This Offering Memorandum and the information contained herein are subject to completion, amendment or other change without notice. The Notes may not be sold nor may offers to buy be accepted prior to the time the Offering Memorandum is delivered in final form. Under no circumstances shall this Offering Memorandum constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Notes in any jurisdiction
in wh ich such offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of any such jurisdiction.
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NO DEALER, BROKER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED BY THE SCHOOL DISTRICT OR THE UNDERWRITER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THAT GIVEN OR MADE IN THIS OFFERING MEMORANDUM, AND IF GIVEN OR MADE, ANY SUCH OTHER INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SCHOOL DISTRICT OR THE UNDERWRITER NAMED ON THE COVER PAGE HEREOF (THE “UNDERWRITER”).
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE.
THIS OFFERING MEMORANDUM HAS BEEN APPROVED BY THE SCHOOL DISTRICT AND, WHILE THE INFORMATION SET FORTH IN THIS OFFERING MEMORANDUM HAS BEEN FURNISHED BY THE SCHOOL DISTRICT AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE, SUCH INFORMATION IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS. THE INFORMATION AND EXPRESSIONS OF OPINION SET FORTH IN THIS OFFERING MEMORANDUM ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE UNDER THIS OFFERING MEMORANDUM SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE AFFAIRS OF THE SCHOOL DISTRICT HAVE REMAINED UNCHANGED SINCE THE DATE OF THIS OFFERING MEMORANDUM.
THE ORDER AND PLACEMENT OF MATERIALS IN THIS OFFERING MEMORANDUM, INCLUDING THE APPENDICES, ARE NOT TO BE DEEMED TO BE A DETERMINATION OF RELEVANCE, MATERIALITY OR IMPORTANCE, AND THIS OFFERING MEMORANDUM, INCLUDING THE APPENDICES, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF THE NOTES IS MADE ONLY BY MEANS OF THIS ENTIRE OFFERING MEMORANDUM.
IN CONNECTION WITH THE OFFERING OF THE NOTES, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME, WITHOUT PRIOR NOTICE.
THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFERING MEMORANDUM. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFERING MEMORANDUM PURSUANT TO ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
THIS OFFERING MEMORANDUM CONTAINS CERTAIN “FORWARD-LOOKING STATEMENTS” CONCERNING THE OPERATIONS AND FINANCIAL CONDITION OF THE SCHOOL DISTRICT. THESE STATEMENTS ARE BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES WHICH ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE SCHOOL DISTRICT. THE WORDS "MAY," "WOULD," "COULD," "WILL,' "EXPECT," "ANTICIPATE," "BELIEVE," "INTEND," "PLAN," "ESTIMATE" AND SIMILAR EXPRESSIONS ARE MEANT TO IDENTIFY THESE FORWARD- LOOKING STATEMENTS. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVES 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 SCHOOL DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THESE FORWARD- LOOKING STATEMENTS IF OR WHEN CHANGES TO ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED, OCCUR.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Table of Contents
School District Employees A-14 BOARD OF SCHOOL DIRECTORS 1 INTRODUCTION 2 PENSION PROGRAM A-14 USE OF PROCEEDS 2 Pension Contributions A-14 History of Tax Anticipation Note Financings and Certain Prior Bonds 2 Other Post-Employment Benefits A-14 SOURCES AND USES OF FUNDS 3 APPENDIX B SECURITY FOR THE NOTES 3 DEMOGRAPHIC CHARACTERISTICS RELATING DEFAULTS AND REMEMDIES 3 Population Trends B-1 BOOK-ENTRY ONLY SYSTEM 4 Age Composition - 2010 B-1 TAX MATTERS 5 Income - 2010 2 B-1 MISCELLANEOUS 6 Occupied Housing Units - 2010 B-2 Underwriting 6 Medical Facilities B-3 No Litigation 6 Transportation B-3 Legal Opinion 6 Labor Force, Employment and Unemployment Trends B-4 Rating 6 Top Employers of Chester County (2nd Q 2016) B-4 The Notes are not rated. 6 Distribution of Employment by Industry B-5 Continuing Disclosure 6 APPENDIX C - Estimated General Fund Cash Flow for 2019-20 and 2020- 21 Infectious Disease Outbreak – COVID-19 6 APPENDIX D - FINANCIAL STATEMENTS Estimated General Fund Cash Flows for Fiscal Years 2019-2020 and 2020-2021 7 APPENDIX E - OPINION OF BOND COUNSEL Other 8 APPENDIX A THE SCHOOL DISTRICT AND FINANCIAL REVIEW THE SCHOOL DISTRICT A-1 Introduction A-1 School Facilities and Current Enrollment A-1 Historical Enrollment Trends (Actual and Projected) A-1 Description of Certain Prior Criminal Activity A-2 School District Budget Information and Charter School Tuition Impact A-2 FINANCIAL REVIEW A-3 Budgeting Process in School Districts under the Taxpayer Relief Act A-3 General Fund Comparative Summary of Assets, Liabilities, Deferred Inflows of Resources and Fund Equities A-4 General Fund Comparative Summary of Revenue and Expenditure Sources & Beginning and Ending Fund Balances A-5 TAXING POWERS OF THE SCHOOL DISTRICT A-6 PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS A-6 Act 1 of Special Session 2006 (“Taxpayer Relief Act”), as amended A-6 The Notes are Not Eligible for Act 1 Exceptions A-7 Act 130 of 2008 A-8 Act 48 of 2003 – Limitation on Fund Balances A-8 TRENDS OF THE TEN LARGEST TAXPAYERS/ASSESSED VALUES, REAL PROPERTY TAX COLLECTION, TAX RATES, MARKET/ASSESSED VALUE TRENDS OF THE SCHOOL DISTRICT A-9 Ten Largest Taxpayers and their Aggregate Assessed Values A-9 Real Property Tax Collection A-9 Real Property Millage Rates and Other (Act 511) Tax Rates of the School District A-10 Comparative Real Property Millage Rates of the School District, Component Municipalities and its County A-10 Market Values and Assessed Values of the School District A-11 Comparative Market Values and Assessed Values of the School District, Component Municipalities and its County A-11 COMMONWEALTH AID AND APPROPRIATIONS A-12 Commonwealth Aid to School Districts A-12 STATEMENT OF LONG-TERM INDEBTEDNESS DIRECT DEBT (NON ELECTORAL & LEASE RENTAL), OVERLAPPING DEBT, DEBT RATIOS AND DEBT LIMITS A-13 Debt Statement A-13 Limitation on Maximum Size of Notes under IRS Regulations A-13 LABOR RELATIONS A-14
COATESVILLE AREA SCHOOL DISTRICT (Chester County, Pennsylvania)
BOARD OF SCHOOL DIRECTORS
Robert J. Fisher ...... President Thomas N. Keech ...... Vice President Michelle Kelly ...... Treasurer* Lori Diefenderfer ...... Secretary* Henry J. Assetto ...... Member James Bookman ...... Member Andrew C. Finkbohner...... Member Rebecca L. Harlan ...... Member Mary Ann Harris ...... Member Amelia Mills ...... Member Brandon J. Rhone ...... Member
*Non-voting.
ADMINISTRATION
Tomas Hanna* ...... Superintendent of Schools Lori Diefenderfer ...... Director of Business Administration
*Term commences on July 1, 2020.
SOLICITOR Michael Levin, Esquire Huntingdon Valley, Pennsylvania
BOND COUNSEL Lamb McErlane PC West Chester, Pennsylvania
PAYING AGENT U.S. Bank National Association Philadelphia, Pennsylvania
UNDERWRITER RBC Capital Markets, LLC West Conshohocken, Pennsylvania
UNDERWRITER’S COUNSEL Eckert Seamans Cherin & Mellott, LLC Philadelphia, Pennsylvania
SCHOOL DISTRICT ADDRESS 3030 C G Zinn Road Thorndale, Pennsylvania 19372
Telephone: (610) 466-2400 Website Address: www.casdschools.org 1
OFFERING MEMORANDUM
$11,225,000* COATESVILLE AREA SCHOOL DISTRICT (Chester County, Pennsylvania) TAX AND REVENUE ANTICIPATION NOTES, SERIES OF 2020
INTRODUCTION
This Offering Memorandum is furnished by Coatesville Area School District, Chester County, Pennsylvania (the "School District"), in connection with the offering of its Tax and Revenue Anticipation Notes, Series of 2020 (the "Notes").
The Notes are being issued pursuant to a Resolution of the Board of School Directors of the School District, adopted on June 23, 2020 (the "Resolution"), and in accordance with the Local Government Unit Debt Act of the Commonwealth of Pennsylvania (the “Commonwealth”), as amended (the "Debt Act").
The Notes will be issued in minimum denominations of $100,000 and in integral multiples of $5,000 in excess thereof. The Notes shall be dated the date of delivery, when interest will begin to accrue, and shall all mature on November 13, 2020. Interest on the Notes shall be paid upon maturity based on a 30/360-day year.
The Notes originally will be issued solely in book-entry only form registered in the name of Cede & Co. as nominee for The Depository Trust Company ("DTC"). So long as the Notes are held in the book-entry only system, DTC or its nominee will be the registered owner of the Notes for all purposes of the Resolution, the payment obligations under the Notes and this Offering Memorandum. For purposes of this Offering Memorandum, DTC or its nominee are referred to as the "Securities Depository." See “SECURITY FOR THE NOTES” and “BOOK-ENTRY ONLY SYSTEM” herein.
The Notes are not subject to optional or mandatory redemption prior to maturity.
The information which follows contains summaries of the Resolution, the School District's Budget and the School District's Financial Statements. Such summaries do not purport to be complete and reference is made to the Resolution, the School District's Budget and the School District's Financial Statements, copies of which are on file and available for examination at the offices of the School District.
USE OF PROCEEDS
The proceeds from the sale of Notes will be deposited into the School District's General Fund as working capital to pay its general operating expenses, including the payment of debt service as more fully described below, pending the collection of property taxes and other general revenues and to pay the cost of issuing the Notes.
History of Tax Anticipation Note Financings and Certain Prior Bonds
The School District has issued Tax and Revenue Anticipation Notes over the past five years as follows:
Fiscal Year June 30, Amount Issued 2019 $0 2018 $0 2017 $8,040,000** 2016 $0 2015 $0
Source: Audits
**The proceeds from the sale of these notes were deposited into the School District's General Fund as working capital to pay its general operating expenses, including the payment of debt service as more fully described below, pending the collection of property taxes and other general revenues and to pay the cost of issuing the Notes.
The School District has previously issued the following series of bonds, each supported by the intercept provisions of Section 633 of the Pennsylvania Public School Code of 1949 (the “School Code”).
General Obligation Bonds, Series of 2013 (“2013 Bonds”) General Obligation Bonds, Series A of 2014 (“2014A Bonds”) General Obligation Bonds, Series B of 2014 (Federally Taxable) (“2014B Bonds”) General Obligation Bonds, Series of 2017 (“2017 Bonds”) Coatesville Area School District Building Authority, Guaranteed School Lease Revenue Bonds, Series of 2018 (“2018 Bonds”) General Obligation Bonds, Series A and B of 2020, General Obligation Notes, Series C of 2020 and General Obligation Notes, Series D of 2020 (Federally Taxable) (the “2020 Bonds”) (to be issued on July 14, 2020)
*Preliminary, subject to change.
2
As it relates to each of the above-referenced series of bonds (collectively, the “Bonds”), U.S. Bank National Association (the “Paying Agent”), as paying agent and sinking fund depository, is directed to make demand on the Secretary of Education of the Commonwealth of Pennsylvania (the “Secretary”) if there is a deficiency on a sinking fund deposit date on any Bonds in order to cause the implementation of the provisions of Section 633 of the School Code in advance of an actual debt service payment on the Bonds.
The sinking fund deposit dates for the 2017 Bonds are January 15 and July 15, each approximately fifteen days prior to the February 1 and August 1 principal and interest payment dates on the 2017 Bonds.
On July 31, 2017, the Paying Agent provided written notice to the Secretary that the School District failed to make the required sinking fund deposit on July 15, 2017 for the August 1, 2017 principal and interest payment date of the 2017 Bonds, thereby requesting the implementation of the intercept provisions of the School Code as it relates to the August 1, 2017 principal and interest payment date. On August 1, 2017, the Paying Agent provided written notice to the Secretary that the School District had made the required sinking fund deposit on August 1, 2017 and requested that the Secretary cease any action under the intercept provisions.
The sinking fund deposit date for each of the 2013 Bonds, the 2014A Bonds and the 2014B Bonds is February 1 and August 1, each approximately fifteen days prior to the February 15 and August 15 principal and interest payment date on such Bonds.
The School failed to make the required sinking fund deposit on August 1, 2017 for the August 15, 2017 principal and interest payment date for each of the 2013 Bonds, the 2014A Bonds and the 2014B Bonds. The required sinking fund deposit was made by the School District in advance of the August 15 principal and interest payment date from the proceeds of the Notes.
The School District posted a notice on EMMA describing its failure to make the required sinking fund deposits and the notices provided to the Secretary by the Paying Agent as a result thereof, all as described hereinabove.
SOURCES AND USES OF FUNDS*
Sources of Funds: Total Par Amount of the Notes ...... Net Original Issue Premium ...... Total Sources of Funds ......
Uses of Funds: Deposit to the General Fund ...... Costs of Issuance (1) ...... Total Use of Funds ......
(1)Includes bond discount, legal, printing, CUSIP, paying agent fee and miscellaneous fees.
SECURITY FOR THE NOTES
The Notes are payable from and secured by a pledge of, security interest in, and lien and charge upon, the taxes and other revenues of the School District to be received during the period in which the Notes are outstanding, as set forth in the Resolution. The School District will file a financing statement in order to perfect the security interest in such taxes and revenues in accordance with the Act. The Act further provides that any tax and revenue anticipation notes issued in compliance with the Act shall be general obligations of the School District and, if the amounts are not paid within the fiscal year in which the Notes were issued, they shall be deemed to be non-electoral debt enforceable in the manner of a general obligation which, unless otherwise funded, shall be included in the budget of the School District for the ensuing fiscal year and payable from the taxes and revenues of such ensuing year without regard to any other debt limits imposed upon the School District by the Act.
As set forth above, upon the failure of the School District to pay the amount due on the Notes when due, the Notes shall be deemed to be non-electoral debt of the School District. Section 633 of the School Code contains provisions authorizing the withholding or "interception" of certain Commonwealth appropriations due to the School District in the event it fails to pay the principal of or interest due on indebtedness, in an amount equal to the amount of principal and interest so due. It is not certain that Section 633 of the School Code is applicable upon the failure of the School District to pay the principal of and interest when due on the Notes. Purchasers of the Notes should consult with their own counsel in order to make their investment decision to purchase the Notes.
* Preliminary, subject to change. 3
DEFAULTS AND REMEDIES
In the event of failure of the School District to pay or cause to be paid the interest on or principal of the Notes, as the same becomes due and payable, the holders of the Notes shall be entitled to certain remedies provided by the Act. Among the remedies, if the failure to pay shall continue for 30 days, holders of the Notes shall have the right to recover the amount due by bringing an action in assumpsit in the Court of Common Pleas of the county in which the School District is located. The Act also provides that upon default of at least 30 days, holders of at least 25 percent of the Notes may appoint a trustee to represent them. The Act provides certain other remedies in the event of default, and further qualifies the remedies hereinbefore described.
BOOK-ENTRY ONLY SYSTEM
The information in this section has been obtained from materials provided by DTC for such purpose. The School District (herein referred to as the “Issuer”) and the Underwriter does not guarantee the accuracy or completeness of such information and such information is not to be construed as a representation of the School District or the Underwriter.
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Notes (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered note certificate will be issued for each Note, in the aggregate principal amount of such issue, and will be deposited with DTC.
DTC the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency'' registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants'') deposit with DTC.
DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner'') is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities: DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the paying agent and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct
4
Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the School District (the “Issuer”) as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from Issuer or Paying Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Paying Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption proceeds and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
NEITHER THE ISSUER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE NOTES; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE NOTES; (4) THE DELIVERY TO ANY BENEFICIAL OWNER BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO NOTEHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE NOTES; OR (6) ANY OTHER ACTION TAKEN BY DTC AS NOTEHOLDER.
The Issuer and the Paying Agent cannot give any assurances that DTC or the Participants will distribute payments of the principal or redemption price of and interest on the Notes paid to DTC or its nominee, as the registered owner of the Notes, or any redemption or other notices, to the Beneficial Owners or that they will do so on a timely basis, or that DTC will serve and act in the manner described in this Offering Memorandum.
TAX MATTERS
In the opinion of Bond Counsel, interest on the Notes is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. This opinion is subject to the condition that the School District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issuance of the Notes in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The School District has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Notes to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Notes.
Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Notes. Owners of the Notes should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Notes, which may include original issue discount, original issue premium, and purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.
Bond Counsel is also of the opinion that, under the laws of the Commonwealth of Pennsylvania as enacted and construed on the date of initial delivery of the Notes, interest on the Notes is exempt from Pennsylvania personal income tax and corporate net income tax, and the Notes are exempt from personal property taxes in Pennsylvania.
The opinions expressed by Bond Counsel above are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Notes, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation, regulatory initiatives or litigation.
Legislative and regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Notes. Purchasers of the Notes should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation.
5
MISCELLANEOUS
Underwriting
RBC Capital Markets, LLC (the “Underwriter”) has agreed, subject to certain conditions, to purchase the Notes from the School District at a net purchase price of $ , which reflects an underwriter’s discount of $ plus an original issue premium of $ . The Underwriter’s obligation to purchase the Notes is subject to certain conditions precedent; however, the Underwriter is obligated to purchase all such Notes if any such Notes are purchased. The Notes may be offered and sold to certain dealers (including dealers depositing such Notes into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed, from time to time, by the Underwriter.
The Underwriter has provided the following information for inclusion in this Offering Memorandum: The Underwriter and its affiliates are full service financial institutions engaged in various activities, that may include securities trading, commercial and investment banking, municipal advisory, brokerage and asset management. In the ordinary course of business, the Underwriter and their respective affiliates may actively trade debt and if applicable equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriter and its affiliates may engage in transactions for their own accounts involving the Notes or other offering of the School District. The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of the Notes or other offerings of the School District. The Underwriter does not make a market in credit default swaps with respect to municipal securities at this time but may do so in the future.
No Litigation
As of the date of this Offering Memorandum, there is no litigation, of any nature, pending or threatened against the School District to restrain or enjoin the issuance, sale, execution or delivery of the Notes.
Legal Opinion
Certain legal matters relating to the authorization and issuance of the Notes will be subject to the approving opinion of Lamb McErlane PC, West Chester, Pennsylvania, Bond Counsel to the School District. Certain legal matters will be passed upon for the School District by Michael Levin, Esquire, Huntingdon Valley, Pennsylvania, Solicitor to the School District. Certain legal matters relating to the Underwriter will be passed by its Counsel, Eckert Seamans Cherin & Mellott, LLC, Philadelphia, Pennsylvania.
Rating
The Notes are not rated.
Continuing Disclosure
The Notes mature on November 13, 2020. The School District will not be executing a continuing disclosure undertaking with respect to the Notes; however, the School District has in the past executed continuing disclosure agreements in connection with its prior issuance of bonds and notes and has taken steps to facilitate the timely filing of required information thereunder by hiring a third-party dissemination agent, Digital Assurance Certification, LLC, to assist it in complying with the requirements of its previous undertakings.
Infectious Disease Outbreak – COVID-19
The outbreak of COVID-19, a respiratory disease caused by a new strain of coronavirus, has been characterized as a pandemic (the “Pandemic”) by the World Health Organization and is currently affecting many parts of the world, including the United States and the Commonwealth of Pennsylvania. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States and on March 13, 2020, the President of the United States declared the outbreak of COVID-19 in the United States a national emergency. Subsequently, the President’s Coronavirus Guidelines for America and the United States Centers for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-19 in the United States.
Pennsylvania Governor Tom Wolf ordered all non-life-sustaining businesses in Pennsylvania to close their physical locations as of 8:00 p.m. March 19, 2020 to slow the spread of COVID-19. On March 23, 2020, the Pennsylvania Department of Education (PDE) announced that all schools in the Commonwealth would be required to remain closed through at least April 6 as a result of the COVID-19 response efforts. On April 9, 2020, the closure order was extended by the Governor through the remainder of the 2019-20 academic year. The closure order has since been extended indefinitely in an effort to stop the spread of COVID-19. On April 1, 2020, the Governor issued a Stay at Home order effective for all Pennsylvania counties. As of June 26, 2020, Chester County entered the green phase; however, a portion of the Governor’s work, congregate setting and social restrictions remain in place in the County. On March 27, 2020, Act No. 13 of 2020 was signed into law by the Governor to amend the School Code concerning the Pandemic. Act No. 13 permits the Pennsylvania Secretary of Education to further order the closure of all school entities until the threat to health and safety caused by the Pandemic has ended. Act No. 13 also waives the requirement that school entities be open for at least 180 days of instruction and provides for, inter alia, compensation of school entity employees, school subsidies and reimbursements from the Commonwealth as a result of actions taken by the Secretary of Education pursuant to Act No. 13, and continued payments to charter schools, intermediate units, career and technical centers, and approved private schools and residential rehabilitative institutions where public schools have placed students.
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Act No. 13 requires each school entity to make a good faith effort to develop a plan to offer continuity of education using alternative means during the closure period. To assist schools during the extended closure, the Commonwealth’s 29 intermediate units will provide technical assistance to help develop continuity of education plans for all students. The School District is currently employing remote instructional resources for its students and working with its teachers to improve its remote instructional techniques to maximize the educational experience for all of its students.
The Pandemic has negatively affected travel, commerce, and financial markets globally, and is widely expected to continue negatively affecting economic growth and financial markets worldwide. These negative impacts may reduce or negatively affect property values within the School District. To secure the payment of the principal of and interest on the Notes, the School District has pledged its full faith, credit and all available taxing power, which taxing power presently includes the power to levy ad valorem taxes on all taxable real property within the School District, within the limits provided by law as to rate or amount for such purpose. A reduction in property values may require an increase in the ad valorem tax rate required to pay the Notes as well as the School District’s share of operations and maintenance expenses payable from ad valorem taxes. See “LEGISLATION AFFECTING LOCAL TAXING POWERS OF SCHOOL DISTRICTS - ACT 1 OF SPECIAL SESSION 2006 (TAXPAYER RELIEF ACT)” herein for a discussion of the limitations on the School District’s ability to increase the ad valorem tax rate.
Despite any taxing initiatives taken by the School District, however, there is also a risk that some taxpayers within the School District will not be able to timely pay such taxes due to employment disruption across the country. On April 28, 2020, the Pennsylvania Association of School Business Officials released a study which predicted that the reduction in total local revenue to Pennsylvania School Districts could be more than $1.04 billion for 2020-21 if the economic recovery from the COVID-19 crisis lags. Currently, school districts collect about $18 billion in total local revenue so the projected decline represents a loss of 4-5% in total local revenue. Moreover, it is currently unknown at this time what, if any, measures that the Commonwealth may take that could complicate the School District’s ability to either levy new taxes or collect any taxes that would otherwise be due and owing if current tax deadlines are extended.
Because of the evolving nature of the outbreak and federal, state and local responses thereto, the School District cannot predict how the outbreak will impact the financial condition or operations of the School District, or if there will be any impact on the assessed values of property within the School District or deferral of tax payments to School District. The School District cannot predict costs associated with this or any other potential infectious disease outbreak, including whether there will be any reduction in Commonwealth funding or an increase in operational costs incurred to implement strategies to clean, sanitize and maintain its facility either before or after an outbreak of an infectious disease. At this time, it is also unclear whether the School District will receive any federal relief funding under the recently passed CARES Act, or, even if eligible, how much funding would be available to the School District.
The financial and operating data contained herein are the latest available, but are as of the dates and for periods prior to the economic impact of the Pandemic and measures instituted to slow it. Accordingly, they may not be indicative of the current financial condition or future prospects of the School District.
The School District continues to monitor the spread of COVID-19 and is working with federal, state, and local agencies to address the potential impact of the Pandemic upon the School District and its employees. While the potential impact of the Pandemic on the School District cannot be quantified at this time, the continued outbreak of COVID-19 could have an adverse effect on the School District’s operations and financial condition, and the effect could be material.
Additional information with respect to events surrounding the outbreak of COVID-19 and responses thereto can be found on Commonwealth websites, including but not limited to the Governor’s office (http://www.pa.gov/), the Pennsylvania Department of Health (http://www.health.pa.gov/). The School District has not incorporated by reference the information on such websites and the School District does not assume any responsibility for the accuracy of the information on such websites.
Estimated General Fund Cash Flows for Fiscal Years 2019-2020 and 2020-2021
A summary of the School District’s estimated General Fund cash flows for fiscal years 2019-2020 and 2020-2021 are attached hereto as Appendix C. The estimated General Fund cash flows are based upon a number of assumptions and estimates which are subject to significant uncertainties, many of which are beyond the control of the School District. The School District does not plan to issue any updates or revisions to these estimated General Fund cash flows if or when changes to its expectations or events, conditions or circumstances, on which such estimated General Fund cash flows are based, occur.
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Other
All references to the provisions of the Debt Act, the Notes and the Resolution set forth in this Offering Memorandum are made subject to all the detailed provisions thereof, to which reference is hereby made for further information, and this Offering Memorandum does not purport to set forth complete statements of any or all such provisions.
All information, estimates and assumptions herein have been obtained from officials of the School District, other governmental bodies, trade and statistical services, and other sources which are believed to be reliable; but no representations whatsoever are made that such estimates or assumptions are correct or will be realized. So far as any statements herein involve matters of opinion, whether or not expressly so stated, they are intended as such and not representations of fact.
The School District has authorized the distribution of this Offering Memorandum.
COATESVILLE AREA SCHOOL DISTRICT Chester County, Pennsylvania
By: President, Board of School Directors
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APPENDIX A
THE SCHOOL DISTRICT AND FINANCIAL REVIEW
THE SCHOOL DISTRICT
Introduction
Coatesville Area School District, Chester County, Pennsylvania (the “School District”) covers an area of 75.82 square miles. The School District is located in the Chester Valley, which runs in the southeast and northwest direction through the area. Geographically, the area of the School District extends from the western boundary of the Borough of Downingtown in central Chester County to the eastern boundary of Lancaster County, with the City of Coatesville in the center. The School District is located approximately 35 miles west of the City of Philadelphia, 25 miles east of Lancaster, Pennsylvania, 10 miles northwest of West Chester, Pennsylvania, and 25 miles south of Reading, Pennsylvania. Many unincorporated communities are located within the School District and these include: Wagontown in West Caln Township, Pomeroy and Sadsburyville in Sadsbury Township, Ercildoun in East Fallowfield Township, and Thorndale in Caln Township.
The School District is governed by a board of nine School Directors who are residents of the School District and who are elected to serve four-year terms on a staggered basis. The daily operations and management of the School District are performed by a central administrative staff which is led by the Superintendent and the Director of Business Administration who are appointed by the Board of School Directors.
School Facilities and Current Enrollment
The School District currently operates one senior high school, one intermediate high school, two middle schools, five elementary schools, and one cyber academy, all as described below:
Year(s) of Rated 2019-20 Original Additions/ Pupil Current School Building Facility Construction Renovations Grades Housed Capacity Enrollment(1) Coatesville High School Campus 1965 2010 9-12 1,894 1,749
Scott Middle School ...... 1938 2003 6 931 409 North Brandywine Middle School...... 1958 1982 7-8 726 764 South Brandywine Middle School...... 1958 1982 N/A 781 Closed
Caln Elementary ...... 1926 1951/98 K-5 525 385 East Fallowfield Elementary ...... 1939 1966/86 K-5 375 391 Friendship Elementary ...... 1960 1970 K-5 500 Closed King's Highway Elementary ...... 1955 1982/97 K-5 575 764 Rainbow Elementary ...... 2009 --- K-5 725 731 Reeceville Elementary...... 1990 --- K-5 675 419 Benner School ...... 1964 Closed Coatesville Administrative Offices
(Administration and 2016 ---- N/A (2) 135 CASD Cyber Academy) ......
(1) January 1st enrollment. (2) The CASD Cyber Academy is a virtual online learning program and utilizes the Apex Digital Curriculum that is aligned to the Common Core and meets the academic needs of students. Source: School District officials
Historical Enrollment Trends (Actual and Projected)
Actual Enrollment(1) School Year Ending June 30, K-6 7-12 Total 2015-2016 3,616 3,142 6,758 2016-2017 3,349 3,014 6,363 2017-2018 3,094 2,850 5,944 2018-2019 2,909 2,723 5,632 2019-2020 2,811 2,635 5,446
Projected Enrollment(2) School Year Ending June 30, K-6 7-12 Total(3) 2020-2021 2,680 2,529 5,209 2021-2022 2,568 2,408 4,976 2022-2023 2,486 2,244 4,730 2023-2024 2,401 2,107 4,508 2024-2025 2,336 2,010 4,346
(1) Enrollments are on a decline due to increased charter school enrollments and residents relocating out of the School District.
(2) Based on the School District’s projections using the Cohort Survival Method 3-year average for projecting).
(3) The decline is representative of continued increased charter school enrollments. Also, recent increases for charter and special education tuitions by the Department will possibly make it more difficult for the School District to fund these tuitions; however, the School District plans to apply for the Act 1 exception for special education, if needed (see Act 1 of Special Session 2006 (“Taxpayer Relief Act”) herein) and if necessary, a tax increase would be proposed. There is no assurance that any proposed tax increase will be implemented.
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Description of Certain Prior Criminal Activity
On December 3, 2014, a Chester County, Pennsylvania grand jury issued a report (the “Report”) finding that the person who served as the School District superintendent from 2005 to 2013, and another person who served as the School District athletic director from 2009 to 2013, engaged in various improper activities relating to improper use of School District funds, violations of the state Ethics Act, and other matters. The Report also found that the School Board did not provide sufficient oversight of these two individuals. Following release of the Report, the Chester County District Attorney brought criminal charges against these two individuals. In 2016, the former athletic director pled guilty and was sentenced by a judge of the Chester County Common Pleas Court to serve two to 23 months in prison plus five years of probation.
January 20, 2018, the former Superintendent was found guilty of two counts of theft by unlawful taking, two counts of theft by failure to make required disposition of funds, two counts of dealing in unlawful proceeds, and four counts of conflict of interest. He also was found guilty of two counts each of attempted theft by unlawful taking, theft by failure to make required disposition of funds, and dealing in unlawful proceeds.
The prior criminal activity described above has had no material financial impact on the School District.
The School District has adopted policies and procedures to address the findings in the Report and to mitigate against similar conduct in the future.
School District Budget Information and Charter School Tuition Impact
As shown below, a significant growth in charter school enrollment took place in each of the five years. It has been difficult to project this growth and as such, the budgeted amount was significantly lower than the actual costs, which is also shown below.
Year Month Charter School Enrollment 2016 June 1,988 2017 June 2,225 2018 June 2,505 2019 June 2,803 2020 January 3,044
Budgeted Charter Fiscal Year School Tuition Actual Charter Tuition Difference 2015-16 $21,943,258 $26,293,521 ($4,350,263) 2016-17 $23,200,536 $33,988,574 ($10,788,038) 2017-18 $27,234,385 $36,876,934 ($9,642,549) 2018-19 $42,577,786 $45,619,096 ($3,041,310) 2019-20 (Projected) $46,775,000 $54,177,906 ($7,402,906)
As a result of the major increases in charter school tuition, the General Fund ending fund balance is projected to be approximately negative $4.5 million (deficit) for FY 2019-20. To eliminate this projected deficit and any subsequent deficit, the School District is in the process of implementing a multi-year financial turnaround plan with the goal of total General Fund revenues being equal to or greater than expenditures for FY 2020-21.
The School District’s turnaround plan consists of restructuring its bonds, a reduction in staff, revamping its online Academy through use of the Brandywine Virtual Academy, a reduction in transportation costs, and the enhancement of special education offerings, to close the remaining gap between revenues and expenses, assuming there is no growth in charter school enrollment. If there would be some growth in charter school enrollment, the School District has no (0) budgetary reserve that can be utilized. Additionally, the School District has some flexibility to make some debt service payments from its capital funds, which currently have a combined balance in excess of $3 million.
The School District is also taking steps to stop the loss of students to charter schools and to attract students who have enrolled in charter schools back to the School District. These steps include periodic community meetings to discuss the matter; outreach to the parents of students who have left for charter schools and to determine why they left; and a day-long event to highlight the programs the School District has to offer.
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FINANCIAL REVIEW
This Appendix A is a summary only and is not intended to be a complete report. For more complete information, the individual financial statements and the Budgets of the School District should be reviewed at the Business Office, Coatesville Area School District, Chester County, Pennsylvania.
The School District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education (the “Department”). An annual operating budget is prepared by the Superintendent and Business Administrator and submitted to the School Board for approval prior to the beginning of each fiscal year on July 1.
The School District keeps its books and prepares its financial reports according to a modified accrual basis. Major accrual items are payroll taxes and pension fund contributions payable, delinquent taxes receivable, advances receivable from other funds, and revenues receivable from other governmental units. Its financial statements are audited annually by a firm of independent certified public accountants, as required by State law.
The firm of Maillie LLP of West Chester, Pennsylvania currently serves as the School District’s independent auditor (the “Auditor”). The Auditor has not been engaged to perform, and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. The Auditor also has not performed any procedure relating to this Offering Memorandum.
Budgeting Process in School Districts under the Taxpayer Relief Act
In General. School districts budget and expend funds according to procedures mandated by the Department. An annual operating budget is prepared by school district administrative officials on a uniform form furnished by such Department and submitted to the board of school directors for approval prior to the beginning of the fiscal year on July 1.
Procedures for Adoption of the Annual Budget. Under Pennsylvania Act No. 1 of the Special Session of 2006, as amended, the (“Taxpayer Relief Act”), all school districts of the first class A, second class, third class and fourth class (except as described below) must adopt a preliminary budget proposal (which must include estimated revenues and expenditures and proposed tax rates) no later than 90 days prior to the date of the election immediately preceding the fiscal year. The preliminary budget proposal must be printed and made available for public inspection at least 20 days prior to its adoption; the board of school directors may hold a public hearing on the budget; and the board must give at least 10 days’ public notice of its intent to adopt the final budget.
If the adopted preliminary budget includes an increase in the rate of any tax levy, the preliminary budget must be submitted to the Department no later than 85 days prior to the date of the election immediately preceding the fiscal year. The Department is to compare the proposed percentage increase in the rate of any tax with the school district’s Index (see “Pennsylvania Act No. 1 of the Special Session of 2006 (“Taxpayer Relief Act”)” herein) and within 10 days, but not later than 75 days prior to the upcoming election, inform the school district whether the proposed percentage increase is less than or equal to the Index. If the Department determines that a proposed tax increase will exceed the Index, the school district must reduce the proposed tax increase, seek voter approval for the tax increase at the upcoming election, or seek approval to utilize one or more of the referendum exceptions authorized under The Taxpayer Relief Act.
With respect to the utilization of any of the Taxpayer Relief Act referendum exceptions for which the Department approval is required (see “Pennsylvania Act No. 1 of the Special Session of 2006 (“Taxpayer Relief Act”) herein), the school district must publish notice of its intent to seek the Department approval not less than one week before submitting its request for approval to the Department and, if the Department determines to schedule a public hearing on the request, a notice of the date, time and place of such hearing. The Department is required by the Taxpayer Relief Act to rule on the school district’s request and inform the school district of its decision no later than 55 days prior to the upcoming election so that, if the Department denies the school district’s request, the school district may submit a referendum question to the local election officials at least 50 days before the upcoming election, if it so chooses.
To use any of the referendum exceptions for which court approval is required under the Taxpayer Relief Act, the school district must petition the court of common pleas no later than 75 days prior to the upcoming election, after giving one week’s public notice of the intent to file such petition. The court may schedule a hearing on the petition, and the school district must prove by clear and convincing evidence that it qualifies for the exception sought. The Taxpayer Relief Act requires that the court rule on the petition and inform the school district of its decision no later than 55 days prior to the upcoming election. Such Act provides that the court in approving the petition shall determine the dollar amount for which the exception is granted, the tax rate increase required to fund the exception and the appropriate duration of the tax increase. If the court denies the school district’s petition, such Act permits the school district to submit a referendum question to the local election officials at least 50 days before the upcoming election, if it so chooses.
If a school district seeks voter approval to increase taxes at a rate higher than the applicable Index, whether or not it first seeks approval to utilize one of the referendum exceptions available under the Taxpayer Relief Act, and the referendum question is not approved by a majority of the voters voting on the question, the board of school directors may not approve an increase in the tax rate greater than the applicable Index.
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Simplified Procedures in Certain Cases. The above budgetary procedures will not apply to a school district if the board of school directors adopts a resolution no later than 110 days prior to the election immediately preceding the upcoming fiscal year declaring that it will not increase any tax at a rate that exceeds the Index and that a tax increase at or below the rate of the Index will be sufficient to balance its budget. In that case, the Taxpayer Relief Act requires only that the proposed annual budget be prepared at least 30 days, and made available for public inspection at least 20 days, prior to its adoption, and that at least ten (10) days’ public notice be given of the board’s intent to adopt the annual budget. No referendum exceptions are available to a school district adopting such a resolution.
General Fund Comparative Summary of Assets, Liabilities, Deferred Inflows of Resources and Fund Equities
Fiscal Year Ending June 30, Assets 2015 2016 2017 2018 2019 Cash and Cash Equivalents ...... $21,100,245 $12,879,880 $4,134,449 $12,685,909 $7,093,742 Interest receivable ...... 0 7,000,000 4,213,386 8,000,000 10,000,000 Taxes receivable ...... 6,866,310 6,148,406 6,235,817 5,894,116 6,514,876 Due from other governments ...... 3,210,400 9,419,311 9,206,171 8,792,099 6,747,933 Due from other funds ...... 1,450,803 1,202,899 1,056,358 0 39,715 Other Receivables ...... 680,127 871,291 476,261 131,095 159,098 Federal Revenue Receivable ...... 0 12,879,880 0 0 0 Prepaid Expenses/Expenditures ...... 0 101 0 51,167 1,845 Other Assets ...... 0 0 0 354,000 354,000 Total Assets ...... $33,307,885 $37,521,888 $25,322,442 $35,908,386 $30,911,209
Liabilities Accounts Payable ...... $6,942,779 $9,100,095 $9,726,907 $9,766,256 $10,503,476 Accrued Salaries and Benefits ...... 8,862,664 10,462,802 7,849,774 10,509,652 9,344,579 Due to other funds ...... 0 0 0 17,381 20,039 Unearned revenue ...... 0 0 0 0 1,411,914 Tax receivable anticipation...... 0 0 0 0 0 Total Liabilities ...... $15,805,443 $19,562,897 $17,576,681 $20,293,289 $21,280,008
Deferred Inflows of Resources Unavailable Revenue - Property Taxes ...... $6,279,438 $5,966,730 $4,936,379 $4,361,008 $4,846,652 Unavailable Revenue - Collateralized Borrowing ...... 0 0 0 0 0 Total Deferred Inflows of Resources ...... $6,279,438 $5,966,730 $4,936,379 $4,361,008 $4,846,652
Fund Balances Non-spendable, prepaid expenses ...... $0 $101 $0 $51,167 $1,845 Committed, future retirement liability ...... 2,085,000 0 0 0 0 Restricted, capital projects...... 0 0 0 0 0 Assigned ...... 9,138,004 11,992,261 2,809,382 11,202,922 4,482,205 Unassigned ...... 0 0 0 0 300,499 Total Fund Equity ...... $11,223,004 $11,992,261 $2,809,382 $11,254,089 $4,784,549
TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND EQUITY...... $33,307,885 $37,521,888 $25,322,442 $35,908,386 $30,911,209
Sources: School District Audits.
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A-4
General Fund Comparative Summary of Revenue and Expenditure Sources & Beginning and Ending Fund Balances
Fiscal Year Ending June 30, Budgeted Budgeted REVENUE 2016 2017 2018 2019 2020 2021
Local Sources ...... $106,290,147 $105,651,301 $111,346,379 $116,138,509 $120,480,802 $118,870,009
State Sources ...... 49,779,838 50,567,327 51,929,586 52,811,372 52,160,015 52,118,042
Federal Sources ...... 3,382,713 4,759,046 4,117,450 3,300,792 3,565,723 4,911,958
Sale of Fixed Assets ...... 0 0 13,005,633 0 0 0
Refund of Prior Year Expenditures . 0 0 0 0 0 0
Interfund Transfers ...... 0 0 0 0 0 0
Bond Issue Proceeds...... 0 0 0 0 0 0
Other Financing Sources ...... 0 0 0 0 0 0
Total Revenues...... $159,452,698 $160,977,674 $180,399,048 $172,250,673 $176,206,540 $175,900,009
EXPENDITURES Instruction ...... $104,603,632 $113,753,046 $116,070,795 $122,474,440 $118,123,028 $123,009,341
Support Services...... 37,801,279 38,830,693 40,259,613 38,923,190 40,251,267 37,140,081
Non-Instruction Services ...... 1,128,908 1,232,412 1,206,072 1,256,721 1,231,079 1,702,992
Debt Service (P&I) ...... 15,149,622 15,153,960 14,417,861 16,065,862 15,493,209 7,510,378 Transfers Out ...... 0 1,000,000 0 0 0 0 Refund of Prior Years Revenue ...... 0 190,442 0 0 0 0 Payment to Escrow Agent ...... 0 0 0 0 0 0 Budgetary Reserve ...... 0 0 0 0 5,590,000 6,537,212 Total Expenditures ...... $158,683,441 $170,160,553 $171,954,341 $178,720,213 $180,688,583 $175,900,004
Excess of Revenue Over (Under) Expenditures ..... $769,257 $(9,182,879) $8,444,707 $(6,469,540) $(4,482,043) $ 5
Fund Balance, July 1 ...... $11,223,004 $11,992,261 $2,809,382 $11,254,089 Prior Period Adjustment ...... 0 0 0 0 Fund Balance, June 30 ...... $11,992,261 $2,809,382 $11,254,089 $4,784,549
Sources: School District Audits and Budget.
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TAXING POWERS OF THE SCHOOL DISTRICT
Subject to certain limitations imposed by the Taxpayer Relief Act (See “PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS – Act 1 of Special Session 2006 (“Taxpayer Relief Act”), as amended)) the School District, as a school district of the third class, is empowered by the Public School Code to levy the following taxes:
1. A basic annual tax on all real property taxable for school purposes, not to exceed 25 mills on each dollar of assessed valuation, to be used for general school purposes.
2. An ad valorem tax on the property taxable for school purposes to provide funds:
a. for minimum salaries and increments of the teaching and supervisory staff;
b. to pay rentals due any municipality authority or non-profit corporation or due the State Public School Building Authority;
c. to pay interest and principal on any indebtedness incurred pursuant to the Debt Act, or any prior or subsequent act governing the incurrence of indebtedness of the school district; and
d. to pay for the amortization of a bond which financed the construction of a school building prior to the first Monday of July, 1959.
3. An annual per capita tax on each resident or inhabitant over 18 years of age of not more than $5.00.
The School District may also levy additional taxes, subject to division with other political subdivisions authorized to levy similar taxes on the same person, subject, business, transaction or privilege, under Act No. 511, enacted December 31, 1965, as amended (the “Local Tax Enabling Act”). These taxes, which may include, among others, an additional per capita tax, wage and other earned income taxes, real estate transfer taxes, gross receipts taxes, and occupation taxes, may not exceed, in the aggregate, an amount equal to the product of the market valuation of real estate in the school district (as certified by the State Tax Equalization Board of the Commonwealth – “STEB”) multiplied by twelve mills. A recent amendment to the Local Tax Enabling Act authorized all taxing authorities to increase at their individual discretion, the exemption level for per capita, occupational, earned income and similar taxes from $5,000 to $10,000.
The Local Tax Enabling Act was amended by Act 222 of 2004 to authorize all taxing authorities to exempt from per capita, occupation, emergency and municipal service or earned income taxes any person whose total income from all source is less than $12,000 per year.
The taxing powers of the School District described above may be modified by the provisions of the Taxpayer Relief Act or certain other legislation. See “PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS” below.
PENNSYLVANIA ACTS AFFECTING CERTAIN LOCAL TAXING POWERS OF SCHOOL DISTRICTS
Act 1 of Special Session 2006 (“Taxpayer Relief Act”), as amended
The Taxpayer Relief Act, which became effective June 27, 2006 provides, inter alia, that a school district may not, in fiscal year 2007- 2008 or in any subsequent fiscal year, levy any tax for the support of the public schools which was not levied in the 2006-2007 fiscal year, raise the rate of any earned income and net profits tax if already imposed under the authority of the Local Tax Enabling Act (Act 511), or increase the rate of any tax for school purposes by more than the Index (defined below), unless in each case either (a) such increase is approved by the voters in the school district at a public referendum or (b) the increase was necessary to fund one of the exceptions provided therein: On June 30, 2011, the General Assembly adopted legislation (Act 25 of 2011) amending the Taxpayer Relief Act eliminating several exceptions previously permitted and providing for the rescission of certain prior approved referendum exceptions for disaster/emergency costs, implementation of a court order, school construction and non-academic school construction (effective after the last payment of principal and interest on debt incurred to finance same). The current exceptions allowing tax increases above the Index are summarized as follows:
1. to pay interest and principal on indebtedness incurred (i) prior to September 4, 2004, in the case of a school district which had elected to become subject to the provisions of the prior Homeowner Tax Relief Act, Act 72 of 2004, or (ii) prior to June 27, 2006, in the case of a school district which had not elected to become subject to Act 72 of 2004 (the School District did not so elect); to pay interest and principal on any indebtedness approved by the voters at referendum;
2. to pay costs incurred in providing special education programs and services to students with disabilities, under specified circumstances;
3. to make payments into the State Public School Employees’ Retirement System when the increase in the actual dollar amount of estimated payments between the current year and the upcoming year is greater than the Index.
A school district intending to utilize the foregoing exceptions is entitled to apply to the Department for approval thereof, if and to the extent a tax increase greater than the Index is needed in any particular fiscal year. The Taxpayer Relief Act provides that the Department shall approve a school district’s request if a review of the data demonstrates that the school district qualifies for the exception sought and the sum of the dollar amounts of all exceptions for which the school district qualifies is not more than what is necessary to balance the budget after giving effect to the revenue to be raised by the allowable increase under the Index. There can be no assurance; however, that approval will be given by the Department to utilize a referendum exception in any future fiscal year or years.
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Any revenue derived from an increase in the rate of any tax allowed under the exception numbered 1 above may not exceed the anticipated dollar amount of the expenditure, and any revenue derived from an increase in the rate of any tax allowed pursuant to any other exception enumerated above may not exceed the rate increase required, as determined by the court or the Department, as the case may be. If a school district’s petition or request to increase taxes by more than the Index pursuant to one or more of the allowable exceptions is not approved, the school district may submit the proposed tax increase to a referendum.
The Index (to be determined and reported by the Department by September 1st of each year for application to the following fiscal year) is the average of the percentage increase in the statewide average weekly wage, as determined by the State Department of Labor and Industry for the preceding calendar year, and the employment cost index for elementary and secondary schools, as reported by the federal Bureau of Labor Statistics for the preceding 12-month period beginning July 1 and ending June 30. If and when a school district has a Market Value/Income Aid Ratio greater than 0.40 for the prior school year, however, the Index is adjusted upward by multiplying the unadjusted Index by the sum of 0.75 and such Aid Ratio.
The Index applicable to the School District for the current and previous fiscal years is as follows:
Fiscal Year Applicable (ending June 30) Index % 2019-20 2.9 2018-19 3.0 2017-18 3.2 2016-17 3.1 2015-16 2.4
In accordance with the Taxpayer Relief Act, the Board of School Directors of the School District placed a referendum on the ballot for the May 15, 2007 primary election seeking voter approval to levy (or increase the rate of) an earned income tax or personal income tax and use the proceeds to reduce local real estate taxes by a homestead and farmstead exclusion. The referendum was not approved by a majority of the voters at the primary election.
A board of school directors may submit, but is not required to submit, a further referendum question to the voters at the municipal election in 2009 or any later year seeking approval to levy or increase the rate of an EIT or a PIT for the purpose of further funding homestead and farmstead exclusions, but the proposed rate of the EIT or PIT shall not exceed the rate which, when combined with any tax rate authorized at the 2007 primary election, is required to provide the maximum homestead and farmstead exclusions allowable under law.
The Taxpayer Relief Act also provides for gaming revenues received by the Commonwealth to be accumulated in the Property Tax Relief Reserve Fund (“Fund”). When the Fund has sufficient monies according to a formula, the Secretary of the Commonwealth announces that funds are available for distribution to school districts. The monies received by school districts from the Fund may only be used to provide a reduction in real estate taxes to qualified homestead/farmstead properties. To qualify for a homestead and/or farmstead tax reduction, the property must be owner-occupied and used for residential purposes. The monies received by the local school district from the Fund are offset on a dollar for dollar basis by reductions in the local real estate tax payments from owners of qualified homestead and farmstead properties.
THE FOREGOING SUMMARY OF THE TAXPAYER RELIEF ACT IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF THE PROVISIONS OF THE TAXPAYER RELIEF ACT NOR A LEGAL INTERPRETATION OF ANY PROVISION OF THE TAXPAYER RELIEF ACT, AND A PROSPECTIVE PURCHASER OF THE NOTES SHOULD REVIEW THE FULL TEXT OF THE TAXPAYER RELIEF ACT AS A PART OF ANY DECISION TO PURCHASE THE NOTES.
The Notes are Not Eligible for Act 1 Exceptions
The Notes are being issued after the effective date of Act 1 and, therefore, no exception to the referendum requirement is expect to pay debt service on the Notes is expected.
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Act 130 of 2008
Act 130 of 2008 of the Commonwealth amended the Local Tax Enabling Act so as to authorize school districts levying an occupation tax to replace such revenue with an increased earned income tax or, if the school district has implemented a personal income tax in accordance with the Taxpayer Relief Act, an increased personal income tax, in a revenue neutral manner. To replace an occupation tax, the board of school directors must first hold at least one public hearing on the matter and then place binding referendum question on the ballot at a general or municipal election for approval by the voters.
The School District had a public hearing at which time the referendum was approved to increase the earned income tax and eliminate the occupation tax under Act 130 of 2008.
SET FORTH ABOVE IS A SUMMARY OF PORTIONS OF ACT 130 OF 2008. THIS SUMMARY IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF THE PROVISIONS OF ACT 130 OF 2008 NOR A LEGAL INTERPRETATION OF ANY PROVISION OF ACT 130 OF 2008. A PROSPECTIVE PURCHASER OF THE NOTES SHOULD REVIEW THE FULL TEXT OF ACT 130 OF 2008 AS A PART OF ANY DECISION TO PURCHASE THE NOTES.
Act 48 of 2003 – Limitation on Fund Balances
Pennsylvania Act No. 2003-48 (enacted December 23, 2003) prohibits a school district from increasing real property taxes for the school year 2005-2006 or any subsequent school year, unless the school district has adopted a budget for such school year that includes an estimated ending unreserved undesignated fund balance which is not more than a specified percentage of the total budgeted expenditures, as set forth below:
Estimated Ending Unassigned Fund Balance as Total Budgeted Expenditures: a Percentage of Total Budgeted Expenditures: Less than or equal to $11,999,999 12.0% Between $12,000,000 and $12,999,999 11.5% Between 13,000,000 and $13,999,999 11.0% Between $14,000,000 and $14,999,999 10.5% Between $15,000,000 and $15,999,999 10.0% Between $16,000,000 and $16,999,999 9.5% Between $17,000,000 and $17,999,999 9.0% Between $18,000,000 and $18,999,999 8.5% Greater than or equal to $19,000,000 8.0%
“Estimated ending unreserved fund balance” is defined in Act 2003-48 as that portion of the fund balance which is appropriable for expenditure or not legally or otherwise segregated for a specific or tentative future use, projected for the close of the school year for which a school district’s budget was adopted and held in the general fund accounts of the school district.
SET FORTH ABOVE IS A SUMMARY OF PORTIONS OF ACT 48. THIS SUMMARY IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF THE PROVISIONS OF ACT 48 NOR A LEGAL INTERPRETATION OF ANY PROVISIONS OF ACT 48. A PROSPECTIVE PURCHASER OF THE NOTES SHOULD REVIEW THE FULL TEXT OF ACT 48 AS A PART OF ANY DECISION TO PURCHASE THE NOTES.
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TRENDS OF THE TEN LARGEST TAXPAYERS/ASSESSED VALUES, REAL PROPERTY TAX COLLECTION, TAX RATES, MARKET/ASSESSED VALUE TRENDS OF THE SCHOOL DISTRICT
Ten Largest Taxpayers and their Aggregate Assessed Values
The assessed value for these largest taxpayers represents 4.06% of the School District's total assessed valuation.
Taxable Taxpayer Assessed Values Freedom Village at Brandywine...... $ 33,600,000 Coatesville Hospital Corp. (1) ...... 16,802,840 FTP Millview LP ...... 12,647,050 First Montgomery Townhomes ...... 10,850,000 500 Meadowlake Drive ...... 8,822,290 Sikorsky Global Helicopter ...... 8,491,860 AMT-PMP Fairways Assoc...... 7,770,000 Parsons Coatesville LLC ...... 6,576,240 ISG Plating ...... 6,388,220 470 Manor Realty LLC ...... 6,231,600 Total ...... $118,207,100
(1) Recently purchased as nonprofit, the current taxpayer filed a request for an exemption on its real estate taxes with the Chester County Board of Tax Assessment Appeals, which denied the request for an exemption. The nonprofit organization has the right to appeal the board’s decision, or it could work out a deal to make payments in lieu of taxes (PILOTS).
The School District annually assigns fund balance in an amount it determines to be sufficient to offset a potential loss, if any, in taxpayer appeals. A successful appeal by the nonprofit organization would result in a revenue loss of less than ½ of 1% of real estate tax collections for the School District and would be included in any such fund balance set aside.
Source: School District officials
Real Property Tax Collection
The School District mails tax notices to taxpayers on or about July 1 of each year. The tax collection process of the School District allows taxpayers remitting in full prior to August 31 of each year a 2% discount on their tax obligations. Remittances between September 1 and October 31 are paid at face value, and taxpayers remitting after October 31 pay a 10% penalty. After December 31, all unpaid real estate taxes are turned over to the County Tax Claim Bureau for collection and delinquent collections are remitted monthly to the School District. In November 2019, the School District made an administrative decision to send its delinquent 2019 real estate taxes to Portnoff Law Associates, Ltd. for collection.
Percent of Current and Percent Adjusted Current Year Collected Prior Years' Collected Fiscal Year Levy Collections (Current) Collections (Total) 2014-2015 $ 88,103,962 $ 83,473,817 94.74 $ 88,320,122 100.25 2015-2016 90,837,272 86,893,434 95.66 91,485,817 100.71 2016-2017 93,483,906 89,182,981 95.40 93,129,748 99.62 2017-2018 97,913,613 93,725,822 95.72 98,292,337 100.39 2018-2019 103,730,878 100,227,690 96.62 100,986,694 97.35
Source: School District officials
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Real Property Millage Rates and Other (Act 511) Tax Rates of the School District
Real Estate Local Services Earned Income Real Estate Transfer Tax Tax Tax Fiscal Year (Mills) (%) ($) (%) 2015-16 32.7716 0.5 5.0 0.5 2016-17 33.4598 0.5 5.0 0.5 2017-18 34.9138 0.5 5.0 0.5 2018-19 36.7537 0.5 5.0 0.5 2019-20 38.2018 0.5 5.0 0.5
Source: School District Officials
Other Taxes Under Act 511. The School District has budgeted $10,330,000 in other taxes for 2019-20. Among the taxes authorized by Act 511, the Real Estate Transfer, Local Services and Earned Income Taxes are levied by the School District. The Act 511 limit, equal to 12 mills on the budgeted market value of real property was $51,276,862.
Real Estate Transfer Tax. The School District levies a tax at a rate 0.5% of the value of real estate transfers. In 2019-20 the School District’s share of the collected portion of this is budgeted to yield approximately $1,500,000 of the School District’s total revenue.
Local Services Tax. A tax of $10.00 is levied on each person with an occupation. In 2019-20 the School District’s share of the collected portion of this is budgeted to yield approximately $80,000 of the School District’s total revenue.
Earned Income Tax. A tax of 0.5% is levied on the earned income of residents. In 2019-20 the School District’s share of the collected portion of this is budgeted to yield approximately $8,750,000 of the School District’s total revenue.
Source: The Department 2028 Budget report for FYE June 30, 2020.
Comparative Real Property Millage Rates of the School District, Component Municipalities and its County
2015-16 2016-17 2017-18 2018-19 2019-20 School District ...... 32.7716 33.4598 34.9138 36.7537 38.2018 Caln Township ...... 3.4580 4.0580 3.4580 4.0580 4.0580 Coatesville City ...... 13.5790 13.5790 13.5790 13.5790 13.5790 East Fallowfield Township ...... 1.2500 1.2500 1.2500 1.2500 1.2500 Modena Borough ...... 6.4000 6.4000 6.4000 6.4000 6.4000 Sadsbury Township ...... 1.3000 1.3000 1.3000 1.3000 1.3000 South Coatesville Borough ...... 7.6000 7.6000 7.6000 7.6000 7.6000 Valley Township ...... 1.5000 1.5000 1.5000 1.5000 1.5000 West Brandywine Township ...... 2.3080 2.3080 2.3080 2.3080 2.3080 West Caln Township ...... 1.0000 1.0000 1.0000 1.0000 1.0000 Chester County...... 4.1630 4.3690 4.1630 4.3690 4.3690
Source: Chester County website (current and archived tax rates).
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Market Values and Assessed Values of the School District
Fiscal Year Market Value Assessed Value Ratio 2013-14 $4,030,076,198 $2,868,857,284 71.19% 2014-15 4,148,200,560 2,881,658,864 69.47% 2015-16 4,162,959,282 2,894,356,697 69.53% 2016-17 4,273,071,865 2,917,030,886 68.27% 2017-18 4,418,960,609 2,930,553,399 66.32%
Source: State Tax Equalization Board (“STEB”)/Tax Equalization Division (“TED”)
Comparative Market Values and Assessed Values of the School District, Component Municipalities and its County
2017 2017 2018 2018 Market Assessed Market Assessed Values Values Values Values School District ...... $ 4,273,071,865 $ 2,917,030,886 $4,418,960,609 $2,930,553,399 Caln Township ...... 1,149,998,068 713,316,329 1,210,152,414 720,844,082 Coatesville City ...... 354,294,578 253,676,460 365,052,167 254,612,370 East Fallowfield Township ...... 543,648,291 405,500,341 561,442,911 404,043,821 Modena Borough ...... 17,227,853 12,700,080 17,582,262 12,602,570 Sadsbury Township ...... 294,517,152 215,818,567 334,090,234 220,775,467 South Coatesville Borough ...... 83,681,323 60,501,780 81,478,138 60,531,160 Valley Township ...... 549,563,442 390,252,744 563,547,805 391,944,324 West Brandywine Township ...... 642,656,515 418,826,685 634,854,499 419,479,795 West Caln Township ...... 637,484,642 446,437,900 650,760,179 445,719,810 Chester County...... 58,830,683,735 37,595,989,177 62,405,913,737 38,705,155,578
Source: State Tax Equalization Board (“STEB”)/Tax Equalization Division (“TED”)
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COMMONWEALTH AID AND APPROPRIATIONS
Commonwealth Aid to School Districts
Pennsylvania school districts receive financial assistance from the Commonwealth in a number of forms, all subject to statutory provisions and annual appropriation by the Pennsylvania General Assembly.
Basic education funding is allocated to all school districts in an amount equal to: (1) a fixed sum equal to the school district’s Fiscal Year 2014-15 basic educational funding; plus (2) an additional increment determined annually pursuant to statutory formula which adjusts a school district’s average daily membership by a number of factors specific to the composition of the student population as well as the school district’s median household income, local tax effort and capacity to generate local revenue. The additional increment as calculated above for any individual school district may be zero.
The School District’s Fiscal Year 2014-15 funding amount was $23,465,564.71.
Information concerning the calculation of the School District’s basic education funding can be found on the Pennsylvania Department of Education’s website at https://www.education.pa.gov
School districts may also receive state aid for special education, pupil transportation, vocational education, and health services, among other things.
Commonwealth law presently provides that the School District will receive reimbursement from the Commonwealth for a portion of the debt service on its bonds and notes after said bonds and notes have received final approval of the Department of Education. Commonwealth reimbursement is based on the "Reimbursable Percentage" assigned to the bonds and notes and the School District's Aid Ratio or CARF, whichever is higher. The School District’s MVAR is currently higher at 51.884%. The Reimbursable Percentage is determined through a process known as the “Planning and Construction Workbook” or “PlanCon”. In future years, this percentage may change as the School District’s MVAR changes, or as a result of future legislation regarding changes to, or even elimination of, the PlanCon program.
In May of 2016, the Commonwealth enacted appropriation legislation known as Act 25 (“Act 25”), which contains authorization for the Commonwealth Finance Authority (“CFA”) to issue up to $2.5 billion of debt to fund PlanCon reimbursements to school districts. Act 25 also instituted a moratorium on new projects entering the PlanCon process while an advisory committee established under Act 25 considers amendments to the PlanCon reimbursement program. This moratorium went into effect on May 15, 2016 and expired on June 30, 2017. On November 6, 2017, House Bill 178 became law without the signature of the Governor and became known as Act 55 of 2017. Contained in Act 55 of 2017 was an extension of the PlanCon moratorium through the end of the 2017-18 fiscal year and a retroactive effective date of July 1, 2017. Subsequently, the Commonwealth enacted Act 42 of 2018, which permitted PlanCon applications submitted between July 1, 2017 and November 6, 2017, and whose school district votes to proceed with construction and award bids on their construction contracts no later than July 1, 2021, to receive PlanCon funding as permitted by law, if made available by the Commonwealth. On June 22, 2018, the Governor approved and signed House Bill 1448, known as Act 39 of 2018, extending the PlanCon moratorium through the end of the 2018-2019 fiscal year. On June 28, 2019, the Governor approved and signed House Bill 1615, known as Act 16 of 2019, further extending the PlanCon moratorium through the end of fiscal year 2019- 2020.
To date, the CFA has issued $1,170,705,000, to provide for PlanCon reimbursements owed to school districts, consisting of the issuance of its Revenue Bonds, Series A of 2016 (Federally Taxable) in the principal amount of $758,185,000 issued on October 31, 2016 and its Revenue Bonds, Series of 2019 (Federally Taxable) in the total amount of $412,520,000 issued on January 18, 2018. It is expected that proceeds of these issues will be used to provide PlanCon reimbursement to the School District for the current and future fiscal years. However, the School District cannot be certain that any future PlanCon reimbursement will be received by the Department as the ability for CFA to issue additional bonds in the future to fund future PlanCon reimbursements owed to school districts may impact the availability of PlanCon reimbursements payable to the School District. Any failure by the Commonwealth to adopt a timely budget and enact necessary spending authorizations could have a material adverse effect upon the School District’s anticipated receipt of PlanCon reimbursements.
There can be no assurances that the School District will be able to successfully apply for, be awarded, and receive sufficient PlanCon reimbursement for the costs of any current or future projects of the School District. A failure by the School District to receive such reimbursement could force the School District to apply other available funds, if any, toward the completion costs of the Project and may have a material adverse effect on the financial resources of the School District to fund other obligations, including payment of debt service on its bonds and notes.
Legislation has been introduced from time to time in the Pennsylvania legislature containing language that would revise or even abolish the debt service reimbursement program for Pennsylvania school districts. As of the date of this Offering Memorandum, none of these proposals have been signed into law. To the extent that any future legislation contains material changes to the PlanCon program as currently is structured, the amount of PlanCon reimbursement to the School District may be positively or negatively affected, which could materially impact the amount of local funds needed to be raised by the School District to pay debt service or its debt obligations.
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STATEMENT OF LONG-TERM INDEBTEDNESS DIRECT DEBT (NON ELECTORAL & LEASE RENTAL), OVERLAPPING DEBT, DEBT RATIOS AND DEBT LIMITS
Debt Statement
NONELECTORAL DEBT As of June 25, 2020 Project DIRECT DEBT Gross Reimbursable Net Effective State Local (1) (2) Issue Type Outstanding % Reimbursement Share Share General Obligation Notes, Series D of 2020 (Federally Taxable)(CABs) $12,345,182 29.43% 15.27% $1,884,897 $10,460,284 General Obligation Notes, Series C of 2020 (CABs) 3,005,755 29.43% 15.27% 458,927 2,546,828 General Obligation Bonds, Series B of 2020 (CABs) 6,432,770 22.08% 11.46% 736,880 5,695,889 General Obligation Bonds, Series A of 2020 (CABs) 21,050,075 0.00% 0.00% 0 21,050,075 General Obligation Notes, Series of 2020 59,493,000 0.00% 0.00% 0 59,493,000 General Obligation Notes, Series of 2019 23,055,000 22.08% 11.33% 2,612,131 20,442,869 General Obligation Bonds, Series of 2017 44,060,000 29.43% 15.11% 6,657,466 37,402,534 General Obligation Bonds, Series of 2013 (CABs) 649,589 0.00% 0.00% 0 649,859 TOTAL PRINCIPAL OF DIRECT DEBT $170,091,370 $12,350,303 $157,741,068
LEASE RENTAL DEBT Coatesville Area School District Authority School Lease Revenue Bonds, Series of 2018 $12,395,000 TOTAL PRINCIPAL OF LEASE RENTAL DEBT $12,395,000
TOTAL PRINCIPAL OF DIRECT AND LEASE RENTAL DEBT $182,486,370
OVERLAPPING DEBT Component Municipalities Debt $34,899,412 (3) Chester County 40,209,921 TOTAL PRINCIPAL OF OVERLAPPING DEBT $75,109,333
TOTAL DIRECT, LEASE RENTAL AND OVERLAPPING DEBT $257,595,703
DEBT RATIOS OF DIRECT AND OVERLAPPING DEBT Direct Debt to Market Value Market Valuation of Real Estate ...... 4.13% Assessed Valuation of Real Estate ...... 6.23% Per Capita (2010 Population) ...... $2,899
Overlapping Debt to Market Value Market Valuation of Real Estate ...... 1.70% Assessed Valuation of Real Estate ...... 2.56% Per Capita (2010 Population) ...... $1,193
FINANCIAL FACTORS OF THE SCHOOL DISTRICT Market Value ...... $4,418,960,609 Assessed Value ...... $2,930,553,399 Population (2010) ...... 62,976
(1) Product of the project reimbursable percentage multiplied by the School District’s MVAR of 51.88% for 2016-17. (2) Gives effect to current appropriations for payment of debt service and expected future Commonwealth Reimbursement of School District sinking fund payments based on its MVAR. See “Commonwealth Aid to School Districts” above. (3) Pro rata share of 7.84% percent of $585,660,000 principal amount outstanding.
Source: PA - Department of Community and Economic Development (“DCED”) – Local Government Unit Debt Act (“LGUDA”) reports.
Limitation on Maximum Size of Notes under IRS Regulations
The size of the Notes is limited by the Internal Revenue Code of 1986 and regulations thereunder to maintain the excludability of interest from gross income of the holders. The School District has calculated the size of the Notes so that it will experience a time during the period when the Notes are outstanding when available fund balances to pay operating expenses are less than 10% of the proceeds of the Notes.
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LABOR RELATIONS
School District Employees
There are presently approximately 677 full-time employees of the School District, including 521 teachers and administrators, and 156 full-time support personnel including secretaries, athletic staff, maintenance/custodial staff, transportation staff, cafeteria staff, and teachers’ aides.
The School District is under contract with the Coatesville Area Teachers Association (“CATA”), which is affiliated with the Pennsylvania State Education Association covering the professional employees of the School District other than administrators. CATA acts as bargaining agent for its members under the conditions of Pennsylvania Law (Act 195) providing for collective bargaining. Members of CATA have a right to strike if bargaining and mediation do not result in agreement on a new contract. The current contract with CATA expires August 31, 2021. Negotiations will begin in January 2021.
In addition to CATA, the School District is under contract with two other bargaining units: The Coatesville Area Federation of Educational Employees (Federation), representing custodial, cafeteria, and maintenance employees, which contract expires on June 30, 2023; and Teamsters Local Union No. 384 (CATSS), representing support staff, which contract expires on June 30, 2023.
Source: School District officials
PENSION PROGRAM
Pension Contributions
School Districts in Pennsylvania are required to participate in a statewide pension program administered by the Public School Employees Retirement System (PSERS). All of the School District's full-time employees, part-time employees who work more than 80 days in a school year, and hourly employees who work over 500 hours a year participate in the program. However, a Pennsylvania Supreme Court decision (1) has removed the hourly de minimis requirement for current members of PSERS regarding the purchase of credit for their part-time school service rendered prior to their being members of PSERS, for purposes of increasing their pension benefits.
(1)Pennsylvania Sch. Boards Ass'n, Inc. v. Com., Pub. Sch. Employees' Ret. Bd., 580 Pa. 610, 612, 863 A.2d 432, 434 (2004).
The PSERS Board of Trustees certified an annual employer contribution rate of 25.84% for fiscal year 2015-16. The 25.84% employer contribution rate is composed of 0.84% for health insurance premium assistance and a pension rate of 25.00%. The pension component of the rate was capped at a 4.50% increase from the previous year. On December 8, 2015 the Board of Trustees certified an annual employer contribution rate of 30.03% for fiscal year 2016-17, which commenced on July 1, 2016. Total employer contributions for fiscal year 2016-17 are estimated at $4.1 billion.
The Commonwealth reimburses school employers for not less than 50% of the total employer contribution rate. The gross contributions for the School District are as follows:
Fiscal Year Ending Annual Gross June 30, Pension Contribution 2014-15 $ 9,887,000 2015-16 12,126,113 2016-17 13,930,977 2017-18 13,984,574 2018-19 13,510,559 2019-20 (Budgeted) 14,147,231
PSERS is also funded through investment earnings and mandatory member contributions. Investment earnings are the largest source of funding for PSERS. For the most recent fiscal year ended June 30, 2015, PSERS’ investments added over $1.3 billion in investment income (net of fees) to the fund. PSERS members contribute from 5.25% to 10.30% of payroll depending on their membership class and when they joined PSERS. Members will contribute an average of 7.52% of their salary to fund their retirement benefit in fiscal year 2016-17. Member contributions of approximately $1 billion are expected in fiscal year 2016-17.
In June 2012, the Government Accounting Standards Board (“GASB”) issued “Statement No. 68 Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No 27.” The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. The new accounting standard requires the School District to report in its government-wide financial statements its proportionate share of the new pension liability of the pension systems to which it contributes. GASB 68 is effective for fiscal years beginning after June 15, 2014, which, in the case of the School District will begin with fiscal year ending June 30, 2015. Please see the School District’s Audited Financial Statements for fiscal year ending June 30, 2016 in Appendix F for the net effects of the implementation of GASB 68.
Source: Pennsylvania School Board Association at www.PSBA.org and PSERS at www.PSERS.state.pa.us, for additional information.
Other Post-Employment Benefits
The School District is obligated under collective bargaining agreements to provide in the future health insurance coverage for current and a few qualified future retired employees, and to provide retirement severance pay for qualified existing employees. The School District became subject to the requirements of GASB Statements No. 43 and 45, which required the present value of future other post-employment benefits to be reflected as a liability on the School District's financial statements which commenced with the School District's annual financial statements for the fiscal year ending June 30, 2009. For a full description of the plan, please refer to Appendix F – Audited Financial Statements - Fiscal Year Ended June 30, 2019.
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APPENDIX B
DEMOGRAPHIC CHARACTERISTICS RELATING TO THE SCHOOL DISTRICT
DEMOGRAPHIC CHARACTERISTICS
The following tables provide population trends, age, and wealth and housing indices for the School District, Chester County and the Commonwealth of Pennsylvania (the Commonwealth”).
Population Trends
% of Political Change Subdivision 2000 2010 2000-2010 School District Caln Township ...... 11,916 13,817 1.49% Coatesville City ...... 10,838 13,100 1.91% East Fallowfield Township ...... 5157 7449 3.75% Modena Borough ...... 610 535 -1.30% Sadsbury Township ...... 2582 3570 3.29% South Coatesville Borough ...... 997 1,303 2.71% Valley Township ...... 5,116 6,794 2.88% West Brandywine Township ...... 7153 7394 0.33% West Caln Township ...... 7054 9014 2.48% Total ...... 51,423 62,976 2.05%
Chester County...... 433,501 498,886 1.41% Commonwealth ...... 12,281,054 12,702,379 0.34%
Source: U.S. Census Bureau
Age Composition - 2010
Percent Percent Percent 65 Municipality Median Age Under 5 18+ and Over School District Caln Township ...... 38.5 7.5 80.6 11.4 Coatesville City ...... 29.9 9.6 69.6 8.3 East Fallowfield Township ...... 37.9 8.8 74.5 9.5 Modena Borough ...... 31.5 11.0 68.8 9.5 Sadsbury Township ...... 37.4 7.9 75.2 9.7 South Coatesville Borough ...... 32.9 9.1 73.4 12.0 Valley Township ...... 37.2 8.2 75.9 14.6 West Brandywine Township ..... 45.5 5.3 78.0 17.1 West Caln Township ...... 41.9 6.3 75.9 13.8
Chester County...... 38.1 6.2 75.1 12.8 Commonwealth ...... 39.9 5.9 78.0 15.4
Source: Pennsylvania State Data Center; U.S. Bureau of Census.
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Income - 2010
Median Household Municipality Income Per Capita Income School District Caln Township ...... 74,227 33,905 Coatesville City ...... 35,553 18,153 East Fallowfield Township ...... 81,509 31,851 Modena Borough ...... 51,875 25,608 Sadsbury Township ...... 77,551 31,603 South Coatesville Borough ...... 41,944 26,448 Valley Township ...... 61,366 28,707 West Brandywine Township ...... 84,167 37,377 West Caln Township ...... 75,717 31,075
Chester County...... 84,284 40,138 Commonwealth ...... 49,288 26,374
Source: Pennsylvania State Data Center; U.S. Bureau of Census.
Occupied Housing Units - 2010
Average Municipality Total Housing Units Owner Renter Total Household Size Caln Township ...... 5,612 3,837 1,422 5,259 2.51 Coatesville City ...... 4,988 1,681 2,817 4,498 2.86 East Fallowfield Township ...... 2,762 2,418 222 2,640 2.81 Modena Borough ...... 209 85 104 190 2.82 Sadsbury Township ...... 1,361 1,131 180 1,311 2.72 South Coatesville Borough ...... 551 292 209 501 2.60 Valley Township ...... 2,828 2,193 463 2,656 2.54 West Brandywine Township ..... 2,980 2,519 328 2,847 2.56 West Caln Township ...... 3,364 2,965 295 3,260 2.76
Chester County...... 192,462 139,328 43,572 182,900 2.65 Commonwealth ...... 5,567,315 3,491,722 1,527,182 5,018,904 2.45
Source: Pennsylvania State Data Center; U.S. Bureau of Census. Census data for each municipality in its entirety.
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Medical Facilities
The following table lists the ten hospitals and their locations that service the residents of the School District. Residents also have access to seven medical teaching hospitals in Philadelphia as well as other major hospitals located in the metropolitan Philadelphia area. Additionally, Wilmington, Delaware area has five acute care hospitals with bed capacity of over 1,500 beds and employ over 4,000 people.
Institution Location Brandywine Hospital Coatesville Bryn Mawr Rehabilitation Hospital Malvern Chester County Hospital West Chester Devereux – Mapleton Center Malvern Jennersville Regional Hospital West Grove Malvern Institute Malvern Paoli Memorial Hospital Paoli Phoenixville Hospital of UPHS Phoenixville Veterans’ Administration Medical Center Coatesville Villa St. John Vianny Center Downingtown
Transportation
Residents of Chester County are served by a network of interlocking local, state and federal highways which connect the major employment centers of the Delaware Valley, City of Philadelphia, Great Valley Corporate Center, Valley Forge and King of Prussia Industrial Parks, West Chester and Wilmington, Delaware. U.S. Route 30 traverses the County in an east-west direction and U.S. Route 202 crosses the County in the northeast-southeast direction connecting the area with Norristown via King of Prussia to the north and Wilmington, Delaware via West Chester to the south.
Travel has been enhanced by the completion of the Exton bypass, an approximately $130 million project which provides direct inter- connection of three separate limited access roadways including U.S. 202, Pennsylvania Route 100 Spur and the Coatesville-Downingtown bypass. The Exton bypass improved the inter-state, inter-city and inter-regional functions of U.S. Route 30 by improving access between Pennsylvania, Delaware and New Jersey.
Significant improvements in the capacity of U.S. Route 202 are currently in progress. Specifically, in the eastern section of the County, a five mile link is currently being expanded from four to six and eight lanes.
Railroad services, both passenger (Amtrak, in conjunction with the Southeastern Pennsylvania Transportation Authority) and freight is provided by the main line of Conrail (CSX Corporation). The Southeastern Pennsylvania Transportation Authority also provides frequent bus service to West Chester, Ardmore and the 69th Street Terminal of the Market Street Elevated train which provides direct commutation to center city Philadelphia. Residents of the County utilize both the Chester County Airport, located outside the City of Coatesville and the Philadelphia International Airport which is one of the larger regional airports in the Delaware Valley providing both jet and propeller aircraft facilities.
Utilities
The Philadelphia Electric Company (PECO) supplies natural gas and electricity to the School District residents. Local phone service is provided by Verizon. Water is furnished to the majority of the School District area by Pennsylvania American.
Educational Institutions
Residents of the School District benefit from a number of cultural and economic advantages provided by the educational institutions located in the vicinity of the School District. These include: Cheyney University, located in Cheyney, the oldest minority institution in the U.S., which offers 4-year liberal arts degree and has an estimated student enrollment of approximately 10,000; Immaculata University, located in Immaculata, a Catholic co-educational liberal arts college, offering day classes, evening classes and a graduate school program, having an enrollment of approximately 4,057 full and part-time students; Lincoln University, located in Lincoln University, the nation’s oldest continuously operating college founded to provide higher education to youths of African descent, has approximately 3,275 undergraduate and graduate degree- seeking students; Penn State – Great Valley, located in Malvern, is a special mission campus of the Penn State University, offering graduate and continuing education courses to approximately 1,900 adult, part-time students; Valley Forge Christian College, located in Phoenixville, an Assemblies of God institution for vocational ministry and ministry-related endeavors, grants a bachelor of science and bachelor of religious education and has an approximate enrollment of 1,200 students; Delaware County Community College, which has an approximate enrollment of 28,000 at its Chester and Delaware County locations; and West Chester University, located in West Chester, the largest 4-year liberal arts college in Chester County, has a total enrollment of more than 14,211.
B-3
ECONOMIC AND EMPLOYMENT
Labor Force, Employment and Unemployment Trends
Chester County* Time Period Labor Force Employed Unemployed Unemployment Rate 2012 273,000 257,600 15,400 5.6% 2013 273,400 259,000 14,500 5.3% 2014 273,700 262,300 11,400 4.2% 2015 276,400 266,200 10,200 3.7% November 2016 278,400 268,500 9,900 3.5%
Pennsylvania* Time Period Labor Force Employed Unemployed Unemployment Rate 2012 6,466,000 5,954,000 513,000 7.9% 2013 6,460,000 5,982,000 478,000 7.4% 2014 6,378,000 6,009,000 370,000 5.8% 2015 6,424,000 6,094,000 330,000 5.1% December 2016 6,420,000 6,108,000 312,000 4.9%
*Not seasonally adjusted. Source: Pennsylvania Department of Labor and Industry, Center for Workforce Information and Analysis website.
Top Employers of Chester County (2nd Q 2016)
Chester County
Name Vanguard Group Inc. QVC Network Inc. County of Chester Federal Government The Chester County Hospital Main Line Hospitals Inc. Giant Food Stores LLC Cerner Health Services Inc. YMCA of Greater Brandywine Valley The Devereux Foundation
Source: Center for Workforce Information & Analysis - Quarterly Census of Employment and Wages.
B-4
Distribution of Employment by Industry MONTGOMERY-BUCKS-CHESTER, PA METROPOLITAN DIVISION (Bucks, Chester, and Montgomery – PA Counties)
Industry Employment Net Change From: November October September November October November ESTABLISHMENT DATA 2016 2016 2016 2015 2016 2015 TOTAL NONFARM 1,059,900 1,056,800 1,048,600 1,046,400 3,100 13,500 TOTAL PRIVATE 975,100 972,400 966,400 961500 2,700 13,600 GOODS-PRODUCING 144,500 145,500 146,100 140,900 -1,000 3,600 Mining, Logging, and Construction 52,300 53,300 53,700 51,100 -1,000 1,200 Manufacturing 92,200 92,200 92,400 89,800 0 2,400 Durable Goods 47,700 47,600 47,700 45,600 100 2,100 Non-Durable Goods 44,500 44,600 44,700 44,200 -100 300 Chemical Mfg. 19,800 19,800 19,900 19,200 0 600 SERVICE-PROVIDING 915,400 911,300 902,500 905,500 4,100 9,900 PRIVATE SERVICE-PROVIDING 830,600 826,900 820,300 820,600 3,700 10,000 Trade, Transportation, and Utilities 209,600 206,700 204,200 207,800 2,900 1,800 Wholesale Trade 59,200 59,000 58,200 56,700 200 2,500 Retail Trade 122,100 119,700 117,700 122,500 2,400 -400 General merchandise stores 20,000 18,800 18,200 20,200 1,200 -200 Transportation, Warehousing, and Utilities 28,300 28,000 28,300 28,600 300 -300 Information 20,700 20,700 20,700 20,900 0 -200 Financial Activities 79,800 79,700 79,400 78,100 100 1,700 Finance and insurance 65,600 65,400 65,200 63,900 200 1,700 Credit intermediation and related activities 15,900 15,800 15,900 15,600 100 300 Depository credit intermediation 9,700 9,700 9,800 9,800 0 -100 Insurance carriers and related activities 27,500 27,500 27,500 27,500 0 0 Real estate and rental and leasing 14,200 14,300 14,200 14,200 -100 0 Professional Business Services 204,900 203,000 202,800 201,200 1,900 3,700 Professional and technical services 107,300 105,200 105,800 105,700 2,100 1,600 Scientific research and development services 16,800 16,500 16,500 15,700 300 1,100 Management of companies and enterprises 27,600 27,500 27,700 26,300 100 1,300 Administrative and waste services 70,000 70,300 69,300 69,200 -300 800 Education and Health Services 182,300 181,200 178,500 182,000 1,100 300 Educational services 28,500 28,200 26,300 28,700 300 -200 Health care and social assistance 153,800 153,000 152,200 153,300 800 500 Ambulatory health care services 58,400 58,100 57,600 57,700 300 700 Hospitals 31,200 31,100 31,000 31,300 100 -100 Nursing and residential care facilities 36,400 36,300 36,300 36,800 100 -400 Social assistance 27,800 27,500 27,300 27,500 300 300 Leisure and Hospitality 85,600 88,000 88,300 83,600 -2,400 2,000 Accommodation and food services 70,100 71,500 70,500 68,880 -1,400 1,220 Other Services 47,700 47,600 46,400 47,000 100 700 Government 84,800 84,400 82,200 84,900 400 -100 Federal Government 6,100 6,200 6,100 6,000 -100 100 State Government 9,900 9,800 9,800 9,800 100 100 Local Government 68,800 68,400 66,300 69,100 400 -300 Local government educational services 48,600 48,200 46,000 49,100 400 -500 Local government excluding educational services 20,200 20,200 20,300 20,000 0 200 Data benchmarked to March 2015 ***Data changes of 100 may be due to rounding***
Source: Center for Workforce Information & Analysis, Pennsylvania Department of Labor & Industry – November 2016 Newsletter.
B-5 APPENDIX C
Estimated General Fund Cash Flows for 2019-20 and 2020-21 Coatesville Area School 2019-20 Cash Flow Summary
Estimated Estimated Cumulative Month Opening Balance Receipts Disbursements Surplus / Deficit Jul-19 $20,230,069 $5,647,412 $14,502,482 $11,374,999 Aug-19 $11,374,999 $38,604,570 $16,769,067 $33,210,501 Sep-19 $33,210,501 $55,489,907 $18,058,708 $70,641,700 Oct-19 $70,641,700 $18,167,001 $14,295,648 $74,513,053 Nov-19 $74,513,053 $14,030,014 $13,639,910 $74,903,158 Dec-19 $74,903,158 $11,155,124 $14,614,721 $71,443,560 Jan-20 $71,443,560 $8,018,966 $17,755,579 $61,706,948 Feb-20 $61,706,948 $4,937,093 $13,842,737 $52,801,303 Mar-20 $52,801,303 $4,639,418 $18,185,315 $39,255,406 Apr-20 $39,255,406 $8,777,719 $13,984,243 $34,048,882 May-20 $34,048,882 $7,239,389 $13,834,929 $27,453,342 Jun-20 $27,453,342 $2,957,931 $27,381,478 $3,029,795 Total $179,664,544 $196,864,817 Coatesville Area School 2020-21 Cash Flow Summary
Estimated Estimated Cumulative Month Opening Balance Receipts Disbursements Surplus / Deficit Jul-20 $10,000,000 $5,757,762 $17,143,251 ($1,385,489) Aug-20 ($1,385,489) $45,919,828 $11,311,695 $33,222,644 Sep-20 $33,222,644 $50,049,361 $17,905,939 $65,366,065 Oct-20 $65,366,065 $14,414,699 $13,261,064 $66,519,700 Nov-20 $66,519,700 $9,711,425 $14,319,176 $61,911,950 Dec-20 $61,911,950 $15,039,096 $15,402,358 $61,548,688 Jan-21 $61,548,688 $2,889,495 $13,836,997 $50,601,185 Feb-21 $50,601,185 $6,404,031 $14,115,747 $42,889,469 Mar-21 $42,889,469 $5,591,166 $16,839,511 $31,641,123 Apr-21 $31,641,123 $4,648,591 $13,526,752 $22,762,962 May-21 $22,762,962 $3,890,197 $12,840,286 $13,812,873 Jun-21 $13,812,873 $11,584,351 $21,638,927 $3,758,297 Total $175,900,001 $182,141,703
APPENDIX D
FINANCIAL STATEMENTS
COATESVILLE AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Year Ended June 30, 2019 INTRODUCTORY SECTION COATESVILLE AREA SCHOOL DISTRICT TABLE OF CONTENTS YEAR ENDED JUNE 30, 2019
Page
Introductory Section
Table of Contents 1
Financial Section
Independent Auditors’ Report 3
Management’s Discussion and Analysis (Unaudited) 6
Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Position 19
Statement of Activities 20
Fund Financial Statements
Governmental Funds
Balance Sheet 21
Reconciliation of Total Governmental Funds Balances to Net Position of Governmental Activities 22
Statement of Revenues, Expenditures and Changes in Fund Balances 23
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 24
Proprietary Fund
Statement of Net Position 25
Statement of Revenues, Expenses and Changes in Net Position 26
Statement of Cash Flows 27
Fiduciary Fund
Statement of Fiduciary Net Position 28
Statement of Changes in Fiduciary Net Position 29
- 1 - COATESVILLE AREA SCHOOL DISTRICT TABLE OF CONTENTS YEAR ENDED JUNE 30, 2019
Page
Notes to the Basic Financial Statements 30
Required Supplementary Information
Budgetary Comparison Schedule 63
Note to the Budgetary Comparison Schedule 64
Schedule of the School District’s Proportionate Share of the PSERS Net Pension Liability 65
Schedule of the School District’s PSERS Pension Contributions 66
Schedule of the School District’s Proportionate Share of the PSERS Net Other Postemployment Benefit Plan Liability 67
Schedule of the School District’s PSERS Other Postemployment Benefit Plan Contributions 68
Schedule of Changes in the Total Other Postemployment Benefit Plan Liability and Related Ratios 69
Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 70
Independent Auditors’ Report on Compliance for Each Major Federal Program; and Report on Internal Control over Compliance in Accordance With the Uniform Guidance 72
Supplementary Information - Major Federal Award Programs Audit
Schedule of Expenditures of Federal Awards 74
Notes to the Schedule of Expenditures of Federal Awards 76
Schedule of Findings and Questioned Costs 77
- 2 - FINANCIAL SECTION Maillie LLP | maillie.com PO Box 680, Oaks, PA 19456-0680 600 Willowbrook Lane, Suite 624, West Chester, PA 19382 PO Box 11847, Wilmington, DE 19850-1847
Independent Auditors’ Report
To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund and the aggregate remaining fund information of the Coatesville Area School District as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Coatesville Area School District's basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
- 3 - To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Coatesville Area School District as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 6 through 18, budgetary comparison information on pages 63 and 64, schedule of the school district’s proportionate share of the PSERS net pension liability on page 65, schedule of the school district’s PSERS pension contributions on page 66, schedule of the school district’s proportionate share of the PSERS net other postemployment benefit plan liability on page 67, schedule of the school district’s PSERS other postemployment benefit plan contributions on page 68 and schedule of changes in the total other postemployment benefit plan liability and related ratios on page 69 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Coatesville Area School District‘s basic financial statements. The schedule of expenditures of federal awards, as required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and is not a required part of the basic financial statements.
- 4 - To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
The schedule of expenditures of federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2019, on our consideration of the Coatesville Area School District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Coatesville Area School District’s internal control over financial reporting and compliance.
Oaks, Pennsylvania December 18, 2019
- 5 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
Management’s Discussion and Analysis (“MD&A”) for the Coatesville Area School District's (“the District”) financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, 2019. The intent of the MD&A is to look at financial performance as a whole. Readers should review the basic financial statements and corresponding notes to the financial statements to enhance their understanding of the District's financial performance.
The MD&A is an element of the reporting model adopted by the Governmental Accounting Standards Board (“GASB”) in their Statement No. 34, “Basic Financial Statements – Management’s Discussion and Analysis – for State and Local Governments.” Certain comparative information between the current year and the prior year is required to be presented in the MD&A.
SCHOOL DISTRICT
The District is a public school district in Chester County, Pennsylvania organized under the Public School Code of Pennsylvania. The District provides educational programs from kindergarten through twelfth grade to students who are residents of the District and to non-residents on a tuition basis.
MISSION STATEMENT
The Mission of the Coatesville Area School District, rich in diversity and committed to excellence, is to create innovative educational experiences which are funded by the taxpayers, supported by the community, delivered by dedicated teachers and administrators, to ensure all students will become responsible, contributing global citizens.
FINANCIAL HIGHLIGHTS
Overall, the District ended the 2018-2019 fiscal year with a $859,952 decrease in overall net position. The District’s net deficit totaled $169,104,814 at June 30, 2019. The Net Change in the Fund Balance for all Governmental Funds decreased by $7,480,062 to $10,100,259.
The General Fund reported a positive total fund balance at June 30, 2019 of $4,784,549, which represents a decrease of $6,469,540 from the previous year. The decrease is the result of the District budgeting to use fund balance to cover increasing charter school tuition and rising special education costs that outpace the District’s increases in revenues. The 2019-2020 budget approved in June 2019 included the appropriation of $4,482,205 of fund balance, which has been included in the assigned fund balance.
The District’s General Fund balance at June 30, 2019, of $4,784,549 did not meet the guidelines of Board Policy 620 – Fund Balance, which states the unassigned portion of the fund balance is not to be less than 5% of the General Fund budgeted expenditures nor more than 8% of budgeted expenditures for that fiscal year. If the unassigned portion of the fund balance falls below the threshold of five percent (5%) of budgeted expenditures, the Board will pursue options for increasing revenues and decreasing expenditures, or a combination of both until five percent (5%) is attained. The District is considering multiple options as it begins to develop its 2020-2021 General Fund Budget.
The Capital Reserve Fund reported a positive total fund balance of $887,242 and the Capital Projects Fund reported a positive total fund balance of $4,428,468.
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Total Governmental Funds revenues and other financing sources were $173,186,219 compared to expenditures and other financing uses in the amount of $180,666,281. General Fund revenues were $172,250,673 with other funds having total revenues of $935,546. General Fund revenues consist of 67.42% local revenue, 30.66% state revenue, and 1.92% federal revenues including grant funds. Other revenue funds consist of the Food Service Fund with revenues of $3,044,493 and expenditures of $2,815,207 resulting in an increase in net position of $229,286.
FINANCIAL STATEMENTS
The financial statements consist of three parts: Management’s Discussion and Analysis (this section), the basic financial statements, and required supplementary information (“RSI”). The basic financial statements include two kinds of statements that present different views of the District.
The first two statements are government-wide financial statements – the Statement of Net Position and the Statement of Activities. These provide both long-term and short-term information about the District’s overall financial status.
The remaining statements are fund financial statements that focus on individual parts of the District’s operations in more detail than the government-wide statements.
The governmental funds statements tell how basic services such as regular and special education were financed in the short term as well as what remains for future spending.
Proprietary fund statements offer short-term and long-term financial information about the activities that the District operates like a business. For the District, this is the Food Service Fund.
Fiduciary fund statements provide information about financial relationships where the District acts solely as a trustee or agent for the benefit of others.
The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and reports the financial statements.
- 7 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
Figure A-1 shows how the required parts of the Financial Sections are arranged and relate to one another:
Figure A-1 Required Components of Coatesville Area School District’s Financial Report
- 8 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
Figure A-2 summarizes the major features of the financial statements, including the portion of the program they cover and the types of information they contain. The remainder of this overview section of management discussion and analysis explains the structure and contents of each of the statements.
Figure A-2 Major Features of Coatesville Area School District’s Government-wide and Fund Financial Statements
- 9 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
OVERVIEW OF FINANCIAL STATEMENTS
Impact of GASB Statements No. 68, 71 and 75
During the 2014-2015 year, the District implemented Governmental Accounting Standards Board (“GASB”) Statement No. 68, “Accounting and Financial Reporting for Pensions,” and GASB Statement No. 71, “Pension Transition for Contributions Made Subsequent to Measurement Date – An Amendment of GASB Statement No. 68.” During the 2017-2018 fiscal year, the District implemented GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pension.” The purpose of these statements is to improve the transparency, consistency, and comparability of the pension and other postemployment benefit information reported by state and local governments (e.g. school districts).
The adoption of these statements has had, and will continue to have, a profound effect on the financial statements and net position of school districts and governments not only in Pennsylvania, but across the nation. By recognizing the impact of any unfunded liability faced by defined benefit pension and OPEB plans, plan administrators (at the direction of elected officials) and participants will be required to evaluate the cost of providing these benefits as compared to the benefit to be derived through providing for certain retirement benefits to the workforce.
The net pension liability is the difference between the market value of pension fund assets and the actuarial present value of projected benefit payments at the measurement date. Included in the calculation are projected employer and employee contributions as well as the expectation that the assets will grow at the long-term assumed rate of return on plan investments. Similarly, the net OPEB liability is the difference between the market value of OPEB fund assets and the actuarial present value of the projected retiree healthcare benefits as a specified measurement date.
While both the net pension liability and the net OPEB liability are significant to the District’s financial statements, they are liabilities the District has limited control over. Over the last nine years, the PSERS employer contribution rate has risen significantly, from 6.24% in 2010-2011 to 33.43% in 2018-2019. These increases are expected to improve the plan’s funding level, which will reduce the net pension liability in future years. This rate is anticipated to continue to increase to a level of over 36% in future years. In addition, the benefits paid by the District to eligible retirees for retiree healthcare benefits are governed by the collective bargaining agreements and contract in effect at the time of a given retiree’s retirement; until these individuals receive their full benefits and future bargaining agreements and contracts are modified, the District will have very limited control over the value of its net OPEB liability.
Government-Wide Statements
The government-wide statements report information about the District as a whole using accounting methods similar to those used by private sector companies. The statements of net position include all of the government’s assets, deferred outflows of resources, liabilities and deferred inflows of resources. All of the current year’s revenue and expenditures are accounted for in the statement of activities regardless of when cash is received and paid.
The two government-wide statements report the District’s net position and how it has changed. Net position, the difference between the District’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, is one way to measure the District’s financial health or position.
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Over time, increases or decreases in the District’s net position are an indication of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the District, readers should consider additional factors in conjunction with the information provided by the Commonwealth, increase in the required PSERS contribution rate, and the projected enrollment of students.
The government-wide statements of the District are divided into two categories:
Governmental Activities – All of the District’s basic services are included here, such as instruction, administration and community services. Property taxes and state and federal subsidies and grants finance most of these activities.
Business-Type Activities – The District operates a food service operation and charges fees to staff and students to cover the cost of the food service operation.
Fund Financial Statements
The remaining statements are fund financial statements that focus on individual parts of the District’s operations in more detail than the government-wide statements. Some funds are required by state law and by bond requirements.
Governmental Funds – Most of the District’s activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. Governmental funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District’s operations and the services it provides. Governmental fund information helps the reader determine whether there are more or few financial resources that can be spent in the near future to finance the District’s programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the financial statements.
Proprietary Funds – These funds are used to account for District activities that are similar to business operations in the private sector; or where the reporting is on determining net income, financial position, changes in financial position, or where there is a significant portion of funding through user charges. When the District charges customers for services it provides – whether to outside customers or to other units in the District – the services are generally reported in proprietary funds. The Food Service Fund is the District’s proprietary fund and is the same as the business-type activities report in the government-wide statements, but provides more detail and additional information, such as cash flows.
Fiduciary Funds – The District is the trustee, or fiduciary, for the assets that belong to others, such as scholarship funds, agency funds, or student activity funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assts belong. The District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
Notes to the financial statements – The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements.
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Other Information – In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information which consists of the budgetary comparison schedule for the General Fund, schedules of the District’s proportionate share of the net pension liability and pension plan contributions – PSERS, schedule of changes in OPEB liability single-employer plan, and the schedules of the District’s proportionate share of the net OPEB liability and OPEB plan contributions – PSERS.
The following table presents condensed information for the Statement of Net Position of the District at June 30, 2018, and June 30, 2019.
Table A-1 STATEMENT OF NET POSITION Fiscal Years Ended June 30, 2018, and June 30, 2019
Governmental Activities Business-Type Activities Totals 2018 2019 2018 2019 2018 2019
ASSETS AND DEFERRED OUTFLOWS Current and other assets $ 42,218,965 $ 36,332,708 $ 552,051 $ 757,759 $ 42,771,016 $ 37,090,467 Capital assets 163,329,847 156,810,925 - - 163,329,847 156,810,925
TOTAL ASSETS 205,548,812 193,143,633 552,051 757,759 206,100,863 193,901,392
Deferred outflows of resources 26,439,726 19,982,294 575,774 445,357 27,015,500 20,427,651
TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 231,988,538 $ 213,125,927 $ 1,127,825 $ 1,203,116 $ 233,116,363 $ 214,329,043
LIABILITIES Current liabilities $ 23,906,981 $ 24,218,775 $ 2,682 $ 1,137 $ 23,909,663 $ 24,219,912 Long-term liabilities 362,442,123 335,452,305 3,605,898 3,274,448 366,048,021 338,726,753
TOTAL LIABILITIES 386,349,104 359,671,080 3,608,580 3,275,585 389,957,684 362,946,665
Deferred inflows of resources 11,232,541 20,137,192 171,000 350,000 11,403,541 20,487,192
NET POSITION (DEFICIT) Net investment in capital assets (12,312,191) (10,028,170) - - (12,312,191) (10,028,170) Restricted - 5,315,709 - - - 5,315,709 Assigned - 4,482,205 - - - 4,482,205 Unrestricted (153,280,916) (166,452,089) (2,651,755) (2,422,469) (155,932,671) (168,874,558)
NET POSITION (DEFICIT) (165,593,107) (166,682,345) (2,651,755) (2,422,469) (168,244,862) (169,104,814)
TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION (DEFICIT) $ 231,988,538 $ 213,125,927 $ 1,127,825 $ 1,203,116 $ 233,116,363 $ 214,329,043
The District’s net deficit totaled $169,104,814 at June 30, 2019. This represents a $859,952 decrease in overall net position (deficit) over prior year. The net investment in capital assets is net of accumulated depreciation less any related debt used to acquire those assets that is still outstanding. The governmental activities restricted net position in the amount of $5,315,709 is set aside to fund capital improvements and facilities maintenance. The governmental activities assigned net position of $4,482,205 is set aside to balance the 2019-2020 general fund budget. The unrestricted net position includes the effect of the District’s net pension and OPEB liabilities as required by GASB No. 68 and 75, respectively. Of the $362,946,665 in total liabilities, $170,910,435 or 47.09%, is related to these net pension and OPEB liabilities.
- 12 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
Statement of Activities
The Statement of Activities shows the cost of program services, charges for services, and grants received offsetting those services. Table A-2 STATEMENT OF ACTIVITIES Fiscal Year Ended June 30, 2019 and June 30, 2018
June 30, 2019 June 30, 2018 Total Services Net Services Total Services Net Services PROGRAM EXPENSES Governmental Activities: Instruction $ 122,991,537 $ 106,612,748 $ 118,866,353 $ 101,609,047 Instructional student support 7,093,585 6,210,253 8,493,585 7,507,853 Administration 10,841,594 9,902,044 11,726,984 10,707,366 Maintenance 13,921,972 13,251,651 13,904,307 13,242,344 Pupil transportation 11,549,715 4,620,857 11,066,569 4,269,223 Student activities 1,137,117 940,311 1,175,920 994,441 Community services 85,589 82,958 33,259 32,477 Interest and fiscal charges 6,448,063 5,893,719 6,911,307 6,682,592 Total Governmental Activities 174,069,172 147,514,541 172,178,284 145,045,343
Business-Type Activities: Food service 2,815,207 (217,203) 3,241,913 (113,501)
Total Primary Government $ 176,884,379 $ 147,297,338 $ 175,420,197 $ 144,931,842
- 13 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
Table A-3 CHANGES IN NET POSITION For the Years Ended June 30, 2019 and June 30, 2018
Governmental Activities Business-Type Activities Totals 2018 2019 2018 2019 2018 2019
REVENUES Program services Charges for services $ 460,237 $ 382,763 $ 561,374 $ 477,472 $ 1,021,611 $ 860,235 Operating grants and contributions 26,672,704 26,171,868 2,794,040 2,554,938 29,466,744 28,726,806 General revenues Property taxes 99,860,593 104,707,310 - - 99,860,593 104,707,310 Other taxes 8,538,775 8,748,802 - - 8,538,775 8,748,802 Grants, subsidies and contributions not restricted 30,725,342 31,506,278 - - 30,725,342 31,506,278 Investment earnings 574,027 1,117,236 15,618 12,083 589,645 1,129,319 Other revenues 278,841 345,677 - - 278,841 345,677 TOTAL REVENUES 167,110,519 172,979,934 3,371,032 3,044,493 170,481,551 176,024,427
EXPENSES Instruction 118,866,353 122,991,537 - - 118,866,353 122,991,537 Instructional student support 8,493,585 7,093,585 - - 8,493,585 7,093,585 Administrative and financial support 11,726,984 10,841,594 - - 11,726,984 10,841,594 Operation and maintenance of plant services 13,904,307 13,921,972 - - 13,904,307 13,921,972 Pupil transportation 11,066,569 11,549,715 - - 11,066,569 11,549,715 Student activities 1,175,920 1,137,117 - - 1,175,920 1,137,117 Community service 33,259 85,589 - - 33,259 85,589 Interest on long-term debt 6,911,307 6,448,063 - - 6,911,307 6,448,063 Food services - - 3,241,913 2,815,207 3,241,913 2,815,207 TOTAL EXPENSES 172,178,284 174,069,172 3,241,913 2,815,207 175,420,197 176,884,379
CHANGE IN NET POSITION $ (5,067,765) $ (1,089,238) $ 129,119 $ 229,286 $ (4,938,646) $ (859,952)
Fund Balances
At June 30, 2019, the District’s governmental funds reported a combined fund balance of $10,100,259 which is a decrease of $7,480,062 from June 30, 2018.
Table A-4 GOVERNMENTAL FUND BALANCE For the Years Ended June 30, 2019 and June 30, 2018
June 30, 2019 June 30, 2018 Change
General Fund $ 4,784,549 $ 11,254,089 $ (6,469,540) Capital Reserve Fund 887,242 944,062 (56,820) Capital Projects Fund 4,428,468 5,382,170 (953,702)
TOTAL REVENUES $ 10,100,259 $ 17,580,321 $ (7,480,062)
- 14 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
REVENUES
General Fund revenues for 2018-2019, which totaled $172,250,673 decreased $8,148,375 or 4.52% over prior year revenues. Revenues for 2017-2018 included $13,005,633 in proceeds from the district entering into a sale leaseback transaction during June 2018.
Revenues from local sources primarily includes revenue from real estate taxes levied by the District as well as earned income taxes. The real estate tax millage rate for 2018-2019 was 36.75, a 5.3% increase from the 2017-2018 rate of 34.91. Local taxes and revenues made up 67.4% of revenues for the District in fiscal year 2018-2019. State subsidies account for 30.7% of revenues and Federal revenues comprise the remaining 1.9%. Revenue amounts for the 2018-2019 and the 2017-2018 fiscal years are shown below: Table A-5 GENERAL FUND REVENUE Fiscal Years 2018-2019 and 2017-2018
2018-2019 2017-2018 Increase (Decrease) Revenue % of Total Revenue % of Total Revenue % of Inc (Dec)
Local sources $116,138,509 67.42% $ 111,346,380 61.62% $ 4,792,129 4.30% State sources 52,811,372 30.66% 51,929,587 28.74% 881,785 1.70% Federal sources 3,300,792 1.92% 4,117,450 2.28% (816,658) (19.83)% Other financing sources - 0.00% 13,307,553 7.36% (13,307,553) (100.00)%
TOTAL REVENUES $ 172,250,673 100.00% $ 180,700,970 100.00% $ (8,450,297) (4.68)%
- 15 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
EXPENDITURES
General Fund expenditures and net other financing uses for 2018-2019, which totaled $178,720,213, increased $6,765,872 over 2017-2018 expenditures. The most significant increases from prior year were in purchased services due to an increase in the number of students in charter schools and an increase in charter tuition rates, coupled with an increase in special education placements.
Expenditures consisted of the following: Table A-6 GENERAL FUND EXPENDITURES Fiscal Years 2018-2019 and 2017-2018 Expenditures by Function
2018-2019 2017-2018 Increase (Decrease) Revenue % of Total Revenue % of Total Revenue % of Inc (Dec)
Instruction $ 122,474,440 68.53% $ 116,070,793 67.38% $ 6,403,647 5.52% Supporting services 38,923,190 21.78% 40,259,623 23.37% (1,336,433) (3.32)% Non-instructional services 1,256,721 0.70% 1,206,071 0.70% 50,650 4.20% Other financing sources 16,065,862 8.99% 14,719,780 8.55% 1,346,082 9.14%
TOTAL EXPENDITURES $ 178,720,213 100.00% $ 172,256,267 100.00% $ 6,463,946 3.75%
Expenditures by Object
2018-2019 2017-2018 Increase (Decrease) Revenue % of Total Revenue % of Total Revenue % of Inc (Dec)
Salaries $ 40,913,846 22.89% $ 43,353,143 25.17% $ (2,439,297) (5.63)% Fringe benefits 26,434,626 14.79% 30,201,172 16.90% (3,766,546) (12.47)% Purchased and technical services 21,723,222 12.15% 19,774,070 11.06% 1,949,152 9.86% Purchase property services 4,069,057 2.28% 4,679,423 2.62% (610,366) (13.04)% Other purchased services 64,895,040 36.31% 54,827,194 30.68% 10,067,846 18.36% Supplies 3,659,314 2.05% 3,853,370 2.16% (194,056) (5.04)% Property 173,659 0.10% 122,058 0.07% 51,601 42.28% Other objects 16,851,449 9.43% 15,445,837 8.97% 1,405,612 9.10%
TOTAL EXPENDITURES $ 178,720,213 100.00% $ 172,256,267 97.62% $ 6,463,946 3.75%
THE SCHOOL DISTRICT'S FUNDS
Information about the School District's major funds is stated within the Independent Auditors’ Report. These funds are accounted for using the modified accrual basis of accounting.
- 16 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the end of fiscal 2018-2019, the School District has $156,810,925 invested in land, buildings, and equipment, net of accumulated depreciation. Below is a summary of the capital assets.
2019 2018
Land $ 2,812,500 $ 2,812,500 Land improvements 7,425,060 7,425,060 Buildings and building improvements 234,030,578 233,008,164 Furniture and equipment 16,213,464 16,068,308 TOTAL CAPITAL ASSETS BEING DEPRECIATED 260,481,602 259,314,032 Accumulated depreciation (103,670,677) (95,984,185)
TOTAL CAPITAL ASSETS, net $ 156,810,925 $ 163,329,847
Debt
As of June 30, 2019, the School District had a total debt of $158,664,104 in bonds, net of any interest. Below is a summary of debt for the District’s outstanding bond issues.
Bonds/Notes Maturing Outstanding Issued Date Principal
2009A 08/15/26 $ 21,955,000 2010 08/15/31 53,375,000 2013 08/15/20 5,274,104 2014A 08/15/19 7,910,000 2017A 08/01/25 57,750,000 2018 06/15/28 12,400,000
$ 158,664,104
- 17 - COATESVILLE AREA SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) YEAR ENDED JUNE 30, 2019
FOR THE FUTURE
Coatesville Area School District continues to face financial challenges. Increases in both charter school enrollment and charter school tuition rates have put a severe financial strain on the District. In 2017- 2018, charter school enrollments were 2,456 students. In 2018-2019, charter school enrollments were 2,775 students. For 2019-2020, charter school enrollments are projected to be 3,017. The District spent in excess of $45 million in 2018-2019 on charter school costs, and that number is expected to be more than $50 million in 2019-2020. The District is also experiencing increases in special education costs and increased costs for pensions. These challenges continue into the 2019-2020 fiscal year, despite an increase in the real estate tax millage rate of 5.3% in 2018-2019 and a 3.9% increase in 2019-2020. Because of these financial challenges, the District will consider many cost savings ideas as it develops its 2020-2021 budget.
The pension rate, which was a major driver of costs for all school districts, has begun to slow its rate of increase. The rate soared since 2010-11 from 5.64% of payroll to 33.43% of payroll in 2018-2019. The rate will again increase in 2019-2020 to 34.29% of payroll, The District’s share of pension costs will rise by approximately $200,000 in 2019-2020.
The District increased taxes by 3.9% for the 2019-2020 fiscal year and closed South Brandywine Middle School at the end of the 2018-2019 school year. Most employees have been moved to a high deductible health plan to help decrease the costs related to health insurance. The 2019-2020 budget approved in June 2019 included the appropriation of $4,482,205 of fund balance to close the gap between budgeted revenues and expenditures.
ACT 1 of 2006 provides for the District to limit budget increase to an established index that changes from year to year. The budget process is limited unless budget exceptions are approved by the Pennsylvania Department of Education. The index provided by the Pennsylvania Department of Education for the 2020-2021 fiscal year has been established at 3.3%. This low index will make it difficult to balance the 2020-2021 budget. The District is anticipating ending the 2019-2020 fiscal year with a fund balance of $302,342 which will fall well short of covering the anticipated revenue to expense shortfall in the 2020-2021 budget.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the District's finances. If you have questions about this report or wish to request additional financial information, please contact the Business Office, Coatesville Area School District, 3030 C. G. Zinn Road, Thorndale, PA 19372.
- 18 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2019
Governmental Business-Type Activities Activities Totals
ASSETS Cash and cash equivalents $ 12,515,950 $ 755,974 $ 13,271,924 Investments 10,000,000 - 10,000,000 Pledged taxes receivable 6,514,876 - 6,514,876 Internal balances 39,006 (39,006) - Due from other governments 6,747,933 - 6,747,933 Other receivables 159,098 21,428 180,526 Prepaid expenses 1,845 - 1,845 Inventories - 19,363 19,363 Other assets 354,000 - 354,000 Capital assets Land 2,812,500 - 2,812,500 Land improvements 7,425,060 - 7,425,060 Buildings and building improvements 234,030,578 - 234,030,578 Furniture and equipment 16,213,464 1,555,042 17,768,506 Accumulated depreciation (103,670,677) (1,555,042) (105,225,719) TOTAL ASSETS 193,143,633 757,759 193,901,392 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources, OPEB activity 1,254,294 80,357 1,334,651 Deferred outflows of resources, pension activity 18,728,000 365,000 19,093,000 TOTAL DEFERRED OUTFLOWS OF RESOURCES 19,982,294 445,357 20,427,651 LIABILITIES Accounts payable and accrued expenses 10,629,304 1,137 10,630,441 Accrued salaries and benefits 9,344,579 - 9,344,579 Accrued interest 2,832,978 - 2,832,978 Unearned revenues 1,411,914 - 1,411,914 Long-term liabilities Portion due or payable within one year Bonds payable, net 9,988,777 - 9,988,777 Compensated absences 126,134 - 126,134 Portion due or payable after one year Bonds payable, net 156,517,116 - 156,517,116 Net pension liability 153,363,000 2,989,000 156,352,000 Other postemployment benefits 14,322,069 236,366 14,558,435 Compensated absences 1,135,209 49,082 1,184,291 TOTAL LIABILITIES 359,671,080 3,275,585 362,946,665 DEFERRED INFLOWS OF RESOURCES Deferred amounts on refunding 333,202 - 333,202 Deferred inflows of resources, OPEB activity 2,806,990 19,000 2,825,990 Deferred inflows of resources, pension activity 16,997,000 331,000 17,328,000 TOTAL DEFERRED INFLOWS OF RESOURCES 20,137,192 350,000 20,487,192 NET POSITION Net investment in capital assets (10,028,170) - (10,028,170) Restricted for capital projects 5,315,709 - 5,315,709 Assigned 4,482,205 - 4,482,205 Unrestricted (166,452,089) (2,422,469) (168,874,558)
TOTAL NET POSITION $ (166,682,345) $ (2,422,469) $ (169,104,814)
See accompanying notes to the basic financial statements.
- 19 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2019
Program Revenues Operating Capital Charges for Grants and Grants and Functions/ProgramsExpenses Services Contributions Contributions
GOVERNMENTAL ACTIVITIES Instruction $122,991,537 $ 292,268 $ 16,086,521 $ - Instructional student support7,093,585 - 883,332 - Administrative and financial support services10,841,594 - 939,550 - Operation and maintenance of plant services13,921,972 - 670,321 - Pupil transportation11,549,715 - 6,928,858 - Student activities1,137,117 90,495 106,311 - Community services85,589 - 2,631 - Interest on long-term debt6,448,063 - 554,344 - TOTAL GOVERNMENTAL ACTIVITIES 174,069,172 382,763 26,171,868 -
BUSINESS-TYPE ACTIVITIES Food service2,815,207 477,472 2,554,938 -
TOTAL SCHOOL DISTRICT ACTIVITIES $ 176,884,379 $ 860,235 $ 28,726,806 $ -
GENERAL REVENUES Property taxes, levied for general purposes Taxes levied for specific purposes Grants and entitlements not restricted to specific programs Investment earnings Miscellaneous TOTAL GENERAL REVENUES
CHANGE IN NET POSITION
NET POSITION AT BEGINNING OF YEAR
NET POSITION AT END OF YEAR
See accompanying notes to the basic financial statements. Net (Expense) Revenue and Changes in Net Position Governmental Business-Type Activities Activities Totals
$ (106,612,748) $ - $ (106,612,748) (6,210,253) - (6,210,253)
(9,902,044) - (9,902,044)
(13,251,651) - (13,251,651) (4,620,857) - (4,620,857) (940,311) - (940,311) (82,958) - (82,958) (5,893,719) - (5,893,719)
(147,514,541) - (147,514,541)
- 217,203 217,203
(147,514,541) 217,203 (147,297,338)
104,707,310 - 104,707,310 8,748,802 - 8,748,802 31,506,278 - 31,506,278 1,117,236 12,083 1,129,319 345,677 - 345,677 146,425,303 12,083 146,437,386
(1,089,238) 229,286 (859,952)
(165,593,107) (2,651,755) (168,244,862)
$ (166,682,345) $ (2,422,469) $ (169,104,814)
- 20 - COATESVILLE AREA SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2019
Coatesville Area School District Total General Capital Capital Building Governmental Fund Reserve Fund Projects Fund Authority Funds
ASSETS Cash and cash equivalents $ 7,093,742 $ 887,242 $ 4,534,966 $ - $ 12,515,950 Investments 10,000,000 - - - 10,000,000 Taxes receivable 6,514,876 - - - 6,514,876 Due from other funds 39,715 - 19,330 - 59,045 Due from other governments 6,747,933 - - - 6,747,933 Other receivables 159,098 - - - 159,098 Prepaid items 1,845 - - - 1,845 Other assets 354,000 - - - 354,000
TOTAL ASSETS $ 30,911,209 $ 887,242 $ 4,554,296 $ - $ 36,352,747
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES
LIABILITIES Accounts payable $ 10,503,476 $ - $ 125,828 $ - $ 10,629,304 Due to other funds 20,039 - - - 20,039 Accrued salaries and benefits 9,344,579 - - - 9,344,579 Unearned revenue 1,411,914 - - 1,411,914 TOTAL LIABILITIES 21,280,008 - 125,828 - 21,405,836
DEFERRED INFLOWS OF RESOURCES Unavailable revenue Property taxes 4,846,652 - - - 4,846,652
FUND BALANCES Nonspendable, prepaid expenses 1,845 - - - 1,845 Restricted, capital projects - 887,242 4,428,468 - 5,315,710 Assigned 4,482,205 - - - 4,482,205 Unassigned 300,499 - - - 300,499 TOTAL FUND BALANCES 4,784,549 887,242 4,428,468 - 10,100,259
TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 30,911,209 $ 887,242 $ 4,554,296 $ - $ 36,352,747
See accompanying notes to the basic financial statements.
- 21 - COATESVILLE AREA SCHOOL DISTRICT RECONCILIATION OF TOTAL GOVERNMENTAL FUNDS BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2019
TOTAL GOVERNMENTAL FUNDS BALANCES $ 10,100,259
Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. These assets consist of: Land 2,812,500 Land improvements 7,425,060 Buildings and building improvements 234,030,578 Furniture and equipment 16,213,464 Accumulated depreciation (103,670,677)
Deferred charges used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of: Deferred amounts on refunding (333,202)
Deferred inflows and outflows of resources related to pension and OPEB activities are not financial resources and therefore are not reported in the governmental funds. 178,304
Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: Accrued interest (2,832,978) Bonds payable (166,505,893) Compensated absences (1,261,343) Net pension liability (153,363,000) Net OPEB liability (14,322,069)
Some of the School District’s revenues will be collected after year- end but are not available soon enough to pay for the current period’s expenditures and therefore are deferred in the funds. 4,846,652
NET POSITION OF GOVERNMENTAL ACTIVITIES $ (166,682,345)
See accompanying notes to the basic financial statements.
- 22 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2019
Coatesville Area School District Total General Capital Capital Building Governmental Fund Reserve Fund Projects Fund Authority Funds
REVENUES Local sources $ 116,138,509 $ 20,152 $ 314,460 $ 600,934 $ 117,074,055 State sources 52,811,372 - - - 52,811,372 Federal sources 3,300,792 - - - 3,300,792 TOTAL REVENUES 172,250,673 20,152 314,460 600,934 173,186,219
EXPENDITURES Instruction 122,474,440 - - - 122,474,440 Support services 38,923,190 - - - 38,923,190 Operation of non-instructional services 1,256,721 - - - 1,256,721 Facilities acquisition, construction - and improvement services - 76,972 1,268,162 - 1,345,134 Debt service 16,065,862 - - 600,934 16,666,796 TOTAL EXPENDITURES 178,720,213 76,972 1,268,162 600,934 180,666,281
NET CHANGE IN FUND BALANCES (6,469,540) (56,820) (953,702) - (7,480,062)
FUND BALANCES AT BEGINNING OF YEAR 11,254,089 944,062 5,382,170 - 17,580,321
FUND BALANCES AT END OF YEAR $ 4,784,549 $ 887,242 $ 4,428,468 $ - $ 10,100,259
See accompanying notes to the basic financial statements.
- 23 - COATESVILLE AREA SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2019
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ (7,480,062)
Capital outlays are reported in Governmental Funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation exceeds capital outlay in the current period. (6,518,922)
Deferred charges are reported in Governmental Funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over the term lives of debt instruments as amortization expense. 118,450
The issuance of long-term debt provides current financial resources to government funds, while the repayment of bond principal is an expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the statement of net position. 8,684,493
Some expenses reported in the statement of activities do not require the use of current financial resources and are not reported as expenditures in Governmental Funds: Accrued interest not reflected in Governmental Funds 724,349 Pension and OPEB plan expense 2,769,434
In the statement of activities, certain operating expenses--compensated absences (vacations and sick leave) and special termination benefits (early retirement)--are measured by the amounts earned during the year. In the Governmental Funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). 55,358
Because some property taxes will not be collected for several months after the District's fiscal year ends, they are not considered as "available" revenues in the Governmental Funds. Deferred tax revenues increased by this amount this year. 557,662
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ (1,089,238)
See accompanying notes to the basic financial statements.
- 24 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF NET POSITION PROPRIETARY FUND JUNE 30, 2019
Enterprise Fund Food Service Fund
ASSETS
CURRENT ASSETS Cash and cash equivalents $ 755,974 Due from other funds 709 Other receivables 21,428 Inventories 19,363 TOTAL CURRENT ASSETS 797,474
CAPITAL ASSETS Furniture and equipment 1,555,042 Accumulated depreciation (1,555,042) TOTAL CAPITAL ASSETS -
TOTAL ASSETS 797,474
DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources, pension activity 365,000 Deferred outflows of resources, OPEB activity 80,357 TOTAL DEFERRED OUTFLOWS OF RESOURCES 445,357
CURRENT LIABILITIES Accounts payable and accrued liabilities 1,137 Due to other funds 39,715 TOTAL CURRENT LIABILITIES 40,852
NONCURRENT LIABILITIES Compensated absences 49,082 Other postemployement benefits 236,366 Net pension liability 2,989,000 TOTAL NONCURRENT LIABILITIES 3,274,448
TOTAL LIABILITIES 3,315,300
DEFERRED INFLOWS OF RESOURCES Deferred inflows of resource, pension activity 331,000 Deferred inflows of resource, OPEB activity 19,000 TOTAL DEFERRED INFLOWS OF RESOURCES 350,000
NET POSITION Unrestricted (2,422,469)
TOTAL NET POSITION $ (2,422,469)
See accompanying notes to the basic financial statements.
- 25 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUND YEAR ENDED JUNE 30, 2019
Enterprise Fund Food Service Fund
OPERATING REVENUES Charges for services $ 398,583 Miscellaneous 78,889 TOTAL OPERATING REVENUES 477,472
OPERATING EXPENSES Salaries 865,735 Employee benefits 555,558 Purchased professional and technical services 11,903 Purchased property services 23,957 Other purchased services 35 Supplies 1,350,820 Other operating expenses 7,199 TOTAL OPERATING EXPENSES 2,815,207
OPERATING LOSS (2,337,735)
NONOPERATING REVENUES Earnings on investments 12,083 State sources 272,419 Federal sources 2,282,519 TOTAL NONOPERATING REVENUES 2,567,021
CHANGE IN NET POSITION 229,286
NET POSITION AT BEGINNING OF YEAR (2,651,755)
NET POSITION AT END OF YEAR $ (2,422,469)
See accompanying notes to the basic financial statements.
- 26 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDED JUNE 30, 2019
Enterprise Fund Food Service Fund
CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 483,946 Payments to employees (1,443,326) Payments to suppliers (1,328,667) NET CASH USED BY OPERATING ACTIVITIES (2,288,047)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Federal sources 2,364,670 State sources 275,081 NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 2,639,751
CASH FLOWS FROM INVESTING ACTIVITIES Earnings on investments 12,083
NET INCREASE IN CASH AND CASH EQUIVALENTS 363,787
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 392,187
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 755,974
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES Operating loss $(2,337,735) Adjustments to reconcile operating loss to net cash used by operating activities Pension expense (45,000) OPEB Expense 3,374 (Increase) decrease in Other receivables 6,474 Inventories 10,405 Due from other funds 16,672 Increase (decrease) in Accounts payable and accrued liabilities (1,545) Compensated absences 19,593 Due to other funds 39,715
NET CASH USED BY OPERATING ACTIVITIES $ (2,288,047)
SUPPLEMENTAL DISCLOSURES Noncash activities Donated commodities $ 217,299
See accompanying notes to the basic financial statements.
- 27 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2019
Private Purpose Agency Trust Fund Fund
ASSETS Cash and cash equivalents $ 186,084 $ 325,030
LIABILITIES AND NET POSITION
LIABILITIES Accounts payable $ 1,035 $ 325,030
NET POSITION Held in trust for benefits and other purposes 185,049
TOTAL LIABILITIES AND NET POSITION $ 186,084
See accompanying notes to the basic financial statements.
- 28 - COATESVILLE AREA SCHOOL DISTRICT STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2019
Private Purpose Trust Fund
ADDITIONS Investment earnings $ 4,632
DEDUCTIONS Scholarships 28,950
CHANGE IN NET POSITION (24,318)
NET POSITION AT BEGINNING OF YEAR 209,367
NET POSITION AT END OF YEAR $ 185,049
See accompanying notes to the basic financial statements.
- 29 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Coatesville Area School District (the “District”) operates six elementary schools, three middle schools and two senior high schools to provide education and related services to the residents of the City of Coatesville, two boroughs (South Coatesville and Modena) and six townships (Caln, East Fallowfleld, Sadsbury, Valley, West Brandywine and West Caln). The District operates under current standards prescribed by the Pennsylvania Department of Education in accordance with the provisions of the School Laws of Pennsylvania as a school district of the second class. The District operates under a locally elected nine-member Board form of government.
The financial statements of the District have been prepared in accordance with generally accepted accounting principles (“GAAP”) as applied to governmental units. The Governmental Accounting Standards Board (“GASB”) is the authoritative standard setting body for the establishment of governmental accounting and financial reporting principles. The more significant of these accounting policies are described below.
Reporting Entity
The accompanying basic financial statements comply with the provisions of GASB Statement No. 61, The Financial Reporting Entity: Omnibus, in that the financial statements include all organizations, activities and functions for which the District is financially accountable. Financial accountability is defined as the appointment of a voting majority of a component unit’s board and either (1) the District’s ability to impose its will over a component unit, or (2) the possibility that the component unit will provide a financial benefit or impose a financial burden on the District. In addition, component units can be other organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the District’s financial statements to be misleading. This report presents the activities of Coatesville Area School District. The District is not a component unit of another reporting entity. The Coatesville Area School District Building Authority (the "Authority") is considered to be a component unit because of its operational and financial relationship with the District as explained below.
Blended Component Unit
The Authority was formed under the Municipal Authorities Act of 1945, as amended, and was incorporated in the Commonwealth of Pennsylvania on March 27, 2018 for the purpose acquiring, holding, constructing, improving, maintaining, and operating, owning or leasing, public school buildings and other school projects acquired, constructed or improved for public school purposes. The Authority is governed by a five-member board, which is appointed by the School Board. Although it is legally separate from the District, the Authority is reported as if it were part of the primary government because it conducts business solely with the District through a sale-leaseback agreement related to a public school building in the District. Financial information from the Authority for the year ended June 30, 2019, is combined in the accompanying financial statements by including financial information from the Authority as a special revenue fund in the District's governmental funds (blending).
- 30 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Joint Ventures
The District is a participating member of the Center for Arts and Technology (the “Vo-Tech”). The Vo-Tech is run by a joint board consisting of school directors from each member district. The Board of Directors from each member district must approve the Vo-Tech’s annual budget. Each member pays an allocated share of the debt and operating costs of the Vo-Tech based on the number of students from each district. For fiscal year ended June 30, 2019, the District’s share of operating costs was $3,321,676. The Vo-Tech prepares financial statements which are available to the public. The financial statements of the Vo-Tech are available from the Chester County Intermediate Unit located at 455 Boot Road, Downingtown, PA 19335.
Basis of Presentation and Accounting
Government-Wide Financial Statements - The statement of net position and the statement of activities display information about the District as a whole. These statements distinguish between activities that are governmental and those that are considered business-type activities. These statements include the primary financial activities of the District, except for Fiduciary Funds.
The government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting as further defined under Proprietary Funds below. This is the same approach used in the preparation of the Proprietary Fund financial statements but differs from the manner in which Governmental Funds financial statements are prepared. Therefore, Governmental Funds financial statements include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements of Governmental Funds.
The statement of activities presents a comparison between expenses and program revenues for each segment of the business-type activities of the District and for each governmental function. Expenses are those that are specifically associated with a service or program and are, therefore, clearly identifiable to a particular function. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Revenues which are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each function is self-financing or draws from the general revenues of the District.
Except for interfund activity and balances between the funds that underlie governmental activities and the funds that underlie business-type activities, which are reported as transfers and internal balances, the effect of interfund activity has been removed from these statements.
- 31 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The government-wide financial statements report net position in one of three components. Net investment in capital assets consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of borrowing attributable to acquiring, constructing, or improving those assets. Net position is reported as restricted when constraints placed on net position use are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Those restrictions affect net position arising from Special Revenue and Capital Projects Funds. Unrestricted net position consists of net position that does not meet the definition of “net investment in capital assets” or “restricted.”
Fund Financial Statements - During the school year, the District segregates transactions related to certain District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements report detailed information about the District. The focus of Governmental and Enterprise Fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Fiduciary Funds financial statements are presented by fund type.
Governmental Funds - All Governmental Funds are accounted for using the modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. The District reports the following major Governmental Funds:
The General Fund is the District’s primary operating fund. It accounts for all financial resources of the District, except those required to be accounted for in another fund.
The Capital Projects Fund and the Capital Reserve Fund are used to account for the acquisition, construction and renovation of major capital facilities.
Revenue Recognition - In applying the “susceptible to accrual concept” under the modified accrual basis, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers tax revenue to be available if collected within 60 days of the end of the fiscal period. Revenue from federal, state and other grants designated for payment of specific District expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are reported as unearned revenues until earned.
Other revenues, including certain other charges for services and miscellaneous revenues, are recorded as revenue when received in cash because they generally are not measurable until actually received.
- 32 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Expenditure Recognition - The measurement focus of Governmental Funds accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred. However, principal and interest on general long-term debt which has not matured are recognized when payment is due. Liabilities for compensated absences and special termination benefits are recognized as fund liabilities to the extent they mature each period. Allocations of costs, such as depreciation and amortization, are not recognized in the Governmental Funds.
Proprietary Fund - The Proprietary Fund is accounted for using the accrual basis of accounting. This fund accounts for operations that are financed primarily by user charges. The economic resource measurement focus concerns determining costs as a means of maintaining the capital investment and management control. Revenues are recognized when they are earned and expenses are recognized when they are incurred.
This fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing end delivering goods in connection with the Proprietary Fund’s principal ongoing operations. The principal operating revenues of the District’s Proprietary Fund are food service charges. Operating expenses for the District’s Enterprise Fund include payroll, supplies and administrative costs. All revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses.
Fiduciary Funds - Fiduciary Funds account for the assets held by the District as a trustee or agent for individuals, private organizations and/or governmental units and are, therefore, not available to support the District’s own programs. The District accounts for these assets in a Private Purpose Trust and Agency Fund. The Private Purpose Trust Fund accounts for activities in various scholarship accounts, whose sole purpose is to provide annual scholarships to particular students as described by donor stipulations. The Agency Fund accounts for funds held on behalf of students of the District. The measurement focus and basis of accounting for the Private Purpose Trust is the same as for Proprietary Fund, while the Agency Fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations.
Cash and Cash Equivalents
The District’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition and no restrictions on withdrawal.
Under Act No. 72, enacted by the General Assembly of the Commonwealth of Pennsylvania, the funds deposited with the various banks are permitted to be secured on a pooled basis with all other public funds which the banking institution has on deposit. These may be bonds of the United States, any state of the United States, or bonds of any political subdivision of Pennsylvania or the general state authority or their authorities created by the General Assembly of the Commonwealth of Pennsylvania, or insured with the Federal Deposit Insurance Corporation. The market value of such bonds pledged must equal 120% of the funds deposited. The security pledged by the various depositories utilized during the year and at June 30, 2019, was in excess of the minimum requirements just described. - 33 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments
Statutes authorize the District to invest in U.S. Treasury bills, time or share accounts of institutions insured by the Federal Deposit Insurance Corporation, or in certificates of deposit when they are secured by proper bond or collateral, repurchase agreements, State Treasurer’s investment pools, or mutual funds.
The School District has adopted GASB Statements No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, No. 72, Fair Value Measurement and Application and No. 79, Certain External Investment Pools and Pool Participants. In accordance with these Statements, investments in marketable securities with readily determinable fair value and all investments in debt securities are reported at their fair values. Investments in qualifying external investment pools are reported at amortized cost basis.
Receivables and Payables
Activity between funds representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances.
Property Taxes
Taxes are levied on July 1 and are payable in the following periods:
Discount period, 2% of gross levy ...... July 1 to August 31 Face period ...... September 1 to October 31 Penalty period, 10% of gross levy ...... November 1 to collection Lien date ...... January 15
Assessed valuations of property are determined by the Chester County Board of Assessments. The District’s taxes are billed and collected by a third-party administrator. The tax on real estate for public school purposes for fiscal 2018-2019 was 36.7537 mills ($3.67537 for $100 of assessed valuation) for the entire District.
Prepaid Items and Inventories
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.
All inventories are valued at the lower of cost (first-in, first-out method) or market.
- 34 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Capital Assets
Capital assets, which include property, plant and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide and Proprietary Fund financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed, inclusive of ancillary costs.
Property, plant and equipment of the District are depreciated using the straight-line method over the following estimated useful lives: Years
School buildings and improvements 20-50 Site improvements 15-20 Equipment 5-10 Vehicles 8-15 Library books 5-7
Compensated Absences
District policies permit employees to accumulate earned but unused vacation, personal and sick days as stipulated in each bargaining unit’s contract. The liability for these compensated absences is recorded as a long-term liability in the government-wide financial statements. The current portion of this liability is estimated based on historical trends. In the fund financial statements, Governmental Funds report only the compensated absence liability payable from expendable available financial resources.
Long-Term Obligations
In the government-wide financial statements and Proprietary Fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are netted against outstanding principal balances amortized over the life of the bonds. Bond issuance costs are expensed when incurred. Deferred amounts on refunding are recorded as a deferred inflow or outflow of resources and amortized over the life of the old debt or the life of the new debt, whichever is shorter. All amortized amounts are amortized using the straight-line method.
- 35 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In the fund financial statements, Governmental Fund Types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received and discounts paid on debt issuances are reported as other financing sources and uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
Deferred Inflows and Deferred Outflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The School District has two items that qualify for reporting in this category. The deferred outflow of resources for pension activities is reported in the government-wide statement of net position and the proprietary fund statement of net position. The deferred outflow related to pension activity is the result of changes in the School District’s proportionate share of the total plan from year to year, the difference between actual employer contributions and the School District’s proportionate share of total contributions, the differences between expected and actual experience, changes in proportion, changes in assumption, net difference between projected and actual investment earnings and actual contributions subsequent to the measurement date. The deferred outflow of resources for OPEB activities is reported in the government-wide statement of net position and the proprietary fund statement of net position. The deferred outflow related to OPEB activity is the result of the net difference between projected and actual investment earnings, changes in assumptions, the difference between expected and actual experience, the difference between actual employer contributions and the School district's proportionate share of total contributions and contributions subsequent to the measurement date.
In addition to liabilities, the statement of financial position will sometimes report a separate section of deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The School District has four items that qualify for reporting in this category. The first item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes. The second item, deferred amounts on refunding, is reported in the government-wide statement of net position and results from the difference in the carrying value of refunded debt and its reacquisition prices. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The deferred inflow related to pension activity is reported in the government-wide statement of net position and the proprietary fund statement of net position. The deferred inflow related to the pension activity is the result of differences between expected and actual experience and changes in proportion. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The deferred inflow of resources for OPEB activities is reported in the government-wide statement of net position and the proprietary fund statement of net position. The deferred inflow related to OPEB activity is the result of changes in assumptions, the difference between expected and actual experience and changes in the School District’s proportionate share of the total plan from year to year. - 36 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fund Balance
The District previously implemented GASB Statement No. 54, Fund Balance reporting and Governmental Fund Type Definitions. This statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on the District’s fund balances more transparent. The following classifications describe the relative strength of the spending constraints:
Nonspendable - Amounts that cannot be spent either because they are not in a spendable form or because they are legally or contractually required to be maintained intact.
Restricted - Amounts that can be spent only for specific purposes because of state or federal laws or externally imposed conditions by grantors or creditors.
Committed - Amounts constrained to specific purposes by the District itself, using its highest level of decision-making authority (resolution by the Board of School Directors). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level of action to remove of change the constraint.
Assigned - Amounts that are intended to be used for a specific purpose, as expressed by the Board of School Directors or by an official or body to which the Board of School Directors delegates the authority. The Board has not delegated the authority to assign amounts to be used for a specific purpose.
Unassigned - All amounts not included in other spendable classifications.
NOTE B - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
The details of the fund balances are included in the Governmental Funds balance sheet (page 21). Restricted funds are used first as appropriate, followed by committed resources and then assigned resources, to the extent that expenditure authority has been budgeted by the Board of School Directors. The District does reserve the right to first reduce unassigned fund balance to defer the use of these other classified funds. In the event that unassigned fund balance becomes zero, then assigned and committed fund balances are used in that order.
Budgetary Information
An annual budget is adopted prior to the beginning of each year for the General Fund on the modified accrual basis of accounting. The General Fund is the only fund for which a budget is legally required, although project-length financial plans are adopted for all capital projects funds.
- 37 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE B - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued)
The District is required to publish notice by advertisement at least once in two newspapers of general circulation in the municipalities in which it is located, and within 20 days of final action, that the proposed budget has been prepared and is available for public inspection at the administrative offices of the District. Notice that public hearings that will be held on the proposed operating budget must be included in the advertisement; such hearings are required to be scheduled at least ten days prior to the date final action on adoption is taken by the Board.
Legal budgetary control is maintained at the sub-function/major object level. The Board may make transfers of funds appropriated to any particular Item of expenditure by legislative action in accordance with the Pennsylvania School Code. Management may amend the budget at the sub-function/sub-object level without Board approval. Appropriations lapse at the end of the fiscal period. Budgetary information reflected in the financial statements is presented at or below the level of budgetary control and includes the effect of approved budget amendments.
NOTE C - CASH AND INVESTMENTS
Custodial Credit Risk - Deposits
Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned. At June 30, 2019, the carrying amount of the District’s deposits was $13,783,038 and the bank balance was $17,002,936. Cash deposits in the amount of $17,002,936 are uninsured and uncollateralized, and are in the Pennsylvania School District Liquid Asset Fund (PSDLAF). Although not registered with the Securities and Exchange Commission and not subject to regulatory oversight, PSDLAF acts like a money market mutual fund in that its objective is to maintain stable net asset value of $1 per share, is rated by a nationally recognized statistical rating organization and is subject to an independent annual audit. As of June 30, 2019, PSDLAF was rated as AAAm by a nationally recognized statistical rating agency.
Investments
As of June 30, 2019, the School District had the following investments and maturities:
Investment Maturities Amortized Less Than One to Five Investment Type Cost One Year Years
State investment pools $ 10,000,000 $ 10,000,000 $ -
- 38 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE C - CASH AND INVESTMENTS (Continued) The School District’s investments are in the PSDLAF program, which is a fund similar to mutual funds. GASB Statement No. 3, Paragraph 69, provides that certain types of cash and investments, such as cash investments in a State Treasurer’s investment pool or mutual fund, cannot be assigned a credit risk category because the government does not own specific securities. Therefore, the PSDLAF cash investments included in these statements will not be assigned a credit risk category. The carrying amount of these investments at June 30, 2019, is $10,000,000. These assets maintain a stable net asset value of $1 per share. PSDALF is not SEC-registered. All investments are monitored weekly by Standard & Poor’s and are subject to an independent audit on an annual basis. Interest Rate Risk The District’s investment policy limits investment maturities to securities with maturity dates under one year as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The District limits its investment choices to those with the highest credit ratings by a nationally recognized statistical rating organization. As of June 30, 2019, PSDLAF was rated as AAAm by a nationally recognized statistical rating organization.
NOTE D - CAPITAL ASSETS Capital asset activity for the year ended June 30, 2019, was as follows:
Balance Balance July 1, 2018 Additions Deletions June 30, 2019
GOVERNM ENTAL ACTIVITIES Capital assets not being depreciated Land $ 2,812,500 $ - $ - $ 2,812,500 Capital assets being depreciated Land improvements 7,425,060 - - 7,425,060 Buildings and building improvements 233,008,164 1,022,414 - 234,030,578 Furniture and equipment 16,068,308 173,659 (28,503) 16,213,464 TOTAL CAPITAL ASSETS BEING DEPRECIATED 256,501,532 1,196,073 (28,503) 257,669,102 Accumulated depreciation Land improvements (7,145,890) (23,259) - (7,169,149) Buildings and building improvements (76,573,972) (7,261,390) - (83,835,362) Furniture and equipment (12,264,323) (430,346) 28,503 (12,666,166) TOTAL ACCUM ULATED DEPRECIATION (95,984,185) (7,714,995) 28,503 (103,670,677) TOTAL CAPITAL ASSETS BEING DEPRECIATED, net 160,517,347 (6,518,922) - 153,998,425 GOVERNM ENTAL ACTIVITIES CAPITAL ASSETS, net 163,329,847 (6,518,922) - 156,810,925
BUSINESS-TYPE ACTIVITIES Capital assets being depreciated Furniture and equipment 1,555,042 - - 1,555,042 Accumulated depreciation (1,555,042) - - (1,555,042) BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS, net - - - -
CAPITAL ASSETS, net $ 163,329,847 $ (6,518,922) $ - $ 156,810,925
- 39 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE D - CAPITAL ASSETS (Continued)
Depreciation expense was charged to functions/programs of the District as follows:
GOVERNMENTAL ACTIVITIES Instruction $ 2,700,249 Operation and maintenance of plant service 154,300 Student transportation services 771,499 Central and other support services 154,300 Facilities and construction 3,934,647
TOTAL DEPRECIATION EXPENSE, GOVERNMENTAL ACTIVITIES $ 7,714,995
BUSINESS-TYPE ACTIVITIES $ -
- 40 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE E - INTERNAL RECEIVABLES, PAYABLES AND TRANSFERS
The composition of interfund balances as of June 30, 2019, is as follows:
Interfund Interfund Receivables Payables
General Fund $ 39,715 $ 20,039 Capital Projects Fund 19,330 - Food Service Fund 709 39,715
$ 59,754 $ 59,754
Interfund balances between funds represent temporary loans recorded at year-end subsequent to a final allocation of expenses. The balances generally are paid shortly after year-end.
NOTE F - GENERAL LONG-TERM DEBT
The following summarizes the changes in the long-term liabilities of governmental and business-type activities for the year ended June 30, 2019:
Balance July 1, 2018 Additions
GOVERNMENTAL ACTIVITIES Bonds payable $ 166,220,809 $ - Premium on bonds payable 8,969,577 - Accumulated compensated absences 1,316,701 - Net pension liability 171,056,000 - Other postemployment benefits 14,879,036 -
TOTAL GOVERNMENTAL ACTIVITIES $ 362,442,123 $ -
BUSINESS-TYPE ACTIVITIES Accumulated compensated absences $ 29,489 $ 19,593 Net pension liability 3,334,000 - Other postemployment benefits 242,409 -
TOTAL BUSINESS-TYPE ACTIVITIES $ 3,605,898 $ 19,593 Balance Due Within Reductions June 30, 2019 One Year
$ (7,556,705) $ 158,664,104 $ 8,860,989 (1,127,788) 7,841,789 1,127,788 (55,358) 1,261,343 126,134 (17,693,000) 153,363,000 - (556,967) 14,322,069 -
$ (26,989,818) $ 335,452,305 $ 10,114,911
$ - $ 49,082 $ - (345,000) 2,989,000 - (6,043) 236,366 -
$ (351,043) $ 3,274,448 $ -
- 41 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE F - GENERAL LONG-TERM DEBT (Continued)
Bonds payable, net, consists of the following:
Bonds payable, at face $ 158,664,104 Bond premiums/(discounts), net 7,841,789
TOTAL BONDS PAYABLE, net $ 166,505,893
Payments of long-term debt from bonds and notes payable are to be funded by the General Fund, while long-term debt from compensated absences is paid out of the fund from which the liability was incurred.
General Obligation Bonds
General Obligation Bonds are as follows:
Series A of 2009, maturing August 15, 2026, bearing interest ranging from 4.00% to 5.00%, interest payable semiannually on February 15 and August 15 $ 21,955,000
Series of 2010, maturing August 2031, bearing interest ranging from 2.25% to 5.00%, interest payable semiannually on February 15 and August 15 53,375,000
Series of 2013, maturing August 2020, bearing interest ranging from 1.33% to 4.13%, interest payable semiannually on February 15 and August 15 5,274,104
Series A of 2014, maturing August 2019, bearing interest ranging from 1.00% to 4.00%, interest payable semiannually on February 15 and August 15 7,910,000
Series A of 2017, maturing August 2025, bearing interest ranging from 2.00% to 5.00%, interest payable semiannually on February 1 and August 1 57,750,000
Guaranteed School Lease Revenue Bonds, Series of 2018, maturing June 2028, bearing interest ranging from 2.50% to 5.00%, interest payable semiannually on June 1 and December 1 12,400,000
TOTAL GENERAL OBLIGATION BONDS $ 158,664,104
- 42 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE F - GENERAL LONG-TERM DEBT (Continued)
Presented below is a summary of debt service requirements to maturity by years:
Year Ending June 30, Principal Interest Totals
2020 $ 8,860,988 $ 7,339,628 $ 16,200,616 2021 8,453,116 8,295,352 16,748,468 2022 11,295,000 6,482,609 17,777,609 2023 11,870,000 5,903,624 17,773,624 2024 12,475,000 5,295,139 17,770,139 2025-2029 73,125,000 16,323,514 89,448,514 2030-2034 32,585,000 1,621,453 34,206,453
$ 158,664,104 $ 51,261,319 $ 209,925,423
NOTE G - OPERATING LEASES
The District currently is obligated under an operating lease agreement for office equipment. The following is a schedule by years of future minimum lease payments:
Year Ending June 30,
2020 $ 150,216 2021 150,216 2022 150,216 2023 150,216 2024 25,036
$ 625,900
Rental expense, including short-term rentals, for the year ended June 30, 2019, was $161,194.
- 43 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE H - PENSION PLAN
Summary of Significant Accounting Policies
Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense, information about the fiduciary net position of the Public School Employees’ Retirement System (PSERS) and additions to/deductions from PSERS’s fiduciary net position have been determined on the same basis as they are reported by PSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
General Information About the Pension Plan
Plan Description - PSERS is a governmental cost-sharing multi-employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in the System include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtained at www.psers.state.pa.us.
Benefits Provided - PSERS provides retirement, disability and death benefits. Members are eligible for monthly retirement benefits upon reaching (a) age 62 with at least one year of credited service; (b) age 60 with 30 or more years of credited service; or (c) 35 or more years of service regardless of age. Act 120 of 2010 (Act 120) preserves the benefits of existing members and introduced benefit reductions for individuals who become new members on or after July 1, 2011. Act 120 created two membership classes, Membership Class T-E (Class T-E) and Membership Class T-F (Class T-F). To qualify for normal retirement, Class T-E and Class T-F members must work until age 65 with a minimum three years of service or attain a total combination of age and service that is equal to or greater than 92 with a minimum of 35 years of service. Benefits are generally equal to 2% or 2.5%, depending on membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service. For members whose membership started prior to July 1, 2011, after completion of five years of service, a member’s right to the defined benefits is vested and early retirement benefits may be elected. For Class T-E and Class T-F members, the right to benefits is vested after ten years of service.
Participants are eligible for disability retirement benefits after completion of five years of credited service. Such benefits are generally equal to 2% or 2.5%, depending upon membership class, of the member’s final average salary (as defined in the Code) multiplied by the number of years of credited service, but not less than one-third of such salary nor greater than the benefit the member would have had at normal retirement age. Members over normal retirement age may apply for disability benefits.
- 44 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE H - PENSION PLAN (Continued)
Death benefits are payable upon the death of an active member who has reached age 62 with at least one year of credited service (age 65 with at least three years of credited service for Class T-E and Class T-F members) or who has at least five years of credited service (ten years for Class T-E and Class T-F members). Such benefits are actuarially equivalent to the benefit that would have been effective if the member had retired on the day before death.
Contributions
Members Contributions
Active members who joined the System prior to July 22, 1983, contribute at 5.25% (Membership Class T-C) or at 6.50% (Membership Class T-D) of the member’s qualifying compensation.
Members who joined the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, contribute at 6.25% (Membership Class T-C) or at 7.50% (Membership Class T-D) of the member’s qualifying compensation.
Members who joined the System after June 30, 2001 and before July 1, 2011, contribute at 7.50% (automatic Membership Class T-D). For all new hires and for members who elected Class T-D membership, the higher contribution rates began with services rendered on or after January 1, 2002.
Members who joined the System after June 30, 2011, automatically contribute at the Membership Class T-E rate of 7.5% (base rate) of the member’s qualifying compensation. All new hires after June 30, 2011, who elect Class T-F membership, contribute at 10.3% (base rate) of the member’s qualifying compensation. Membership Class T-E and Class T-F are affected by a “shared risk” provision in Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate between 7.5% and 9.5% and the Membership Class T-F contribution rate to fluctuate between 10.3% and 12.3%.
Employer Contributions
The School District’s contractually required contribution rate for the fiscal year ended June 30, 2019, was 32.6% of covered payroll, actuarially determined as an amount that, when combined with employee contributions is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the plan from the School District were $13,445,000 for the year ended June 30, 2019.
- 45 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE H - PENSION PLAN (Continued)
Pension Liabilities, Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2019, the School District reported a liability of $156,352,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by rolling forward the System’s total pension liability as of June 30, 2017 to June 30, 2018. The School District’s proportion of the net pension liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2019, the School District’s proportion was 0.3257% which was a decrease of 0.0274% from its proportion measured as of June 30, 2018.
For the year ended June 30, 2019, the School District recognized pension expense of $11,131,000. At June 30, 2019, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred Outflows of Inflows of Resources Resources
GOVERNMENTAL ACTIVITIES Difference between expected and actual experience $ 1,236,000 $ 2,374,000 Changes in assumptions 2,857,000 - Net difference between projected and actual investment earnings 751,000 - Changes in proportions 354,000 14,623,000 Difference between employer contributions and proportionate share of total contributions 342,000 - Contributions subsequent to the measurement date 13,188,000 -
$ 18,728,000 $ 16,997,000
BUSINESS-TYPE ACTIVITIES Difference between expected and actual experience $ 23,000 $ 46,000 Changes in assumptions 56,000 - Net difference between projected and actual investment earnings 15,000 - Changes in proportions 7,000 285,000 Difference between employer contributions and proportionate share of total contributions 7,000 - Contributions subsequent to the measurement date 257,000 -
$ 365,000 $ 331,000
- 46 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE H - PENSION PLAN (Continued)
$13,445,000 reported as deferred outflows of resources related to pensions resulting from School District contributions subsequent to the measurement date will be recognized as a reduction of the new pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:
Year Ending Governmental Business-Type June 30, Activities Activities
2020 $ (1,114,000) $ (22,000) 2021 (3,200,000) (62,000) 2022 (6,488,000) (126,000) 2023 (655,000) (13,000)
$ (11,457,000) $ (223,000)
Actuarial Assumptions - The total pension liability as of June 30, 2018, was determined by rolling forward the System’s total pension liability as of the June 30, 2017 actuarial valuation to June 30, 2018, using the following actuarial assumptions:
Actuarial cost method – entry age normal – level % of pay
Investment Return – 7.25%, includes inflation at 2.75%
Salary growth – effective average of 5.00%, comprised of inflation of 2.75% and 2.25% for real wage growth and for merit or seniority increases.
Mortality rates were based on the RP-2014 Mortality Tables for Males and Females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale.
The actuarial assumptions used in June 30, 2017 valuation were based on the results of an actuarial experience study that was performed for the five year period ending June 30, 2015.
The long-term expected rate of return on plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.
The plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Plan assets are managed with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension.
- 47 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE H - PENSION PLAN (Continued) Long-Term Expected Target Real Rate Asset Class Allocation of Return
Global public equity 20.0% 5.2% Fixed income 36.0% 2.2% Commodities 8.0% 3.2% Absolute return 10.0% 3.5% Risk parity 10.0% 3.9% Infrastructure/MLP's 8.0% 5.2% Real estate 10.0% 4.2% Alternative investments 15.0% 6.7% Cash 3.0% 0.4% Financing (LIBOR) -20.0% 0.9%
100.0%
The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2018.
Discount Rate - The discount rate used to measure the total pension liability was 7.25%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Sensitivity of the School District’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the net pension liability, calculated using the discount rate of 7.25%, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.25%) or one percentage point higher (8.25%) than the current rate: Current 1% Discount 1% Decrease Rate Increase 6.25% 7.25% 8.25%
School District's proportionate share of the net pension liability $ 193,810,000 $ 156,352,000 $ 124,680,000
Pension Plan Fiduciary Net Position - Detailed information about PSERS’s fiduciary net position is available in the PSERS Comprehensive Annual Financial Report which can be found on the System’s website at www.psers.state.pa.us.
- 48 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE I - SELF-INSURANCE The District administers a self-insurance program to provide for the medical care for eligible employees and their dependents. Benefit payments plus an administrative charge are made to a third-party administrator, who approves and processes all claims. The District has recorded a liability for claims incurred through June 30, 2019. Change in Aggregate Claims Liabilities Change in aggregate claims liabilities for the year ended June 30, 2019, consisted of the following: CLAIMS LIABILITY, BEGINNING OF YEAR $ 4,553,814 Current year claims and changes in estimates 8,911,915 Claim payments by the District (9,831,949)
CLAIMS LIABILITY, END OF YEAR $ 3,633,780
The liability is included in accrual salaries and benefits in the financial statements. Self-Insurance benefits also are offered to retired District employees according to the provisions set forth in each bargaining unit’s ERIP agreement. Currently, 53 retirees are eligible for benefits, which are financed on a pay-as-you-go basis. The total amount of benefits paid was $1,558,688 for the year ended June 30, 2019.
NOTE J - COMMITMENTS AND CONTINGENCIES
Government Grants and Awards
The District participates in both state and federally assisted grant programs. These programs are subject to program compliance audits by the grantors or their representatives. The District is potentially liable for any expenditures which may be disallowed pursuant to the terms of these grant programs. Management is not aware of any material items of noncompliance which would result in the disallowance of program expenditures.
Litigation
Certain litigation claims are pending against the District. In the opinion of District management and legal counsel, the potential losses, if any, on such claims are not yet determinable.
Tax Increment Financing Plan and Cooperation Agreement
On July 18, 2005, the Board of School Directors of the District adopted a Resolution approving a Tax Increment Financing (TIF) Plan for the Hotel-Office Complex Project to construct a hotel and four office buildings at the intersection of Route 82 and the Route 30 Bypass in Coatesville, Pennsylvania. The TIF District is comprised of three tax parcels. A private developer, Oliver Tyrone Pulver Corporation, will construct a hotel and a 90,000 square foot office building. The Redevelopment Authority of the City of Coatesville (the “Authority”) designed the TIF Plan to finance the project. The Tax Increment Financing Act (P.L. 465 July 11, 1990), as amended, grants this power to development authorities.
- 49 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE J - COMMITMENTS AND CONTINGENCIES (Continued)
The TIF Plan calls for the developer to fund the project costs through a $4,000,000 HUD loan, $12,500,000 from governmental grants, $3,800,000 from the proceeds of the TIF debt and $12,689,000 from the developer’s equity.
The District’s election to participate in the Plan shall not, in any way, pledge or obligate the credit or taxing power of the District, nor shall the District be liable for the payment of principal of, or interest on, any obligations issued by the Authority.
In addition, the Board of School Directors of the District authorized the execution of a Cooperation Agreement among the Authority, the District, the County and the City of Coatesville, which sets forth and confirms the basic terms and conditions of the TIF Plan.
The Tax Increment District was created as of January 31, 2006. The Tax Increment District shall continue in existence until January 31, 2026. Commencing with the collection of the Tax Increment in calendar year 2006, the District will pay to the issuer an amount equal to 100% of the Tax Increment received by the District during the term of the Tax Increment District.
The tax assessor for the County has determined the full aggregate market value of the taxable property in the Tax Increment District to be $38,427. This shall be considered the base assessed value of the taxable property in the Tax Increment District, and the real estate tax calculated at the current millage will be the amount earned by the District. The difference between the base assessed value of the TIF District parcel and the reassessed value is the Tax Assessment Increment. In accordance with the cooperation agreement, 100% of the Tax Increment has to be paid to the Authority when the owners of the TIF parcels pay the annual school real estate tax bill.
NOTE K - RISK MANAGEMENT
The District is exposed to various risks of loss related to tort; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Significant losses are covered by commercial insurance for all major programs. There were no significant reductions of insurance coverages in the 2018-2019 year. Settlement amounts have not exceeded insurance coverage for the current year or the three prior years.
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NOTE L - OTHER POSTEMPLOYMENT BENEFITS - PSERS
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Public School Employees’ Retirement System (PSERS) and additions to/deductions from PSERS’s fiduciary net position have been determined on the same basis as they are reported by PSERS. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
General Information about the Health Insurance Premium Assistance Program
Health Insurance Premium Assistance Program
The System provides Premium Assistance which, is a governmental cost sharing, multiple- employer other postemployment benefit plan (OPEB) for all eligible retirees who qualify and elect to participate. Employer contribution rates for Premium Assistance are established to provide reserves in the Health Insurance Account that are sufficient for the payment of Premium Assistance benefits for each succeeding year. Effective January 1, 2002 under the provisions of Act 9 of 2001, participating eligible retirees are entitled to receive premium assistance payments equal to the lesser of $100 per month or their out-of-pocket monthly health insurance premium. To receive premium assistance, eligible retirees must obtain their health insurance through either their school employer or the PSERS’ Health Options Program. As of June 30, 2018 there were no assumed future benefit increases to participating eligible retirees.
Premium Assistance Eligibility Criteria
Retirees of the System can participate in the Premium Assistance program if they satisfy the following criteria:
Have 24 ½ or more years of service, or Are a disability retiree, or Have 15 or more years of service and retired after reaching superannuation age, and Participate in the HOP or employer-sponsored health insurance program.
Pension Plan Description
PSERS is a governmental cost-sharing multiple-employer defined benefit pension plan that provides retirement benefits to public school employees of the Commonwealth of Pennsylvania. The members eligible to participate in the System include all full-time public school employees, part-time hourly public school employees who render at least 500 hours of service in the school year, and part-time per diem public school employees who render at least 80 days of service in the school year in any of the reporting entities in Pennsylvania. PSERS issues a publicly available financial report that can be obtained at www.psers.pa.gov.
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NOTE L - OTHER POSTEMPLOYMENT BENEFITS – PSERS (Continued)
Benefits Provided
Participating eligible retirees are entitled to receive premium assistance payments equal to the lesser of $100 per month or their out-of-pocket monthly health insurance premium. To receive premium assistance, eligible retirees must obtain their health insurance through either their school employer or the PSERS’ Health Options Program. As of June 30, 2018, there were no assumed future benefit increases to participating eligible retirees
Contributions
The school districts’ contractually required contribution rate for the fiscal year ended June 30, 2019 was 0.83% of covered payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the OPEB plan from the District were $364,000 for the year ended June 30, 2019.
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
At June 30, 2019, the District reported a liability of $6,791,000 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2018, and the total OPEB liability used to calculate the net OPEB liability was determined by rolling forward the System’s total OPEB liability as of June 30, 2017 to June 30, 2018. The District’s proportion of the net OPEB liability was calculated utilizing the employer’s one-year reported covered payroll as it relates to the total one-year reported covered payroll. At June 30, 2019, the District’s proportion was 0.3257% percent, which was a decrease of 0.0274% from its proportion measured as of June 30, 2018.
- 52 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE L - OTHER POSTEMPLOYMENT BENEFITS – PSERS (Continued)
For the year ended June 30, 2019, the District recognized OPEB expense of $183,000. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources
GOVERNMENTAL ACTIVITIES Difference between expected and actual experience $ 42,000 $ - Changes in assumptions 105,000 252,000 Net difference between projected and actual investment earnings 11,000 - Changes in proportions - 726,000 Difference between employer contributions and proportionate share of total contributions 1,000 - Contributions subsequent to the measurement date 335,000 -
$ 494,000 $ 978,000
Outflows of Inflows of Resources Resources
BUSINESS-TYPE ACTIVITIES Difference between expected and actual experience $ 1,000 $ - Changes in assumptions 2,000 5,000 Changes in proportions - 14,000 Contributions subsequent to the measurement date 7,000 -
$ 10,000 $ 19,000
- 53 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE L - OTHER POSTEMPLOYMENT BENEFITS – PSERS (Continued)
$342,000 was reported as deferred outflows of resources related to OPEB resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:
Year Ending Governmental Business-Type June 30, Activities Activities
2020 $ (137,000) $ (3,000) 2021 (137,000) (3,000) 2022 (137,000) (3,000) 2023 (151,000) (3,000) 2024 (175,000) (3,000) Thereafter (82,000) (1,000)
$ (819,000) $ (16,000)
Actuarial Assumptions
The Total OPEB Liability as of June 30, 2018, was determined by rolling forward the System’s Total OPEB Liability as of June 30, 2017 to June 30, 2018 using the following actuarial assumptions, applied to all periods included in the measurement:
Actuarial cost method - Entry Age Normal - level % of pay. Investment return – 2.98% - S&P 20 Year Municipal Bond Rate. Salary growth - Effective average of 5.00%, comprised of inflation of 2.75% and 2.25% for real wage growth and for merit or seniority increases. Premium Assistance reimbursement is capped at $1,200 per year. Assumed Healthcare cost trends were applied to retirees with less than $1,200 in premium assistance per year. Mortality rates were based on the RP-2014 Mortality Tables for Males and Females, adjusted to reflect PSERS’ experience and projected using a modified version of the MP-2015 Mortality Improvement Scale. Participation rate: Eligible retirees will elect to participate Pre age 65 at 50%. Eligible retirees will elect to participate Post age 65 at 70%.
The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study that was performed for the five year period ending June 30, 2015.
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NOTE L - OTHER POSTEMPLOYMENT BENEFITS – PSERS (Continued)
The following assumptions were used to determine the contribution rate:
The results of the actuarial valuation as of June 30, 2015 determined the employer contribution rate for fiscal year 2018. Cost Method: Amount necessary to assure solvency of Premium Assistance through the third fiscal year after the valuation date. Asset valuation method: Market Value. Participation rate: 63% of eligible retirees are assumed to elect premium assistance. Mortality rates and retirement ages were based on the RP-2000 Combined Healthy Annuitant Tables with age set back 3 for both males and females for healthy annuitants and for dependent beneficiaries. For disabled annuitants, the RP-2000 Combined Disabled Tables with age set back 7 years for males and 3 years for females for disabled annuitants. (A unisex table based on the RP-2000 Combined Healthy Annuitant Tables with age set back 3 years for both genders assuming the population consists of 25% males and 75% females is used to determine actuarial equivalent benefits.)
Investments consist primarily of short term assets designed to protect the principal of the plan assets. The expected rate of return on OPEB plan investments was determined using the OPEB asset allocation policy and best estimates of geometric real rates of return for each asset class.
The OPEB plan’s policy in regard to the allocation of invested plan assets is established and may be amended by the Board. Under the program, as defined in the retirement code employer contribution rates for Premium Assistance are established to provide reserves in the Health Insurance Account that are sufficient for the payment of Premium Assistance benefits for each succeeding year. Long-Term Expected Target Real Rate Asset Class Allocation of Return
Cash 5.9% 0.03% Non-US Developed Fixed 1.3% 1.2% US Core Fixed Income 92.8% 0.4%
100.0%
The above was the Board’s adopted asset allocation policy and best estimates of geometric real rates of return for each major asset class as of June 30, 2018.
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NOTE L - OTHER POSTEMPLOYMENT BENEFITS – PSERS (Continued)
Discount Rate
The discount rate used to measure the Total OPEB Liability was 2.98%. Under the plan’s funding policy, contributions are structured for short term funding of Premium Assistance. The funding policy sets contribution rates necessary to assure solvency of Premium Assistance through the third fiscal year after the actuarial valuation date. The Premium Assistance account is funded to establish reserves that are sufficient for the payment of Premium Assistance benefits for each succeeding year. Due to the short term funding policy, the OPEB plan’s fiduciary net position was not projected to be sufficient to meet projected future benefit payments, therefore the plan is considered a “pay-as-you-go” plan. A discount rate of 2.98% which represents the S&P 20 year Municipal Bond Rate at June 30, 2018, was applied to all projected benefit payments to measure the total OPEB liability.
Sensitivity of the System Net OPEB Liability to Change in Healthcare Cost Trend Rates
Healthcare cost trends were applied to retirees receiving less than $1,200 in annual Premium Assistance. As of June 30, 2018, retirees Premium Assistance benefits are not subject to future healthcare cost increases. The annual Premium Assistance reimbursement for qualifying retirees is capped at a maximum of $1,200. As of June 30, 2017, 93.380 retirees were receiving the maximum amount allowed of $1,200 per year. As of June 30, 2017, 1,077 members were receiving less than the maximum amount allowed of $1,200 per year. The actual number of retirees receiving less than the $1,200 per year cap is a small percentage of the total population and has a minimal impact on Healthcare Cost Trends as depicted below.
The following presents the System net OPEB liability for June 30, 2018, calculated using current Healthcare cost trends as well as what the System net OPEB liability would be if it health cost trends were 1-percentage point lower or 1-percentage point higher than the current rate: 1% Current 1% Decrease Rate Increase
Net OPEB liability $ 6,789,000 $ 6,791,000 $ 6,792,000
- 56 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE L - OTHER POSTEMPLOYMENT BENEFITS – PSERS (Continued)
Sensitivity of the System Net OPEB Liability to Change in the Discount Rate
The following presents the net OPEB liability, calculated using the discount rate of 2.98%, as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage point lower (1.98%) or 1-percentage-point higher (3.98%) than the current rate: Current 1% Discount 1% Decrease Rate Increase 1.98% 2.98% 3.98%
District's proportionate share of the net OPEB liability $ 7,723,000 $ 6,791,000 $ 6,017,000
OPEB Plan Fiduciary Net Position
Detailed information about PSERS’ fiduciary net position is available in PSERS Comprehensive Annual Financial Report, which can be found on the System’s website at www.psers.pa.gov.
NOTE M - OTHER POSTEMPLOYMENT BENEFITS – SINGLE EMPLOYER PLAN
Plan Description
The School District administers a single employer defined benefit health care plan. The plan provides medical insurance benefits for eligible retirees and their spouses. The Board of School Directors assigns the authority to establish and amend benefit provisions. The plan does not issue any financial report and is not included in the report of any public employee retirement system or any other entity.
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NOTE M - OTHER POSTEMPLOYMENT BENEFITS – SINGLE EMPLOYER PLAN (Continued)
Plan Membership - At June 30, 2018, plan membership consisted of the following:
Inactive plan members or beneficiaries currently receiving benefits 59 Inactive plan members entitled to but not yet receiving benefits - Active plan members 649
708
Funding Policy and Funding Status
The plan is an unfunded plan with no assets accumulated in a trust. Contributions to the plan are equal to benefit payments. For the fiscal year ended June 30, 2018, the District contributed $764,723 to the Plan related to retirees.
Benefits Provided
The plan provides the following benefits:
All teachers and other employees retired prior to June 30, 2010 are eligible for benefits under the plan. Benefits include medical, prescription drug, dental and vision. The School District and the retiree pay a portion of the premium that is specific to each employee. Once the retiree is Medicare eligible, the plan continues for the COBRA continuation period.
All teachers and other employees retired under early retirement incentive at June 30, 2010 or June 30, 2011 with 10 years of service to the district and are PSERS retirement eligible are eligible for benefits under the plan. Benefits include medical, prescription drug, dental and vision. The retiree must pay the active cost share amount at retirement plus any additional increases in premium that occur after retirement. Once the retiree is eligible for unreduced social security, the plan continues for the COBRA continuation period.
All teachers retired under early retirement incentive at June 30, 2012 and are PSERS retirement eligible are eligible for benefits under the plan. Benefits include medical, prescription drug, dental and vision. The retiree must pay the full premium. Once the retiree reaches age 65, the plan continues for the COBRA continuation period.
All teachers retired after July 1, 2012 and other employees retired after July 1, 2011 and are PSERS retirement eligible are eligible for benefits under the plan. Benefits include medical, prescription drug, dental and vision. The retiree must pay the full premium. Once the retiree is Medicare eligible, the plan continues for the COBRA continuation period.
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NOTE M - OTHER POSTEMPLOYMENT BENEFITS – SINGLE EMPLOYER PLAN (Continued)
Assumptions
The following assumptions and actuarial methods and calculation were used:
Interest Rate – 2.98%, based on S&P Municipal Bond 20 Year High Grade Rate Index at July 1, 2018.
Salary - An assumption for salary increases is used only for spreading contributions over future pay under the entry age normal cost method. For this purpose, salary increases are composed of a 2.5% cost of living adjustment, 1% real wage growth, and for teachers and administrators a merit increase which varies from 2.75% to 0%.
Health Care Cost Trend Rate - 6.0% in 2017, and 5.5% in 2018 through 2023. Rates gradually decrease from 5.4% in 2024 to 3.9% in 2075 and later based on the Society of Actuaries Long-Run Medical Cost Trend Model.
Withdrawal - Rates of withdrawal vary by age, gender and years of service. Sample rates for employees with more than 10 years of service are shown below. Rates for new employees start at 22.9% for both men and women and decrease with age and service.
Male Female Male Female Age Rate Rate Age Rate Rate
25 2.57% 5.02% 45 1.37% 1.65% 30 2.57% 4.02% 50 1.92% 2.06% 35 1.50% 2.85% 55 3.38% 3.11% 40 1.34% 1.60% 60 5.57% 6.40%
Mortality - Separate rates are assumed preretirement and postretirement using the rates assumed in the PSERS defined benefit pension plan actuarial valuation.
Disability - No disability was assumed.
Retirement - Assumed retirement rates are based on PSERS plan experience and vary by age, service and gender.
Percent of Eligible Retirees Electing Coverage in Plan – 55% of Teachers and Administrators and 35% of the Support Staff are assumed to elect coverage.
Percent Married at Retirement - 70% of employees are assumed to be married and have a spouse covered by the plan at retirement. Non-spouse dependents are deemed to be immaterial.
Spouse Age - Wives are assumed to be two years younger than their husbands.
- 59 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE M - OTHER POSTEMPLOYMENT BENEFITS – SINGLE EMPLOYER PLAN (Continued)
Retiree Contributions - Retiree Contributions are assumed to increase at the same rate as the Health Care Cost Trend Rate.
Actuarial Value of Assets - Equal to the Market Value of Assets.
Actuarial Cost Method - Entry Age Normal - Under the Entry Age Normal Cost Method, the Normal Cost is the present value of benefits allocated to the year following the valuation date. Benefits are allocated on a level basis over the earnings of an individual between the date of hire and the assumed retirement age. The Accrued Liability as of the valuation date is the excess of the present value of future benefits over the present value of future Normal Cost. The Unfunded Accrued Liability is the excess of the Accrued Liability over the Actuarial Value of Assets. Actuarial gains and losses serve to reduce or increase the Unfunded Accrued Liability.
Changes in Assumptions - In the 2018 actuarial valuation, the discount rate changed from 3.13% to 2.98%. The trend assumption was updated.
Changes in the Total OPEB Liability Total OPEB Liability Governmental Business-Type Activities Activities
Balance at June 30, 2017 $ 7,823,036 $ 104,409 Changes for the year Service cost 342,568 2,282 Interest cost 242,685 3,272 Changes in assumptions 13,506 400 Benefit payments (760,726) (3,997) Net changes (161,967) 1,957
Balance at June 30, 2018 $ 7,661,069 $ 106,366
- 60 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE M - OTHER POSTEMPLOYMENT BENEFITS – SINGLE EMPLOYER PLAN (Continued)
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate
The following presents the total OPEB liability of the School District, as well as what the School District’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (1.98 percent) or 1-percentage-point higher (3.98 percent) than the current discount rate: Current Discount 1% Increase Rate 1% Increase 1.98% 2.98% 3.98%
Total OPEB liability $ 8,213,346 $ 7,767,435 $ 7,343,050
Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates
The following presents the total OPEB liability of the School District, as well as what the School District’s total OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rate: 1% Current 1% Decrease Rates Increase
Total OPEB liability $ 7,100,970 $ 7,767,435 $ 8,558,260
OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB - For the year ended June 30, 2019, the School District recognized OPEB expense of $415,592. At June 30, 2019, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources
Changes in assumptions $ 12,747 $ 363,034 Difference between expected and actual experience - 1,400,705 Contributions subsequent to the measurement date 752,653 -
$ 765,400 $ 1,763,739
- 61 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2019
NOTE M - OTHER POSTEMPLOYMENT BENEFITS – SINGLE EMPLOYER PLAN (Continued)
$752,653 was reported as deferred outflows of resources related to OPEB resulting from District contributions subsequent to the measurement date and will be recognized as a reduction of the OPEB liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:
Year Ending June 30,
2020 $ (175,215) 2021 (175,215) 2022 (175,215) 2023 (175,215) 2024 (175,215) Thereafter (874,917)
$ (1,750,992)
NOTE O - BUILDING SALE LEASEBACK
In June 2018 The Coatesville Area School District Building Authority (the Authority), a component unit of the Coatesville Area School District (the District), issued Guaranteed School Lease Revenue Bonds of 2018 with a face value of $12,400,000 and issued at a premium of $907,553 to acquire The Scott Middle School Building from the District. The building will be leased back to the District in annual rental payments equal to the debt service on the bonds issued by the Authority. At the end of the bond term, ownership of the building will then revert to the District.
- 62 - REQUIRED SUPPLEMENTARY INFORMATION COATESVILLE AREA SCHOOL DISTRICT BUDGETARY COMPARISON SCHEDULE GENERAL FUND YEAR ENDED JUNE 30, 2019
Variance With Actual Final Budget Budgeted Amounts Amounts Positive Original Final (GAAP Basis) (Negative)
REVENUES Local sources $ 114,914,140 $ 114,914,140 $ 116,138,509 $ 1,224,369 State sources 52,524,695 52,524,695 52,811,372 286,677 Federal sources 3,674,442 3,674,442 3,300,792 (373,650) TOTAL REVENUES 171,113,277 171,113,277 172,250,673 1,137,396
EXPENDITURES Instruction Regular programs 70,249,551 70,249,551 68,350,742 1,898,809 Special programs 41,798,266 41,798,266 49,079,186 (7,280,920) Vocational programs 4,093,408 4,093,408 4,028,257 65,151 Other instructional programs 838,789 838,789 1,016,255 (177,466) TOTAL INSTRUCTION 116,980,014 116,980,014 122,474,440 (5,494,426) Support services Pupil personnel services 3,858,862 3,858,862 2,994,716 864,146 Instructional staff services 3,480,567 3,480,567 3,195,000 285,567 Administrative services 7,366,554 7,366,554 7,566,795 (200,241) Pupil health 1,217,415 1,217,415 1,035,197 182,218 Business services 1,331,514 1,331,514 1,123,197 208,317 Operation and maintenance of plant services 9,461,860 9,461,860 9,792,902 (331,042) Student transportation services 10,746,570 10,746,570 10,786,455 (39,885) Central support services 2,856,658 2,856,658 2,306,911 549,747 Other support services 89,913 89,913 122,017 (32,104) TOTAL SUPPORT SERVICES 40,409,913 40,409,913 38,923,190 1,486,723 Operation of non-instructional services Student activities 1,163,906 1,163,906 1,170,261 (6,355) Community services 28,725 28,725 86,460 (57,735) TOTAL OPERATION OF NON-INSTRUCTIONAL SERVICES 1,192,631 1,192,631 1,256,721 (64,090) Debt service 16,067,911 16,067,911 16,065,862 2,049 Budgetary reserve 1,800,000 1,800,000 - 1,800,000 TOTAL EXPENDITURES 176,450,469 176,450,469 178,720,213 (2,269,744)
NET CHANGE IN FUND BALANCE $ (5,337,192) $ (5,337,192) (6,469,540) $ (1,132,348)
FUND BALANCE AT BEGINNING OF YEAR 11,254,089
FUND BALANCE AT END OF YEAR $ 4,784,549
See accompanying note to the budgetary comparison schedule.
- 63 - COATESVILLE AREA SCHOOL DISTRICT NOTE TO THE BUDGETARY COMPARISON SCHEDULE YEAR ENDED JUNE 30, 2019
NOTE A - BUDGETARY INFORMATION
Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. An annual appropriated budget is adopted for the General Fund. All annual appropriations lapse at fiscal year-end. Project-length financial plans are adopted for the Capital Projects Fund.
The School District follows these procedures in establishing the budgetary data reflected in the financial statements:
1. Prior to April 1, the Business Manager submits to the School Board a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them.
2. Public hearings are conducted at the District offices to obtain taxpayer comments.
3. Prior to July 1, the budget is legally enacted through passage of an ordinance.
4. The Board may, by resolution, transfer unencumbered budgeted amounts between departments within any fund.
5. The operating budget is adopted on a basis prescribed by the Department of Education.
Controls over spending in the Capital Reserve Fund are achieved by the use of internal spending limits. Effective expenditure control is achieved in the Capital Reserve Fund through bond indenture provisions.
All budget amounts presented in the accompanying required supplementary information reflect the original budget and the amended budget (which have been adjusted for legally authorized revisions to the annual budgets during the year).
NOTE B - EXCESS OF EXPENDITURES OVER APPROPRIATIONS
For the period ended June 30, 2019, expenditures exceeded appropriations in the following General Fund object levels:
Instruction Special programs $ (7,280,920) Other instructional programs (177,466) Support services Administrative services (200,241) Operation and maintenance of plant services (331,042) Student transportation services (39,885) Other support services (32,104) Operation of non-instructional services Student activities (6,355) Community services (57,735)
- 64 - 57.24% 310.23% 22.2100% 87,909,000 28,336,379
$ $ opld nomto for information compiled, 45.64% 0.3748% 336.68% 48,219,963 162,345,000 $ $ 50.14% 0.3687% 382.62% 47,754,301 182,716,000 $ $ 51.84% 0.3531% 370.96% 47,010,413 174,390,000 $ $ 54.00% 0.3257% 356.51% 0921 0721 2015 2016 2017 2018 2019 43,856,333 156,352,000 $ $ COATESVILLEAREA DISTRICT SCHOOL SHARE OF THE PSERS NET PENSION LIABILITY PENSION NET PSERS THE OF SHARE YEARS FISCAL FIVE LAST SCHOOL DISTRICT'S PROPORTION OF THE OF PROPORTION DISTRICT'S SCHOOL (ASSET) LIABILITY PENSION NET PROPORTIONATE DISTRICT'S SCHOOL PENSION NET THE OF SHARE (ASSET) LIABILITY PAYROLLCOVERED DISTRICT'S SCHOOL PROPORTIONATE DISTRICT'S SCHOOL LIABILITY PENSION NET THE OF SHARE ITS PERCENTAGEOF A AS (ASSET) PAYROLLCOVERED AAS POSITION NET PLAN'SFIDUCIARY THE PENSION TOTAL THE OF PERCENTAGE LIABILITY is trend ten-year full NOTESSCHEDULE TO a until However, years. (10) ten for 2014).and information 2015 2016, 2017, liability2018, pension 30, net (June the of date measurement the payrollaboveas of covered isnoted District's The show to requirement the present to is schedule This availableis whichshown.is information for onlyyears those - 65 - - 20.50% 2015 9,887,000 9,887,000 48,219,963 $ $ - 25.04% 2016 11,959,000 11,959,000 47,754,301 $ $ $ - 29.23% 2017 13,739,000 13,739,000 47,010,413 $ $ $ - 31.74% 2018 13,920,000 13,920,000 43,856,333 $ $ $ - 32.60% 2019 13,445,000 13,445,000 41,242,331 $ $ $ CONTRIBUTION (EXCESS) CONTRIBUTION DEFICIENCY COATESVILLEAREA DISTRICT SCHOOL SCHEDULE OF THE SCHOOL DISTRICT'S PSERS PENSION CONTRIBUTIONS PENSION PSERS DISTRICT'S SCHOOL THE OF SCHEDULE YEARS FISCAL FIVE LAST CONTRACTUALLY REQUIREDCONTRIBUTION CONTRACTUALLY THE TO RELATION IN CONTRIBUTIONS REQUIREDCONTRIBUTION CONTRACTUALLY PAYROLLCOVERED DISTRICT'S SCHOOL information compiled, is OF PERCENTAGE A AS CONTRIBUTIONS trend ten-year full PAYROLLCOVERED a until However, years. (10) ten for information show SCHEDULENOTETO to requirement the present to is schedule This availableis whichshown.is information yearsfor only those for - 66 - COATESVILLE AREA SCHOOL DISTRICT
PSERS NET OTHER POSTEMPLOYMENT BENEFIT PLAN LIABILITY LAST TWO FISCAL YEARS
2018 2017 SCHOOL DISTRICT'S PROPORTION OF THE NET OPEB LIABILITY (ASSET) 0.3257% 0.3531%
SCHOOL DISTRICT'S PROPORTIONATE SHARE OF THE NET OPEB LIABILITY (ASSET) $ 6,791,000 $ 7,194,000
SCHOOL DISTRICT'S COVERED PAYROLL $ 43,856,333 $ 47,010,413
SCHOOL DISTRICT'S PROPORTIONATE SHARE OF THE NET OPEB LIABILITY (ASSET) AS A PERCENTAGE OF ITS COVERED PAYROLL 15.48% 15.30%
THE PLAN'S FIDUCIARY NET POSITION AS A PERCENTAGE OF THE TOTAL OPEB LIABILITY 5.56% 5.73%
NOTES TO SCHEDULE
The District's covered payroll noted above is as of the measurement date of the net pension liability (June 30, 2018 and 2017).
This schedule is to present the requirement to show information for ten (10) years. However, until a full ten-year trend is compiled, information for only those years for which information is available is shown.
- 67 - COATESVILLE AREA SCHOOL DISTRICT SCHEDULE OF THE SCHOOL DISTRICT'S PSERS OTHER POSTEMPLOYMENT BENEFIT PLAN CONTRIBUTIONS LAST TWO FISCAL YEARS
2018 2017
CONTRACTUALLY REQUIRED CONTRIBUTION $ 342,000 $ 364,000
CONTRIBUTIONS IN RELATION TO THE CONTRACTUALLY REQUIRED CONTRIBUTION 342,000 364,000
CONTRIBUTION (EXCESS) DEFICIENCY $ - $ -
SCHOOL DISTRICT'S COVERED PAYROLL $ 41,204,819 $ 43,856,333
CONTRIBUTIONS AS A PERCENTAGE OF COVERED PAYROLL 0.83% 0.83%
NOTE TO SCHEDULE
This schedule is to present the requirement to show information for ten (10) years. However, until a full ten-year trend is compiled, information for only those years for which information is available is shown.
- 68 - COATESVILLE AREA SCHOOL DISTRICT SCHEDULE OF CHANGES IN THE TOTAL OTHER POSTEMPLOYMENT BENEFIT PLAN LIABILITY AND RELATED RATIOS LAST TWO FISCAL YEARS
2018 2017 TOTAL OPEB LIABILITY Service cost $ 344,850 $ 388,100 Interest 245,957 261,532 Changes in experience - (1,680,843) Changes of assumptions 13,906 (435,642) Benefit payments (764,723) (1,573,002) NET CHANGE IN TOTAL OPEB LIABILITY (160,010) (3,039,855)
TOTAL OPEB LIABILITY, BEGINNING 7,927,445 10,967,300
TOTAL OPEB LIABILITY, ENDING $ 7,767,435 $ 7,927,445
COVERED PAYROLL $ 40,089,961 $ 40,089,961
TOTAL OPEB LIABILITY AS A PERCENTAGE OF COVERED PAYROLL 19.38% 19.77%
NOTES TO SCHEDULE
No assets are accumulated in a trust to pay benefits related to this plan
Changes in assumptions: In the 2018 actuarial valuation, the discount rate changed from 3.13% to 2.98%. The trend assumption was updated.
This schedule is to present the requirement to show information for ten (10) years. However, until a full ten-year trend is compiled, information for only those years for which information is available is shown.
- 69 - Maillie LLP | maillie.com PO Box 680, Oaks, PA 19456-0680 600 Willowbrook Lane, Suite 624, West Chester, PA 19382 PO Box 11847, Wilmington, DE 19850-1847
Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Coatesville Area School District as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Coatesville Area School District’s basic financial statements, and have issued our report thereon dated December 18, 2019.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Coatesville Area School District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Coatesville Area School District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Coatesville Area School District’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
- 70 - To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Coatesville Area School District’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Oaks, Pennsylvania December 18, 2019
- 71 - Maillie LLP | maillie.com PO Box 680, Oaks, PA 19456-0680 600 Willowbrook Lane, Suite 624, West Chester, PA 19382 PO Box 11847, Wilmington, DE 19850-1847
Independent Auditors’ Report on Compliance for Each Major Federal Program; and Report on Internal Control Over Compliance in Accordance With the Uniform Guidance
To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
Report on Compliance for Each Major Federal Program
We have audited the Coatesville Area School District’s compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the Coatesville Area School District’s major federal programs for the year ended June 30, 2019. The Coatesville Area School District’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for each of the Coatesville Area School District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200. Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Coatesville Area School District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Coatesville Area School District’s compliance.
Opinion on Each Major Federal Program
In our opinion, the Coatesville Area School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2019.
- 72 - To the Board of School Directors Coatesville Area School District Thorndale, Pennsylvania
Report on Internal Control Over Compliance
Management of the Coatesville Area School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Coatesville Area School District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Coatesville Area School District’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Purpose of this Report
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Oaks, Pennsylvania December 18, 2019
- 73 - SUPPLEMENTARY INFORMATION -MAJOR FEDERAL AWARD PROGRAMS AUDIT COATESVILLE AREA SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2019
Federal Federal Pass-Through Grant Period Federal Grantor/Pass-Through Source CFDA Grantor’s Beginning/ Grantor/Program Title Code Number Number Ending Dates
U.S. DEPARTMENT OF EDUCATION Passed through the Pennsylvania Department of Education Title I - 1718 I 84.010 013-18-0089 August 3, 2017 to September 30, 2018
Title I - 1819 I 84.010 013-19-0089 July 22, 2018 to September 30, 2019
Title I - Delinquent - 1718 I 84.010 107-18-0089 August 3, 2017 to September 30, 2018
Title I - Delinquent - 1819 I 84.010 107-19-0089 July 22, 2018 to September 30, 2019
Title I - Program Improvement I 84.010 042-13-0089 April 10, 2013 to September 30, 2014
TOTAL TITLE I
Title II - Improving Teacher Quality -1718 I 84.367 020-18-0089 August 3, 2017 to September 30, 2018
Title II - Improving Teacher Quality -1819 I 84.367 020-18-0089 July 22, 2018 to September 30, 2019 TOTAL TITLE II
Title III - 1617 I 84.365 010-17-0089 August 8, 2016 to September 30, 2017
Title III - 1718 I 84.365 010-18-0089 August 3, 2017 to September 30, 2018
Title III - 1819 I 84.365 010-19-0089 July 22, 2018 to September 30, 2019 TOTAL TITLE III
Title IV - 1819 I 84.424 144-19-0089 July 22, 2018 to September 30, 2019
21st Century Community Learning Centers I 84.287 410-006-2385 July 1, 2014 to June 30, 2015
21st Century Community Learning Centers I 84.287 410-006-2385 July 1, 2013 to June 30, 2014 TOTAL 21st CENTURY COMMUNITY LEARNING CENTERS Passed through Chester County Intermediate Unit IDEA 611-1718 I 84.027 062-18-0024 July 1, 2017 to June 30, 2018
IDEA 611-1819 I 84.027 062-19-0024 July 1, 2018 to June 30, 2019 TOTAL IDEA 611
IDEA 619-1718 I 84.173 131-14-0 July 1, 2017 to June 30, 2018
IDEA 619-1819 I 84.173 131-14-0 July 1, 2018 to June 30, 2019 TOTAL IDEA 619
TOTAL SPECIAL EDUCATION CLUSTER
TOTAL FORWARD Accrued or Accrued or Program Total (Deferred) (Deferred) Passed or Award Received Revenue at Revenue Revenue at Through to Amount for the Year July 1, 2018 Recognized Expenditures June 30, 2018 Sub-Recipients
$ 1,740,662 $ 870,331 $ 549,645 $ 320,686 $ 320,686 $ - $ -
1,706,749 1,033,706 - 1,402,995 1,402,995 369,289 -
52,250 37,321 15,413 21,909 21,909 - -
53,140 14,171 - 15,902 15,902 1,731 -
161,209 - (10,098) - - (10,098) -
1,955,529 554,960 1,761,492 1,761,492 360,922 -
266,553 150,103 105,689 44,414 44,414 - -
259,470 192,244 - 203,066 203,066 10,822 -
342,347 105,689 247,480 247,480 10,822 -
90,961 19,492 9,758 9,734 9,734 - -
78,231 50,291 (10,612) 66,491 66,491 5,588 -
71,475 19,060 - 32,500 32,500 13,440 -
88,843 (854) 108,725 108,725 19,028 -
124,889 33,304 - 95,511 95,511 62,207 -
252,793 - 127,687 - - 127,687 -
252,793 63,198 63,198 - - - -
63,198 190,885 - - 127,687 -
1,219,911 1,219,911 1,219,911 - - - -
1,277,512 681,340 - 1,277,512 1,277,512 596,172 -
1,901,251 1,219,911 1,277,512 1,277,512 596,172 -
2,940 2,940 2,940 - - - -
4,000 - - 4,000 4,000 4,000 -
2,940 2,940 4,000 4,000 4,000 -
1,904,191 1,222,851 1,281,512 1,281,512 600,172 -
$ 4,387,412 $ 2,073,531 $ 3,494,719 $ 3,494,719 $ 1,180,838 $ -
- 74 - COATESVILLE AREA SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2018
Federal Federal Pass-Through Grant Period Federal Grantor/Pass-Through Source CFDA Grantor’s Beginning/ Grantor/Program Title Code Number Number Ending Dates
U.S. DEPARTMENT OF EDUCATION TOTAL FORWARDED
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through the Substance Abuse and Mental Health Services Administration Substance Abuse and Mental Health Services - NITT I 93.243 1H79SM062038-01 September 30, 2014 to September 29, 2016
Passed through Leader Services Medical Assistance Reimbursement - CCIU I 93.778 N/A July 1, 2014 to June 30, 2015 TOTAL MEDICAID CLUSTER
TOTAL U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
U.S. DEPARTMENT OF AGRICULTURE Passed through the Pennsylvania Department of Education National School Lunch Program I 10.555 N/A July 1, 2017 to September 30, 2018
National School Lunch Program I 10.555 N/A July 1, 2018 to September 30, 2019
National School Breakfast Program I 10.553 N/A July 1, 2017 to September 30, 2018
National School Breakfast Program I 10.553 N/A July 1, 2018 to September 30, 2019 Passed through the Pennsylvania Department of Agriculture Value of U.S.D.A. Donated Commodities I 10.555 N/A July 1, 2017 to September 30, 2018
Value of U.S.D.A. Donated Commodities I 10.555 N/A July 1, 2018 to September 30, 2019 TOTAL CHILD NUTRITION CLUSTER
Passed through the Pennsylvania Department of Education Fresh Fruit and Vegetable Program I 10.582 N/A July 1, 2017 to September 30, 2018
Fresh Fruit and Vegetable Program I 10.582 N/A July 1, 2018 to September 30, 2019 TOTAL FRESH FRUIT AND VEGETABLE PROGRAM
TOTAL U.S. DEPARTMENT OF AGRICULTURE
TOTAL FEDERAL AWARDS
Footnotes: Source Codes:
(A) Total amount of commodities received from Department of Agriculture. I = Indirect funding (B) Beginning inventory at July 1, 2018. (C) Total amount of commodities used. (D) Ending inventory at June 30, 2019. Accrued or Accrued or Program Total (Deferred) (Deferred) Passed or Award Received Revenue at Revenue Revenue at Through to Amount for the Year July 1, 2017 Recognized Expenditures June 30, 2018 Sub-Recipients
$ 4,387,412 $ 2,073,531 $ 3,494,719 $ 3,494,719 $ 1,180,838 $ -
$ 99,756 - 47,695 - - 47,695 -
58,665 - (9,465) 9,465 9,465 - -
- (9,465) 9,465 9,465 - -
- 38,230 9,465 9,465 47,695 -
N/A 31,414 31,414 - - - -
N/A 1,428,796 - 1,428,796 1,428,796 - -
N/A 20,243 20,243 - - - -
N/A 610,679 - 610,679 610,679 - -
N/A - (A) (22,868) (B) 22,868 22,868(C) - (D) -
N/A 205,355 (A) - (B) 194,431 194,431 (C) (10,924)(D) -
2,296,487 28,789 2,256,774 2,256,774 (10,924) -
N/A 30,496 30,496 - - - -
N/A 25,745 - 25,745 25,745 - -
56,241 30,496 25,745 25,745 - -
2,352,728 59,285 2,282,519 2,282,519 (10,924) -
$ 6,740,140 $ 2,171,046 $ 5,786,703 $ 5,786,703 $ 1 ,217,609 $ -
- 75 - COATESVILLE AREA SCHOOL DISTRICT NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2019
NOTE A - SCOPE OF THIS SCHEDULE
The schedule of expenditures of federal awards reflects the federal expenditures for all individual grants which were active during the fiscal year.
NOTE B - BASIS OF ACCOUNTING
The District uses the modified accrual method of recording transactions except as noted for the accounting of donated commodities in Note C. Revenues are recorded when measurable and available. Expenditures are recorded when incurred.
NOTE C - NONMONETARY FEDERAL AWARDS - DONATED FOOD
The Commonwealth of Pennsylvania distributes federal surplus food to institutions (schools, hospitals and prisons) and to the needy. Expenditures reported in the schedule of expenditures of federal awards under CFDA #10.555 Value of U.S.D.A. Donated Commodities represent surplus food consumed by the District during the 2019 fiscal year.
NOTE D - INDIRECT COST RATES
The School District has not elected to use the 10% de minimis indirect cost rate as allowed in the Uniform Guidance, Section 414.
- 76 - COATESVILLE AREA SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2019
A. SUMMARY OF AUDITORS’ RESULTS
1. The auditors’ report expresses an unmodified opinion on the financial statements of the Coatesville Area School District.
2. No significant deficiencies or material weaknesses relating to the audit of the financial statements are reported in the Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards.
3. No instances of noncompliance material to the financial statements of the Coatesville Area School District were disclosed during the audit.
4. No significant deficiencies or material weaknesses relating to the audit of the major federal award programs are reported in the Independent Auditors’ Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards in Accordance with the Uniform Guidance.
5. The auditors’ report on compliance for the major award programs for the Coatesville Area School District expresses an unmodified opinion.
6. There were no audit findings that are required to be reported in accordance with the Uniform Grant Guidance.
7. The programs tested as major programs include:
Program CFDA
Child Nutrition Cluster 10.555, 10.553
8. The threshold used for distinguishing Types A and B programs was $750,000.
9. Coatesville Area School District was not determined to be a low-risk auditee.
B. FINDINGS - FINANCIAL STATEMENT AUDIT
None
C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS AUDIT
None
- 77 -
APPENDIX E
OPINION OF BOND COUNSEL
[Proposed Form of Bond Counsel Opinion]
Re: Coatesville Area School District $______Tax and Revenue Anticipation Notes, Series of 2020
Ladies and Gentlemen:
You have requested our opinion as to the legality of the above Tax and Revenue Anticipation Notes (the “Notes”). The Notes are issued by the Coatesville Area School District, Chester County, Pennsylvania (the "School District"), under the provisions of the Pennsylvania Local Government Unit Debt Act, as amended (the “Act”), and pursuant to a Resolution adopted by the Board of Directors of the School District on June 23, 2020 (the "Resolution"). The Notes are issued to provide funds to finance the cash flow deficit of the School District for the year ending June 30, 2021.
As Bond Counsel for the School District, we have examined the relevant provisions of the Constitution of the Commonwealth of Pennsylvania; the Acts of Assembly pursuant to which the Notes are authorized, issued and sold; the transcript of proceedings filed with the Pennsylvania Department of Community and Economic Development (the “Department”); and certain statements, affidavits and other documents which we have considered pertinent.
In rendering this opinion we have examined and relied upon (i) the opinion of Michael Levin, Esquire, Solicitor to the School District, with respect, among other things, to the due adoption by the School District of the Resolution, and (ii) the accuracy of the statements and representations and the performance of the covenants of the School District set forth in the Resolution and the School District's Tax Certificate and Agreement delivered on this date in connection with the issuance of the Notes.
Based on the foregoing, we are of the opinion that:
1. The School District is authorized under the provisions of the Constitution and laws of the Commonwealth of Pennsylvania to issue the Notes for the purposes above set forth, and the School District has authorized the issuance thereof.
2. The aggregate principal amount of the Notes, together with all other outstanding tax and revenue anticipation notes issued by the School District during its fiscal year ending June 30, 2021, does not exceed any applicable constitutional or statutory limitation imposed by federal or Pennsylvania laws.
3. The provisions of the Notes, and the pledge of security therefor, comply with the provisions of the Act.
4. Under the laws of the Commonwealth of Pennsylvania, as currently enacted and construed, the Notes are exempt from personal property taxes in Pennsylvania, and interest on the Notes is exempt from Pennsylvania personal income tax and corporate net income tax.
5. Interest on the Notes is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. The opinion set forth in this paragraph is subject to the condition that the School 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 Notes in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The School District has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Notes to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Notes.
In providing this opinion, we advise you as follows:
(a) Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Notes. Owners of the Notes should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Notes, which may include original issue premium and purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.
(b) The enforceability (but not the validity) of the documents mentioned herein may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter enacted by any state or the federal government affecting the enforcement of creditors' rights generally, and "enforceable in accordance with its (their) terms" shall not mean that specific performance would necessarily be available as a remedy in every situation.
(c) We express no opinion herein with respect to the adequacy of the security or sources of payment for the Notes or the accuracy or adequacy of any description of the School District or its facilities contained in any offering document used in connection with the sale of the Notes.
LAMB McERLANE PC
E-2