UTAH CHARTER SCHOOL FINANCE AUTHORITY

Transcription

1 NEW ISSUE BOOK-ENTRY-ONLY RATING: Standard & Poor s AA UNDERLYING RATING: Standard & Poor s BBB- (See: MISCELLANEOUS Ratings ) In the opinion of Bond Counsel to the Authority, based on existing laws, regulations, rulings and court decisions and assuming, among other matters, the accuracy of certain certifications and compliance with certain covenants, interest on the Series 2012A Bonds is excludable from gross income for federal income tax purposes. Interest on the Series 2012A Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes but such interest is included in adjusted current earnings in computing the federal alternative minimum taxes imposed on certain corporations. Interest on the Series 2012B Bonds is taxable as ordinary income for federal income tax purposes. Bond Counsel is also of the opinion based on existing laws of the State of Utah as enacted and construed that interest on the Bonds is exempt from Utah individual income taxes. Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See TAX MATTERS herein. UTAH CHARTER SCHOOL FINANCE AUTHORITY $17,400,000 $410,000 CHARTER SCHOOL REVENUE BONDS CHARTER SCHOOL REVENUE BONDS (Ogden Preparatory Academy Project) (Ogden Preparatory Academy Project) Series 2012A Series 2012B (Federally Taxable) Dated: Date of Delivery Due: October 15, as shown on the inside cover The Bonds will be issued by the Authority as fully registered bonds pursuant to a Trust Indenture, dated as of December 1, 2012, between the Authority and Zions First National Bank, as trustee. The Bonds will be issued in Authorized Denominations and bear interest payable semiannually on April 15 and October 15 of each year, commencing April 15, 2013, until maturity or earlier redemption. DTC will act as securities depository for the Bonds, and the Bonds will be registered in the name of Cede & Co., as nominee of DTC. Capitalized terms used on this cover page are defined in APPENDIX D and in the Introduction to this Official Statement. The proceeds derived from the sale of the Bonds will be loaned by the Authority to the Charter School pursuant to the Loan Agreement, dated as of December 1, 2012, by and between the Authority and the Charter School to (i) fund the cost of acquiring land and building and constructing improvements thereto for use as an educational facility, (ii) fund capitalized interest on the Bonds, (iii) fund a debt service reserve fund, and (iv) pay the costs associated with the issuance of the Bonds. The Bonds are subject to optional, extraordinary and mandatory sinking fund redemption prior to maturity as set forth herein. The Bonds constitute limited obligations of the Authority and except to the extent payable from Bond proceeds, investment income, and amounts that may be appropriated by the State of Utah pursuant to the Act, are payable solely from certain payments, revenues and other amounts derived by the Authority pursuant to the Loan Agreement. The Bonds are secured solely by the Trust Estate, which is limited to (a) the rights and interests of the Authority under the Loan Agreement, except the Authority s Unassigned Rights, (b) the Project and all rights and interests of the Authority in the Project, subject to Permitted Encumbrances, except the Authority s Unassigned Rights, (c) the Pledged Revenues and all rights and interests of the Authority in the Pledged Revenues, subject to Permitted Encumbrances, except the Authority s Unassigned Rights, (d) the rights and interests of the Authority and the Charter School under the Mortgage and the Promissory Notes, and (e) all Funds created in the Indenture (other than the Cost of Issuance Fund, the Tax and Insurance Escrow Fund and the Rebate Fund), except for moneys or obligations deposited with or paid to the Trustee for the payment or redemption of Bonds that are no longer deemed to be Outstanding, and all trust accounts containing all insurance and condemnation proceeds and all Revenues payable to the Trustee by or for the account of the Authority pursuant to the Loan Agreement and the Indenture, subject to the provisions of the Indenture. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE LOAN PAYMENTS TO BE MADE BY THE CHARTER SCHOOL AND OTHER FUNDS PLEDGED THEREFOR UNDER THE INDENTURE, AND DO NOT GIVE RISE TO A GENERAL OBLIGATION OR GENERAL LIABILITY OF THE AUTHORITY OR A CHARGE AGAINST ITS GENERAL CREDIT AND SHALL NEVER CON- STITUTE A DEBT, LIABILITY OR LOAN OF CREDIT OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE STATE OF UTAH OR OF ANY POLITICAL SUBDIVISION THEREOF. THE issuance of the BONDS shall not directly, indirectly or CONTINGENTLY, obligate the AUTHORITY, the STATE of UTAH, or any agency, instrumentality or POLITICAL subdivision THEREOF, TO LEVY ANY FORM OF TAXATION THEREFOR or to MAke ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY DOES NOT HAVE ANY TAXING POWER. Pursuant to the Indenture, the Authority has covenanted to request appropriations from the State Legislature under the Charter School Credit Enhancement Program. The Authority has covenanted to certify by December 1 of each year to the governor of the State the amount, if any, required to restore amounts on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Fund Requirement. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read this entire Official Statement to obtain information essential to the making of an informed investment decision, and should give particular attention to the material under the caption RISK FACTORS. The Bonds are offered when, as, and if issued by the Authority subject to the approval of legality and certain other matters by Ballard Spahr LLP, as Bond Counsel. Certain legal matters will be passed upon for the Charter School by their counsel Kirton & McConkie, PC, Orem, Utah, and for the Authority by its general counsel, the Attorney General of the State of Utah, and Chapman and Cutler LLP, Salt Lake City, Utah. Zions Bank Public Finance is acting as financial advisor to the Authority in connection with the issuance of the Bonds. Buck Financial Advisors LLC is acting as financial advisor to the Charter School in connection with the issuance of the Bonds. Kutak Rock LLP has acted as counsel to the Underwriter, and in such capacity has assisted in the preparation of this Official Statement. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about December 12, This Official Statement is dated November 29, 2012.

2 UTAH CHARTER SCHOOL FINANCE AUTHORITY $17,400,000 CHARTER SCHOOL REVENUE BONDS (Ogden Preparatory Academy Project) Series 2012A MATURITY SCHEDULE CUSIP 91754T 1 Maturity Date (October 15) Principal Amount Interest Maturity Date Rate Yield CUSIP 1 (October 15) Principal Amount Interest Rate Yield CUSIP $405, % 0.97% EG $465, % 1.75% EM , EH , EN , EJ , EP , EK , EQ , EL , ER0 $1,680, % Term Bond maturing October 15, 2027 Price: CUSIP: 91754T ES8 1 $6,025, % Term Bond maturing October 15, 2036 Price: CUSIP: 91754T EE9 1 $5,100, % Term Bond maturing October 15, 2042 Price: CUSIP: 91754T EF6 1 $410,000 CHARTER SCHOOL REVENUE BONDS (Ogden Preparatory Academy Project) Series 2012B (Federally Taxable) $410, % Term Bond maturing October 15, 2014 Price: % CUSIP: 91754T ET6 1 Copyright 2012, American Bankers Association, Standard & Poor s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. 1 The Authority and Charter School take no responsibility for the accuracy of the CUSIP numbers, which are included solely for the convenience of owners of the Bonds. 2 Priced to the earliest call date.

3 Issuer Utah Charter School Finance Authority Richard K. Ellis, Chair Ronnie C. Bigelow, Vice-Chair Bruce D. Williams, Secretary Issuer s Counsel Attorney General of the State of Utah Salt Lake City, Utah Chapman and Cutler LLP Salt Lake City, Utah Issuer s Financial Advisor Zions Bank Public Finance Charter School Ogden Preparatory Academy Inc. Charter School Counsel Kirton & McConkie, PC Orem, Utah Charter School s Financial Advisor Buck Financial Advisors LLC Englewood, Colorado Underwriter Robert W. Baird & Co. Incorporated Denver, Colorado Trustee and Paying Agent Zions First National Bank Salt Lake City, Utah Bond Counsel Ballard Spahr LLP Salt Lake City, Utah Counsel to Underwriter Kutak Rock LLP Denver, Colorado

4 No dealer, salesman, or other person has been authorized to give any information or to make any representation, other than the information contained in this Official Statement, in connection with the offering of the Bonds, and, if given or made, such information or representation must not be relied upon as having been authorized by the Authority, the Charter School or the Underwriter. The information in this Official Statement is subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the Charter School or the Underwriter since the date hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which any person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. EXCEPT FOR THE INFORMATION CONTAINED UNDER THE CAPTIONS INTRODUCTION THE AUTHORITY, THE AUTHORITY AND LEGAL MATTERS NO PROCEEDINGS AGAINST THE AUTHORITY, THE AUTHORITY NEITHER HAS NOR WILL ASSUME ANY RESPONSIBILITY AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION IN THIS OFFICIAL STATEMENT. INTRODUCTION... 1 RISK FACTORS... 7 Risk of Non-Appropriation... 7 Sufficiency of Revenues... 8 Risk Factors Associated With Charter Schools... 8 Risk Factors Associated With the Facilities... 9 Determination of Taxability Potential Effects of Bankruptcy Additional Bonds Additional Indebtedness Enforcement of Remedies Failure To Provide Ongoing Disclosure THE AUTHORITY THE CHARTER SCHOOL THE BONDS Description of the Bonds Prior Redemption Use of Bond Proceeds SECURITY FOR THE BONDS General Charter School Credit Enhancement Program The Indenture The Loan Agreement Debt Service Requirements LEGAL MATTERS Pending and Threatened Litigation TAX MATTERS TABLE OF CONTENTS Original Issue Discount...29 Original Issue Premium...29 MISCELLANEOUS...29 Ratings...29 Underwriting...30 Registration of Bonds...30 Continuing Disclosure Agreement...30 Interest of Certain Persons Named in This Official Statement...30 Independent Auditors...30 Additional Information...31 Official Statement Certification...31 APPENDIX A Charter Schools in Utah APPENDIX B The Charter School APPENDIX C Charter School Audited Financial Statements for the Fiscal Year Ended June 30, 2012 APPENDIX D Definitions and Summary of Certain Provisions of the Agreement and the Indenture APPENDIX E Form of Bond Counsel Opinion APPENDIX F Form of Continuing Disclosure Agreement APPENDIX G Economic and Demographic Information APPENDIX H Book-Entry-Only System Neither the Securities and Exchange Commission nor any securities regulatory authority of any state has approved or disapproved the Bonds or this Official Statement. Any representation to the contrary is unlawful. Neither the Securities and Exchange Commission nor any securities regulatory authority of any state has approved or disapproved the Bonds or this Official Statement. Any representation to the contrary is unlawful. ii

5 INTRODUCTION The purpose of this Official Statement is to provide certain information concerning the issuance and sale by the Utah Charter School Finance Authority (the Authority ) of its $17,400,000 aggregate principal amount of Charter School Revenue Bonds (Ogden Preparatory Academy Project) Series 2012A (the Series 2012A Bonds ), and its $410,000 aggregate principal amount of Charter School Revenue Bonds (Ogden Preparatory Academy Project) Series 2012B (Federally Taxable) (the Series 2012B Bonds ). Collectively herein, the Series 2012A Bonds and the Series 2012B Bonds are referred to as the Bonds. The Bonds are being issued pursuant to a Trust Indenture, dated as of December 1, 2012 (the Indenture ), by and between the Authority and Zions First National Bank, as trustee thereunder (the Trustee ). Capitalized terms used but not defined in this Official Statement have the meanings assigned to them in APPENDIX D hereto. The offering of the Bonds is made only by way of this Official Statement, which supersedes any other information or materials used in connection with the offer or sale of the Bonds. This Official Statement speaks only as of its date, and the information contained herein is subject to Change. This Official Statement contains statements relating to future results that are forward-looking statements as defined in the Private Litigation Reform Act of When used in this Official Statement and the appendices hereto, the words estimate, intend, expect and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty and risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, investors should be aware that there are likely to be differences between forward-looking statements and actual results; those differences could be material. The following introductory material is only a brief description of, and is qualified by, the more complete information contained throughout this Official Statement. A full review should be made of the entire Official Statement and the documents summarized or described herein. Purpose of the Issue... The Authority... Proceeds of the Bonds will be used to (i) fund the cost of acquiring land and building and constructing improvements thereon for use as an educational facility located at th Street, Ogden, Utah (the Facilities ), (ii) fund capitalized interest on the Bonds, (iii) fund a debt service reserve fund, and (iv) pay the costs associated with the issuance of the Bonds (collectively, the Project ). See THE BONDS Use of Bond Proceeds. The Authority is an independent public body politic and corporate constituting a public instrumentality and political subdivision of the State of Utah (the State or Utah ). The Authority, pursuant to the Charter School Financing Act, Title 53A, Chapter 20b, Utah Code Annotated 1953, as amended, and the Utah Industrial Facilities and Development Act, title 11, Chapter 17, Utah Code Annotated 1953, as amended (together, the Act ), is empowered to issue the Bonds to provide funds for the financing of the costs of acquiring and equipping the Project. See THE AUTHORITY. The Authority is not pledging its general credit to the Bonds. The Authority has not monitored and is under no obligation to monitor the financial condition of the Charter School, the operation of the Facilities

6 or otherwise monitor payment of the Bonds or compliance with the documents relating thereto. The responsibility for the operation of the Facilities will rest entirely with the Charter School. The Bonds are limited obligations of the Authority. No recourse by any holder of a Bond will be had for the payment of the principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant, or agreement in the Indenture or the Loan Agreement, against any past, present or future officer, member, counsel, advisor or agent of the Authority or any successor thereto, as such, directly or through the Authority or any successor thereto, under any rule of law or equity, statute or constitution, or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officer, member, counsel, advisor or agent as such has been expressly waived as a condition of and in consideration of the execution of the Indenture, the Loan Agreement and the issuance of the Bonds. The Charter School... Ogden Preparatory Academy Inc. (the Charter School ) is a Utah public charter school and a Utah nonprofit corporation organized under the laws of the State. The Charter School received a 501(c)(3) determination letter from the Internal Revenue Service on December 1, 2004 classifying the Charter School as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ) which is exempt from federal income taxation under Section 501(a) of the Code (except with respect to unrelated business taxable income within the meaning of Section 512(a) of the Code). The Charter School was incorporated on July 1, 2003, and is organized pursuant to the Utah Charter Schools Act, Utah Code Ann. 53A-la-501, et seq. (the Charter Schools Act ). The Charter School operates under a charter school agreement which automatically renews at the end of each school year unless terminated by either the Charter School s Governing Board or the State Charter School Board for the grounds set forth in the Charter or the Charter Schools Act. See RISK FACTORS Revocation of Charter. The primary source of revenues for the Charter School are the State Payments (defined below) made by the Utah State Treasurer to the Charter School pursuant to the Charter Schools Act which are currently based on the Charter School s October 1 student count. School Facilities... The Charter School is currently operating three schools, including (i) the Ogden Preparatory Academy Elementary School (Grades K-4) (the Elementary School ), which is currently located at the Facilities (the Charter School has been operating at this location since 2010); (ii) the Ogden Preparatory Academy Intermediate School (Grades 5&6) (the Intermediate School ), which is currently located at 2221 Grant Avenue, Ogden, Utah (the Charter School has been operating at this location since 2003); and (iii) the Ogden Preparatory Academy Secondary School (Grades 7-9) (the Secondary School ), which is 2

7 currently located at nd Street, Ogden, Utah (the Charter School has been operating at this location since 2005). Following the completion of the Project, the Secondary School and the Intermediate School will be relocated to the Facilities with the Elementary School. For operational and financial information relating to the Charter School, as well as a description of the Facilities and the Project, see APPENDIX B THE CHARTER SCHOOL and THE BONDS Use of Bond Proceeds. Charter School Credit Enhancement Program... The Charter School has been designated a qualifying charter school by the Authority pursuant to the Act and the guidelines of the Authority promulgated thereunder, and accordingly, the Bonds are to be issued under the Charter School Credit Enhancement Program (the CSCE Program ), codified as Section 53A-20b-201, Utah Code Annotated 1953, as amended (the Utah Code ), for the Bonds. On or before December 1 of each year, the Authority must, pursuant to Section 53A-20b-201(9) of the Utah Code, certify to the Governor of the State the amount required, if any, to restore amounts on deposit in the debt service reserve funds with respect to all bonds issued under the CSCE Program, including the Debt Service Reserve Fund established in connection with the Bonds, to the respective debt service reserve fund requirements. The Governor must then request from the State Legislature an appropriation of the certified amount to restore such debt service reserve funds to the respective debt service reserve fund requirements. The State Legislature may, but shall not be required to, appropriate moneys, including from amounts on deposit in the Charter School Reserve Account created pursuant to Section 53A-20b-301 of the Utah Code, to restore amounts on deposit in any such debt service reserve fund to the respective debt service reserve fund requirement. See SECURITY FOR THE BONDS Charter School Credit Enhancement Program and APPENDIX D. Security... The Bonds constitute limited obligations of the Authority and except to the extent payable from Bond proceeds, investment income, and amounts that may be appropriated by the State pursuant to the Act, are payable solely from certain payments, revenues and other amounts derived by the Authority pursuant to the Loan Agreement, dated as of December 1, 2012 (the Loan Agreement ), by and between the Authority and the Charter School. The Bonds are secured solely by the Trust Estate, which is defined in the Indenture to include (a) the rights and interests of the Authority under the Loan Agreement, except the Authority s Unassigned Rights (as defined in the Indenture), (b) the Project and all rights and interests of the Authority in the Project, subject to Permitted Encumbrances, except the Authority s Unassigned Rights, (c) the Pledged Revenues (defined below) and all rights and interests of the Authority in the Pledged Revenues, subject to Permitted Encumbrances, except the Authority s Unassigned Rights, (d) the rights and interests of the Authority and the Charter School under the Mortgage and the Promissory Notes, and (e) all Funds created in the Indenture (other than 3

8 the Cost of Issuance Fund, the Tax and Insurance Escrow Fund and the Rebate Fund), except for moneys or obligations deposited with or paid to the Trustee for the payment or redemption of Bonds that are no longer deemed to be Outstanding, and all trust accounts containing all insurance and condemnation proceeds and all Revenues payable to the Trustee by or for the account of the Authority pursuant to the Loan Agreement and the Indenture, subject to the provisions of the Indenture (collectively, the Trust Estate ). As defined in the Indenture, the Pledged Revenues consist of State Payments received by the Charter School plus all revenues, rentals, fees, third-party payments, receipts, donations, contributions or other income of the Charter School, to the extent permitted thereby and by law, including accounts receivables or other rights to receive such revenues, including, without limitation, proceeds derived from insurance, condemnation proceeds, accounts, contract rights and other rights and assets, whether now or hereafter owned, held or possessed by the Charter School; and all gifts, grants, bequests and contributions (including income and profits therefrom) to the extent permitted by the terms thereof and by law (collectively the Pledged Revenues ). The State Payments included in the Pledged Revenues consist of any and all payments made by the State to the Charter School pursuant to the Charter Schools Act which are permitted to be used as Pledged Revenues (the State Payments ). The obligations of the Charter School to make the payments required under the Loan Agreement and observe the other agreements on its part contained therein are absolute and unconditional and are a recourse obligation of the Charter School; such obligations are further secured by a Deed of Trust, Assignment of Rents and Leases, Security Agreement, and Fixture Filing and dated as of December 1, 2012 (the Mortgage ) on the Facilities. Debt Service Reserve Fund... Limited Obligations... A debt service reserve fund will be established pursuant to the Indenture for the Bonds (the Debt Service Reserve Fund ) in an amount equal to $960,100 (which amount represents the Debt Service Reserve Fund Requirement ), which is pledged for the repayment of the Bonds. Upon the issuance of the Bonds the Debt Service Reserve Fund will be fully funded from proceeds of the Bonds. The Debt Service Reserve Fund is established for the purpose of securing the payment of the principal of and interest on the Bonds in the event moneys in the Bond Principal Fund and Bond Interest Fund are not sufficient to make such payments when due. The Bonds constitute limited obligations of the Authority and except to the extent payable from Bond proceeds, investment income, and amounts that may be appropriated by the State pursuant to the Act, are payable solely from certain payments, revenues and other amounts derived by the Authority pursuant to the Loan Agreement. The Bonds are secured solely by the Trust Estate. Payments to be received by the Authority 4

9 from the Charter School will be the Authority s sole expected source of the Pledged Revenues. THE BONDS DO NOT GIVE RISE TO A GENERAL OBLIGATION OR GENERAL LIABILITY OF THE AUTHORITY OR A CHARGE AGAINST ITS GENERAL CREDIT AND SHALL NEVER CONSTITUTE A DEBT, LIABILITY OR LOAN OF CREDIT OR A PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF. THE ISSUANCE OF THE BONDS SHALL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE AUTHORITY, THE STATE, OR ANY AGENCY, INSTRUMENTALITY OR POLITICAL SUBDIVISION THEREOF, TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY DOES NOT HAVE ANY TAXING POWER. See SECURITY FOR THE BONDS. Risk Factors... Payment Provisions... Book-Entry-Only Registration... A prospective purchaser is advised to read this entire Official Statement and the Appendices attached hereto in their entirety, particularly the section entitled RISK FACTORS herein, for a discussion of certain risk factors, which should be considered in connection with an investment in the Bonds. The Bonds mature and bear interest (computed on the basis of a 360-day year of twelve 30-day months) at the rates set forth on the cover page hereof. Interest on the Bonds is payable semiannually on April 15 and October 15 of each year, commencing April 15, The Bonds will be issued in fully registered form and will be registered initially in the name of Cede & Co. as nominee for The Depository Trust Company, New York, New York ( DTC ), a securities depository. Beneficial ownership interests in the Bonds may be acquired in Authorized Denominations through participants in the DTC system (the Participants ). Such beneficial ownership interests will be recorded in the records of the Participants. Persons for which Participants acquire interests in the Bonds (the Beneficial Owners ) will not receive certificates evidencing their interests in the Bonds so long as DTC or a successor securities depository acts as the securities depository with respect to the Bonds. So long as DTC or its nominee is the registered owner of the Bonds, payments of principal, premium, if any, and interest on the Bonds, as well as notices and other communications made by or on behalf of the Authority pursuant to the Bond Resolution, will be made to DTC or its nominee only. Disbursement of such payments, notices, and other communications by DTC to Participants, and by Participants to the Beneficial Owners, is the responsibility of DTC and the Participants pursuant to rules and procedures established by such entities. See APPENDIX H BOOK ENTRY ONLY SYSTEM for a discussion of the operating procedures of the DTC system with respect to payments, registration, transfers, notices, and other matters. 5

10 Prior Redemption... The Bonds are subject to optional, extraordinary and mandatory sinking fund redemption prior to maturity as set forth in THE BONDS Prior Redemption. Registration and Denominations... The Bonds are issued in fully registered form in denominations of $5,000 or any integral multiple of $5,000 in excess thereof. Exchange and Transfer... Tax Status... Authority for Issuance... Delivery Information... Financial Statements... Agents and Advisors... While the Bonds remain in book-entry-only form, transfer of ownership by Beneficial Owners (as defined by the rules of DTC, defined below) may be made as described in APPENDIX H BOOK ENTRY ONLY SYSTEM. In the opinion of Bond Counsel to the Authority, based on existing laws, regulations, rulings and court decisions and assuming, among other matters, the accuracy of certain certifications and compliance with certain covenants, interest on the Series 2012A Bonds is excludable from gross income for federal income tax purposes. Interest on the Series 2012A Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes but such interest is included in adjusted current earnings in computing the federal alternative minimum taxes imposed on certain corporations. Interest on the Series 2012B Bonds is taxable as ordinary income for federal income tax purposes. Bond Counsel is also of the opinion based on existing laws of the State of Utah as enacted and construed that interest on the Bonds is exempt from Utah individual income taxes. Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See TAX MATTERS herein. The Bonds are issued in full conformity with the constitution and laws of the State, and pursuant to the Act, to provide funds for the financing of the Project. The Bonds are offered when, as, and if issued by the Authority and accepted by the Underwriter, subject to prior sale and the approving legal opinion of Bond Counsel and certain other conditions. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about December 12, The Charter School s audited financial statement for the fiscal year ended June 30, 2012, by EideBailly LLP, Certified Public Accountants and Business Consultants, Ogden, Utah, are attached as APPENDIX C hereto. See APPENDIX B THE CHARTER SCHOOL. Ballard Spahr LLP has acted as Bond Counsel. Certain legal matters will be passed on for the Charter School by their counsel, Kirton & McConkie, PC, Orem, Utah, and for the Authority by its general counsel, the Attorney General of the State of Utah, and Chapman and Cutler LLP, Salt Lake City, Utah. Zions Bank Public Finance is acting as financial advisor to the Authority in connection with the issuance of the Bonds. 6

11 Buck Financial Advisors LLC is acting as financial advisor to the Charter School in connection with the issuance of the Bonds. Robert W. Baird & Co. Incorporated is serving as the underwriter (the Underwriter ) for the Bonds. See MISCELLANEOUS Underwriting. Kutak Rock LLP has acted as counsel to the Underwriter, and in such capacity has assisted in the preparation of this Official Statement. Zions First National Bank, Salt Lake City, Utah, will serve as the Trustee for the Bonds. Certain fees that are payable with respect to the Bonds to various counsel, the Underwriter and the Trustee are contingent upon the issuance and delivery of the Bonds. Additional Information... The summaries of or references to constitutional provisions, statutes, resolutions, agreements, contracts, financial statements, reports, publications and other documents or compilations of data or information set forth in this Official Statement do not purport to be complete statements of the provisions of the items summarized or referred to and are qualified in their entirety by the actual provisions of such items, copies of which are either publicly available or available upon request and the payment of a reasonable copying, mailing and handling charge from the Charter School s offices, th Street, Ogden, Utah Telephone: , or Robert W. Baird & Co. at 210 University Boulevard, Suite 460, Denver, Colorado 80206, Telephone: (303) RISK FACTORS This Official Statement contains summaries of pertinent portions of the Bonds, the Indenture, the Loan Agreement and the Mortgage. Such summaries and references are qualified in their entirety by reference to the full text of such documents. The following discussion of some of the risk factors associated with the Bonds is not, and is not intended to be, exhaustive, and such risks are not necessarily presented in the order of their magnitude. Risk of Non-Appropriation An event of Non-Appropriation by the State would cause a delay, reduction or termination of amounts received by the Authority under the CSCE Program, codified as Section 53A-20b-201 of the Utah Code. For additional information regarding the CSCE Program, see SECURITY FOR THE BONDS Charter School Credit Enhancement Program. As defined in the Indenture, Non-Appropriation means (i) the Authority does not timely certify to the governor of the State the amount, if any, required to restore amounts on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Fund Requirement, (ii) the governor does not timely request from the State Legislature an appropriation at least equal to the certified amount, or (iii) the State Legislature does not appropriate money to the Authority under the CSCE Program to restore amounts on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Fund Requirement. below. To the extent that an event of Non-Appropriation has occurred, additional risks are described 7

12 Sufficiency of Revenues The Bonds are secured by and payable from funds of the Charter School under the terms and conditions of the Loan Agreement and as otherwise described therein. Based on present circumstances, the Charter School believes it will generate Pledged Revenues sufficient to make payments under the Loan Agreement and the Promissory Notes representing debt service on the Bonds. However, the Charter School s Charter Agreement may be terminated or not renewed, or the basis of the assumptions utilized by the Charter School to formulate its beliefs regarding its operations may otherwise change. No representation or assurance can be made that the Charter School will continue to generate sufficient revenues to meet such obligations. Risk Factors Associated With Charter Schools Generally. There are a number of factors affecting charter schools in general, including the Charter School, that could have an adverse effect on the Charter School s financial position and its ability to make the payments required under the Loan Agreement. These factors include, but are not limited to, the ability to attract a sufficient number of students; increasing costs of compliance with federal or State regulatory laws or regulations, including, without limitation, laws or regulations concerning environmental quality, work safety and accommodating persons with disabilities; any unionization of the Charter School s work force with consequent impact on wage scales and operating costs of the Charter School; changes in existing statutes pertaining to the powers of the Charter School and legislation or regulations which may affect program funding. The Charter School cannot assess or predict the ultimate effect of these factors on its operations or financial results. Dependence on State Payments. The Charter School may not charge tuition and has no taxing authority. The primary source of revenues for the Charter School is the State Payments which are currently based on the Charter School s October 1 student count. The State Legislature provides funding for such State Payments by appropriating for them. Utah may experience downturns in its economy and tax revenues in the future, and there is a risk that the State Legislature may not appropriate funds for State Payments, or may not appropriate funds in a sufficient amount, to enable the Charter School to meet its general operating expenses and to make payments under the Loan Agreement representing debt service on the Bonds. In addition to general State economic conditions, State budget considerations may also adversely affect appropriations for charter school funding. State Payments could be reduced or not keep pace with expenses such that the Charter School s revenues are inadequate to allow it to pay its operating expenses and to make payments under the Loan Agreement. No liability would accrue to the Authority, the State or any other party in that event, nor would any such party be obligated or liable for any future payments or any damages. Delay in, Reduction, or Termination of State School Aid. Any event that would cause a delay, reduction or termination of State Payments would have a material adverse effect on the ability of the Charter School to make payments under the Loan Agreement representing debt service on the Bonds. Key Personnel. The Charter School s creation, curriculum and educational philosophy reflect the vision and commitment of a few individuals essential to the management and administration of the Charter School ( Key Personnel ). Loss of any such Key Personnel could adversely affect the Charter School s operations, its ability to attract and retain students and ultimately its financial results. For more information regarding the Charter School s Key Personnel, see APPENDIX B THE CHARTER SCHOOL Charter School Officials. Competition for Students. The Charter School competes for students with other public schools, charter schools and private schools. No students are officially assigned to, or required to attend, charter 8

13 schools. There can be no assurance that the Charter School will attract and retain the number of students needed to produce the revenues that are necessary to make payments under the Loan Agreement representing debt service on the Bonds. There are other public schools and charter schools in the Charter School s immediate service area, in which the Facilities are located. For additional information, see APPENDIX B THE CHARTER SCHOOL Competing Schools. Revocation of Charter Agreement. The Charter School s Charter Agreement (the Charter Agreement ) will automatically renew at the end of each school year unless it is terminated by either the Charter School s Governing Board or the State Charter School Board for the grounds set forth in the Charter Agreement or the Charter Schools Act. In the event that the Charter School s Charter Agreement is revoked or not renewed, the ability of the Charter School to make any payments due under the Loan Agreement representing debt service on the Bonds would be adversely affected and the Charter School could be forced to cease operations. For more information regarding conditions under which the Charter Agreement may be revoked, and the revocation procedure, see APPENDIX B THE CHARTER SCHOOL Charter Agreement. Compliance With the No Child Left Behind Act of Title I of the Elementary and Secondary Education Act ( ESEA ), as reauthorized by the No Child Left Behind Act ( NCLB ) of 2001, requires each state, as a condition of receiving funds under the Title I program, to implement a single, statewide State accountability system applicable to all of its public schools, including charter schools. A component of that system is adequate yearly progress ( AYP ) which measures the extent to which schools succeed in educating all students to proficiency in at least reading (or language arts) and mathematics. The Charter School made AYP under the federal No Child Left Behind Act for each of the years from 2007 through 2010, but not in the school year. For more information, see APPENDIX B THE CHARTER SCHOOL Academic Achievement Indicators. Failure of the Charter School to meet the requirements of NCLB in the future may have a material adverse effect on the Charter School and its ability to generate Pledged Revenues necessary to pay debt service on the Bonds. Changes in Charter School Law. Future changes to the Charter Schools Act by the State Legislature could be adverse to the financial interests of the Charter School and hence could adversely affect the security for the Bonds. There can be no assurance that the State Legislature will not amend the Charter Schools Act in a manner adverse to the interests of the registered owners of the Bonds. For additional information regarding the Charter Schools Act, see APPENDIX A CHARTER SCHOOLS IN UTAH. Risk Factors Associated With the Facilities Completion of the Construction of the Addition to the Pledged Property. The construction of the improvements to the Facilities began on November 1, 2012 and will need to be completed for an amount not exceeding the amount deposited to the Project Fund. No assurance can be given that the planned improvements to the Facilities will be constructed on time or that the maximum price guaranteed in the contract for the construction of improvements to the Facilities described herein (the GMP Contract ) will not be exceeded. For more information regarding the GMP Contract, see THE BONDS Use of Bond Proceeds the Project and APPENDIX B THE CHARTER SCHOOL Facilities. Damage or Destruction of the Facilities. The Charter School s Charter Agreement and the Loan Agreement require the Facilities to be insured against certain risks in certain amounts. There can be no assurance that the amount of insurance required to be obtained will be adequate or that the cause of any damage or destruction will be as a result of an insured risk. Further, there can be no assurance of the creditworthiness of the insurance companies from which applicable insurance policies may be obtained. 9

14 The Charter School may choose not to rebuild if a casualty renders the Facilities totally or partially untenantable, unfit for their purposes, or if insurance proceeds are insufficient to restore the Facilities to tenantable condition. Limited Nature of Real Estate Appraisals; Value of Facilities. The Charter School engaged Rigby & Company Appraisers and Consultants in Farmington, Utah to conduct an appraisal dated May 29, 2012 (the Appraisal ). The value of the Facilities at any given time will be directly affected by market and financial conditions that are not in the control of the parties involved in this transaction. For additional information regarding the appraisal, including the appraised valuation of the Facilities, see APPENDIX B THE CHARTER SCHOOL Appraisal. Potential purchasers of the Bonds should refer to a complete copy of the Appraisal for additional information. Copies of the appraisal for the Facilities are available as described under INTRODUCTION Additional Information. The Facilities are designed for use as an educational facility, and there is nothing associated with the Facilities that would suggest that their value would remain stable or would increase if the general values of property in the Charter School s service areas were to decline. The Facilities will also require ongoing capital repairs and improvements and, although the Charter School intends to maintain the Facilities in good condition, no assurance can be given that the Charter School will have sufficient revenue to maintain a regular capital improvements program for the Facilities in the future. Foreclosure Delays and Deficiency. If the Pledged Revenues are insufficient to pay the principal of and interest on the Bonds, the Trustee may seek to foreclose on or sell the Facilities. No assurance can be given that the value of the Facilities at the time of such foreclosure or sale would be sufficient to meet all remaining principal and interest payments on the Bonds. In addition, the time necessary to institute and complete such proceedings could substantially delay receipt of funds from a foreclosure or sale. There could also be delays in regaining possession of the Facilities from the Charter School in the event of a default or dispute under the Loan Agreement. Environmental Regulation. The Facilities are and will be subject to various federal, State and local laws and regulations governing health and the environment. In general, these laws and regulations could result in liability to the Charter School and to any beneficiary of the Mortgage, particularly following any sale or foreclosure proceeding, for remediating adverse environmental conditions on or relating to the Facilities, whether arising from preexisting conditions or conditions arising as a result of activities conducted in connection with the ownership and operation of the Facilities. Costs incurred by the Charter School with respect to environmental remediation or liability could adversely affect its financial condition, its ability to own and operate the Facilities, and ultimately its ability to make payments under the Loan Agreement representing debt service on the Bonds. Excessive costs in connection with any such environmental remediation or any such liability to third parties could also make it difficult to successfully relet the Facilities. For a description of the environmental assessments and study conducted in connection with the Facilities, see APPENDIX B THE CHARTER SCHOOL Environmental Studies. Copies of the environmental assessments and study are available as described under INTRODUCTION Additional Information. Determination of Taxability The excludability from gross income for federal income taxation purposes of the interest on the Series 2012A Bonds is based on the continuing compliance by the Trustee, the Charter School and the Authority with certain covenants contained in the Indenture, the Loan Agreement and the Tax Certificate and Agreement, dated as of the date of delivery of the Bonds (the Tax Certificate ), and executed by the Authority and the Charter School. These covenants relate generally to restrictions on the use of the Facilities, restrictions on use of the Facilities by organizations other than the Charter School, arbitrage 10

15 limitations, and rebate of certain excess investment earnings, if any, to the federal government. Failure to comply with such covenants could cause interest on the Series 2012A Bonds to become subject to federal income taxation retroactive to the date of issuance of the Series 2012A Bonds. The occurrence of a Determination of Taxability will constitute an Event of Default under the Indenture. Potential Effects of Bankruptcy If the Charter School were to file a petition for relief (or if a petition were filed against the School as debtor) under the United States Bankruptcy Code, 11 U.S.C. 101 et seq., as amended, or other State insolvency, liquidation or receivership laws, the filing could operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Charter School or the property of the Charter School. If the bankruptcy court or other state or federal court so ordered, the Charter School s property and revenues could be used for the benefit of the Charter School despite the claims of its creditors, including the owners of the Bonds. In a bankruptcy proceeding under Chapter 11 of the Bankruptcy Code, the Charter School could file a plan of reorganization which would modify the rights of creditors generally or the rights of any class of creditors, secured or unsecured, including the owners of the Bonds. The plan, when approved ( confirmed ) by the bankruptcy court, would bind all creditors who had notice or knowledge of the plan and would discharge all claims against the Charter School except as otherwise provided for in the plan. No plan may be confirmed by a bankruptcy court unless, among other conditions, the plan is in the best interest of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Even if the plan is not so accepted, it may be confirmed if such Court finds that the plan is fair and equitable with respect to each class of nonaccepting creditors impaired thereunder and does not discriminate unfairly. Additional Bonds The Indenture provides that additional bonds may be issued by the Authority payable from the Trust Estate on a parity with the Bonds and/or subordinate to the Bonds, if certain conditions are met. See the Additional Bonds requirements set forth in APPENDIX D hereto. Additional Indebtedness Under the Loan Agreement, the Charter School may incur other parity Indebtedness secured by the Mortgage on the Facilities and the security interest in the Pledged Revenues only if certain conditions are met. See Limitations on Incurrence of Additional Indebtedness requirement set forth in APPENDIX D hereto. Enforcement of Remedies The remedies available to the Trustee or the registered owners of the Bonds upon an Event of Default under the Indenture or the Loan Agreement are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, the remedies provided in the Indenture and the Loan Agreement may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the sovereign powers of the State and the constitutional powers of the United States of America, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. 11

16 Failure To Provide Ongoing Disclosure The Charter School will covenant to enter into the Continuing Disclosure Agreement pursuant to Rule 15c2-12. See MISCELLANEOUS Continuing Disclosure Agreement, below. Failure to comply with the Continuing Disclosure Agreement and Rule 15c2-12 may adversely affect the liquidity of the Bonds and their market price in the secondary market. THE AUTHORITY The Authority is a body politic and corporate of the State. Pursuant to the Act, the Authority is empowered to issue the Bonds to provide funds for the financing of the costs of the Project. The Authority is not pledging its general credit to the Bonds. The Authority has not monitored and is under no obligation to monitor the financial condition of the Charter School, the operation of the Facilities or otherwise monitor payment of the Bonds or compliance with the documents relating thereto. The responsibility for the operation of the Facilities will rest entirely with the Charter School. The Bonds are limited obligations of the Authority. No recourse by any holder of a Bond will be had for the payment of the principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant, or agreement in the Indenture or the Loan Agreement, against any past, present or future officer, member, counsel, advisor or agent of the Authority or any successor thereto, as such, directly or through the Authority or any successor thereto, under any rule of law or equity, statute or constitution, or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officer, member, counsel, advisor or agent as such has been expressly waived as a condition of and in consideration of the execution of the Indenture, the Loan Agreement and the issuance of the Bonds. Under the financing contemplated hereby, the Authority has no obligations with respect to this financing after the issuance of the Bonds. All payments made pursuant to the Loan Agreement will be made directly to the Trustee for disbursement to the Bondholders. None of the revenues to pay the Bonds will come from the Authority and therefore the Authority s financial information and status is irrelevant to any investment decision with respect to the Bonds. As a result, no information regarding the Authority will be provided in respect of any continuing disclosure requirement relating to the Bonds. The Authority has not assumed responsibility for any information in this Official Statement, except for the information under this caption and the caption LEGAL MATTERS Pending and Threatened Litigation No Proceedings Against the Authority. THE CHARTER SCHOOL Ogden Preparatory Academy Inc. is a Utah public charter school and a Utah nonprofit corporation organized under the laws of the State. The Charter School received a 501(c)(3) determination letter from the Internal Revenue Service on December 1, 2004 classifying the Charter School as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ) which is exempt from federal income taxation under Section 501(a) of the Code (except with respect to unrelated business taxable income within the meaning of Section 512(a) of the Code). The Charter School was incorporated on July 1, 2003 and began operating under its Charter in the school year with approximately 213 students in grades K-5. The Charter School currently has 1,025 students enrolled for the school year. The Charter School is organized pursuant to the Utah Charter Schools Act, and provides public education for students in grades K-9. 12

17 The Charter School is governed by the Board of Directors of the Charter School (the Board ), which is responsible for the academic and operations programs of the Charter School. On June 2, 2005, the Charter School executed a Charter School Management Agreement with Academica West LLC, a Utah limited liability company (the Management Company ) for the purpose of having the Management Company manage and administer various business and administrative operations of the Charter School. On July 17, 2012, the Management Company and the Charter School executed an Amended and Restated Management Agreement effective August 1, 2012, having a term of 10 years unless earlier terminated as set forth therein. The Charter School agrees to pay the Management Company $395,000 for up to 1,050 students enrolled in the Charter School in grades Kindergarten through 9 th grade, plus $350 per student in excess of 1,050 students as determined by the Charter School s audited October 1 student count, per annum. The fee is to be adjusted annually in proportion to annual percentage changes in the consumer price index. The Management Company agrees to coordinate certain management and administrative duties required to operate the Charter School, including, among others: scheduling and maintaining records of Board meetings; ensuring compliance with all federal and state requirements for record keeping; providing bookkeeping services and ensuring accurate and timely financial reporting; identifying and proposing qualified teachers, para-professionals, administrators and other staff members and education professionals for positions in the Charter School; preparing the annual budget; soliciting grants and other available funds for the Charter School when available; coordinating with the Board to identify facilities needs and assist the Charter School in planning the design of new facilities or in the expansion of existing ones; and additional services as requested by the Board. See APPENDIX B THE CHARTER SCHOOL for a more detailed description of the Charter School. Description of the Bonds THE BONDS The Bonds will be dated as of their date of delivery, will be issued in the aggregate principal amounts, will bear interest at the rates and will mature on the dates, subject to redemption as described below, set forth on the inside front cover page hereof. The Bonds will be issuable as fully registered bonds without coupons in Authorized Denominations. Interest on the Bonds is payable semiannually on April 15 and October 15 of each year, commencing April 15, 2013 (each an Interest Payment Date ) by check or draft mailed to the registered owners of the Bonds. Interest on the Bonds shall be paid on each Interest Payment Date until the principal thereof shall have been paid or provided for. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. Amounts due with respect to the Bonds will be payable in lawful money of the United States. Payment of principal, premium, if any, and interest on the Bonds will be paid by check mailed to the registered Owner thereof at his or her address as it appears on the Bond Registration Books on the Record Date. Payments for the principal of and interest on the Bonds will be made as described in APPENDIX H BOOK-ENTRY-ONLY SYSTEM. Prior Redemption Optional Redemption. Series 2012A Bonds. The Series 2012A Bonds are subject to redemption at the option of the Authority (which option shall be exercised upon the written direction of an Authorized Representative of the Charter School) from prepayment of the Promissory Note made by the Charter School pursuant to the Loan Agreement, in whole or in part on any Business Day commencing October 15, 2022, as more 13

18 specifically provided in the Indenture, at a redemption price of 100% of the principal amount to be redeemed, together with accrued interest to the date fixed for redemption. Series 2012B Bonds. The Series 2012B Bonds are not subject to optional redemption. Mandatory Sinking Fund Redemption. Series 2012A Bonds. The Series 2012A Bonds maturing on October 15, 2027 are subject to mandatory sinking fund redemption on the dates set forth below, at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date from amounts on deposit in the Bond Principal Fund as follows on October 15 in the years and in the principal amounts specified in the sinking fund redemption schedule set forth below: October 15 of the Year Principal Amount 2025 $545, , ,000 1 Maturity Date. The Series 2012A Bonds maturing on October 15, 2036 are subject to mandatory sinking fund redemption on the dates set forth below, at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date from amounts on deposit in the Bond Principal Fund as follows on October 15 in the years and in the principal amounts specified in the sinking fund redemption schedule set forth below: October 15 of the Year Principal Amount 2028 $590, , , , , , , , ,000 1 Maturity Date. The Series 2012A Bonds maturing on October 15, 2042 are subject to mandatory sinking fund redemption on the dates set forth below, at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date from amounts on deposit in the Bond Principal Fund as follows on October 15 in the years and in the principal amounts specified in the sinking fund redemption schedule set forth below: 14

19 October 15 of the Year Principal Amount 2037 $785, , , , , ,000 1 Maturity Date. Series 2012B Bonds. The Series 2012B Bonds in the principal amount of $410,000 maturing on October 15, 2014 are subject to mandatory sinking fund redemption on October 15, 2014, at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date from amounts on deposit in the Bond Principal Fund. Redemption of Bonds Upon Occurrence of Certain Events. The Bonds are redeemable at the option and upon the written direction of an Authorized Representative of the Charter School to the Authority and the Trustee, in whole or in part on any Business Day from and to the extent of funds on deposit under the Indenture and available for this purpose at a redemption price equal to the principal amount of each Bond to be redeemed plus accrued interest to the redemption date, upon the occurrence of any of the following events: (a) The Facilities shall have been damaged or destroyed in whole or in part to such extent that, as expressed in a Consulting Architect s Certificate filed with the Trustee, either (i) the Facilities cannot reasonably be restored within a period of 12 consecutive months to the condition thereof immediately preceding such damage or destruction, (ii) the Charter School is thereby prevented from carrying on its normal operations for a period of 12 consecutive months, (iii) the cost of restoration thereof would exceed the Net Proceeds of insurance carried thereon pursuant to the requirements of the Loan Agreement or (iv) the final maturity of the Bonds is within five years of the date of such damage or destruction. (b) Title to, or the temporary use of, all or any substantial part of the Facilities shall have been taken under the exercise of the power of eminent domain by any governmental issuer, or Person, firm or corporation acting under governmental authority or because of a defect in title. (c) As a result of any changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Charter School in good faith, the Loan Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purposes of the parties as expressed in the Loan Agreement. Redemption as described in this paragraph shall be in whole only. Only Net Proceeds of insurance or a condemnation award shall be used for a partial redemption of the Bonds as described in (a) and (b) above. Redemption of Bonds Upon Default Under Loan Agreement. Subject to the provisions of the Indenture, all or a portion of the Bonds, as applicable, are subject to redemption at par, in whole or in part, as soon as is practicable following the Trustee s receipt of notice of an uncured default under the 15

20 Loan Agreement and at the direction of at least a majority of the Owners of the Bonds Outstanding in an amount equal to the extent of the Charter School s obligation thereunder from amounts received from the foreclosure or nonjudicial sale of the Facilities and, if necessary, amounts on deposit in the Debt Service Reserve Fund. In such event, the Bonds, in an amount equal to the Charter School s loan obligation, shall be called for redemption as set forth in the Indenture. To the extent there is a deficiency in the amount of monies received from the foreclosure or nonjudicial sale when added to amounts on deposit in the Debt Service Reserve Fund to redeem such amount of the Bonds, the Charter School undertakes pursuant to the Loan Agreement to promptly provide to the Trustee any additional funds required to redeem the necessary amount of remaining Bonds Outstanding and to the extent there still remains a deficiency, the Trustee shall redeem Bonds as set forth in the Indenture. Redemption Upon Failure to Reimburse the Authority under the Charter School Credit Enhancement Program. The Bonds are subject to redemption at par, in whole, from amounts deposited by or on behalf of the Authority as soon as is practicable following the Trustee s receipt of notice from the Authority of an uncured default under the Agreement for failure by the Charter School to reimburse the Authority for any appropriation received on behalf of the Charter School from the State under the Credit Enhancement Program (as defined below). In such event, the Bonds, in an amount equal to the Charter School s loan obligation, shall be called for redemption as set forth in the Indenture. Notices of Redemption. All or a portion of the Bonds shall be called for optional redemption by the Trustee as provided in the Indenture upon receipt by the Trustee at least 45 days prior to the redemption date of a certificate of the Authorized Representative of the Charter School specifying the principal amount of the Bonds to be called for redemption, the applicable redemption price or prices, and the provision or provisions of the Indenture pursuant to which such Bonds are to be called for redemption, provided that such certificate shall not be required with respect to a sinking fund redemption. In the case of every redemption, the Trustee shall cause notice of such redemption by mailing by first class mail a copy of the redemption notice to the Registered Owners of the Bonds designated for redemption in whole or in part, at their addresses as the same shall last appear upon the registration records, in each case not more than 60 nor less than 20 days prior to the redemption date, provided, however, that failure to give such notice, or any defect therein, shall not affect the validity of any proceedings for the redemption of such Bonds. The Trustee shall not mail any notice of optional redemption as first set forth under Optional Redemption above unless it has received from the Charter School, at least 45 days before the redemption date specified in the notice of redemption, sufficient evidence of the Charter School s ability to deliver Protected Funds to redeem all such Bonds called for redemption on the anticipated redemption date. If adequate Protected Funds are not received by the Trustee on or prior to the redemption date, no Bonds shall be redeemed. Each notice of redemption shall specify conditions precedent to redemption, if any, the date fixed for redemption, the redemption price, the place or places of payment, that payment will be made upon presentation and surrender of the Bonds to be redeemed, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon will cease to accrue. If less than all the Outstanding Bonds are to be redeemed, the notice of redemption shall specify the numbers of the Bonds or portions thereof to be redeemed. Purchase in Lieu of Redemption. If, at any time, Bonds are subject to redemption, the Charter School may direct the Trustee to purchase Bonds which would otherwise be subject to redemption from money available for such redemption under the Indenture or other money provided to the Trustee by the Charter School and deposited by the Trustee in a separate account to be established by the Trustee at such time. The purchase price of such Bonds shall not exceed the then applicable redemption price thereof. Written notice of such election must be given to the Trustee not less than five (5) Business Days prior to the date the Trustee must send notice of redemption. 16

21 Acceleration. Upon the occurrence of an Event of Default under the Indenture, the Trustee (i) may by notice in writing given to the Authority and the Charter School, or (ii) shall, upon the written request of the Owners of a majority of all Bonds Outstanding, declare the principal amount of all Bonds then Outstanding and the interest accrued thereon to be immediately due and payable and said principal and interest shall thereupon become immediately due and payable. See APPENDIX D. Use of Bond Proceeds The Project. The net Bond proceeds will be used to demolish the existing building on the Facilities and the construction of two new buildings. The first building will be used for the Charter School s elementary aged students ( New Elementary School. ). It will be a two-story masonry and steel structure with a maximum occupancy of 770 students. Both floors of the New Elementary School will total 53,768 square feet with an average height of The building will have both a fire alarm and fire suppression system. As currently planned, the layout consists of 26 classrooms, a gymnasium, stage, kitchen, storage room, art room, resource room, two work rooms, two teacher break rooms, reception foyer, office area, library, multimedia center, computer lab, special education room, science lab, music room, computer server room, electrical utilities closest, elevator, janitorial rooms, and restrooms. The second building will be used for the Charter School s junior high aged students ( New Junior High Building ). This building will be a two-story masonry and steel structure as well, with a maximum occupancy of 385 students. Both floors of the New Junior High Building will total 38,685 square feet with an average height of The building will have both a fire alarm and fire suppression system. As planned, the layout consists of 10 classrooms, a gymnasium, kitchen, storage room, art room, music room, two science rooms, student breakout room, special education room, computer lab, reception foyer, office area, work room, teacher break room, library, multimedia center, computer server room, electrical utilities closet, elevator, janitorial rooms, and restrooms. The Facilities are designed for 158 parking spaces for daytime parking and 187 vehicles for evening and event parking including ADA stalls. In addition to landscaping there is a proposed soccer field located north of the site. Construction of the Facilities began in November, 2012 and is expected to be complete by June 1, 2013 with the New Facilities having an economic life of 50 years. On May 25, 2011 and on November 11, 2010 (as amended by a First Amendment dated May 25, 2011), the current owner of the Facilities, Mountain View School Development LLC (the Seller ), entered into agreements with One West Construction, LLC (the Contractor ) for the construction of the improvements to the Facilities (collectively, the GMP Contract ). Pursuant to the terms of the Agreement of Purchase and Sale, dated as of May 25, 2011 (the Purchase Agreement ), the Charter School is to purchase the Facilities at a Purchase Price of $2,500, The Purchase Agreement additionally provides that the Seller is to assign the GMP Contract to the Charter School for the above described improvements to the Facilities. Pursuant to the GMP Contract, the Contractor agrees to construct the improvements to the Facilities for a total price not to exceed $12,344,573.28, subject to additions and deductions by changes in the work, as described therein. On July 13, 2012, the Contractor received a commitment from The Guarantee Company of North America, USA, to provide a payment and performance bond for the Facilities in the amount of $12,400,000 contingent upon the issuance of the Bonds. Neither the Contractor nor the Borrower currently has a contract to purchase the Millcreek Parcel (as hereinafter defined) currently under negotiation for purchase for a soccer and recreation field which is presently owned by a home owner s association. However, $350,000 of proceeds of the Bonds has been allocated to be used to acquire and improve the Millcreek Parcel, which the Borrower and the Contractor 17

22 anticipate should be sufficient to purchase and improve the Millcreek Parcel in the future. In the event the Borrower is unable to acquire the Millcreek Parcel, the Borrower anticipates using such proceeds for general improvements to the Facilities. Sources and Uses of Funds. following table. The sources of funds and the uses of funds are shown in the General Sources of Funds Par Amount of the Series 2012A Bonds... $17,400, Par Amount of the Series 2012B Bonds , Net Original Issue Discount (24,452.10) Total... $17,785, Uses of Funds Deposit to Project Fund... 15,328, Deposit to Debt Service Reserve Fund , Deposit to Capitalized Interest Account of Bond Interest Fund , Deposit to Expense Fund , Costs of Issuance Fund (including underwriting discount) , Total... $17,785, Includes the Authority s fee and certain capitalized expenses. Source: The Underwriter SECURITY FOR THE BONDS The Bonds are limited obligations of the Authority payable solely from the Loan Payments to be made by the Charter School and other funds pledged therefor under the Indenture, do not give rise to a general obligation or general liability of the Authority or a charge against its general credit and shall never constitute a debt, liability or loan of credit or a pledge of the full faith and credit or taxing power of the State of Utah or of any political subdivision thereof. The issuance of the Bonds shall not directly, indirectly or contingently, obligate the Authority, the State, or any agency, instrumentality or political subdivision thereof, to levy any form of taxation therefor or to make any appropriation for their payment. The Authority does not have any taxing power. No recourse shall be had for the payment of the principal of, premium, if any, or interest on the Bonds against any past, present, or future officer, member, counsel, advisor, or agent of the Authority, or of any successor to the Authority, as such, either directly or through the Authority or any successor to the Authority, under any rule of law or equity, statute, or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, members, counsel, advisors, or agents, as such, is expressly waived and released as a condition of and consideration for the execution and issuance of the Bonds. Charter School Credit Enhancement Program Generally. The operation of the CSCE Program centers on the Debt Service Reserve Fund held by the Trustee under the Indenture. The CSCE Program requires that the amount on deposit in the Debt Service Reserve Fund be not less than the maximum annual debt service on the Bonds (which amount includes both the principal of and interest on the Bonds due in any calendar year). 18

23 Pursuant to the Loan Agreement, the Charter School covenants to make pro rata monthly Loan Payments on the fifth day of each calendar month which are sufficient to pay the interest on the Bonds (due semi-annually on April 15 and October 15 of each year) and the principal of the Bonds (due or subject to sinking fund redemption on October 15 of each year). In the event that the amount on deposit in the Bond Interest Fund or the Bond Principal Fund are not sufficient to pay the interest on and principal of the Bonds when due, the Trustee is required to transfer money from the Debt Service Reserve Fund to cover any insufficiency in the Bond Interest Fund or the Bond Principal Fund. By November 1 of each year, the Trustee is required to notify the Authority of the amount, referred to hereafter as the Shortfall Replenishment, which is necessary to restore the Debt Service Reserve Fund to the required amount (which amount is the maximum annual debt service on the Bonds). The Authority has covenanted to certify, by December 1, the Shortfall Replenishment amount to the Governor of Utah and the Governor is required, under the Act, to request from the State Legislature an appropriation of the amount to be deposited into the Debt Service Reserve Fund. Under the Act, the State Legislature may, but is not required, to appropriate sufficient moneys for the Shortfall Replenishment. Annual general sessions of the State Legislature begin on the fourth Monday in January and, with certain exceptions, do not exceed 45 calendar days. The enabling legislation for the CSCE Program created a Charter School Reserve Account and initially funded the account in the amount of $3,000,000. Moneys in the Charter School Reserve Account are, among other purposes described hereafter, available for appropriation by the State Legislature for the funding of the Shortfall Replenishment. Upon appropriation by the State Legislature for any Shortfall Replenishment, the Charter School is required to repay the State in the time and manner required by the Authority. Additionally, until such time as that the obligations of the Charter School owing to the Authority and the State for any Shortfall Replenishment have been repaid in full, the Authority may exercise certain rights, including the acceleration and redemption at par, in whole, of the Bonds. The CSCE Program. The Charter School has been designated a qualifying charter school by the Authority pursuant to Section 53A-20b-102 of the Utah Code and the guidelines of the Authority promulgated thereunder, and accordingly, the Bonds are to be issued under the CSCE Program. As described above, by December 1 of each year, the Authority is required, pursuant to Section 53A-20b-201(9) of the Utah Code, to certify to the Governor of the State the amount required, if any, to restore amounts on deposit in the debt service reserve funds with respect to all bonds issued under the CSCE Program, including the Debt Service Reserve Fund established in connection with the Bonds, to the respective debt service reserve fund requirements. The Governor is then required to request from the State Legislature an appropriation of the certified amount to restore such debt service reserve funds to the respective debt service reserve fund requirements. The State Legislature may, but is not required to, appropriate moneys, including from amounts on deposit in the Charter School Reserve Account created pursuant to Section 53A-20b-301 of the Utah Code, to restore amounts on deposit in any such debt service reserve fund to the respective debt service reserve fund requirement. Moneys on deposit in the Charter School Reserve Account may also be appropriated by the State Legislature to pay fees and expenses of the Authority, pay the principal of and interest on bonds issued under the CSCE Program, or otherwise provide financial assistance to a qualifying charter school participating in the CSCE Program. The Charter School Reserve Account held by the State has been and will be funded from a one-time appropriation by the State Legislature in 2012 of $3,000,000, certain interest earnings, and amounts to be contributed by the qualifying charter schools that participate in the CSCE Program in amounts determined by the Authority. Amounts in the Charter School Reserve Account are to be available to replenish, at the 19

24 discretion of the State Legislature, the Debt Service Reserve Fund, and any other debt service reserve fund created to secure bonds issued pursuant to the CSCE Program, if depleted and not replenished. The total par amount of bonds that may be issued by the Authority under the CSCE Program is limited as set forth in Section 53A-20b-204 of the Utah Code. On or before January 1 of each year, the Authority is required to determine the bond issuance limitation pursuant to Section 53A-20b-204(2) of the Utah Code, and the Authority may not issue bonds under the CSCE Program if the total par amount outstanding under the CSCE Program would exceed such limitation. Provisions in the Indenture and the Loan Agreement Relating to the Credit Enhancement Program. Notwithstanding any other provision of the Indenture or Loan Agreement to the contrary, so long as the Bonds remain outstanding and there has not been and is continuing a Non-Appropriation the following provisions shall apply: (a) The maturity of the Bonds shall not be accelerated or the Bonds redeemed pursuant to the Indenture without the prior written consent of the Authority. (b) If there has been an appropriation under the CSCE Program for the benefit of the Charter School that has not been reimbursed by the Charter School, the Authority shall be deemed to be the sole Owner of the Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Owners of the Bonds are entitled to take pursuant to the Loan Agreement, the Mortgage, and any other document related thereto. (c) To the extent not otherwise required, the Charter School shall pay or reimburse the Authority any and all charges, fees, costs and expenses which the Authority may reasonably pay or incur in connection with (i) the administration, enforcement, defense, or preservation of any rights or security in the Indenture or Loan Agreement, (ii) the pursuit of any remedies under the Indenture, the Loan Agreement, or any other related document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Indenture, the Loan Agreement or any other related document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Indenture, the Loan Agreement or the transactions contemplated thereby. (d) The Indenture shall not be discharged and the Loan Agreement shall not be terminated until all obligations of the Charter School owing to the Authority or the State under the CSCE Program or otherwise shall have been paid in full. The Charter School's obligation to pay such amounts shall expressly survive payment in full of the Bonds. The Indenture The Indenture provides that the Bonds will be equally and ratably secured thereby, without preference, priority or distinction on account of the date or dates or the actual time or times of the issue or maturity of the Bonds, so that all Bonds at any time issued and Outstanding thereunder will have the same right, lien and preference under and by virtue of the Indenture. As security for the Bonds, the Indenture grants, assigns and pledges to the Trustee for the benefit of the Registered Owners of the Bonds, the Trust Estate, which is limited to (a) the rights and interests of the Authority under the Loan Agreement, except the Authority s Unassigned Rights, (b) the Project and all rights and interests of the Authority in the Project, subject to Permitted Encumbrances, except the Authority s Unassigned Rights, (c) the Pledged Revenues and all rights and interests of the Authority in the Pledged Revenues, subject to Permitted Encumbrances, except the Authority s Unassigned Rights, (d) the rights and interests of the Authority and the Charter School under the Mortgage and the Promissory 20

25 Notes, and (e) all Funds created in the Indenture (other than the Cost of Issuance Fund, the Tax and Insurance Escrow Fund and the Rebate Fund), except for moneys or obligations deposited with or paid to the Trustee for the payment or redemption of Bonds that are no longer deemed to be Outstanding, and all trust accounts containing all insurance and condemnation proceeds and all Revenues payable to the Trustee by or for the account of the Authority pursuant to the Loan Agreement and the Indenture, subject to the provisions of the Indenture. See APPENDIX D. Flow of Funds. Under the Indenture, there is to be deposited in the Revenue Fund as and when received, all Loan Payments and all other monies deposited into the Revenue Fund, including all State Payments, pursuant to the Loan Agreement or the Indenture. Under the Indenture, commencing after the date of issuance of the Bonds all monies held on deposit in the Revenue Fund are to be disbursed by the Trustee, on each Disbursement Date (which is not later than two Business Days after receipt by the Trustee of State Payments transferred by the State and in no event later than the 10th day of each month) in the following order of priority (the term pro rata portion, as used below, shall mean the fractional amount calculated with a numerator equal to the amount due on the next payment date and a denominator equal to the number of monthly Disbursement Dates to occur until the next payment date): FIRST: for deposit in the Bond Interest Fund, after taking into consideration earnings or capitalized interest amounts then on deposit in the Bond Interest Fund, (a) an amount equal to pro rata portion the of the interest due on the Bonds on the next succeeding Interest Payment Date; plus (b) all amounts due as to interest on the Bonds on the immediately preceding Disbursement Date as described in this paragraph which have not otherwise been credited or transferred to the Bond Interest Fund; SECOND: for deposit in the Bond Principal Fund: (a) an amount equal to a pro rata portion of the principal due on the Bonds on the next succeeding Principal Payment Date; plus (b) all amounts due as to principal on the Bonds on the immediately preceding Disbursement Date as described in this paragraph which have not otherwise been credited or transferred to the Bond Principal Fund; THIRD: on each Disbursement Date, (i) first, to the Debt Service Reserve Fund, the amount required, if any, under the Indenture to restore the balance in the Debt Service Reserve Fund to the Debt Service Reserve Requirement prior to November 1 of each year in equal installments, and (ii) second, to the Authority, the amount required, if any, to reimburse the State for appropriations made or other amounts paid to or by the Authority under the CSCE Program for the benefit of the Charter School; FOURTH: on the Disbursement Date following the last Business Day of every Rebate Year and continuing on the Disbursement Date thereafter until the full amount is so paid, to the Rebate Fund, any amount, as directed by the Charter School to the Trustee, required of the Charter School to be deposited in the Rebate Fund; FIFTH: (i) to the Expense Fund, an amount equal to a pro rata portion of the Trustee s Fees and Trustee s Expenses due on the next payment date with respect to the Trustee s Fees, plus (ii) an amount equal to a pro rata portion of the Authority s Annual Fee, plus (iii) an amount equal to a pro rata portion of the annual Rating Agency surveillance fee due on the next invoiced date, plus (iv) any amount previously due as described under clauses (i), (ii) or (iii) of this paragraph but that remains unpaid because of an insufficiency in Pledged Revenues available therefore; 21

26 SIXTH: to the Tax and Insurance Escrow Fund, an amount equal to (i) certain payments required to be made pursuant to the Loan Agreement (generally consisting of governmental charges and impositions whatsoever related to the Facilities or the Project, and premiums for insurance policies maintained on the Facilities and the Project as required by the Loan Agreement), plus (ii) all amounts that were previously due under (i) of this paragraph but were not transferred because of an insufficiency in Revenues available therefore; SEVENTH: to the Repair and Replacement Fund, the amount required, if any, under the Loan Agreement, to fund or to restore the balance in the Repair and Replacement Fund Requirement in twelve equal installments not to exceed the annual contribution limit for the Repair and Replacement Fund Requirement; EIGHTH: to the Expense Fund, an amount equal to a fraction of any amount owed as payment for the services of the Rebate Analyst where the numerator is such amount and the denominator is the number of Disbursement Dates that will occur during the period between the last date on which such amounts were paid or, if such fees have not yet been paid, the Closing Date and the next Principal Payment Date; NINTH: to any third-party lender, any amount, as directed by Charter School to the Trustee, to make principal and interest payments on any outstanding Short-Term Debt; and TENTH: all amounts remaining on deposit in the Revenue Fund after the Trustee has made the disbursements required in FIRST through NINTH above, to the Charter School, if not in default under the Loan Agreement. Debt Service Reserve Fund. The Indenture provides for the creation of the Debt Service Reserve Fund in the custody of the Trustee which is to be used (subject to any required rebate of investment earnings thereon to the United States of America) solely for the payment of principal of, premium, if any, and interest on the Bonds in the event that moneys in the Bond Principal Fund and Bond Interest Fund are insufficient to make such payments when due, whether on an Interest Payment Date, redemption date, mandatory sinking fund redemption date, maturity date or otherwise. Upon the occurrence of an Event of Default hereunder and the exercise by the Trustee of the remedy specified in the Loan Agreement and Indenture, any moneys in the Debt Service Reserve Fund shall be transferred by the Trustee to the Bond Interest Fund, and with respect to any moneys in excess of the amount required to be transferred to the Bond Interest Fund, to the Bond Principal Fund and applied in accordance with the Indenture. On the final maturity date of the Bonds any moneys in the Debt Service Reserve Fund may be used to pay the principal of and interest on the Bonds on such final maturity date. The Debt Service Reserve Fund is required to be maintained in an amount equal to the Debt Service Reserve Fund Requirement (as defined in APPENDIX D hereto). Upon issuance of the Bonds, Bond proceeds in the amount of the Debt Service Reserve Requirement will be deposited into the Debt Service Reserve Fund. In the event of the redemption of the Bonds in whole or in part pursuant to the Indenture, any Moneys in the Debt Service Reserve Fund shall be transferred to the Bond Principal Fund and applied to the payment of the principal of and premium, if any, on the Bonds. The Trustee shall value the Investment Obligations in the Debt Service Reserve Fund on each Interest Payment Date at the lesser of their market value plus accrued interest to the valuation date or cost. The weighted average maturity of the Investment Obligations in the Debt Service Reserve Fund shall not exceed two (2) years. If on any valuation date the amount in the Debt Service Reserve Fund (determined pursuant to the Indenture) is greater than the Debt Service Reserve Fund Requirement, such excess shall be transferred by the Trustee to the Bond Interest Fund and credited in accordance with the Indenture. If on any valuation date the amount in the Debt Service Reserve Fund (determined pursuant to the Indenture) is less than the Debt 22

27 Service Reserve Fund Requirement, the Trustee shall immediately notify the Charter School in writing of the amount of such deficit and request that the Charter School deposit with the Trustee such amount in equal monthly installments to be paid on the next succeeding Disbursement Dates such that the amount on deposit in the Debt Service Reserve Fund is equal to the Debt Service Reserve Fund Requirement prior to November 1 of each year. Within five (5) Business Days of any transfer of funds from the Debt Service Reserve Fund to the Bond Principal Fund or the Bond Interest Fund because of a deficiency therein, the Trustee shall give written notice to the Charter School of such transfer and of the amount of the deficiency, if any, of amounts then on deposit in the Debt Service Reserve Fund as of such date and request that the Charter School deposit with the Trustee an amount equal to such deficiency in equal monthly installments to be paid on the next succeeding Disbursement Dates such that the amount on deposit in the Debt Service Reserve Fund is equal to the Debt Service Reserve Fund Requirement prior to November 1 of each year. Additional Bonds. The Indenture provides for the issuance of Additional Bonds secured by and payable solely from the Trust Estate on a basis which is on a parity with the Bonds provided the following conditions, among others, are met: the Trustee has received a certificate of an Authorized Representative of the Charter School to the effect that the Charter School is not in default under the Loan Agreement or the Indenture, is not aware of any Events of Default under the Loan Agreement or the Indenture and that such Indebtedness may be issued under Loan Agreement (as described below); and the Trustee will receive from the proceeds of the Additional Bonds or otherwise on the date of delivery of the Additional Bonds an amount equal to the additional Debt Service Reserve Fund Requirement for deposit into the Debt Service Reserve Fund. For the complete terms and conditions for the issuance of Additional Bonds provisions secured by and payable solely from the Trust Estate, see APPENDIX D. The Loan Agreement Loan Payments and Pledge by the Charter School. Under the Loan Agreement, the Authority agrees to loan the proceeds of the Bonds to the Charter School for the purpose of financing the cost of the Project, and the Charter School agrees to make payments into the Revenue Fund as repayment of the Loan until the principal of, premium, if any, and interest on the Bonds have been paid. In fulfillment of its obligations under the Loan Agreement, the Charter School pledges to the payment of the Loan the following: (i) all of the Charter School s right, title and interest in and to the Project, including all related additions, replacements, substitutions and proceeds for the purposes of securing such Loan; (ii) all Pledged Revenues, and (iii) any and all other interests in real or personal property of every name and nature from time to time hereafter by delivery or by writing of any kind specifically mortgaged, pledged or hypothecated, as and for additional security by the Charter School or by anyone on its behalf. See APPENDIX D. Direction to the State. Under the Indenture, all Loan Payments made by the Charter School shall be deposited in the Revenue Fund as and when received. In support of its obligation to make Loan Payments, the Charter School covenants in the Loan Agreement to direct the State to transfer all of the Charter School s State Payments (commencing after the Closing Date) directly to the Trustee. Under the Loan Agreement, the Charter School agrees that such direction will be renewed as necessary to ensure that all State Payments are transferred directly to the Trustee or so long as any of the Bonds remain outstanding or unsatisfied, and that all such directions shall remain irrevocable so long as any of the obligations of the Charter School under the Loan Agreement remain outstanding or unsatisfied. See APPENDIX D. Obligations Unconditional. The obligations of the Charter School to make the payments required under the Loan Agreement and observe the other agreements on its part contained therein are 23

28 absolute and unconditional and are a recourse obligation of the Charter School. The Loan Agreement provides that the Charter School will not suspend or discontinue, or permit the suspension or discontinuance of, any payments provided for therein; will perform and observe all of its other agreements contained in the Loan Agreement, the Mortgage and the Promissory Notes (as defined in the Indenture); and, except as otherwise provided therein, will not terminate the Loan Agreement for any cause. See APPENDIX D. Minimum Fund Balance Covenant. Under the Loan Agreement, the Charter School covenants that so long as any of the Bonds remain Outstanding, it will: (i) maintain an unrestricted fund balance/net asset balance in its operating fund which equals not less than an amount calculated as a percentage of the sum of Operating Expenses plus management fees for the prior Fiscal Year as follows: (a) Such percentage shall be 5.0% for any Fiscal Year if, in the Fiscal Year immediately preceding such Fiscal Year, the total of the Maximum Annual Debt Service plus any similar lease-purchase or loan payment obligations of the Charter School were equal to or less than 10% of Pledged Revenues; (b) Such percentage shall be 7.5% for any Fiscal Year if, in the Fiscal Year immediately preceding such Fiscal Year, the total of the Maximum Annual Debt Service plus any similar lease-purchase or loan payment obligations of the Charter School were greater than 10% but less than or equal to 15% of Pledged Revenues; and (c) Such percentage shall be 10.0% for any Fiscal Year if, in the Fiscal Year immediately preceding such Fiscal Year, the total of the Maximum Annual Debt Service plus any similar lease-purchase or loan payment obligations of the Charter School were greater than 15% of Pledged Revenues; and (ii) maintain cumulative unrestricted cash reserves and/or access to Short-Term Debt sufficient to meet all accrued and unrestricted salary obligations of the Charter School. Under the Loan Agreement, each of the above covenants shall be tested as of June 30 of each year based on the results included in the annual audit of the Charter School for such fiscal year. If, on any testing date, the Charter School s minimum fund balance is below that which is required, as described above, by not more than 25%, the Charter School is required to retain on an annual basis 50% of the Excess Net Revenues until such time as the Charter School is in compliance with the minimum fund balance described above. In the event that the Charter School is unable to comply with the above fund balance requirements within 12 months of the initial non-compliance, then the Beneficial Owners of 2/3rds of the Outstanding Bonds or the Authority shall have the right to direct the Trustee to require the Charter School to engage, at the Charter School s expense, a Management Consultant (as defined in the Loan Agreement), which shall deliver a written report within 75 days of engagement to the Trustee, the Beneficial Owners, the Authority and the Charter School containing recommendations concerning the Charter School s: (a) operations; (b) financing practices and activities, including Short-Term Debt, lease financing, and investment activities; 24

29 (c) management practices, including the use of consultants, budgeting practices, and ongoing financial systems and monitoring of the Charter School s financial condition; (d) (e) governance and administration practices; and other factors relevant to maintaining such compliance. Upon submission of the Management Consultant s report, the Charter School is required to arrange for payment of the amount owed to the Management Consultant and issue a written certificate to the Trustee and the Authority indicating its acceptance or rejection of all or any material portion of the recommendations of the Management Consultant within 30 days of receiving the report of the Management Consultant. The Beneficial Owners of 2/3rds of the Outstanding Bonds or the Authority shall have the right to require the Charter School to comply with any reasonable recommendation of the Management Consultant with respect to items (a) through (e) above. The Charter School shall work with the Beneficial Owners or the Authority to follow the recommendations. Covenant as to Cash on Hand. Under the Loan Agreement, the Charter School covenants to maintain a cash, liquid investment, or accounts receivable balance (provided such accounts receivables are from the State) sufficient to cover at least 30 days of the sum resulting from the Operating Expenses less any Management Fee. Such covenant is to be tested annually based upon the results included in the annual audited financial statements of the Charter School distributed pursuant to the Loan Agreement. In the event that the Charter School is unable to comply with the requirements of the above covenant within 12 months of the initial non-compliance, then the Beneficial Owners of 2/3rds of the Outstanding Bonds or the Authority have the right to direct the Trustee to require the Charter School to engage, at the Charter School s expense, a Management Consultant, which shall deliver a written report within 75 days of engagement to the Trustee, the Beneficial Owners, the Authority and the Charter School containing the recommendations set forth in (a) through (e) in Minimum Fund Balance Covenant above. Upon submission of the Management Consultant s report, the Charter School is required to arrange for payment of the amount owed to the Management Consultant and issue a written certificate to the Trustee indicating its acceptance or rejection of all or any material portion of the recommendations of the Management Consultant within 30 days of receiving the report of the Management Consultant. The Beneficial Owners of 2/3rds of the Outstanding Bonds or the Authority shall have the right to require the Charter School to comply with any reasonable recommendation of the Management Consultant. The Charter School shall work with the Beneficial Owners or the Authority to follow the recommendations. Coverage Ratio Covenant. Under the Loan Agreement, the Charter School covenants to maintain Net Income Available for Debt Service in an amount equal to at least 1.10 times Maximum Annual Debt Service on all Indebtedness then outstanding. Such covenant is to be tested annually based upon the results included in the annual audited financial statements of the Charter School distributed pursuant to the Loan Agreement. In the event that the Charter School s Net Income Available for Debt Service is less than 1.10 but greater than or equal to 1.0 times the Maximum Annual Debt Service on all Indebtedness then outstanding on any testing date as set forth above, the Charter School shall give notice of such event to the Authority and the Beneficial Owners of the Outstanding Bonds, and the Beneficial Owners of 2/3rds of the Outstanding Bonds or the Authority have the right to direct the Trustee to require the Charter School to engage, at the Charter School s expense, a Management Consultant, which shall deliver a written report within 75 days of engagement to the Trustee, the Beneficial Owners, the Authority and the 25

30 Charter School containing the recommendations set forth in (a) through (e) in Minimum Fund Balance Covenant above. Upon submission of the Management Consultant s report, the Charter School is required to arrange for payment of the amount owed to the Management Consultant and issue a written certificate to the Trustee and the Authority indicating its acceptance or rejection of all or any material portion of the recommendations of the consultant within 30 days of receiving the report of the Management Consultant. The Beneficial Owners of 2/3rds of the Outstanding Bonds or the Authority shall have the right to require the Charter School to comply with any reasonable recommendation of the Management Consultant. The Charter School shall work with the Beneficial Owners or the Authority to follow the recommendations. If, however, the Charter School s Net Income Available for Debt Service is less than 1.0 times the Maximum Annual Debt Service on all Indebtedness then outstanding on any testing date, the Charter School shall give notice of such event to the Authority and the Beneficial Owners of the Outstanding Bonds and shall have 12 months to cure such noncompliance. In the event such noncompliance is not cured within such 12 month period, an Event of Default shall be deemed to have occurred under the Loan Agreement. Repair and Replacement Fund Deposits. Under the Loan Agreement and subject to the limitations set forth therein, the Charter School covenants to maintain a balance on deposit in the Repair and Replacement Fund at an amount not less than the Repair and Replacement Fund Requirement (which amount is calculated as provided in the following paragraph). Under the Indenture, the Repair and Replacement Fund Requirement means an amount equal to the greater of (i) $200,000 or (ii) such amount as recommended by the Facilities Consultant pursuant to the Loan Agreement, but in no event is the total of all deposits required to be made by or on behalf of the Charter School to the Repair and Replacement Fund in any one Fiscal Year to exceed $40,000. The Indenture and the Loan Agreement provide that if at any time the amount on deposit in the Repair and Replacement Fund is less than the Repair and Replacement Fund Requirement, the Trustee is to notify the Charter School. Upon such notification, the Charter School is to restore the required balance in twelve equal installments not to exceed the annual contribution limit for the Repair and Replacement Fund Requirement, beginning with the next succeeding Disbursement Date. To the extent that the amount required to the restore the balance in the Repair and Replacement Fund to the Repair and Replacement Fund Requirement exceeds a total of $40,000 in any one Fiscal Year, the Charter School is to continue to make twelve equal installments in each successive Fiscal Year until the Repair and Replacement Fund Requirement is met. The Charter School is to begin making payments to the Repair and Replacement Fund on the first Disbursement Date following the date of issuance of the Bonds to satisfy the Repair and Replacement Fund Requirement. The Charter School is to cause a Facilities Consultant (as defined in the Indenture) to prepare and submit to the Charter School and the Trustee, on or before July 1, 2017 and each fifth anniversary thereafter, a report containing a physical needs assessment of the Facilities and a recommendation of any increases in the Repair and Replacement Fund Requirement where such increases are necessary to comply with sound asset management principles (provided, however, such Repair and Replacement Fund Requirement shall never decrease to an amount less than $200,000). Upon the filing of such physical needs assessment report with the Charter School and the Trustee, if the recommended amount for the Repair and Replacement Fund Requirement is greater than the Repair and Replacement Fund Requirement then in effect, such recommendation will constitute the Repair and Replacement Fund Requirement until the next report issued by a Facilities Consultant. The Charter School is to fund any deficiency in the Repair and Replacement Fund to the Repair and Replacement Fund Requirement as set forth above. 26

31 Debt Service Requirements basis. Set forth in the following table are the debt service requirements for the Bonds on a calendar year TABLE I Debt Service Requirements 1 Series 2012A Bonds Series 2012B Bonds Year Principal Interest Principal Interest Annual Debt Service $ 459, $3,451 $ 463, ,000 $410,000 4, , $ 405, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 86, , ,000 58, , ,000 29, ,900 Total $17,400,000 $10,177,263 $410,000 $7,551 $27,994,814 1 Figures have been rounded to the nearest dollar. Source: The Underwriter Pending and Threatened Litigation LEGAL MATTERS No Proceedings Against the Charter School. In connection with the issuance of the Bonds, the Charter School will deliver a certificate which will state that, as of the date of issuance of the Bonds, to the best of their knowledge, there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, public board or body pending or threatened against or affecting the Charter School, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Indenture, the Loan Agreement, the bond purchase agreement (referred to in MISCELLANEOUS Underwriting ), or this Official Statement, the validity and enforceability of the Indenture, the Loan Agreement, the bond purchase agreement or the Bonds or the operations (financial or otherwise) of the Charter School. 27

32 No Proceedings Against the Authority. There is not now pending or, to the knowledge of the Authority, threatened, any litigation against the Authority restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings or authority under which they are to be issued. There is no litigation pending or, to the Authority s knowledge, threatened against the Authority which in any manner questions the right of the Authority to enter into the Loan Agreement with the Charter School or to issue and secure the Bonds in the manner provided in the Indenture. TAX MATTERS In the opinion of Bond Counsel to the Authority, based on existing laws, regulations, rulings and court decisions and assuming, among other matters, the accuracy of certifications and compliance with certain covenants, interest on the Series 2012A Bonds is excludable from gross income for federal income tax purposes. Interest on the Series 2012A Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes but such interest is included in adjusted current earnings in computing the federal alternative minimum taxes imposed on certain corporations. Interest on the Series 2012B Bonds is taxable as ordinary income for federal income tax purposes. Bond Counsel is also of the opinion based on existing laws of the State of Utah as enacted and construed that interest on the Bonds is exempt from Utah individual income taxes. Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on the Bonds. The Code establishes certain requirements which must be met on a continuing basis subsequent to the delivery of the Series 2012A Bonds for interest on the Series 2012A Bonds to be excludable from gross income for federal income tax purposes. The Authority and the Charter School have covenanted in the Indenture and the Loan Agreement to take all reasonable steps to comply with all of the requirements of the Code so that interest on the Series 2012A Bonds will be excludable from gross income for federal income tax purposes. Bond Counsel has assumed continuing compliance by the Authority and the Charter School with the above covenants and procedures in rendering their opinion with respect to the interest on the Series 2012A Bonds being excludable from gross income for federal income tax purposes. Failure to comply with certain tax requirements may cause interest on the Series 2012A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of such bonds. To the extent that the opinions rendered by Bond Counsel are dependent on the organization and operation of the Charter School as an organization described in Section 501(c)(3) of the Code and exempt from tax under Section 501(a) of the Code, no part of the net earnings of which inures to the benefit of any person, Bond Counsel is relying on the representations of the Charter School and the opinion of the Charter School's counsel dated as of the date of issuance of the Bonds. Bond Counsel's engagement with respect to the Series 2012A Bonds ends with the issuance of the Series 2012A Bonds. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) or any other matters coming to the attention of Bond Counsel after the date of issuance of the Series 2012A Bonds may adversely affect the value of, or the tax status of interest on, the Series 2012A Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2012A Bonds to be subject directly or indirectly, to federal income taxation or interest on Series 2012A Bonds to be subject to or exempted from state income taxation, or otherwise prevent bondholders from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Series 2012A Bonds. Prospective purchasers of the Series 2012A Bonds should consult their own tax advisors regarding any pending or 28

33 proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ("IRS") or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority or the Charter School or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. Although Bond Counsel expects to render an opinion that interest on the Series 2012A Bonds is excludable from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, such bonds may otherwise affect a bondholder's federal or state tax liability. The nature and extent of these other tax consequences will depend upon a bondholder's particular tax status and the bondholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Interest on the Series 2012B Bonds is taxable as ordinary income for federal income tax purposes at the time the interest accrues or is received in accordance with a bondholder's method of accounting for federal income tax purposes. Holders of Series 2012B Bonds who are not United States persons, as defined for federal tax purposes, may be subject to special rules and should consult their tax advisors. A form of the proposed opinion of Bond Counsel to the Authority is attached as "APPENDIX E- FORM OF BOND COUNSEL OPINION." Original Issue Discount Certain of the Series 2012A Bonds are offered at a discount ( original issue discount ) equal generally to the difference between public offering price and principal amount. For federal income tax purposes, original issue discount on a bond accrues periodically over the term of the bond as interest with the same tax exemption and alternative minimum tax status as regular interest. The accrual of original issue discount increases the tax holder s tax basis in the bond for determining taxable gain or loss from sale or from redemption price to maturity. Holders should consult their tax advisors for an explanation of the accrual rules. Original Issue Premium Certain of the Series 2012A Bonds are offered at a premium ( original issue premium ) over their principal amount. For federal income tax purposes, original issue premium is amortizable periodically over the term of a bond through reductions in the holder s tax basis for the bond for determining taxable gain or loss from sale or from redemption prior to maturity. Amortization of premium does not create a deductible expense or loss. Holders should consult their tax advisers for an explanation of the amortization rules. Ratings MISCELLANEOUS Standard & Poor s Rating Services ( S&P ) has assigned the ratings to the Bonds shown on the cover page hereof. The first rating shown on the cover page is reflective of the CSCE Program. The second is the rating on the Bonds without taking into account the security provided by the CSCE 29

34 Program. The CSCE Program rating carries a stable outlook, and the underlying rating carries a stable outlook. The ratings reflect only the view of the rating agency and any desired explanation of the significance of such ratings should be obtained from S&P at 55 Water Street, New York, New York. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agency, if, in the judgment of such agency, circumstances so warrant. Any such downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Bonds. Underwriting The Bonds are being sold by the Authority at an underwriting discount of $267, to the Underwriter pursuant to a bond purchase agreement entered into by and among the Underwriter, the Charter School and the Authority. Expenses associated with the issuance of the Bonds are being paid from proceeds of the Bonds. The right of the Underwriter to receive compensation in connection with the Bonds is contingent upon the actual sale and delivery of the Bonds. The Underwriter has initially offered the Bonds to the public at the prices or yields set forth on the cover page of this Official Statement, plus accrued interest from the date of the Bonds. Such prices or yields may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other investment banking firms in offering the Bonds to the public. Registration of Bonds Registration or qualification of the offer and sale of the Bonds (as distinguished from registration of the ownership of the Bonds) is not required under the federal Securities Act of 1933, as amended. THE AUTHORITY ASSUMES NO RESPONSIBILITY FOR QUALIFICATION OR REGISTRATION OF THE BONDS FOR SALE UNDER THE SECURITIES LAWS OF ANY JURISDICTION IN WHICH THE BONDS MAY BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED. Continuing Disclosure Agreement Pursuant to the requirements of the Securities and Exchange Commission Rule 15c2-12 (17 CFR Part 240, c2-12) ( Rule 15c2-12 ), the Charter School has agreed for the benefit of the Registered Owners and Beneficial Owners of the Bonds to provide certain financial information, other operating data and notices of material events (the Continuing Disclosure Agreement ). The form of the Continuing Disclosure Agreement is attached as an appendix to this Official Statement. The Charter School has not failed to comply with any undertakings prior to the date hereof. Interest of Certain Persons Named in This Official Statement The legal fees to be paid to Ballard Spahr LLP and to Kutak Rock LLP are contingent upon the sale and delivery of the Bonds. Independent Auditors The audited financial statements of the Charter School for the fiscal year ended June 30, 2012, which are appended hereto, have been audited by independent auditor, EideBailly LLP, Certified Public 30

35 Accountants and Business Consultants, Ogden, Utah, as stated in their report appearing therein. financial statements have been included without the review of the auditor. Such Additional Information Copies of constitutional provisions, statutes, resolutions, agreements, contracts, financial statements, reports, publications and other documents or compilations of data or information summarized or referred to herein are available as described in INTRODUCTION Additional Information. Official Statement Certification The preparation of this Official Statement and its distribution has been authorized by the Charter School. This Official Statement is not to be construed as an agreement or contract between the Charter School and any purchaser, owner or holder of any Bond. OGDEN PREPARATORY ACADEMY INC., a Utah nonprofit corporation By /s/ Laura D Hulst President 31

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37 APPENDIX A CHARTER SCHOOLS IN UTAH

38 APPENDIX A CHARTER SCHOOLS IN UTAH This Appendix summarizes certain provisions of Utah charter school law. This Appendix provides only a summary, for informational purposes only. Potential investors should refer to and independently evaluate such provisions in their entirety, with assistance from counsel, for a complete understanding of their terms. Further, potential investors should note that the provisions summarized below are subject to change, and this summary only pertains to certain aspects of currently existing law. See RISK FACTORS Changes in Charter School Law. Introduction The Utah legislature first established charter schools in In Utah, a charter school is a public school established by contract with a district governing board or the Utah State Charter School Board (the State Charter School Board ). The State Charter School Board consists of members appointed by the Governor representing specific bodies or constituencies. The State Charter School Board is charged with: (i) authorizing and promoting the establishment of charter schools; (ii) annually reviewing and evaluating the performance of charter schools authorized by the State Charter School Board and holding the schools accountable for their performance; (iii) monitoring charter schools authorized by the State Charter School Board for compliance with federal and state laws, rules, and regulations; and (iv) providing technical support to charter schools and persons seeking to establish charter schools. The Board may also contract, sue and be sued and provide administrative services to, or perform other school functions for, charter schools authorized by the Board and charge fees for the provision of services or functions. Various statutory provisions govern the creation, operation and financing of Utah charter schools. These provisions, which are described further below, derive from the following authorities: Utah Charter Schools Act: Utah Code Ann. 53A-1a-501, et seq. (the Charter Schools Act ), which includes, among others, provisions governing the authority of the State Charter School Board; the legal status and organization of charter schools; the charter application process; requirements for charter schools, termination of a charter, and charter school funding. Utah State Board of Education Rules: The Utah State Board of Education (the Board of Education ) has promulgated rules regarding pupil accounting, a charter school revolving loan fund, and charter school accountability and assistance. The sections that follow provide additional information relating to (i) the Charter Schools Act generally, (ii) provisions of the Charter Schools Act and related Rules governing Utah charter schools financing, and (iii) additional Rules pertaining to the operation and administration of Utah charter schools. General Provisions of the Utah Charter Schools Act (Utah Code Ann. 53A-1A-501, et seq.) Status and Purpose of Charter Schools in Utah (Utah Code Ann. 53A-1A-503) Charter schools in Utah are public schools. A charter school may be established through the creation of a new school or by converting an existing public school to a charter school. Charter schools

39 are intended to: (i) improve student learning; (ii) encourage the use of different and innovative teaching methods; (iii) create new professional opportunities for educators that will allow them to actively participate in designing and implementing learning programs; (iv) increase choice of learning opportunities for students; (v) establish new public school models and new forms of accountability for schools; (vi) provide opportunities for greater parental involvement in school management decisions; and (vii) expand public school choice in areas where schools have been identified for school improvement, corrective action, or restructuring under the No Child Left Behind Act of 2001, 20 U.S.C. 6301, et seq. Charter Application Process (Utah Code Ann. 53A-1A-505) An applicant seeking to establish a new charter school (or to convert an existing public school to charter school status) must submit a proposal. An applicant seeking the authorization of a charter school from the State Charter School Board must first provide a copy of the application to the local school board of the school district in which the proposed charter school will be located, either before or at the time the application is filed with the State Charter School Board. The local board may then review the applications and provide recommendations to the applicant or to the State Charter School Board prior to its acting on the application. The State Charter School Board then votes to approve or deny the application. If the State Charter School Board approves the application, the application is reviewed by the Utah State Charter School Board of Education, which must vote on the application within 60 days of action by the State Charter School Board. After approval of an application, the applicant and the State Charter School Board will set forth the terms and conditions for the operation of the charter school in a written contractual agreement. A charter school agreement may be modified only by mutual agreement of the State Charter School Board and the governing body of the school. Eligible Students (Utah Code Ann. 53A-1a-506) Charter schools must enroll all eligible students who submit a timely application, unless the number of applications exceeds the capacity of a program, class, grade level or the school. If capacity is insufficient to enroll all students who submit timely applications, the charter school may select students on a random basis except that preference may be given to, among others, a student of a parent who has actively participated in the development of the charter school, to siblings of students already enrolled in the charter school, and to a student of a parent who is employed by the charter school. Preference may also be given to students matriculating between charter schools offering similar programs that are governed by the same governing body; and students matriculating from one charter school to another pursuant to a matriculation agreement between the charter schools that is approved by the State Charter School Board. A charter school whose mission is to enhance learning opportunities for refugees or children of refugees or for English language learners may also give an enrollment preference to students who fit such categorization. A charter school may not discriminate in its admission policies or practices on the same basis as other public schools may not discriminate in their admission policies and practices. Requirements for Charter Schools (Utah Code Ann. 53A-1a-507) Charter schools are required to meet certain requirements. Charter schools are required to be nonsectarian in their programs, admission policies, employment practices and operations. Charter schools may not charge tuition or fees except those fees normally charged by other public schools. Charter schools must meet all applicable federal, State, and local health, safety and civil rights requirements and are required to submit an annual report, which includes an annual financial audit report, as required of other public schools. Charter schools are accountable to their chartering entities for performance as provided in the school s charter school agreement. To measure the performance of a charter school, a chartering entity may use data contained in: (i) the charter school s annual financial audit report; (ii) a report submitted by the charter school as required by statute; or (iii) a report submitted by the charter A-2

40 school as required by the school s charter school agreement. Chartering entities may not impose performance standards, except as permitted by statute, that limit, infringe, or prohibit their charter school s ability to successfully accomplish the purposes of charter schools as provided in Section 53A-1a- 503 or otherwise provided in law. Noncompliance and Termination (Utah Code Ann. 53A-1a-509, 10) If a charter school is found to be out of compliance with the requirements for charter schools (Section 53A-1a-507), or the school s charter, the chartering entity shall notify the school s governing board and provide the charter school with a reasonable amount of time to remedy the problem; provided, however, if the health, safety or welfare of the students at the school is threatened, the chartering entity may terminate a charter immediately. If the school does not remedy the noncompliance, the chartering entity may take any of the following actions: remove the school director or finance officer, remove governing board members; appoint an interim director or mentor to work with the charter school; or terminate the school s charter. Notwithstanding the foregoing, a chartering entity may not terminate the charter of a qualifying charter school with outstanding bonds issued in accordance with the CSCE Program, without mutual agreement of the Authority and the chartering entity. A chartering entity may terminate a school s charter for any of the following reasons: failure to meet the requirements stated in the charter, failure to meet generally accepted standards of fiscal management; failure to make adequate yearly progress under the No Child Left Behind Act of 2001, 20 U.S.C. Sect et seq.; violation of the requirements under the Charter Schools Act or another law; or other good cause shown. The chartering entity must notify the governing body of the school of the proposed termination in writing, stating the grounds for the termination, and stipulate that the governing body may request an informal hearing before the chartering entity. If the chartering entity, by majority vote, approves a motion to terminate a charter school, the governing body of the charter school may appeal the decision to the State Board of Education. The State Board of Education shall hear an appeal of a termination made the chartering entity). The State Board of Education s action is final action subject to judicial review. If a charter is terminated during a school year, the school district in which the school is located may assume operation of the school or a private management company may be hired to operate the school. A chartering entity may terminate a charter under the same circumstances that local educational agencies are required to implement alternative governance arrangements under 20 U.S.C Funding for Charter Schools State Funding through the Uniform School Fund (Utah Code Ann. 53A ) The primary source of funds for the operation of Utah charter schools is State funding. State revenue is distributed through the State Uniform School Fund (the Uniform School Fund ), which derives its income primarily from interest and dividends, personal income taxes, taxes on intangible property and revenue from certain forfeited and unclaimed property. The Minimum School Program Act, which is adjusted each year in the State budget bill, governs the use of State funds. Various types of State funding are distributed through the Uniform School Fund, including: (i) regular basic school program funding, which can be used for general operations, and which is distributed through a statutory formula of weighted per pupil units (or WPUs ); A-3

41 (ii) restricted basic program funding, which is allocated to schools based on the number of students who qualify for such restricted programs (for example, special education programs); and (iii) funding for special populations, which is allocated to schools based on the number of students who qualify for such programs (for example, student at risk programs or accelerated learning programs). Weighted Pupil Unit Funding Formula (Utah Code Ann. 53A-la-513) In Utah, the Minimum School Program Act determines the value of each weighted pupil unit ( WPU ) and establishes additional special State appropriations for various public education programs. Under the Charter Schools Act, charter schools are funded in the same way that traditional public school districts are funded. Funds are transferred directly from the State to each charter school each month using a statutory formula. The system of differentiated WPUs is applied to charter school students as follows: (i).55 for kindergarten pupils; (ii).9 for pupils in grades 1-6; (iii).99 for pupils in grades 7-8; and (iv) 1.2 for pupils in grades A charter school s membership is broken down into the number of students in each category, and the number in each category is multiplied by the relevant WPU. The State calculates the applicable funding level for the school according to this total number of WPUs. The number of WPUs allocated to the charter school is then multiplied by the amount of per pupil funding allocated each year to public schools by the State legislature in the budget bill. Funding for the regular basic program (through the weighted pupil unit funding formula) as well as restricted basic program funding is a function of student membership. Pursuant to State Board of Education Rule , a student can only be a pupil in average daily membership once on any day. A student may be counted in full-time membership in the regular school program, or full-time membership in some other program. A student may not be funded for more than one regular WPU for any school year. If a student is enrolled part-time in a regular school program and part-time in some other program (such as Adult basic Education or Youth in Custody), the student s membership is reported on a pro-rated basis for each program. The membership of students enrolled part-time in public schools is determined by the ratio of the number of hours or periods that the student is in membership per day or week to the total number of hours or period in the school day or week. State Board of Education Rule requires that to determine membership, charter schools must ensure that attendance records are kept which clearly and accurately show the entry date, exit date and attendance record of each student, and must employ an independent auditor to audit student accounting records annually. The Utah State Office of Education reviews student membership and fall enrollment audits as they relate to the allocation of State funds. Local Funding ( In Lieu of Local Funding Appropriation) The Charter Schools Act provides that the State Legislature shall provide for an appropriation for charter schools for each of their students to replace some of the local property tax revenues that are not available to charter schools in the form of in lieu of local funding appropriations. Such in lieu of local funding appropriations from the State legislature are determined by calculating (a) the sum of (i) school districts operations and maintenance revenues derived from local property taxes, except certain revenues, A-4

42 (ii) school districts capital projects revenues derived from local property taxes, and (iii) school districts expenditures for interest on debt; and (b) dividing such sum by the total daily average membership of the districts schools. Ten percent of monies received from the above calculation are required to be expended for school facilities only. According to the Utah State Office of Education, local funding was $1,184 per WPU in the school year, $1,427 per WPU in the school year, $1,443 per WPU in the school year, $1,607 per WPU in the school year, $1,687 per WPU in the school year, and is estimated to be $1,710 per WPU in the school year. Federal Funding Utah charter schools are also eligible to receive federal funding pursuant to various federal programs, generally in the form of grants and specific program funding if they meet all applicable federal requirements and comply with the related federal regulations. Additional Utah State Board of Education Rules The Board of Education has promulgated rules regarding the operation and administration of charter schools, certain of which are described below. As discussed below, references to Board means the Utah State Board of Education. Operation (R ) School districts must conduct at a minimum 990 instructional hours and 180 school days each school year, however under special circumstances variances may be granted. The days or hours may be offered at any time during the school year, which is the twelve-month period from July 1 through June 30. A school day is defined for kindergarten as a minimum of two hours of instruction per day and for grades one through twelve, a minimum of four hours of instruction per day. All school day calculations exclude lunch periods and pass time between classes. Accounting (R ) In order to generate membership for funding through the MSP for any clock hour of instruction on any school day, a student must: (a) not have previously earned a basic high school diploma or certificate of completion; (b) not be enrolled in a Youth in Custody ( YIC ) program with a YIC service code other than RSM, ISI-1 or ISI-2; (c) not have unexcused absences on all of the prior ten consecutive school days; (d) be a resident of Utah as defined under Sections 53A through 213; (e) be of compulsory school age or a retained senior; (f) (i) be expected to attend a regular learning facility operated or recognized by the local education agency ( LEA ), including local school boards/public school districts and charter schools on each regularly scheduled school day; or (ii) have direct instructional contact with a licensed educator provided by the LEA at an LEA-sponsored center for tutorial assistance or at the student s place of residence for at least 120 minutes each week during an expected period of absence, if physically excused from such a facility for an extended period of time, due to: (A) injury, illness, surgery, suspension, pregnancy, pending court investigation or action; or (B) an LEA determination that home instruction is necessary. If a student was enrolled for only part of the school day or only part of the school year, the student s membership shall be prorated according to the number of hours, periods or credits for which the student actually was enrolled in relation to the number of hours, periods or credits for which a full-time student normally would have been enrolled. For example: A-5

43 (a) If the student was enrolled for 4 periods each day in a 7 period school day for all 180 school days, the student s aggregate membership would be 4/7 of 180 days or 103 days. (b) If the student was enrolled for 7 periods each day in a 7 period school day for 103 school days, the student s membership would also be 103 days. For students in grades 2 through 12, days in membership shall be calculated by the LEA using a method equivalent to the following: total clock hours of instruction for which the student was enrolled during the school year divided by 990 hours and then multiplied by 180 days and finally rounded up to the nearest whole day. For example, if a student was enrolled for only 900 hours during the school year, the student s aggregate membership would be (900/990) 180, and the LEA would report 164 days. For students in grade 1, the first term of the formula shall be adjusted to use 810 hours as the denominator. For students in kindergarten, the first term of the formula shall be adjusted to use 450 hours as the denominator ) New or Expanding Charter School Notification to Prospective Students and Parents (R277- All charter schools opening or expanding by at least ten percent of overall enrollment or adding one or more grade levels shall notify all families consistent with the schools outreach plans described in the charter agreements of: (1) a new or expanding charter school s purpose, focus and governance structure, including names, qualifications, and contact information of governing board members; (2) the number of new students that will be admitted into the school by grade; (3) the proposed school calendar for the charter school including at a minimum the first and last days of school, scheduled holidays, prescheduled professional development days (no student attendance), and other scheduled non-school days; (4) the charter school s timelines for acceptance or rejection of new students consistent with Section 53A- 1a-506.5; (5) the requirement and availability of a State-approved charter school student application; (6) procedures for transferring to or from a charter school, together with applicable timelines; and (7) provide for payment, if required, of a one-time fee per secondary school enrollment, not to exceed $5.00, consistent with Section 53A Charter schools must provide written notice of the information in the above paragraph consistent with the school s outreach plan and at least 180 days before the proposed opening day of school. Charter schools must have an operative and readily accessible electronic website providing information required under the above paragraph in place. The completed charter school website shall be provided to the State Charter School Board at least 180 days prior to the proposed opening day of school. The State Charter School Board shall require new charter schools to have websites that may be reviewed by the State Charter School Board prior to the schools posting the websites publicly. Transfer Student Criteria (R ) Charter schools must allow students to transfer from one charter school to another and enroll students only consistent with Sections 53A-1a-506.5(2) through (6), including timelines. Charter schools must provide notice to a withdrawing student s school of residence consistent with Section 53A-1a (5) and using USOE-designated transfer forms. Both charter schools and neighborhood schools must enroll students and exchange student information consistent with 53A-1a-506.5(2)(c) and 53A and using USOE-designated transfer forms. Both charter schools and neighborhood schools must have policies that provide procedures for properly excluding students and notifying students and parents under 53A and 53A Neither neighborhood schools nor charter schools may discourage students from attending schools of choice in violation of state or federal law. Neither charter schools nor A-6

44 neighborhood schools are required to enroll students who have been properly excluded from public schools under 53A and 53A Timelines Charter School Starting Date (R ) The State Charter School Board must accept a proposed starting date from a charter school applicant, or the State Charter School Board shall negotiate and recommend a starting date prior to recommending final charter approval to the Board. A local or state-chartered school must be approved by November 30, two years prior to the school year it intends to serve students in order to be eligible for state funds. A local or state-chartered school must acquire a facility and enter into a written agreement, or begin construction on a new or existing facility no later than January 1 of the year the school is scheduled to open. Each state-chartered school must submit any lease, lease-purchase agreement, or other contract or agreement relating to the charter school s facilities or financing the charter school facilities to its chartering entity for review and advice prior to the charter school entering into the lease, agreement, or contract, consistent with Section 53A-1a-507(9). If students are not enrolled and attending classes by October 1, a charter school will not receive funding from the state for that school year. Despite a charter school meeting starting dates, a charter school is required to satisfy R requirements of 180 days and 990 hours of instruction time, unless otherwise exempted by the Board under 53A-1a The Board may, following review of information, approve the recommended starting date or determine a different charter school starting date after giving consideration to the State Charter School Board recommendation. Remedying Charter School Financial Deficiencies (R ) Upon receiving credible information of charter school financial deficiencies, the State Charter School Board is to immediately direct a review or audit through the charter school governing board, by State Charter School Board staff, or by an independent auditor hired by the State Charter School Board. As defined within the Rules, charter school deficiencies means the following information: (1) a charter school is not satisfying financial obligations as required by Section 53A-1a-505 in the charter school s written contractual agreement; (2) a charter school is not providing required documentation following reasonable warning; (3) compelling evidence of fraud or misuse of funds by charter school governing board members or employees. The State Charter School Board or the Board through the State Charter School Board may direct a charter school governing board or the charter school administration to take reasonable action to protect state or federal funds consistent with Section 53A-1a-510. The State Charter School Board or the Board in absence of the State Charter School Board action may: (1) allow a charter school governing board to hold a hearing to determine financial responsibility and assist the charter school governing board with the hearing process; (2) immediately terminate the flow of state funds; (3) recommend cessation of federal funding to the school; (4) take immediate or subsequent corrective action with employees who are responsible for financial deficiencies; or (5) any combination of the foregoing (1), (2), (3) and (4). The recommendation by the State Charter School Board must be made within 20 school days of receipt of complaint of deficiency(ies). The State Charter School Board may exercise flexibility for good cause in making recommendation(s) regarding deficiency(ies). The Board is to consider and affirm or modify the State Charter School Board s recommendation(s) for remedying a charter school s financial deficiency(ies) within 60 days of receipt of information from the State Charter School Board. In addition to remedies provided for in Section 53A-1a-509, the State Charter School Board may provide for a remediation team to work with the school. A-7

45 Charter School Financial Practices and Training (R ) Charter school directors, business administrators, and finance staff must attend Utah State Office of Education ( USOE ) required business meetings for charter schools. Local charter school board members and directors are invited to all applicable Board- sponsored training, meetings, and sessions for traditional school district financial personnel/staff if charter schools supply current staff information and addresses and indicate the desire to attend. The Board is to work with other education agencies to encourage their inclusion of charter school representatives at training and professional development sessions. A charter school is to appoint a business administrator consistent with Sections 53A and 303. The business administrator is responsible for the submission of all financial and statistical information required by the Board. The Board may interrupt disbursements to charter schools for failure to comply with financial and statistical information required by law or Board rules. Charter schools are not eligible for necessarily existent small schools funding under Section 53A- 17a-109(2) and R Charter schools must comply with R regarding required oversight of School Inspections. Charter Schools and NCLB Funds (R ) Charter schools that desire to receive No Child Left Behind ( NCLB ) funds shall comply with the requirements of R To obtain its allocation of NCLB formula funds, a charter school must complete all appropriate sections of the Utah Consolidated Application (UCA) and identify its economically disadvantaged students in the October upload of the Data Clearinghouse. If the school does not operate a federal school lunch program, the school: (1) shall determine the economically disadvantaged status for its students on the basis of criteria no less stringent than those established by the U.S. Department of Agriculture for identifying students who qualify for reduced price lunch for the fiscal year in question; or (2) may use the Charter School Declaration of Household Income form provided by the USOE for this purpose. A school which does not use the form shall maintain equivalent documentation in its records, which may be subject to audit. Charter School Oversight and Monitoring (R ) The State Charter School Board is to provide direct oversight to the state s board chartered schools, including: (1) requiring that all charter schools shall be members of an accredited by NAAS; (2) annual review of student achievement indicators for all schools, disaggregated for various student subgroups; (3) quarterly review of summary financial records and disbursements and student enrollment; (4) annual review conducted through site visits or random audits of personnel matters such as employee licensure and evaluations; (5) regular review of other matters specific to effective charter school operations as determined by the USOE charter school staff; (6) audits and investigations of claims of fraud or misuse of public assets or funds; and (7) requiring that charter schools are in compliance with their charter agreement, as maintained by the USOE. It is presumed that the charter agreement maintained by the USOE is the final, official and complete agreement. The Board retains the right to review or repeal charter school authorization based upon factors that may include: (1) financial deficiencies or irregularities; or (2) persistently low student achievement inconsistent with comparable schools; or (3) failure of the charter school to comply with state law, Board rules, or directives; or (4) failure to comply with currently approved charter commitments. All charter schools are required to include the following statement in their charters: To the extent that any charter school s charter conflicts with applicable federal or state law or rule, the charter shall be A-8

46 interpreted and enforced to comply with such law or rule and all other provisions of the charter school shall remain in full force and effect. District charter school authorizers must: (1) visit a charter school at least once during its first year of operation; (2) visit a charter school as determined in the review process; and (3) provide written reports to the charter schools after the visits. Satellite School for Approved Charter Schools (R ) An existing charter school may submit an amendment request to the State Charter School Board for a satellite school no later than April 1 two years prior to the date of the proposed implementation of the satellite if the charter school fully satisfies the following: (1) The school currently satisfies all requirements of state law and Board rule including adequate insurance, adequate parental involvement, compliance with all fiscal requirements, and adequate services for all special education students at the school; (2) The school has operated successfully for at least three years; (3) Students at the school are performing on standardized assessments at an acceptable level with stable scores or scores showing an upward trend; (4) The proposed satellite school will provide educational services, assessment, and curriculum consistent with the services, assessment, and curriculum currently being offered at the existing charter school; (5) The school shall be financially stable; there have been no repeat findings of deficiencies on required outside audits for at least two consecutive years; (6) Adequate qualified administrators, including at least one onsite administrator, and staff are available to meet the needs of the proposed student population at the satellite site school; (7) The school has had an audit by Charter School Section staff regarding performance of the current charter agreement, contractual agreements, and financial records; and (8) The school provides any additional information or documentation requested by the Charter School Section staff or the Board. A satellite school that receives School LAND Trust funds shall have a School LAND Trust committee and satisfy all requirements for School LAND Trust committees consistent with R The satellite school amendment request shall include the following: (1) Written certification from the charter school governing board that the charter school currently satisfies all requirements of state law and Board rule; (2) A detailed explanation of the governance structure for the satellite school, including appointed or elected representation on the governing board, parental involvement and professional staff involvement in implementing the educational plan; (3) Information detailing the grades to be served, the number of students to be served and general information regarding the physical facilities anticipated to serve the school; (4) A detailed financial plan for the satellite school; (5) A signed acknowledgment by the charter school governing board certifying board members understanding that a physical site for the building must be secured no later than January 1 of the year the satellite school is scheduled to open; (a) the securing of the building site must be verified by a real estate closing document, signed lease agreement, or other contract indicating a right of occupancy pursuant to R C; (b) failure to secure a site by the required date may, at the discretion of the State Charter School Board, delay the opening of the satellite school for at least one academic year; (6) Notification to both the school district in which the charter school is located and the school district of the proposed satellite school location in the same manner as required in Section 53A-1a-505(1); (7) Written certification that no later than 15 days after securing a building site, the charter school governing board shall notify the school district in which the charter school satellite school is located of the school location, grades served, and anticipated enrollment by grade with a copy of the notification sent to the State Charter School Board; and (8) A signed acknowledgment by the charter school governing board that the board understands the satellite school shall be held accountable for its own AYP report and disaggregated financial data and reports. A-9

47 The approval of the satellite school by the State Charter School Board requires ratification by the State Board of Education and will expire 24 months following such ratification if a building site has not been secured for the satellite school. A charter school may not apply for more than three satellite locations. Transportation (R ) Charter schools are not eligible for to-and-from school transportation funds. A charter school that provides transportation to students must comply with Utah law Section A school district may provide transportation for charter school students on a space-available basis on approved routes. Appeals Criteria and Procedures (R ) Only an operating charter school, a charter school that has been recommended by the State Charter School Board to the Board, or a charter school applicant that has met State Charter School Board requirements for review by the full State Charter School Board, may appeal State Charter School Board administrative decisions or recommendations to the Board. Only the following State Charter School Board administrative decisions or recommendations may be appealed to the Board: (1) recommendation for termination of a charter; (2) recommendation for denial of local charter board proposed changes to approved charters; (3) recommendation for denial or withholding of funds from local charter boards; and (4) recommendation for denial of a charter. No other issues may be appealed. Appeals procedures and timelines are established as follows: (1) The State Charter School Board shall, upon taking any of the administrative actions: (a) provide written notice of denial to the charter school or approved charter school; (b) provide written notice of appeal rights and timelines to the local charter board chair or authorized agent; and (c) post information about the appeals process on the State Charter School Board website and provide training to prospective charter school board members and staff regarding the appeals procedure. A local charter school board chair or authorized agent (appellant) may submit a written appeal to the State Superintendent within 14 calendar days of the State Charter School Board administrative action or recommendation. The Superintendent shall, in consultation with the Board chair, designate three to five Board members and a hearing officer, who is not a Board member, to act as an objective hearing panel. The hearing officer, in consultation with the Superintendent, shall set a hearing date and provide notice to all parties, including the State Charter School Board staff and State Charter School Board. The Hearing is to be held no more than 45 days following receipt of the written appeal. The hearing officer is to establish procedures that provide fairness for all parties. The hearing panel is to make written findings and provide an appeal recommendation to the Board no more than 10 calendar days following the hearing. The Board is to take action on the hearing report findings at the next regularly scheduled Board meeting. The Board s acceptance or rejection of the hearing report is the final administrative action on the issue. A-10

48 APPENDIX B THE CHARTER SCHOOL

49 APPENDIX B THE CHARTER SCHOOL General Ogden Preparatory Academy Inc. (the Charter School ) is a Utah public charter school and a Utah nonprofit corporation organized under the laws of the State. The Charter School received a 501(c)(3) determination letter from the Internal Revenue Service on December 1, 2004 classifying the Charter School as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ) which is exempt from federal income taxation under Section 501(a) of the Code (except with respect to unrelated business taxable income within the meaning of Section 512(a) of the Code). The Charter School was incorporated on July 1, 2003, and is organized pursuant to the Utah Charter Schools Act, Utah Code Ann. 53A-la-501, et seq. (the Charter Schools Act ). Capitalized terms not otherwise defined in this Appendix B shall have the same meanings as set forth in the body of this Official Statement. The Charter School was originally chartered by the Ogden City School District in 2003 and then converted to the Utah State Charter School Board (the State Charter School Board ) in 2004 pursuant to an Application for Conversion dated September 15, The Charter School currently operates under a charter agreement dated October 18, 2007 (the Charter Agreement ) with the State Charter School Board, and pursuant to a Charter (the Charter ) that is the application ultimately approved by the State Charter School Board and the Utah State Board of Education (the State Board of Education ). The Charter School was originally chartered for 600 students in grades K-8. In 2007, the Charter was amended to expand to grade 9 for the school year but to remain within the 600 student enrollment cap. In 2008 the Charter was again amended to expand enrollment to 1,300 students and to authorize the Charter School to offer grades beginning with the school year. The Charter School added a grade 10 in 2010; however, due to a lack of numbers in the following year the Board eliminated the grade 10 class and has remained a K-9 school with an authorized enrollment up to 1,300 students. Utah s charter schools, including the Charter School, have perpetual charter terms. Pursuant to its terms and applicable law, the Charter Agreement s term will automatically renew at the end of the term and at the end of each school year thereafter unless terminated by the State Charter School Board pursuant to Utah Code Section 53A-1a-510. See Charter Agreement, below. Facilities The Charter School opened for the school year with 213 students in grades K-5 with 8 teachers and one administrator. Grade 6 was added in the school year, and grades 7 and 8 were added in the school year. The Charter School is currently operating three schools at three campuses which include (i) the Ogden Preparatory Academy Elementary School (Grades K-4) (the Elementary School ), which is currently located at th Street, Ogden, Utah (the Charter School has been operating at this location since 2010); (ii) the Ogden Preparatory Academy Intermediate School (Grades 5&6) (the Intermediate School ), which is currently located at 2221 Grant Avenue, Ogden, Utah (the Charter School has been operating at this location since 2003); and (iii) the Ogden Preparatory Academy Secondary School (Grades 7-9) (the Secondary School and together with the Elementary School and Intermediate School, the Schools ), which is currently located at nd Street, Ogden, Utah (the Charter School has been operating at this location since 2005). The Elementary School building consists of approximately 33,200 square feet of space with a maximum capacity of 750 students and the Intermediate School consists of approximately 12,632 square

50 feet of space with a maximum capacity of 300 students. The Secondary School consists of approximately 25,000 square feet of space with a maximum capacity of 400 students. Upon completion of demolition work and construction of the Project, the proposed campus will be located at th Street, Ogden, Utah, the same address as the current Elementary School. The Facilities are expected to include two buildings as described below. The first building will be used for the elementary aged students in grades K-6 ( New Elementary School. ). It will be a two-story masonry and steel structure with a maximum occupancy of 770 students. Both floors of the New Elementary School will total 53,768 square feet with an average height of The building will have both a fire alarm and fire suppression system. As currently planned, the layout consists of 26 classrooms, a gymnasium, stage, kitchen, storage room, art room, resource room, two work rooms, two teacher break rooms, reception foyer, office area, library, multimedia center, computer lab, special education room, science lab, music room, computer server room, electrical utilities closest, elevator, janitorial rooms, and restrooms. The second building will house the junior high aged students in grades 7-9 ( New Junior High Building ). This building will be a two-story masonry and steel structure as well, with a maximum occupancy of 385 students. Both floors of the New Junior High Building will total 38,685 square feet with an average height of The building will have both a fire alarm and fire suppression system. As planned, the layout consists of 10 classrooms, a gymnasium, kitchen, storage room, art room, music room, two science rooms, student breakout room, special education room, computer lab, reception foyer, office area, work room, teacher break room, library, multimedia center, computer server room, electrical utilities closet, elevator, janitorial rooms, and restrooms. The Facilities are designed for 158 parking spaces for daytime parking and 187 vehicles for evening and event parking including ADA stalls. In addition to landscaping on the Facilities, there is to be a soccer field constructed on the Facilities. Construction of the Facilities began in November 2012 and is expected to be complete by June 1, The Facilities are planned to have an economical life of 50 years. See THE BONDS Use of Bond Proceeds. During the course of construction for the Facilities, the Charter School will continue to operate the Schools in the currently existing facilities for the school year. Once the Project is complete, the New Elementary School will house grades K through 6, and the New Junior High Building will house grades 7 through 9. The leases on the Intermediate School and Secondary School will expire on June 30, The current Elementary School facilities will not be demolished until completion of the Project. Pursuant to the terms of the Purchase Agreement, the Charter School is to purchase the Facilities at a Purchase Price of $2,500, The Purchase Agreement additionally provides that the Seller is to assign to the Charter School the GMP Contract for the above described improvements to the Facilities. Pursuant to the GMP Contract, the Contractor agrees to construct the improvements to the Facilities for a total price not to exceed $12,344,573.28, subject to additions and deductions by changes in the work, as described therein. The Contractor was formed in 2006 primarily for the construction associated with the development of charter school facilities. The Contractor has completed construction of at least 11 school facilities since The Seller and the Contractor share common ownership and management. One member and manager of both of those entities is also the manager and a minority member of the Management Company. B-2

51 Appraisal The Charter School engaged Rigby & Company Appraisers and Consultants in Farmington, Utah ( Rigby ) to conduct an appraisal dated May 29, 2012 (the Appraisal ) encompassing 6.93 acres of land to be improved with a 53,768 square foot elementary school and a 38,685 square foot junior high school and an additional 1.63 acres under negotiation for purchase for a soccer and recreation field (the Millcreek Parcel ) for a total of approximately 8.56 acres (the Appraised Property ). However, the Millcreek Parcel will not be included in the Facilities or as part of the Trust Estate if such negotiations are not successful. The estimated market value of the Appraised Property in its fee simple estate as is as of May 15, 2012 is $2,115,000 and upon completion, estimated to be June 1, 2013, is $16,500,000. Such valuations are subject to the assumptions and limiting conditions set forth in the Appraisal. See RISK FACTORS-Limited Nature of Real Estate Appraisals; Value of Facilities. A $350,000 portion of the proceeds of the Bonds has been allocated to be used to acquire and improve the Millcreek Parcel, which the Borrower and the Contractor anticipate should be sufficient to purchase and improve the Millcreek Parcel in the future. In the event the Borrower is unable to acquire the Millcreek Parcel, the Borrower anticipates using such proceeds for general improvements to the Facilities. Environmental Studies A Phase I Environmental Site Assessment (the Phase I ) was conducted on the Facilities by Y² Geotechnical, P.C., in Kaysville, Utah ( Y² ) on October 7, 2010 to provide a review of historical information and an evaluation of the physical site features to identify Recognized Environmental Conditions. A Recognized Environmental Condition is defined as the presence or likely presence of any hazardous substances or petroleum products on a property under condition s that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, groundwater, or surface water of the property. Y² concluded that there were no Recognized Environmental Conditions found at the site. A Phase I Environmental Site Assessment was conducted on the Facilities by GSH Geotechnical, Inc., of Salt Lake City, Utah ( GSH ) on September 12, 2012 to document current and historical information for the Facilities, to evaluate the risk of adverse environmental impact to the Facilities based upon those usages and to identify and Recognized Environmental Conditions. GSH concluded that there was no evidence of any Recognized Environmental Conditions found in connection with the Facilities. A Phase I Environmental Site Assessment was conducted on the Millcreek Parcel by GSH on July 17, 2012 to document current and historical information for the Millcreek Parcel, to evaluate the risk of adverse environmental impact to the Millcreek Parcel based upon those usages and to identify Recognized Environmental Conditions. GSH concluded that there was no evidence of any Recognized Environmental Conditions found in connection with the Millcreek Parcel. A Geotechnical Study was also conducted by Silver Peak Engineering, Inc., in Salt Lake City, Utah ( Silver Peak ) on May 16, 2012 on the Facilities define and evaluate the subsurface soil and groundwater conditions and to provide appropriate foundation, earthwork and pavement recommendations and geoseismic information to be utilized in the design and construction of the Facilities. Silver Peak concluded that the Facilities could be supported upon conventional spread and continuous wall foundations. See RISK FACTORS-Environmental Regulation. B-3

52 Mission The Charter School s mission is to instill in all of its students, through a bilingual education, a passion for learning, a readiness to address the challenges of the future and the competence to thrive as productive and responsible citizens in our global community. Curriculum The Charter School provides a challenging curriculum where academic excellence, character development, and individual growth are nurtured in a safe and happy environment that involves the active participation of students, teachers, parents and community members. One emphasis of the Charter School is bilingual literacy. The Charter School s program offers bilingual education for language-minority students and foreign-language immersion for English-proficient students. The dual language program encompasses an innovative, thematic curriculum in an environment that furthers a philosophy of respect and high expectations. Spanish instruction is integrated across the core curriculum, with explicit Spanish instruction given at least forty-five minutes each day. Students learn through music, dance, stories and traditional Spanish instruction. The school uses a Spanish curriculum that was developed through the Spanish Ministry of Education for primary-aged students. The textbooks also come from Spain. Extracurricular Activities. The Charter School offers a number of extracurricular activities that are directly tied to the curriculum. In the area of science, the school offers Science Olympiad Club, Lego Logo Club, as well as a Science Fair Prep Club. In the area of physical fitness, the school offers a Climbing Club, Skateboarding Club, Soccer Club, and Cross Country Running Club. In the area of mathematics, the school offers math competition clubs before school depending on the student s grade level in order to prepare them for the Kangaroo Math competition each spring. The Charter School also has an after-school math club at the Elementary School for students with exceptional math skills. In the area of language arts, the Charter School offers a newspaper club for fourth graders, library clubs that include writing children s books, Anime, and book discussions. For relaxation, the school offers a Knitting Club and yoga. Tutoring is offered by all teachers who are not engaged in conducting a club. The Charter School runs Homework Recovery daily to allow students an opportunity to complete assignments under adult supervision. Accreditation. The Charter School received accreditation on June 12, 2012 from the Northwest Accreditation Commission of which the State is a part. Reduced Lunch Program. The Charter School provides a free and reduced price lunch program. As of October 1, 2012, 636 students, or 62% of total Charter School students, were eligible to participate in this program. Special Education Program. The Charter School offers special education services to its students. As of December 1, 2011, which is the date on which the State counts special education students for funding purposes for the then current fiscal year, 95 special education students, or 9.1% of total Charter School students, were enrolled. Charter Agreement The Charter School operates under the Charter Agreement. To obtain its Charter Agreement, the Charter School submitted a proposal pursuant to the requirements of Utah Code Section 53A-1a-505. Under Utah law, the Charter Agreement may be modified only by mutual agreement of the State Charter B-4

53 School Board and the Charter School s Governing Board. See APPENDIX A CHARTER SCHOOLS IN UTAH. Pursuant to its terms and applicable law, the Charter Agreement will automatically renew at the end of the term and at the end of each school year thereafter unless terminated by the State Charter School Board or the Charter School Board. The State Charter School Board retains the right to rescind authorization for a charter school based on the following grounds: (a) failure of the Charter School or the Charter School s Governing Board to meet the requirements stated in the Charter Agreement; (b) failure of the Charter School s Governing Board to meet generally accepted standards of fiscal management; (c) violation of law; (d) material violation of any of the conditions, standard, or procedures set forth in the Charter Agreement; (e) failure to meet the requirements for student performance under State or federal law; and (f) other good causes shown. To terminate a charter agreement, the State Charter School Board must notify the Charter School s Governing Board and to give the charter school a reasonable amount of time to remedy the problem, unless the health, safety or welfare of the students is threatened, in which case the State Charter School Board may terminate a charter school agreement immediately. Notwithstanding the foregoing, pursuant to the Charter Schools Act, the State Charter School Board may not terminate the Charter Agreement of the Charter School without mutual agreement of the Authority and the State Charter School Board. For more information, see APPENDIX A CHARTER SCHOOLS IN UTAH General Provisions of the Utah Charter Schools Act Noncompliance and Termination. Charter School s Governing Board The Charter School is incorporated as a Utah nonprofit corporation and operates in accordance with its Articles of Incorporation filed with the State on July 1, 2003 (the Articles ) and its Amended and Restated Bylaws approved on July 1, 2010 (the Bylaws ). As set forth in the Bylaws, the Charter School was formed to manage, operate, guide, direct and promote the Charter School. The Charter School has the following powers, among others: to select and remove all of the officers, agents and employees of the Charter School; to borrow money and incur indebtedness for the purpose of the Charter School, and to cause to be executed and delivered therefore, in the Charter School name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations and other evidences of debt and securities therefore; to acquire by purchase, exchange, lease, gift, devise, bequest, or otherwise and to hold, improve, lease, sublease, mortgage, transfer in trust, encumber, convey or otherwise dispose of real and personal property; and to assume any obligations, enter into any contracts or other instruments and do any and all other things incidental or expedient to the attainment of any Charter School purpose. No part of the earnings of the Charter School will inure to the benefit of, or be distributable to, its members, trustees, officers, or other persons, except that the Charter School will be authorized and empowered to pay reasonable compensation for services rendered to the Charter School and to make payments and distributions in furtherance of its purposes. Under the Bylaws, the Board of Directors of the Charter School (the Board ), consisting of a maximum of seven members, but not less than three members, is responsible for the overall policy and direction of the Charter School. The Board will include at least one but no more than two president(s) of the Ogden Preparatory Academy Parent Organization(s). The Board delegates responsibility for day to day operations to the Director/Principal of the Charter School and to committees established by the Board. Board members serve four year terms and are eligible for re-election. Vacancies on the Board are filled in accordance with the Bylaws. Regular meetings are held as deemed necessary by the Board with special meetings called for any purpose at any time at the request of the President/Chief Acting Officer, B-5

54 Secretary, or one-third of the members of the Board. Members do not receive compensation for their services; however, the Board may approve the reimbursement of a director s actual and necessary expenses incurred in the conduct of the Charter School s business. Brief biographical information pertaining to the current Board members is presented below. Laura D Hulst President. Ms. D Hulst has served as the Board President since January 11, 2005 and her term expires in June of She has over 20 years of experience in the restaurant business including 9 years as an assistant manager and 8 years as a general manager. She is currently a member of the Ogden Union Station Foundation, Ogden-Weber Community Action Partnership, the Ogden Junior League, the Ogden Chamber of Commerce and Women in Business. Hilary Wahlen Vice President. Ms. Wahlen was appointed to the Board on May 12, 2010 and her current term expires in June of She holds a Bachelor of Nursing degree from Westminster College in Salt Lake City, Utah, and has been employed in the medical field for over 17 years. She is currently employed by Endocrine Research Specialists as a research coordinator/manager. Nancy Allen Secretary. Ms. Allen is one of the Charter School s founding parents and served on the Board until she resigned on January 4, She was reappointed to the Board on May 31, 2007 and her current term expires in June of She holds a Bachelor of Elementary Education degree from Weber State University in Ogden, Utah. Ms. Allen is a freelance author and editor. Her prior experience includes two years as an elementary school teacher. Monica Godfrey Financial Coordinator. Ms. Godfrey was appointed to the Board on May 12, 2010 and her current term expires in June of She holds a Bachelor of Communications degree from Weber State University in Ogden, Utah. She has served in various church and civic positions since Samantha Shupe Board Member. Ms. Shupe was appointed to the Board on May 25, 2011 and her term expires in June of She is a certified medical assistant, certified nurse assistant and certified professional coder. She has been employed in the medical field for over 15 years as a medical assistant, nurse assistant, clinic director, medical coder and billing business owner. She received her professional coder certification in Ms. Shupe is a member of the American Academy of Professional Coders and is the president of the Charter School s Parent Organization. Jana Whitby Board Member. Ms. Whitby was appointed to the Board on June 20, She serves as the president of the Charter School s parent organization and is the mother of two students who attend the Charter School. Ms. Whitby has worked as a Critical Care Technician in the Newborn Intensive Care Unit at McKay Dee Hospital in Ogden, Utah, including serving as chair of the NICU's Education Council. Ms. Whitby is active in a number of community and volunteer activities, including the GOAL Foundation. Stephen Ballard Board Member. Mr. Ballard was appointed to the Board on June 20, He owns and operates the Sonora Grill restaurant in Ogden, Utah. Prior to opening the Sonora Grill, Mr. Ballard was vice president for Malouf Marketing, a growing import company, and worked as general manager of Café Sabor. Mr. Ballard currently serves on a number of community organizations, including as president of the Ogden Weber Convention and Visitor Bureau board of directors, as a board member of the Ogden/Weber Chamber of Commerce, as a member of the Tourism Tax Advisory Board, and as a member of the boards of the Downtown Business Alliance and Junction Association. Mr. Ballard graduated with a Bachelor of Science degree in Organizational Management from Utah State University in Logan, Utah. B-6

55 The Management Company The Charter School is governed by the Board, which is responsible for the academic and operations programs of the Charter School. On June 2, 2005, the Charter School executed a Charter School Management Agreement with Academica West LLC, a Utah limited liability company (the Management Company ) for the purpose of having the Management Company manage and administer various business and administrative operations of the Charter School. On July 17, 2012, the Management Company and the Charter School executed an Amended and Restated Management Agreement effective August 1, 2012, having a term of 10 years unless earlier terminated as set forth therein. The Charter School agrees to pay the Management Company $395,000 for up to 1,050 students enrolled in the Charter School in grades Kindergarten through 9th grade, plus $350 per student in excess of 1,050 students as determined by the Charter School s audited October 1 student count, per annum. The fee is to be adjusted annually in proportion to annual percentage changes in the consumer price index. The Board conducts annual reviews of the Management Company and has the right to terminate the Management Agreement for cause by providing 60 days notice to the Management Company. The Management Company coordinates the management and administrative duties required to operate the Charter School, including, among others: scheduling and maintaining records of Board meetings; ensuring compliance with all federal and state requirements for record keeping; providing bookkeeping services and ensuring accurate and timely financial reporting; identifying and proposing qualified teachers, para-professionals, administrators and other staff members and education professionals for positions in the Charter School; preparing the annual budget; soliciting grants and other available funds for the Charter School when available; coordinating with the Board to identify facilities needs and assist the Charter School in planning the design of new facilities or in the expansion of existing ones; and additional services as requested by the Board. Listed below are key administrators of the Management Company in charge of operations for the Charter School, along with brief biographical information pertaining to each. None of the Charter School s administrators are employees of the Charter School. Jed Stevenson President. Jed Stevenson serves as the President of the Management Company. In August 2002, Mr. Stevenson established the Management Company to provide business services and management to Utah charter schools. Since 2002, the Management Company has grown and now manages 11 charter schools and over 8,000 students in the State. Mr. Stevenson has served as a board member of the Utah Association of Public Charter Schools and was appointed by the Governor of the State to serve on the Utah State Board of Education Nominating Committee. Mr. Stevenson recently served as the chair of the Davis Chamber of Commerce and serves as an honorary Falcon with the 388th Fighter Wing stationed at Hill Air Force Base in Northern Utah. Mr. Stevenson is a graduate of Weber State University in Ogden, Utah and holds a Juris Doctor from California Western School of Law in San Diego, California. Sheldon Killpack Vice President. As vice president of the Management Company, Sheldon Killpack serves in training and advisement for the governing boards of the Management Company clients. Drawing on his experience as a founding board member of North Davis Preparatory Academy, Mr. Killpack helps each charter school s governing board achieve autonomy and control over its schools academic program, staffing needs, and curriculum. Mr. Killpack served in the Utah State Senate for 6 years, during which time he served as Assistant Majority Whip and Senate Majority Leader. In addition to serving in state government, Mr. Killpack has served as chair of the Davis Chamber of Commerce and as a board member of the Davis Convention and Visitor Bureau as well as the North Davis Hospital and Medical Center. He has served as a board member of the Utah Defense Alliance and the United Way of B-7

56 Salt Lake Executive Steering Committee. Mr. Killpack is a graduate of Weber State University in Ogden, Utah. Gabe Clark General Counsel. As general counsel for the Management Company, Gabe Clark advises the boards, principals, and employees of the charter schools on a variety of issues, including employment law, public law issues such as the open meetings act and GRAMA, education law, civil rights law, risk management issues, contractual issues, and corporate governance issues. Prior to joining the Management Company, Mr. Clark worked as an associate and shareholder in the Salt Lake City, Utah law firm of Durham Jones & Pinegar from 2001 until Most recently, Mr. Clark practiced primarily in areas of business and estate planning. His practice focused on working with business owners to form business entities, draft contracts for business transactions, and properly structure their businesses to achieve their operational, asset protection and estate planning objectives. He has experience in the formation of non-profit entities, income and estate taxation issues, and general estate planning as well as securities, corporate finance and real estate issues. Mr. Clark was an original board member of Quest Academy, a charter school in West Haven, Utah. In addition, he has been involved in the Ogden/Weber Chamber of Commerce s Leadership Northern Utah program as a participant, co-chair, and chair, and also serves as a member of the board of directors for EnableUtah, Inc. Brad Taylor Controller. As controller, Brad Taylor manages the financial and accounting activities of the Management Company s client charter schools. In addition to overseeing the day-to-day bookkeeping and payroll, Mr. Taylor advises board members and school directors on budgeting, annual state and federal reporting requirements, and state charter school funding rules. Prior to joining the Management Company, Mr. Taylor was a staff auditor with Deloitte in Salt Lake City, Utah. During this period, he worked on audits involving the banking industry and non-profit organizations. Mr. Taylor is fluent in Spanish and graduated with a Bachelor of Arts degree and a Master of Professional Accountancy degree from Weber State University in Ogden, Utah. Charter School Officials Certain information on the Principal and the Assistant Principal of the Charter School is set forth in the following paragraphs. Kathleen Thornburg Principal. The Principal, hired by the Board, handles the day to day operations of the Charter School, including carrying out the Charter School s goals and Board policy. The Principal attends all Board meetings, reports on the progress of the Charter School and carries out the duties prescribed by the Board. Kathleen Thornburg has served as the Charter School s principal since it opened. Ms. Thornburg has over 30 years of experience in teaching and school administration. She holds a Bachelor degree from Marquette University in Milwaukee, Wisconsin, and a Master of Education degree from the University of Southern Florida in Orlando, Florida. Her teaching career began in 1973 as an instructor for the 4th and 6th grades at Gemini Elementary in Melbourne Beach, Florida. She has also instructed 5th grade at Bonneville Elementary in Ogden, Utah. Ms. Thornburg has extensive administrative experience, serving as an assistant principal and head principal. She is currently a member of the Utah Association of Supervision and Curriculum Development and the National Association of Elementary School Principals and serves as the Director for the Utah Association of Elementary School Principals. Robert Mitchell Assistant Principal. -The Assistant Principal is responsible for overseeing school operations at the 7th through 9th grade building and supporting the Principal. His duties include B-8

57 coordination and supervision of activities; evaluation of school programs; evaluation of staff performance and classroom observations; supervision of facilities; monitoring of student progress; and ensuring the safe operation of the school and the general welfare of all students, staff, parents and patrons on or about the school site. He also assists the Principal in curriculum and program development and evaluation, presentation of staff development and in-service for all employees, development and implementation of school restructuring programs, and consensus and team building. Robert Mitchell has served as the Charter School s Assistant Principal since August He has over 17 years of experience in teaching and school administration. Mr. Mitchell attended Oxford College, Emory University, Webster University, Harvard University, The Air War College and The National Defense University receiving degrees and diplomas in humanities, biology/chemistry, business administration, human relations and contracting/acquisition management. Charter School Staff and Faculty The Charter School currently employs 100 staff members, as shown below. Full Time Part Time Total Teachers Special Education Administrators Support Staff Total As of November, 2012, the Charter School s teachers held the following degrees: Degree Held Percent of Certificated/Licensed Staff Bachelors 66% Bachelors plus 1 5 Masters 26 Masters plus 1 3 Doctorate 0 Total 100% 1 Credit hours acquired toward an advanced degree. The following tables set forth certain historical information regarding the Charter School s staff, faculty and student/teacher ratios. Teacher retention from to , to and to was 83.7%, 88.9% and 97.0%, respectively. B-9

58 Historical Staff and Faculty Information 2008/ / / / Faculty & Staff Teachers Special Education Administrators Support Staff Total Faculty Beginning Teachers Years Experience Years Experience Years Experience Over 20 Years Experience Student-Teacher Ratio (Number of Students Per Teacher) 20.7:1 19.7:1 22.7:1 23.7:1 25.0:1 Employee Benefits. Full-time employees are eligible to participate in the Charter School s health insurance plan, dental insurance plan, vision insurance plan, and 401(k). Full-time employees receive a stipend in the amount of $725 per month that can be contributed toward those benefits or taken as additional income. Retirement and Pension Matters. The Charter School has established a defined contribution retirement plan covering all full time, salaried employees. Eligible employees may contribute into an account, at their option and discretion with the Charter School matching up to 3% of the employee s salary. For the year ended June 30, 2012 the Charter School contributed $50,001 (unaudited) to the plan. For further information, see Note 6 to the Charter School s audited financial statement appended hereto. Labor Relations. Teachers are employed on an at-will basis pursuant to annually renewable contracts initiated by the administration and approved by the Board. The Charter School considers its relations with the teachers as excellent. The Charter School s employees are not represented by any unions. Charter School Enrollment and Waitlist Policy Enrollment. Enrollment to the Charter School is open to all students who are residents of Utah. Students are accepted into the Charter School by lottery. Enrollment applications are accepted on a continual basis and all applications are held in a general application pool. A lottery drawing is held from the general application pool when there is a vacancy. Kindergarten enrollment begins in January of the calendar year the student will begin kindergarten. The kindergarten lottery begins on March 1 of each year. Selected students are notified by phone and . All other applicants receive a postcard in the mail. Lotteries for grades 1 through 9 are held as needed. The following tables set forth data provided by the Charter School regarding its historical and projected enrollment. Enrollment figures are actual data as of October 1 in the years and prior. For and thereafter, the numbers are projections provided by the Charter School, and are subject to the general qualifications and limitations described under INTRODUCTION Forward- Looking Statements. The Charter Agreement limits the Charter School s enrollment to 1,300 students. B-10

59 TABLE 1 Historical and Projected Enrollment by Grade Level Grade Kindergarten Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade Total ,067 1,042 1,025 1,059 1 Projected enrollment for years and thereafter are the same as what is shown above. Student Retention Data October 1 Student Count Students Re-enrolled Retention Percentage October 1 Student Count Students Re-enrolled Retention Percentage Kindergarten % % Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade , % 1 1, % 1 1 Percentages determined based on grades K-8 and did not include 9th or 10th grade students that were not subject to re-enrollment. Wait List. The Charter School does not maintain historical waitlist numbers. The Charter School creates a new lottery database to receive applications for each school year. The Charter School does not roll over any applications received for the previous year but encourages the parents of students who were not accepted in the lottery the previous year to submit a new application if they are still interested in enrolling their children in the Charter School. The Charter School's wait list therefore starts at zero each year. The Charter School has a waitlist of 228 students as of November 5, 2012 as shown in the following table. B-11

60 TABLE 2 Wait List 1 Grade Wait List K Total As of November 5, Such values are subject to change as students withdraw and are added through the lottery. Source: The Charter School Competing Schools The Charter School teaches students residing primarily in Weber County with approximately 73% of students residing in the Ogden School District and 24% of students residing in the Weber School District. There are currently 2 other charter schools, 6 private schools and 25 public schools within a 5-mile radius of the Charter School that provide educational services to children ranging from Pre-kindergarten through 9 th grade. See RISK FACTORS-Competition for Students. Academic Achievement Indicators The following table sets forth historical information on the Charter School s Criterion Reference Testing results as compared with the Ogden School District results for the same period. Historical State Criterion Reference Testing (CRT) Results (Percentage Testing Proficient or Above) Grades Charter Charter Charter Charter Charter School District School District School District School District School District Language Arts 85% 69% 80% 64% 84% 66% 88% 64% 88% 62% Math The following table sets forth 2012 results on the Charter School s Criterion Reference Testing. B-12

61 2012 State Criterion Reference Testing (CRT) Results (Percentage Testing Proficient or Above) Language Arts Math Science Grade 3 87% 74% -- Grade % Grade Grade Grade Grade Grade Adequate Yearly Progress. Title I of the Elementary and Secondary Education Act ( ESEA ), as reauthorized by the No Child Left Behind Act ( NCLB ) of 2001, requires each state, as a condition of receiving funds under the Title I program, to implement a single, statewide accountability system applicable to all its public schools, including charter schools. A component of that system is adequate yearly progress ( AYP ) which measures the extent to which schools succeed in educating all students to proficiency in at least reading (or language arts) and mathematics. Whether a school meets AYP in the State is based on student assessment results, the student participation rate on assessments, and the other academic indicators included in the State s AYP definition. The Utah State Office of Education provides information regarding district and school AYP attainment. The current Federal AYP Summary Report and the Utah Performance Assessment System ( U-PASS ) School Performance Report are made available by the State Office of Education. See RISK FACTORS-Compliance with No Child Left Behind Act of In compliance with NCLB, schools that are identified for improvement, not having met AYP for each of the prior two years, must develop a two-year school improvement plan and submit a revised school improvement plan for review and approval. They must also use at least 10% of their Title I funds for each of the next two years for professional development to support the revised plan, in addition to certain other requirements. The school must also notify parents of the school s failure to meet AYP. Failure to meet AYP for years subsequent to the second year carries further consequences under Section 6316 of NCLB. The Charter School made AYP under the federal No Child Left Behind Act for each of the years from 2007 through 2010, but did not make AYP in the school year. According to Charter School officials this was the result of a significant increase in enrollment from the previous year. Ogden School District, the school district in which approximately 73% of the Charter School s students reside, did not make AYP four out of the last five years ( , , , and ). U-PASS. The Charter School achieved the State Level of Performance under the U-PASS Accountability System each of the last five years ( ). The Charter School s whole school proficiency was above state standards in 2008, 2009, and While not every individual subgroup in the Charter School achieved an acceptable level of proficiency each year, every subgroup did achieve acceptable levels of progress each of those years. The Charter School s whole school progress has been well above State standards each year from Specific scoring and testing information for the Charter School is available at Reports.aspx. B-13

62 AYP and U-PASS were not produced by the Utah State Office of Education for the as there was a waiver granted. Budgeting and Accounting Principles In general, the Charter School follows Utah s State Office of Education guidelines with respect to budgeting, accounting and auditing public school districts. The Charter School Board administers the financial affairs of the Charter School and is responsible for implementing proper accounting controls. See APPENDIX A CHARTER SCHOOLS IN UTAH Additional Utah State Board of Education Rules Accounting. With respect to budgeting, the Charter School s Director/Principal and the Management Company prepare a tentative budget which is presented to the Board by June 1 annually. Under the Charter Agreement, the Charter School is required to conduct an annual financial audit. The Charter School presently employs EideBailly LLP, Ogden, Utah, as its auditor, and the Charter School s financial statements as of June 30, 2012, are included in APPENDIX C CHARTER SCHOOL AUDITED FINANCIAL STATEMENT FOR THE YEAR ENDED JUNE 30, State Payments As further described in APPENDIX A CHARTER SCHOOLS IN UTAH Funding for Charter Schools, Utah charter schools receive funding from state, local, and federal sources. The primary source of funding for Utah charter schools is State funding which consists, first, of regular basic program funding distributed under the Minimum School Program Act through a statutory formula of weighted pupil units (or WPUs ). The Minimum School Program Act (and resulting regular basic school program funding) is adjusted each year in the State budget bill. The Charter School receives additional State and Federal funding for programs such as special education, accelerated learning, and reading achievement. Utah charter schools, including the Charter School, receive additional funds from the State, such as restricted program funding as well as additional grants, appropriations and contributions from the State. The State also provides charter school with in lieu of local funding appropriations under the Charter Schools Act, and charter schools are eligible to receive various forms of federal funding. See APPENDIX A CHARTER SCHOOLS IN UTAH Funding for Charter Schools. Fundraising and Grants The Charter School does not actively participate in fundraising. The Charter School s parent teacher organization ( OPAPO ) coordinates any efforts to raise funds for the Charter School, either generally or specifically. OPAPO is a separate entity with its own board which is independent of the Charter School Board. Fundraising and donations do not represent a significant source of revenues for the Charter School, comprising less than $10,000 annually. The Charter School, in conjunction with the District, is participating in the Federal Gear Up Grant. The purpose of this grant is to assist low income students in preparing for post-secondary education. As a sub-recipient of the grant, the Charter School is scheduled to receive $148,701 in funds during the three-year grant period, beginning with the fiscal year. The Charter School is in year two of the three year grant. Other Charter School Obligations Facilities Operating Lease Agreements. The Charter School has executed three separate operating lease agreements (the Facilities Operating Leases ) for the current Elementary, Intermediate B-14

63 and Secondary School facilities including: (i) an Amended and Restated Lease and Security Agreement dated December 1, 2004, amending and restating in its entirety the prior Lease and Security Agreement dated August 1, 2003, with Ogden School Development, LLC, a limited liability company ( OSD ) related to the Charter School s leasing of the Intermediate School Facilities (the Intermediate School Lease ); (ii) a Lease Agreement with Mountain View School Development, LLC, a Utah limited liability company ( MVSD ), executed on March 8, 2011 related to the Charter School s leasing of the Elementary School Facilities (the Elementary School Lease ); and (iii) a Lease and Security Agreement with Ogden School Development II, LLC, a Utah limited liability company ( OSD II ) executed on December 1, 2005, as extended pursuant to that Extension of Lease Agreement dated March 8, 2011 (the Secondary School Lease ), related to the Charter School s leasing of the Secondary School. Pursuant to an exercised option to renew the term of the Amended and Restated Lease, the term of the Intermediate School Lease will expire July 30, 2013; pursuant to an exercised option to renew the term of the Lease and Security Agreement, the term of the Secondary School Lease will expire June 30, The Elementary School Lease will terminate upon the Charter School s acquisition of the Facilities. Monthly lease payments are $18, at the 5-6 th grade building (2221 Grant Avenue), $32, at the 7-9 th grade building (215 East 22 nd Street), and $36, at the K-4 th grade building ( th Street) with the rent adjusted annually based on the consumer price index ( CPI ). Note Payable. As set forth in the Elementary School Lease and Intermediate School Lease, the annual lease payments to be made by the Charter School are to increase by the CPI increase for that year. Historically, payments for the CPI increases have not been collected; therefore, the Charter School has accrued a payable in the amount of the CPI increases. The obligation is due on demand, unsecured and bears no interest. At June 30, 2012 the amount owed was $98,142. Insurance The Board acts to protect the Charter School against loss and liability by maintaining certain insurance coverages. The Charter School s administration believes the present insurance coverage to be adequate and in compliance with the Charter Agreement. However, there can be no assurance that the Charter School will continue to maintain this level of coverage. See APPENDIX D. Historical and Budgeted Financial Information The following table sets forth the Charter School s history of revenues and expenditures for the past five fiscal years. The Charter School s audited financial statement for the fiscal year ended June 30, 2012 is set forth in APPENDIX C hereto. B-15

64 TABLE 4 Statement of Activities and Changes in Fund Balances Revenue Federal $ 196,460 $ 496,344 $ 474,295 $ 920,475 $ 886,376 State 3,349,740 3,148,649 3,397,169 5,697,129 5,777,070 Local 100,329 95, , , ,053 Total revenue 3,646,529 3,740,203 3,972,952 6,755,777 6,868,499 Expenses Instructional-teachers 1,804,943 1,999,215 2,260,043 3,659,820 3,582,317 Instructional-aides 68,641 81,024 91, , ,556 Administration operations 527, , , , ,419 Student support service 150, , , , ,652 Operation and maintenance 817, , ,684 1,511,763 1,429,954 Depreciation 86, , , , ,591 Total expenses 3,455,899 3,807,815 4,119,432 6,706,620 6,520,489 Change in Net Assets 190,630 (67,612) (146,480) 49, ,010 Beginning net assets 745, , , , ,232 Ending net assets $ 936,167 $ 868,555 $ 722,075 $ 771,232 $1,119,242 Source: Charter School Annual Financial Statements for the years ended June 30, and the Charter School The following table sets forth the Charter School s budgets for the fiscal years ended June 30, 2012 and 2013, as well as the year to date actual, unaudited figures for the fiscal year. TABLE 5 Budget Summary and Comparison Budget Budget Year to Date (unaudited) 1 Revenue State funding $5,594,862 $5,898,122 $1,526,993 Student fees 32,000 32,000 20,418 Federal funding 1,174, , ,521 Other local 129, ,140 19,531 Total revenue $6,930,701 $7,013,292 $1,677,463 Expenses Instruction $4,878,433 $4,848,314 $ 838,373 Operations & Maintenance 1,999,796 2,010, ,948 Total expenses $6,878,229 $6,858,460 $1,325,321 1 Year to date actual (unaudited) figures through September 30, Sources: Charter School and Budgets and the Charter School Projected Revenues and Expenditures The following table provides historical and projected revenue and expense information for the Charter School. To the extent that these projections provide information for future years, such projections B-16

65 are forward-looking statements and are subject to the general qualifications and limitations described under INTRODUCTION Forward-Looking Statements with respect to such statements. The information contained in the following table has been prepared by the Charter School and has not been independently verified by any party other than the Charter School. Such information has not been prepared in accordance with generally accepted accounting principles ( GAAP ). No feasibility studies have been conducted with respect to the related projections. Such projections relate only to a limited number of fiscal years and consequently do not cover the entire period that the Bonds will be outstanding. The Underwriter has not independently verified the Charter School s projections, and makes no representation nor gives any assurances that such projections, or the assumptions underlying them, are complete or correct. The Charter School s financial projections are based on assumptions made by the Charter School (on matters such as future enrollment, revenues and anticipated expenses), but there can be no assurance that actual enrollment, revenues and expenses will be consistent with such assumptions. Actual operating results may be affected by many factors, including, but not limited to increased costs, lower than anticipated revenues (as a result of difficulty with or failure of the Charter School s expansion plan, insufficient enrollment, reduced payments form the State, or otherwise), employee relations, changes in taxes, changes in applicable government regulation, changes in demographic trends, factors associated with education, competition for students, and changes in local or general economic conditions. NO REPRESENTATION OR ASSURANCE CAN BE GIVEN THAT THE CHARTER SCHOOL WILL REALIZE REVENUES IN AMOUNTS SUFFICIENT TO MAKE ALL REQUIRED PAYMENTS ON THE SERIES 2012 BONDS SUFFICIENT TO PAY DEBT SERVICE ON THE BONDS. THE REALIZATION OF FUTURE REVENUES DEPENDS ON, AMONG OTHER THINGS, THE MATTERS DESCRIBED IN RISK FACTORS AND FUTURE CHANGES IN ECONOMIC AND OTHER CONDITIONS THAT ARE UNPREDICTABLE AND CANNOT BE DETERMINED AT THIS TIME. THE UNDERWRITER MAKES NO REPRESENTATION AS TO THE ACCURACY OF THE PROJECTIONS CONTAINED HEREIN, OR AS TO THE ASSUMPTIONS ON WHICH THE PROJECTIONS ARE BASED. [Remainder of page intentionally left blank] B-17

66 Ogden Preparatory Academy Ogden, Utah Budgeted Projected Projected Projected Projected Projected Fiscal Year Ending June State Revenues Basic Funding 5,556,712 5,645,389 5,744,183 5,844,706 5,961,600 6,080,832 Trust Lands Funding 44,410 45,119 45,908 46,712 47,646 48,599 Special Education Funding 251, , , , , ,675 Food Service 46,000 46,734 47,552 48,384 49,352 50,339 Total State Revenues $ 5,898,122 $ 5,992,247 $ 6,097,111 $ 6,203,811 $ 6,327,887 $ 6,454,445 Federal Revenues Title Revenues 460, , , , , ,036 School Lunch Revenues 264, , , , , ,901 IDEA 167, , , , , ,808 Grants 55,565 56,452 57,440 58,445 59,614 60,806 Total Federal Revenues $ 948,030 $ 963,159 $ 980,014 $ 997,165 $ 1,016,666 $ 1,036,551 Local Revenues Student Fees 32,000 32,511 33,080 33,659 34,332 35,018 Lunch Money 95,040 95,130 95,130 95,130 95,130 95,130 Other Local Revenues 40,100 $ 40,100 $ 40,100 $ 40,100 $ 40,100 $ 40,100 $ 167,140 $ 167,740 $ 168,309 $ 168,888 $ 169,561 $ 170,248 Total Revenues $ 7,013,292 $ 7,123,146 $ 7,245,435 $ 7,369,863 $ 7,514,115 $ 7,661,243 Expenses Instruction, Administration & Support Instructional Salaries 1,972,339 2,011,785 2,052,021 2,093,062 2,134,923 2,177,621 Administrative Salaries 208, , , , , ,863 Support Salaries 341, , , , , ,014 Special Ed Salaries 317, , , , , ,068 Employee Benefits 1,002,109 1,052,214 1,104,825 1,160,066 1,218,070 1,278,973 Library Personnel 105, , , , , ,949 Professional Development/Travel 6,000 6,126 6,248 6,373 6,501 6,631 Supplies 147, , , , , ,569 Instructional Aides, Books, Library 40,000 40,800 41,616 42,448 43,297 44,163 Student Lunch Program 387, , , , , ,974 Copier /Furn./Equip Exp. & Maint. 27,000 40,000 25,000 25,500 26,010 26,530 Building Repairs & Maint. 37,000 37,776 38,531 39,302 40,088 40,890 Utilities 104,000 95,000 99, , , ,473 Insurance 30,000 30,629 31,241 31,866 32,504 33,154 Computers/Technology/Telephone 181, ,170 72,834 74,291 75,777 77,292 Custodial & Related 105, , , , , ,038 Other Purchased Services 87,406 89,154 90,937 92,756 94,611 96,504 Gear Up Program 55,565 56,452 57,440 58,445 59,614 60,806 "Above the Line" Back Office 290, , , , , ,000 Purchased Professional Services - Title 20,164 20,567 20,979 21,398 21,826 22,263 Property Taxes 115,000 Other Expenses 108, , , , , ,713 Total Operating Expenses 5,687,373 5,706,915 5,722,590 5,872,035 6,026,320 6,185,488 Revenues Available for Debt Service $ 1,325,919 $ 1,416,231 $ 1,522,845 $ 1,497,828 $ 1,487,795 $ 1,475,756 Facility Lease Expense 1,063,637 Capitalized Interest (540,301) Debt Service 504, , , , , ,148 Fees 35,471 41,110 40,340 39,540 38,720 37,880 Total Facility Capital Expense 1,063,636 1,025,908 1,021,188 1,022,388 1,023,368 1,022,028 Excess Net Revenues 262, , , , , ,728 "Below the Line" Back Office 107, ,450 97,450 92,450 87,450 82,450 Remaining Net Revenues 154, , , , , ,278 Estimated Facility Expense Coverage Estimated Debt Burden 15.17% 14.40% 14.09% 13.87% 13.62% 13.34% B-18

67 Management s Discussion and Analysis The following discussion has been prepared by Charter School officials for inclusion in this offering document and presents an analysis of the Charter School s financial performance during the year ended June 30, For additional information see the Charter School s audited financial information for the year ended June 30, 2012 attached as APPENDIX C to this Official Statement (the Financial Statements ). Financial Highlights Total cash increased by $415,307. One of the reasons cash increased was due to the fact that the Charter School purchased significant capital assets in the prior year to provide for the increase in student membership of 437 students. Net assets increased by $348,010. Financial Analysis A summary of the Charter School s statements of financial position is presented in the schedule below. This section will discuss and analyze significant differences between the years ended June 30, 2012 and OGDEN PREPARATORY ACADEMY Condensed Statements of Financial Position 2012 % of Total 2011 % of Total Current and other assets $ 975, % $ 636, % Capital assets, net 687, % 854, % Total assets $ 1,662, % $ 1,490, % Current liabilities $ 543, % $ 719, % Net assets unrestricted 1,119, % 771, % Total liabilities and net assets $ 1,662,685 $ 1,490,822 The statement of financial position includes all of the Charter School s assets and liabilities, and net assets which are categorized as unrestricted. Net assets may serve as a useful indicator of an entity s financial position. As can be seen from the schedule above, assets exceeded liabilities by $1,119,242 at the end of the year. The total amount of net assets is classified as unrestricted, which represent the portion available to maintain the facility for quality education and continuing obligations to employees and creditors. The unrestricted net assets are in the form of cash, receivables, and other current assets. While the statement of financial position shows the change in financial position of net assets, the summary of the Charter School s statements of activities and changes in net assets, provides information regarding the nature and source of these changes as seen in the following schedule. Net assets increased in 2012 by $348,010. B-19

68 OGDEN PREPARATORY ACADEMY Condensed Statements of Activities and Changes in Net Assets Change Revenues: Federal $ 886,376 $ 920,475 $ (34,099) State 5,777,070 5,697,129 79,941 Local 205, ,173 66,880 Total revenues 6,868,499 6,755, ,722 Expenses: Instructional - teachers 3,582,317 3,659,820 (77,503) Instructional - aids 146, ,933 (46,377) Administration operations 841, ,476 (61,057) Student support service 316, ,873 33,779 Operation and maintenance of facility 1,429,954 1,511,763 (81,809) Depreciation 203, ,755 46,836 Total expenses 6,520,489 6,706,620 (186,131) Net change in net assets 348,010 49, ,853 Net assets, beginning 771, ,075 49,157 Net assets, ending $ 1,119,242 $ 771,232 $ 348,010 Capital Assets and Debt Administration Capital assets a review of the schedule below shows that gross capital assets increased $36,736. The major capital asset events during the year included computer purchases, furniture, and equipment purchases. B-20

69 OGDEN PREPARATORY ACADEMY Capital Assets Furniture and equipment $ 250,787 $ 232,386 Computers 850, ,429 Textbooks 211, ,368 Library books 23,907 23,907 Audio and visual materials 32,300 32,300 Capitalized software 59,379 59,379 Construction in progress - 152,028 Capital improvements 73,907 73,907 1,502,440 1,465,704 Less accumulated depreciation (814,962) (611,372) $ 687,478 $ 854,332 Debt administration As of June 30, 2012, the Charter School had no outstanding debt. Economic Factors and Next Year s Budget The primary factor deriving the budget for the Charter School is student enrollment. Enrollment for the school year was 1,042. The enrollment projected for the school year is expected to be 1,060. This factor was considered in preparing the Charter School s budget for fiscal year B-21

70 PROJECT LOCATION Following completion of construction, Ogden Preparatory Academy s new campus will be located at th Street, Ogden, Utah. Ogden is the county seat of Weber County, Utah, and lies approximately 10 miles east of the Great Salt Lake and approximately 40 miles north of Salt Lake City, Utah. B-22

71 APPENDIX C CHARTER SCHOOL AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

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73

74

75

76

77

78

79

80

81

82