's rights. Bankruptcy proceedings, if initiated, could suqject the cwners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or modification of their rights.

~~LEGAL MATTERS~~

~~Legality for Investment in California~~

Under pr0.tisions of the State Financial Code, the Bonds are legal investments for commercial banks in the State to the extent that the Bands, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and, under pr0.tisions of the State G0.ternment Code, are eligible for security for deposits of public moneys in the State.

~~Information Reporting Requirements~~

On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA"). Under Section 6049 of the Internal Revenue Code of 1986, as amended b,I TIPRA, interest paid on tax-exempt obligations is suqject to information reporting in a manner sinilar to interest paid on taxable obligations. The effective date of this pr0.tision is for interest paid after December 31, 2005, regardless of when the tax-exempt obligations were issued. The purpose of this change was to assist i n relevant i nformati on gatheri ng for the I RS rel ati ng to other appi i cable tax pr0.tisions. Tl PRA pro.tides that backup withholding may appiy to such interest payments made after M arch 31, 2007 to any bondholder who fai Is to fi I e an accurate Form W -9 or who meets certai n other criteria The information reporting and backup withholding requirements of TIPRA do not affect the excl udabi I ity of such interest from gross income for federal i ncorne tax purposes.

~~Continuing Disclosure~~

Current Undertaking. In connection with the issuance of the Bonds, the District has co.tenanted for the benefit of bondholders (including the Beneficial owners of the Bonds) to pro.tide certain financial information and operating data relating to the District (the "Annual Reports") b,I not later than nine months follcwing the end of the District's fiscal year (which currently ends June 30), commencing with the report for the 2016-17 fiscal year, and to pro.tide notices of the occurrence of certain listed events. The Annual Reports and notices of listed events will be filed b,I the District in accordance with the requirements of the Rule. The specific nature of the information to be contained in the Annual Reports or the notices of listed events is included in "APPENDIX C - FORM OF CONTINUING DISCLOSURE CERTIFICATE" attached hereto. These co.tenants have been made in order to assist the Underwriter in compiyingwith the Rule.

Prior Undertakings. Within the past five years, the District has failed to file in a timely manner the annual reports required in connection with its prior continuing disclosure undertakings for fiscal year 2011-12. For such period, the District has failed to file certain notices of listed events as required in connection with its prior continuing disclosure undertakings.

~~68 Absence of Material Litigation~~

No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished to purchasers at the time of the original delivery of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District's ability to receive ad valorern property taxes or to collect other revenues or contesting the District's ability to issue and retire the Bonds.

~~Financial Statements~~

The financial statements with required supplemental information for the year ended June 30, 2016, the independent auditor's report of the District, and the related statements of activities and of cash flo.vs for the year then ended, and the report of Moss Levy & Hartzheim LLP (the "Auditor") dated December 15, 2016, are included in this Official Statement as APPENDIX B. In connection with the inclusion herein, the District did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action i ntended or I i kely to elicit i nformati on concerni ng the accuracy, corrpl eteness or fairness of the statements rnade in this Official Statement, and no opinion is expressed b,I the Auditor with respect to any event subsequent to the date of its report.

~~Legal Opinion~~

The legal opinion of Bond Counsel, apprcwing the validity of the Bonds, will be supplied to the original purchasers of the B ands without cost. A cop,1 of the proposed forrn of such Iegal opinion is attached to this Official Statement as APPENDIX A.

~~MISCELLANEOUS~~

~~Ratings~~

The Bonds are expected to be assigned a rating of "AA," with a stabie outlook, b,I S&P, based upon the issuance of the Policy b,I BAM at the time the Bonds are delivered. S& P has also assigned the Bonds an underlying rating of "A-t''. The ratings reflect only the vie.vs of S& P and an explanation of the significance of such ratings rnay be obtained therefrom There is no assurance that the ratings will continue for any given period ohime or that they will not be revised dONnward or withdrawn entirely b,I S& P, if, in its judgment, circumstances so warrant. Any such dONnward revision or withdrawal of such ratings may have an ad.terse effect on the market price of the Bonds.

Generally, rating agencies base their ratings on information and materials furnished to thern (which rnay include information and material frorn the District which is not included in this Official Statement) and on investigations, studies and assumptions b,I the rating agencies.

The District has co.tenanted in a Continuing Disclosure Certificate to file on The Electronic Municipal Market Access ("EMMA") website operated b,I the Municipal Securities Rulernaking Board notices of any rating changes on the Bonds. See "LEGAL MATTERS -Continuing Disclosure'' herein and "APPENDIX C -FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE BONDS" attached hereto. N otwi thstandi ng such co.tenant, i nformati on relating to rati ng changes on the B ands rnay be publicly available frorn the rating agency prior to such information being pro.tided to the District and prior to the date the District is obligated to file a notice of rating change on EMMA. Purchasers of the Bonds are directed to the rating agency and its website and official media outlets for the mast current rating changes with respect to the Bonds after the initial issuance of the Bonds.

~~69 Underwriting~~

The Bonds are being purchased by RayrmndJarnes & Associates, Inc. (the "Underwriter"). The Underwriter has agreed to purchase the Bonds at a price of $10,099,071.84 (which is equal to the principal armunt of the Bonds of $10,000,000.00, plus net original issue prenium of $168,185.20, less an underwriting discount of $39,000.00, and less $30,113.36, which the Underwriter will use to pay the preniumforthe Policy.

The purchase contract for the Bonds pr0.tides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being suqject to certain terms and conditions set forth in such purchase contract, the appr0.tal of certain legal matters by bond counsel and certain other conditions. The initial offering prices stated on the c0.ter of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at prices lcwerthan such initial offering prices.

~~Additional Information~~

The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the Resolutions pr0.tiding for issuance of the Bands, and the constituti anal pro.ti si ans, statutes and other documents referenced herei n, do not purport to be complete, and reference is made to said documents, constitutional pr0.tisions and statutes for full and complete statements of their pr0.tisions.

Some of the data contained herein has been taken or constructed from District records. Appropriate District officials, acting i n thei r official capacities, have reviewed this Official Statement and have deterni ned that, as of the date hereof, the information contained herein is, to the best of their kncwl edge and belief, true and correct in al I material respects and does not contai n an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been appr0.ted by the District.

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

~~GARVEY SCHOOL DISTRICT~~

~~By: ------~/s~/~A~n~it~a~C~h~u______Superi ntendent~~

~~70 APPENDIX A~~

~~FORM OF OPINION OF BOND COUNSEL FOR THE BONDS~~

Upon the issuance and delivery of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final apprcwing opinion with respect to the Bonds substantially in the follc:M,ing form

~~May 4, 2017~~

~~B oard of Education Garvey School District~~

~~M embers of the Board of Education:~~

We have examined a certified cop,1 of the record of the proceedings relative to the issuance and sale of $10,000,000 Garvey School District Election of 2016 General Obligation Bonds, Series A (the "Bonds"). As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same b,I independent investigation.

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

1. Such proceedings and proofs shew Iawful authority for the issuance and sale of the Bonds pursuant to Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Gcwernment Code of the State of California (the "Act"), commencing with Section 535CXi et seq., a vote of 55% of the qualified electors of the Garvey School District (the "District'') voting at an election held on Ncwember 8, 2016, and a resolution of the Board of Trustees of the District (the "Resolution").

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

3. Under existing statutes, regulations, rulings andjudicial decisions, interest on the Bands is excluded from gross i ncome for federal i ncome tax purposes and is not an i tern of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; hcwever, it should be noted that, with respect to corporations, such interest on the Bonds may be included as an aqjustment in the calculation of alternative ninirnum taxable i ncome, which may affect the alternative mini mum tax I i abi Ii ty of such corporations.

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

5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondcwner before receipt of cash attributable to such excludable income. The

A-1 amount of original issue discount deemed received b,I a Bondcwner will increase the Bondo.vner's basis in the applicable Bond. Original issue discount that accrues to the Bondo.vner is excluded from the gross income of such o.vner for federal income tax purp:ises, is not an item of tax preference for purp:ises of the federal alternative minimum tax imp:ised on individuals and corporations, and is exempt from State of California personal income tax.

6. The amount b,I which a Bondcwner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the of the Internal Revenue Code of 1986, as amended (the "Code"); such amorti zabl e Bond preni um reduces the Bondcwner' s basis in the appl i cable B ond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purp:ises. The basis reduction as a result of the amortization of Bond prenium may result in a Bondo.vner realizing a taxable gain when a Bond is sold b,I the Bondo.vner for an amount equal to or I ess ( under certain circumstances) than the original cost of the Bond to the B ondcwner. Purchasers of the Bonds should consult their o.vn tax ad.tisors as to the treatment, computation and collateral consequences of amortizable Bond premium

The opinions expressed herein may be affected b,I actions taken (or not taken) or events occurring ( or not occurring) after the date hereof. We have not undertaken to deterni ne, or to inform any person, whether any such actions or events are taken or do occur. The Resolutions and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is pro.tided with respect thereto. No opi ni on is expressed herei n as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purp:ises with respect to any Bond if any such action is taken or omitted based upon the ad.tice of counsel other than ourselves. Other than expressly stated herei n, we express no opinion regarding tax consequences with respect to the Bonds.

The opinions expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made b,I the District and others and are suqject to the condition that the District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bands to assure that such i nterest ( and original issue discount) will not become includable in gross income for federal income tax purp:ises. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bands to be included in gross income for federal income tax purp:ises retroactive to the date of issuance of the Bonds. The District has ccwenantedtocomplywith all such requirements.

It is p:issi bl e that subsequent to the issuance of the Bands there might be federal , state, or I ocal statutory changes (or judicial or regulatory interpretations of federal, state, or local liM') that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequentto the issuance of the Bands such changes or interpretations wi 11 not occur.

The rights of the o.vners of the Bonds and the enforceability thereof may be suqject to bankruptcy, insolvency, reorganization, moratorium and other similar I.M's affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be suqject to the exercise of judicial discretion in appropriate cases, and b,I the limitations on legal remedies against public agencies in the State of California.

~~Respectfully submitted,~~

~~A-Z APPENDIX B~~

~~THE 2015-16AUDITED Fl NANCI AL STATEMENTS OF THE DISTRICT~~

~~B-1 [THIS PAGE INTENTIONALLY LEFT BLANK] GARVEY SCHOOL DISTRICT OF LOS ANGELES COUNTY ROSEMEAD, CALIFORNIA~~

~~AUDIT REPORT June 30, 2016 [THIS PAGE INTENTIONALLY LEFT BLANK] GARVEY SCHOOL DISTRICT TABLE OF CONTENTS J une 30, 2016~~

~~Fl NANCI AL SECTION~~

~~I ndependentAuditor' s Report ...... 1~~

~~Management's DiscussionandAnalysis ...... 3~~

Basic Financial Statements: GCNernment-wide Financial Statements: Statement of Net Position ...... 11 Statement of Activities ...... 12 Fund Financial Statements: Balance Sheet- GCNernmental Funds ...... 14 Reconciliation oftheGCNernmental Funds Balance Sheet to the Statement of Net Position ...... 17 Statement of Revenues, Expenditures, and Changes in Fund Balances- GCNernmental Funds ...... 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of GCNernmental Funds to the Statement of Activities ...... 20 Statement of Fiduciary Assets and Liabilities ...... 21 Notes to Basic Financial Statements ...... 23

~~REQUIRED SUPPLEMENTARY INFORMATION SECTION~~

Budgetary Corrparison Schedule- General Fund ...... 49 B udgetary Corrparison Schedule - Chi Id Development Fund ...... 50 Schedule of Proportionate Share of Net Pension Liability ...... 51 Schedule of Pension Contributions ...... 53 Schedule of Funding Progress for Post-ernpl0yment Benefits ...... 55

~~SUPPLEMENTARY INFORMATION SECTION~~

C ombi ni ng and I ndivi dual Fund Financial Statements and Schedules: Combining Balance Sheet- Non-rrajor Special Revenue Funds ...... 57 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances- Non-rrajorSpecial Revenue Funds ...... 59 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances- B udgetand Actual - Non-rrajor Special Revenue Funds ...... 60 Balance Sheet- Non-rrajor Debt Service Fund ...... 63 Staternentof Revenues, Expenditures, and Changes in Fund Balance- Non-rrajor Debt Service Fund ...... 64 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Non-rrajor Debt Service Fund ...... 65 Combining Balance Sheet- Non-rrajor Capital Projects Funds ...... 66 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance- Non-rrajor Capital Projects Funds ...... 67 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Non-rrajor Capital Projects Funds ...... 68 GARVEY SCHOOL DISTRICT TABLE OF CONTENTS J une 30, 2016

SUPPLEMENTARY INFORMATION SECTION (Continued) History and Organization ...... 71 Schedule of Average Daily Attendance ...... 72 Schedule of Instructional Time ...... 73 Schedule of Financial Trends and Analysis ...... 74 Schedule of Expenditures of Federal Awards ...... 75 Note to the Schedule of Expenditures of Federal Awards ...... 77 Reconci I iation of U naudited Actual Report with Audited Financial Statements ...... 78 I ndependent Auditor' s Report on I nternal Control Over Financial Reporting and on Corrpl iance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GCNernmentAuditing Standards ...... 80 I ndependentAuditor's Report on State Corrpliance ...... 82 lndependentAuditor's Report on Corrpliancefor Each Major Program and on Internal Control OverCorrpliance Required 0y the Uniform Guidance ...... 84

~~Fl NDI NGS AND RECOMMENDATIONS SECTION~~

~~Schedule of Audit Findings and Questioned Costs ...... 87 Sumrary Schedule of PriorY ear Audit Findings ...... 92 TINANCIAL SECTION [THIS PAGE INTENTIONALLY LEFT BLANK] MOSS, LEVY & HARTZHEIM LLP CEl~~

PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES RONALD A LEVY, CPA 433 N. CAMDEN DRIVE, SUITE 730 5800 HANNUM AVENUE, SUITE E CRAIG A HARTZHEIM, CPA BEVERLY HILLS, CA 90210 CULVER CITY, CA 90230 HADLEY Y HUI, CPA TEL: 310.273.2745 TEL: 310.670.2745 ALEXANDER C HOM, CPA FAX: 310.670.1689 FAX: 310.670.1689 ADAM V GUISE, CPA www.mlhcpas.com www.mlhcpas.com TRAVIS J HOLE, CPA

~~INDEPENDENT AUDITOR'S REPORT~~

~~Board of Trustees Garvey School District Rosemead, California~~

~~Report on the Financial Statements~~

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information for the Garvey School District (District) as of and for the fiscal year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

~~Management's Responsibility for the Financial Statements~~

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

~~Auditor's Responsibility~~

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing 5 tandards, issued by the Comptroller General of the United States and the 2015-2016 Guide for Annual Audits of California K-12 Local Educational Agencies and State Compliance Reporting published by the California Education Audit Appeals Panel. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Garvey School District, as of June 30, 2016, and the respective changes in financial position for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America.

~~OFFICES: BEVERLY HILLS· CULVER CITY· SANTA MARIA~~

~~MEMBER AMERICAN INSTITUTE OF C PA'S CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS Other Matters~~

~~Required S upplemen1ary Information~~

Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 3 through l 0, the B udge1ary Comparison Schedule - General Fund on page 49, the B udge1ary Comparison Schedule - Child Development Fund on page 50, the Schedule of Proportionate Share of Net Pension Liability on pages 51 through 52, the Schedule of Pension Contributions on pages 53 through 54, and the Schedule ofFunding Progress for Other Post-£ mployment Benefits Other than Pensions Trend Information on page 55, be presented to supplement the basic financial statements. Such information, although not a partofthe basic financial statements, is required by the Governmental Accounting Standards Board, who considers itto 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 pre paring the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

~~Other Information~~

Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The accompanying combining and individual fund financial statements and schedules, financial, and statistical 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 of the District The schedule of expenditures of federal awards is presented for purposes of additional analysis as required byTi~e 2 U.S. Code ofFederal Regulations (CFR) Part 200, Uniform Administrative Requirements, CostP rinciples, and Audit Requirements of Federal Awards, and is also not a required part of the basic financial statements of the District

The combining and individual fund financial statements and schedules, financial and statistical information, and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the 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 financial statements orto the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

~~Other Reporting Required by Government Auditing Standards~~

In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2016, on our consideration of the GarveyS chool District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results ofthattesting, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.

~~Moss, Levy & Hartzheim, LLP Culver City, California December 12, 2016~~

~~2 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS J une 30, 2016~~

This discussion and analysis of Garvey School District's financial ~rformance p-avides an 0.terview of the District's financial activities for the fiscal year endingJ une 30, 2016. Please read it in conjunction with the inde~ndent auditor's report, nctes to the basic financial statements, and the basic gavernmental-wi de financial statements, which i rnmedi ately fd I cw this section, in order to enhance the understanding of the District's financial ~rformance.

~~FINANCIAL HIGHLIGHTS~~

~~G avernmental ex~nses were $66. 7 rni 11 ion. Revenues tctal ed $71. 9 rni 11 ion. Grades K--8 average daily attendance (ADA) decreased 0\/ 173.68, or 3.52%.~~

~~OVERVIEW OF THE FINANCIAL STATEMENTS~~

This annual report consists of three parts - management discussion and analysis (this section), the basic financial statements, and required suppementary information. The basic financial statements include two kinds of statements that present different views of the District:

The first two statements are district-wide financial statements that pravi de bcth short -terrn and long-terrn i nforrnation about the District's OJerall financial status. The rernai ni ng statements are fund financial statements that focus on individual parts of the District, reporting the District's o~rations in rnore detail than the district-wide statements. • The gavernmental funds' statements tel I hew basic services Ii ke regular and s~ci al education were financed in the short terrn as wel I as what rernai ns for future s~ndi ng. • Fiduciary funds' statements pravi de i nforrnati on about the financial rel ati onshi ps in which the District acts solely as a trustee or agent for the benefit of others to whorn the resources belong.

~~3 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2016~~

The financial statements al so include notes that exp ai n some of the information in the statements and r:n:wide more detailed data Figure A-1 shews hew the various parts of this annual report are arranged and related to one another.

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

~~~------.------~------~ ; : ;~~

Management's Bas;fc Required Discussion Fln:anctal S upp,lamentavy and AAaitysis 1n1orma1ion lnfO!f"mation , , .. ' . , .. ' s.. : [Hstrict-Wide Fund Notes 1:o the F1naricfat Fln:anctal Financiiat st-mems Stal"1nenis Sl-mems

~~SUMMARY DETAIL~~

~~4 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2016~~

~~Figure A-2 sumrrwizes the rrajor features of the District's financials statements, including what [X)rtion of the District's activities they caver and the types of information they contain.~~

~~FigureA-2. M ajar Features of the District-Wide and Fund Financial Statements~~

Type of District-Wide G CNernmental Funds Fiduciary Funds Statements Scope Entire district, except The activities of the district that I nstances in which the district fiduciary activities are not proprietary or fiduciary, administers resources on behalf of such as special education and someone else, such as scholarship building m1intenance programs and student activities monies Required • Statement of Net • Balance Sheet • Statement of Fiduciary financial Position • Statement of Revenues, Assets and Liabi Iities statements • Statement of Activities Expenditures & Changes in Fund Balance Accounting basis Accrual accounting and Modified accrual accounting and Accrual accounting and econorric resources focus current financial resources focus rreasurement focus Type of All assets and liabilities, 0 nly assets expected to be used All assets and liabilities, both asset~iability both financial and capital, up and liabilities that come due short-term and long-term: The inform1tion short-term and I ong -term during the year or soon thereafter; district's funds do not currently no capital assets included contain nonfi nancial assets, though they can Type of All ra,enues and expenses Ra,enues for which cash is All ra,enues and expenses during i nfi ON/outfl ON during year, regardless of received during or soon after the the year, regardless of when cash inform1tion when cash is received or end of the year: expenditures is received or paid paid when goods or services have been received and payment is due during the year or soon thereafter

~~5 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2016~~

~~The remainder of this averview section of management's discussion and analysis highlights the structure and contents of each of the statements.~~

~~Gavernment-wide Statements~~

The gavernment-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 al I 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 gavernment-wide statements report the District's net position and hew they have changed. Net position - the difference between the District's assets and I iabi Ii ties - is one way to measure the District's financial health or position.

~~Overtime, increases and decreases in the District's net position are an indicator of whether its financial position is imprcwing or deteriorating.~~

To assess the cwerall health of the District, you need to consider additional nonfinancial factors such as changes i n the Di stri ct' s property tax base and the condition of school bui I di ngs and other faci I i ti es.

In the gavernment-wide financial statements, the District's activities are categorized as Gavernmental Activities. Most of the District's basic services are included here, such as regular and special education, transportation, and admi ni strati on. Property taxes and state formula aid finance most of these activities.

~~Fund Financial Statements~~

The fund financial statements pravide detailed information about the District's most significant 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 cavenants.~~

The District estall ishes other funds to contrd and manage money for particular purposes (like repaying its long-term debt) or to shavv that it is properly using certain revenues (like Federal grants).

~~6 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS J une 30, 2016~~

~~The District has two kinds of funds:~~

Gavernrnental funds - Most of the District's basic services are included in gavernmental funds, which generally focus on ( 1) havv cash and other financial assets that can readily be converted to cash fl cw in and out and ( 2) the balances I eft at year-end that are avai I able for spending. Consequently, the gavernmental funds statements prcwi de a detai I ed short -terrn view that helps you deterrri ne whether there are rnore or fewer financial resources that can be spent in the near future to finance the District's programs. Because this information does nct encompass the additional long-terrn focus of the gavernment-wide statements, we pravide reconci Ii ati on of the gcwernmental funds to the gavernment-wide statements that explains the relationship (or differences) between them

Fiduciary funds - The Di strict is the trustee, or fiduciary, for assets that belong to others, such as the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and b,' those to whorn the assets belong. A 11 of the Di strict' s fi duci ary acti vi ti es are reported i n a separate statement of fiduciary assets and liabilities. We exclude these activities frorn the gavernment-wide financial statements because the District cannot use these assets to finance its operations.

~~FINANCIAL ANALYSIS OF THE DISTRICT ASA WHOLE~~

~~Net Position. The District's corri:Jined net position onJ une 30, 2016 was ($28,537,926). (See Table A-1.)~~

~~TableA-1.~~

Gc:wernrrental A ctiv~ies (I n Variance Millions) Increase 2015 2016 (Decrease) Current and cther assets $ 20.0 $ 24.8 $ 4.8 Cap~I assts 49.1 50.2 1. 1 T ctal assets 69.1 75.0 5.9 Deferred outflc:ws cf resources 3.0 4.8 1.8 Long-terrn delx oustanding 92.2 99.4 7.2 cther liabilities 5.0 4.6 (0.4) T ctal liabilities 97.2 104.0 6.8 Deferred inflc:ws of resoruces 9.7 4.2 (5.5) Net Assets Invested in capital assets, net of related delx 11.6 14.5 2.9 Restricted 6.2 4.5 ( 1. 7) U nrestricted (52.6) (47.5) 5.1 T ctal net assets $ (34.8) $ (28.5) $ 6.3

~~7 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2016~~

~~Changes in net positim, governmental activities. The District's tctal revenues were $71.9 rrillion (See TableA-2). This represents a 16% increase from the previous year.~~

The total cost of al I programs and services was $66. 8 rri 11 i m. Of this amount, 78¾ was related to directly educating and caring for students. The purely administrative activities of the District accounted for approximately 7.1 % of tctal costs.

~~TableA-2.~~

~~Gcwernrrental Activities (I n Variance Millims) Increase 2015 2016 (Decrease) Total Revenues 61.7 71.9 1Q2 Total Expenses 60.1 66.8 (6.7) Increase (decrease) in Net Assets 1.6 5.1 3.5~~

~~Fl NANCI AL ANALYSIS OF THE DISTRICT'S FUNDS~~

The financial performance of the District as a whole is reflected in its gavernmental funds as well. As the District completed this fiscal year, its governmental funds reported a combined fund balance of $20.3 million, an increase from last year's ending fund balance of $5.1 million.

~~General Fund Budgetary Highlights~~

While the District's final budget for the General Fund anticipated revenues in excess of expenditures by about $1,084,926, the actual results for the fiscal year shew revenues in excess of expenditures by $6,861,024. Actual revenues were $2,211,852 greater than anticipated and expenditures were $3,564,246 less than budgeted.

~~8 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2016~~

~~CAPITAL ASSET AND DEBT ADMINISTRATION~~

~~Capital Assets~~

By the end of 2015-16, the District had invested $2,009,960 in mw captal assets. (Information about cap tal assets can ~ found in N cte 6 to the financial statements.) Total depreciation expense for the fiscal year exceeded $1.6 rrillion.

~~TableA-3 Capital Assets at Fiscal Year-£ nd, Net of Depreciation~~

Gcwernrrental Activities (In Variance Millions) Increase 2015 2016 (Decrease) Land 1.7 1.7 0.0 Site irnprcwerrents 0.1 0.1 0.0 Buildngs 46.7 46 (0.7) Machinery & Equiprent 0.6 1.7 1.1 Work in prcgess 0 0.7 0.7 49.1 5Q2 1.1

~~The District's fiscal year 2016-17 budget prqjects spending another $300 thousands for capital projects.~~

~~Long-Term Debt~~

At year-end, the District had $99.4 rrillion in general olligation bonds, captal leases, compensated albsences, net pension Ii albi Ii ty and other post-emp 0yment ~nefi ts ( OPE B) - an increase of 7.Z/4' from last fiscal year- as shavvn in TalbleA-4. (More detailed information about the District's long-term liablities is presented in Note 7 to the financial statements.) The increase is mainly due to include the pension liablity in current fiscal year which in previously fi seal years have never ~en recognized.

~~9 GARVEY SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2016~~

~~TableA-4 Outstanding Long-Term Debt at Fiscal Year-£ nd~~

Gcwernrrental Activities (In Variance Millions) Increase 2015 2016 (Decrease) General otligation b:Jnds $ 36.2 $ 34.5 $ (1.7) Original issue p-errium 1.4 1.2 (Q2) Accreted interest payal::le 11.0 12.5 1.5 Carpensated absences Q9 Q9 QO Net pension liability 36.6 43.8 7.2 OPEB 6. 1 6.5 Q4 $ 92.2 $ 99.4 $ 7.2

~~FACTORS BEARING ON THE DISTRICT'S FUTURE~~

The District is currently financially sound, rut may face a num~r of fiscal challenges in the future. Along with many other school districts in Los Angeles County, the District is in a period of declining K-12 enrol I ment. This decline is attri butabi e to the continued decline of the County's birth rate and other factors, such as housing costs. Lasses in enrol I ment wi 11 cause a school district to lose operating revenues without necessarily perrritting the district to make timely adjustments to fixed operating costs.

~~In addition to declining enrollment, the District also faces fi seal challenges due to impementing the LCFF for distri b.Jti ng State aid, and the impementation period of 5 more years.~~

The District's fiscal team continuously monitors information, data, and forecasts of the State's economy, revenue, and budgetary proposals. District planners use this information to make decisions that will maintain the financial stability of the District

~~The District's systems of budgeting and internal contrds are well-regarded and will ~ used to meetthe District's future financial challenges.~~

~~CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT~~

This financial report is designed to pravide our citizens, taxpayers, investors, and creditors with a general averview of the District's finances, and to demonstrate the District's accountability for the money it receives. If you have any questions aboutthi s report or need additional financial information, contact the District's Business Office at (626) 307-3400.

~~10 GARVEY SCHOOL DISTRICT STATEMENT OF NET POSITION June 30, 2016~~

~~Governmental Assets Activities~~

Cash in County Treasury $ 20,066,345 Revolving cash fund 30,000 Cash in bank and on hand 59,984 Accounts receivable 4,584,906 Inventories, at cost 41,315 Prepaid items 9,397 Non depreciable: Land 1,711,462 Construction in progress 750,675 Depreciable: Improvement of sites 2,882,240 Buildings 72,652,310 Equipment 2,466,799 Less accumulated depreciation (30,241,986)

~~Total assets 75,013,447~~

~~Deferred Outflows of Resources Pension 4,765,513 Deferred loss on refunding 47,187~~

~~Total deferred outflow ofresources 4,812,700~~

~~Liabilities~~

~~Accounts payable 4,352,667 Interest payable 215,417 Unearn.ed revenue 47,680 Long-term liabilities: Due within one year 2,015,983 Due in more than a year 97,453,298~~

~~Total liabilities 104,085,045~~

~~Deferred Inflows of Resources Pension 4,279,028~~

~~Net Position~~

Net investment in capital assets 14,548,187 Restricted for: Education programs 1,132,939 Children nutrition program 1,973,906 Child development 2,701 Capital projects 1,339,060 Unrestricted (47,534,719)

~~Total net position (deficit) $ (28,537,926)~~

~~See notes to financial statements 11 GARVEY SCHOOL DISTRICT STATEMENT OF ACTIVITIES For the Fiscal Year Ended June 30, 2016~~

Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Goverrnnental Activities: lnstructi on $ 36,071,850 $ 683,873 $ 11,704,233 $ Instruction-related services: Supervision of instruction 3,746,663 79,601 2,302,992 Instructional library, media, and teclmology 403,311 333 15,403 School site administration 2,884,796 Pupil services: Home-to-school transportation 895,019 Food services 3,261,796 182,242 3,053,802 All other pupil services 3,905,998 153,768 1,485,509 General administration: Data processing 799,424 All other general administration 3,388,743 17,821 398,855 Plant services 5,577,506 24,357 881,746 Interest on long-term debt 338,875 Other outgo 2,763,638 9,736 61,070 Depreciation (unallocated) 1,642,472

~~Total Govennnental Activities $ 65,680,091 $ 1,151,731 $ 19,903,610 $~~

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 Miscellaneous Total general revenues

~~Change in net position~~

~~Net position beginning of fiscal year~~

~~Net position ( deficit) end of fiscal year~~

~~See notes to :financial statements 12 Net (Expense) Revenue and Changes in Net Position~~

~~$ (23,683,744)~~

~~(1,364,070)~~

~~(387,575) (2,884,796)~~

~~(895,019) (25,752) (2,266,721)~~

~~(799,424) (2,972,067) (4,671,403) (338,875) (2,692,832) (1,642,472)~~

~~(44,624,750)~~

~~4,447,688 2,253,400 93,043~~

~~43,269,539 127,943 671,204 50,862,817~~

~~6,238,067~~

~~(34,775,993)~~

~~$ (28,537,926)~~

~~13 GARVEY SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2016~~

~~Other General Child Development Governmental Fund Fund Funds~~

~~Assets~~

Cash in County Treasury $ 16,476,925 $ (667,991) $ 4,257,411 Revolving cash fund 30,000 Cash in bank and on hand 33 59,951 Due from other funds Cash and investments with fiscal agent Accounts receivable 1,993,664 1,270,052 1,321,190 Inventory, at cost 22,653 18,662 Prepaid items 9,397

~~Total assets $ 18,532,672 $ 602,061 $ 5,657,214~~

~~Liabilities and Fund Balances~~

~~Liabilities: Accounts payable $ 3,591,355 $ 598,624 $ 162,688 Unearned revenue 46,944 736~~

~~Total liabilities 3,638,299 599,360 162,688~~

Fund balances: N onspendable Revolving cash 30,000 Stores inventories 22,653 18,662 Prepaid expenditures 9,397 Restricted Medi-Cal billing 541,711 California Clean Energy Jobs Act 62,045 Lottery: instructional material 68,495 Special education: mental health 406,147 Transportation: special education 7,649 Ongoing & Major Maintenance Account 12,268 Other restricted local 34,624 Child development 2,701 Child nutrition program 1,955,244 State school facilities projects Construction 1,361,590 Debt service 2,159,030 Assigned Text book adoption 1,250,000 LCAP carryover 1,217,549 Unassigned 11,231,835

~~Total fund balances 14,894,373 2,701 5,494,526~~

~~Total liabilities and fund balances $ 18,532,672 $ 602,061 $ 5,657,214~~

~~See notes to financial statements 14 Total~~

~~$ 20,066,345 30,000 59,984~~

~~4,584,906 41,315 9,397~~

~~$ 24,791,947~~

~~$ 4,352,667 47,680~~

~~4,400,347~~

~~30,000 41,315 9,397~~

~~541,711 62,045 68,495 406,147 7,649 12,268 34,624 2,701 1,955,244~~

~~1,361,590 2,159,030~~

~~1,250,000 1,217,549 11,231,835~~

~~20,391,600~~

~~$ 24,791,947~~

~~15 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~16 GARVEY SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENT AL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION June 30, 2016~~

~~Total flmd balances - governmental funds $ 20,391,600~~

~~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 at historical cost $ 80,463,486 Accumulated depreciation (30,241,986)~~

~~Net 50,221,500~~

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 net position, it is recognized in the period that it is incurred. (215,417)

Deferred losses on refunding, net of accumulated amortization have not been reported in the governmental flmds. These are capitalized and amortized over the life of the new debt or old debt whichever is shorter in the statement of net position. 47,187

In governmental funds, bond premiums are recognized as other financing sources in the period they are incurred. In the government-wide statements, bond premiums are amortized over the life of the debt. (1,252,644)

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

Accreted bond interest payable $ (12,446,824) Compensated absences payable (898,855) General obligation bonds payable (34,490,386) Other postemployrnent benefits (6,558,347) Net pension liability (43,822,225)

~~Total (98,216,637)~~

In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position deferred outflows and inflows of resources relating to pensions are reported. Deferred outflows of resources relating to pensions $ 4,765,513 Deferred inflows of resources relating to pensions (4,279,028)

~~Net 486,485~~

~~Total net position (deficit), governmental activities $ (28,537,926)~~

~~See notes to financial statements 17 GARVEY SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Fiscal Year Ended June 30, 2016~~

Child Other General Development Governmental Fund Fund Funds Revenues: LCFF Sources: State apportionments $ 33,375,127 $ $ Education Protection Account Funds 6,384,472 Local sources 4,447,688 Federal 3,917,093 4,249,152 3,137,852 Other state 7,712,286 408,543 247,011 Other local 4,933,122 404,456 2,701,356

~~Total revenues 60,769,788 5,062,151 6,086,219~~

Expenditures: Certificated salaries 24,250,790 1,296,920 Classified salaries 7,059,240 1,315,373 1,227,786 Employee benefits 11,263,672 1,142,979 412,487 Books and supplies 2,656,189 300,930 1,457,151 Contracted services and other operating expenditures 7,428,802 495,381 459,102 Capital outlay 214,584 489,330 1,851,573 Other outgo 1,035,487 20,771 166,786 Debt service 2,244,292

~~Total expenditures 53,908,764 5,061,684 7,819,177~~

~~Excess of revenues over (under) expenditures 6,861,024 467 (1,732,958)~~

~~Other Financing Sources (Uses): Transfers in 19,579 Transfers out (19,579)~~

~~Total other financing sources (uses) (19,579) 19,579~~

~~Net change in fund balances 6,841,445 467 (1,713,379)~~

~~Fund balances, July 1, 2015 8,052,928 2,234 7,207,905~~

~~Fund balances, June 30, 2016 $ 14,894,373 $ 2,701 $ 5,494,526~~

~~See notes to financial statements 18 Total~~

~~$ 33,375,127 6,384,472 4,447,688 11,304,097 8,367,840 8,038,934~~

~~71,918,158~~

~~25,547,710 9,602,399 12,819,138 4,414,270~~

~~8,383,285 2,555,487 1,223,044 2,244,292~~

~~66,789,625~~

~~5,128,533~~

~~19,579 (19,579)~~

~~5,128,533~~

~~15,263,067~~

~~$ 20,391,600~~

19 GARVEY SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the Fiscal Year Ended June 30, 2016

~~Total net change in fund balances - governmental funds $ 5,128,533~~

Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital asset additions $ 2,760,635 Depreciation expense (1,642,472) 1,118,163

~~In governmental funds, repayments oflong-term debt are reported as expenditures. In the government-wide statements, repayments oflong-term debt are reported as reductions ofliabilities. 1,690,000~~

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: (1,386,181)

In the statement of activities, compensated absences are measured by the amounts earned during the fiscal year. In governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially the amounts paid). This fiscal year, the difference between compensated absences paid and compensated absences earned was: 13,849

In governmental funds, if debt is issued at a premium, the premium is recognized as an other financing source in the period it is incurred. In the government-wide statements, the premium plus a deferred loss from debt refunding, is amortized as interest over the life of the debt. Amortization of the debt issue premium, plus any deferred loss from debt refunding, for the period is: 100,960

In governmental funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. This fiscal year, the difference between accrual-basis pension costs and actual employer contributions was: (37,923)

In the statement of activities, early retirement incentives and other postemployment benefit are measured by the amounts earned during the fiscal year. In governmental funds, expenditures for these items are measured by the amount of financial resources used (essentially the amount paid). Other postemployment benefits (389,334)

~~Changes in net position of governmental activities $ 6,238,067~~

~~See notes to financial statements 20 GARVEY SCHOOL DISTRICT STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND June 30, 2016~~

~~Agency Fund Payroll Clearance Fund Assets~~

~~Cash in County Treasury $ 200,412 Accmmts receivable (3,157)~~

~~Total assets $ 197,255~~

~~Liabilities:~~

~~Accmmts payable $ 197,255~~

~~Total liabilities $ 197,255~~

~~See notes to financial statements~~

~~21 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~22 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~A. Accounting Policies~~

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

~~B Reporting Entity~~

The reporting entity is the Garvey School District. There are no component units included in this report which meet the reporting entity definition criteria of GASE Statement No. 14, The Financial Reporting Entity, as amended by GASE Statement No. 39 and GASE Statement No. 61.

~~C. Basis of Presentation~~

~~G 0/ernrrent-wide Financial Staterrents:~~

~~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.~~

The government-wide statements are prepared using the economic resources measurement focus. Government-wide statements differ from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds.

Certain eliminations have been made as prescribed by GASE Statement No. 34 in regards to interfund activities, payables, and receivables. All internal balances in the Statement of Net Position and Statement of Activities have been eliminated, including due to/from other funds and transfers in/out.

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 meet 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 Staterrents:~~

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 non-major 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 present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets.

~~23 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~D. 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. 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 the 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 one year after fiscal 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 fiscal 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 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.

~~Pensions:~~

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

~~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. Allocation of costs, 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 unrestricted resources as they are needed.~~

~~24 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~E. 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 or retained earnings, revenues, and expenditures or expenses, as appropriate. 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, non-major, and fiduciary funds as follows:

~~Major G CNernrrental Funds:~~

~~The General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund.~~

~~The Child Development Fund is used to account for resources committed to child development programs maintained by the District.~~

Non-rrajor G 0/ernrrental Funds: Special Revenue Funds are established to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to the financing of particular activities and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund. The District maintains two nomnajor special revenue funds:

~~1. The Cafeteria Fund is used to account for revenues received and expenditures incurred to operate the District's food service operations.~~

~~2. The Deferred Maintenance Fund is used for the purpose of major repair or replacement of District property.~~

Debt Service Fund is used to account for the accumulation of resources for, and the payment of, long-term debt principal, interest, and related costs. The District maintains one nonmajor debt service fund.

~~The Bond Interest and Redemption Fund is used to account for the accumulation of resources for, and the repayment of, general obligation bonds, interest, and related costs.~~

Capital Projects Funds are used to account for and report financial resources that are restricted or committed or assigned to expenditure for capital outlays, including the acquisition and/or construction of capital facilities and other capital assets. The District maintains three nonmajor capital project funds:

~~1. The Building Fund is used to account for the acquisition and modernization of major govermnental capital facilities and buildings from the sale of general obligation bonds.~~

2. The County School Facilities Fund is used to account separately for apportiomnents from the State School Facilities Fund authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants.

~~3. The Capital Facilities Fund is used to account for resources received from developer impact fees assessed under provisions of the California Enviromnental Quality Act (CEQA).~~

Fiduciary Fund: Agency Fund is used to account for assets of others for which the District acts as an agent. The District maintains one agency fund for payroll clearance purposes. 25 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

F 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 governmental funds. By state law, the District's governing board must adopt a final budget no later than July I. 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 fiscal year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the General Fund in the financial statements. Formal budgetary integration was employed as a management control device during the fiscal 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.

G. 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 at June 30.

H. Assets Deferred Outflows of Resources Liabilities Deferred Inflows of Resources and Net Position or Fund Balance 1. Deposits and Investments Cash balances held in banks and in revolving funds are insured up to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institutions is fully insured or collateralized. In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Los Angeles 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 fair 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, per the California Government Code. Information regarding the amount of dollars invested in derivatives with the Los Angeles County Treasury was not available.

2. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as interfund receivables/payables.

3. Inventories and Prepaid Items Inventories are recorded using the consumption method, whereby inventory acquisitions are initially recorded in inventory (asset) accounts, and are charged as expenditures when used. Reported inventories are equally offset by a nonspendable fund balance, which indicates that these amounts are not "available for appropriation and expenditure" even though they are a component of net current assets.

The District's central warehouse and cafeteria inventory are presented at the lower of cost or market on a first-in, first-out (FIFO) basis and are expensed when used in the government-wide financial statements.

The District has the option of reporting expenditures in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures during the period benefited. 26 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. Assets Deferred Outflows of Resources Liabilities Deferred Inflows of Resources and Net Position or Fund Balance (Continued) 4. Deferred Outflows and Inflows of Resources

The District reports deferred outflows and inflows of resources. A deferred outflow of resources is a consumption of net position that is applicable to a future reporting period. A deferred inflow of resources represents an acquisition of net position that is applicable to a future period.

Under the modified accrual basis of accounting, it is not enough that revenue has been earned if it is to be recognized as revenue of the current period. Revenue must also be susceptible to accrual; it must be both measurable and available to finance expenditures of the current fiscal period. If assets are recognized in connection with a transaction, but those assets are not yet available to finance expenditures of the current fiscal period, then the assets must be offset by a corresponding deferred inflow of resources. This type of deferred inflow is unique to governmental funds, since it is tied to the modified accrual basis of accounting, which is used only in connection with governmental funds. Occasionally, the District refunds some of its existing debt. When this occurs, the difference between the funds required to retire (reacquisition price of) the refunded debt and the net carrying amount of refunded debt results in a deferred amount on refunding. If there is an excess of the reacquisition price of refunded debt over its net carrying amount, it is treated as a deferred outflow of resources (a deferred loss on refunding). If there is an excess net carrying value amount of refunded debt over its reacquisition price, it is treated as a deferred inflow of resources ( a deferred gain on refunding). 5. Amortization of Bond Premium and Discount Bond premiums and discounts are being amortized on the straight line method over the life of the bonds on the government-wide statements.

6. Deferred Loss on Refunding The District has incurred a loss on the refunding of its debt. The deferred loss is being amortized using the straight line method over the lesser of the remaining period of the old debt or the remaining period of the new debt on the government-wide statements.

7. 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 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 capital assets or materially extend the capital asset's lives are not capitalized, but are expensed as incurred. Depreciation on all capital assets is computed using the straight-line basis over the following estimated useful lives.

~~Descri ti.on Estimated Lives~~

Buildings and Improvements 25-50 years Furniture and Equipment 15-20 years Vehicles 8 years 8. 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 cash received on specific projects and programs exceed qualified expenditures.

~~27 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~H. Assets Deferred Outflows of Resources Liabilities Deferred Inflows of Resources and Net Position or Fund Balance (Continued)~~

9. 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 or 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. Unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires.

~~10. Long-Tenn 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 are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable is reported net of applicable bond premium or discount.

In the fund financial statements, governmental funds recognize bond premiums and discounts during the current period. The face amount of the debt issued, premiums, or discounts is reported as other financing sources/uses.

~~11. Fund Balance~~

~~As of June 30, 2016, fund balances of the governmental funds are classified as follows:~~

~~Nonspendable - amounts that cannot be spent either because they are in 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 constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.

Committed - amounts that can be used only for specific purposes determined by a formal action of the governing board is the highest level of decision-making authority for the district. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the governing board.

Assigned- amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's adopted policy, only the governing board or director may assign amounts for specific purposes. Unassigned- all other spendable amounts. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance 1s available, the district considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balance are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions.

~~28 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~H. Assets Deferred Outflows of Resources Liabilities Deferred Inflows of Resources and Net Position or Fund Balance (Continued)~~

~~12. Net Position~~

The government-wide statement of net position includes three equity categories entitled net investment in capital assets; restricted net position; and unrestricted net position. The net investment in capital assets category presents the District's equity interest in capital assets less outstanding principal of related debt. The restricted net position category is designed to reflect net position that are subject to restrictions beyond the District's control (externally imposed or imposed by law). The unrestricted net position category equals any remaining balance and can be subdivided into designated and undesignated portions. Designations reflect the District's self-imposed limitations on the use of otherwise available current financial resources. The District had no net position which was restricted by enabling legislation.

~~I. Property Tax~~

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 of the preceding January I, which is also the lien date. Property taxes on the secured roll are due on November I and February I, and taxes become delinquent after December 10 and April 10, respectively. Property taxes on the unsecured roll are due on the lien date (January!), and become delinquent if unpaid by August 31.

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 I of each fiscal 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 Control Funding Formula (LCFF) local sources by the District.

~~J Use of Estimates~~

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenditures/expenses during the reporting period. Actual results could differ from those reported.

~~29 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~K. Future Accounting Pronouncements~~

~~GASE Statements listed below will be implemented in future financial statements:~~

~~Statement No. 7 4 "Financial Reporting for Postemeployment The provision of this statement are effective for fiscal Benefits Plans Other Than Pension Plans" years beginning after June 15, 2016.~~

~~Statement No. 75 "Accounting and Financial Reporting for The provision of this statement are effective for fiscal Postemployrnent Benefits Other Than Pensions" years beginning after June 15, 2017.~~

~~Statement No. 77 "Tax Abatement Disclosures" The provision of this statement are effective for fiscal years beginning after December 15, 2015.~~

~~Statement No. 78 "Pensions Provided through Certain Multiple The provision of this statement are effective for fiscal Employer Defined Benefit Pension Plans" years beginning after December 15, 2015.~~

~~Statement No. 79 "Certain External Invesment Pools and Pool The provision of this statement are effective for fiscal Participants" years beginning after December 15, 2015.~~

Statement No. 80 "Blending Requirements for Certain Component The provision of this statement are effective for fiscal Units-an amendment ofGASB Statement No. 14'' years beginning after December 15, 2015.

~~Statement No. 81 ''Irrevocable Split-InterestAgreements'' The provision of this statement are effective for fiscal years beginning after December 15, 2016.~~

~~Statement No. 82 "Pension Issues-an amendment of G.A..SB The provision of this statement are effective for fiscal Statements No. 67, No. 68, and No. 73" years beginning after December 15, 2017.~~

~~NOTE 2 - CASH AND INVESTMENTS~~

~~The District's cash and investments, at June 30, 2016, consisted of the following:~~

~~Cash in revolving fund $ 30,000 Cash in bank and on hand 59,984 Cash and investments with County Treasurer 20,266,757~~

~~Total cash and investments $ 20,356,741 Cash and investments are presented on the accompanying basic financial statements, as follows:~~

Cash in County Treasury, statement of net position $ 20,066,345 Cash on hand and in banks, statement of net position 59,984 Cash in revolving fillld, statement of net position 30,000 Cash in County Treasury, statement of fiduciary assets and liabilities 200,412

Total cash and investments $ 20,356,741 The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accolfilting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. These principles recognize a three-tiered fair value hierarchy. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The District had investments in the Los Angeles County Investment Pool, however, this external pool is not measured under Level 1, 2 or 3.

~~30 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 2 - CASH AND INVESTMENTS (Continued)~~

~~Cash in County Treasury~~

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Los Angeles County Treasury as part of the common investment pool ($20,266,757 as of June 30, 2016). The fair value of this pool as of June 30, 2016 as provided by the plan sponsor, was $20,266,757. The District is considered to be an involuntary participant in the external pool. Interest is deposited in the 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.

~~Cash on Hand, in Banks, and in Revolving Fund~~

Cash balance on hand and in banks ($59,984) as of June 30, 2016 and in the revolving fund ($30,000) are insured up to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institution is fully insured or collateralized.

~~Investments Authorized by the District's Investment Policy~~

~~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. One of the ways that the District manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

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 maturi !):: ( in Months) More Carrying 12 Months or 13 to 24 25 to 60 Than60 Investment Type Amount Less Months Months Months Los Angeles County Investment Pool $ 20,266,757 $ 20,266,757 $ $ $

~~Total $ 20,266,757 $ 20,266,757 $ $ $~~

~~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 the California Government Code and the District's investment policy, and the actual rating as of fiscal year end for each investment type.

~~31 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 2 - CASH AND INVESTMENTS (Continued)~~

~~Disclosures Relating to Credit Risk (Continued)~~

~~Rating as ofFiscal Year End Exempt 1.1inimum From Investment Type Amount Legal Rating Disclosure AAA AA A Not Rated Los Angeles Comly Investment Pool $ 20,266,757 NIA $ $ $ $ $ 20,266,757~~

~~Total $ 20,266,757 $ $ $ $ $ 20,266,757~~

~~Concentration of Credit Risk~~

The District's investment policy only authorizes investment in the local government investment pool administered by the County of Los Angeles. The District's investment policy does not contain any specific provisions intended to limit the District's exposure to interest rate risk, credit risk, and concentration of credit risk. There are no investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of the total District investments.

~~Custodial Credit Risk~~

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the District's deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

~~As of June 30, 2016, none of the District's deposits with financial institutions in excess of federal depository insurance limits were held in uncollateralized accounts.~~

The custodial credit risk for investrrents is the risk that, in the event of the failure of the counterparty ( e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools (such as Los Angeles County Investment Pool).

~~32 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 3 - EXCESS OF EXPENDITURES OVER APPROPRIATIONS~~

~~The District's expenditures exceeded appropriations in individual funds as follows:~~

Excess Fund Expenditures Major Governmental Funds General Fund Employee benefits $ 1,533,859 Child Development Fund Employee benefits 74,196 Contracted services and other operating expenditures 9,999 Non-major Goverrnnental Flfilds Cafeteria Special Revenue Fund Contracted services and other operating expenditures 160,424 County School Facilities Fund Contracted services and other operating expenditures 90,227

~~NOTE 4 - ACCOUNTS RECEIVABLE~~

~~Receivables at June 30, 2016, consist of the following:~~

~~Child Other Development Governmental General Fund Fund Funds Totals Federal Government Categorical Aid Programs $1,171,867 $1,224,585 $ 1,311,384 $3,707,836~~

~~State Government Categorical Aid Programs 186,032 45,269 231,301 Lottery 518,610 518,610~~

~~Local Sources Interest 42,370 198 150 42,718 Mscellaneous 74,785 9,656 84,441~~

~~Total Accounts Receivable $1,993,664 $1,270,052 $ 1,321,190 $4,584,906~~

~~NOTE 5 - INTERFUND TRANSACTIONS~~

Interfund transactions are reported as 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 occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental funds are netted as part of the reconciliation to the government-wide financial statements.

~~Interfund Transfers~~

~~Interfund transfers consist of transfers from funds receiving revenue to funds through which the resources are to be expended.~~

~~33 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 5 - INTERFUND TRANSACTIONS (Continued)~~

~~Interfund transfers for the 2015-2016 fiscal year, are as follows:~~

~~Funds Transfers In Transfers Out~~

~~Major Govermnental Fund: General Fund $ $ 19,579 Non-major Govermnental Fund: Deferred Maintenance Fund 19,579 Totals $ 19,579 $ 19,579~~

~~NOTE 6 - CAPITAL ASSETS AND DEPRECIATION~~

~~Capital asset activity for the fiscal year ended June 30, 2016, is shown below:~~

Balance Balance July 1, 2015 Additions Deletions June 30, 2016 Capital assets, not being depreciated: Land $ 1,711,462 $ $ $ 1,711,462 Construction in progress 750,675 750,675 Total capital assets, not being depreciated 1,711,462 750,675 2,462,137

Capital assets being depreciated: Improvement of sites 2,882,240 2,882,240 Buildings 71,993,665 658,645 72,652,310 Equipment 1,115,484 1,351,315 2,466,799 Total capital assets being depreciated 75,991,389 2,009,960 78,001,349

Accumulated depreciation for: Improvement of sites (2,792,143) (5,788) (2,797,931) Buildings (25,329,667) (1,359,145) (26,688,812) Equipment (477,704) (277,539) (755,243) Total accumulated depreciation (28,599,514) (1,642,472) (30,241,986)

~~Total capital assets, being depreciated, net 47,391,875 367,488 47,759,363~~

~~Governmental activity capital assets, net $ 49,103,337 $ 1,118,163 $ $ 50,221,500~~

~~Depreciation expense was charged to governmental activities as follows:~~

~~Depreciation unallocated $ 1,642,472~~

~~Total depreciation expense $ 1,642,472~~

~~34 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 7 - LONG-TERM DEBT A schedule of changes in long-term debt for the fiscal year ended June 30, 2016, is shown below:~~

Amounts Due Balance Balance Within July I, 201S Additions Deductions June 30, 2016 One Year General obligation bonds $ 36,180,386 $ $ (1,690,000) $ 34,490,386 $ 1,775,000 Original issue premium 1,358,799 (106, ISS) 1,252,644 106, ISS Accreted interest payable 11,034,931 1,420,727 (8,834) 12,446,824 Compensated absences 912,704 123,056 (136,905) 898,855 134,828 Net pension liability 36,586,230 10,251,043 (3,015,048) 43,822,225 OPEB 6,169,013 1,522,034 (!, 132,700) 6,558,347

~~Totals $ 92,242,063 $13,316,860 $ (6,089,642) $ 99,469,281 $ 2,015,983~~

A General Obligation Bonds Election of 2000 On November 7, 2000, an election was held, at which more than two-thirds of the persons voting on the proposition voted to authorize the issuance and sale of $15 million of general obligation bonds. The county has the power and is obligated to annually levy ad valorem taxes upon all property subject to taxation by the District, for the payment of principal and interest on the bonds. On April 19, 2001, the District issued a General Obligation Bond in the amount of $7,999,903. The bonds were issued to repair and construct school facilities within the District. The bonds consist of: a) Current Interest Serial Bonds of $5,530,000 with interest rates ranging from 3.30% to 5.10% and fully maturing August 1, 2022, b) Current Interest Term Bonds of $1,940,000 with a stated interest rate of 5.25% due on August 1, 2025, and c) Capital Appreciation Bonds of $529,903 with yields to maturity ranging between 4.95% and 5.22% and fully maturing on August 1, 2014. At June 30, 2016, there was no principal outstanding balance, and there was no accreted interest on capital appreciation bonds balance.

On March 12, 2004, the District issued Series B of the election of 2000 General Obligation Bonds in the amount of $6,999,519. The bonds were issued to fund the repair of school facilities. The bonds consist of Current Interest Serial Bonds of $2,655,000 with interest rates ranging from 2.5% to 3.875% and fully maturing on August 1, 2020, and Capital Appreciation Bonds of $4,344,519 with yields to maturity ranging between 4.73% to 5.11 % and fully maturing on August 1, 2033. On December 17, 2013, the District refunded the Currentlnterest Series Bonds portion and it has been called on December 18, 2013. For financial reporting purposes, the debt has been considered defeased and therefore removed from the District's financial statements At June 30, 2016, the Capital Appreciation Bonds principal balance outstanding was $4,344,519, and $70,341 of unamortized original premium. The accreted interest on capital appreciation bonds balance was $3,858,238.

~~Election of 2004~~

On November 2, 2004, an election was held, at which more than fifty-five percent of the persons voting on the proposition voted to authorize the issuance and sale of $30 million of general obligation bonds. 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 purpose of financing the addition and modernization of school facilities.

On June 10, 2005, the District issued Series 2005, in the amount of $9,998,736. The issue consisted of: a) Current Interest Bonds of$9,450,000 with stated interest rates ranging from 3.0% to 4.25% and fully maturing on August 1, 2025, and b) Capital Appreciation Bonds of $548,736 with yields to maturity ranging from 4.84% to 4.94% and fully maturing on August 1, 2029. At June 30, 2016, the outstanding balance on the bonds was $548,736 and $8,745 of unamortized bond issue premium. The accreted interest on the capital appreciation bonds balance was $641,074. 35 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016

~~NOTE 7 - LONG-TERM DEBT (Continued) A General Obligation Bonds (Continued)~~

On December 21, 2006, the District issued Series 2006, in the amount of $10,999,898. The issue consisted of: a) Current Interest Bonds of $2,785,000 with stated interest rates ranging from 4.00% to 4.50% and fully maturing on August 1, 2020, and b) Capital Appreciation Bonds of $8,214,898 with yields to maturity ranging from 3.65% to 6.22% and fully maturing on August 1, 2031. At June 30, 2016, the outstanding balance on the bonds was $9,099,167 and $209,670 of unamortized bond issue premium. The accreted interest on the capital appreciation bonds balance was $3,802,125. On June 4, 2008, the District issued Series 2008, in the amount of $8,997,964. The issue consisted of: a) Current Interest Bonds of $680,000 with stated interest rates ranging from 3.00% to 4.00% and fully maturing on August 1, 2018, and b) Capital Appreciation Bonds of $8,317,964 with yields to maturity ranging from 4.25% to 5.38% and fully maturing on August 1, 2042. At June 30, 2016, the outstanding balance on the bonds was $8,722,964, and $284,169 of unamortized bond issue premium. The accreted interest on the capital appreciation bonds balance was $4,145,387.

On July 7, 2011, the District issued 2011 General Obligation Refunding Bonds refunded a portion of the District's Election of 2000 General Obligation Bonds, Series A The issue consisted of Current Interest Bonds of $5,200,000 with stated interest rates ranging from 2.00% to 4.00% and fully maturing on August 1, 2024. At June 30, 2016, the outstanding balance on the bonds was $4,415,000, and $133,840 of unamortized bond issue premium.

On December 17, 2013, the District issued 2013 General Obligation Refunding Bonds in the amount of $1,995,000 with stated interest rates 2.15% and fully maturing on August 1, 2020 to refund the Current Interest Bonds portion of the District's Election of 2000 General Obligation Bonds, Series B At June 30, 2016, the outstanding balance on the bonds was $1,945,000.

On December 9, 2014, the District issued 2014 General Obligation Refunding Bonds in the amount of $5,500,000 with stated interest rates ranging from 2.00% to 5.00% and fully maturing on August 1, 2025 to refund the Current Interest Bonds portion of the District's Election of 2004 General Obligation Bonds, Series 2005. At June 30, 2016, the outstanding balance on the bonds was $5,415,000, and $545,879 of unamortized bond issue premium.

~~The annual requirements to amortize all general obligation bonds payable, outstanding as of June 30, 2016, are as follows:~~

~~Fiscal Year Year Ending, Principal Interest Total~~

2017 $ 1,775,000 $ 492,103 $ 2,267,103 2018 1,965,000 427,171 2,392,171 2019 2,154,751 523,838 2,678,589 2020 2,035,200 597,709 2,632,909 2021 2,420,880 299,741 2,720,621 2022-2026 8,728,086 5,995,851 14,723,937 2027-2031 6,596,953 13,978,047 20,575,000 2032-2036 5,781,112 16,438,573 22,219,685 2037-2041 2,637,664 11,935,400 14,573,064 2042 395,740 2,519,260 2,915,000

~~Total $ 34,490,386 $ 53,207,693 $ 87,698,079~~

~~36 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 7 - LONG-TERM DEBT (Continued)~~

~~B Other Postemployment Benefits (OPEB)~~

Plan Description The Post-employment benefits plan (the "Plan") is a single-employer defined benefit healthcare plan administrated by the Garvey School District. The Plan provides health benefits to eligible retirees and their dependents and the detailed provisions of the plan are as follows:

~~Certificated employees Classified employees Management All employees~~

-Retirees age 55 to 65 with -Retirees age 55 to 65 with -Retirees age 55 to 65 with -After the age of 65, the at least 15 years of service at least 20 years of service at least 6 years of service District will pay an amount may choose among health may choose among health may choose among health toward the cost of a plans offered by the District plans offered by the plans offered by the District Medicare supplement plan but shall pay the difference District but shall pay the but shall pay the difference offered by the District's between the least expensive difference between the least between the least expensive provider for the retiree plan and the plan selected. expensive plan and the plan plan and the plan selected. only. Retirees may Retirees have the option for selected. Retirees have the Retirees have the option for purchase coverage for dependent coverage solely option for dependent dependent coverage solely dependents solely at the at the retiree's expense. coverage solely at the at the retiree's expense. retiree's expense. -Retirees age 55 to 65 with retiree's expense. Retirees have the option for -Benefits are pro-rated at least 15 years of service -Retirees age 55 to 65 with dependent coverage solely based on a percentage of receive dental, vision, and at least 20 years of service at retiree's expense. full time equivalency. life insurance at no cost to receive dental, vision, and -Retirees age 55 to 65 with the retiree. Retirees have life insurance at no cost to at least 6 years of service the option for dental and the retiree. (This benefit is receive dental, vision, and v1s10n coverage for currently limited to 18 life insurance at no cost to dependents solely at the retirees at a time.) If more the retiree. Retirees have retiree's expense. than 18 retirees seek dental, the option for dental, and vision, and life insurance v1s10n coverage for coverage, they may be dependents solely at the purchased solely at the retiree's expense. retiree's expense. -After age 65, retirees may -Retirees age 55 to 65 with purchase dental and vision at least 10 years of service insurance for themselves receive dental, vision, and and their dependents solely v1s10n coverage for the at the retiree's expense. retiree and dependents solely at the retiree's expense.

~~Funding Policy~~

The contribution requirement of plan members and the District are established under a funding policy approved by the District's Board, and may be amended by the District from time to time. The District's funding policy is to contribute an amount sufficient to pay the current year's retiree costs. For fiscal year 2016, the District contributed $1,132,700 to the plan, all of which was used for current premiums and no pre funded benefits had been made.

~~37 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 7 - LONG-TERM DEBT (Continued)~~

~~B Other Postemployment Benefits (OPEB) (Continued)~~

~~Annual OPEB and Net OPEB Obligation~~

The District's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), and amount actuarially determined in accordance with the parameters of GASE 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 (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPEB cost for the fiscal year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation.

Amual required contribution $ 1,595,777 Interest on net OPEB obligation 308,451 Adjustment to annual required contribution (382,194) Annual OPEB cost (expense) 1,522,034 Contributions made (1,132,700) Increase in net OPEB obligation 389,334 Net OPEB obligation- beginning of fiscal year 6,169,013 Net OPEB obligation- end of fiscal year $ 6,558,347

The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation was as follows: Percentage of Fiscal Annual OPEB Net Year Annual Cost OPEB Ended OPEB Cost Contribution Obligation

~~6/30/2014 $ 1,384,020 -57.48% $ 5,715,142 6/30/2015 1,518,716 -74.42% 6,169,013 6/30/2016 1,522,034 -34.37% 6,558,347~~

Funded Status and Funding Progress As of July 1, 2014, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $15,629,414, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of$15,629,414. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, present as required supplementary information following the notes to the basic financial statements, present multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 38 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016

~~NOTE 7 - LONG-TERM DEBT (Continued)~~

~~B Other Postemployment Benefits (OPEB) (Continued)~~

~~Actuarial Methods and Assumptions (Continued)~~

In the July 1, 2014 actuarial valuation, the unit credit cost method was used. The actuarial assumptions included a 5% investment rate of return, which is the expected long-term investment returns on plan assets expected to be held by the plan and an annual healthcare cost trend rate of 7% for future years trending down to an ultimate 5% increase for 2018 and later years. The actuarial value of assets is not applicable (no assets as of the initial valuation date). The UAAL is being amortized as a closed, level dollar method over 30 years. The remaining amortization period at July 1, 2014 was thirty years.

~~NOTE 8 - JOINT VENTURES~~

The District is a member of two joint powers agencies (JPAs): the Mountain View, El Monte City, Rosemead, Garvey, and El Monte Union High School Districts (MERGE) public entity risk pool, and the Alliance of Schools for Cooperative Insurance Program (ASCIP). The relationships between the District and the JPAs are such that the JPAs are not component units of the District for financial reporting purposes.

The MERGE IPA provides worker's compensation, property, and liability insurance for its member districts. ASCIP provides dental coverage, vision care, and life insurance for its member school districts. The J'vIERGE JPA is governed by a board consisting of one representative from each member district. The governing board controls the operations of the JPA, independent of any influence by the member districts. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionally to its participation in the JPA.

~~NOTE 9 - RISK MANAGEMENT~~

The District is exposed to various risks of loss related to torts, thefts, damage to District's assets, errors and omissions, employee injuries and natural disasters. The District participates in public entity risk pools, as described in Note 8, for claims in excess of insured amounts for workers' compensation and property and liability losses. The District purchases commercial insurance for other types of risk. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years.

~~NOTE 10 - COMMITMENTS AND CONTINGENCIES~~

~~A 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. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursements will not be material.

~~B. Litigation~~

~~According to the District's staff and attorney, no contingent liabilities are outstanding and no lawsuits are pending of any real financial consequence.~~

~~39 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 - PENSION PLANS~~

~~State Teachers' Retirement System (CalSTRS)~~

~~A. General Information about the Pension Plan~~

Plan Descriptions - All qualified California full-time and part-time public school teachers from pre-kindergarten through community college and certain other employees of the public school system are eligible to participate in the CalSTRS Pension Plans, multiple-employer, cost-sharing defined benefit plans administered by the California State Teacher's Retirement System (CalSTRS). Benefit provisions under the Plans are established by the Teachers' Retirement Law (California Education Code Section 22000 et seq), as enacted and amended by the California Legislature. The benefit terms of the plans may be amended through legislation CalSTRS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalSTRS website.

~~Benefits Provided - The CALSTRS Defined Benefit Program has two benefit formulas:~~

~~CalSTRS 2% at 60: Members first hired on or before December 31, 2012, to perform services that could be creditable to CalSTRS~~

~~CalSTRS 2% at 62: Members first hired on or after January 1, 2013, to perform services that could be creditable to CalSTRS~~

The Defined Benefit Program provides retirement benefits based on members' final compensation, age and years of service credit. In addition, the retirement program provides benefits to members upon disability and on survivors/beneficiaries upon death of eligible members.

~~After earning five years of credited service, members become 100 percent vested in retirement benefits.~~

After five years of credited service, a member (prior to age 60 if under Coverage A, no age limit if under Coverage B, as defined in Education Code Sections 24001 and 24101, respectively) is eligible for disability benefits of up to 50.0 percent of final compensation plus 10.0 percent of final compensation for each eligible child, up to a maximum addition of 40.0 percent. The member must have a disability that will exceed a period of 12 or more months to qualify for benefit.

Any compensation for service in excess of one year in a school year due to overtime or working additional assignments is credited to the Defined Benefit Supplement Program so long as it is under the creditable compensation limit. Other compensation, such as allowances, bonuses, cash in-lieu of fringe benefits, limited-period compensation or compensation determined to have been paid to enhance a benefit, are not creditable to any CalSTRS benefit program.

~~The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows:~~

~~Prior to On or after Hire Date January 1, 2013 January 1, 2013~~

Benefit formula 20%@60 20%@62 Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life Retirement age 50-55 53 Monthly benefits, as a% of eligible compensation 20% to 2.4% 200% Required employee contributions rates 9.20% 8.56% Required employer contribution rates 10.73% 10.73%

Specific details for the retirement, disability or death benefit calculations for each of the pension plans are available in the CalSTRS Comprehensive Armual Financial Report (CAFR). The CalSTRS' CAFR is available online at http://www. calstrs. com/comprehensive-annual-financial- report.

~~40 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 -PENSION PLANS (Continued)~~

~~State Teachers' Retirement System (CalSTRS) (Continued)~~

~~A. General Information about the Pension Plan (Continued)~~

Contributions -Required member, errpl0yer and state contribution rates are set by the California Legislature and GCNernor and detailed in Teachers' Retirement Law. Contribution rates are expressed as a level percentage of payroll using the entry age norm1I actuarial cost method.

~~Forthe fiscal year endedJ une 30, 2016, the contributions recognized as part of pension expense was as fol lo.vs:~~

~~Contribution- errpl0yer $ 2,102,847 Contribution - state $ 1,631,491~~

~~B. Pension Liabilities, Pension Expenses, and Deferred Outflo.vs~ nflo.vs of Resources Related to Pensions~~

As of June 30, 2016, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support pr01ided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follo.v:

District's proportionate srare of the net penion I iabi lity $ 33,803,380 State's proportionate srare of the net penion liability associated with the District 17,878,262 Total $ 51,681,642 ...a.--.a...... a--

The District's net pension liability is measured as the proportionate share of the net pension liability. The net pension liability is measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plans relative to the prqjected contributions of all participating errpl0yers, actuarially deterrrined. AtJ une 30, 2015, the District's proportion was 0.0502%, which increased by 0.0002%, its proportion measured as of June 30, 2014.

For the fiscal year ended June 30, 2016, the District recognized pension expense of $52,303. AtJ une 30, 2016, the District reported deferred outflo.vs of resources and deferred inflo.vs of resources related to pensions from the follo.ving sources: Deferred Outflows Deferred I tflows of Resources of Resources Difference between expected and actual exrerien:::e $ $ 564,863 Charges of assunµ:ior,; Charges in proportior,; 131,089 Net difference between projected and actual eani rg on per,;ion plan i 111/estrrerts 2,755,525 Charges in proportion and differences between District contri butior,; and proportionate share of contri buti or,; 36,363 Di strict cortri buti or,; subsequent to the rreasurerrent date 2,697,966 Total $ 2,865,418 $ 3,320,388

~~41 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 -PENSION PLANS (Continued)~~

~~State Teachers' Retirement System (CalSTRS) (Continued)~~

~~B. Pension Liabilities, Pension Expenses, and Deferred Outflo.vs~ nflo.vs of Resources Related to Pensions (Continued)~~

$2,697,966 reported as deferred outflo.vs of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2017. Other amounts reported as deferred outflo.vs of resources and deferred inflo.vs of resources related to pensions will be recognized as pension expense as folio.vs:

~~Fiscal Year E ndedJ une 30 Amount~~

~~2017 $ (755,116) 2018 (755,116) 2019 (755,116) 2020 (755,116) 2021 (66,236) 2022 (66,236) $ (3,152,936)~~

~~Actuarial Assurrptions -The total pension liabilities in the June 30, 2015 actuarial valuations were deterrrined using the follo.ving actuarial assurrptions:~~

Valuation Date June 30, 2014 Experience Study July 1, 2ITTi, throughJ une 3Q 2010 Actuarial Cost Method Entry age nonrnl Investment RateofRetum 7.60)6 Consumer Price Inflation 3.0(])6 Wage Growth 3.l'Wo Post-retirement Benefit Increases 2.0(])6 sinµle for DB Not applicable for DBS /CB B

CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are based on RP2000 series tables adjusted to fit CalSTRS experience. RP2000 series tables are an industry standard set of mortality rates published o, the Society of Actuaries. See CalSTRS July 1, 2006 -June 30, 2010 Experience Analysis for more inform1tion.

The long-term expected rate of return on pension plan investments was deterrrined using a building-block method in which best-estim1te ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each m1jor asset class. The best-estim1te ranges were developed using capital m1rket assumptions from CalSTRS general investment consultant (Pension Consulting Alliance - PCA) as an input to the process. Based on the model from CalSTRS consulting actuary's (Millim1n) investment practice, a best estim1te range was deterrrined 0y assuming the portfolio is re-balanced annually and that annual returns are norm1lly distributed and independent from year to year to da,elop expected percentiles for the long-term distribution of annualized returns. The assumed asset allocation o, PCA is based on board policy for target asset allocation in effect on February 2, 2012, the date the current experience stu0y was apprCNed o, the board. Best estim1tes of 10-year geometric real rates of return and the assumed asset allocation for each m1jor asset class used as input to develop the actuarial investment rate of return are summ1rized in the follo.ving table:

~~NOTE 11 -PENSION PLANS (Continued) 42 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 - PENSION PLANS (Continued)~~

~~State Teachers' Retirement System (CalSTRS) (Continued)~~

~~B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)~~

~~Long-Term* Assumed Asset &peeled Real Asset a.ass Allocation Rate of Return~~

~~Global Equity 47 % 4.50 % Private Equity 12 % 6.2 % Real Estate 15 % 5 % Inflation Sensitive 5 % 3.2 % Fixed Income 20 % 0.20 % Cash/Liquidity % 0.00 % *10-year geometric average~~

Discount Rate - The discount rate used to measure the total pension liability was 7.60 percent The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increases per AB 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the CalSTRS fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the District's proportionate share of the net pension liability, calculated using the discount rate, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is I percentage point lower or I percentage point higher than the current rate:

~~1% Decrease 6.60% Net Pension Liability $ 51,040,473~~

~~Current Discount Rate 7.60% Net Pension Liability $ 33,803,380~~

~~1% Increase 8.60% Net Pension Liability $ 19,477,965~~

~~Pension Plan Fiduciary Net Position -Detailed information about pension plan's fiduciary net position is available in the separately issued CalSTRS financial reports.~~

~~C. Payable to the Pension Plan~~

~~At June 30, 2016, the District had no amount outstanding for contributions to the pension plan required for the fiscal year ended June 30, 2016.~~

~~43 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 - PENSION PLANS (Continued)~~

~~California Public Employees' Retirement System (CalPERS)~~

~~A. General Information About the Pension Plan~~

Plan Description - The Garvey School 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. Plan membership consists of non-teaching and non-certificated employees of public schools (K-12), community college districts, offices of education, charter and private schools (elective) in the State of California. 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 the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.

~~Benefits Provided - The CalPERS Defined Benefit Program has two benefit formulas:~~

~~CalPERS 2% at 55: Members first hired on or before December 31, 2012, to perform service that could be creditable to CalPERS.~~

~~CalPERS 2% at 62: Members first hired on or after January 1, 2013, to perform service that could be creditable to CalPERS.~~

The Defined Benefit Program provides retirement benefits based on members' final compensation, age, and years of service credit. In addition, the retirement program provides benefits to members upon disability and to survivors/beneficiaries upon the death of eligible members.

~~After earning five years of credited service, members become 100 percent vested in retirement benefits.~~

~~A family benefit is available if an active member dies and has at least one year of credited service.~~

Members' accumulated contributions are refundable with interest upon separation from CalPERS. The board determines the credited interest rate each fiscal year. For the fiscal year ended June 30, 2015, the rate of interest credited to members' accounts was 6 percent.

The member's benefit is reduced dollar for dollar, regardless of age, for the first 180 days after retirement if the member performs activities in the public schools that could be creditable to CalPERS, unless the governing body of the school district takes specified actions with respect to a member who is above normal retirement age.

~~The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows:~~

~~Prior to On or after Hire Date January 1, 2013 January 1, 2013~~

Benefit formula 20%@55 20%@62 Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life Retirement age 50-63 52-67 Monthly benefits, as a% of eligible compensation 1.17% to 2.5% 100% to 2.5% Required employee contributions rates 7% 7% Required employer contribution rates 11.847% 11.847%

Specific details for retirement, disability or death benefit calculations for each of the pension plans are available in the CalPERS' Comprehensive Annual Financial Report (CAFR). The CalPERS' CAFR is available online at https ://www.calpers.ca.gov/page/form s-publications. 44 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016

~~NOTE 11 -PENSION PLANS (Continued)~~

~~California Public E mpl0yees' Retirement System (Cal PE RS) (Continued)~~

~~A. General Information About the Pension Plan (Continued)~~

Contributions - Section 20814 (c) of the California Public Empl0yees' Retirement Law requires that the empl0yer contribution rates for all public empl0yees be determined on an annual basis by the actuary and shall be effective onJ uly 1 follo.ving notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by Cal PERS. The actuarially deterrrined rate is the estim1ted amount necessary to finance the costs of benefits earned by empl0yees during the fiscal year, with an additional amount to finance any unfunded accrued liability. The Local G 0/ernment is required to contribute the difference between the actuarially deterrri ned rate of empl0yees.

~~Forthe fiscal year endedJ une 30, 2016, the contributions recognized as JE.rt of pension expense was as follo.v:~~

~~Contribution- empl0yer $ 912,201~~

~~B. Pension Liabilities, Pension Expenses, and Deferred Outflo.vs~ nflo.vs of Resources Related to Pensions~~

~~As of June 30, 2016, the District reported net pension liability for its proportionate shares of the net pension liability in the amount of $10,018,845.~~

The District's net pension liability is measured as the proportionate share of the net pension liability. The net pension liability is measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plans relative to the prqjected contributions of all JRrticiJRting empl0yers, actuarially deterrrined. AtJ une 30, 2015, the District's proportion was 0.0680!6, which increased by 0.0031% from its proportion measured as of June 30, 2014.

For the fiscal year ended June 30, 2016, the District recognized pension expense of $90,226. AtJ une 30, 2016, the District reported deferred outflo.vs of resources and deferred inflo.vs of resources related to pensions from the follo.ving sources:

~~Deferred Oufl o.vs Deferred I rtl o.vs of Resou-ces of Resou-ces~~

~~Difference between expected and actual experience $ 572,592 $~~

~~Changes of assunµti ons 615,586~~

~~Changes in proportions 348,205~~

~~Net difference between projected and actual earri ng on pension pl an i rNestrrerts 343,054~~

~~Changes in proportion and differences between District contri bu:i ons and proportionate srare of contri bu:i ons 16,705~~

~~District cortri buti ons subsequent to the measu-ement date 962,593~~

~~$ 1,900,095 $ 958,640~~

~~45 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 -PENSION PLANS (Continued)~~

~~California Public E mpl0yees' Retirement System (Cal PE RS) (Continued)~~

~~B. Pension Liabilities, Pension Expenses, and Deferred Outflo.vs~nflo.vs of Resources Related to Pensions (Continued)~~

$962,593 reported as deferred outflo.vs of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2017. Other amounts reported as deferred outflo.vs of resources and deferred inflo.vs of resources related to pensions will be recognized as pension expense as fol lo.vs: Fiscal Year EndedJ une 30 Amourt 2017 $ 25,242 2018 25,242 2019 14,140 2020 (85,762) $ (21,138)

~~Actuarial Assurrptions -The total pension liabilities in the June 30, 2015 actuarial valuations were deterrrined using the follo.ving actuarial assurrptions:~~

Valuation Date June 3Q 2014 Experience Study July 1, 1997, throughJ une 30, 2011 Actuarial Cost Method Entry age nom1d Investment RateofRetum 7.6"!'/o Consumer Price Inflation 2. l"f'/o Wage Growth Varies Post-retirement Benefit Increases Up to 2.a»6 until purchasing power protection Allowance flows purchasing power applies, 2.l'Wo thereafter

The underlying mortality assurrptions and all other actuarial assurrptions used in theJ une 30, 2013 valuation were based on the results of January 2014 actuarial experience study forthe period 1997 to 2011. Further details of the Experience Study can be found on the Cal PERS website

Changes of Assurrptions - GAS B No 68, paragraph 68 states that the long term expected rate of return should be determined net of pension plan irNestment expense, but without reduction for pension plan adrrinistrative expenses. The discount rate was change from 7.50!6 (net of administrative expenses in 2014) to 7.65% as of June 30, 2015 to correct the adjustment which previously reduced the discount rate for adrri nistrative expenses.

Discount Rate - The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of the discount rate for public agency plans (including PERF C), Cal PERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Base on the testing the plans, the tests ra,ealed the assets would not run out. Therefore, the current 7.65 percent is applied to all plans in the Public Empl0yees Retirement Fund, including PERF C. The stress test results are presented in a detailed report called "GAS B CrossCNer Testing Report" that can be obtained at Cal PERS' website underthe GASB No68section.

~~46 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 -PENSION PLANS (Continued)~~

~~California Public E mpl0yees' Retirement System (Cal PE RS) (Continued)~~

~~B. Pension Liabilities, Pension Expenses, and Deferred Outflo.vs~nflo.vs of Resources Related to Pensions (Continued)~~

Cal PERS is scheduled to ra,iew all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that is scheduled to be completed February 2018. Any changes to the discount rate will require Board action and proper stockholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GAS B 67 and 68 calculations through at least the 2017-18 fiscal years. Cal PE RS wi II continue to check the m1terial ity of the difference in calculation unti I such ti me as we have changed our methodology.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estim1ted ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each m1jor asset class.

In determining the long-term expected rate of return, Cal PERS took into account both short-term and long-term m1rket return expectation's as well as the expected pension fund cash flo.vs. Using historical returns of all the funds' asset classes, expected compound returns were calculated CNer the short-term (first 10 years) and the long-term (11-60 years) using a bui I ding-block approach. Using the expected norri nal returns for both short-term and I ong-term, the present value of benefits was calculated for each fund. The expected rate of return was set 0y calculating the single equivalent expected return that arrived at the same present value of benefits for cash flo.vs as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated abCNe and rounded do.vn to the nearest one quarter of one percent.

The table belo.v reflects the long-term expected real rate of return 0y asset class. The rate of return was calculated using the capital m1rket assurrptions applied to determine the discount rate and asset allocation. These rates are net of adrrinistrative expenses.

~~New Expected Expected Strategic Real Rate of Return Real Rate of Return Asset Class Allocation Years 1-lO(a) Years 11-t{b)~~

Global Equity 51.(1)6 5.2'Wo 5.71% Global Filed I ncorre 19.(1)6 Q99)6 2.431/o Inflation Sensitive 6.(1)6 Q4'Wo 3.36)6 Private Equity 1Q(J)6 6.831/o 6.9'Wo Real Estate 1Q(J)6 4.5(1)6 5.131/o Infrastructure and Forestland 2.(1)6 4.5(1)6 5.ffiYo Liquidity 2.(1)6 -0.S'Wo -1.IB'/o Total 1Q(J)6

~~(a) An expected inflation of 2.5% was used for this period (b) An expected inflation of 3.Wo was used for this period~~

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The follo.ving presents the District's proportionate share of the net pension liability, calculated using the discount rate, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lo.ver or 1 percentage point higher than the current rate:

~~47 GARVEY SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016~~

~~NOTE 11 - PENSION PLANS (Continued)~~

~~California Public Employees' Retirement System (CalPERS) (Continued)~~

~~R Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)~~

~~1% Decrease 6.65% Net Pension Liability $ 16,306,505~~

~~Current Discount Rate 7.65% Net Pension Liability $ 10,018,845~~

~~1 % Increase 8.65% Net Pension Liability $ 4,790,236~~

~~Pension Plan Fiduciary Net Position -Detailed information about pension plan's fiduciary net position is available in the separately issued CalPERS financial reports.~~

~~C. Payable to the Pension Plan~~

~~At June 30, 2016, the District had no amount outstanding for contributions to the pension plan required for the fiscal year ended June 30, 2016.~~

48 REQUIRED SUPPLEMENTARY INFORMATION SECTION [THIS PAGE INTENTIONALLY LEFT BLANK] GARVEY SCHOOL DISTRICT BUDGETARY COMPARISON SCHEDULE GENERAL FUND Forthe Fiscal Year EndedJ une 30, 2016 Variance with Final B udget Budgeted A mounts Positive Original Final Actual (Negative) Revenues: LCFF Sources State apportionments $ 35,333,298 $ 35,241,312 $ 33,375,127 $ (1,866,185) Education Protection Account Funds 5,726,600 5,726,600 6,384,472 657,872 Local sources 3,304,758 3,304,758 4,447,688 l, 142,930 Federal 4,556,027 5,218, ll l 3,917,093 (1,301,018) Other state 5,468,544 5,468,544 7,712,286 2,243,742 Other local 3,598,611 3,598,611 4,933,122 1,334,511

~~Total revenues 57,987,838 58,557,936 60,769,788 2,211,852~~

Expenditures: Certificated salaries 27,374,217 27,451,980 24,250,790 3,201,190 Classified salaries 7,801,297 7,430,778 7,059,240 371,538 Employee benefits 9,572,956 9,729,813 11,263,672 (1,533,859) Boaks and supplies 4,559,725 3,541,511 2,656,189 885,322 Contracted services and other operating expenditures 7,586,548 8,049,276 7,428,802 620,474 Capital outlay 214,585 214,584 l Other outgo 43,428 1,055,067 1,035,487 19,580

~~Total expenditures 56,938,171 57,473,010 53,908,764 3,564,246~~

~~Excess of revenues over (under) expenditures 1,049,667 1,084,926 6,861,024 5,776,098~~

~~Other Financing Sources (Uses): Transfers out (19,579) (19,579)~~

~~Total other financing sources (uses) (19,579) (19,579)~~

~~Net change in fund balance 1,049,667 1,084,926 6,841,445 5,756,519~~

~~Fund balances.July l, 2015 8,052,928 8,052,928 8,052,928~~

~~Fund balances,J une 30, 2016 $ 9,102,595 $ 9,137,854 $ 14,894,373 $ 5,756,519~~

49 GARVEY SCHOOL DISTRICT BUDGETARY COMPARISON SCHEDULE CHILD DEVELOPMENT FUND Forthe Fiscal YearEndedJune 30, 2016 Variance with Fi nal B udget Budgeted A rmunts Positive Original Final Actual (Negative) Revenues Federal $ 4,295,914 $ 4,440,623 $ 4,249,152 $ (191,471) Other state 362,817 305,823 408,543 101,720 Other I cx:al 214,453 216,454 404,456 188,002

~~Total revenues 4,873,184 4,963,900 5,062,151 98,251~~

Expenditures Certificated salaries 1,403,927 1,296,925 1,296,920 5 CI ass fi ed sal ari es l, 198,854 1,315,867 1,315,373 494 Employee benefits l, 133,137 1,068,783 l, 142,979 (74,195) Books and supplies 52,410 300,930 300,930 Contra=t:ed services and other operating expenditures 1,084,856 485,382 495,381 (9,999) Capital outlay 489,330 489,330 Other outgo 20,772 20,771

~~Total expenditures 4,873,184 4,977,989 5,061,684 (83,695)~~

~~Excess of revenues over ( under) expenditures (14,089) 467 14,556~~

~~Fund balances.July l, 2015 2,234 2,234 2,234~~

~~Fund balances, J une 30, 2016 $ 2,234 $ (11,855) $ 2,701 $ 14,556~~

~~50 GARVEY SCHOOL DISTRICT SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY Last 10 Years* As of June 30, 2016~~

~~The follcwing table prCNides required supplementary inforrration regarding the District's CAL PERS Pension Plan.~~

~~2016 2015~~

~~Proportion of the net pension liability 0.068036 0.064936~~

~~Proportionate share of the net pension liability $ 10,018,845 $ 7,367,730~~

~~CCNered-empl0yee payroll $ 7,699,848 $ 7,131,253~~

~~Proportionate share of the net pension liability as percentage of cCNered-€mpl0yee payroll 130.12% 103.32%~~

~~Plan's total pension liability $ 71,651,164,353 $ 68,292,799,349~~

~~Plan's fiduciary net position $ 56,911,065,643 $ 59,940,364,500~~

~~Plan fiduciary net position as a percentage of the total pension I iabi I ity 79.43% 87.7736~~

* -Fiscal year 2015 was the 1st year of implementation, therefore only two years are shewn.

~~51 GARVEY SCHOOL DISTRICT SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY Last 10 Years* As of June 30, 2016~~

~~The follcwing table prCNides required supplementary inforrration regarding the District's CALSTRS Pension Plan.~~

~~2016 2015~~

~~Proportion of the net pension liability 0.0502% 0.050036~~

~~Proportionate share of the net pension liability $ 33,803,380 $ 29,218,500~~

~~CCNered-empl0yee payroll $ 25,489,055 $ 22,895,273~~

~~Proportionate share of the net pension liability as percentage of cCNered-€mpl0yee payroll 132.62% 127.62%~~

~~Plan's total pension liability $ 259,146,248,000 $ 248,911,000,000~~

~~Plan's fiduciary net position $ 191,822,335,995 $ 190,474,000,000~~

~~Plan fiduciary net position as a percentage of the total pension I iabi I ity 74.02% 76.52%~~

* -Fiscal year 2015 was the 1st year of implementation, therefore only two years are shewn.

~~52 GARVEY SCHOOL DISTRICT SCHEDULE OF PENSION CONTRIBUTIONS Last lO Years* As of June 30, 2016~~

~~The following table provides required supplern,ntary inforrmtion regarding the District's CAL PERS Pension Plan.~~

~~2016 2015~~

~~Contractually required contribution (actuarially determined) $ 962,593 $ 912,201~~

~~Contribution in relation to the actuarially determined contributions 962,593 912,201 Contribution deficiency (excess) $ $~~

~~Covered-employee payroll $ 8,125,205 $ 7,749,562~~

~~Contributions as a percentage of covered-~~

~~Notes to Schedule~~

~~Valuation Date: 6;30;2014~~

~~Methods and assumptions used to determine contribution rates:~~

~~Actuarial cost rn,thod Entry Age~~

~~Asset valuation rn,thod 5-year smoothed rmrket~~

~~Amortization rn,thod The unfunded actuarial accrued liability is amorti:aed over an open 17 year period as a level percentage of payroll~~

~~Discount rate 7.l"f'/o Amortization growth rate 3.7"!'/o Price I nflation 3.2"!'/o~~

~~Salary increases 3. l"f'/o plus rn,rit component based on employee classification and years of service~~

~~Mortality Sex distinct RP-2000Combined Mortality projected to 2010 using Scale AA with a 2 year setback for rmles and a 4 year setback for fermles~~

~~Valuation Date: 6;30;2015~~

~~Discount rate 7.6"!'/o~~

* -Fiscal year 2015 was the lstyear of implern,ntation, therefore only two years are shown.

~~53 GARVEY SCHOOL DISTRICT SCHEDULE OF PENSION CONTRIBUTIONS Last lO Years* As of June 30, 2016~~

~~The following table provides required supplern,ntary inforrmtion regarding the District'sCALSTRS Pension Plan.~~

~~2016 2015~~

~~Contractually required contribution (actuarially determined) $ 2,697,966 $ 2,102,847~~

~~Contribution in relation to the actuarially determined contributions 2,697,966 2,102,847 Contribution deficiency (excess) $ $~~

~~Covered-employee payroll $ 25,144,138 $ 23,680,709~~

~~Contributions as a percentage of covered-~~

~~Notes to Schedule~~

~~Valuation Date: 6;30;2014~~

~~Methods and assumptions used to determine contribution rates:~~

~~Actuarial cost rn,thod Entry Age~~

~~Asset valuation rn,thod Excepted value with 33"/o adjustrn,ntto rmrket value~~

~~Amortization rn,thod The unfunded actuarial accrued liability is amorti:aed over an open 30 year period as a level percentage of payroll~~

~~Discount rate 7.60'/o Amortization growth rate 3.75% Price I nflation 3.00'/o~~

~~Salary increases 3.75%~~

~~Mortality Sex distinct RP-2000Combined Mortality projected to 2010 using Scale AA with a 2 year setback for rmles and a 4 year setback for fermles~~

* -Fiscal year 2015 was the lstyear of implern,ntation, therefore only two years are shown.

~~54 GARVEY SCHOOL DISTRICT OTHER POST-EMPLOYMENT BENEFITS TREND INFORMATION June 30, 2016 other Post-€mpl0yment Benefits~~

~~Trend I nform1tion~~

~~Schedule of Funding Progress for Retiree Health Plan~~

Unfunded Actuarial Unit Accrued Actuarial Credit Cost Actuarial Liability Annual UAAL as a Valuation Accrued Value of (Ex:ess Funded Covered % of Date Liability Assets Assets) Ratio Payroll Payroll 7/1;2000 $ 14,279,353 $ $ 14,279,353 QYo $ 47,335,269 3(])6 7/1;2010 12,371,764 12,371,764 QYo 34,752,273 3(l)6 7/1;2012 13,479,156 13,479,156 QYo Not Provided Not Provided 7/1;2014 15,629,414 15,629,414 QYo Not Provided Not Provided

~~55 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~56 SUPPLEMENTARY INFORMATION SECTION [THIS PAGE INTENTIONALLY LEFT BLANK] GARVEY SCHOOL DISTRICT NONMAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET June 30, 2016~~

~~Deferred Cafeteria Maintenance Fund Fund Totals Assets~~

~~Cash in County Treasury $ 643,239 $ $ 643,239 Cash in bank and on hand 59,951 59,951 Accounts receivable 1,315,435 1,315,435 Inventory, at cost 18,662 18,662~~

~~Total assets $ 2,037,287 $ $ 2,037,287~~

~~Liabilities and Fund Balances~~

~~Liabilities: Accounts payable $ 63,381 $ $ 63,381~~

~~Total liabilities 63,381 63,381~~

~~Fund balances: Nonspendable Store inventories 18,662 18,662 Restricted Child nutrition program 1,955,244 1,955,244~~

~~Total fund balances 1,973,906 1,973,906~~

~~Total liabilities and fund balances $ 2,037,287 $ $ 2,037,287~~

~~57 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~58 GARVEY SCHOOL DISTRICT NONMAJOR SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES,ANDCHANGES IN FUND BALANCES Forthe Fiscal Year EndedJ une 30, 2016~~

~~Deferred Cafeteria Maintenance Fund Fund Totals Revenues: Federal $ 3,137,852 $ $ 3,137,852 Other state 227,498 227,498 Other local 265,335 265,336~~

~~Total revenues 3,630,685 3,630,686~~

Expenditures: Certificated salaries Classified salaries 1,227,786 1,227,786 Employee benefits 412,487 412,487 B oaks and supplies 1,457,002 149 1,457,151 Contracted services and other operating expenditures 266,595 7,731 274,326 Capital outlay 233,593 11,700 245,293 Other outgo 166,786 166,786

~~Total expenditures 3,764,249 19,580 3,783,829~~

~~Excess of revenues over (under) expenditures (133,564) (19,579) (153,143)~~

~~Other Financing Sources (Uses): Transfers in 19,579 19,579~~

~~Total other financing sources (uses) 19,579 19,579~~

~~Net change in fund balances (133,564) (133,564)~~

~~Fund balances.July l, 2015 2,107,470 2,107,470~~

~~Fund balances,J une 30, 2016 $ 1,973,906 $ $ 1,973,906~~

~~59 GARVEY SCHOOL DISTRICT NONMAJOR SPECIAL REVENUE FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES,ANDCHANGES IN FUND BALANCES BUDGET AND ACTUAL Forthe Fiscal YearEndedJune 30, 2016~~

~~Cafeteria Fund Variance Final Positive Budget Actual (Negative) Revenues: Federal $ 2,725,670 $ 3,137,852 $ 412,182 Other state 210,361 227,498 17,137 Other local 281,000 265,335 (15,665)~~

~~Total revenues 3,217,031 3,630,685 413,654~~

Expenditures: Certificated salaries Classified salaries 1,288,024 1,227,786 60,238 Employee benefits 413,354 412,487 867 B oaks and supplies 1,457,003 1,457,002 Contracted services and other operating expenditures 106,171 266,595 (160,424) Capital outlay 234,450 233,593 857 Other outgo 195,557 166,786 28,771

~~Total expenditures 3,694,559 3,764,249 (69,690)~~

~~Excess of revenues over (under) expenditures (477,528) (133,564) 343,964~~

~~Other Financing Sources (Uses): Transfers in~~

~~Total other financing sources (uses)~~

~~Net change in fund balances (477,528) (133,564) 343,964~~

~~Fund balances,July l, 2015 2,107,470 2,107,470~~

~~Fund balances,J une 30, 2016 $ 1,629,942 $ 1,973,906 $ 343,964~~

~~60 Deferred Maintenance Fund Totals Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative)~~

~~$ $ $ $ 2,725,670 $ 3,137,852 $ 412,182 210,361 227,498 17,137 2,000 (1,999) 283,000 265,336 (17,664)~~

~~2,000 (1,999) 3,219,031 3,630,686 411,655~~

~~1,288,024 1,227,786 60,238 413,354 412,487 867 35,000 149 34,851 1,492,003 1,457,151 34,852~~

~~87,687 7,731 79,956 193,858 274,326 (80,468) 70,000 11,700 58,300 304,450 245,293 59,157 195,557 166,786 28,771~~

~~192,687 19,580 173,107 3,887,246 3,783,829 103,417~~

~~(190,687) (19,579) 171,108 (668,215) (153,143) 515,072~~

~~19,579 19,579 19,579 19,579~~

~~(190,687) 190,687 (668,215) (133,564) 534,651~~

~~2,107,470 2,107,470~~

~~$ (190,687) $ $ 190,687 $ 1,439,255 $ 1,973,906 $ 534,651~~

~~(Continued)~~

~~61 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~62 GARVEY SCHOOL DISTRICT NON MAJOR DEBT SERVICE FUND BALANCE SHEET J une 30, 2016~~

~~Bond I merest and Redemption Fund Assets~~

~~Cash in County Treasury $ 2,159,030~~

~~Total assets $ 2,159,030~~

~~Liabilities and Fund Balance~~

~~Fund balance: Restricted Debt service $ 2,159,030~~

~~Total liabilities and fund balance $ 2,159,030~~

~~63 GARVEY SCHOOL DISTRICT NON MAJOR DEBT SERVICE FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Fiscal Year EndedJ une 30, 2016~~

~~Bond I merest and Redemption Fund Revenues: Other state $ 19,513 Other local 2,254,344~~

~~Total revenues 2,273,857~~

~~Expenditures: Debt service 2,244,292~~

~~Total expenditures 2,244,292~~

~~Excess of revenues over (under) expenditures 29,565~~

~~Fund balance,July l, 2015 2,129,465~~

~~Fund balance,June 3Q 2016 $ 2,159,030~~

~~64 GARVEY SCHOOL DISTRICT NON MAJOR DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Fiscal Year E ndedJ une 30, 2016~~

~~Bond Interest and Redemption Fund Variance Final Positive Budget Actual (Negative) Revenues: Other state $ $ 19,513 $ 19,513 Other local 2,151,199 2,254,344 103, 145~~

~~Total revenues 2,151,199 2,273,857 122,658~~

~~Expenditures: Debt service 2,244,292 2,244,292~~

~~Total expenditures 2,244,292 2,244,292~~

~~Excess of revenues over (under) expenditures (93,093) 29,565 122,658~~

~~Fund balance,July l, 2015 2,129,465 2,129,465~~

~~Fund balance,June 3Q 2016 $ 2,036,372 $ 2,159,030 $ 122,658~~

~~65 GARVEY SCHOOL DISTRICT NONMAJORCAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET J une 30, 2016~~

~~County School Capital Building Facilities Facilities Fund Fund Fund Totals Assets~~

~~Cash in county treasury $ 22,460 $ 945,765 $ 486,917 $ 1,455,142 Accounts receivable 70 4,306 1,379 5,755~~

~~Total assets $ 22,530 $ 95Q07l $ 488,296 $ 1,460,897~~

~~Liabilities and Fund Balances~~

~~Liabilities: Accounts payable $ $ 87,400 $ 11,907 $ 99,307~~

~~Total liabilities 87,400 11,907 99,307~~

~~Fund balances: Restricted Construction 22,530 862,671 476,389 1,361,590~~

~~Total fund balances 22,530 862,671 476,389 1,361,590~~

~~Total liabilities and fund balances $ 22,530 $ 95Q07l $ 488,296 $ 1,460,897~~

~~66 GARVEY SCHOOL DISTRICT NONMAJOR CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES For the Fi seal Year Ended J une 30, 2016~~

~~County School Capital Building Facilities Facilities Fund Fund Fund Totals Revenues: Other local $ 177 $ 371 $ 181,128 $ 181,676~~

~~Total revenues 177 371 181,128 181,676~~

~~Expenditures: Contracted services and other operating expenditures 750 184,026 184,776 Capital ou~ay 1,558,560 47,720 1,606,280~~

~~Total expenditures 750 1,742,586 47,720 1,791,056~~

~~Excess of revenues over (under) expenditures (573) (1,742,215) 133,400 (1,609,380)~~

~~Fund balanc:es,July l, 2015 23,103 2,604,886 342,981 2,970,970~~

~~Fund balanc:es,June 30, 2016 $ 22,530 $ 862,671 $ 476,389 $ 1,361,590~~

~~67 GARVEY SCHOOL DISTRICT NONMAJOR CAPITAL PROJECTS FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For the Fi seal Year Ended J une 30, 2016~~

~~Building Fund Variance Final Positive Budget Actual (Negative) Revenues: Other local $ $ 177 $ 177~~

~~Total revenues 177 177~~

~~Expenditures: Classified salaries Employee benefits Books and supplies Contracted services and other operating expenditures 750 750 Capital ou~ay~~

~~Total expenditures 750 750~~

~~Excess of revenues over (under) expenditures (750) (573) 177~~

~~Fund balances,July l, 2015 23, 103 23,103~~

~~Fund balances,June 30, 2016 $ 22,353 $ 22,530 $ 177~~

68 CcuntySd"'OO FacilitiesFurd Capital Facilities Furd Tctals Variance Variance Variance Final Positive Final Positive Final Positive Buc!:Je: Actual (Negative) Bwget Actual (Negative) B uc!:Je: Actual (Negative)

~~$ 12,0'.Xl $ 371 $ (11,629) $ 176,0'.Xl $ 181,128 $ 5,128 $ 188,0'.Xl $ 181,676 $ (6,324)~~

~~12,0'.Xl 371 (11,629) 176,0'.Xl 181,128 5,128 188,0'.Xl 181,676 (6,324)~~

~~93,799 184,026 (90,227) 81,0'.Xl 81,0'.Xl 175,549 184,776 (9,227) 1,558,561 1,558,560 l 95,0'.Xl 47,720 47,280 1,653,561 1,606,280 47,281~~

~~1,652,360 1,742,586 (90,226) 176,0'.Xl 47,720 128,280 1,829,110 1,791,056 38,054~~

~~( 1,640,360) (1,742,215) (101,855) 133,408 133,408 (1,641,110) ( 1,609,380) 31,730~~

~~2,604,886 2,604,886 342,981 342,981 2,970,970 2,970,970~~

~~$ 964,526 $ 862,671 $ (101,855) $ 342,981 $ 476,389 $ 133,408 $ 1,329,860 $ 1,361,590 $ 31,730~~

~~69 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~70 GARVEY SCHOOL DISTRICT HISTORY AND ORGANIZATION June 30 2016~~

The Garvey School District was established in 1892, and is comprised of an area of approximately six square miles located in Los Angeles County. There were no changes in the boundaries of the District during the current fiscal year The District is currently operating eight elementary schools and two intermediate schools.

~~GOVERNING BOARD~~

~~Member Office Term Expires~~

~~Maureen Chin President November, 2017~~

~~Ronald Trabanino Vice President November, 2017~~

~~Bob Bruesch Clerk November, 2017~~

~~Henry Lo Member November, 2019~~

~~Keilley Meng Member November, 2019~~

~~DISTRICT ADMINISTRATORS~~

~~Anita Chu Superintendents~~

~~Carol Mehochko Learning Support Services Director 11~~

~~Grace Gamer Chief Business Officer~~

~~Genaro Alarcon Assistant Superintendent, Hurran Resources~~

~~71 GARVEY SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE For the Fiscal Year Ended June 30 2016~~

Original Revised Second Period Second Period Reeort Reeort Annual Reeort Regular Elementary Kindergarten through Third 2,022.66 2,023.09 2,025.08 Fourth through Sixth 1,589.14 1,589.21 1,595.22 Seventh and Eighth 1,126.51 1,126.77 1,129.83 Extended Year Special Education Kindergarten through Third 2.78 2.78 2.78 Fourth through Sixth 3.10 3.10 3.10 Seventh and Eighth 203 203 203 Special Education- Nonpublic, Nonsectarian Kindergarten through Third 0.95 0.95 0.99 Fourth through Sixth 0.60 0.60 0.43 Seventh and Eighth 10.17 10.30 10.22 Extended Year Special Education - Nonpublic, Nonsectarian Kindergarten through Third 0.11 0.11 0.11 Fourth through Sixth 0.11 0.11 Seventh and Eighth 0.43 0.50 0.50

~~Total Average Daily Attendance 4,758.48 4,759.55 4,770.40~~

~~There were no audit findings which resulted in necessary revisions to attendance. The revised second period report was completed by the District prior the audit completion.~~

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.

~~72 GARVEY SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME For the Fiscal Year Ended June 30 2016~~

~~Ed Code Number of 46207 2015-16 Days Minutes Actual Traditional Grades Requirement Minutes Calendar Status~~

Kindergarten 36,000 57,149 180 In Compliance Grade 1 50,400 54,464 180 In Compliance Grade 2 50,400 54,464 180 In Compliance Grade 3 50,400 54,464 180 In Compliance Grade 4 54,000 54,464 180 In Compliance Grade 5 54,000 54,464 180 In Compliance Grade 6 54,000 54,464 180 In Compliance Grade 7 54,000 58,939 180 In Compliance Grade 8 54,000 58,939 180 In Compliance

~~Districts must maintain their instructional minutes as defined in Education Code Section 46207.~~

The District has received incentive funding for increasing instructional time as provided by the Incentive for Longer Instructional Day. This schedule presents information on the amount of instruction time offered by the District and whether the District complied with the provisions of Education Code Sections 46201 through 46206. The District has met or exceeded its Local Control Funding Formula target funding.

~~73 GARVEY SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS For the Fiscal Year Ended June 30 2016~~

~~(Budget) General Fund 2017 (Note 1) 2016 2015 2014~~

~~Revenues and other financial sources $ 56,561,891 $ 60,769,788 $ 51,490,141 $ 46,398,696~~

~~Expenditures 58,683,243 53,908,764 49,689,605 46,882,560~~

~~Other uses and transfers out 19,579 5,544~~

~~Total outgo 58,683,243 53,928,343 49,695,149 46,882,560~~

~~Change in fund balance (2,121,352) 6,841,445 1,794,992 (483,864)~~

~~Prior period adjustment 31,282~~

~~Ending fund balance $ 12,773,021 $ 14,894,373 $ 8,052,928 $ 6,226,654~~

~~Available reserves (Note 1) $ 11,578,032 $ 11,231,835 $ 4,368,187 $ 4,206,123~~

~~Available reserves as a percentage of total outgo 19.7% 20.8% 8.8% 90%~~

~~Total long-term debt $ 97,453,298 $ 99,469,281 $ 92,242,063 $ 54,960,132~~

~~Average daily attendance atP-2 4,658 4,760 4,933 5,115~~

This schedule discloses the District's financial trends by displaying past fiscal years' data along with cunent fiscal year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time.

The General Fund balance has increased by $8,667,719 over the past two fiscal years. The fiscal year 2016-2017 adopted budget projects a deficit of $2,121,352. For a district this size, the state recommends available reserve of at least 3% of total general fund expenditures, transfers out, and other uses (total outgo).

The District has incuned an operating surplus in two of the past three fiscal years, and anticipating an operating deficit during the 2016-17 fiscal year. Total long-term debt has increased $44,509,149 over the past two fiscal years.

~~Average daily attendance has decreased by 355 over the past two fiscal years. A decrease of 102 ADA is anticipated during the fiscal year 2016-17.~~

~~NOTES 1. Available reserves consist of all unassigned fund balances and all funds reserved for economic uncertainties contained within the General Fund.~~

74 GARVEY SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended June 30, 2016 Pass-through Federal Entity Federal Grantor/Pass-Tirrough Catalog Identification Federal Grantor/Program or Cluster Number Number Expenditures

Federal Programs: U.S. Department of Agriculture: Passed through California Dept. of Education (CDE): Child Nutrition Cluster National School Breakfast 10.553 13526 $ 547,275 National School Lunch 10.555 13391 2,318,198 Summer Food Program 10.559 13004 111,415 Total Child Nutrition Cluster 2,976,888 Commodities Supplemental Food Program* 10.565 13396 160,964

~~Total U.S. Department of Agriculture 3,137,852~~

U.S. Department of Education: Passed through California Dept. of Education (CDE): No Child Left Behind (NCLB): Title I, Part A, Basic Grants 84.010 14329 2,195,980 Title I, Migrant Edcation Summer Program 84.011 10005 2,145 Title II, Part A, Improving Teacher Quality 84.367 14341 238,141 Title III, Immigrant Education Program 84.365 15146 32,117 Title III, Limited English Proficiency Student Program 84.365 14346 376,024 Special Education (IDEA) State Grants Cluster: Local Assistance 84.027 13379 819,926 Federal Preschool 84.173 13430 19,456 Local Preschool 84.027A 13682 39,563 IDEA Mental Health 84.027 14468 54,668 Preschool Staff Development 84.173A 13431 235 Total Special Education Cluster 933,848

~~Total U.S. Department of Education 3,778,255~~

U.S. Department of Health and Human Services: Passed through Los Angeles County Office of Education (LACOE): Head Start 93.600 90101 4,236,462 Head Start Training and Technical Review 93.600 90102 12,690 Passed through the California Department of Health Care Services: Medicaid Cluster Medi-Cal Billing Option 93.778 10013 88,242 Medicare Administrative Billing 93.778 10060 50,596 Total Medicaid Cluster 138,838

~~Total U.S. Department of Health & Human Services 4,387,990~~

~~Total expenditures of federal awards $ 11,304,097~~

~~Head Start Non-Federal In-Kind Contribution $ 836,064~~

* Indicated a noncash expenditures

~~The accompanying note is an integral part ofthis schedule.~~

~~75 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~76 GARVEY SCHOOL DISTRICT NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS June 30 2016~~

~~NOTE 1 - BASIS OF PRESENTATION~~

The accompanying schedule of expenditures of federal awards includes the federal grant activity of Garvey School District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with State requirements, therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements.

~~77 GARVEY SCHOOL DISTRICT RECONCILIATION OF UNAUDITED ACTUAL WITH AUDITED FINANCIAL STATEMENTS June 30, 2016~~

~~Child Deferred General Development Cafeteria Maintenance Fund Fund Fund Fund~~

~~June 30, 2016, unaudited actual fund balances $ 14,894,373 $ 3,437 $ 1,851,136 $~~

~~Understatement of cash in bank and on hand 59,951 Understatement of accounts receivable 62,819 Understatement ofuneamed revenues (736)~~

~~June 30, 2016, audited financial statements fund balances $ 14,894,373 $ 2,701 $ 1,973,906 $~~

~~1bis schedule provides the information necessary to reconcile the fund balances of all funds and the total liabilities as reported on the unaudited actual to the audited financial statements.~~

~~78 Bond County Interest and Building Capital Facilities School Facilities Redemption Fund Fund Fund Fund~~

~~$ 22,530 $ 476,389 $ 862,671 $ 2,159,030~~

~~Long-Term Debt~~

June 30, 2016, unaudited actual total liabilities $ 90,432,059 Overstatement of general obligation bonds payable (12,287,575) Understatement of bond premiums 1,252,644 Overstatement ofOPEB liability 389,334 Understatement of net pension liability 7,235,995 Understatement of accreted interest payable 12,446,824

~~June 30, 2016, audited financial statements long-term debt total liabilities $ 99,469,281~~

~~79 M_o_ MOSS, LEVY & HARTZHEIM LLP - ~ CERTIFIED PUBLIC ACCOUNTANTS~~

PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES RONALDALEVY,CPA 433 N. CAMDEN DRIVE, SUITE 730 5800 HANNUM AVENUE, SUITE E CRAIG A HARTZHEIM, CPA BEVERLY HILLS, CA90210 CULVER CITY, CA 90230 HADLEYY HUI, CPA TEL: 310.273.2745 TEL: 310.670.2745 ALEXANDER C HOM, CPA FAX: 310.670.1689 FAX: 310.670.1689 ADAMVGUISE,CPA www.mlhcpas.com www.mlhcpas.com TRAVIS J HOLE, CPA

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORT! NG AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

~~Board of Trustees Garvey School District Rosemead, California~~

We have audited, in accordance with the auditing standards generally accepted in the U nited States of America and the standards appl icabletofi nancial audits contained in G cwernmentAuditi ngStandards issued 0y the Conµ:rollerG eneral of the United States, the financial statements of the go,;ernmental activities, each rrajor fund, and the aggregate rerraining fund inforrration of the Garvey School District (the "District"), as of and forthe fiscal year endedJ une 30, 2016, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated December 12, 2016.

~~Internal Control ewer Financial Reporting~~

In planning and perforrring our audit of the financial statements, we considered the District's internal control o,;er financial reporting (internal control) to deterrrine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.

A deficiency in internal control exists when the design or operation of a control does not all cw rranagement or empl0yees, in the norrral course of perf orrri ng their assigned functions, to pra-ent, or detect and correct, rri sstatements on a timely basis. A rraterial weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a rraterial rrisstatement of the entity's financial statements will not be pra-ented, 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 sa-ere than a rraterial weakness, yeti mportant enough to merit attention Dy those charged with go,;ernance.

Our consideration of internal control was for the Ii rrited purpose described in the first paragraph of this section and was not designed to identify all defi ci enci es in internal control o,;er financial reporting that rri ght be rraterial weaknesses or significant deficiencies. Given these I irritations, during our audit, we did not identify any deficiencies in internal control o,;er financial reportingthatwe consider to be rraterial weaknesses. Hcwa-er, rraterial weaknesses rray existthat have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule offindingsand questioned costs, as items 2016-1 and 2016-3 that we considerto be significant deficiencies.

80 OFFICES BEVERLY HILLS -CULVER CITY -SANTA MARIA MEMBER AMERICAN INSTITUTE OF C.P A.'S ·CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS · CALIFORNIAASSOCIATION OF SCHOOL BUSINESS OFFICIALS Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District's financial statements are free from rraterial rrisstatement, we performed tests of its compliance with certain prCNisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and rraterial effect on the deterrri nation offi nancial statement amounts. Hcwa-er, prCNiding an opinion on compliance with those prCNisions 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 rratters that are required to be reported under GCNernmentAuditing Standards. The District's Response to Finding

The District's response to the finding identified in our audit is described in the accomparryi ng schedule of findings and questioned costs. The District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

~~Purpose of this Report~~

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to prcwide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed inaccordancewithGcwernmentAuditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

~~Moss, Levy & Hartzheim, LLP Culver City, California December 12, 2016~~

~~81 M_o_ MOSS, LEVY & HARTZHEIM LLP - ~ CERTIFIED PUBLIC ACCOUNTANTS~~

PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES RONALDALEVY,CPA 433 N. CAMDEN DRIVE, SUITE 730 5800 HANNUM AVENUE, SUITE E CRAIG A HARTZHEIM, CPA BEVERLY HILLS, CA90210 CULVER CITY, CA 90230 HADLEYY HUI, CPA TEL: 310.273.2745 TEL: 310.670.2745 ALEXANDER C HOM, CPA FAX: 310.670.1689 FAX: 310.670.1689 ADAMVGUISE,CPA www.mlhcpas.com www.mlhcpas.com TRAVIS J HOLE, CPA

~~INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE~~

~~Board of Trustees Garvey School District Rosemead, Cal ifomia~~

~~Report on State Compliance~~

We have audited the Garvey School District's (the" District'') compl iancewith the types of compliance requirements described in the 2015--2016G uidefor Annual Audits of California K-12 Local EducationAgenciesandStateCompliance Reporting, published Dy the Education Audit Appeals Panel, that could have a direct and rraterial effect on each of the District's state programs identified belcw for the fiscal year endedJ une 30, 2016.

~~Management's Responsibility for State Compliance~~

~~Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs.~~

~~Auditor's Responsibility~~

Our responsi bi Iity is to express an opinion on compliance for each of Garvey School District's ( District) State programs based on our audit of the types of compliance requirements referred to awe. 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 GCNernrnentAuditing Standards, issued 0y the Comptroller General of the United States; and the 2015--2016G uide for Annual Audits of California K-12 Local Education Agencies and State Compliance Reporting, published Dy the California Education AuditAppeals Panel. Those standards and audit guide require that we plan and performtheauditto obtain reasonable assurance about whether noncompliance with the compliance requirements ref erred to awe that could have a direct and rraterial effect on the state programs noted belcw occurred. An audit includes exarrining, on a test basis, a-idence about the Garvey School District's compliance with those requirements and perforrring such other procedures as we considered necessary in the circumstances. We belia-e that our audit prCNides a reasonable basis for our opinion. Our audit does not prCNide a legal deterrrination on Garvey School District's compliance with those requirements.

In connection with the audit referred to awe, we selected and tested transactions and records to deterrrine the District's compliance with the state laws and regulations applicable to the follcwing items:

Procedures Description Performed Attendance accourti ng Attendance reporting Yes Teacher certification and nisassignrnerts Yes Ki ndergirten continuance Yes Independent study NotApplicable Cortinuation education NotApplicable Instructional time for school districts Yes lnstructioral rrnterials, general reqlirernerts Yes Ratios of adni ri strative empl 0yees to teachers Yes Classroom teacher salaries Yes

82 OFFICES BEVERLY HILLS -CULVER CITY -SANTA MARIA MEMBER AMERICAN INSTITUTE OF C.P A.'S ·CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS · CALIFORNIAASSOCIATION OF SCHOOL BUSINESS OFFICIALS Procedures Description Performed Early reti rerrent i rcentive NotApplicable Garn linitcalcuation Yes School accolJ11ability report card Yes J tweri le court schools NotApplicable Middle or early college ngi schools NotApplicable K -3 g-ade span adj ustrrert Yes Transportation rraintenarce of effort Yes Educator effectiveness Yes Cal iforria clean energy jobs act Yes After school education and safety program General requi rerrents Yes After school Yes Before school NotApplicable Proper expenditures of education protectionaccourtflJlds Yes Undupl i cated I ocal control funding pupi I counts Yes Local control and accourtabi I ity plan Yes Independent stuly-<:mrse based NotApplicable I mmuri li!ti ons Yes C rarter schools Attendarce NotApplicable Mode of instruction NotApplicable Nor-classroom-based i nstruction/1 ndependert stuly NotApplicable Deterni ration offundi ng for nor-classroom-based instruction NotApplicable Annual instructional ninltes-classroombased NotApplicable Facility grart prog-am NotApplicable

~~We did not perf ormtesti ng of independent study because the average daily attendance was bel cw the State requi rerrentfor testing.~~

~~Opinion on State Compliance~~

In our opinion, Garvey School District complied, in all rraterial respects, with the compliance requirerrents referredtoalxNethat are applicable to the statutory requirerrents listed in the schedule awe forthe fiscal year endedJ une 30, 2016.

~~Purpose of this Report~~

The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to prcwide an opinion of all the effectiveness of the entity's internal control or on compliance outside of the items tested as noted abcwe. This report isan integral part of an audit performed in accordance with 2015-2016G uidefor Annual Audits of California K -12 Local Education Agencies and State C ornpl iance Reporting, published o,, the Education A uditA ppeals Panel in considering the entity's compliance. Accordingly, this communication is not suitable for any other purpose.

~~Moss, Levy & Hartzheim, LLP Culver City, California December 12, 2016~~

~~The term "not applicable'' is used abc:we to mean either the District did not offer the program during the current fiscal year or the program applies to a different type of local education agency.~~

~~83 M_o_ MOSS, LEVY & HARTZHEIM LLP - ~ CERTIFIED PUBLIC ACCOUNTANTS~~

PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES RONALDALEVY,CPA 433 N. CAMDEN DRIVE, SUITE 730 5800 HANNUM AVENUE, SUITE E CRAIG A HARTZHEIM, CPA BEVERLY HILLS, CA90210 CULVER CITY, CA 90230 HADLEYY HUI, CPA TEL: 310.273.2745 TEL: 310.670.2745 ALEXANDER C HOM, CPA FAX: 310.670.1689 FAX: 310.670.1689 ADAMVGUISE,CPA www.mlhcpas.com www.mlhcpas.com TRAVIS J HOLE, CPA

~~I NDPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJ OR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE~~

~~B oard of Trustees Garvey School District Rosemead, California~~

~~Report on Cornpliancefor Each Major Federal Program~~

We have audited the Garvey School District's (the" District'') compl iancewith the types of compliance requirements described in theOMB ComplianceSupplementthatcould haveadirectand rraterial effect on each of the District's rrajorfederal programs for the fiscal year endedJ une 30, 2016. The District's rrajor federal programs are identified in the sumnary of auditor's results section of the accornpanyi ng schedule of findings and questioned costs.

~~M anagernent' s Responsi bi I ity~~

~~Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.~~

~~Auditors' Responsibility~~

Our responsibility is to express an opinion on compliance for each of the District's rrajorfederal programs based on our audit of the types of compliance requirements referred to awe. We conducted our audit of compliance in accordance with auditing standards generally accepted in the U nited Stat es of America; the standards applicable to financial audits contained in G CNernment Auditing Standards, issued 0y the Corrptroller General of the United States, and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, UniformAdninistrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompl iancewith the types of compliance requirements referred toalxNethat could have a direct and rraterial effect on a rrajorfederal program occurred. An audit includes exanining, on a test basis, a-idenceaboutthe District's compliance with those requirements and perforning such other procedures as we considered necessary in the circumstances.

We belia-e that our audit prCNides a reasonable basis for our opinion on compliance for each rrajor federal program Hcwa-er, our audit does not prCNide a legal deternination of the District's compliance.

~~Opinion on Each Major Federal Program~~

In our opinion, the District, complied, in all rraterial respects, with the types of compliance requirements referred toalxNe that could have a direct and rraterial effect on each of its rrajor federal programs for the fiscal year endedJ une 30, 2016.

84 OFFICES BEVERLY HILLS -CULVER CITY -SANTA MARIA MEMBER AMERICAN INSTITUTE OF C.P A.'S ·CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS · CALIFORNIAASSOCIATION OF SCHOOL BUSINESS OFFICIALS Report on Internal Control CNer Compliance

The Di strict is responsible for establishing and rrai ntai ni ng effective internal control CNer compl iancewith the types of conµ iance requirements ref erred to abCNe. I n planning and perforrri ng our audit of compliance, we considered the District's internal control CNer compliance with the types of requirements that could have a direct and rraterial effect on each rrajor federal program to deterrrine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each rrajor federal program and to test and report on internal control CNer comp! iance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control ewer compliance. Accordingly, we do not express an opinion of the effectiveness of the District's internal control CNer compliance.

A deficiency in internal control CNer conµ iance exists when the design or operation of a control CNer compliance does not al Icw rranagement or empl0yees, in the norrral course of perforrring their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely rasis. A rraterial weakness in internal control CNer conµiance is a deficiency, or combination of deficiencies, in internal control CNer compliance, such that there is a reasonable possibility that rraterial noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely rasis. A significant deficiency in internal control CNer compliance is a deficiency, or a combination of deficiencies, in internal control CNer compliance with a type of compliance requirement of a federal program that is less severe than a rraterial weakness in internal control CNer compliance, yeti mportant enough to merit attention 0y those charged with gCNernance.

Our consideration of internal control ewer compliance was for the lirrited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control CNer compliance that rright be rraterial weaknesses or significant deficiencies. We did not identify any deficiencies in internal control CNer compliance that we consider to be rraterial weaknesses. Hcwever, rraterial weaknesses rray exist that have not been identified.

The purpose of this report on internal control CNer compliance is solely to describe the scope of our testing of internal control CNer compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

~~Moss, Levy & Hartzheim, LLP Culver City, California December 12, 2016~~

~~85 THIS PAGE INTENTIONALLY LEFT BLANK~~

~~86 F1NDINGS AND RECOMMENDATIONS SECTION [THIS PAGE INTENTIONALLY LEFT BLANK] GARVEY SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS June 30, 2016~~

~~Section I- Summary of Auditor's Results~~

~~Financial Staterrents~~

~~Type of auditor's report issued Unmodified~~

Internal control over financial reporting: Material weakness(es) identified ____Yes -~X~~No Significant deficiency(ies) identified not considered to be material weaknesses -~X~_Yes ---~None reported Noncompliance material to financial statements noted ____Yes -~X~~No

Federal Awards Internal control over major programs: Material weakness(es) identified ____Yes -~X~~No Significant deficiency(ies) identified not considered to be material weaknesses ____Yes -~X~~Nonereported

~~Type of auditor's report issued on compliance for maJor programs: Unmodified~~

~~Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance, 2 CFR 200.516 (a) ____Yes -~X~~No~~

~~Identification of major programs~~

~~CFDA Number (s) Name of Federal Program or Cluster~~

~~93.600 Head Start~~

~~Dollar threshold used to distinguish between Type A and Type B programs: $ 750 000~~

~~Auditee qualified as low-risk auditee: -~X~_Yes ---~No~~

~~State Awards~~

~~Any audit findings disclosed that are required to be reported in accordance with Standards and Procedures for Audits of California K-12 Local Education Agencies? ____Yes -~X~~No~~

~~Type of auditor's report issued on compliance for state programs: Unmodified~~

~~87 GARVEY SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS J une 30, 2016~~

~~Section 11 - Financial Statement Findings~~

~~FINDING 2016-1 INTERNAL CONTROLS 30000~~

Condition: During our search for unrecorded I iabi I iti es, we noted numerous exceptions in which invoices relating to goods received or services performed priortotheyearend date were not recorded as payables in the proper period. Proper cutoffs are critical for the accuracy of the accrual basis of accounting.

~~Effect: Incorrect liabilities accruals present the risk of inaccurate account balances.~~

~~Cause: A lack of yearend closing policy can be attributed to payable being entered in the improper period.~~

Recommendation: We recommend that the Department Head prepare written instructions to be included as a part of the District accounting policies and a procedures rranual that indicates basic concepts of proper cutoffs and the individuals responsible for accruing payables at the accounting period year end.

LEA'sCorrectiveAction Plan: Fiscal Services Department Head will rrake sure that all liabilities are recorded in the proper fiscal year as required in the Modified Accrual Basis of Accountingwhich establishes that all expenditures must be recognized when a liability is incurred. Fi seal Services Department Head wi II prepare written process and procedures that reflect effective steps to foll cw the basic concepts of accruing I iabi I iti es with rraj or emphasis at year end accounting period.

~~88 GARVEY SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS J une 30, 2016~~

~~FINDING 2016--2 INTERNAL CONTROLS 30000~~

Condition: Our audit procedures disclosed that when vendors' invoices are received, the rrailroom clerk routes them directly to the accounts payable deJRrtment, unless the invoice is rrarked to the attention of an individual, in which case the invoice is sent to that person. This creates a gap in the length oftime between receipt of and the recording of invoices and thus JE.ymentof invoices. I naddition, we also noted the location of the original invoices inthevoucher system is not always kncwn. Because of certain system requirementand, oftentimes, the needtoinvestigateaspectsof the invoices, the original invoice is frequently reITTNed from the voucher system A great deal of ti me is spent attempting to I ocate these documents when the,, are needed.

~~Effect: Without proper control of the invoices presentthe risk of inaccurate account balances and JE.yments not being rradeontime.~~

~~Cause: Lack of accounts payable process can be attributed to vendor invoices being delayed in the flew of JE.yment process.~~

Recommendation: We recommend that District should establish a procedure to track and rraintain the original invoices as well as prCNide a specified location for storage and all invoices be routed directly to the accounts JE.yable deJRrtmentwith subsequent routing of a cor,,, of the invoice to individuals if noted on the appropriate invoices.

LEA'sCorrectiveAction Plan: The District has initiated a procedure that emphasizes efficient communication with the Mai Iroom CI erk to rrake sure that all vendor's invoices are given to the Accounts Payable Desk including those that are addressed to specific district's staff. The Account Payable Technician wi 11 then assure prompt and timely payment to vendors keeping a successful tracking system for all payments vouchers and backup documentation.

~~89 GARVEY SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS J une 30, 2016~~

~~Section 11 - Financial Statement Findings (Continued)~~

~~FINDING 2016--3 INTERNAL CONTROLS 30000~~

~~Condition: Our audit procedures disclosed that the District's cafeteria clearing bank account deposits were not rerritted to the Los Angel es County Treasury in a timely manner.~~

~~Effect: Clearing bank account's deposits that are not transfer in a timely manner present the risk of inaccurate ra-enue account balances.~~

~~Cause: A lack of policy and a vacancy in the accountant position can be attributed to the untimely transfer.~~

Recommendation: We recommend the Districtto implement policies and procedures to ensure the deposits withheld in bank clearing account are rerritted to the Los Angeles County Treasury in a timely manner.

LEA'sCorrectiveAction Plan: The District is establishing a procedure that includes a comprehensive process to ensure that cash deposits are sent to the Los Angel es County DeJE.rtment of Education from the bank clearing account in a timely manner. The main objective of this process is to account for all funds cash balances accurately in the district's financial statements.

~~90 GARVEY SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS J une 30, 2016~~

~~Section Ill - Federal Award Findings~~

~~None~~

~~Section IV - State Award Findings~~

~~None~~

~~91 GARVEY SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS J une 30, 2016~~

~~Section 11 - Financial Statement Findings~~

~~None~~

~~Section Ill - Federal Award Findings~~

~~None~~

~~Section IV - State Award Findings~~

~~Fl NDI NG 2015-1 School Accountability Report Card (SARC) 72000~~

Criteria: Subdivision (b) 8 of Education CodeSection 33126states that, (b) The school accountability report card shall include, but is not linited to, assessrrent of the follONing school conditions: (8) Safety, cleanliness, and adequacy of school facilities, including any needed rraintenanceto ensure good repair as specified in Section 17014, Section 17032.5, subdivision (a) of Section 17070.75, and subdivision (b) of Section 17089.

Condition: During the ra-iew of the School Accountability Report Card (SARC), it was noted that an authorized school facility conditions a-aluation instrurrent or a local equivalent is not being utilized. The facilities conditions reported in the School Accountability Report Card cannot be verified for all schools.

~~Effect: The District is not in corrpliancewith Education Code Section 33126.~~

~~Cause: Lack of CNersight on the part of the District.~~

~~Questioned Costs: No Questioned Cost~~

Recommendation: We recomrrend that the District use the school facility conditions a-aluation instrurrent da-eloped 0y the Office of Public School Construction and apprCNed 0y the StateA II ocati on Boo.rd, or a I ocal a-al uati on i nstrurrent that meets the sarre criteria.

LEA' s corrective action plan: Garvey SD will make sure to maintain compliance of Education Code Section 33126 0y applying the School Facility Conditions Evaluation I nstrurrent thatthe Office of Public School Construction has available in order for the district present an efficient assessrrent of the schools condition related to safety, cleanliness, and adequacy.

~~Current Status: I rrplerrented.~~

~~92 GARVEY SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS J une 30, 2016~~

~~Section IV-StateAward Findings(Continued)~~

~~FINDING 2015--2 C lassroom Teacher Salaries 61000~~

Criteria: Subdivision (b) of Education Code Section 41372 states that, (b) There shall be expended during each fiscal year for payment of salaries of classroomteachers: (1) By an elementary school district, 60 percent of the district's current expense of education. (2) By a high school district, 50 percent of the district's current expense of education. (3) By a unified school district, 55 percent of the district's current expense of education.

~~Condition: During the ra-ie.v of the classroom teacher salaries, it was noted that the District lacked supporting documentation for the teacher salary reduction.~~

~~Effect: There is no backup documentation for the teacher salary reduction; therefore we could not verify that the District is in compliance with Education Code Section 41372.~~

~~Cause: Lack of CNersight on the part of the District.~~

~~Questioned Costs: No Questioned Cost~~

~~Recommendation: We recommend that the District retains al I supporting documentation for teacher salary reductions.~~

LEA' s corrective action plan: Garvey SD will makesurethatcompliancewith EducationCodeSection41372will be accomplished 0y keeping track and maintaining proper compilation of documentation related to classroom teacher salaries reportingandadjustrnents that may be done in the district's financial reporting.

~~Current Status: Implemented.~~

~~93 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX C~~

~~FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE BONDS~~

This Continuing Disclosure Certificate (the" Disclosure Certificate") is executed and delivered b,I the Garvey School District (the "District'') in connection with the issuance of $10,CXXl,CXXl of the District's Election of 2016 General Obligation Bonds, Series A (the "Bonds"). The Bonds are being issued pursuant to a resolution of the District dated March 9, 2017. The District co.tenants and agrees as folio.vs:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered b,I the District for the benefit of the Holders and Beneficial owners of the Bonds and in orderto assistthe Participating Underwriter in corrplyingwith S.E.C. Rule 15c2-12(b)(5).

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

~~"Annual Report'' shall mean any Annual Report pro.tided b,I the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.~~

"Beneficial owner" shall mean any person which (a) has the po.ver, directly or indirectly, to vote or consent with respect to, or to dispose of o.vnershi p of, any Bands (including persons holding Bands through nomi nees, depositories or other i ntermedi ari es) , or ( b) is treated as the o.vner of any Bands for federal income tax purposes.

"Dissenination Agent" shall mean initially lsomAcwisors, a Division of Urban Futures, Inc., or any successor Dissenination Agent designated in writing b,I the District (which may be the District) and which has filed with the District a written acceptance of such designation.

~~" Holders" shal I mean the registered o.vners of the B ands.~~

~~"Listed Events" shall mean any of the events listed in Sections S(a) or S(b) of this Disclosure Certificate.~~

~~"Official Statement'' means that certain official statement, dated April 20, 2017, relating to the offering and sale of the Bands.~~

~~"Participating Underwriter" shall mean Raymond James & Associates, Inc., as the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.~~

"Repository" shall mean, the Municipal Securities Rulemaking Board, which can be found at http://emma.msrb.org/, or any other repository of disclosure information that may be designated b,I the Securities and Exchange Comnission as such for purposes of the Rule in the future.

~~"Rule" shall mean Rule 15c2-12(b)(5) adopted b,I the Securities and Exchange Comnission underthe Securities Exchange Act of 1934, as the same may be amended from time to time.~~

~~"State'' shall mean the State of California~~

C-1 "State Repository" shall rrean any public or private repository or entity designated b,I the State as a state repository for the purpose of the Rule and recognized as such b,I the Securities and Exchange Commission. As of the date of this Certificate, there is no State Repository.

~~SECTION 3. Prcwision of Annual Reports.~~

(a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District's fiscal year (presently endingJ une 30), commencing with the report for the 2016-17 Fiscal Year, pro.tide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single docurrent or as separate docurrents comprising a package, and may cross,eference other information as pro.tided in Section 4 of this Disclosure Certificate; pro.tided that the audited financial staterrents of the District may be submitted separately from the balance of the Annual Report and later than the date required abcwe for the filing of the Annual Report if they are not available b,I that date. If the District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section S(c).

(b) Not later than thirty (30) days (nor more than sixty (60) days) prior to said date the Dissemination Agent shall give notice to the District that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the District shall pro.tide the Annual Report in a format suitable for reporting to the Repository to the Dissenination Agent (if other than the District). If the District is unable to pro.tide to the Repository an Annual Report b,I the date required in subsection (a), the District shall send a notice to the Repository in substantially the form attached as Exhibit A with a cop,1 to the Dissemination Agent. The Dissenination Agent shall not be required to file a Notice to Repository of Failure to File an Annual Report.

(c) The Dissemination Agent shall file a report with the District stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was pro.tided to the Repository.

~~SECTION 4. Content and Form of Annual Reports. (a) The District's Annual Report shall contain or include b,I reference the fol Io.vi ng:~~

1. The audited financial staterrents of the District for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to gcwernmental entities from time to time b,I the Gcwernmental Accounting Standards Board. If the District's audited financial statements are not available b,I the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial staterrents in a format si mi I ar to the financial staterrents contained in the final Official Statement, and the audited financial statements shall be filed in the sarre manner as the Annual Report when they become avai I able.

2. Material financial information and operating data with respect to the District of the type included in the Official Statement in the follo.ving categories (to the extent not included in the District's audited financial statements):

~~(a) State funding received b,I the District for the last completed fiscal year;~~

~~(b) Average daily attendance of the District for the last completed fiscal year;~~

~~C-2 (c) Outstanding District indebtedness;~~

~~(cl) Summary financial information on revenues, expenditures and fund balances for the District's general fund reflecting adopted budget for the then-current fiscal year;~~

~~(e) Assessed valuation of taxable property within the District as reflected on the rmst recent equalized assessment rol I; and~~

~~(f) Secured ad valoremtax charges and delinquencies within the District for the last corrpleted fiscal year.~~

Any or all of the items listed alx:we may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been subnitted to the Repository or the Securities and Exchange Comnission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference.

~~(b) The Annual Report shall be filed in an electronic format, and accompanied by identifying information, prescribed by the Municipal Securities Rulemaking Board.~~

~~SECTION 5. Reporting of Significant Events.~~

(a) Pursuant to the prcwisions of this Section 5(a), the District shall give, or cause to be given, notice of the occurrence of any of the follo.ving events with respect to the Bonds in a timely manner not in excess of 1O business days after the occurrence of the event:

~~1. principal and interest payment delinquencies.~~

~~2. tender offers.~~

~~3. defeasances.~~

~~4. rating changes.~~

~~5. ad.terse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, ad.terse tax opinions or Notices of Proposed Issue (I RS Form 5701-TEB).~~

~~6. unscheduled draws on the debt service reserves reflecting financial difficulties.~~

~~7. unscheduled draws on credit enhancement reflecting financial difficulties.~~

~~8. substitution of the credit or liquidity prcwiders ortheir failure to perform~~

9. bankruptcy, insolvency, receivership or similar event (within the meaning of the Rule) of the District. For the purposes of the event identified in this Section 5(a)(9), the event is considered to occur when any of the follo.ving occur: the appointment of a receiver, fiscal agent or sinilar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal liM' in which a court or gcwernmental authority has assumed jurisdiction ewer substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing gcwernmental body and officials or officers in

C-3 p:issession but suqject to the supervision and orders of a court or gcwemrrental authority, or the entry of an order confirning a plan of reorganization, arrangerrent or liquidation b,I a court or gcwemrrental authority having supervision or jurisdiction ewer substantially all of the assets or business of the District.

~~(b) Pursuant to the prcwisions of this Section S(b), the District shall give, or cause to be given, notice of the occurrence of any of the follo.ving events with respect to the Bonds, if material:~~

~~1. non--payrrent related defaults.~~

~~2. rnodi fi cati ans to rights of Bondholders.~~

~~3. opti anal , conti ngent or unscheduled Bond cal Is.~~

~~4. unless described under Section S(a)(S) abcwe, material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.~~

~~5. rel ease, substitution or sale of property securing repayrrent of the Bands.~~

6. the consummation of a rrerger, consolidation, or acquisition involving the District orthe sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreerrent to undertake such an action or the ternination of a definitive agreerrent relating to any such actions, other than pursuant to its terms.

~~7. appointrrent of a successor or additional trustee or paying agent with respect to the Bands or the change of narre of such a trustee or paying agent.~~

(c) Whenever the District obtains kno.vledge of the occurrence of a Listed Event under Section S(b) hereof, the District shall as soon as p:issible deternine if such event would be material under applicable federal securities laws.

(cl) If the District deternines that kno.vledge of the occurrence of a Listed Event under Section S(b) hereof would be material under applicable federal securities laws, the District shall (i) file a notice of such occurrence with the Rep:isitory in a tirrely manner not in excess of 10 business days after the occurrence of the event or (ii) pro.tide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Rep:isitory in a tirrely manner not in excess of 1O business days after the occurrence of the event. The Dissemination Agent shal I have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent rnay conclusively rely on the District's deternination of materiality pursuantto Section S(c).

SECTION 6. Ternination of Reporting Obligation. The District's obligations under this Disclosure Certificate shall terninate upon the legal defeasance, prior redemption or payrrent in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the sarre manner as for a Listed Event under Section S(a) or Section S(b), as applicable.

SECTION 7. Dissenination Agent. The District rnay, frorn tirre to tirre, appoint or engage a Dissemination Agent (or substitute Dissemination Agent) to assist it in carrying out its obligations under this Disclosure Certificate, and rnay discharge any such Agent, with or without appointing a successor

C-4 Dissemination Agent. The Dissenination Agent may resign upon fifteen (15) days written notice to the District. Upon such resignation, the District shall act as its o.vn Dissemination Agent until it appoints a successor. The Dissenination Agent shall not be responsible in any manner for the content of any notice or report prepared b,I the District pursuant to this Disclosure Certificate and shall not be responsible to verify the accuracy, corrpl eteness or materiality of any continuing di sci osure information pro.tided b,I the District. The District shall compensate the Dissenination Agent for its fees and expenses hereunder as agreed b,I the parties. Any entity succeeding to al I or substantial ly al I of the Di sseni nation A gent' s corporate trust business shall be the successor Dissemination Agent without the execution or filing of any paper or further act.

SECTION 8. Amendment; Waiver. Notwithstanding any other prcwision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any prcwision of this Disclosure Certificate may be waived, pro.tided thatthe follo.ving conditions are satisfied:

(a) If the amendment or waiver relates to the prcwisions of Sections 3(a), 4, S(a) or S(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bands, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the ti me of the original issuance of the B ands, after taki ng into account any amendments or interpretations of the Rule, as well as any change in circumstances;

~~(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impairthe interests of the Holders or Beneficial owners of the Bonds; and~~

~~(cl) No duties of the Dissemination Agent hereunder shall be amended without its written consent thereto.~~

In the event of any amendment or waiver of a prcwision of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented b,I the District. In addition, if the amendment relates to the accounting principles to be follo.ved in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section S(b), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounti ng pri nci pl es and those prepared on the basis of the former accounting principles.

C-5 SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deerred to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the District to comply with any prcwision of this Disclosure Certificate any Holder or Beneficial owner of the Bonds may take such actions as may be necessary and appropriate, incl udi ng seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Resolutions, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to corrply with this Disclosure Certificate shal I be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissenination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The Dissemination Agent acts hereunder solely for the benefit of the District; this Disclosure Certificate shall confer no duties on the Dissenination Agent to the Participating Underwriter, the Holders and the Beneficial owners. The District agrees to indemnify and save the Dissemination Agent, its officers, directors, errplO(ees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its p:wers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful nisconduct. The obligations of the District under this Section shall survive resignation or remcwal of the Dissemination Agent and payrrent of the Bonds. The Dissemination Agent shall have no liability for the failure to report any event or any financial information as to which the District has not pro.tided an information report in format suitable for filing with the Repository. The Dissenination Agent shall not be required to monitor or enforce the District's duty to corrply with its con ti nui ng di sci osure requi rerrents hereunder.

SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial owners from ti rre to ti rre of the Bands, and shal I create no rights i n any other person or entity. Dated: May 4, 2017 GARVEY SCHOOL DISTRICT

~~By:------Superi ntendent~~

~~C--6 EXHIBIT A~~

~~NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT~~

~~Name of District: GARVEY SCHOOL DISTRICT~~

~~Name of Bond Issue: Election of 2016 General Obligation Bonds, Series A~~

~~Date of Issuance: May 4, 2017~~

NOTICE IS HEREBY GIVEN that the District has not pr0.tided an Annual Report with respect to the abOJe---narred Bands as required b,I the Continuing Di sci osure Certificate relating to the Bands. The District anticipates thatthe Annual Report will be filed b,I ______.

~~Dated: ______~~

~~GARVEY SCHOOL DISTRICT~~

~~By_~[~=or~m~o=n~ly~;~n=o=si=g~na=t=ur=e~~=q=u~i~=~~--~~

~~C-A-1 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX D~~

~~GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF MONTEREY PARK, THE CITY OF ROSEMEAD AND LOS ANGELES COUNTY~~

The follONing informttion concerning the City of Monterey Park(" Monterey Park:'), the City of Rosemead(" Rosemead," and together with Monterey Park, the" Cities") and Los Angeles County (the "County'') is included only for the purp:ise of supplying general informttion regarding the local connunity and econOffi{. The Bonds are not a debt of the Cities or of the County. This mtterial has been prepared by or excerpted from the sources as noted herein and has not been reviewed for accuracy by the District, the Underwriter or the Financial Advisor.

~~General~~

City of Monterey Park. Monterey Park is situated in the San Gabriel Valley and is bounded by Los Angel es to the west, uni ncorporated East Los Angel es to the south and west, A I hambra to the north, Rosemead to the northeast, M ontebel Io to the south, and uni ncorporated South San Gabri el to the southeast Incorporated in 1916, Monterey Park is 7.73 square miles and is approximately 7 miles east of do.vnto.vn Los Angeles. Monterey Park has a council-manager form of gcwernmentwhich includes an elected five-member City Council, who in turn appoints a City Manager to carry out its policies and serve as the administrative head of the city organization. The Mayor is the presiding officer that is changed each year within the council.

City of Rosemead. Rosemead is situated on the eastern edge of the Los Angeles basin and the southern edge of the area kno.vn as the San Gabriel Valley approximately 13 niles southeast of do.vnto.vn Los Angeles. Formed from a large pioneer ranch, Rosemead was officially incorporated in August 1959. Rosemead's prime location affords easy access to all major Southern California free.vays and contributes to the city's gro.vth. Rosemead has a council-manager form of g0.ternment which includes an elected five-member City Council, who in turn appoints a City Manager to carry out its policies and serve as the administrative head of the city organization. The Mayor is the presiding officer that is changed each year within the council.

Los Angeles County. The County encompasses an area of approximttely 4,081 miles in southwestern California The 88 cities within the County encompass about 35% of the County, while more than 65% of the County remains unincorporated. The County has the largest population of any county in the nation with approximttely 10 million inhabitants as of 2015. The County is bordered on the east and the south by Orange and San Bernardi no Counties, on the north by Kern County, and on the west by Ventura County and the Pacific Ocean. The five-member Board of Supervisors, created by the state Legislature in 1852, is the g0.terning body of the County of Los Angeles.

~~D-1 Population~~

~~The follo.ving table sho.vs historical population figures for the Cities, the County and State of California (the "State'') from 2007 through 2016.~~

~~POPULATION ESTIMATES 2007 through 2016 City of Monterey Park, City of Rosemead, Los Angeles County and State of California~~

City of City of Los Angeles State of Year111 Monterey Park Rosemead County California 2007 60,622 54,045 9,780,808 36,399,676 2008 60,304 53,849 9,785,474 36,704,375 2009 60,441 53,877 9,801,096 36,966,713 201d 21 60,269 53,764 9,818,605 37,253,956 2011 60,482 54,119 9,874,887 37,563,835 2012 61,221 54,505 9,956,722 37,881,357 2013 60,960 54,669 10,023,753 38,239,207 2014 61,090 54,865 10,093,053 38,567,459 2015 61,137 54,987 10,155,069 38,907,642 2016 61,346 55,231 10,241,335 39,255,883 Cl/ AsofJanuruy l. w As of April l. Source: 2010: U.S. Departrrent of Comrerce, Bureau of the Census, for April l. 2007-ffi, 201 l-16 (2000and 2010 DRU Benchrmrlq: California Departrrentof Finance for January l.

~~I ncorne~~

~~The follo.ving table sho.vs per capita personal income for the County, State and the United States for the past lOyears.~~

~~PER CAPITA PERSONAL INCOME 2006 through 2015 Los Angeles County, State of California, and United States~~

Year LosAnaeles Countv State of California United States 2006 $40,800 $42,334 $38,144 2007 42,499 43,692 39,821 2008 43,715 44,162 41,082 2009 42,043 42,224 39,376 2010 43,234 43,315 40,277 2011 45,969 45,820 42,453 2012 48,818 48,312 44,267 2013 48,140 48,471 44,462 2014 50,730 50,988 46,414 2015 53,521 53,741 48,122

Note: Per capital personal incorre is the total personal incorre divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation). Data for 2016 is not yet available. Source: U .5. Departrrent of Comrerce, Bureau of Econorric Analysis. D-2 Principal Employers

~~The follo.ving tables sho.v the principal employers in the Cities and the County b,I number of employees.~~

~~PRINCIPAL EMPLOYERS As ofJ une 30, 2016 City of Monterey Park~~

Company Description Emplcyees Garfield Medical Center Services: Health Services 976 Care 1st Health Plan Services: Health Services 541 Southern California Gas Company Services: Utilities 387 Syner Med Inc. Services: Health Services 356 Monterey Park Hospital Services: Health Services 320 Remitco LLC Payment Processing 187 Ral phs Grocery ( 2 Iocati ons) Retail Trade: Food Stores 171 24 Hour Fitness Gym 143 Chinese Daily Ne.vs Ne.vspaper 142 California Psychare Inc. Early Infant Development Services 103 Camino Real Chevrolet Retai I Trade: Car Deal ershi p 100 Monterey Park Convalescent Services: Hotels and Motes 120 Southern California Edison Services: Electric Services 90 Heritage Manor Healthcare Services: Nursing Facility 90 La Colonial Tortilla Products Inc. Food Service 85

~~Source: City of Monterey Park'CorrprehensiveAnnual Financial Report' for Fiscal Year EndedJ une 30, 2016.~~

~~PRINCIPAL EMPLOYERS As ofJ une 30, 2016 City of Rosemead~~

Company Description Emplcyees Southern California Edison Services: Electric Services 4,100 Garvey School District Services: Educational Services 804 Wal-Mart Retai I Trade: General Merchandise 435 Panda Restaurant Group, Inc. Retai I Trade: Restaurant 400 Rosemead School District Services: Educational Services 337 Target Retai I Trade: General Merchandise 235 Hermetic Seal Corporation EI ectroni c Components 150 Olive Garden Retai I Trade: Restaurant 111 Doubletree Services: Hotels and Motels 120 Don BOSCO Tech Services: Educational Services 90

~~Source: City of Roserread 'CorrprehensiveAnnual Financial Report' for Fiscal Year EndedJ une 30, 2016.~~

~~D-3 PRINCIPAL PRIVATE-SECTOR EMPLOYERS 2016 Los Angeles County~~

Company Description Emplcyees Kaiser Permanente Services: Health Services 36,987 University of Southern California Services: Educational Services 18,971 Northrop Grumman Corp. Manufacturing: Search, Detection, 16,619 Navigation, Guidance, Aeronautical, and Nautical Systems and Instruments Target Corp. Retai I Trade: General Merchandise 15,000 Ralphs;Food 4 Less (Kroger Co. Retail Trade: Food Stores 13,500 division) Bank of America Corp. Finance: Depository Institutions l3 cxxjll ' Prcwidence Health & Services Services: Health Services 13,000 Southern California Walt Disney Co. Services: Amusement and Recreational 12,500 A Ibertsons/11 ons;PiNi I ions Retail Trade: Food Stores 12,400 Cedars-Sinai M edi cal Center Services: Health Services 11,625 en Business Journal estimate. Source: LosAngelesBusinessJournal, The Lis~ published August 29, 2016.

~~PRINCIPAL PUBLIC-SECTOR EMPLOYERS 2016 Los Angeles County~~

Company People Served E mplcyees Los Angel es County l0million residents 108,093 Los Angeles Unified School District 732,833 students 59,823 U.S. Gcwernment- Federal Executive United States residents 47,200 Board 11 University of California, Los Angeles 43,301 students 46,220 City of LosAngeles1 21 4.03 million residents 32,576 State of Cal ifornia131 State of California 28,900 Los Angeles County Metropolitan 10 million residents 9,892 Transportation Authority Department of Water and Pcwer of the Los Angeles residents 9,335 City of Los Angeles (LADWP) Los Angeles Community College Nine community colleges; 6,909 District 155,133 students Long Beach Unified School District 75,000 students 6,515

'" Excludes law enforcerrent and judiciary errplc,yee~ w Excludes proprie1ary departrrents (LADWP or the Departrrentof Airports for the City of Los Angeles). 3 < > Excludes education errplc,yees. Source: Los Angeles BusinessJ ournal, The Lis~ published August 29, 2016.

~~D-4 E mpl O{ment~~

The follcwing table summarizes the labor force, emplO{ment and unemplO{ment figures for the past five years for Rosemead, the County, State and the United States. Data for Monterey Park, and data for Rosemead for calendar years 2014 and 2015, is not currently available due to the benchmarking of data currently being undertaken b,I the U.S. Department of Labor.

CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT 2011 through 2015111 City of Monterey Park, City of Rosemead, Los Angeles County, the State of California, and the United States UnemplO(ment Year and Area Labor Force E mpl cyment1' 1 U nempl cyment131 Rate(%) 2011 City of Monterey Park City of Rosemead 25,400 21,900 3,500 13.9 Los Angel es County 4,928,500 4,327,900 600,500 12.2 California 18,415,100 16,258,100 2,157,000 11.7 United States 153,617,000 139,869,000 13,747,000 8.9 2012 City of Monterey Park City of Rosemead 24,900 22,500 2,400 9.6 Los Angel es County 4,921,800 4,385,300 536,500 10.9 California 18,551,400 16,627,800 1,923,600 10.4 United States 154,975,000 142,469,000 12,506,000 8.1 2013 City of Monterey Park City of Rosemead 25,500 23,000 2,200 8.7 Los Angel es County 4,979,000 4,494,400 484,600 9.7 California 18,670,100 17,001,000 1,669,000 8.9 United States 155,389,000 143,929,000 11,460,000 7.4 2014 City of Monterey Park City of Rosemead Los Angel es County 5,025,900 4,611,500 414,300 8.2 California 18,811,400 17,418,000 1,409,900 7.5 United States 155,922,000 146,305,000 9,617,000 6.2 2015 City of Monterey Park City of Rosemead Los Angel es County 5,011,700 4,674,800 336,900 6.7 California 18,981,800 17,798,600 1,183,200 6.2 United States 157, 130,000 148,834,000 8,296,000 5.3

Note: Data is not seasonally adjusted. en Annual averages, unless otherwise specified. Data for 2016 is not yet available. w Inc:1 udes persons involved in labor-managerrent trade dispute~ 3 < > The unemplc:,yrrent rate is corrputed from unrounded data; therefore, it may differ from rates corrputed from rounded figures in this table. Source: U.S. Departrrent of Labor - Bureau of Labor Statistic~ California Errplc:,yrrent Developrrent Departrrent March 2016 Benc:hrmrk.

~~D-5 Industry~~

The Cities and County are included in the Los Angeles-long Beach-Glendale Metropolitan Division (the "MD"). The distribution of errplO{rrent in the MD is presented in the follo.ving table for the past five calendar years. These figures are multi county-wide statistics and may not necessarily accurately reflect emplO{rrenttrends in the County.

~~INDUSTRY EMPLOYMENT & LABOR FORCE ANNUAL AVERAGES 2012 through 2016 Los Angeles-long Beach-Glendale MD~~

Category 2012 2013 2014 2015 2016 Total Farm 5,400 5,500 5,200 5,000 5,300 Total Nonfarm 4,034,900 4,111,700 4,188,700 4,281,500 4,390,400 Total Private 3,478,100 3,560,500 3,632,500 3,713,000 3,814,200 Goods Producing 485,200 493,500 492,700 496,800 497,100 Natural Resources and M i ni ng 4,300 4,500 4,300 3,900 3,600 Construction 107,600 114,600 118,500 126,200 133,100 Manufacturing 373,300 374,400 370,000 366,800 360,400 Durable Goods 210,300 210,600 208,700 208,100 203,600 Nondurable Goods 163,100 163,800 161,300 158,700 156,900 Service Pr0.tiding 3,549,700 3,618,200 3,696,000 3,784,700 3,893,300 Private Service Pr0.tiding 2,992,900 3,067,000 3,139,800 3,216,200 3,317,100 Trade, Transportation and U ti Ii ti es 767,400 781,800 798,800 816,400 829,900 W hol esal e Trade 211,900 218,700 222,500 225,700 227,000 Retai I Trade 400,900 405,600 413,000 419,200 422,300 Transportation, W arehousi ng and Utilities 154,500 157,500 163,400 171,500 180,600 Information 192,100 197,000 198,800 207,500 230,900 Financial Activities 212,400 213,000 211,200 215,500 219,800 Professional and Business Services 564,100 586,900 593,300 595,500 605,200 Educational and Health Services 699,500 702,100 720,700 741,100 767,400 Leisure and Hospitality 415,800 440,500 466,600 489,100 510,500 Other Services 141,700 145,700 150,500 151,000 153,400 G0.ternrrent 556,800 551,200 556,200 56~500 576,300 Total, All Industries 4,040,300 4,117,200 4,193,900 4,286,500 4,395,700

Note: The "To1al, All Industries"" da1a is not direc~y comparable to the employmentda1a found herein. Source: S1ate of California, Employrrent Developrrent Departrrent, Labor Market I nforrmtion Division, Los Angeles County (Los Angeles-long Beach-Glendale MD) Annual Average Labor Force and Industry Errployrren~ March 2016 Benchrmrk. Da1a for 2016 is not yet available.

~~D-6 Commercial Activity~~

~~Summaries of annual taxable sales for the Cities and County from 2011 through 2015 are sho.vn i n the fol Io.vi ng tables.~~

~~ANNUAL TAXABLE SALES 2011 through 2015 City of Monterey Park (Dollars in Thousands)~~

Retail Stores Total Out I ets Retail Taxable Taxable Year Permits Transactions Total Permits Transactions 2011 894 $310,622 1,304 $395,472 2012 890 328,022 1,292 410,932 2013 890 360,627 1,284 444,604 2014 877 378,501 1,295 478,979 2015 411,037 514,692

Note: Beginning in 2015, 1he outlet counts in 1hese repcrt,; sh0\/11 1he nurmer of outlets 1hat were ai:tive durirg 1he rep::n1irg period. Re0lers that operate part fa,e are now 1al:ulated with s1nre retailers. Industry level datl for 2015 are not corrµ,rable 1D flat of r,-ior ye..-s. Source: "Taxable Sales in California (Sales & Use Tax),"" California State Board of Equali,..tion.

~~ANNUAL TAXABLE SALES 2011 through 2015 City of Rosemead (Dollars in Thousands)~~

Retail Stores Total Out I ets Retail Taxable Taxable Year Permits Transactions Total Permits Transactions 2011 651 $324,335 954 $356,686 2012 689 334,394 1,006 368,379 2013 695 350,493 1,009 389,088 2014 723 358,786 1,049 397,902 2015 368,346 409,062

Note: Beginning in 2015, 1he outlet counts in 1hese repcrt,; show 1he nurmer of outlets th.st were active durirg 1he rep:,rtirg period. Retailers that operare part--1in,e are now 1al:ulated with s1nre retailers. lndustry~evel da1a for 2015 are riot corrµ,rable 1D flat of prior years. Source: "Taxable Sales in California (Sales & Use Tax),"" California State Board of Equali,..tion.

~~D-7 ANNUAL TAXABLE SALES 2011 through 2015 Las Angeles County (Dollars in Thousands)~~

Retail Stores Total Out I ets Retail Taxable Taxable Year Permits Transactions Total Permits Transactions 2011 179,872 $89,251,447 266,868 $126,440,737 2012 180,359 95,318,603 266,414 135,295,582 2013 179,370 99,641,174 263,792 140,079,708 2014 187,408 104,189,819 272,733 147,446,927 2015 108,147,021 151,033,781

~~shavv the nunber of outlets that were active the operate are nO\/V store reizlilers. datl for 2015 are not~~

~~Source: "Taxable Sales in California (Sales & Use Tax)," California State Board of Equali;a,_tion.~~

~~Construction Activity~~

~~The annual building permit valuations and number of permits for ne.v Melling units issued for the past five years for the Cities and County are shewn in the follo.ving tables.~~

~~BUILDING PERMIT VALUATIONS 2011 through 2015 City of Monterey Park (Dollars in Thousands)~~

~~2011 2012 2013 2014 2015 Valuation Residential $10,997 $9,588 $11,259 $16,891 $23,876 N on-R esi denti al 6,906 6,764 4,656 3,859 7,301 Total $17,903 $16,352 $15,915 $20,750 $31,177~~

~~Units Single Famly 7 7 11 27 51 Multiple Family 0 0 0 4 6 Total 7 7 11 31 57~~

~~Note: Totals may not add to sum because ofrounding. Data for 2016 is not yet available. Source: Construction Industry Research Board.~~

~~D-8 BUILDING PERMIT VALUATIONS 2011 through 2015 City of Rosemead (Dollars in Thousands)~~

~~2011 2012 2013 2014 2015 Valuation Residential $6,788 $7,927 $7,712 $9,054 $14,191 Non-R esi denti al 12,124 15,565 13,191 11,449 10,790 Total $18,912 $23,492 $20,903 $20,503 $24,981~~

~~Units Single Famly 10 10 8 10 24 Multiple Famly 2 6 0 0 5 Total 12 16 8 10 29~~

~~Note: Totals may not add to sum because ofrounding. Data for 2016 is not yet available. Source: Construction Industry Research Board.~~

~~BUILDING PERMITS AND VALUATIONS 2011 through 2015 Los Angeles County (Dollars in Thousands)~~

2011 2012 2013 2014 2015 Valuation Resi denti al $3,415,434 $3,821,324 $4,743,955 $5,509,418 $6,428,532 Non-R esi denti al 3,126,956 3,682,730 4,326,366 6,657,571 5,599,877 Total $6,542,390 $7,504,054 $9,070,321 $12,166,989 $12,028,409

~~Units Single Family 2,370 2,820 3,607 4,358 4,487 Multiple Family ____§,ill§ 8,895 13,243 14,349 18,405 Total 10,468 11,715 16,850 18,707 22,892~~

~~Note: Totals may not add to sum because ofrounding. Data for 2016 is not yet available. Source: Construction Industry Research Board.~~

~~D-9 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E~~

~~LOS ANGELES COUNTY TREASURY POOL~~

The follc:M,ing informttion concerning the Los Angeles County Treasury Pool (the "Treasury Pool") has been pro.tided by the Treasurer and Tax Collector (the" Treasurer") of Los Angeles County (the "County''), and has not been confirrred or verified by the District, the Financial Ad.tisor or the Underwriter. The District, the Financial Advisor and the Underwriter have not mtde an independent investigation of the investrrents in the Treasury Pool and have mtde no assessrrent of the current County investrrent policy. The value of the various investrrents in the Treasury Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other econonic conditions. Additionally, the Treasurer, with the consent of the County Board of Supervisors mty change the County i nvestrrent policy at any ti rre. Therefore, there can be no assurance that the values of the various investrrents in the Treasury Pool will not vary significantly from the values described herein. Finally, none of the District, the Financial Ad.tisor or the Underwriter mtke any representation as to the accuracy or adequacy of such informttion or as to the absence of mtterial ad.terse changes in such informttion subsequent to the date hereof, or that the informttion contained or incorporated hereby by reference is correct as of any ti rre subsequent to its date. Additional i nformttion regarding the Treasury Pool mty be obtained from the Treasurer at www.ttc.lacounty.ge:w; hcwever, the i nformttion presented on such website is not incorporated herein by any reference.

~~[REMAINDER OF PAGE LEFT BLANK]~~

~~E-1 [THIS PAGE INTENTIONALLY LEFT BLANK] THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS~~

The Treasurer and Tax Collector (the Treasurer) of Los Angeles County has the delegated authority to invest funds on deposit in the County Treasury (the Treasury Pool). As of February 28, 2017, investments in the Treasury Pool were held for local agencies including school districts, community college districts, special districts and discretionary depositors such as cities and independent districts in the following amounts:

~~Invested Funds Local Agency (in billions) County of Los Angeles and Special Districts $12.592 Schools and Community Colleges 13.527 Discretionary Participants 2.430 Total $28.549~~

~~The Treasury Pool participation composition is as follows:~~

~~Non-discretionary Participants 91.49% Discretionary Participants: Independent Public Agencies 7.72% County Bond Proceeds and Repayment Funds 0.79%~~

~~Total 100.0CJ'/o~~

Decisions on the investment of funds in the Treasury Pool are made by the County Investment Officer in accordance with established policy, with certain transactions requiring the Treasurer's prior approval. In Los Angeles County, investment decisions are governed by Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of Title 5 of the California Government Code, which governs legal investments by local agencies in the State of California, and by a more restrictive Investment Policy developed by the Treasurer and adopted by the Los Angeles County Board of Supervisors on an annual basis. The Investment Policy adopted on March 29, 2016, reaffinned the following criteria and order of priority for selecting investments:

~~1. Safety of Principal 2. Liquidity 3. Return on Investment~~

The Treasurer prepares a monthly Report of Investments (the Investment Report) summarizing the status of the Treasury Pool, including the current market value of all investments. This report is submitted monthly to the Board of Supervisors. According to the Investment Report dated March 31, 2017, the February 28, 2017 book value of the Treasury Pool was approximately $28.549 billion and the corresponding market value was approximately $28.359 billion.

An internal controls system for monitoring cash accounting and investment practices is in place. The Treasurer's Compliance Auditor, who operates independently from the Investment Officer, reconciles cash and investments to fund balances daily. The Compliance Auditor's staff also reviews each investment trade for accuracy and compliance with the Board adopted Investment Policy. On a quarterly basis, the County's outside independent auditor (External Auditor) reviews the cash and investment reconciliations for completeness and accuracy. Additionally, the External Auditor reviews investment transactions on a quarterly basis for conformance with the approved Investment Policy and annually accounts for all investments.

~~The following table identifies the types of securities held by the Treasury Pool as of February 28, 2017:~~

~~Type of Investment % of Pool~~

U.5. Government and Agency Obligations 58.34 Certificates of Deposit 13.40 Commercial Paper 27.84 Bankers Acceptances 0.00 Municipal Obligations 0.25 Corporate Notes & Deposit Notes 0.17 Asset Backed Instruments 0.00 Repurchase Agreements 0.00 Other 0.00 100.00

~~The Treasury Pool is highly liquid. As of February 28, 2017, approximately 38.81% of the investments mature within 60 days, with an average of 673 days to maturity for the entire portfolio.~~

~~TreasPool Update 02/28{,Wl 7 APPENDIX F~~

~~SPECIMEN MUNICIPAL BOND INSURANCE POLICY~~

~~F-1 [THIS PAGE INTENTIONALLY LEFT BLANK] MUNICIPAL BOND INSURANCE POLICY~~

~~ISSUER: [NAME OF ISSUER] Policy No: __~~

~~MEMBER: [NAME OF MEMBER]~~

~~BONDS: $ _____ in aggregate principal amount of [NAME OF TRANSACTION] [ and maturing on] Risk Premium· Member Surplus Contrib Total Insurance~~

BUILD AMERICA MUTUAL ASSURANCE COMPANY ("BAM"), for co ec ·ved, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or p ent (the t") for the Bonds named above (as set forth in the documentation providing for the issuance and securing o f the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (w ent hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shal ayment by the Issuer.

On the later of the day on which such principal r Payment or the first Business Day following the Business Day on which BAM shall have received Notic ayme sburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefi f each Owner oft , the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's rig receive payme ch principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignme at all of the Ow r's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in . A e of Nonpay nt will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New Yark time) on t , it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is in ot to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advi gent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disburse ect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon t t to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights o ner's right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Age ers, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM said Nonpayment.

essly modified by an endorsement hereto, the following terms shall have the meanings specified for all Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the al Agent (as defined herein) are authorized or required by law or executive order to remain closed. "Due fo eferring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the or mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of ( other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole etion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) an eferring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the fail of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principa and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity mahng the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed ammmt becomes or became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. BAM may appoint a fiscal agent (the "Insurer's Fiscal Agent'') for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date ofreceipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to BAM and shall not be deemed received lllltil received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer's Fiscal Agent on behalf of BAM. The Insurer's Fiscal Agent is the agent of BAM only, and the Insurer's Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer's Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient fllllds to make payments due under this Policy.

To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the bene of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud hether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payme obligations llllder this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.

This Policy sets forth in full the lllldertaking of BAM and shall not be modified, altered or affected by including any modification or amendment thereto. Except to the extent expressly modified by an endorsement this Policy is nomefundable for any reason whatsoever, including payment, or provision being made for THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FU NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTU

~~In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has Authorized Officer.~~

~~By:~~

~~2 Notices (Unless Otherwise Specified by BAM)~~

~~Email: claims!aibuildamerica.com Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 ( attention: Claims)~~

~~3 [THIS PAGE INTENTIONALLY LEFT BLANK]~~

~~GARVEY SCHOOL DISTRICT (Los Angeles County, California) Election of 2016 General Obligation Bonds, Series A~~

~~1!' il ~ "f j ] c:tll:ii~~